【正文】 F: 1 REF: p. 165 | p. 166 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 2. A C corporation must use a calendar year as its tax year unless the corporation has a business reason for using a tax year that is not a calendar year. ANS: F A C corporation can have either a fiscal year or a calendar year as its tax year. PTS: 1 DIF: 1 REF: p. 163 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 3. An S corporation’s tax year, generally, is determined by the tax year of its principal shareholders. ANS: F Generally, an S corporation must adopt a calendar year. However, an S corporation may elect a fiscal year under either of the following: ? A business purpose for the fiscal year can be demonstrated. ? The fiscal year results in a deferral of not more than three months ine, and the S corporation agrees to make required tax payments. PTS: 1 DIF: 1 REF: p. 165 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 4. Generally, a partnership elects any tax year that ends on the last day of a calendar month and then the partners must change their tax years to be the same as the partnership. ANS: F Unless the business purpose requirement is satisfied, the partnership tax year is determined in accordance with the following sequence: ? The partnership tax year must be the same as the tax year of the majority interest partners. ? If there are no majority interest partners, the partnership must adopt the same tax year as its principal partners. ? If the principal partners do not all have the same tax year and there are no majority interest partners, the partnership must use a tax year that results in the least aggregate deferral of ine. Accounting Periods and Methods 165 PTS: 1 DIF: 1 REF: p. 164 | p. 165 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 5 min 5. For purposes of determining the partnership’s tax year, there may be more than one principal partner. ANS: T PTS: 1 DIF: 1 REF: p. 164 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 6. The Seagull Partnership has three equal partners. Partner A’s tax year ends June 30th, and Partners B and C use a calendar year. If the partnership uses the calendar year to report its ine, when Partner A files his tax return for his tax year ending June 30, 2020, he will include his share of partnership ine for the period July 1, 2020 through June 30, 2020. ANS: F The partner reports his ine for the partnership tax year that ends with or within his tax year ending June 30, 2020. Thus, when Partner A files his tax return for his year ending June 30, 2020, he must report his share of the partnership ine for the calendar year 2020. PTS: 1 DIF: 1 REF: p. 164 | p. 165 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 5 min 7. Red Corporation and Green Corporation are equal partners in the R amp。 G Partnership. Red Corporation’s tax year ends September 30th, and Green Corporation is a calendar year taxpayer. R amp。 G Partnership must use September 30th as its tax year, unless it has a business purpose for using a different tax year. ANS: T With a year ending September 30th, the aggregate deferral months will be (3 ? .50). That is, Green Corporation will defer for three months its share of partnership ine. With a calendar year, the aggregate deferral months will be (9 ? .5). Red Corporation will defer for 9 months its share of partnership ine. PTS: 1 DIF: 1 REF: p. 164 | p. 165 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 5 min 8. An orthopedic surgeon’s incorporated practice is located near a ski resort. Twothirds of his fees are earned in the months of January, February, and March. The corporation may be permitted to report its ine using a fiscal year ending March 31. ANS: T The practice is conducted through a personal service corporation (PSC). Although a PSC generally is required to use a calendar year to report its ine, an exception applies to seasonal businesses, such as in this case, permitting the corporation to adopt a natural business year. Here the natural business year appears to end in March. PTS: 1 DIF: 1 REF: p. 165 | p. 166 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 166 2020 Comprehensive Volume/Test Bank 9. A partnership can elect to use a tax year other than a calendar year if the partnership’s CPA is too busy to prepare a calendar year return. ANS: F The IRS acknowledges only the need to conform the tax year to the natural business year. The CPAs work schedule is not considered relevant. PTS: 1 DIF: 1 REF: p. 165 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 10. In 2020, a medical doctor who incorporated his practice elected a fiscal year ending September 30th. During the fiscal year ended September 30, 2020, he received a salary of $180,000. During the period from October 1, 2020 to December 31, 2020 the corporation paid the doctor a total salary of $40,000, and paid him $200,000 of salary in the following 9 months. The corporation’s salary deduction for the fiscal year ending September 30, 2020, is $240,000. ANS: F The personal service corporation’s deduction is limited to $160,000 {$40,000 + $40,000[(12 – 3)/3]}. PTS: 1 DIF: 1 REF: p. 166 | Example 6 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 5 min 11. Laura Corporation changed its tax year end from September 30th to December 31st in 2020. The ine for the period October 1, 2020 through December 31, 2020 was $15,000. The corporate tax rate is 15% on the first $50,000 of ine and 25% on ine from $50,001 to $75,000. A portion of Laura’s October – December 2020 ine will be taxed at 25%. ANS: T The tax for the short period is 3/12 of the tax on the annualized ine of $60,000 ($15