1

loophole

play
noun loop·hole \ˈlüp-ˌhōl\
Updated on: 26 Jul 2017

Definition of loophole

  1. 1a :  a small opening through which small arms may be firedb :  a similar opening to admit light and air or to permit observation

  2. 2 :  a means of escape; especially :  an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded

Examples of loophole in a Sentence

  1. She took advantage of a loophole in the tax law.

  2. His attorney has been hunting for a loophole that would allow him to get out of the deal.

  3. tried to close a loophole in the new legislation

Recent Examples of loophole from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'loophole.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of loophole

1loop


2

loophole

verb loop·hole

Definition of loophole

  1. transitive verb
  2. :  to make loopholes in

First Known Use of loophole

1664


Financial Definition of LOOPHOLE

loophole

What It Is

A loophole is an exception that allows a system to be circumvented or avoided.  It usually refers to legal, taxation, or security strategies that are exploited for personal gain.

How It Works

Loopholes are failures of a system to account for all conditions, variables, or exceptions.   To illustrate a legal loophole, consider a local development law that requires even an unoccupied building to pay real estate taxes so long as it receives a certificate of completion.  In order to avoid paying taxes, a builder may exploit this loophole and choose not to "complete" the building.

An example of a tax loophole is the tax break for small businesses who invest in "heavy vehicles". The tax break applies if the vehicle is used at least 50% of the time for the business.   Business owners may exploit this loophole by upgrading their own vehicles to SUVs, which are considered "heavy" under the tax law, and thereby gain a personal financial advantage.

In most instances, loopholes that lead to excessive abuse are corrected by subsequent regulations and laws.

Why It Matters

While loopholes may save money or allow a purchase that would otherwise not be economical, the use of loopholes is considered questionable. Exploiting loopholes may lead to intensive scrutiny and audits, or even just a feeling of bad faith.  For example, a tax payer should be aware when a tax consultant advises of specific tax advantage of whether the advantage is claimed on the basis of an allowable deduction or a loophole.


LOOPHOLE Defined for English Language Learners

loophole

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noun

Definition of loophole for English Language Learners

  • : an error in the way a law, rule, or contract is written that makes it possible for some people to legally avoid obeying it


LOOPHOLE Defined for Kids

loophole

play
noun loop·hole \ˈlüp-ˌhōl\

Definition of loophole for Students

  1. :  a way of avoiding something a loophole in the law



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