1. A

Certain farming businesses and individuals can use the cash method. C Corporations and partnerships with a c corp partner, where the production, purchase or sale of merchandise is not an income-producing factor, may use cash method if average gross annual receipts over the three-year prior period were $5 million or less.

2. D

Constructive receipt income (if available), must be reported in the year that the income is controlled by you; it cannot be pushed forward to be claimed in the upcoming year. Examples include checks received but not yet cashed and interest earned (accrued interest) but not yet paid.

3.
B

Shifting from LIFO to FIFO will move out the oldest inventory first. Typically this inventory has the lowest cost basis, therefore increasing the tax liability. Earnings will be higher because there will be a larger profit margin between the basis and sales price by using FIFO.

4.
C

The carry back for farming NOL is five years.

5.
B

Tower Builders cannot use the "completed contract" method because they are too large and have average annual gross receipts in excess of $10 million. Revenue is recognized at the end of the contract for completed contract method. To be a long-term contract the project cannot be completed in the same year of the contract origination.



Introduction

Related Articles
  1. Investing

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  2. Taxes

    Which Receipts Save Big Money at Tax Time

    Don't wait to April 13th to set up a smart receipt-filing system. These 7 categories could save you some significant money.
  3. Small Business

    Understanding First In, First Out (FIFO)

    A company that uses the first in, first out inventory valuation method will sell, use, or dispose of assets that it produced or acquired first.
  4. Small Business

    Build Your Small Business During Downswings

    Here we offer some cost-saving measures to strengthen your business even when the market is weak.
  5. Investing

    When & Why Should a Company Use LIFO

    By using LIFO (last in, first out) when prices are rising, companies reduce their taxes and also better match revenues to their latest costs.
  6. Investing

    Why Last In First Out Is Banned Under IFRS (XOM)

    We explain why Last-In-First-Out is banned under IFRS
  7. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  8. Investing

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  9. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  10. Investing

    Do You Need A Rent Receipt?

    Landlords don't always bother to send receipts to renters. But there are important reasons renters should insist on getting proof they paid their rent.
Frequently Asked Questions
  1. What is a reasonable amount of debt?

    It really depends on numerous factors - what stage of life you are at, your spending and saving habits, the stability of ...
  2. How are IRA withdrawals taxed?

    Learn how IRA withdrawals are taxed at retirement age and for qualified withdrawals. Consider the different tax consequences ...
  3. How does CareCredit for pets work?

    Understand how using a CareCredit credit card aids pet parents in the payment of potentially high veterinary care costs.
  4. Do 401k contributions reduce AGI and/or MAGI?

    Discover how contributing to a 401(k) plan can reduce your AGI and/or MAGI. Also learn by how much and how this differs from ...
Trading Center