Question

A partnership may use the cash method despite having a corporate partner when the partnership's average gross receipts for the prior 3 taxable years don't exceed?

A) $5,000,000

B) $1,000,000

C) $25,000,000

D) Partnerships may never use cash method if they have corporate partners.

Explain

Answer 1

Cash Basis is an accounting method in which the income is reported when the cash is received and expense is reported when the cash is paid. Accrual of income and expense is not followed in the cash basis. Taxpayers are allowed to use the cash basis method. A partnership may use the cash method despite having a corporate partner only when the average gross receipts for the prior three taxable year doesn't exceed $5,000,000.

The correct answer is oprion (A) i.e. $5,000,000.