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Interest equalization tax |
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Definition of Interest equalization taxInterest equalization taxtax on foreign investment by residents of the U.S. which was abolished in 1974.
Related Terms:fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the After-tax profit marginThe ratio of net income to net sales. After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Average tax ratetaxes as a fraction of income; total taxes divided by total taxable income. Base interest rateRelated: Benchmark interest rate. Before-tax profit marginThe ratio of net income before taxes to net sales. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Cash flow after interest and taxesNet income plus depreciation. Compound interestinterest paid on previously earned interest as well as on the principal. Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Corporate taxable equivalentRate of return required on a par bond to produce the same after-tax yield to Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. Double-tax agreementAgreement between two countries that taxes paid abroad can be offset against Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Foreign tax creditHome country credit against domestic income tax for foreign taxes paid on foreign Forward interest rateinterest rate fixed today on a loan to be made at some future date. Gross interestinterest earned before taxes are deducted. Imputation tax systemArrangement by which investors who receive a dividend also receive a tax credit for InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of mortgages, Treasury Interest rate agreementAn agreement whereby one party, for an upfront premium, agrees to compensate the Interest rate capAlso called an interest rate ceiling, an interest rate agreement in which payments are made Interest rate ceilingRelated: interest rate cap. Interest rate floorAn interest rate agreement in which payments are made when the reference rate falls Interest rate on debtThe firm's cost of debt capital. Interest rate parity theoreminterest rate differential between two countries is equal to the difference Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Interest subsidyA firm's deduction of the interest payments on its debt from its earnings before it calculates Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Limited-tax general obligation bondA general obligation bond that is limited as to revenue sources. Marginal tax rateThe tax rate that would have to be paid on any additional dollars of taxable income earned. Nominal interest rateThe interest rate unadjusted for inflation. Open interestThe total number of derivative contracts traded that not yet been liquidated either by an Personal tax view (of capital structure)The argument that the difference in personal tax rates between Pooling of interestsAn accounting method for reporting acquisitions accomplished through the use of equity. Progressive tax systemA tax system wherein the average tax rate increases for some increases in income but Rate of interestThe rate, as a proportion of the principal, at which interest is computed. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Short interestThis is the total number of shares of a security that investors have borrowed, then sold in the Short-term tax exemptsShort-term securities issued by states, municipalities, local housing agencies, and Simple interestinterest calculated only on the initial investment. Related:compound interest. Split-rate tax systemA tax system that taxes retained earnings at a higher rate than earnings that are Spot interest rateinterest rate fixed today on a loan that is made today. Related: forward interest rates. Stated annual interest rateThe interest rate expressed as a per annum percentage, by which interest TANs (tax anticipation notes)tax anticipation notes issued by states or municipalities to finance current Tax anticipation bills (TABs)Special bills that the Treasury occasionally issues that mature on corporate Tax booksSet of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's Tax clawback agreementAn agreement to contribute as equity to a project the value of all previously Tax differential view ( of dividend policy)The view that shareholders prefer capital gains over dividends, Tax-exempt sectorThe municipal bond market where state and local governments raise funds. Bonds issued Tax free acquisitionA merger or consolidation in which 1) the acquirer's tax basis in each asset whose Tax havenA nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific Tax Reform Act of 1986A 1986 law involving a major overhaul of the U.S. tax code. Tax shieldThe reduction in income taxes that results from taking an allowable deduction from taxable income. Tax swapSwapping two similar bonds to receive a tax benefit. Tax deferral optionThe feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is Tax-deferred retirement plansEmployer-sponsored and other plans that allow contributions and earnings to Tax-timing optionThe option to sell an asset and claim a loss for tax purposes or not to sell the asset and Taxable acquisitionA merger or consolidation that is not a tax-fee acquisition. The selling shareholders are Taxable incomeGross income less a set of deductions. Taxable transactionAny transaction that is not tax-free to the parties involved, such as a taxable acquisition. Times-interest-earned ratioEarnings before interest and tax, divided by interest payments. True interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate Two-tier tax systemA method of taxation in which the income going to shareholders is taxed twice. Value-added taxMethod of indirect taxation whereby a tax is levied at each stage of production on the value Withholding taxA tax levied by a country of source on income paid, usually on dividends remitted to the INCOME TAXWhat the business paid to the IRS. Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. InterestThe cost of money, received on investments or paid on borrowings. Profit before interest and taxes (PBIT)See EBIT. Interest incomeIncome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Interest payableThe amount of interest that is owed but has not been paid at the end of a period. Payroll tax expenseThe amount of tax associated with salaries that an employer pays to governments (federal, state, and local). Payroll taxes payableThe amount of payroll taxes owed to the various governments at the end of a period. earnings before interest and income tax (EBIT)A measure of profit that times interest earnedA ratio that tests the ability of a business to make Accrued InterestThe amount of interest accumulated on a debt security between Compound Interestinterest paid on principal and on interest earned in previous Effective Interest RateThe rate of interest actually earned on an investment. It is Nominal Interest RateThe rate of interest quoted, or stated, to be paid on a security Real Interest RateThe rate of interest paid on an investment adjusted for inflation
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