Andrew owns 100% of the stock of Crow's Farm Inc., an S corporation, that raises cattle and corn.The farm's annual gross receipts have never exceeded $23 million, and the farm is not considered a tax shelter.
A)The farm must report its sales and cost of goods sold by the accrual method because inventories are material to the business.
B)The income from the farm may be reported by the cash method.
C)The income from the sales of cattle may be reported by the cash method, but the income from the sales of corn must be reported by the accrual method.
D)The income from the sales of corn may be reported by the cash method, but the income from cattle sales must be reported by the accrual method.
E)None of these.

Question

Quizplus · Accepted Answer

Since the farm's annual gross receipts have never exceeded $25 million and the farm is not considered a tax shelter, it may use the cash method of accounting for tax purposes. Therefore, the income from the farm may be reported by the cash method.

Andrew Owns 100% of the Stock of Crow's Farm Inc