Reportable or taxable income which does not generate cash flow. One example is taxable income from zero coupon bonds.
Refers to a situation where a development is generating more taxable income to its owners than the annual cash flow they receive. Phantom income comes from two different types of situations: 1) as properties age, both the amount of mortgage interest and depreciation decrease, meaning that the tax write-offs are much less than in the early years; and 2) when a development generates cash flow in excess of the amount allowed to be distributed under a limited dividend requirement, that money is taxable even though the investors may not receive it.
Income from a limited partnership that creates taxability without generating cash flow.
Income reported on a tax basis for which no cash or financial benefit is realized.
Interest reportable to the IRS that does not generate income, such as interest from a zero-coupon bond.
income that is subject to tax even though the recipient never actually gets control of it, for example, income from a limited partnership.
Non-cash income on which taxes must be paid. For example, accreted interest on an OID Corporate Bond.
The possible recognition of income for tax purposes by owners who did not receive any cash or other distribution. S Corporations and some LLCs electing to can book income for the year that is not paid out to owners. For example, an S corporation with two equal owners earns $50,000 but makes no distribution. Since it is a tax entity, $25,000 in income is deemed distributed to each of the owners, although nothing was paid out to them. The owners must then pay tax on their personal tax returns for their $25,000 portions of the "phantom income."
Income that is recognized as being received for tax purposes, when in fact, no actual cash has been Received (i.e. soft taxable income).
Noncash income on which taxes must be paid. For example, accreted interest on an Original Issue Discount (OID) corporate or U.S. Treasury bond.
