Your boss, Jane Smith, has a meeting with a new client. The client is considering starting a personal service corporation (PCS) but has some questions, one of which is whether to use a calendar year-end or fiscal year-end. Its been a while since your boss as handled a PSC tax matter. She wants a brief, but thorough, memo on the business purpose exception to selection of a fiscal year-end.

Complete the attached Memorandum based on your research.Support your research with proper citations of tax authority. Your homework should be typed, in Word, and no more than 3 pages long.

Partial list of research aids:

IRC 441(i) and corresponding regulations

MEMORANDUM

To: Jane Smith, Partner

From: [Your Name]

Subject: PSC Business Purpose Exception to Fiscal Year

Facts:

A personal service corporation (PSC) generally is limited to the calendar year for reporting purposes. One exception to this rule is when the PSC can demonstrate a business purpose for a fiscal year-end.

Issue:

Explain the business purpose exception to a PSC using a fiscal year-end, including use of examples of when the standard is and is not satisfied.

Analysis:

[Provide analysis]