Accelerated cost recovery system (ACRS). A system of depreciation in the tax law. It replaced traditional methods of depreciation starting in 1981. Under ACRS, costs of assets are deducted over certain preset periods. The amount of yearly depreciation and the time or useful life over which depreciation is taken depend on the class the property is placed in by the ACRS system (e.g., realty, equipment). See also “Modified accelerated cost recovery system.”

Accelerated depreciation. A faster method of depreciating a business asset, which allows for larger deductions in the early years of the asset's "life," and smaller deductions later. (See also “Depreciation,” "Straight-line depreciation.")

Accounting period. The 12-month period used by a taxpayer to calculate his federal income tax liability. Unless a specific fiscal year is chosen, a taxpayer’s accounting period is the January-to-December calendar year.

Accrual basis of accounting (or accrual method of accounting). As opposed to “Cash method” or “Cash basis,” a method of accounting applied for tax purposes. The method of tax accounting used determines when a transaction has significance for tax purposes. Under the accrual method, a transaction is taxed when the taxpayer “accrues” an obligation to pay or a right to receive a payment is created. In the case of a service business, for example, income tax would be payable in the year during which services are rendered, as opposed to the year when payment is actually made (as would be the case under the cash method). The accrual method is used by most businesses. Smaller businesses use the cash method.

ACRS. See “Accelerated cost recovery system.”

Adjusted basis. The cost of an asset (its basis) adjusted downward for depreciation (for business property), upward for improvements (for real estate), or upward or downward for withdrawals or reinvestment (as to securities, funds, accounts, insurance or annuities). Adjusted basis is used to compute gain or loss on a sale or exchange of an asset. It is also the basis on which depreciation is calculated.

Adjusted gross income (AGI). The amount of income considered actually "available" to be taxed. Adjusted gross income is gross income reduced principally by business expenses incurred to earn the income and other specified reductions (such as alimony).

Advance payments. Prepayments for services or goods. These generally must be included in gross income when received by both accrual-basis and cash-basis taxpayers.

AGI. See “Adjusted gross income.”

Alternative minimum tax (AMT). Provisions in the tax law intended to prevent taxpayers from paying too little income tax. The AMT kicks in once a taxpayer has too many of certain deductions or other tax benefits, and varies depending on the taxpayer’s income level.

AMT. See “Alternative minimum tax.”

Amended return. A return, filed on Form 1040X, that is filed at some time after the original return was filed, and used to correct errors or claim a refund of previously paid tax.

Amortization. The deduction over time of amounts spent to create or improve certain capital assets. Amortization — instead of depreciation — is required for certain assets, such as goodwill, that are enumerated in the tax law. Note that the tax meaning of this term differs from the financial meaning of the term “amortization,” as in “amortization of a loan.”

Amount realized. Applies in calculating gain or loss realized by a taxpayer who sells or exchanges an asset. The “amount realized” is the amount received by a taxpayer on the sale or exchange: the sum of cash and other property or services received, plus any debt of the seller that is taken over by the buyer. The realized gain or loss (i.e., profit or loss for tax purposes) is, generally, the amount realized minus the asset’s adjusted basis.

Annuitant. Someone receiving a pension or an annuity.

Annuity. A sum of money that is payable at specified intervals for a specified period of time, or for the life of the annuitant. For tax purposes, payments are part return of capital and part return on the capital investment, and therefore partly taxable and partly nontaxable.

Applicable Federal Rates (AFRs). Minimum interest rates that must be charged on various transactions that involve payments over a number of years. If the parties to a transaction do not adhere to these rates, the IRS will impute the interest.

At-risk rules. Tax rules that limit an investor's deductible losses from an investment to the amount actually invested. Without these rules, investors could claim loss deductions for amounts they are not personally liable for — i.e., for amounts as to which they are not at-risk.

Audit. An examination by the IRS of a taxpayer's return or of other tax-related transactions. An IRS audit may be done at an IRS office, in the field (on the business premises of the taxpayer), or in the office of the practitioner representing the taxpayer.

Bad debt. If the requirements of the tax law are met, a tax deduction is allowed for bad debts, which comprise (1) business accounts receivable that were included in income in a prior year and are now uncollectible, (2) legitimate debts owed to the taxpayer that are now totally worthless and uncollectible, and (3) debts the taxpayer must pay because he guaranteed them in connection with his business or for a profit.

Basis. Usually, the cost of an asset. Basis is the amount assigned to an asset for tax purposes, so that gain or loss can be computed when the asset is sold. There are special rules to determine the basis of property received because of another's death or by gift, and the basis of stock or property received upon various corporate transactions.

Bearer bond. A bond for which an owner's name is not registered on the books of the issuing company; bond proceeds and interest are therefore payable to the holder of the bond.

Bequest. A gift of personal property by will. Bequests are not income-taxable to recipients.

Bond. A debt that obligates a corporation or governmental unit to repay, at the end of a certain term, money loaned to it by the bondholder. The bondholder generally receives interest for the term of the bond. “Mortgage bonds” are backed by collateral, whereas “debentures” are backed only by the good faith and credit rating of the issuing company.

Boot. When discussing nontaxable exchanges, boot is the term used to describe cash or property that will cause an otherwise tax-free transfer to become partially taxable. The amount subject to tax is the lesser of the fair market value of the boot or the realized gain on the transfer.

Cafeteria plan. An employee benefit plan that allows employees to select from a “menu” of taxable and nontaxable benefits.

Calendar year. The 12-month period beginning January 1 and ending December 31.

Call. An option to purchase stock or some other asset at a fixed price and within a certain time period.

Callable. With regard to bonds or preferred stock, refers to a bond issue that can be redeemed by the corporation before maturity under specific conditions.

Calls. See “Puts and calls.”

Capital asset. In tax terms, refers to any asset that is not specifically excluded from the “capital asset” category by the tax Code; these exclusions include inventory, accounts receivable, depreciable property, and real estate used in a business. Broadly speaking, a capital asset, when sold, produces capital gain as opposed to ordinary income.

Capital expenditure. An investment or expenditure in an asset that will last more than one year. Capital expenditures may generally not be deducted in the year they are paid. Instead, they are capitalized and generally may be depreciated or amortized.

Capital gain. The type of gain that results from the sale or exchange of a capital asset (a term defined in the tax code). The sale or exchange of a non-capital asset results in “ordinary income.”

Capital improvement. Similar to “Capital expenditure,” a capital improvement is any improvement to an asset that is intended to extend its useful life or increase its value. The replacement of flooring in a residence, for example, is a capital improvement. Money spent on capital improvements to business property must be capitalized — not deducted in the year the money is spent — and may be depreciated.

Capital loss. A loss from the sale or exchange of a capital asset. Individuals may deduct a certain amount of their capital losses per year, and the excess can be carried forward to future years and deducted then. Losses on personal-use assets are not deductible.

Capital stock. Stock representing ownership of a corporation.

Carryback/carryover. Refers to losses or credits that can, under special provisions in the tax law, be used in a tax year other than the tax year in which they are incurred. A carryover is to a future year, while a carryback is to a prior year.

Cash method of accounting. One of two common methods of accounting. See also “Accrual method of accounting.” Under the cash method of accounting, income is reported in the tax year when it is actually or constructively received, and expenses are deducted in the tax year in which they are paid.

Casualty loss. A casualty, in tax terms, is the complete or partial destruction of property resulting from an identifiable event of a sudden, unexpected, or unusual nature. Examples of casualties include floods, storms, fires, earthquakes, and auto accidents. The tax law allows taxpayers to deduct casualty losses, within certain limits.

Charitable contributions. Money or property donated to a qualified charitable organization, and deductible, within the limits of the tax law, by individuals as an itemized deduction.

Child and dependent care credit. The tax law allows for a credit against tax of a certain percentage of employment-related child and dependent care expenses.

Child tax credit. The tax law allows for a credit against tax for each dependent child of the taxpayer.

Closed year. A tax year for which the statute of limitations has expired; this means the taxpayer can no longer claim a refund for that year and the IRS can no longer collect additional taxes. There are certain exceptions to the applicability of the statute of limitations, such as fraud on the part of the taxpayer.

Commodity futures. Contracts to buy or sell some fixed amount of a commodity (wheat or soy beans, for example) for a fixed price at a future date.

Common stock. Shares of stock representing ownership of a corporation. Common stockholders are generally entitled to receive dividends after bondholders and preferred stockholders have received interest and preferred dividends. Common stockholders are usually entitled to vote in deciding company affairs.

Community income. Income of a married couple who live in a “community property state.” Community income is considered to belong equally to each spouse, regardless of which spouse receives it. See also “Community property.”

Community property. A concept of ownership for property acquired after marriage, under which property is considered to belong in equal shares to a husband and wife. The concept is followed only in so-called “community property states.”

Commuting. Travel from one's residence to one's regular place of business, and back.

Condemnation. The acquisition of property by the state or some other public authority. Government entities have the right to take private property for some public purpose, with or without the agreement of the property owner. When property is “condemned” as the result of state action, it is taken over by the state, and the owner is compensated. Note that the legal meaning of “condemnation” varies from the generally meaning of the term, which means to “officially judge unfit for use.”

Constructive receipt. Refers to a cash-basis taxpayer’s right to receive income. Cash-basis taxpayers are generally taxed only on income that they actually receive. But if income is unreservedly subject to the taxpayer’s demand, the tax law says it has been “constructively received”; it is therefore taxable even though the taxpayer has not actually received it.

Convertible bond. A bond that may, upon certain contingencies, be exchanged for common stock or some other security of the same corporation.

Copyright. An exclusive right to sell, reproduce, or publish a work of literature, music, or art.

Cost depletion. A special type of cost recovery or depreciation provided for in the tax law, for recovering a taxpayer's investment in natural resources or timber. The taxpayer’s costs are recovered ratably as the resource is extracted. Another special method for computing depletion of natural resources is percentage depletion. (See separate entry.)

Cost recovery. Another term for depreciation, cost recovery is the writing off of the capital cost of assets over a specified time period. See also “Accelerated cost recovery system (ACRS)” and “Modified accelerated cost recovery system (MACRS).”

Coupon bond. A bond to which interest coupons are actually attached. As interest becomes due, the bondholder clips the coupons and presents them for payment.

Credits. Tax credits are reductions of tax liability specifically allowed by the tax law.

Dealer. In tax terms, a person or business that regularly buys and sells property. The tax results of a transaction may hinge upon the classification of the taxpayer as a dealer or non-dealer.

Debenture. A bond.

Declining balance method of depreciation. An accelerated method of depreciation.

Deduction. An amount that the tax law says may be subtracted from otherwise taxable income.

Deferred compensation. An arrangement under which an employee may receive part of a year's pay in a later year and to not be taxed on the deferred portion in the year the money was earned.

Defined benefit plan. An employee benefit plan that provides a specific, determinable benefit that is not contingent on employer profits. Example: A traditional pension plan.

Defined contribution plan. An employee benefit plan under which each employee has a separate account, and certain specific “defined” amounts are paid to each account. Example: A profit-sharing plan.

Dependency exemption. An amount that the tax law allows to be deducted from an individual’s taxable income. A dependency exemption amount is allowed for each person the taxpayer can legally claim as a dependent.

Dependent. An individual who the tax law allows to be claimed as a dependent on another individual’s income tax return.

Depletion. A special system of depreciation applicable to natural resources (such as an oil well), under which the asset’s owner can deduct a portion of its cost per year. The two methods of depletion are “cost depletion” and “percentage depletion.” (See separate entries.)

Depreciation. A system under which a business or individual can deduct part of the cost of an asset for each year of the asset’s "life".

Dependent care credit. See “Child and dependent care credit.”

Devise. A transfer of real property under a decedent's will.

Disaster loss. If an area of the U.S. is designated a “disaster area” by the President, a casualty sustained there is a disaster loss, which gets special treatment under the tax law.

Distribution. Money a taxpayer withdraws from a retirement plan. Also refers to money or property distributed by a corporation to its shareholders, e.g., dividends or liquidating distributions.

Dividend. A corporation’s distribution of profits to its stockholders.

Earned income. The tax law, in various areas, treats income earned by working for it (“earned income”) differently from “unearned income,” e.g., interest, dividends and other profits.

Earned income credit. A specific tax credit available to individuals with low levels of earned income.

Employee stock ownership plan (ESOP). A type of profit-sharing plan; benefits are in the form of stock in the corporate employer.

Employee. For various tax purposes, including whether an employer must withhold payroll taxes, it is important to distinguish employees from independent contractors. The tax law defines an employee, briefly, as one who is subject to the will and control of the employer.

Estate. A separate taxable entity that comes into being on the death of a taxpayer. An estate comprises the decedent's property.

Estimated tax. Quarterly installments of tax liability not covered by withholding. Taxpayers generally must pay these “downpayments” on the year's taxes to the government on April 15, June 15, September 15, and January 15.

Exclusion. An amount of income that the tax law allows a taxpayer not to include in adjusted gross income.

Exemption. An amount allowed by the tax law as a reduction of otherwise taxable income. The two types of exemptions are “personal” and “dependency.”

Expensing. Generally, refers to an immediate deduction, as opposed to the capitalization of costs. Also, specifically refers to the “Section 179 expense deduction,” which is a special, immediate deduction for certain types of business property.

Fair Market Value (FMV). The amount at which property would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell and both having reasonable knowledge of the relevant facts.

Federal Insurance Contributions Act (FICA). Social security taxes, which must be paid via payroll taxes or self-employment tax.

Federal Unemployment Tax Act (FUTA). Unemployment taxes.

FICA. See “Federal Insurance Contributions Act.”

Fiduciary. A person or entity who acts for the benefit of another to preserve or manage property, and who must observe certain rules of fiduciary behavior. Examples: The trustee of a trust or the executor of an estate.

FIFO. See “First-in, first-out.”

First-in, first-out (FIFO). If the FIFO rule is applied by the tax law to the sale of a group of assets or in determining inventory, then it is assumed that the first acquired are the first sold. Applicability of the FIFO method can make a big difference in tax result, if items in the group were acquired or manufactured at different times or for different costs. (See also "Last-in, first-out (LIFO).")

Fiscal year. An accounting period that ends on the last day of any month except December.

Fringe benefits. Non-cash benefits received by an employee. Tax rules specify whether various types of fringe benefits are taxable to the employee or covered by an exclusion.

FUTA. See “Federal Unemployment Tax Act.”

Gain. On the sale of an asset, gain is the excess of the sale proceeds (termed “amount realized”) over the adjusted basis of the property sold or exchanged.

Generation-skipping transfer tax. An extra tax imposed on gifts or on-death transfers that would otherwise escape estate or gift tax. Example: A gift from a grandfather to a granddaughter skips a generation, and thus might be subject to this tax.

Gift. A transfer of property from one person or entity to another without consideration or compensation, and where the donor has the intent to make a gift.

Gift tax. A graduated system of federal tax paid by donors on gifts exceeding certain minimum amounts.

Golden parachute. Amounts payable to key executives in case of a takeover, merger, or other change in control of the corporation.

Goodwill. When a business is sold, goodwill represents the difference between the purchase price and the value of the net assets.

Gross income. Any income that might be subject to tax.

Head of household. A beneficial filing status available to qualifying taxpayers who support dependents.

Hobby loss. A loss deemed to result from a personal hobby rather than a for-profit activity; hobby losses are not deductible.

Holding period. The period of time for which an asset has been owned. The length of an asset’s holding period can be important in determining the rate of tax on the gain from sale of the item.

Home office expenses. The expenses of running that part of a residence used for business or employment-related purposes.

Incentive stock option. A tax-favored type of employee stock option.

Independent contractor. In tax terms, a person who contracts to do work for another, and is not subject to control except as to the results of such work. By contrast, an employee is subject to the control of the employer as to various other aspects of the work.

Individual retirement arrangement (IRA). A tax-favored retirement savings vehicle for individuals.

Information returns. Returns, such as Forms W-2 and 1099, upon which various types of payments and transactions are reported to the IRS. The information returns include the amount of the payment, the identity of the recipient, and the recipient’s Social Security number, in addition to other required information. Payers subject to information return reporting requirements are penalized for noncompliance.

Inheritance. As opposed to a bequest or devise, denotes property acquired through laws of descent and distribution from a person who dies without leaving a will.

Installment method. A method of reporting or paying for tax purposes, under which taxpayer can spread the recognition of received payments or the payment of installments over a period of time, instead of having the receipts or payments occur in a lump sum.

Inventory. For income tax purposes, inventory refers to a list of articles held for sale to customers in the regular course of business.

Itemized deductions. Also known as “below the line” deductions, these are certain types of personal deductions that must be itemized, or listed separately on a schedule attached to the return. Itemized deductions, to be claimed, must total more than the “standard deduction.”

Involuntary conversion. A conversion of property into money under circumstances beyond the control of the property owner. Example: Property is seized by the government and "converted" into a condemnation award. The tax law provides for certain tax-advantaged treatment upon an involuntary conversion.

Joint return. A return filed by a married couple using the married-filing-jointly filing status; this filing status is available only to married taxpayers. Generally (with certain exceptions) filing a joint return results in lower taxes for the couple than "married filing separately" status.

Joint tenancy. A form of joint ownership in which each co-owner has an undivided interest in the entire property. On the death of one owner, the survivor(s) automatically become(s) the owner of the whole property.

Joint venture. An enterprise participated in by persons acting together with a community of interests, each person having the right to participate in management. For income tax purposes, a joint venture is taxed similarly to a partnership — i.e., not taxed at the entity level, but treated as a pass-through mechanism.

Keogh plan. A type of retirement plan available to self-employeds.

Last-in, first-out (LIFO). A rule that applies to the sale of part of a group of similar items; the rule assumes the last items acquired were the first ones sold. Used of this assumption can make a big difference in tax liability if items in the group were acquired or manufactured at different times or for different costs. See also "First-in, first-out (FIFO)."

Lien (tax lien). A legal claim to property of a taxpayer that attaches to and encumbers the property as a part of IRS efforts to collect a tax.

Like-kind exchange. A tax-free swap of investment property provided for in the tax law, and commonly used for real estate.

Limited liability company (LLC). A legal form that allows a business to be taxed like a partnership but function generally like a corporation. An LLC offers members protection against liability for claims against the business; this legal benefit is not available in a partnership.

Liquidation. The converting of securities or other property into cash.

Loss. With regard to property, refers to a lessening in value; with regard to a business, refers to operating “in the red.”

Load. The commission fee charged for buying shares in a mutual fund.

Lump-sum distribution. Payment of an amount at one time rather than in installments. Usually refers to retirement plan distributions.

Margin. In the case of an investor who buys a security on credit, margin refers to that percentage of the full price of the security that must be paid as a down payment.

Married filing jointly. One of two filing statuses that may be used by a couple who are married at the end of the tax year and not legally separated; with joint filing status, the total income, exemptions, and deductions of both spouses are recorded on one return.

Married filing separately. The filing status used by a married couple who choose to record incomes, exemptions, and deductions on separate returns.

Modified Accelerated Cost Recovery System (MACRS). A method of depreciation, introduced by the Tax Reform Act of 1986, used for most property today.

Mortgage bond. See “Bond.”

Mutual fund. An open-ended investment company that invests money of its shareholders in a chosen group of securities of other corporations.

Net operating loss. The excess of business expenses over income. A business may offset a net operating loss against certain taxes already paid in previous years, or against certain future taxes.

Nonrecourse debt. An obligation for which the obligor is not personally liable.

Nonresident alien. A person who is not a U.S. citizen and does not live in the United States, or who lives in the United States under a nonresident visa and is not considered a “resident” under the tax law.

Original issue discount (OID). A purchase discount offered on some bonds instead of interest. OID is generally treated as interest income to the holder.

Open year. A taxable year for which the statute of limitations has not yet expired, and for which the taxpayer can still claim a refund, and the IRS can still seek to assess tax.

Option. An agreement to buy or sell property on or before a specific date at a certain price.

Ordinary income (loss). Income or loss that constitutes gross income and that does not have the characteristics of capital gain or loss.

Over-the-counter. The market for securities that are not listed on any stock exchange.

Partnership. A form of business in which two or more persons join their money and skills in conducting the business. Partnerships are treated as “pass-through” entities for tax purposes, and are not subject to taxation at the entity level. Items of partnership income, expenses, gains, and losses pass through to the individual partners and are reported on the partners’ income tax returns.

Patent. The exclusive right of an inventor to make, use, or sell his invention for a period of years.

Penalties. For tax purposes, amounts the IRS may assess in addition to a tax deficiency and interest. The tax Code provides for penalties at various levels for infractions such as fraud, underpayment of estimated tax, late filing of a return, and late payment of tax.

Pension. A stream of defined retirement payments made periodically over a specified period from an employer-funded plan to workers.

Percentage depletion. A method of cost recovery allowed for most natural resources, except timber.

Personal exemptions. Set amounts that the tax law allows individuals to deduct in calculating taxable income.

Personal property. Generally, any property but real estate.

Points. A one-time charge for obtaining a mortgage or other loan.

Principal. The actual amount of an investment, as opposed to the income earned by that investment.

Principal residence. A taxpayer’s regular, permanent abode for tax purposes; a taxpayer’s main home.

Puts and calls. Option contracts: A put gives its holder the option to sell a particular stock or commodity at a fixed price within a specified period of time. A call gives its holder the right to buy stock under the same conditions.

Qualified plan. A retirement or profit-sharing plan for employees that meets the requirements of the tax law for qualification, and is therefore eligible for certain tax benefits.

Real estate investment trust (REIT). A fund that invests in real estate.

Real estate mortgage investment conduit (REMIC). A fund that invests in real estate mortgages.

Realization. In tax parlance, the point at which, by reason of some act, such as a sale or exchange, the amount of gain or loss in an asset becomes determinable.

Recapture. The undoing of a tax benefit. Example: Certain depreciation may be recaptured on the premature sale of a depreciable asset.

Recognition. In tax parlance, the point at which, by virtue of some act such as a sale, the gain or loss in an asset becomes subject to income tax.

Regulated investment company (RIC). A mutual fund.

Regulations. Rules, interpreting the Internal Revenue Code, issued by the Treasury Department.

Repairs. Current expenditures that restore property to its original condition or maintain it. Repair expenses are usually currently deductible if they qualify as a business or investment expense. On the other hand, substantial repairs that increase the value or extend the life of the property are capital improvements, and must have their cost recovered over a period of years.

Resident alien. A citizen of another country who lives in the United States and/or has resident status by law or visa, or who passes the “substantial presence” test.

Rollover. The tax-free termination of one investment and reinvestment of the proceeds. Example: A taxpayer rolls over a lump-sum distribution from an employee retirement plan into an IRA.

Royalty. Payment made to the owner of a literary or other creation, in exchange for the right to exploit the creation.

S corporation. A special type of corporation that is not taxed at the entity level, but is instead treated similarly to a partnership for tax purposes, as long as various requirements are met.

Section 179 expense deduction. Also known as “expensing,” a special election provided in the tax law, with which the taxpayer deducts the cost of certain business equipment and other depreciable property currently, rather treating it as a capital expenditure and recovering the costs over time.

Securities. In general, any interest in corporate stock or stock rights or any note, bond, debenture or other evidence of indebtedness issued by a government or corporation.

Self-employed individuals. Taxpayers who work for themselves, rather than being an employee of some third party. The difference between self-employed status and being an employee carries with it various important tax consequences.

Self-employment tax. Social Security and Medicare taxes paid by self-employed persons. While the employer pays part of these payroll taxes for employees, self-employeds must pay the entire amounts themselves.

Standard deduction. A deduction of a set amount allowed to individuals, instead of listing or itemizing deductible personal expenses. (See "Itemized deductions.")

Stock dividend. Additional shares of stock that are distributed to shareholders.

Stock in trade. Property held primarily for sale to customers in the ordinary course of business.

Stock split. Additional shares of stock distributed to shareholders at no cost.

Straddle. A combination of a call and a put (see separate glossary entries) written at the same time, on the same number of shares of a security, at the same price, and during the same period of time. The call and put parts of a straddle are generally bought by different holders.

Straight-line depreciation. A method of depreciation that yields lesser amounts of depreciation deductions in the earlier years of recovery. The modern Cost Recovery methods, applicable to most business assets, yield higher deductions in the early life of the asset.

Taxable income. The tax base that remains after all deductions are taken. This is the amount upon which tax is computed.

Taxable year. The calendar year or fiscal year for which taxable income is computed.

Tax bracket. The particular rate at which a level of income is taxed.

Tax Court. The U.S. Tax Court — one of three courts that can decide litigation involving federal taxes.

Tax-exempt income. Income not subject to income tax under the tax law.

Tax-free exchange. Any transfer of property that is specifically exempt from current federal income tax consequences. Example: A like-kind exchange.

Tenancy by the entirety. A way of holding real estate; joint ownership by a married couple. After the death of one tenant, the survivor automatically becomes the owner of the whole.

Tenancy in common. The joint ownership by two or more individuals. Each owns an undivided share of the whole. A tenancy in common has no survivorship rights; the shares of the property remain separate upon the death of one party.

Trade date. Date on which a capital asset is actually bought or sold.

Trust. A tax entity, created by a trust agreement, which distributes all or part of its income to beneficiaries per the trust agreement. A trust is required to pay its own income taxes.

Unearned income. Income that is not in exchange for services performed (earned income). Examples: Interest, dividends, and royalties.

Vesting. The point at which pension or retirement benefits actually become the property of the plan participant.

Warrant. Authorizes the warrant holder to buy a corporation's stock at a specified price, either indefinitely or within a certain time.