Regulation 3 PassMaster Questions

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Unformatted text preview: return to report the additional $2,000 of income. Brun is required to notify the IRS within 30 days of the determination of the exact amount of the item. The $2,000 difference is includible in Brun's 1993 income tax return. No further inclusion of income is required as the difference is less than 25% of the original amount reported and the estimate had been made in good faith. CPA-02136 Explanation Choice "c" is correct. Under the accrual basis of accounting, when you include an amount in gross income on the basis of a reasonable estimate, and you later determine the exact amount, the difference (if any) is taken into account in the tax year in which the determination is made. Therefore, in this case, the additional $2,000 is included in Brun's 1993 income. Choice "a" is incorrect. There is no requirement to file an amended return as a result of an inaccurate but reasonable estimate of income in a prior year. Choice "b" is incorrect. There is no requirement to notify the IRS....
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.

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