Taxation Essentials of LLCs and Partnerships

Tax Glossary

401(k) plan

A qualified retirement plan to which contributions from salary are made from pre‐ tax dollars.

Accelerated depreciation

Computation of depreciation to provide greater deductions in earlier years of equipment and other business or investment property.

Accounting method

Rules applied in determining when and how to report income and expenses on tax returns.

Accrual method

Method of accounting that reports income when it is earned, disregarding when it may be received, and expense when incurred, disregarding when it is actually paid.

Acquisition debt

Mortgage taken to buy, hold, or substantially improve main or second home that serves as security.

Active participation

Rental real estate activity involving property management at a level that permits deduction of losses.

Adjusted basis

Basis in property increased by some expenses (for example, by capital improvements) or decreased by some tax benefit (for example, by depreciation).

Adjusted gross income (AGI)

Gross income minus above‐the‐line deductions (such as deductions other than itemized deductions, the standard deduction, and personal and dependency exemptions).

Alimony

Payments for the support or maintenance of one's spouse pursuant to a judicial decree or written agreement related to divorce or separation.

Alternative minimum tax (AMT)

System comparing the tax results with and without the benefit of tax preference items for the purpose of preventing tax avoidance.

Amortization

Write‐off of an intangible ...