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Financial Terms | |
Tax deferral option |
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Definition of Tax deferral optionTax deferral optionThe feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
Related Terms:Abandonment optionThe option of terminating an investment earlier than originally planned. 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. American optionAn option that may be exercised at any time up to and including the expiration date. American optionAn option that can be exercised any time until its American-style optionAn option contract that can be exercised at any time between the date of purchase and Arbitrage-free option-pricing modelsYield curve option-pricing models. ![]() Asian optionoption based on the average price of the asset during the life of the option. 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. average tax rateTotal taxes owed divided by total income. Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Barrier optionsContracts with trigger points that, when crossed, automatically generate buying or selling of Basket optionsPackages that involve the exchange of more than two currencies against a base currency at Before-tax profit marginThe ratio of net income before taxes to net sales. Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two ![]() Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering cafeteria plan a “menu” of fringe benefit options that includecash or nontaxable benefits Call an optionTo exercise a call option. Call optionAn option contract that gives its holder the right (but not the obligation) to purchase a specified Call OptionA contract that gives the holder the right to buy an asset for a call optionRight to buy an asset at a specified exercise price on or before the exercise date. Cash flow after interest and taxesNet income plus depreciation. Compound optionoption on an option. 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 or hedge option strategiesStrategies that involve a position in an option as well as a position in the Currency optionAn option to buy or sell a foreign currency. Current Income Tax ExpenseThat portion of the total income tax provision that is based on Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. Dealer optionsOver-the-counter options, such as those offered by government and mortgage-backed Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Deferred Tax LiabilityFuture tax obligation that results from the origination of a temporary Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the Delivery optionsThe options available to the seller of an interest rate futures contract, including the quality Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. depreciation tax shieldReduction in taxes attributable to the depreciation allowance. Double-tax agreementAgreement between two countries that taxes paid abroad can be offset against Doubling optionA sinking fund provision that may allow repurchase of twice the required number of bonds Down-and-in optionBarrier option that comes into existence if asset price hits a barrier. Down-and-out optionBarrier option that expires if asset price hits a barrier. earnings before interest and income tax (EBIT)A measure of profit that Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold 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. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working EBDDT - Earnings before depreciation and deferred taxesThis measure is used principally by Effective Tax RateThe total tax provision divided by pretax book income from continuing Elasticity of an optionPercentage change in the value of an option given a 1% change in the value of the Electronic Federal Tax Payment Systems (EFTPS)An electronic funds transfer system used by businesses to remit taxes to the government. Embedded optionAn option that is part of the structure of a bond that provides either the bondholder or Equity optionsSecurities that give the holder the right to buy or sell a specified number of shares of stock, at Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Escalating Price OptionA nonqualified stock option that uses a sliding scale for European optionoption that may be exercised only at the expiration date. Related: american option. European optionAn option that can be exercised only on its expiration date. European-style optionAn option contract that can only be exercised on the expiration date. Exercising the optionThe act buying or selling the underlying asset via the option contract. Exit OptionsA variety of options available to an investor to recover their invested capital and the return on their investment. Federal Unemployment Tax Act (FUTA)A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a Foreign currency optionAn option that conveys the right to buy or sell a specified amount of foreign Foreign tax creditHome country credit against domestic income tax for foreign taxes paid on foreign Futures optionAn option on a futures contract. Related: options on physicals. Garmen-Kohlhagen option pricing modelA widely used model for pricing foreign currency options. Greenshoe optionoption that allows the underwriter for a new issue to buy and resell additional shares. Heavenly Parachute Stock OptionA nonqualified stock option that allows a deceased option holder’s estate up to three years in which to exercise his or her Imputation tax systemArrangement by which investors who receive a dividend also receive a tax credit for Incentive Stock OptionAn option to purchase company stock that is not taxable INCOME TAXWhat the business paid to the IRS. Income taxA government tax on the income earned by an individual or corporation. Income Tax ExpenseSee income tax provision. Income Tax ProvisionThe expense deduction from pretax book income reported on the Index and Option Market (IOM)A division of the CME established in 1982 for trading stock index Index optionA call or put option based on a stock market index. Indirect Taxestaxes paid by consumers when they buy goods and services. A sales tax is an example. Inflation TaxThe loss in purchasing power due to inflation eroding the real value of financial assets such as cash. Interest equalization taxtax on foreign investment by residents of the U.S. which was abolished in 1974. Interest OptionOne of several investment accounts in which your premiums may be invested within your life insurance policy. Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. interest tax shieldtax savings resulting from deductibility of interest payments. Intrinsic value of an optionThe amount by which an option is in-the-money. An option which is not in-themoney Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Irrational call optionThe implied call imbedded in the MBS. Identified as irrational because the call is Limited-tax general obligation bondA general obligation bond that is limited as to revenue sources. Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co. Lookback optionAn option that allows the buyer to choose as the option strike price any price of the Margin requirement (Options)The amount of cash an uncovered (naked) option writer is required to Margin Tax RateThe tax rate applicable to the last unit of income. Marginal tax rateThe tax rate that would have to be paid on any additional dollars of taxable income earned. marginal tax rateAdditional taxes owed per dollar of additional income. Marginal Tax RatePercent of an increase in income paid in tax. Multi-option financing facilityA syndicated confirmed credit line with attached options. Naked option strategiesAn unhedged strategy making exclusive use of one of the following: Long call Nonqualified Stock OptionA stock option not given any favorable tax treatment OptionGives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |