Legal Definitions - nonrecognition provision

A nonrecognition provision is a rule in tax law that allows a taxpayer to postpone the recognition of a gain or loss for tax purposes. This means that the taxpayer does not have to pay taxes on the gain or loss until a later time.

For example, if a taxpayer sells a piece of property for a profit, they may be able to use a nonrecognition provision to defer paying taxes on that profit until a later date. This can be helpful for taxpayers who want to reinvest the money from the sale into another property or investment.

Nonrecognition provisions are just one way that tax law can be used to help taxpayers manage their finances. By understanding these provisions, taxpayers can make informed decisions about when and how to sell their assets.