- 8 - 2. Whether Western Used a Permitted Tax Year An S corporation may use only a permitted year as its taxable year. Sec. 1378(a). A permitted year is a year ending December 31, or any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary. Sec. 1378(b). Western stated in its S corporation election that a tax year ending January 31 was its natural business year as provided in Rev. Proc. 87-32, secs. 4.01 and 4.02(a). Rev. Proc. 87-32, supra, provides a procedure under which a corporation electing S corporation status may have a tax year ending on a date other than January 31 that coincides with its natural business year. Generally, a 12-month period is a taxpayer’s natural business year if at least 25 percent of the gross receipts of the enterprise are regularly earned in the last two months of the annual period. Id. A taxpayer cannot establish a natural business year under Rev. Proc. 87-32, sec. 4.01(1)(d), if the taxpayer (and any predecessor organization) has not had gross receipts for a period of at least 47 months. Petitioners did not offer evidence showing the amount of Western’s gross receipts from sales and services for any period. Thus, petitioners have not established that Western may use a tax year other than a calendar year. WePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011