Flashcards
Ch. 5 Flashcards
Cards in this deck (30)
- 1Gross IncomeIncome that taxpayers realize, recognize, and report on their tax returns for the year.
Or
Realized income minus excluded and deferred income - 2Realization PrincipleThe proposition that income only exists when there is a transaction with another party resulting in a measurable change in property rights.
- 3Wherewithal to PayThe ability or resources to pay taxes due from a particular transaction
- 4Barter ClubsOrganizations that facilitate the exchange of rights to goods and services between members
- 5Tax Basisthe amount of a taxpayer's unrecovered cost of or investment in an asset
- 6Return of CapitalThe portion of proceeds from a sale (or distribution) representing a return of the original cost of the underlying property
- 7Tax Benefit RuleHolds that a refund of an amount deducted in a previous period is only included in income to the extent that the deduction reduced taxable income
- 8Accrual Methodthe procedure for determine the taxable year in which a business recognizes a particular item of income or deduction, thereby dictating the timing of when a taxpayer reports income and deductions
- 9Cash Methodthe method of accounting that recognizes income in the period in which cash, property, or services are received and recognizes deductions in the period paid.
- 10Constructive Receipt DoctrineThe judicial doctrine that provides that a taxpayer must recognize income when it is actually or constructively received. Constructive receipt is deemed to have occurred if the income has been credited to the taxpayer's account or if the income is unconditionally available to the taxpayer, the taxpayer is aware of the income's availability, and there are no restrictions on the taxpayer's control over income.
- 11Claim of right doctrineJudicial doctrine that states that income has been realized if a taxpayer receives income and there are no restrictions on the taxpayer's use of the income.
- 12Assignment of income doctrineThe judicial doctrine holding that earned income is taxed to the taxpayer providing the service, and that income from property is taxed to the individual who owns the property when the income accrues
- 13Community Property SystemsSystems in which state laws dictate how the income and property are legally shared between a husband and a wife
- 14Earned IncomeCompensation and other forms of income received for providing goods or services in the ordinary course of business
- 15Unearned IncomeIncome from property that accuses as time passes without effort on the part of the owner of the property
- 16AnnuityStream of equal payments over time
- 17Flow-through entitiesLegal entities, like partnerships, limited liability companies, and S corporations, that do not pay income tax. Income and losses flow through entities are allocated to their owners.
- 18AlimonyA support payment of cash made to a former spouse. The payment must be made under a written separation agreement or divorce decree that does not designate the payment as something other than alimony, the payment must be made when the spouses do not live together, and the payments must cease no alter than when the recipient dies.
- 19Imputed IncomeIncome fro an economic benefit the taxpayer receives indirectly rather than directly. The amount of the income is based on comparable alternatives.
- 20Discharge of indebtednessDebt forgiveness
- 21Nonrecognition ProvisionsTax laws that allow taxpayers to permanently exclude income from taxation or to defer recognizing realized income until a subsequent period
- 22Municipal BondsThe common name for state and local government debt
- 23Fringe BenefitsNon-cash benefits provided to an employee as a form of compensation. As a general rule, fringe benefits are taxable. However, certain fringe benefits are excluded from gross income.
- 24Accountable PlanAn employer's reimbursement plan under which employees must submit documentation supporting expenses to receive reimbursement and reimbursements are limited to legitimate business expenses.
- 25GiftTransfer of property where no, or inadequate consideration is paid for the property
- 26InheritanceTransfer of property when the owner is deceased (the transfer is made by the decedents estate).
- 27Accelerated death benefitsEarly receipt of life insurance proceeds that are not taxable under certain circumstances, such as the taxpayer is medically certified with an illness that is expected to cause death within 24 months.
- 28Disability InsuranceSometimes called sick pay or wage replacement insurance. It pays the insured for wages lost due to injury or disability
- 29Installment SalesSales for which taxpayers receive payment in more than one period
- 30Qualified Retirement AccountPlans meeting certain requirements that allow compensation placed in the account to be tax-deferred until the taxpayer withdraws money from the account.
Information
- Description
- Flashcards on Ch. 5 Flashcards, created by HANNAH BRUNA on 22/08/2022.
- Created by
- HANNAH BRUNA
- Views
- 16
- Rating