Preferential tax rate tax rates lower than the tax

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Preferential tax rate tax rates lower than the tax rate applied to ordinary income. Preferentially taxed income income taxed at a preferential rate such as long-term capital gains and qualified dividends. Present interest right to presently enjoy property or receive income from the property. Present value the concept that $1 today is worth more than $1 in the future. For example, assuming an investor can earn a 5 percent after-tax return, $1 invested today should be worth $1.05 in one year. Hence, $1 today is equivalent to $1.05 in one year. Primary authority official sources of the tax law generated by the legislative branch (i.e., statutory authority issued by Congress), judi- cial branch (i.e., rulings by the U.S. District Court, U.S. Tax Court, U.S. Court of Federal Claims, U.S. Circuit Court of Appeals, or U.S. Supreme Court), or executive/administrative branch (i.e., Treasury or IRS pronouncements). Principal partner a partner having a 5 percent interest or more in partnership capital or profits. Principal residence the main place of residence for a taxpayer dur- ing the taxable year. Private activity bond a bond issued by a municipality but proceeds of which are used to fund privately owned activity. Private letter rulings IRS pronouncements issued in response to a taxpayer request for a ruling on specific issues for the taxpayer. They are common for proposed transactions with potentially large tax im- plications. For the requesting taxpayer, a private letter ruling has very high authority. For all other taxpayers, private letter rulings have little authoritative weight. Private nonoperating foundations privately sponsored foundations that disburse funds to other charities. Private operating foundations privately sponsored foundations that actually fund and conduct charitable activities.
Appendix B B-13 Recognized gain or loss the gain or loss included in gross income on a taxpayer’s tax return. This is usually the realized gain or loss unless a nonrecognition provision applies. Recourse debt debt held by a partnership for which at least one partner has economic risk of loss. Recovery period a length of time prescribed by statute in which business property is depreciated or amortized. Recurring item an election under economic performance to currently deduct an accrued liability if the liability is expected to persist in the future and is either not material or a current deduction better matches revenue. Refinance when a taxpayer pays off a current loan with the proceeds of a second loan. Refundable credits credits that are not limited to the amount of the gross tax liability. If the credit exceeds the gross tax liability, the taxpayer receives a refund for the excess credit. Regressive tax rate structure a tax rate structure that imposes a decreasing marginal tax rate as the tax base increases. As the tax base increases, the taxes paid increase, but the marginal tax rate decreases.

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