Tax Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
S corporation

A corporation that elects S status in order to receive tax treatment similar to that of a partnership.

Salvage value

The estimated value of an asset at the end of its useful life. Salvage value is ignored by ACRS and MACRS rules.

Section 1231 property

Depreciable property used in a trade or business and held for more than a year. All Section 1231 gains and losses are netted; a net gain is treated as capital gain, a net loss as an ordinary loss.

Section 179 deduction (or First-year expensing)

A deduction allowed for investments in depreciable business equipment in the year the property is placed in service.

Section 457 plan

Deferred compensation plan set up by a state or local government, or tax-exempt organization, which allows tax-free deferrals of salary.

Self-employed person

An individual who operates a business or profession as a proprietor or independent contractor and reports self-employment income on Schedule C.

Self-employment tax

Tax paid by self-employed persons to finance Social Security coverage. In 2007, there are two rates. A 12.4% rate applies to a taxable earnings base of $95,700 or less and a 2.9% rate applies to all net earnings.

Separate return

Return filed by a married person who does not file a joint return. Filing separately may save taxes where each spouse has separate deductions, but certain tax benefits require a joint return.

Short sale

Sale of borrowed securities made to freeze a paper profit or to gain from a declining market.

Short tax year

A tax year of less than 12 months. May occur with the startup of a business or change in accounting method.

Short-term capital gain or loss

Gain or loss on the sale or exchange of a capital asset held one year or less.

Simplified employee plan (SEP)

IRA-type plan set up by an employer, rather than the employee. Salary-reduction contributions may be allowed to plans of small employers set up before 1997.

Standard deduction

A fixed deduction allowed to taxpayers who do not itemize deductions. The amount depends on filing status, age, and blindness.

Standard mileage rate

A fixed rate allowed by the IRS for business auto expenses in place of deducting actual expenses.

Statutory employees

Certain employees, such as full-time life insurance salespersons, who may report income and deductions on Schedule C, rather than on Schedule A as miscellaneous itemized deductions.

Stock dividend

A distribution of additional shares of a corporation’s stock to its shareholders.

Stock option

A right to buy stock at a fixed price.

Straddle

Taking an offsetting investment position to reduce the risk of loss in a similar investment.

Straight-line method

A method of depreciating the cost of a depreciable asset on a pro rata basis over its cost recovery period.

advertisement