The Accelerated Cost Recovery System (ACRS) was a method used to depreciate property for tax purposes at an accelerated rate. Introduced by the Economic Recovery Tax Act of 1981 (ERTA), it allowed for quicker cost recovery of investments in tangible property.
Tax laws that limit the amount of deductible tax losses an investor can claim based on their tangible financial risk in an investment. These rules were specifically extended to real estate investments by the 1986 Tax Reform Act.
Depreciation recapture refers to the process of collecting income tax on gains made through the sale of depreciable property, where deductions for accelerated depreciation exceed via recapture in accordance with Section 1250 of the Internal Revenue Code.
The principle that transactions must have a genuine financial or economic effect and not be solely orchestrated to evade taxes. This concept is crucial for determining the legitimacy and validity of financial actions, especially in tax law.
Equal and Uniform Taxation is a principle asserting that all individuals and property within the same class must be treated equally, with the same rate and value applied to property being taxed.
An estate tax is a levy on the estate of a deceased person, based on the value of the property left by the deceased. The tax is typically calculated based on the market value of the estate either at the date of death or six months afterward, taken at the lower value if applicable.
Interest deductions under current tax law vary based on the type of interest incurred. From investment interest to consumer interest, different rules apply for deductibility.
Passive activity income refers to profits derived from business activities in which the taxpayer does not materially participate or rental activities, which are typically deemed passive regardless of material participation.
Safe harbor refers to regulations or provisions designed to shield companies or individuals from legal repercussions, provided they adhere to specified guidelines or practices. These rules offer clarity and a guarantee of compliance, thus minimizing legal risk and ambiguity.
A tax liability refers to the amount of tax debt owed to the Internal Revenue Service (IRS) or a state's tax authority. These liabilities can result from income earned, properties owned, or other taxable activities.
