The taxpayer voluntarily changed from the cash to the accrual method of accounting,because inventories were material to the taxpayer's business.The change resulted in a positive $60,000 adjustment to income.
A)The taxpayer must add the $60,000 to income for the year of the change.
B)The taxpayer must amend all prior open years and compute income by the accrual method and pay the additional tax.
C)The taxpayer must add $15,000 to income for the year of the change and add $15,000 to the incomes for each of the three preceding years.
D)The taxpayer may add $15,000 to the income for the year of the change and to the incomes for each of the three following years.
E)None of the above.

Question

Quizplus · Accepted Answer

When a taxpayer voluntarily changes accounting methods, the IRS allows the adjustment to be spread over four years to ease the transition. In this case, the $60,000 adjustment can be added as $15,000 per year over four years.

The Taxpayer Voluntarily Changed from the Cash to the Accrual