ACME Partnership has had the following gross receipts since its formation: $21.8 million in 2018, $24.6 million in 2019, $28.8 million in 2020, $21.6 million in 2021, and $32 million in 2022. Partner Meile, Inc. is a C corporation. In what tax years must ACME use the accrual method?

Question

Quizplus · Accepted Answer

Under the tax code, the requirement to use the accrual method is triggered when a taxpayer has average annual gross receipts that exceed $25 million for the three preceding tax years. ACME Partnership had average annual gross receipts of $24.4 million in the years 2018-2019, which is below the threshold. However, in 2020, gross receipts exceeded $25 million and remained above that threshold in subsequent years. Therefore, ACME Partnership must start using the accrual method in the tax year 2021 and all following years.

ACME Partnership Has Had the Following Gross Receipts Since Its