Tax Attribute

AAA

DEFINITION of 'Tax Attribute'

A type of loss or tax credit that must be reduced as a result of the exclusion of debt cancellation from a taxpayer's gross income. Tax attributes are adjusted when a taxpayer declares bankruptcy.

Tax attributes include net operating losses and carryovers, general business credit carryovers, alternative minimum tax credit carryovers, capital loss and foreign tax credit carryovers.

INVESTOPEDIA EXPLAINS 'Tax Attribute'

Taxpayers who are forgiven debts as a result of bankruptcy do not have to include the forgiven debt as income, but certain tax attributes must be reduced by an amount proportionate to the amount of debt that has been forgiven.

For example, if $5,000 in debt was forgiven, then the taxpayer could elect to have the basis of his/her rental property reduced by $5,000 and defer the tax until the property is sold. If the property is sold for a gain, then $5,000 of that gain will be taxed as ordinary income.

RELATED TERMS
  1. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  2. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  3. Net Operating Loss - NOL

    A period in which a company's allowable tax deductions are greater ...
  4. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  5. Cancellation Of Debt - COD

    When a creditor forgives a debt without requiring consideration ...
  6. Capital Loss Carryover

    The net amount of capital losses that aren't deductible for the ...
RELATED FAQS
  1. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Full Answer >>
  2. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Full Answer >>
  3. What are some ways to minimize tax liability?

    Minimizing tax liability is one of the most important financial planning aspects for business owners and individuals each ... Read Full Answer >>
  4. What deductions, credits and exemptions depend on gross income calculations?

    The greatest challenge in determining your total tax liability stems from an incomplete understanding of what income figure ... Read Full Answer >>
  5. What is the difference between gross income and earned income?

    Prior to preparing and filing a tax return, do yourself a favor by gaining an understanding of commonly used tax terms including ... Read Full Answer >>
  6. Are Roth IRAs tax deductible?

    Contributions made to a Roth IRA are not tax deductible, although you may be able to take a tax credit, depending on your ... Read Full Answer >>
Related Articles
  1. Budgeting

    Negotiating A Debt Settlement

    If you're being harassed by a debt-collection agency, you can take charge. Find out how.
  2. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  3. Credit & Loans

    A Lifeline For Those Drowning In Debt

    Don't wait to be saved, find out where the lifesaving devices are and hang on tight!
  4. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  5. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  6. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.
  7. Taxes

    Which Is Better? Tax Preparer Or Tax Software

    Every taxpayer โ€“ and every year โ€“ is different, so here are four factors to help you decide whether a tax pro or software is best for you.
  8. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience โ€“ and all the tax benefits you're due.
  9. Economics

    What's a Subsidy?

    A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually ...
  10. Economics

    EU Probes Tax Laws To Catch Corporate Cheaters

    Recently, the EU has launched an investigation into tax deals between Amazon and the country of Luxembourg.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center