chapter 16

Question 1

A taxpayer who keeps adequate books and records may be permitted to elect to use a ______, a 12 month period period ending on the last day of a month other than December, for the accounting period. Otherwise a ______ must be used

Answer 1

fiscal year

calendar year

Question 2

The partnership tax year must be the same as the tax year of _____.

Answer 2

the majority interest partners

Question 3

The ______ are the partners who own a greater-than-50 percent interest in the partnership capital and profits

Answer 3

Majority interest partners

Question 4

If there are no majority interest partners, the partnership must adopt the same tax year as _____

Answer 4

the principal partner

Question 5

A ______ is a partner with a 5 percent or more interest in the partnership capital or profits

Answer 5

principal partner

Question 6

If the principal partners do not all have the same tax year and no majority of partners have the same tax year, the partnership must use a a year that results in the ____.

Answer 6

least aggregate deferral of income

Question 7

Under the _____, the different tax years of the principal partners are tested to determine which produces the least aggregate deferral

Answer 7

least aggregate deferral method

Question 8

Generally, S corporations must adopt a ____

Answer 8

calendar year

Question 9

Partnerships and S corporations may elect an otherwise ______, under any of the following conditions

Answer 9

impermissible year

1. a business purpose for the year can be demonstrated
2. the partnership’s or S corporation’s year results in a deferral of not more than 3 months’ income, and the entity agrees to make required tax payments

Question 10

A _____ is a period of less than 12 calendar months.

Answer 10

Short taxable year

Question 11

A taxpayer may have a short year for these reasons

Answer 11

1. the first income tax return
2. the final income tax return
3. a change in tax year

Question 12

The court-made _______ applies when the taxpayer receives property as income and treats it as his or her own but a dispute arises over the taxpayer’s rights to income

Answer 12

claim of right doctrine

Question 13

If you receive property that is in question whether or not it should be reported as income. the IRS says you report it in the year you receive it, then if you later learn that it should not have been reported then you deduct it. You do not need to amend, just deduct it. This is to offset amount of benefit that was previous. You wont get penalized for change in rates.

Answer 13

.

Question 14

The basic accounting methods are

Answer 14

1. cash method
2. accrual method
3. hybrid method

*Other special purpose methods, such as the installment method and the methods used for long-term construction contracts, are available for specific circumstances or types of transactions

Question 15

Generally a taxable year may not exceed ____.

Answer 15

12 calendar months

*if certain requirements are met. a taxpayer may elect to use an annual period that varies from 52 to 53 weeks. In that case, the year-end must be on the same day of the week