Brass Corporation, a C Corporation, had gross receipts of $5 million in 2010, $6
ID: 2426626 • Letter: B
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