Accounting Periods

Question 1

There are three times when a short-period tax return is required:

Answer 1

1) When a corporation starts up and does not start in the first month of its adopted tax year
2) When a corporation is dissolved and does not end on the last month of tax year
3) When a corporation changes accounting policies in the middle of a tax year

Question 2

Calendar Year

Answer 2

Must be used by Taxpayers who keep no records
Must be used by Trusts (except grantor trusts)
Must be used by personal service corporations and S Corps (Unless they meet certain requirements)

Question 3

Generally, a partnership

Answer 3

must adopt a tax year that is used by a partner or partners who hold more than a 50% interest in the partnership

2) If this rule does not apply, then the partnership must use the tax year of all of its principal partners (holding 5% or more interest in partnership capital or profits)
3) If that rule does not apply, the partnership must use the tax year that results in the least (not greatest) aggregate deferral of income

Question 4

When a taxpayer changes an accounting period

Answer 4

the change must have prior approval of the IRS

Generally, a short-period return from the old year-end date to the new year-end date is required