TAX: Accounting periods and methods- Corporations

Question 1

What is the tax year the corporation has to use?

Answer 1

C-Corp: any taxable year

PSC- Generally must adopt a calendar year

Partnership- Generally same tax year that a majority if its partner have

S-Corp: Calendar Year

Estate- Any taxable year end

Trust- Calendar Year

Question 2

If a corporation wants to justify changing the tax year, what test should they look to?

Answer 2

The business purpose test: Taxpayer receives at least 25% of its gross receipts in the last two months of the selected year for three consecutive years (at least 25% in the last two months of the year)

Question 3

What entities CANNOT use the cash method?

Answer 3

• Regular C Corps (Any Crop/Partnership where Gross Receipts do not exceed $25 million)
• Partnerships that have a corp as a partner
• Tax Shelter