An extended form of an IOU from one party to another that enables a payee to receive payments (possibly with interest) over a set period of time, ending with the date at which the entire loan is to be repaid.Loan notes are usually provided in lieu of cash at the payee's request. A loan note can help an individual investor avoid an undue tax hit resulting from a lump sum payment from a settlement or cash-out package from a company. In these cases, the individual is given a choice between cash or a loan note.When loan notes are used between businesses, the purchaser is able to act as a borrower and make payments over time, often at a minimal or "at cost" interest rate.
An annual limit on the amount of depreciation that can be taken on a luxury car used for business purposes. This amount is indexed each year for inflation. The purpose of luxury automobile limitations is to control the type and amount of money spent on luxury automobiles by businesses for tax purposes. The limitations apply to any four-wheeled vehicle used primarily on public streets. The economic stimulus package of 2008 temporarily raised the luxury automobile limitations to $10,960 for cars and $11,060 for trucks and vans. There are several different categories of luxury cars, and each has a different depreciation schedule.
This act provides an incentive for home developers to build, buy and refurbish housing for low-income taxpayers. The Low-Income Housing Tax Credit also provides a non-refundable credit for those who invest in low-income housing projects as a means of stimulating the flow of capital into this sector. The type of housing structures typically used for this credit are multi-family dwellings. Watch: Tax Deduction Vs. Tax Credit The Low-Income Housing Tax Credit was created as part of the Tax Reform Act of 1986. Residents of these housing projects cannot have incomes that exceed certain guidelines in order for the project to qualify for the credit. This part of the act has been extremely successful, and has created over a hundred thousand low-income housing units and several hundred million dollars in investment capital.
A method of computing the cost basis of an asset that is sold in a taxable transaction. There are five major lot relief methods that can be used for this purpose. They include FIFO (First-In-First-Out), LIFO (Last-In-First-Out), Dollar Value LIFO, Specific ID (a specific lot of securities or assets are chosen to use for the cost basis) and Average Cost (the average cost basis of all securities or assets purchased is used). The choice of lot relief method can have a substantial impact on the amount of tax that may be paid when an asset is sold. There are several factors that can determine which method is best, including the amount of gain, the amount of income that year versus projected future income and the method that was chosen for previous sales.
An Internal Revenue Service rule implemented in 1991 to prevent a consolidated group - a business conglomerate filing a single tax return on behalf of its subsidiaries - from taking a tax deduction for losses on the sale of a subsidiary's stock. The IRS wanted to make sure corporations paid taxes on their capital gains and wanted to prevent them from claiming the same loss twice as a tax deduction - known as a duplicated loss. An important court case for the loss disallowance rule was Rite Aid Corp v. United States. In this case, the Federal Circuit Court of Appeals rejected the IRS's duplicated loss component of the loss disallowance rule.
A filing status for married couples that have wed before the end of the tax year. When filing under the married filing jointly status, couples can record their respective incomes, exemptions and deductions on the same tax return. Married filing jointly is best if only one spouse has a significant income. However, if both spouses work and the income and itemized deductions are large and very unequal, it may be more advantageous to file separately. When filing jointly, both you and your spouse are equally responsible for the return and the taxes. If either one of the spouses understates the tax due, both are equally liable for the penalties unless the other spouse claims he or she was not aware of the mistake and did not benefit from it. Taxes can get pretty technical and tricky so if you or your spouse is having trouble determining tax liability, talk to an experienced tax preparer.
The increased tax burden for married couples compared to when they were filing seperate tax returns as singles. Progressive tax rate structures in the United States led to a situation where higher income individuals and couples pay higher taxes than their lower income counterparts. The marriage penalty has been at the center of many political debates and the United States governement has taken steps to resolve the taxation discrepency. The fact that married couples tend to pay more in taxes than single filers is debatable. However, some believe that the marriage penalty has led to greater consideration by couples to avoid marriage.
A tax deduction that allows an individual to transfer some assets to his or her spouse tax free, creating a reduction in taxable income. A marital deduction is mainly used for the purposes of estates and gifts. The Internal Revenue Service has strict guidelines for allowable deductions, so it is important to make sure that you or your accountant adheres to them when making deductions.
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