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Simple English definitions for legal terms
ratable
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A quick definition of ratable:
Definition: Ratable means a fair and equal portion of something that needs to be divided or appraised. For example, when selling stocks, the ratable share of the amount that would have been a dividend at the time of distribution is exempt from taxation. In the context of a corporate entity wind-up, any member who has contributed more than their fair share can recover their proportionate share of the surplus contribution.
A more thorough explanation:
Ratable: An amount that can be appraised or apportioned.
1. The Internal Revenue Code § 306 exempts the "ratable share" of the value of a stock from being taxed as income. This means that the amount of the stock's value that would have been attributed to dividend distributions at the time of sale is not taxed.
2. In the context of a corporate entity's wind-up, the California Corporate Code § 8721 allows a member to recover their "ratable share" of the surplus contribution. This means that if an investor contributed more than their proportionate share of the corporation's liabilities, they can receive their share of the surplus contribution.
The term "ratable" refers to an amount that can be divided or apportioned among different parties. In the first example, the Internal Revenue Code exempts the "ratable share" of a stock's value from being taxed. This means that the amount of the stock's value that would have been attributed to dividend distributions is divided among the shareholders and is not taxed as income. In the second example, the California Corporate Code allows a member to recover their "ratable share" of the surplus contribution. This means that the amount of the surplus contribution is divided among the members in proportion to their contributions, ensuring that each member receives a fair share of the assets.