| Term |
Definition |
| Dealer |
A person or firm that
regularly buys and sells property. A person is
classified as a dealer if at the time of the
sale, that person held the property primarily for
sale to customers in the ordinary course of
business. Gains from the sale of such property
are ordinary gains not capital gains. |
| Declining Balance
Method of Depreciation |
An accelerated method of
depreciation. The percent is determined by the
type of property. The depreciable basis for the
next year is reduced by the depreciation
deduction taken in the current year. |
| Deduction |
An amount that may be
subtracted from income that is otherwise taxable. |
| Deferred Compensation |
Compensation that will
be taxed when received or upon the removal of
certain restrictions on receipt and not when
earned. For example, contributions by an employer
to a qualified pension or profit-sharing plan on
behalf of an employee is considered deferred
compensation. Such contributions will not be
taxed to the employee until the funds are made
available or distributed to the employee, usually
upon retirement. |
| Deferred Gain |
Nonrecognition of
realized gain at the time of a tax-deferred
exchange. Deferred gain on the sale of a
principal residence generally applies only to
those sales made before May 7, 1997. |
| Defined Benefit Plan |
An employee benefit plan
that provides determinable benefits not based on
employer profits. |
| Defined Contribution
Plan |
An employee benefit plan
that provides a separate account for each person
covered and pays benefits on amounts allocated to
each account. |
| Dependency Exemption |
An exemption for an
individual who qualifies as the taxpayer's
dependent ($2,750 for 1999). |
| Dependent |
An individual who
qualifies to be claimed as a dependent exemption
on another person's income tax return. |
| Dependent Care Credit |
A nonrefundable credit
based on expenses paid for a dependent's care.
Such care must enable the taxpayer to be
gainfully employed or to look for gainful
employment. The credit is computed on Form 2441
for Form 1040 filers and on Schedule 2 for Form
1040A filers. |
| Depletion |
The process by which the
cost or other basis of a natural resource (for
example, an oil and gas interest) is recovered
upon extraction and sale of the resource. The two
ways to determine the depletion allowance are the
cost and percentage methods, both of which are
defined elsewhere in this glossary. |
| Depreciable Asset |
Tangible personal
property or real property used in business or
held for the production of income with a
determinable useful life of more than one year. |
| Depreciation |
The deduction of a
reasonable allowance for the wear and tear of
assets (excluding inventory) used in a trade or
business or held for the production of income. In
a more narrow sense, the term depreciation refers
to the method used to write off the cost or other
basis of assets placed in service before 1981
over their estimated useful lives. |
| Devise |
A transfer of real
property to a beneficiary under the terms of a
decedent's will. For income tax purposes, the
term is used mainly in connection with
determining the basis of property so acquired.
Basis is the value of the property at the date of
death of the decedent, or the later alternate
valuation date if chosen for estate tax purposes.
Receipt of property by devise is not a taxable
event. |
| Disability Pension |
A taxable pension from
an employer-funded disability plan or a
disability provision of a retirement plan. |
| Disaster Loss |
If a casualty is
sustained in an area designated as a disaster
area by the President of the United States, the
casualty is designated a disaster loss. A
disaster loss may be treated as having occurred
in the taxable year immediately preceding the
year in which the disaster actually occurred.
Thus, immediate tax benefits are provided to
victims of the disaster. |
| Distribution |
Money a taxpayer
withdraws from a retirement plan such as an
individual retirement arrangement or an employer-maintained
pension plan. See also Distributions by
Corporations. |
| Distributions by
Corporations |
As used in the tax Code,
this term refers to any amounts paid by a
corporation to its shareholders, or any property
distributed, other than for value received in
goods or services. It is a broader term than
dividends, for a distribution may be a divid end,
and therefore taxable income, or it may be a
return of capital. See also Returns of Capital. |
| Dividend |
A stockholder's share of
the profits of a corporation. An insurance
dividend is not a true dividend but a return of
premium. Dividends from a savings and loan
association or credit union are interest, not
dividends. |
| Divorce Decree (Final) |
A decree issued after a
divorce is declared final by the court. This
action dissolves the marriage and returns the
spouses to unmarried status. Alimony payments
made as a result of this decree are deductible by
the payer and income to the recipient, if
requirements are met. |
| Divorce Decree (Interlocutory) |
A divorce decree that is
not yet final. Alimony paid under an
interlocutory decree is deductible by the payer
and income to the recipient, if requirements are
met. |
| Dollar Amount Paid |
Cash plus the principal
amount of a loan on the property that the
taxpayer is legally obligated to pay. |
| Drought Sale |
The sale of more animals
in a particular year than is the farmer's usual
practice because of drought conditions. If
certain conditions are met, the farmer may elect
to report the proceeds from such sales either in
the year of the sale or in the following year. |
