Flashcards
BUS 419 CH 6 KEY TERMS
Cards in this deck (20)
- 1Bunching itemized deductionsa common planning strategy in which a taxpayer pays two years’ worth of itemized expenses in one year to exceed the standard deduction in that year.
- 2Business activitya profit-motivated activity that requires a relatively high level of involvement or effort from the taxpayer to generate income.
- 3Capital gain propertyany asset that would have generated a long-term capital gain if the taxpayer had sold the property for its fair market value.
- 4Ceilinglimitation that is the maximum amount for adjustments to taxable income (or credits). The amounts in excess of the ceiling are either lost or carried to another tax year.
- 5Deduction for qualified business incomesubject to limitations, equal to 20 percent of the taxpayer’s qualified business income.
- 6Excess business lossexcess of aggregate business deductions for the year over aggregate business gross income or gain of an individual taxpayer plus a threshold amount depending on filing status.
- 7Floor limitationa minimum amount that an expenditure (or credit or other adjustment to taxable income) must meet before any amount is allowed.
- 8Investment activitya profit-seeking activity that is intermittent or occasional in frequency, including the production or collection of income or the management, conservation, or maintenance of property held for the production of income.
- 9Ordinary and necessaryan expense that is normal or appropriate and that is helpful or conducive to the business activity.
- 10Ordinary income propertyproperty that if sold would generate income taxed at ordinary rates.
- 11Private nonoperating foundationsprivately sponsored foundations that disburse funds to other charities.
- 12Private operating foundationsprivately sponsored foundations that actually fund and conduct charitable activities.
- 13Qualified business incomenet business income from a qualified trade or business conducted in the United States. This is the tax base for the deduction for qualified business income.
- 14qualified education expensesconsist of tuition and related costs for enrolling the taxpayer, spouse, or a dependent at a postsecondary institution of higher education.
- 15Qualified educational loansloans whose proceeds are used to pay qualified education expenses.
- 16Qualified trade or businessfor purposes of the deduction for qualified business income, any trade or business other than a specified trade or business.
- 17Specified service trade or businessany trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities. Architecture and engineering services (their services build things) are specifically excluded from the definition of specified service trade or business.
- 18Standard deductiona fixed deduction offered in lieu of itemized deductions. The amount of the standard deduction depends on the taxpayer’s filing status.
- 19Trade or businessa profit-motivated activity characterized by a sustained, continuous, high level of individual involvement or effort.
- 20Traditional IRAan individually managed retirement account with deductible contributions and taxable distributions.