Tax Accounting Methods Flashcards Preview

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Flashcards in Tax Accounting Methods Deck (16):
1

A cash-basis taxpayer should report gross income for the year in which income is either _____ or _____ received, whether in cash or in _____

Actually
Constructively
Property

2

This means that an item is unqualifiedly available without restriction

Constructive Receipt

3

The cash method cannot generally be used if ______ are necessary to clearly reflect income

Inventories

4

T/F

The cash method can be used by C Corporations

FALSE

5

T/F

The cash method can be used by partnerships that have a C corporation as a partner

FALSE

6

T/F

The cash method can be used by tax shelters

FALSE

7

T/F

The cash method cannot be used by certain tax-exempt trusts

TRUE

8

This is a corporation performing services in health, law, engineering, accounting, actuarial science, performing arts, or consulting

A qualified personal service corporation

9

A qualified personal service corporation can use the cash method if at least ____ of stock is owned by specified shareholders including employees

95%

10

Any entity other than a tax shelter may use the cash method if for every year it has an average annual gross receipts of _______ for any prior 3-year period and provided it does not have inventories for sale to customers

$5M or less

11

A small business taxpayer with an average annual gross receipts of _____ for any prior three-year period can use the cash method and is excepted from the requirements to account for inventories and use the accrual method for purchased and sales of merchandise

$1M or less

12

A small business taxpayer is eligible to use the cash method of accounting if, in addition to having average gross receipts of more than $1M but less than $10M, the business meets an one of what requirements?

1) The principal business is not retailing, wholesaling, manufacturing, mining, publishing, or sound recording

2) The principal business activity is the provision of services or custom manufacturing

13

T/F

A taxpayer using the accrual method who meets the small-business taxpayer to be on a cash-basis may change to the cash basis provided they treat merchandise inventory as a material or supply that is not incidental

TRUE

14

T/F

Unless the IRS consents to a change of method, the accrual method of tax reporting is generally mandatory for a sole proprietor when there are accounts receivable for services rendered

FALSE

15

T/F

Unless the IRS consents to a change of method, the accrual method of tax reporting is generally mandatory for a sole proprietor when there are year-end merchandise inventories

TRUE

16

A cash-basis employer pays 2014 year-end bonuses to the employees in 2015. When is this expense deductible?

In 2015, because the employer is cash basis