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ID: 2562271 • Letter: T
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TOOLS VIEW ch. 5 Qug-Fa 2017 ) 0Protected View-word Produ ROTECTED nw Be carefu-fies from, the tent can cortan vw·Unless you need to ed, it's safe to stay in Protected View. I Enable Edtng 4. The cash method of accounting may not be used by 6. tenants. s6,000 f a. a solely owned personal service corporation in the management consulting business. b. an individual engaged as a sole proprietor in a service business (inventory is not the principal business activity) whose average annual gross receipts for all prior years exceed S6 million. Ren Adv Sect c. a partnership of attomeys that has average anmual gross receipts of $7 million c. All of the above may use the cash method. b and c. For t a. b. c. d. ·R, a cash basis taxpayer, wanted to defer incorne fom 2017 to 2018, which of the following will serve that purpose? Purchase of a Treasury Bill in November 2017 that matures in February 2018. e. S a. b. A signed agreement (a deferred compensation agreement) with his employer that the latter will pay him part of his 2017 salary in 2018. c. Delay cashing his last salary check for 2017 until 2018. d. a and b. e. a and c 7. In A income annu a gain of S35 a. shi bor b. shi bon c. The d. a anExplanation / Answer
4. answer option E All of the above may use the cash method.
Congress allows the cash method of accounting to be used by: any individual (e.g., a sole proprietor);partnerships that do not have C corporations as partners; corporations or partnerships when the annual gross receipts for all preceding years do not exceed $5 million; certain farming businesses; and qualified personal service corporations in health, law, engineering, architecture, accounting, actuarial sci-ence, performing arts, or consulting.
5. answer: option D a and b
The discount on the Treasury Bill is reported when it matures. The deferral arrangement with the employer is effective because the taxpayer does not have the right, after the agreement is signed, to obtain the salary payments in 2017; thus, the doctrine of constructive receipt does not apply.
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