Question

C corporations with annual average gross receipts of $25 million or more are allowed to use...

C corporations with annual average gross receipts of $25 million or more are allowed to use the cash method of accounting for at least the first two years of their existence. true or false

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Answer #1

Answer: False

Corporations with annual average gross receipts for the last three years of $25 million or less may use the cash method of accounting. Corporations that have not been in existence for at least three years will need to compute their annual average gross receipts over the period they have been in existence to determine if they are allowed to use the cash method of accounting or not.

A corporation (other than an S corporation) with average annual gross receipts for the 3 preceding tax years exceeding $25 million (indexed for inflation) cannot use the cash method of accounting.

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