Must Taxpayers Practice Zen to Use the Cash Method?
Posted: 27 Nov 2000
The cash basis method of accounting is currently available to a relatively small set of corporations that pay a relatively small amount of income tax. Even that limited availability, say the authors, is subject to great uncertainty. They believe that it seems best for all concerned to allow corporations having less than $5 million of average annual gross receipts to employ the cash basis method or a simple variation thereof. If the cash basis method were made available to most or all "small" corporations, they say, reg. section 1.162-3 should be clarified as to what constitutes "supplies," "materials," and "incidental." In the end, the authors conclude, greater certainty in this area would allow the Service to focus its efforts and resources on more significant areas and allow "small" corporations to focus their efforts on generating income subject to tax.
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