This year, G Corporation contracted to build a hotel that it anticipates completing in 10 months.G Corporation's annual gross receipts have historically exceeded $15 million.Assuming construction is not complete at the end of its taxable year, the corporation must use the percentage of completion method to account for the income from the contract.

Question

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According to the IRS, if a taxpayer's average annual gross receipts for the past three taxable years exceed $25 million, the percentage of completion method must be used for long-term contracts. However, if the taxpayer's average annual gross receipts are less than $25 million, they may elect to use either the percentage of completion method or the completed contract method. In this scenario, G Corporation's average annual gross receipts are not specified, but it is stated that they historically exceed $15 million, indicating that they may be subject to the percentage of completion method requirement.

This Year, G Corporation Contracted to Build a Hotel That