Industry Related Definitions
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Realized Gain or Loss
The
difference between the amount received upon the sale or other
disposition of property and the adjusted basis of the property.
Real Property
Also known
as real estate, includes land, buildings, and their structural
components.
Recapture
The
inclusion of a previously deducted or excluded amount in gross income
or tax liability. Recapture may be applicable to accelerated
depreciation, cost recovery, amortization, and various credits.
Recapture of Depreciation or Cost Recovery
Each year that a depreciable business asset is owned, depreciation is
claimed that theoretically corresponds with the using up of the
property through normal wear, obsolescence, etc. Thus, the property
should be worth approximately its adjusted basis. If the property is
sold for more than its adjusted basis, section 1245 of the tax Code
requires that the gain on personal property and certain non residential
real property (to the extent of depreciation claimed) be recaptured;
that is, included as ordinary income on the tax return. The purpose of
this recapture is to prevent capital gain treatment of gain resulting
from claiming depreciation. The recapture of depreciation or cost
recovery rules don't apply when the property is disposed of at a loss.
Recognized Gain or Loss
The
portion of realized gain or loss that is subject to income taxation.
Recovery
The amount
of a deduction or creditable expense paid in a previous year that is
later refunded to the taxpayer. The recovered amount must usually be
included in income in the year it is received, to the extent of the
previous tax benefit.
Recovery Exclusion
The
portion of an item deducted in a prior year and recovered in whole or
part in a later tax year, which did not generate any tax benefit for
the taxpayer. Because no tax benefit was derived from this portion of
the recovered amount, it is not taxable.
Recovery of Cost
The amount
that was paid for income received--usually a factor only in income
from sales of items purchased for resale, income from sales of
property, and income from pensions or annuities. The portion of income
that represents recovery of cost is not taxable.
Recovery Period
A period of years during which the cost of business assets is written
off under ACRS or MACRS.
Recovery Property
Tangible
depreciable property that is not excluded from ACRS (Accelerated Cost
Recovery System) or MACRS (Modified Accelerated Cost Recovery System).
Generally, this property acquired for use in a trade or business or
property held for the production of income.
Refundable Credit
A credit for which the IRS will send the taxpayer a refund for any
amount in excess of the taxpayer's tax liability.
Registered
pension plan (RPP)
A
private pension plan, registered and approved by the government, for
which contributions, up to a given maximum, are tax-free.
Registered
retirement savings plan (RRSP)
A
private pension plan, registered and approved by the government, for
which contributions, up to a given maximum, may be deductible when
calculating taxable income.
Regular Method (Automobile Expenses)
A deduction for business use of the taxpayer's vehicle based on actual
cost of gas, oil, repairs, tires, washing, etc. plus a deduction for
depreciation.
Regulated Investment Company (Mutual Fund)
A company
or trust that uses its capital to invest in other companies. The two
principal types are closed-end and open-end mutual funds. Shares in
closed-end mutual funds, some of which are listed on stock exchanges,
are readily transferable on the open market and are bought and sold
like other shares. Open-end funds sell their own new shares to
investors, stand ready to buy back their old shares, and are not
listed.
Regulations
The IRS
Commissioner publishes his interpretation of the tax Code in the form
of regulations. They do not have the force and effect of law except in
those cases in which the law on a particular subject calls for rules
on that subject to be expounded through regulations.
Reinvested Dividends
Earnings that the shareholder has accepted as additional shares of
stock rather than as cash. They are taxable in the year constructively
received.
Rental Income
Income
received by the taxpayer for allowing another person's use of the
taxpayer's property. Rental income includes advance rental payments,
late payments, and current payments. Payments received for lease
cancellation and forfeited security deposits are rental income the
year received or forfeited. Rental income is considered passive income
for purposes of the passive loss rules, except for that of qualified
real estate professionals.
Repairs
Current expenditures to restore business-use property to an original
condition or maintain the property through minor alterations rather
than to extend its useful life. The cost of repairs normally is
deductible annually. Substantial repairs that increase the value or
extend the life of the property are treated as capital improvements
and must have their cost recovered over a number of years.
Repossession
Taking
possession of property that was earlier sold on an installment
contract because the buyer defaults on payment of the debt.
Resident Alien
A citizen
of another country who lives in the United States and/or has resident
status by law or visa, or passes the substantial presence test.
Retained
Earnings
The
capital that comes from company profits which has not yet been paid
out to shareholders.
Returns of Capital (Nontaxable Distributions)
A return of a shareholder's investment generally made because an
excess amount of capital has been accumulated. Returns of capital may
be received in cash or reinvested to acquire additional shares at the
shareholder's request. Amounts received that are not in excess of the
basis of the stock on which they are paid are not taxable. The basis
of the stock on which returns of capital are paid must be reduced.
Amounts received in excess of the basis of the stock on which returns
of capital are paid are reported on Schedule D, in Part I if stock has
been owned short term, or in Part II if stock has been owned long
term.
Revenue
An
increase in equity resulting from the proceeds of the sale of goods
and services.
Right
The
opportunity a corporation gives a shareholder to buy additional shares
at a special price for a limited time. Shareholders who don't use
their rights can sell them to other investors.
Rollover
The
conversion of an employer distribution or an existing IRA to another
IRA without taxable consequences. This action must take place within
60 days of receiving the distribution.
Roth IRA
Contributions
to Roth IRAs, which were introduced in 1998, are not deductible.
Earnings grow tax free and qualified withdrawals are also tax free.
Royalty
A
payment received for the right to exploit a taxpayer's ownership of
natural resources or a taxpayer's literary, musical, or artistic
creation.
Royalty Interest
An
interest in the oil and gas in place that entitles the holder to a
specified fraction, in kind or in value, of the total production from
the property, free of any expense of development and operation.
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