| Term |
Definition |
| Safe Harbor |
Tax regulations that
allow a (usually) simpler method of determining a
tax consequence than is available following the
precise language of the Code or regulations. An
example is the simplified method for determining
the taxable portion of pension distributions. |
| Salvage Value |
The estimated value that
will be realized upon the sale or other
disposition of an asset at the end of its useful
life. |
| Schedules |
Official IRS forms used
to report various types of income, deductions,
and/or credits. |
| Scholarships and
Fellowships |
Scholarships and
fellowships received by degree candidates for the
payment of tuition, fees, books, supplies, and
equipment are generally excluded from gross
income. Amounts received for room and board as
well as scholarship and fellowship money received
by non-degree candidates must be included in
income. |
| S Corporations |
An elective provision
permitting certain small business corporations
and their shareholders to elect special income
tax treatment. Of major significance is the fact
that S corporation status usually avoids the
corporate income tax and corporate losses can be
claimed by the shareholders. |
| Section (followed by
a number) |
The section of the tax
Code in which particular laws are given. |
| Section 179 Expense
Deduction |
An election to treat the
cost of certain qualified property as a currently
deductible expense rather than as a capital
expenditure. This treatment is also referred to
as expensing. A maximum deduction of $19,000 may
be claimed for qualified assets placed in service
in 1999. The $19,000 deduction may be limited if
the cost of depreciable assets placed in service
in 1999 exceeded $200,000. |
| Section 1231 |
Section 1231 assets are
depreciable assets and real estate used in a
trade or business and held for more than one year.
Under certain circumstances, the classification
also includes timber, coal, domestic iron ore,
livestock (held for draft, breeding, dairy, or
sporting purposes), and unharvested crops. |
| Section 1231 Gains
and Losses |
If the combined gains
and losses from the taxable dispositions of
section 1231 assets is a gain, such gains are
treated as long-term capital gains. In arriving
at section 1231 gains, however, the depreciation
recapture provisions (for example, sections 1245
and 1250) are first applied to produce ordinary
income. If the net result of the combination is a
loss, such gains and losses for section 1231
assets are treated as ordinary. |
| Section 1245 |
Section 1245 assets are
depreciable business use personal property and
certain nonresidential real property. If the sale
of these assets results in a gain, section 1245
of the Code requires the gain to be treated as
ordinary income to the extent of depreciation
allowed or allowable. That is, the depreciation
must be recaptured. Any gain in excess of the
amount required to be recaptured is section 1231
gain, potentially taxable as long-term capital
gain. |
| Section 1250 |
The section that
requires that gain on disposition of real
property be treated as ordinary income to the
extent of the depreciation claimed in excess of
straight line. Any gain in excess of this
ordinary income is section 1231 gain. |
| Securities |
In general, any evidence
of (1) an interest in corporate stock or stock
rights or (2) an interest in any note, bond,
debenture or other evidence of indebtedness
issued by a government or corporation. For
certain tax purposes, however, the definition is
more limited. |
| Self-Employed
Individuals |
Taxpayers who work for
themselves. They decide when, how, and where to
work, obtain their own jobs or sales, pay their
own expenses, and receive social security and
Medicare coverage through payment of self-employment
tax. |
| Self-Employment
Income |
Self-employed
individuals are taxed on their net income from
self-employment and are entitled to social
security and Medicare benefits through the
payment of self-employment tax. |
| Self-Employment Tax |
For 1999, self-employed
persons are subject to social security tax of 12.4
percent on net earnings of up to $72,600 and
Medicare tax of 2.9 percent on all net earnings.
If a self-employed individual receives wages from
an employer that are subject to social security
tax, the amount of self-employment income subject
to social security tax may be reduced. Self-employment
tax is computed on Schedule SE. |
| Separate Maintenance
Payments |
Amounts paid to one
spouse by the other spouse under a court order or
agreement while they live apart. |
| Service Business |
A business in which
income is produced chiefly by personal services
rendered. |
| Severance Damages |
Payment received because
part of a property is condemned and the value of
the retained part is thereby decreased. |
| Shareholder |
An individual or entity
that owns shares of capital stock. |
| Short Sale |
A sale in which the
seller borrows the stock certificates or other
property delivered to the buyer. At a later date,
the seller either purchases similar stock or
property necessary to "cover" the sale,
and delivers it to the lender or delivers to the
lender stock or property that he or she already
held but did not wish to transfer at an earlier
date. For income tax purposes, there is no gain
or loss on the transaction until the short sale
is covered by purchase and transfer. Special
rules apply in determining whether the gain or
loss on a short sale is a long-term or short-term
capital gain or loss. |
| Short-Term Gain or
Loss |
Gain or loss on the sale
or exchange of a capital asset held one year or
less. |
| SIMPLE Retirement
Plan |
Small employers may
establish a savings incentive match plan for
employees retirement plan. A SIMPLE plan can be
either an IRA for each employee or a cash or
deferred arrangement, such as a 401(k) plan. |
| Simplified Employee
Pension (SEP) |
An arrangement whereby
an employer makes contributions to an employee's
individual retirement account (IRA), or a self-employed
person contributes to his own plan. |
| Single |
The filing status used
by an unmarried taxpayer who does not qualify for
any other filing status. |
| Single-Purpose
Agricultural Building |
An agricultural
structure used for only one purpose. Examples are
milking sheds and greenhouses. Such buildings may
be contrasted with, for example, barns. Barns are
generally used for a variety of farming purposes. |
| Social Security and
Medicare Taxes Withheld |
The employee's share of
these taxes that was withheld and submitted along
with the employer's share to the IRS by the
employer. |
| Social Security Tips |
The amount of tips
reported to an employer by an employee that is
subject to this tax. Tips are also subject to
Medicare tax. |
| Social Security Wages |
Total wages paid to an
employee that are subject to this tax. This
amount does not include tips. Wages are also
subject to Medicare tax. |
| Special Five- or 10-Year
Averaging |
These are special
methods available to determine the tax on a
qualified lump-sum distribution for any taxpayer
who was born before 1936 and meets the other
requirements. The tax computed using special five-year
averaging is based on current year tax rates for
a single individual, whereas the tax computed
using special 10-year averaging is based on 1986
rates for a single individual. The taxpayer
chooses whichever method is more advantageous.
The computation is done on Form 4972. Taxpayers
born after 1935 who are at least 59 1/2 when the
distribution was made may choose five-year
averaging only. |
| Standard Deduction |
A base amount of income
not subject to tax. The regular standard
deductions for 1999 are $4,300 for single
taxpayers, $6,350 for heads of household, $7,200
for married couples filing joint returns and
qualifying widow(er)s, and $3,600 for married
persons filing separately. Taxpayers who are
blind and/or age 65 or older have higher standard
deductions. Taxpayers who may be claimed as
dependents on other taxpayers' returns may have
reduced standard deductions. |
| Standard Business
Mileage Rate |
For 1999, two rates
apply: The rate was 32.5 cents per mile for the
period from January 1 through March 31, and 31
cents per mile for the remainder of the year. |
| Statements |
Explanations of various
types of income, deductions, and/or credits
reported on a schedule or directly on Form 1040.
Statements may or may not be official IRS forms. |
| State and Local
Income Tax Withheld |
The amounts withheld
from an employee's pay and submitted to the state
or local tax division as an advance payment of
the employee's state or local income tax. |
| Statutory Employee |
A worker who is treated
as an employee for social security and Medicare
tax purposes and as self-employed for income tax
purposes. The "Statutory employee"; box
on such a worker's Form W-2 should be marked. |
| Stock Dividend |
Additional shares of
stock distributed to shareholders at no cost. The
number of shares received are a percentage of the
shares owned. The basis of the original shares is
generally apportioned equally to the total shares
owned after the distribution. |
| Stock in Trade |
Property held primarily
for sale to customers in the ordinary course of
business. |
| Stock Split |
Additional shares of
stock distributed to shareholders at no cost. The
number of shares received are a ratio of the
shares owned. The basis of the original shares is
generally apportioned equally to the total shares
owned after the split. |
| Straddle |
A combination of a call
and a put (both of which are defined elsewhere in
this glossary) written at the same time on the
same number of shares of a security at the same
price during the same period of time. The call
and put parts of a straddle are generally bought
by different holders. |
| Straight-Line
Depreciation Method |
The most commonly used
method of depreciation prior to 1981. Basis less
salvage value or land value divided by useful
life equals depreciation deduction. |
| Student Loan Interest
Deduction |
An adjustment to income
(limited to $1,500 for 1999) for interest paid
during the year on qualified higher-education
loans. Qualified interest payments are those made
during the first 60 months in which such payments
are required. |
| SUB Pay |
Supplemental
unemployment benefits. These benefits are
generally received from a company-financed fund
and are fully taxable as wages. |
| Support |
The total amount
provided on behalf of an individual. Support
includes food, lodging, and other necessities as
well as recreation and other nonessential
expenditures. Support is not limited to
necessities and can be as lavish as the taxpayer
can afford. |
