Tax terms and definitions

Tax Terms & Definitions - L

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Term	Definition
Land Value	The value of the land in a sale where the total sale price includes land as well as any improvements to the land.
Last In, First Out (LIFO)	An accounting method for valuing inventories for tax purposes. Under this method, the last items purchased are treated as being the first items sold. Ending inventory is valued using the cost of the items with the earlier purchase dates.
Legally Separated	Separated under a decree of separate maintenance that requires the spouses to live apart.
Lessee	One who rents property from another. In the case of real estate, the lessee is also known as the tenant.
Lessor	One who rents property to another. In the case of real estate, the lessor is also known as the landlord.
Lien for Taxes	The U.S. Treasury, as part of its tax collection effort, may attach a lien (a legal claim) on the property of a taxpayer who is delinquent in the payment of amounts owed to the IRS and who has not made arrangements to pay.
Lifetime Learning Credit	A nonrefundable credit equal to 20 percent of the first $5,000 of qualified higher education tuition and fees paid during the year on behalf of the taxpayer, his or her spouse, or his or her dependents.
Like-Kind Exchange	An exchange of property held for productive use in a trade or business or for investment (except inventory and stocks and bonds) for property of the same type. Unless different property is received (called boot), the exchange is nontaxable in the current year. Any gain or loss is not recognized until the property received in the exchange is sold or disposed of. Like-kind exchanges are reported on Form 8824.
Like-Kind Property	Business or investment properties that are the same type.
Liquidation	The process of converting securities or other property into cash.
Liquidation Distributions	A return of capital received because of a partial or complete liquidation (going out of business) of a corporation. The basis of the stock on which liquidation distributions are paid is reduced by the amount of the distributions. Any amount received in excess of basis in the stock is taxable. In a liquidation that results in cancellation of the stock, a loss can be claimed the year the final distribution is received if total distributions are less than the taxpayer's basis. Report liquidation distributions on Schedule D, Form 1040.
Listed Property	Listed property includes passenger autos and other property used for transportation, property generally used for purposes of entertainment, recreation, or amusement, computers not used exclusively at a regular business establishment, cellular telephones, and other property to be specified by the IRS. Restrictions apply to the depreciation of listed property.
Load	The portion of the price of buying shares in a mutual fund that goes for the salesperson's fees and the costs of making the transaction and maintaining the fund.
Lodging	A portion of total support. Lodging includes the fair rental value of a room, apartment, or house in which the dependent lives, a reasonable allowance for the use of furniture and appliances, and all utilities.
Long-Term Capital Gains and Losses	Gains and losses on the sale or exchange of capital assets that have been held for more than 12 months. A net long-term capital gain is the excess of long-term gains over long-term losses, or vice versa for a net long-term capital loss.
Lower of Cost or Market Method of Inventory Valuation	Inventory valuation considering the actual cost or the replacement cost of merchandise on the inventory date. The lower value is used, creating a reduced gross profit for the period in which the decline occurred. An approximately normal gross profit is realized during the period in which the item is sold.
Lump-Sum Distribution	Payment of the entire amount due at one time rather than in installments. Such distributions often occur from qualified pension or profit-sharing plans upon the retirement or death of a covered employee. The recipient of a lump-sum distribution may be eligible for special tax treatment of the distribution.