Change of accounting method for small taxpayers with inventory under rev. proc. 2000-22.

• Jurisdiction: United States
• Date: 01 October 2000
• Author: Ely, Mark H.

Under Rev. Proc. 2000-22, a qualifying small 'taxpayer with merchandise inventory, that was previously required to account for sales and inventory using the accrual method of accounting, may automatically change to the cash method of accounting and the inventory rules under Sec. 471 will no longer apply. A qualifying small taxpayer is one whose average annual gross receipts for the previous three years (or shorter period if in existence for less than three years) is $1 million or less. For this test, aggregation rules apply to include gross receipts of related parties. Finally, there is a financial statement conformity requirement. The taxpayer must not regularly use arty accounting method other than the cash method to determine profit or loss for its financial statements, other financial records and reports to owners, creditors, etc., for the current or prior three tax...