7. Brite Bros., Inc. is a consulting company that keeps its books on the cash basis method and operates on a calendar year. In 20X0, the corporation erroneously included in income the amount realized on a project completed in December 20X0. The corporation did not receive payment from the client until January 20X1. The income, however, was reported on the 20X0 corporate tax return filed on March 15, 20X1. On August 2, 20X4, the IRS commenced an audit of Brite Bros. for the tax year 20X1. During the audit, the Revenue Agent discovered the error and included the amount in income for 20X1. The 20X1 tax return was filed on March 15, 202.

(A) Can Brite Bros. file a claim for refund for the tax year 20X0? If not, what would you advise them to do?

(B) Assume there was no audit and that Brite Bros. discovered on August 2, 20X4, that they erroneously deducted the cost of certain materials in 20X0 that should have been deducted on their 20X1 return. If the corporation files a claim for refund for the 20X1 tax year, what recourse would the IRS have?