Owners of pass-through entities may defer income recognition by selecting a different tax year for the business if at least 25% of the business revenues occur during the last two months of the proposed year.

Question

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This statement is true. Pass-through entities, such as partnerships, LLCs, and S corporations, allow income and losses to flow through to their owners' individual tax returns. If at least 25% of the entity's revenues occur during the last two months of its tax year, the owners may be able to defer income recognition by selecting a different tax year for the entity. This is allowed under the tax code's "annualization rule."

Owners of Pass-Through Entities May Defer Income Recognition by Selecting