Exam 16: Accounting Periods and Methods

Ron sold land (a capital asset)to an unrelated party for $50,000 cash and a 4% note for $150,000 due in three years.His basis in the land was $40,000.Ron and the purchaser are cash basis taxpayers.Which of the following statements is correct?

Father sold land to Son for $150,000 in 2010.Father's basis in the land was $60,000.Son paid Father $25,000 and gave Father a note for $125,000 due in 2013.In 2011,Son sold the land for $200,000 cash.The note bore interest at the appropriate Federal rate and both Father and Son held the land as an investment.

The accrual basis taxpayer sold land for $100,000 on December 31,2010.He did not collect the $100,000 until January 2,2011.The land was held as an investment.

In 2003,a medical doctor who incorporated his practice elected a fiscal year ending September 30th.During the fiscal year ended September 30,2010,he received a salary of $180,000.During the period from October 1,2010 to December 31,2010 the corporation paid the doctor a total salary of $40,000,and paid him $200,000 of salary in the following 9 months.The corporation's salary deduction for the fiscal year ending September 30,2011,is $240,000.

In regard to choosing a tax year for a business owned by individuals,which form of business provides the greater number of options in regard to the tax year?

A retailer must actually receive a claim for refund from the customer before a deduction can be taken for the refund.