An ad valorem tax is a tax based on the assessed value of an item such as real estate or personal property. This term is commonly used in the contexts of property tax, real estate transactions, and import duties.
The allodial system is a legal framework that grants individuals full property ownership rights. It is one of the foundational principles underlying property rights in the United States.
Apportion refers to the allocation of property taxes paid by a company, such as a utility or railroad, within a state based on various factors like the value and location of the property.
A Burned-Out Tax Shelter refers to a real estate investment that was once advantageous for providing large income tax deductions but has lost its tax-sheltering benefits over time due to the reduction and eventual nil in depreciation deductions and the decrease in interest deductions as mortgage payments increasingly cover the principal.
A capital asset as defined in Section 1221 of the Internal Revenue Code (IRC) that receives favorable tax treatment upon sale contains various exclusions such as inventory, property held for resale, property used in a trade or business, certain copyrights, and specific U.S. government obligations.
A capital gain is the profit that results from a sale of a capital asset, such as real estate, stocks, or bonds, where the sale price exceeds the purchase price.
The Central Appraisal District (CAD) is a government organization responsible for appraising the value of properties within its jurisdiction for tax assessment purposes. By providing a consistent valuation process, it avoids duplication and inconsistencies among various taxing entities.
A collapsible corporation refers to a specific type of corporation that is dissolved typically within three years, with the IRS treating any gain from the sale or liquidation as ordinary income rather than capital gain for the stockholders.
Domicile refers to the place which an individual treats as their permanent home, or lives in and has a substantial connection with. It determines various legal aspects such as taxation, voting rights, and application of local laws.
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.
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.
Excess accelerated depreciation refers to the accumulated difference between accelerated depreciation claimed for tax purposes and what straight-line depreciation would have been. It's typically recaptured as ordinary income upon sale instead of receiving more favorable capital gains treatment.
Fiscal policy refers to the government's decisions regarding taxation, government spending, and borrowing, designed to influence the economy. It aims to manage economic fluctuations by adjusting public finance mechanics such as federal budgets and deficits.
Imputed interest is the interest that tax authorities assume to be paid on a loan, even if no actual interest payment has been made or if the interest rate is below market levels.
Legal residence, also known as domicile, refers to the place where an individual has their permanent home or principal establishment and to where, whenever they are absent, they intend to return. It plays a crucial role in determining tax responsibilities, voting rights, and other legal and financial obligations.
A Mineral Deed is a legal document used to transfer mineral rights from one party to another. This can include the right to explore, extract, and sell the minerals found beneath the surface of a property. Mineral Deeds can significantly impact property rights, land value, and taxation.
Net Spendable Income, also known as After-Tax Cash Flow, refers to the actual cash flow available to an investor after accounting for all operating expenses, debt service, and taxes.
Phantom taxable income occurs when reported taxable income exceeds actual cash flow, often due to tax-related factors such as depreciation deductions that have been fully utilized.
Pretax income refers to the amount of income that a business or individual earns before any income taxes are deducted. This figure is crucial for determining the net profitability of operations and for financial analysis.
A Real Estate Mortgage Investment Conduit (REMIC) is an entity created for the purpose of holding a fixed pool of mortgages and issuing mortgage-backed securities to investors in a tax-efficient manner.
A Real Estate Operating Company (REOC) is a publicly traded real estate company that chooses not to adopt the tax status of a Real Estate Investment Trust (REIT), allowing it to reinvest earnings and operate without restrictions on the type of real estate businesses it conducts.
The Real Estate Roundtable is an organization composed of leading owners, developers, and stakeholders in the real estate industry, focusing on legislative actions, policies, and government interventions affecting real estate finance, taxation, and investment.
Real Property Trades or Businesses encompass various activities in real estate such as development, construction, rental, and management. For tax purposes, a taxpayer must own an interest greater than 5% in the business for the hours to count toward material participation.
A residence refers to the place where one lives, particularly the dwelling in which one resides. It is a key concept in understanding legal, tax, and social identification of one's primary home. Examples range from personal homes to various domiciles.
Rollback refers to the retroactive claim by a taxing authority of a higher tax rate when property is sold after being taxed at a special use rate or when the land is put to a more valuable use.
Schedule K-1 is a tax form used to report a partner or beneficiary's share of income, losses, capital gains, and other tax information passed through from a partnership or trust.
Section 1221 of the Internal Revenue Code specifies what does not constitute a capital asset, crucial for determining tax treatment of different assets.
Section 1245 of the Internal Revenue Code (IRC) pertains to gains from the sale of depreciable personal property and mandates that depreciation recapture occurs, treating a portion of the capital gains as ordinary income.
A short-term capital gain refers to the profit from the sale of a capital asset that was held for less than 12 months. Unlike long-term capital gains, these gains are typically taxed at higher rates corresponding to ordinary income.
The standard deduction is a flat amount that reduces federal or state taxable income, differing based on the taxpayer's filing status.
A tax assessor is a local government official responsible for determining the value of properties within a jurisdiction for taxation purposes, playing a key role in how property taxes are assessed and collected.
Tax Basis, also known as Basis (Tax), refers to the original value of a property or asset for tax purposes, with potential adjustments over time reflecting improvements, depreciation, or other factors.
A tax shelter is an investment strategy that provides tax advantages by generating more after-tax income compared to before-tax income. These investments can produce before-tax cash flow while creating tax losses that can shield income from other sources from taxation.
A transfer tax is a tax imposed when the title or ownership of property is transferred from one person to another, often seen in real estate transactions.
