Question

Which of the following is not required to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Multiple Choice

• Approval of the payment from the board of directors.

• Approval from the IRS prior to making the contribution.

• Payment made within three and one-half months of the tax year-end.

• All of the choices are necessary.

WFO Corporation has gross receipts according to the following schedule:

Year 1	$22.00 million
Year 2	$24.00 million
Year 3	$26.00 million
Year 4	$26.50 million
Year 5	$27.00 million
Year 6	$28.00 million

If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

Multiple Choice

• Year 3.

• Year 4.

• Year 5.

• Year 6.

• None of the choices are correct.

Answer 1

1. Corporations can make Charitable contributions on their tax return. Approval from the IRS prior to making the contribution is not required.

Corporations should take approval from the Board of Directors.

As an accrual-method reporting corporation, they can report the charity payment made within three and a half months of the tax year-end.

2. As per the tax law, if any corporation has generated more than $5 Million a year in revenues on average over the last three years, then they need to change their accounting method from cash to accrual.

So, the answer is Year 4