What Is “Fiduciary accounting income”?
06/04/2026
Fiduciary accounting income (FAI) is the total amount of income earned by a trust or estate that is legally available for distribution to the beneficiaries under the terms of the governing trust document or state law. It represents the regular earnings produced by the trust’s assets, such as interest, dividends, or rent, as opposed to
What Is FDAP Income?
06/04/2026
FDAP income stands for Fixed, Determinable, Annual, Periodical income, which represents a broad category of passive, U.S.-source income earned by foreign individuals and entities. The IRS taxes this income at a flat gross rate—typically 30%—which is withheld directly at the source by the paying agent before the remaining funds are sent abroad. Unlike active business
What Is “FATCA”?
06/04/2026
FATCA stands for the Foreign Account Tax Compliance Act, a federal law designed to combat tax evasion by U.S. citizens and residents holding assets in offshore accounts. It requires foreign financial institutions to report information about accounts held by U.S. taxpayers directly to the IRS. For individual taxpayers, it mandates the disclosure of foreign financial
What Is the “Farm Optional Method”?
06/04/2026
The farm optional method is a specialized, elective accounting calculation permitted by the Internal Revenue Service (IRS) that allows eligible agricultural producers to artificially report a higher net self-employment income than they actually earned during a low-income or net-loss tax year. By choosing this optional framework on their federal return, farmers can deliberately pay a
What Is “Farm Income”?
06/04/2026
Farm income is the specialized legal classification utilized by the Internal Revenue Service (IRS) to define all revenues generated from cultivating, operating, or managing a farm for gain or profit, either as an owner or a tenant. This definition broadly encompasses cash from selling raised livestock, poultry, fish, grains, fruits, and vegetables, alongside associated revenues
What Is “Fair Market Value at Death”?
06/04/2026
Fair market value at death is the price an asset would naturally sell for on the open market on the exact day its owner passes away. The IRS uses this specific valuation to determine if an estate owes federal estate taxes and to establish a new cost basis for the beneficiaries who inherit the property.
What Is an “Excess Benefit Transaction”?
06/04/2026
An excess benefit transaction is an IRS term for an improper economic deal where an influential insider receives greater financial value from a tax-exempt organization than what they provide in return. This typically occurs through overpaid executive salaries, below-market property rentals, or unvetted personal perks funded by a non-profit. The IRS penalizes these lopsided transactions
What Is “Ethereum Tax”?
06/04/2026
“Ethereum tax” refers to the application of U.S. federal and state tax laws to your transactions involving the cryptocurrency Ether (ETH) and its underlying blockchain network. The Internal Revenue Service (IRS) explicitly classifies digital assets like Ethereum as property rather than traditional legal tender. Consequently, every instance of selling ETH, swapping it for other tokens,
What Is Estate Tax Exemption?
06/04/2026
The estate tax exemption is a statutory threshold established by the federal government that allows a specific dollar amount of an individual’s total wealth to pass onto their heirs completely free from federal estate taxes upon their death. It acts as a financial shield, ensuring that the IRS only levies the estate tax (often called
What Is “Estate Tax”?
06/04/2026
The estate tax is a financial levy imposed by the federal government on the transfer of an individual’s property and assets after their death. Often referred to colloquially as the “death tax,” it only applies to estates whose total value exceeds a high statutory threshold set by Congress. The tax is calculated based on the