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Definition of tax deferral
postponing taxation of an amount until a future date
The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
The ratio of net income before taxes to net sales.
The tax rate at which a party to a prospective transaction is indifferent between entering
Net income plus depreciation.
The argument that double (corporate and individual) taxation of equity returns makes
Rate of return required on a par bond to produce the same after-tax yield to
A non-cash expense that provides a source of free cash flow. Amount allocated during the
The value of the tax write-off on depreciation of plant and equipment.
Agreement between two countries that taxes paid abroad can be offset against
A financial measure defined as revenues less cost of goods sold
The yield that must be offered on a taxable bond issue to give the same after-tax
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
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
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An 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,
The municipal bond market where state and local governments raise funds. Bonds issued
Tax free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the U.S. tax code.
The reduction in income taxes that results from taking an allowable deduction from taxable income.
Swapping two similar bonds to receive a tax benefit.
Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and
A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are
Gross income less a set of deductions.
Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Two-tier tax system
A method of taxation in which the income going to shareholders is taxed twice.
Method of indirect taxation whereby a tax is levied at each stage of production on the value
A tax levied by a country of source on income paid, usually on dividends remitted to the
What 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.
Profit before interest and taxes (PBIT)
Payroll tax expense
The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).
Payroll taxes payable
The 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
tax benefit (of depreciation)
the amount of depreciation deductible for tax purposes multiplied by the tax rate;
a tax treatment where income is never subject to income taxation
current compensation that is taxed at a future date
current compensation that is never taxed
tax shield (of depreciation)
the amount of depreciation deductible
A government tax on the income earned by an individual or corporation.
average tax rate
Total taxes owed divided by total income.
depreciation tax shield
Reduction in taxes attributable to the depreciation allowance.
interest tax shield
tax savings resulting from deductibility of interest payments.
marginal tax rate
Additional taxes owed per dollar of additional income.
taxes paid by consumers when they buy goods and services. A sales tax is an example.
The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
Marginal Tax Rate
Percent of an increase in income paid in tax.
A tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax.
A tax taking the same percentage of income regardless of the level of income.
A tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax.
A tax levied as a percentage of retail sales.
Tax-Related Incomes Policy (TIP)
tax incentives for labor and business to induce them to conform to wage/price guidelines.
Current Tax Payment Act of 1943
A federal Act requiring employers to withhold income taxes from employee pay.
Electronic Federal Tax Payment Systems (EFTPS)
An electronic funds transfer system used by businesses to remit taxes to the government.
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
Roth IRA. An IRA account whose earnings are not taxable at all under certain
State Disability Tax
A tax charged by selected states to maintain a disability insurance
Current Income Tax Expense
That portion of the total income tax provision that is based on
Deferred Income Tax Expense
That portion of the total income tax provision that is the result
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Deferred Tax Liability
Future tax obligation that results from the origination of a temporary
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 taxes
This measure is used principally by
Effective Tax Rate
The total tax provision divided by pretax book income from continuing
Income Tax Expense
See income tax provision.
Income Tax Provision
The expense deduction from pretax book income reported on the
Statutory Tax Rate
The income tax rate that is stated in income tax law. It is applied to taxable
Income subject to income tax as reported on the tax return.
Margin Tax Rate
The tax rate applicable to the last unit of income.
tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the
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