Legal Definitions - subtrahend

In legal and accounting contexts, a subtrahend refers to the specific amount that is deducted or taken away from a larger sum (known as the minuend) to determine a remaining balance or net amount.

This term is frequently used when calculating financial outcomes, such as determining net profits, final settlement amounts, or remaining assets after liabilities have been accounted for.

• Example 1: Calculating a Legal Settlement Payout

  Imagine a client wins a personal injury lawsuit and is awarded $150,000. However, their contingency fee agreement with their attorney stipulates that 30% of the award will go towards legal fees. To calculate the client's net payout, the legal fees must be subtracted from the total award.

  In this scenario, the $45,000 (30% of $150,000) representing the legal fees is the subtrahend. It is the amount being taken away from the total award to arrive at the client's final payment.

• Example 2: Determining Distributable Estate Assets

  When an individual passes away, their estate's executor must determine the total value of assets available for distribution to heirs. If the gross value of the estate is $800,000, but there are outstanding debts, funeral expenses, and administrative costs totaling $120,000 that must be paid first.

  Here, the $120,000 representing the accumulated debts and expenses is the subtrahend. This amount is subtracted from the gross estate value to determine the net amount that can be legally distributed to beneficiaries.

• Example 3: Business Profit Calculation for Tax Purposes

  A small business reports gross revenue of $500,000 for the year. To calculate its taxable income, the business needs to deduct all eligible operating expenses, such as rent, salaries, and utility bills, which total $200,000.

  The $200,000 in operating expenses serves as the subtrahend. It is the amount subtracted from the gross revenue to determine the business's net profit, which is then subject to taxation.