Copper Corporation, a C corporation, had gross receipts of $5 million in 2013, $6 million in 2014, and $3 million in 2015. Gold Corporation, a personal service corporation (PSC), had gross receipts of $4 million in 2013, $7 million in 2014, and $5 million in 2015. Which of the corporations will be allowed to use the cash method of accounting in 2016?
A)Copper Corporation only.
B)Gold Corporation only.
C)Both Copper Corporation and Gold Corporation.
D)Neither Copper Corporation nor Gold Corporation.
E)None of the above.

Question

Quizplus · Accepted Answer

Both Copper Corporation and Gold Corporation will be allowed to use the cash method of accounting in 2016 because the gross receipts of each corporation did not exceed $25 million for the three-year period from 2013 through 2015. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) increased the gross receipts threshold for using the cash method of accounting from $5 million to $25 million for C corporations and PSCs. Therefore, both corporations are eligible to use the cash method of accounting in 2016.

Copper Corporation, a C Corporation, Had Gross Receipts of $5