Accounting & Tax Definitions -- L

Land Value: The value of the land in a sale where the total sale price includes land as well as any improvements to the land.

Last In, First Out (LIFO): An accounting method for valuing inventories for tax purposes. Under this method, the last items purchased are treated as being the first items sold. Ending inventory is valued using the cost of the items with the earlier purchase dates.

Lease: A legal contract conveying the use of property from the owner (lessor) to another (lessee) at a fixed rate, for a stated length of time.

Leasehold Improvements: Additions, improvements or alterations made to leased property by the lessee.

Ledger: A book of final entry containing all the accounts of a business or all the accounts of a particular type (for example, general ledger, accounts receivable ledger).

Legally Separated: Separated under a decree of separate maintenance that requires the spouses to live apart.

Lessee: One who rents property from another. In the case of real estate, the lessee is also known as the tenant.

Lessor: One who rents property to another. In the case of real estate, the lessor is also known as the landlord.

Liability: The Liabilities of a business are the debts of a business. For example, if money is borrowed from a bank, there is a liability to repay the loan. In this case, the borrower would be known as the debtor and the bank to which the debt is owed would be called the creditor.

Lien for Taxes: The U.S. Treasury, as part of its tax collection effort, may attach a lien (a legal claim) on the property of a taxpayer who is delinquent in the payment of amounts owed to the IRS and who has not made arrangements to pay.

Lifetime Learning Credit: A nonrefundable credit equal to 20 percent of the first $10,000 (for 2003) of qualified higher education tuition and fees paid during the year on behalf of the taxpayer, his or her spouse, or his or her dependents.

Like-Kind Exchange: An exchange of property held for productive use in a trade or business or for investment (except inventory and stocks and bonds) for property of the same type. Unless different property is received (called boot), the exchange is nontaxable in the current year. Any gain or loss is not recognized until the property received in the exchange is sold or disposed of. Like-kind exchanges are reported on Form 8824.

Like-Kind Property: Business or investment properties that are the same type.

Limited Liability Company: A business entity formed upon filing articles of organization with the proper state authorities and paying all fees. LLCs are a new entity in the United States, although the concept has long been used internationally. LLCs provide limited liability to their members, and are taxed like a partnership, preventing double taxation. LLCs can be formed in every state.

Limited Partnership: A partnership with two classes of partners: Limited partners and one or more General partner. Limited partners have no personal liability for debts of the limited partnership beyond the amounts invested.

Listed Property: Listed property includes passenger autos and other property used for transportation, property generally used for purposes of entertainment, recreation, or amusement, computers not used exclusively at a regular business establishment, cellular telephones, and other property to be specified by the IRS. Restrictions apply to the depreciation of listed property.

Liquid Asset: An asset, such as cash, that can be readily converted into other types of assets or used to buy goods and services or satisfy obligations.

Liquidation: The winding-up of an organization by settling with debtors, creditors and shareholders. Usually done by selling or otherwise disposing of assets to pay off liabilities.

Liquidation Value: The net amount realized on assets in the event of a liquidation.

Liquidation Distributions: A return of capital received because of a partial or complete liquidation (going out of business) of a corporation. The basis of the stock on which liquidation distributions are paid is reduced by the amount of the distributions. Any amount received in excess of basis in the stock is taxable. In a liquidation that results in cancellation of the stock, a loss can be claimed the year the final distribution is received if total distributions are less than the taxpayer's basis. Report liquidation distributions on Schedule D, Form 1040.

Load: The portion of the price of buying shares in a mutual fund that goes for the salesperson's fees and the costs of making the transaction and maintaining the fund.

Local Tax: In addition to federal and state taxes, your local town or city may also need tax money to operate services such as garbage pick-up, water treatment, and street-cleaning.

Lodging: A portion of total support. Lodging includes the fair rental value of a room, apartment, or house in which the dependent lives, a reasonable allowance for the use of furniture and appliances, and all utilities.

Long-Term Capital Gains and Losses: Gains and losses on the sale or exchange of capital assets that have been held for more than 12 months. A net long-term capital gain is the excess of long-term gains over long-term losses, or vice versa for a net long-term capital loss.

Loss: The excess of expenditures over revenues. Opposite of income/profit.

Lump-Sum Distribution: Payment of the entire amount due at one time rather than in installments. Such distributions must come from qualified employer plans. The recipient of a lump-sum distribution may be eligible for special tax treatment of the distribution.