Question

On page 16-12, the text states that corporations (other than S corporations) are generally prohibited from using the cash method of accounting, but that there is an exception for “qualified personal service corporations.” The text states that a qualified personal service corporation is one that performs services in the fields of “health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting” and whose employees own substantially all of the stock of the corporation.

Are there any other fields in which a qualified personal service corporation may provide services? If so, please list them.

What is the test for determining if a qualified personal service corporation meets the stock ownership requirement? Describe in detail.

What are the consequences of a corporation failing to meet the criteria as a qualified personal service corporation for a taxable year?

Please answer each question in complete sentences, and cite name and number of the IRS publication or form/instruction where you found each answer, and the page number on which the answer is found. Use your own words in the answer – do not copy the IRS’ language.

Answer 1

solution:

1.feilds in which a qualified individual administration enterprise may give administrations are

a.health

b.law

c.engineering

d.architecture

e.accounting

f.acturial science

g.performing expressions

h.consulting

2. all in all an enterprise meets the possession ,if consistently amid the assessable year ,subtantially all the organization stock, by esteem is held ,straightforwardly or in a roundabout way by

a.employees performing administrations forn such partnership regarding exercises including a feild alluded previously

b.retired emplyoyees who had preffered such administrations for such partnership

c.the domain of any invidual or

d.any other individual who procured such stock by reason of death of an individual ,yet just for the multi year combined beggining on the date of death ofsuch person

3.a corppration that fizzles the capacity test for any assessable year or that comes up short the proprietorship tests whenever amid an assessable year ,will transform from the money strategy viable for the year in which the partnership neglects to meet the capacity test .