What Is a Tax Treaty? A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens. Income tax treaties generally determine the amount of tax that a country can apply to a taxpayer’s income, capital, estate, or
What Is the Taylor Rule? The Taylor Rule (sometimes referred to as Taylor’s rule or Taylor principle) is an equation linking the Federal Reserve’s benchmark interest rate to levels of inflation and economic growth. Stanford economist John Taylor originally proposed the rule as a rough guideline for monetary policy but has subsequently urged a fixed-rule
What Is a T-Distribution? The t-distribution, also known as the Student’s t-distribution, is a type of probability distribution that is similar to the normal distribution with its bell shape but has heavier tails. It is used for estimating population parameters for small sample sizes or unknown variances. T-distributions have a greater chance for extreme values
What Is a Tear Sheet? The term tear sheet can have different meanings depending on the industry. In finance, a tear sheet is a single-paged document that is used to summarize key information about individual companies or funds. The term “tear sheet” dates back to earlier days when brokers would literally rip a page out
What Is Tax Efficiency? Tax efficiency is when an individual or business pays the least amount of taxes required by law. A financial decision is said to be tax-efficient if the tax outcome is lower than an alternative financial structure that achieves the same end. Key Takeaways Tax efficiency is when an individual or business
What Is the Tax-Equivalent Yield? The tax-equivalent yield is the return that a taxable bond would need to equal the yield on a comparable tax-exempt municipal bond. The calculation is a tool that investors can use to compare the returns between a tax-free investment and a taxable alternative. Key Takeaways The tax-equivalent yield is the return that a taxable bond
Investopedia / Joules Garcia What Are Taxes? Taxes are mandatory contributions levied on individuals or corporations by a government entity—whether local, regional, or national. Tax revenues finance government activities, including public works and services such as roads and schools, or programs such as Social Security and Medicare. In economics, taxes fall on whoever pays the burden
What Is Tax Evasion? Tax evasion is an illegal activity in which a person or entity deliberately avoids paying a true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties. To willfully fail to pay taxes is a federal offense under the Internal Revenue Service (IRS) tax code. Key
What Is Tax-Exempt Commercial Paper? Tax-exempt commercial paper is short-term unsecured debt where the bondholder does not pay federal, state, or local taxes on the interest payments. Key Takeaways Tax-exempt commercial paper is short-term unsecured debt where the bondholder does not pay federal, state, or local taxes on the interest payments.Tax-exempt commercial paper is issued
What Is Tax-Exempt Interest? Tax-exempt interest is interest income that is not subject to federal income tax. In some cases, the amount of tax-exempt interest a taxpayer earns can limit the taxpayer’s qualification for certain other tax breaks. The most common sources of tax-exempt interest come from municipal bonds or income-producing assets inside of Roth
