CPCU 556 vocab ch 9

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mtarman
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113044
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CPCU 556 vocab ch 9
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2011-10-29 19:20:39
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CPCU 556 vocab
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CPCU 556 vocab ch 9
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  1. Gross income
    All income before taxes and expenses are deducted
  2. Top nominal marginal individual federal income tax rate
    The highest rate applicable among the various filing statuses under tax code; on a reducing scale under the Economic Growth and Tax Releif Reconciliation Act until 2010
  3. Average income tax rate
    Total tax payable divided by taxable income
  4. Filing status
    The election of an income tax rate filing schedule from one of five individual taxpayer categories, based on family status
  5. Indexing the tax schedule and other amounts
    The government's annual effort to adjuct the tax law for the effects of inflation upon the individual tax brackets, the standard deduction amounts, the amount of personal and dependency exemptions, the thresholds for phassing out certain itemized deductions and the personal and dependency exemptions, and certain other limits or features in the tax law
  6. Kiddie tax
    the net unearned income of children under age 14 that is taxed to the child but at the child's parents' top marginal federal income tax rate, assuming this rate is higher that the child's tax rate
  7. Income in respect of a decedent (IRD)
    Income that arises when a deceased person was entitled to items that would have been gross income for federal income tax purposes, but which were not includable in the decedent's gross income for the year of their death
  8. Cash basis method of recognizing income
    An accounting method for income in which the items of income or expense are considered received, and hence taxable for income tax purposes, in the year they are actually or constructively received
  9. Constructive receipt
    A record that is created when the income has been creditedto the taxpayer or set apart so that he or she can actually receive it at any time without any sucstantial limitation or restriction on his or her right to do so
  10. Accrual basis method of recognizing income
    An accounting method for income in which the items of income or expense are includible in gross income for the year in which the right to receive the income becomes fixed and the amounts receivable become determinable with reasonable accuracy
  11. Capital gains and losses
    A taxable event realized from the sale or exchange of capital assets, which include, with some exceptions, the property that taxpayers own
  12. Amount realized
    The value received from the sale or exchange of a capital asset
  13. Adjusted basis
    The price from which to calculate and derive capital gains or losses from an asset's sale or exchange. It is generally cost plus commisions and any cost of improvement, depreciation, damage, or other incidents that may have affected the property's value
  14. Net capital gains
    A tax calculation determined by adding net long term capital gains less any net short term capital losses
  15. Net long term capital gains
    A tax calculation determined by adding long term capital gains less long term capital losses
  16. Net short term capital gains
    a taxable calculation determined by adding short term capital gains less short term capital losses
  17. Appreciated financial position
    A position in any stock, debt instrument, or partnership interest in which there would be gain in the position were sold or otherwise terminated at its fair market value
  18. Constructive sale
    A tax provision introduced in the Taxpayer Relief Act of 1997 designed to prohibit the use of certain hedging techniques that essentially had allowed holders of highly appreciated assets to eliminate the risk of owning the securities without actually selling the securities and realizing a sizeable capital gain
  19. Nonrecognition provision
    Any specific tax code provision that defers income taxation on any gain to some future transaction or event when, depending on the property involved and the circumstances, ther may or may not be a tax due
  20. Carryover of income tax basis
    A concept that applied when a nonrecognition provision in the tax code defers capital gains. When a capital asset is sold or exchanged to the new property acquired so, in effect, the new property takes the old property's basis
  21. Alternative minimum tax (AMT)
    A federal tax created to ensure that high income individuals, corporations, trust and estates pay a minimal level income tax, regardless of deductions, credits, or exemptions. It operates by adding certain tax preference items back into adjusted gross income. The tax is applied if it exceeds a taxpayer's regular income tax
  22. Alternative minimum tax income (AMTI)
    One of the steps in calculating the alternative minimum tax: A taxpayer's regular taxable income for the year, with the addition of certain tax preference items, and the addition or subtraction of certain adjustements
  23. C Corp
    A seperate tax paying entity apart from its shareholders; it pays tax on its taxable income at corporate income tax rates, and its taxable income is its gross income subject to tax less deductions allowable to corporations
  24. Net operating loss (nol)
    An operating loss that occurs when a C corporation's business deductions exceed its business gross income with certain adjustments
  25. Personal Service Corporations
    A corporation whose principle activity is the performance of personal services; services are substantially performed by employee-owners of the corporation
  26. Personal holding company (phc)
    A corporation in which its income is mainly from personal holding company income and more than 50% of its stock is owned by five or fewer individuals
  27. Pass through business entity
    An entity that is not taxed itself, but rather reports its profits, losses, and other tax items to its owner, who pays taxes on them or deducts them on the owner's individual tax return
  28. Partnership
    2 or more person that join together to carry on a trade or a business and to share profits and losses, with each partner contributing cash, property, or services. the partnership does not pay taxes but rather reports each partners distributive share of the partnership's taxable income or loss
  29. Publicly traded partnership (ptp)
    A partnership that has its interests traded on an established securities market or on a subtantially equivalent secondary market; its is taxed like a corporation, with some significant exceptions
  30. S Corporation
    An eligible domestic corporation that elects to be taxed under Subchapter S of the IRC rather than Subchapter C, and hence not pay any corporate income tax. Profit, losses, and other tax itmes are passed through to the shareholders in proporton to their stockholdings and are taxable to them on their individual returns
  31. Limited liability company (llc)
    A business organization structure that is a hybrid of a partnership and a corporation. owners have limited liability for its debts and obligations, and can generally elect to be taxed like partnerships for federal income tax purposes
  32. Trust
    A fidiciary arrangement where a person transfers property to a trustee to be administered under the terms of the trust for the benefit of trust beneficiaries
  33. Grantor trust
    An arrangement in which a trust's income is taxed to the grantor of the trust and deductions may be taken by the grantor, regardless of whether the grantor receives such income
  34. Simple trust
    An arrangement where a trust must distribute all income currently, and the trust has no charitable beneficiary; the beneficiary is taxed on the current income distributed, and the trust receives a tax deduction for those distributions
  35. Complex trust
    An arrangement that can include a trust in which income can be accumulated, corpus, is distributed, or there are charitable beneficiaries. Therefore, trusts that give the trustee discretion to pay out or to accumulare current income and to distribuite corpurs to beneficiaries would be complex trust for tax purposes
  36. Tax exchange
    A process where an investor is able to maintain approximately the same investment position in a particular field or industry before or after a taxable sale, by selling the investment in which there is a loss then immediately purchasing an investment of about the same investment attractiveness, thus incurring no current tax liability
  37. Equity collar
    A portfollio diversification or hedging strategy consisting of the simultaneous purchase of put and call options on particullar stocks for certain time periods
  38. Exchange fund
    a technique for deferring gain on highly appreciated stock; an investor contributes appreciated stock to a limited partnership in return for a limited partnership interest in the fund
  39. Employee stock ownership plan (ESOP)
    A qualified retirement plan for employees; either stock/money/ or both purchase plans. An employee stock ownership plan must invest primarily in employer securities

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