Glossary Abstract fees:Expenses generally paid by a buyer to research the title of realproperty. Hoteles de estadia nocturna BolognaActive conduct of a trade or business:To determine if a trade or business is actively conducted requiresan examination of all the facts and circumstances. Generally, for thesection 179 deduction, a taxpayer is considered to actively conduct atrade or business if he or she meaningfully participates in themanagement or operations of the trade or business. A mere passiveinvestor in a trade or business does not actively conduct the trade orbusiness. Adjusted basis:The original cost of property, plus certain additions andimprovements, minus certain deductions such as depreciation allowed orallowable and casualty losses. Amortization:A ratable deduction for the cost of intangible property over itsuseful life. Amount realized:The total of all money received plus the fair market value of allproperty or services received from a sale or exchange. The amountrealized also includes any liabilities assumed by the buyer and anyliabilities to which the property transferred is subject, such as realestate taxes or a mortgage. Basis:A way of measuring an individual's investment in property for taxpurposes. Business/investment use:Usually, a percentage showing how much an item of property, such asan automobile, is used for business and investment purposes. Capitalized:Expended or treated as an item of a capital nature. A capitalizedamount is not deductible as a current expense and must be included inthe basis of property. Circumstantial evidence:Details or facts which indirectly point to other facts. Class life/lives:A number of years that establishes the property class and recoveryperiod for most types of property under the General DepreciationSystem (GDS) and Alternative Depreciation System (ADS). Clean-fuel vehicle:Clean-fuel vehicle property is made up of two kinds of property. Motor vehicles produced by an original equipmentmanufacturer and designed to be propelled by a clean-burning fuel. Theonly part of a vehicle's basis that qualifies for the deduction is: A clean-fuel engine that can use a clean-burningfuel, The property used to store or deliver the fuel to theengine, or The property used to exhaust gases from the combustion ofthe fuel. Any property installed on a motor vehicle (includinginstallation costs) to enable it to be propelled by a clean-burningfuel if: The property is an engine (or modification of an engine)that can use a clean-burning fuel, or The property is used to store or deliver that fuel to theengine or to exhaust gases from the combustion of that fuel. Clean-fuel vehicle refueling property:Clean-fuel vehicle refueling property includes any property (otherthan a building or its structural components) used to: Store or dispense a clean-burning fuel into the fuel tank ofa motor vehicle propelled by the fuel, but only if the storage ordispensing is at the point where the fuel is delivered into the tank,or Recharge motor vehicles propelled by electricity, but onlyif the property is located at the point where the vehicles arerecharged. Commuting:Travel between a personal home and work or job site within the areaof an individual's tax home. Convention:A method established under the Modified Accelerated Cost RecoverySystem (MACRS) to determine the portion of the year to depreciateproperty both in the year the property is placed in service and in theyear of disposition. Declining balance method:An accelerated method to depreciate property. The GeneralDepreciation System (GDS) of MACRS uses the 150% and 200% decliningbalance methods for certain types of property. A depreciation rate(percentage) is determined by dividing the declining balancepercentage by the recovery period for the property. Disposed:Permanently withdrawn from use in a trade or business or from theproduction of income. Documentary evidence:Written records which establish certain facts. Exchange:To barter, swap, part with, give, or transfer property for otherproperty or services. Fair market value (FMV):Sorrento accommodationThe price which property brings when it is offered for sale by onewho is willing but not obligated to sell, and is bought by one who iswilling or desires to buy but is not compelled to do so. Fiduciary:The one who acts on behalf of another as a guardian, trustee,executor, administrator, receiver, or conservator. Fungible commodity:A commodity of a nature that one part may be used in place ofanother part. Goodwill:An intangible property such as the advantage or benefit received inproperty beyond its mere value. It is not confined to a name but canalso be attached to a particular area where business is transacted, toa list of customers, or to other elements of value in business as agoing concern. Grantor:The one who transfers property to another. Listed property:Passenger automobiles, any other property used for transportation,property of a type generally used for entertainment, recreation oramusement, computers and their peripheral equipment (unless used onlyat a regular business establishment and owned or leased by the personoperating the establishment), and cellular telephones or similartelecommunications equipment. Nonresidential real property:Most real property other than residential rental property. Nontaxable exchange:An exchange of property in which any gain or loss realized is notrecognized (included in or deducted from income) for tax purposes.This usually involves exchanges of like-kind property. Placed in service:Ready and available for a specific use whether in a trade orbusiness, the production of income, a tax-exempt activity, or apersonal activity. Property class:A category for property under MACRS. It generally determines thedepreciation method, recovery period, and convention. Recovery period:The number of years over which the basis (cost) of an item ofproperty is recovered. Refueling property:See Clean-fuel vehicle refueling property. Remainder interest:That part of an estate which is left after all of the otherprovisions of a will have been satisfied. Residential rental property:Real property, generally buildings or structures, if 80% or more ofits annual gross rental income is from dwelling units. Salvage value:An estimated value of property at the end of its useful life. Notused under MACRS. Section 1245 property:Property that is or has been subject to an allowance fordepreciation or amortization. Section 1245 property includes personalproperty, single purpose agricultural and horticultural structures,storage facilities used in connection with the distribution ofpetroleum or primary products of petroleum, and railroad grading ortunnel bores. Section 1250 property:Real property (other than section 1245 property) which is or hasbeen subject to an allowance for depreciation. Standard mileage rate:The established amount for optional use in determining a taxdeduction for automobiles instead of deducting depreciation and actualoperating expenses. Straight line method:A way to figure depreciation for property that ratably deducts thesame amount for each year in the recovery period. The rate (inpercentage terms) is determined by dividing 1 by the number of yearsin the recovery period. Structural components:Parts that together form an entire structure, such as a building.The term includes those parts of a building such as walls, partitions,floors, and ceilings, as well as any permanent coverings such aspaneling or tiling, windows and doors, and all components of a centralair conditioning or heating system including motors, compressors,pipes and ducts. It also includes plumbing fixtures such as sinks,bathtubs, electrical wiring and lighting fixtures, and other partsthat form the structure. Taxable exchange:An exchange of property in which the gain or loss is recognized(included in or deducted from income) for tax purposes. Tax-exempt:Not subject to tax. Term interest:A life interest in property, an interest in property for a term ofyears, or an income interest in a trust. It generally refers to apresent or future interest in income from property or the right to useproperty which terminates or fails upon the lapse of time, theoccurrence of an event or the failure of an event to occur. Unadjusted depreciable basis:The basis of an item of property for purposes of figuring gain on asale without taking into account any depreciation taken in earlieryears but with adjustments for amortization, the section 179deduction, any deduction claimed for clean-fuel vehicles or clean-fuelvehicle refueling property, and any electric vehicle credit. Unit-of-production method:A way to figure depreciation for certain property. It is determinedby estimating the number of units that can be produced before theproperty is worn out. For example, if it is estimated that a machinewill produce 1000 units before its useful life ends, and actuallyproduces 100 units in a year, the percentage to figure depreciationfor that year is 10% of the machine's cost less its salvage value. Useful life:An estimate of how long an item of property can be expected to beusable in trade or business or to produce income. Under MACRS, yourecover the cost of property over a set recovery period. The recoveryperiod is based on the property class to which your property isassigned. The class your property is assigned to is generallydetermined by its class life. The class life for most property isestablished and listed in Appendix B.