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Simple English definitions for legal terms
AOGI
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A quick definition of AOGI:
Income is the money you earn from working, owning a business, investing, or receiving gifts. Adjusted ordinary gross income (AOGI) is a specific type of income that takes into account certain expenses and capital gains. Other types of income include gross income (total income before deductions), net income (total income minus deductions), and unearned income (income from investments rather than labor). Taxable income is the amount of income that is subject to taxes, and there are various types of income that may be exempt from taxation.A more thorough explanation:
Definition: AOGI stands for adjusted ordinary gross income. It refers to a corporation's gross income minus capital gains and certain expenses. The IRS uses this calculation to determine whether a corporation is a personal holding company. If 60% or more of a corporation's AOGI consists of certain passive investment income, the company has met the test for personal-holding-company classification.
Example: Let's say a corporation has a gross income of $1,000,000. After deducting capital gains and certain expenses, the AOGI is calculated to be $800,000. If more than 60% of this AOGI comes from passive investment income, the corporation will be classified as a personal holding company.
Explanation: This definition explains what AOGI means and how it is calculated. The example illustrates how a corporation's AOGI is calculated and how it can affect the company's classification. This definition is written in simple language that a high school student can understand.