Must Taxpayers Practice Zen to Use the Cash Method?

Posted: 27 Nov 2000

See all articles by Richard P. Weber

Richard P. Weber

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Dennis J. Gaffney

Le Moyne College - Department of Accounting

Richard O. Davis

Susquehanna University - Department of Accounting and Information Systems

James E. Wheeler

University of Michigan at Ann Arbor - Accounting

Abstract

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.

Suggested Citation

Weber, Richard P. and Gaffney, Dennis J. and Davis, Richard O. and Wheeler, James E., Must Taxpayers Practice Zen to Use the Cash Method?. Available at SSRN: https://ssrn.com/abstract=251731

Richard P. Weber (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States
(517) 432-2925 (Phone)

Dennis J. Gaffney

Le Moyne College - Department of Accounting

Syracuse, NY 13214
United States

Richard O. Davis

Susquehanna University - Department of Accounting and Information Systems ( email )

Sigmund Weis School of Business
Selinsgrove, PA 17870-0101
United States

James E. Wheeler

University of Michigan at Ann Arbor - Accounting ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States
(734) 764-2322 (Phone)

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