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

Question

1. A subsidiary corporation filing a consolidated return with its parent corporation must change its accounting period to conform with its parent's tax year.
2. Misha, a single taxpayer, died on July 31, 2018. Her final income tax return (ignoring extensions) is due November 15, 2018.
3. Taxpayers who change from one accounting period to another must annualize their income for the resulting short period.
4. Generally, if inventories are an income-producing factor to a small business, the accrual method must be used for sales and cost of goods sold.
5. Alvin, a practicing attorney who also owns an office supplies store, may use the cash basis for his legal practice and the accrual basis for his office supplies store.

Answer 1

1. TRUE
A consolidated return can only include members with a common year-end.
2. FALSE
The tax return will be due April 15 of the year following year of death.
3. TRUE
The annualization is required so the taxpayer does not enjoy the lower marginal tax rates twice within 12 months.
4. FALSE
Effective in 2018, businesses whose average gross receipts for the three prior years do not exceed $25 million can use the cash method.
5. TRUE
The fact that an overall accounting method is used in one trade or business does not mean that the same method must be used in a second trade or business or for nonbusiness income and deductions.