【正文】 S is not a seasonal business. a. Gamp。 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 ($15,000 ? 12/3). The tax on $60,000 is: $50,000 ? 15% = $ 7,500 $10,000 ? 25% = 2,500 $10,000 To convert to the tax liability for 2 months, the following calculation is made: $10,000 ? 3/12 = $2,500 PTS: 1 DIF: 1 REF: p. 167 | p. 168 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 5 min 12. In 2020, T Corporation changed its tax year from ending each September 30th to ending each December 31st. The corporation earned $25,000 during the period October 1, 2020 through December 31, 2020. The tax on the annualized ine for the short period will be greater than the tax on $25,000 when the tax rates are progressive. Accounting Periods and Methods 167 ANS: T The annualized ine will be $100,000 [(12 months/3 months) ? $25,000]. The tax on the annualized ine equals 3/12 of the tax on $100,000. With progressive rates, the tax on $100,000 will be greater than 4 times the tax on $25,000. PTS: 1 DIF: 1 REF: p. 168 OBJ: 1 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 13. Snow Corporation was a calendar year corporation that sold all of its assets and liquidated as of April 30, 2020. The corporation is not required to annualize its ine for its final year of operations. ANS: T The purpose of annualizing ine is to prevent the taxpayer from taking undue advantage of the progressive tax rate schedule. Annualization is not required in the corporation’s first tax year, nor for its final tax year. PTS: 1 DIF: 1 REF: p. 168 OBJ: 1 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 14. Ted, a cash basis taxpayer, received a $100,000 bonus in 2020 when he was in the 35% marginal tax bracket. In 2020, when Ted was in the 28% marginal tax bracket, it was discovered that the bonus was incorrectly puted, and Ted was required to refund $25,000 to his employer. As a result of the refund, Ted can reduce his 2020 tax liability by $8,750 (.35 ? $25,000). ANS: T Ted recognized ine in a high tax rate year (35%), but was required to refund the ine in a lower tax rate year. Under 167。 481 adjustment Unchanged 21 22 Installment method: recognized gain Unchanged 22 23 Installment method: recovery of capital Unchanged 23 24 Installment method: interest on deferred taxes New 25 Capitalization of interest Unchanged 25 162 2020 Comprehensive Volume/Test Bank Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 26 Percentage of pletion method versus pleted Unchanged 26 contract method: eligibility 27 Percentage of pletion method: de minimis rule Unchanged 27 MULTIPLE CHOICE 1 Tax year: 5253 weeks Unchanged 1 2 Tax year: partnership Unchanged 2 3 Tax year: partnership and least aggregate deferral Unchanged 3 4 Tax year: entity form New 5 Tax year: selection Unchanged 5 6 Tax year: personal service corporation Unchanged 6 7 Tax year: annualization Unchanged 7 8 Restoration of amounts received under a Unchanged 8