Reg Flashcards
(19 cards)
401 (k) Plan
A deferred compensation plan set up by an employer. A portion of a participating employee’s earnings is deducted and placed in a qualified retirement plan. The employer may also contribute a matching percentage. Money in the plan is not taxed until the employee receives distributions, usually at retirement. A 401 (k) plan is a defined contribution plan
Accelerated Depreciation
A depreciation method (e.g., MACRS) that allows a greater portion of the property cost to be deducted in the first years after purchase, rather than spreading the cost evenly over the life of the asset, as with the straight-line depreciation method.
Acceleration Clause
A clause in a negotiable instrument that speeds up or accelerates the time of payment upon the occurrence of a stated event or at the option of the maker or holder
Acceptance (of an offer)
The acceptance is the offeree’s assent to enter into a contract. Acceptances must be unequivocal
Acceptor
A drawee who has accepted a draft for payment
Accommodation party
An accommodation party is one who signs a negotiable instrument for the purpose of lending his or her name and credit to another party. In essence, an accommodation party is a surety
Accord and Satisfaction
An accord is an agreement to substitute one contractual obligation for another. Satisfaction is the performance of the accord. The original contractual duties are not discharged until the accord is satisfied. See also substituted contract
Account
An account is any right to payment for goods, services, real property, or use of a credit card, not evidenced by an instrument or chattel paper.
Accountant-Client Privilege
A rule of evidence protecting confidential information exchanged between an accountant and her client. The rule is not recognized under federal law or in many states.
Accredited Investor
An individual with a net worth over a four-year period that averages more that $1 million, excluding the value of the person’s residence
Accrual Accounting Method
The form of business accounting in which income is reported in the year earned, and expenses are reported in the year incurred, rather than reporting income and expenses when received or paid, respectively. A business that maintains an inventory is required to use the accrual method for purchases and sales
Accuracy-Related Penalty
An accuracy-related penalty is a penalty based on the accuracy of tax returns. it includes (1) negligence or disregard of rules or regulations, (2) substantial understatement of income tax, (3) substantial valuation misstatement, and (4) substantial overstatement of pension liabilities. It does not include the penalty for fraud
Active Income
Income from wages, tips, salaries, commissions, and trade or business in which the taxpayer materially participates
Active Participation
A term the IRS uses to determine if an investor in rental real estate takes an active roles in its management. The rules for active participation are much easier to meet than the material participation rules. An active participant may generally deduct up to $25,000 of rental real estate losses against other income. An active participant must not be a limited partner or own 10% or less of the property
Actual Authority
The authority an agent reasonably believes he possesses because of the principal’s communications to the agent. Actual authority may be express or implied.
Actual Cash Value at Time of Loss
In insurance, the insured’s recovery is limited to the actual cash value of the property at the time of loss considering such factors as the fair market value and the cost of repair or replacement less depreciation
Ad valorem Tax
A tax imposed on the value of the property; for example, real estate taxes.
Adjusted Basis
The amount used to determine profit or loss from a property sale or exchange. The adjusted basis equals an asset’s original cost, plus the cost of improvements to the asset, and minus any deductions, such as depreciation and depletion. Maintenance expenses do not affect the adjusted basis.
Adjusted Gross Income (AGI)
A taxpayer’s income after certain allowable adjustments from gross income, such as IRA contributions, alimony paid, moving expenses, and Keogh account contributions, have been made.
