What tax year should Cardinal elect

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Problem - The Cardinal Wholesale Company is an S corporation that began business on March 1, 2019. Robert, a calendar year taxpayer, owns 100% of the Cardinal stock. He has $400,000 taxable income from other sources each year. Robert will work approximately 30 hours a week for the corporation. Cardinal sells swimming pool supplies, and its natural business year ends in September. Approximately 80% of Cardinal's gross receipts occur in June through September.

Required -

a. What tax year should Cardinal elect, assuming that Robert anticipates the company producing a net profit for all years?

b. What tax year should Cardinal elect, assuming that it will lose $10,000 a month for the first 12 months and an average of $5,000 a month for the next 12 months? In the third year, the corporation will earn taxable income.

Reference no: EM132672249

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