Accounting & Tax Definitions -- N

Name Reservation: The name of a corporation or LLC must be distinguishable on the records of the state government. If the name is not unique, the state will reject the articles of incorporation or articles of organization (for LLCs). A name can be reserved, usually for 120 days, by applying with the proper state authorities and paying a fee.

Necessary: An expense that is appropriate and helpful in furthering the taxpayer's business or income-producing activity. See also Ordinary defined elsewhere in this glossary.

Negligence: A lack of such reasonable care and caution as would be expected of a prudent person. A penalty may be assessed if any part of an underpayment of tax is due to negligent or intentional disregard of rules and regulations.

Net Income: Profit after all expenditures have been deducted from the revenue. See Profit.

Net Operating Loss (NOL): A net loss for the year attributable to business or casualty losses. In order to mitigate the effect of the annual accounting period concept, the law allows taxpayers to use an excess loss of one year as a deduction for certain past or future years. In this regard, a carryback period of two years (three or five years for certain losses) and a carryforward period of 20 years is allowed.

Net Worth: Excess of total assets over total liabilities as reported in a company's balance sheet. See Capital (or Equity)

No-Par-Value Stock: Stock with no minimum value. Most states allow no-par stock. If the stock is no-par stock then the amount of stated capital is an arbitrary amount assigned by the board of directors. Further, the value of capital for franchise tax purposes is determined by the state and this may result in higher franchise taxes in comparison with low par-value stock.

Nonbusiness Bad Debts: A bad debt loss not incurred in connection with a creditor's trade or business. A nonbusiness bad debt is deductible as a short-term capital loss and is allowed only in the year the debt becomes entirely worthless.

Noncustodial Parent: The parent who does not have physical custody of the child.

Nonrecourse Debt: An obligation for which the endorser is not personally liable.

Nonrecovery Property: Property that does not qualify for a cost recovery deduction under ACRS or MACRS or property the taxpayer elects to exclude from ACRS or MACRS by choosing a depreciation method not based on a number of years.

Nonrefundable Credit: A credit that cannot exceed the taxpayer's tax liability.

Nonresident Alien: A person who is not a U.S. citizen and does not live in the United States, or lives in the United States under a nonresident visa, or does not meet the substantial presence test.

Nontaxable Distributions: A general term applied to stock dividend distributions that are not taxable. These distributions generally take the form of return of capital, stock dividends, stock splits, and/or tax-free distributions.

Nontaxable Earned Income: Income a taxpayer receives for services that is excludable from gross income. Examples include military housing allowances, ministers' housing allowances, excludable combat pay, and deferred compensation. Nontaxable earned income is earned income for purposes of computing the earned income credit.

Nontaxable Exchange: An exchange on which no gain or loss is recognized in the current year.

Nontaxable Income: Income that is by law exempt from tax.

Not-For-Profit Corporation: A Corporation organized for some charitable, civil or other social purpose that does not entail the generation of profits for shareholders. These corporations receive special tax treatment. Not-for-profit corporations must file not-for-profit articles of incorporation with the state.

Note Payable (Promissory Note): Written promise made by one individual to another to pay a specific amount on demand or by a definite date.

Note Receivable: Written promise by another party to make payment to you at a specified date.