Industry Related Definitions
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D
Dealer
A person
or firm that regularly buys and sells property. A person is classified
as a dealer if at the time of the sale, that person held the property
primarily for sale to customers in the ordinary course of business.
Gains from the sale of such property are ordinary gains not capital
gains.
Debit
To record an amount on the left-hand side of an
account.
Debtor
Anyone who owes money to the business.
Declining Balance Method of Depreciation
An
accelerated method of depreciation. The percent is determined by the
type of property. The depreciable basis for the next year is reduced
by the depreciation deduction taken in the current year.
Deduction
An amount
that may be subtracted from income that is otherwise taxable.
Deferred Compensation
Compensation
that will be taxed when received or upon the removal of certain
restrictions on receipt and not when earned. For example,
contributions by an employer to a qualified pension or profit-sharing
plan on behalf of an employee is considered deferred compensation.
Such contributions will not be taxed to the employee until the funds
are made available or distributed to the employee, usually upon
retirement.
Deferred Gain
Nonrecognition
of realized gain at the time of a tax-deferred exchange. Deferred gain
on the sale of a principal residence generally applies only to those
sales made before May 7, 1997.
Defined Benefit Plan
An
employee benefit plan that provides determinable benefits not based on
employer profits.
Defined Contribution Plan
An
employee benefit plan that provides a separate account for each person
covered and pays benefits on amounts allocated to each account.
Dependency Exemption
An
exemption for an individual who qualifies as the taxpayer's dependent
($2,750 for 1999).
Dependent
An
individual who qualifies to be claimed as a dependent exemption on
another person's income tax return.
Dependent Care Credit
A
nonrefundable credit based on expenses paid for a dependent's care.
Such care must enable the taxpayer to be gainfully employed or to look
for gainful employment. The credit is computed on Form 2441 for Form
1040 filers and on Schedule 2 for Form 1040A filers.
Depletion
The
process by which the cost or other basis of a natural resource (for
example, an oil and gas interest) is recovered upon extraction and
sale of the resource. The two ways to determine the depletion
allowance are the cost and percentage methods, both of which are
defined elsewhere in this glossary.
Depreciable Asset
Tangible
personal property or real property used in business or held for the
production of income with a determinable useful life of more than one
year.
Depreciation
The
deduction of a reasonable allowance for the wear and tear of assets
(excluding inventory) used in a trade or business or held for the
production of income. In a more narrow sense, the term depreciation
refers to the method used to write off the cost or other basis of
assets placed in service before 1981 over their estimated useful
lives.
Devise
A transfer
of real property to a beneficiary under the terms of a decedent's
will. For income tax purposes, the term is used mainly in connection
with determining the basis of property so acquired. Basis is the value
of the property at the date of death of the decedent, or the later
alternate valuation date if chosen for estate tax purposes. Receipt of
property by devise is not a taxable event.
Disability Pension
A taxable
pension from an employer-funded disability plan or a disability
provision of a retirement plan.
Disaster Loss
If a
casualty is sustained in an area designated as a disaster area by the
President of the United States, the casualty is designated a disaster
loss. A disaster loss may be treated as having occurred in the taxable
year immediately preceding the year in which the disaster actually
occurred. Thus, immediate tax benefits are provided to victims of the
disaster.
Distribution
Money a
taxpayer withdraws from a retirement plan such as an individual
retirement arrangement or an employer-maintained pension plan. See
also Distributions by Corporations.
Distributions by Corporations
As used in
the tax Code, this term refers to any amounts paid by a corporation to
its shareholders, or any property distributed, other than for value
received in goods or services. It is a broader term than dividends,
for a distribution may be a dividend, and therefore taxable income, or
it may be a return of capital. See also Returns of Capital.
Dividend
A
stockholder's share of the profits of a corporation. An insurance
dividend is not a true dividend but a return of premium. Dividends
from a savings and loan association or credit union are interest, not
dividends.
Divorce Decree (Final)
A decree
issued after a divorce is declared final by the court. This action
dissolves the marriage and returns the spouses to unmarried status.
Alimony payments made as a result of this decree are deductible by the
payer and income to the recipient, if requirements are met.
Divorce Decree (Interlocutory)
A divorce
decree that is not yet final. Alimony paid under an interlocutory
decree is deductible by the payer and income to the recipient, if
requirements are met.
Dollar Amount Paid
Cash plus
the principal amount of a loan on the property that the taxpayer is
legally obligated to pay.
Drawings
A decrease in owner's equity resulting from a
personal withdrawal of funds or other assets by the owner.
Drought Sale
The sale
of more animals in a particular year than is the farmer's usual
practice because of drought conditions. If certain conditions are met,
the farmer may elect to report the proceeds from such sales either in
the year of the sale or in the following year.
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