Industry Related Definitions
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N
Necessary
An expense
that is appropriate and helpful in furthering the taxpayer's business
or income-producing activity. See also Ordinary defined elsewhere in
this glossary.
Negligence
A lack of
such reasonable care and caution as would be expected of a prudent
person. A penalty may be assessed if any part of an underpayment of
tax is due to negligent or intentional disregard of rules and
regulations.
Net Operating Loss (NOL)
A net loss for the year attributable to business or casualty losses.
In order to mitigate the effect of the annual accounting period
concept, the law allows taxpayers to use an excess loss of one year as
a deduction for certain past or future years. In this regard, a
carryback period of two years (three or five years for certain losses)
and a carryforward period of 20 years is allowed.
Net
worth
The
difference between the total assets and total liabilities of a
business.
Nonbusiness Bad Debts
A bad debt
loss not incurred in connection with a creditor's trade or business. A
nonbusiness bad debt is deductible as a short-term capital loss and is
allowed only in the year the debt becomes entirely worthless.
Noncustodial Parent
The parent
who does not have physical custody of the child.
Nonrecourse Debt
An
obligation for which the endorser is not personally liable.
Nonrecovery Property
Property
that does not qualify for a cost recovery deduction under ACRS or
MACRS or property the taxpayer elects to exclude from ACRS or MACRS by
choosing a depreciation method not based on a number of years.
Nonrefundable Credit
A credit that cannot exceed the taxpayer's tax liability.
Nonresident Alien
A person
who is not a U.S. citizen and does not live in the United States, or
lives in the United States under a nonresident visa, or does not meet
the substantial presence test.
Nontaxable Distributions
A general
term applied to stock dividend distributions that are not taxable.
These distributions generally take the form of return of capital,
stock dividends, stock splits, and/or tax-free distributions.
Nontaxable Earned Income
Income a
taxpayer receives for services that is excludable from gross income.
Examples include military housing allowances, ministers' housing
allowances, excludable combat pay, and deferred compensation.
Non taxable earned income is earned income for purposes of computing
the earned income credit.
Nontaxable Exchange
An
exchange on which no gain or loss is recognized in the current year.
Nontaxable Income
Income that is by law exempt from tax.
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