Copper Corporation, a C corporation, had gross receipts of $5 million in 2009, $6 million in 2010, and $3 million in 2011.Gold Corporation, a personal service corporation (PSC), had gross receipts of $4 million in 2009, $7 million in 2010, and $5 million in 2011.Which of the corporations will be allowed to use the cash method of accounting in 2012?
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

The gross receipts of Copper Corporation did not exceed an average of $5 million for the three-year period ending with the previous tax year, so it will be allowed to use the cash method of accounting in 2012. On the other hand, Gold Corporation is a PSC, and PSCs are allowed to use the cash method regardless of their gross receipts, as long as they meet certain criteria. Therefore, both Copper Corporation and Gold Corporation will be allowed to use the cash method of accounting in 2012.

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