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Statute of limitationsA statute of limitations sets out the period within which actions may be brought upon claims or within which rights may be enforced. The limitations periods of greatest importance for tax purposes are the three-year period in which a tax deficiency may be assessed (subject to modifications and extensions) and the three-year period in which a taxpayer may claim a refund (also subject to modifications).Stepped-up basisA stepped-upbasis is a higher basis (see Basis) than an asset had in the hands of a previous owner. Under present law, this is accomplished through a transfer on which the gain is taxable or through acquisitions (not subject to the carryover basis rules) from a decedent.Stock bonus planA stock bonus plan is established and maintained to provide benefits similar to those of a profit-sharing plan, but the contributions are not necessarily dependent upon profits and the benefits are distributable in the stock of the employer. A stock bonus plan is often referred to as an employee stock ownership plan (ESOP) or an employee stock ownership trust.Stock option—See Employee stock optionStraight-line depreciationStraight-line depreciation is the method of writing off the cost or other basis of depreciable assets in equal annual amounts over the estimated useful life of the assets.Straight-line MACRS electionA taxpayer may elect, under MACRS, to claim straight-line MACRS deductions instead of the regular MACRS allowance. The recovery periods under the straight-line election include the regular recovery period and longer recovery periods. The straight-line MACRS deductions are computed in much the same manner as the deductions under the general rules, except that salvage value is not taken into account.Subchapter S corporation—See S corporationSubsidiary—See Parent corporationSubstance v. formIndividuals should arrange their financial transactions in a manner that will minimize their tax liability. If a transaction is all it purports to be and not merely a transaction to avoid taxes, then it is valid. If the transaction is solely to avoid taxes and there is no business purpose to the transaction, then it is invalid. The fact that a taxpayer uses one form of transaction rather than another to minimize taxes does not invalidate the transaction. A good example of when substance v. form is a significant issue is in the area of leases. Payments under a lease are tax deductible. Payments under a purchase agreement are not tax deductible. Therefore, it is of utmost importance to determine the true “substance” of this type of transaction. Questions to be asked might include: Do any equity rights transfer to the lessee at the end of the lease period? May the lessee buy the property at a nominal purchase price? With a lease transaction it is immaterial that the parties refer to the transaction as a lease. The true substance of the transaction controls over the form.