What Is a Qualified Reservist? A qualified reservist is a member of the military reserve who is not active, but when called to duty, is eligible to make an early withdrawal from a retirement account without incurring the usual early distribution penalty. Under most circumstances, the IRS imposes a penalty of 10% on the taxable amount
What Is a Qualified Trust? A qualified trust is a tax-advantaged fiduciary relationship between an employer and an employee in the form of a stock bonus, pension, or profit-sharing plan. In a qualified trust, the underlying beneficiary may use his or her life expectancy to determine required minimum distribution (RMD) amounts, but other considerations like
What Is a Qualified Widow or Widower? The term qualified widow or widower refers to a tax filing status that allows a surviving spouse to use the married filing jointly tax rates on an individual return. The provision is good for up to two years following the death of the individual’s spouse. The taxpayer must remain unmarried
What Are Qualifying Ratios? Qualifying ratios are measuring devices that banks and other financial institutions use in their loan underwriting process. An applicant’s qualifying ratio, expressed as a percentage figure, plays a key role in determining whether they’ll be approved for financing, and often for the terms of the loan as well. Lenders use qualifying
What Is a Qualifying Annuity? A qualifying annuity is similar to any other annuity, except the IRS has approved it for use within a Qualified Retirement Plan or individual retirement account (IRA). These annuities can be fixed, indexed, or variable depending upon the plan sponsor’s investment objectives. According to Employee Retirement Income Security Act (ERISA) guidelines, contributions
What Is a Qualifying Disposition? Qualifying disposition refers to a sale, transfer, or exchange of stock that qualifies for favorable tax treatment. Individuals typically acquire this type of stock through an incentive stock option (ISO), or through a qualified employee stock purchase plan (ESPP). A qualified ESPP requires shareholder approval before it is implemented. Furthermore
What Is a Qualified Domestic Trust? A qualified domestic trust (QDOT) is a special kind of trust that allows taxpayers who survive a deceased spouse to take the marital deduction on estate taxes, even if the surviving spouse is not a U.S. citizen. Normally, a U.S. citizen surviving spouse can take the marital deduction, but a non-citizen
What Is a Qualifying Relative? A qualifying relative is a person designated by federal income tax code to be allowed to be claimed as a dependent by a taxpayer assuming the taxpayer provided considerable financial support for the qualifying relative during the tax year. Claiming a qualifying relative as a dependent will not currently allow the
What Is a Qualifying Transaction? A qualifying transaction is a process in which a private company in Canada issues public stock. This process involves the creation of a capital pool company (CPC) that acquires all of the outstanding shares of the private company, making it a subsidiary and a public company. Key Takeaways A qualifying
What Is a Qualifying Widow/Widower? The federal qualifying widow or widower tax filing status is available for two years for widows and widowers (surviving spouses) with dependents after their spouse’s death. The surviving spouse may file jointly with the deceased spouse for the tax year in which the spouse has died, and they can claim
