Brass Corporation, a C Corporation, had gross receipts of $5 million in 2010, $6

Question

Brass Corporation, a C Corporation, had gross receipts of $5 million in 2010, $6 million in 2011, and $3 million in 2012. Silver Corporation, a personal service corporation (PSC), had gross receipts of $4 million in 2010, $7 million in 2011, and $5 million in 2012. Which of the corporations will be allowed to use the cash method of accounting in 2013? Select one:

a. Silver Corporation only

b. Neither Brass Corporation nor Silver Corporation.

c. Brass Corporation only.

d. Both Brass Corporation and Silver Corporation.

Explanation / Answer

If the entities average gross receipts are $5m or less it qualifies for cash method

Gross receipt test for Brass corporation =$5 +$6 +3/3 = $4.677 yes qualifies

Gross receipt for Silver corporation      = $4+$7 +$5 /3 = $5.33 does not qualify

hence option C Brass only is the answer

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