Tax Terms Glossary | Gain Power With Knowledge

Cancellation of Debt: The forgiveness of a debt without receiving full payment.
Call Option: A call option gives the holder the right, but not the obligation, to buy the underlying security at a predetermined priced, called the strike price, by a set date.
Capital: Assets used for the future production when mixed with labor.
Capital Asset: For tax purposes, capital assets are all assets with certain exceptions, such as inventory, and real property used in a trade or business.
Capital Expenditure: An expense incurred to acquire, or improve, a business asset that has a useful life extending beyond the tax year.
Capitalize: To treat the cost and additions to property as a capital expenditure.
Cash Settled Option: A cash settled option is an option that settles in cash instead of an underlying security. The most typical example of a cash settled option is an index option.
Carry Back: An income tax deduction or credit that can be applied (or carried back) to a previous year’s tax, resulting in a refund.
Carry Forward: An income tax deduction or credit that can be applied to future tax years.
Cash Basis (Accounting Method): An accounting method where the gros income or expenses are accounted for when cash is paid or received, not when earned.
Casualty: A casualty is where a loss is realized from a fire, flood, hurricane, car accident, or similar event.
Charitable Organization: An organization that received a determination letter from a taxing authority that they are tax exempt.
Clearing Corporation: A clearing corporation becomes the buyer for every seller and seller for every buyer in an organized options market. A clearing corporation is designed to ensure standardized contracts and to remove default risk for the counterparties.
Closing Transaction: A closing transaction is the termination of the taxpayer's obligation under an option other than through the exercise or lapse of the option.
Collateral: A pledge of property to a creditor as security for a loan.
Commission: Remuneration to a sales person for goods, services, or assets sold.
Commodities: Anything moveable that is bought and sold.
Company: An association of persons engaged in activity with the motive for profit.
Compensation: Payment to a person for services performed.
Compensatory Stock Options: Stock options offered to employees as compensation, or partial compensation, for their services.
Conduit: An entity where income and deductions flow through to other parties, such as a partnership.
Consideration: In contract law, consideration is a thing of value.
Constructive Dividend: A payment that although not expressed as a dividend, is treated as a dividend under the tax rules.
Constructive Ownership: Where ownership is effectively imposed upon another person for tax purposes. Also see attribution rules.
Constructive Receipt: Gross income is constructively received when it is credited to the taxpayer's account, set aside, or otherwise made available so that it may be drawn upon.
Contango: This is where a futures contract is more expensive than the spot price, usually because of the cost of storing the underlying commodity. This is the opposite of backwardation.
Contract: A written or oral agreement where both parties to an exchange receive consideration.
Control: The ability of one person to compel another person to act according to their demands.
Controlled Foreign Corporation: A corporation that is organized in one jurisdiction, but controlled by shareholders in a different jurisdiction.
Corporate Veil: The legal protection insulating shareholders of a corporation, from the liabilities of the corporation.
Corporation: An entity that is sanctioned by government and is separate from its owners.
Cost Basis: The purchase price paid for property.
Cost of Goods Sold (COGS): A dollar amount associated with the cost of purchasing raw material and producing a finished product.
Counterparties: The different parties on the different sides of a trade or transaction.
Covered Call: A position where a taxpayer owns the underlying security and has sold an equivalent amount of call options.
Credit: An amount owing from one person to another. In tax, it is an amount owing from a taxing authority to a taxpayer.
Creditor: A person who loaned property and is owed something in return.
Currency: A store of value that is used as a medium of exchange in a given society.