What does recognition period mean on the CPA exam?
Recognition period. The window during which a converted C corporation's built-in gains remain exposed to the corporate-level tax. Five years from the first day of the first S year.
Defined against Sec. 1374(d)(7).
Which CPA exam sections use recognition period?
Recognition period appears in the TCP section of the CPA exam.
Related terms
- C corporation: A corporation taxed in its own right under subchapter C.
- statute of limitations: The window in which the Service may assess more tax, normally three years from filing, extended to six for a substantial omission of income and unlimited for a false return or none at all.
- goodwill: An asset representing the future economic benefits of acquired assets not separately identified, measured as consideration less identifiable net assets.
- accumulated adjustments account: The running total of an S corporation's post-election taxable income less distributions.
- capital gain net income: Capital gains minus capital losses for the year, long-term and short-term combined.
- accumulated earnings and profits: The C corporation earnings and profits an S corporation carries into S status.