Glossary of Terms related to accounting, tax planning, cost segregation, and real estate from A to Z

The amount of a capital investment in property for tax purposes. It is used to figure amortization, depreciation, depletion, casualty losses, or any gain or lose on the sale, exchange, or any disposition of the property. 

Profits from the sale of assets or investments. Capital gains are categorized as long-term or short-term.

A tax planning strategy that identifies and reclassifies personal property assets to shorten the depreciation time for taxation purposes, which reduces current income tax obligations.

 An accounting process that is used in allocating the cost of a tangible or physical asset over its useful life. It is a reduction in the value of an asset with the passage of time due to regular wear and tear.  

Deferred tax is the amount of income tax that is payable in future periods in respect of taxable temporary differences. 

Any compensation you receive for providing a service. It refers to the money that you make from working, including wages, salaries, tips, and professional fees.

The amount of capital invested or owned by the owner of the company. It represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debts were all paid off. 

 The costs required to operate a business or property, which can be deducted from revenue to determine profit. 

 It is an asset’s sale price that would sell in an open or competitive market.  

Also known as long-life assets that a company owns and uses in its operations to generate income. In accounting, it is a term used for assets or properties that may not be easily converted into cash.

A common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements.

The total income from all sources before deductions, exemptions, or taxes are subtracted. 

A tax deduction available to individuals who use a portion of their home exclusively for business purposes.

The duration for which an asset is held by an investor or company and determines tax implications. It is the period between the purchase and sale of a security. It is also calculated starting on the day after the security's acquisition and continuing until the day of its disposal or sale. 

A financial statement that shows a company’s revenues and expenditures over a specific period, typically quarterly or annually. The income statement also shows whether a company is making a profit or loss for a given period.

Non-physical assets, such as patents, trademarks, and goodwill.

Intangible assets are assets that lack physical substance. Examples include patents, copyrights, franchises, goodwill, trademarks, trade names, and digital assets like software or cryptocurrency, including stablecoins under duress.

A type of ownership where two or more individuals hold an equal share of the property with rights of survivorship. If one of the owners dies, their interest in the property is directly passed on to the surviving party/(or parties) without having to go through probate or the court system. 

A strategy that companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process.

A tax document used to report the incomes, losses, deductions, credits and dividends of a partnership. 

Metrics used to evaluate the success of an organization or of a particular activity in which it engages.

A company's legal debts or obligations that arise during the course of business operations.

A tax-deferral strategy where a property held for business or investment purposes is swapped for a similar property. 

A loan used to purchase real estate, where the property serves as collateral for the loan. If the loaner fails to repay the money, he borrowed plus interest the lender has the right to take the property.

A tax depreciation system used in the United States to calculate asset depreciation. Taxpayers can apply MACRS depreciation to various asset classes such as, office furniture, automobiles, machinery, fences, farm buildings, computing equipment, etc.

A calculation used to analyze real estate investments that generate income. The formula is Net Operating income = Gross income from the property – all reasonably necessary operating systems.

Non-recourse loan or non-recourse debt that does not allow the lender to pursue anything other than collateral.

The costs required to run a business’s core operations on a daily basis.

The owner's rights to the assets of the business after all liabilities have been deducted.

Earnings derived from rental property, limited partnerships, or other enterprises in which a person doesn't have to actively work for.

In business, a prepaid expense is recorded as an asset on the balance sheet resulting from a company making advance payments for goods or services to be received in the future.

The net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business. It includes income from partnerships, S corporations, sole proprietorships, and certain trusts. 

 A measure of a company’s ability to meet its short-term obligations using its most liquid assets. 

A company that owns, operates, or finances income-producing real estate. REITs own various types of commercial real estate, such as office and apartment buildings, studios, warehouses, hospitals, shopping centers, hotels, to name a few.

Revenue in accounting is the total income generated from selling goods and services related to the main operations of the business. Commercial revenue can be referred to as sales or turnover. Some companies also generate revenue from interest, royalties, or other fees.

A tax form used by sole proprietors to report income or loss from a business operated or a profession practiced as a sole proprietor.

A method of depreciating an asset where the value of a fixed asset is reduced over its useful life.

An item or a business expense that can reduce the taxes a person owes in a given year. A deductible item is subtracted from the total taxable income, which can significantly reduce taxes owed by an individual or corporation.

A lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance on the property.

Any form of income earned passively. Examples include interest on investments, lottery or casino winnings, dividends, and rental income from investment properties. 

A loan that is issued and supported only by the borrower’s assets as security rather than by any type of collateral. Lenders approved unsecured loans based on a borrower’s creditworthiness.

Expenses that change in proportion to the activity of a business. Variable costs change as the volume changes. Examples of variable costs are piece-rate labor, production supplies, raw materials, delivery costs, and commissions. 

The percentage of all available rental units in a property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time.