Term
| Arm's-Length Transaction Concept |
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Definition
| A transaction in which all parties have bargained in good faith and for their individual benefits, not for the benefit of the transaction group. Transactions not made at arm's length are not given any tax effect or are not given the intended tax effect. Related party transactions are not at arm's length |
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Term
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Definition
| Each tax unit must keep separate records and report the results of its operations separate and apart from other tax units. |
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Term
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Definition
| Those that are liable for the payment of tax. The four entities responsible for payment of income tax are Individuals, C corporations, estates, and some trusts. |
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Term
| Assignment-of-Income Doctrine |
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Definition
| all income earned from services provided by an entity is to be taxed to that entity, and income from property is to be taxed to the entity that owns the property. Can't direct wages earned to another and not pay taxes, person who earns it pays it. |
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Term
| Annual Accounting Period Concept |
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Definition
| All entities must report the results of their operations on an annual basis and that each taxable year is to stand on its own apart from others. |
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Term
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Definition
| Taxed on income as it is received and take deductions as they are paid. |
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Term
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Definition
| Report their income as it is earned and take deductions as they are incurred, without regard to actual receipt or payment of cash. |
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Term
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Definition
| Any deduction taken in a prior year that is recovered in a later year is reported as income in the year it is recovered, to the extent that a tax benefit is received from the deduction. |
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Term
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Definition
1) Individuals & their families
2) Individuals & a corporation or partnership if individual owns more than 50%
3) Corporation & Partnership is one person owns more than 50% of both |
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Term
| Substance-Over-Form Doctrine |
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Definition
| Taxability of a transaction is determined by the reality of the transaction, rather than some perhaps contrived appearance. Ex: guy hires 3 yr old daughter as janitor to lower tax on income of sub shop. |
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Term
| All-Inclusive Income Concept |
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Definition
| All income received is considered taxable unless some specific provision can be found in the law that excludes it. |
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Term
| Legislative Grace Concept |
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Definition
| Only congress can grant an exclusion and it must be taken in its narrowest sense. |
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Term
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Definition
| Any asset that is NOT a receivable, inventory, real or depreciable property used in a trade or business, or certain intangible assets, such as copyrights. Capital assets consist of stocks, bonds, and other investment related assets. |
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Term
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Definition
| Results from sale of capital assets that must be separated from other gains & losses and aggregated through netting procedure before entered into income. |
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Term
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Definition
| No income is taxed until all capital previously invested in the asset is recovered. pg 58 ex: 25 |
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Term
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Definition
| No income is recognized for tax purposes until it has been realized by the taxpayer. Realization occurs when an arm's length transaction takes place, Goods are sold, Services rendered. Mere changes in value without the advent of a realization event, in which the taxpayer receives the change in value, do not result in a taxable recognition. Ex: building built on leased land. |
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Term
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Definition
| Income should be recognized and a tax paid on the income when the taxpayer has the resources to pay the tax. |
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Term
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Definition
| Deduction is allowed only for an expenditure that is made for some business or economic purpose that exceeds any tax avoidance motive. 1) trade or business expenses 2) Investment Exp 3) Personal Exp |
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