Discussion:Construction Tax/Completed Contracts

1) Residential pool contractor, small contractor's exemption applies under IRC 460(e).

2) Initial S corp return filed 2004, method of accounting selected on return, CASH; little activity in 2004, no income and a few expenses, minimal.

Taxpayer has NOT filed the '05 S corp return and is sitting on a pile of cash at 12/31/05 with jobs/contracts in progress at 12/31/05.

Is the completed-contract method available to taxpayer for 05 OR since the other preparer selected the cash method on the initial return, must the taxpayer use the cash receipts and disbursements method for 05 and subsequent years until he files for a change in accounting method?

Thanks....I did but I am wondering "out loud" about when the CCM of accounting becomes "official". What I am reading from Pubs and PPC info states that method of accounting is generally adopted on the initial return (in this case, the preparer elected CASH method on the initial return).

However, the Pubs (not the code or regs) imply that contractors have two methods of accounting, one for long term contracts (i.e., PCM, CCM) and one method for everthing else.

May be grasping at nothing here BUT if there were no long term contracts in place at 12/31/04 is the method of accounting for those contracts at 12/31/05 OPEN to CCM or should the original return filed in '04 specified CASH and CCM for long term contracts?