8. A CPA practice that is incorporated earns 60% of its annual revenues
in the months of February, March, and April. Because the CPA practice is
a professional services corporation (PSC), it must use a calendar year
to report its income.
9. A partnership cannot elect to use a tax year other than a calendar
year merely because the partnership’s CPA is too busy to prepare a
calendar year return.
10. In 2003, a medical doctor who incorporated his practice elected a
fiscal year ending September 30th. During the fiscal year ended
September 30, 2011, he received a salary of $180,000. During the period
from October 1, 2011 to December 31, 2011, the corporation paid the
doctor a total salary of $50,000, and paid him $200,000 of salary in
the following 9 months. The corporation’s salary deduction for the
fiscal year ending September 30, 2012, is limited to $200,000.
11. Laura Corporation changed its tax year-end from June 30th to
December 31st in 2011. The income for the period July 1, 2011 through
December 31, 2011 was $45,000. The corporate tax rate is 15% on the
first $50,000 of income, 25% on income from $50,001 to $75,000, and 34%
on income from $75,001 to $100,000. A portion of Laura’s July –
December 2011 income will be taxed at 34%.