Glossary

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Accelerated cost recovery system (ACRS). A statutory method of depreciation allowing accelerated rates for most types of property used in business and income-producing activities during the years 1981 through 1986. It has been superseded by the modified accelerated cost recovery system (MACRS) for assets placed in service after 1986; see 42.4 and 42.12.

Accelerated depreciation. Depreciation methods that allow faster write-offs than straight-line rates in the earlier periods of the useful life of an asset. For example, in the first few years of recovery, MACRS allows a 200% double declining balance write-off, twice the straight-line rate; see 42.5–42.8.

Accountable reimbursement plan. An employer reimbursement or allowance arrangement that requires you to adequately substantiate business expenses to your employer, and to return any excess reimbursement; see 20.32.

Accrual method of accounting. A business method of accounting requiring income to be reported when earned and expenses to be deducted when incurred. However, deductions generally may not be claimed until economic performance has occurred; see 40.3.

Acquisition debt. Debt used to buy, build, or construct a principal residence or second home and that generally qualifies for a full interest expense deduction; see 15.2.

Active participation. Test for determining deductibility of IRA deductions. Active participants in employer retirement plans are subject to IRA deduction phase-out rules if adjusted gross income ...

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