What does taxable income mean on the CPA exam?
Last reviewed
Taxable income. The figure the tax rates are applied to: gross income, less the deductions the Code allows. It is not the same as book income, and the two are reconciled on Schedule M-1 or M-3.
Defined against Sec. 63.
Which CPA exam sections use taxable income?
Taxable income appears in the REG section of the CPA exam.
Related terms
- gross income: All income from whatever source derived, unless the Code specifically excludes it.
- net operating loss: A year in which allowable deductions exceed gross income.
- net investment income: Interest, dividends, capital gains, rents, royalties and income from passive businesses, less the deductions allocable to them.
- ordinary income: Income taxed at the regular graduated rates rather than at preferential capital gain rates.
- net income: What is left after every revenue and expense of the period, including tax and discontinued operations.
- accumulated adjustments account: The running total of an S corporation's post-election taxable income less distributions.