tax

Definition

A deferred compensation retirement plan in which an employer withholds a portion of an employee's pretax wages and invests them in a qualified plan; an employer may contribute to an employee's 401(k) plan, e.g. by matching an employee's contributions. Wages invested in a 401(k) plan and income earned therefrom are not taxed until the employee withdraws them from the plan.

Definition

An exchange, i.e. sale and reinvestment of the proceeds therefrom, of business or investment property for like-kind business or investment property, which allows a seller to defer payment of capital gains taxes.

Illustrative caselaw

See, e.g. Teruya Bros., Ltd. v. C.I.R., 580 F.3d 1038 (9th Cir. 2009).

Definition

See qualified retirement plan.

Definition

A retirement plan, such as a 401(k) plan, an employee annuity plan (26 U.S.C. § 403(a)), an individual retirement account (26 U.S.C. § 408(a)), or a governmental deferred compensation plan (26 U.S.C.

Definition

Under § 1202 of the Internal Revenue Code, stock of a domestic C corporation whose aggregate gross assets do not exceed $50,000,000 before or immediately after issuance. A taxpayer who acquires qualified small business stock at its original issue and holds it for more than five years may exclude 50 percent of any gain from a sale or exchange of that stock from his or her gross income. 

Definition

In a 1031 exchange, a person who acquires business or investment property from a taxpayer, sells that property, uses the proceeds therefrom to acquire like-kind business or investment property for the taxpayer, and then transfers the like-kind property to the taxpayer. A taxpayer who uses a qualified intermediary to conduct a 1031 exchange can defer payment of capital gains tax on the sale of his or her property.

Definition

An abbreviation for qualified terminable interest property trust. See qualified terminable interest property trust.

Illustrative caselaw

See, e.g. Wells Fargo Bank New Mexico, N.A. v. United States, 319 F.3d 1222 (10th Cir. 2003).

See also

• Qualified domestic trust

• Estates and trusts

Definition

A trust for a surviving spouse, who is not a U.S. citizen, that qualifies for the marital deduction. 26 U.S.C. § 2056(d)(2). Also called QDOT.

Definition

An abbreviation for qualified domestic trust. See qualified domestic trust. 

Example

If a married couple has a community property estate of $500,000, each has a net estate value of $250,000. Assuming both spouses have wills that leave their estates to each other, when one spouse dies, the other will inherit the decedent's $250,000 estate. That inheritance is free of estate tax, because the marital deduction eliminates estate tax on anything from one spouse to the other.