Answer the following statements true (T) or false (F)

Question

1. ector Corporation has been using an incorrect method in accounting for supplies expense. It can change to the correct method without filing 3115.
2. Owners of pass-through entities may defer income recognition by selecting a different tax year for the business if at least 25% of the business revenues occur during the last two months of the proposed year.
3. A corporation is starting to produce watches with electronic personal assistant capabilities. Generally, a business producing this type of product will want to elect the LIFO inventory method.
4. A taxpayer sells a parcel of land on the installment sale basis and will recognize the gain over the five-year installment schedule. Form 6252 must be included with his tax return only in the year of sale
5. Advance approval and the filing of Form 970 is required whenever a taxpayer adopts LIFO.

Answer 1

1. FALSE
While approval for a change from an incorrect to correct accounting method may be automatic, Form 3115 must still be filed.
2. TRUE
The selection of a tax year based on a natural business year meeting this revenue standard is allowed.
3. FALSE
Prices of electronics often decline over time so LIFO would not be appropriate.
4. FALSE
Form 6252 is required for the year of the sale and any year in which the taxpayer receives a payment.
5. FALSE
The LIFO method may be adopted in the initial year inventories are maintained without advance approval or filing Form 970. For the initial change to LIFO, advance approval is not required, but Form 970 must be filed with the return.