Question

Which of the following represents the best choice for the new maximum annual average gross receipts threshold on filing with the accrual method of accounting for a C corporation?

A. Gross receipts of less than $5 million

B. Gross receipt of less than $ 10 million

C. Gross receipts of less than $ 20 million

D. Gross receipts of less than $ 25 million

Answer 1

Option (D) is correct answer

D. Gross receipts of less than $ 25 million

Explination:

Under the Act, C corporations and partnerships with C corporation partners may use the cash method of accounting if their annual average gross receipts that do not exceed $25 million for the prior three-taxable-year period (not for all periods, as under prior law), regardless of whether the purchase, production, or sale of merchandise is an income-producing factor.

The Act retains the exceptions from the required use of the accrual method for qualified personal service corporations and for taxpayers other than C corporations. Thus, S corporations, and partnerships without C corporation partners, are allowed to use the cash method without regard to whether they meet the $25 million gross receipts test, so long as the cash method clearly reflects income.