Legal Definitions - disallowance

Disallowance means to deny or reject something. In legal terms, disallowance can refer to:

• The IRS denying a deduction or tax benefit claimed on a tax return after an audit
• A court ruling that a claim is not allowable by law in a bankruptcy case

Here are some examples to help illustrate the definition of disallowance:

Let's say a business claims a large deduction on their tax return for expenses that are not actually related to their business. After an audit, the IRS may issue a disallowance, meaning they deny the deduction and the business will owe more taxes.

In a bankruptcy case, a creditor may file a claim for money owed to them by the debtor. If the court determines that the claim is not valid or allowable by law, they may issue a disallowance, meaning the creditor will not receive any payment from the bankruptcy estate.

Overall, disallowance is a legal term that means to deny or reject something, often in the context of taxes or bankruptcy cases.