Copper Corporation, a C corporation, had gross receipts of $25 million in 2016, $26 million in 2017, and $23 million in2018. Gold Corporation, a personal service corporation (PSC), had gross receipts of $24 million in 2016, $27 million in 2017, and $25 million in 2018. Which of the corporations will be allowed to use the cash method of accounting in
2019?
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 these.

Question

Quizplus · Accepted Answer

Both Copper Corporation and Gold Corporation are allowed to use the cash method of accounting in 2019 because their average annual gross receipts for the three preceding tax years (2016, 2017, and 2018) do not exceed $26 million, which is the threshold for businesses to use the cash method of accounting as per the IRS guidelines effective from tax years beginning after December 31, 2017.

Copper Corporation, a C Corporation, Had Gross Receipts of $25