Question 1

If the majority of the partners do not have the same tax year, the partnership must use the tax year of its principal partners.

Accepted Answer

This conformity is designed to minimize deferral.

Question 2

Partnerships, S corporations, and personal service corporations may elect a taxable year which results in a tax deferral of four months or less.

Accepted Answer

A tax deferral of three months or less is allowed.

Question 3

Emma, a single taxpayer, obtains permission to change from a calendar year to a fiscal year ending June 30, 2015. During the six months ending June 30, 2015, she earns $40,000 and has $8,000 of itemized deductions. What is the amount of her annualized income?
A) $30,000
B) $64,000
C) $60,000
D) $64,300

Accepted Answer

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Question 4

An S corporation elects a September 30 taxable year. The S corporation, as a pass-through entity, does not need to make tax payments to the IRS.

Accepted Answer

S corporations and partnerships making a Sec. 444 election must make annual required payments to offset the deferral advantage.

Question 5

Misha, a single taxpayer, died on July 31, 2015. Her final income tax return (ignoring extensions) is due November 15, 2015.

Accepted Answer

The tax return will be due April 15 of the year following death.

Question 6

Generally, an income tax return covers an accounting period of 12 months.

Accepted Answer

Unless there is a short year, an income tax return will cover 12 months.

Question 7

A subsidiary corporation filing a consolidated return with its parent corporation must change its accounting period to conform with its parent's tax year.

Accepted Answer

A consolidated return can only include members with a common year-end.

Question 8

A partnership must generally use the same tax year of the partners who own the majority of partnership income and capital.

Accepted Answer

Conformity of years between the partnership and the majority partner(s) is required to prevent deferral.

Question 9

All C corporations can elect a tax year other than a calendar year.

Accepted Answer

Personal service corporations are generally required to use a calendar year.

Question 10

If Jett Corporation receives a charter in 2013 but does not begin operations and file its first tax return until 2015, Jett may elect a fiscal year on the 2015 return.

Accepted Answer

Since tax returns were required for 2013 and 2014, the returns are not timely filed and the election may not be made.

Question 11

An improper election to use a fiscal year automatically places the taxpayer on the calendar year.

Accepted Answer

The calendar year is the default tax year.

Question 12

A new business is established. It is not a seasonal business. All of the following are acceptable accounting tax years with the exception of
A) an S corporation year ending October 31.
B) a C corporation (not a personal service corporation) tax year ending on February 15.
C) a C corporation (not a personal service corporation) tax year ending on April 30.
D) a partnership tax year ending on October 31 with three equal partners whose tax years end on September 30, October 31, and November 30.

Accepted Answer

A fiscal year must end on the last day of a month.

Question 13

Which entities may elect a fiscal year? Discuss how certain tax entities may circumvent the requirement of using a calendar year.

Accepted Answer

The answer of Which entities may elect a fiscal year?...

Question 14

All of the following statements are true except:
A) once adopted, an accounting period normally cannot be changed without approval by the IRS.
B) taxpayers who change from one accounting period to another must annualize their income for the resulting short period.
C) taxpayers filing an initial tax return are required to annualize the year's income and prorate exemptions and credits.
D) an existing partnership can change its tax year without prior approval if the partners with a majority interest have the same tax year to which the partnership changes.

Accepted Answer

Taxpayers filing an initial tax return and executors filing a taxpayer's final return or corporations filing their last return are not required to annualize the year's income, nor are personal exemptions or tax credits prorated.

Question 15

A fiscal year is a 12-month period that ends on the last day of any month other than December.

Accepted Answer

A tax year other than a calendar year is referred to as a fiscal year.

Question 16

Except in a few specific circumstances, once adopted, an accounting period may be changed without IRS approval.

Accepted Answer

IRS permission must be requested for most changes in accounting method.

Question 17

A newly married person may change tax years to conform to that of his or her spouse so that a joint return may be filed.

Accepted Answer

A married couple can only file a joint return if they have the same tax year.

Question 18

Taxpayers who change from one accounting period to another must annualize their income for the resulting short period.

Accepted Answer

The annualization is required so the taxpayer does not enjoy the lower marginal tax rates twice within 12 months.

Question 19

When preparing a tax return for a short period, the taxpayer should annualize the income if the short period return
A) is the last return for a decedent who died on June 15.
B) is the first return for a corporation created on June 1.
C) is the last return for a partnership, which was terminated on October 12.
D) is a return for June 1 to December 31, for a corporation changing from a fiscal year to a calendar year.

Accepted Answer

Annualization is required for a change in accounting period.

Question 20

A taxpayer's tax year must coincide with the year used to keep the taxpayer's books and records.

Accepted Answer

Financial reporting and tax years must coincide.

Quiz 11: Accounting Periods and Methods