BUSINESS/TAX RESEARCH ASSIGNMENT
1. For the Tax year 2004, is SK eligible to switch from the accrual to cash method of accounting under Rev. Proc. 2001-10? This revenue procedure applies to taxpayer with "average annual gross receipts" of $1,000,000 or less. Since SK's average annual gross receipt is greater than 1,000,000 for 2004 therefore SK is not eligible to switch from the accrual to cash method of accounting. ( Rev. Proc. 2001-10,2001-1 CB 272)
2. For the tax year 2004, is SK eligible to switch from the accrual to cash method of accounting under Rev. Proc. 2002-28? This revenue procedure applies to a qualifying small business taxpayer as defined in section 5.01 with average gross receipts of $10,000,000 or less that is not prohibited from using cash method under Section 448. Since SK's average gross receipts for 2004 is less than 10,000,000 therefore SK is eligible to switch from the accrual to cash method of accounting. . (Rev. Proc. 2002-28, 2001-1 CB 815-5.01)
3. SK has on hand a large quantity of "funeral linens" that are used to prepare its clients for viewing, and are not re-used. SK has been expensing these linens as they are acquired. May SK expense the cost linens as they are acquired if it remains on the accrual method of accounting? If it adopts the cash method of accounting. Under either method of accounting as long as the cost of such material and supplies have not been deducted in determining the net income or loss or taxable income for any previous year. (Reg. Section 1.162-3)
4. What is SK's NAICS number?
Funeral Homes and Funeral Services
(www.Census.gov and Rev. Proc.2002-28, 2001-1 CB 815, 4.01(1) (a) (v))
5. For SK what is the difference (in concept, not in numbers) between its"gross receipts" and its "gross income"? The differences between SK's gross income and gross receipts are that the gross receipts for the tax year equal all receipts derived from all of the SK's businesses that must be recognized under the...
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