why is annualization required for a short tax accounting per

why is annualization required for a short tax accounting period?

a) annualization is required to capture the income and deductions of the taxpayer\'s full year.

b) annualization is required in order to subject the income to the highest annual marginal tax rate.

c) annualization is required to ensure any income is accounted for when a taxpayer changes an accounting period.

d) annualization is required to compare full year income with short year income.

Solution

a) annualization is required to capture the income and deductions of the taxpayer\'s full year.

Annualization required for a short tax accounting period becasue annualizing means converting the taxable income in the short year to a full year’s equivalent, finding the tax on the full amount, then paying the pro rata share. It is done to prevent avoidance of progressive rates.