Choice "d" is correct. A C corporation has considerable flexibility in choosing an accounting period. A C corporation generally has the same choice of accounting periods as do individual taxpayers. All of the other forms have some limitations (and these are identified in the textbook in chapters R3 and R4).

Choice "c" is incorrect. An S corporation must adopt the calendar year unless a valid business purpose for a different taxable year is established. There are thus some restrictions on S corporations.

Choice "a" is incorrect. A partnership is significantly limited in what accounting period (taxable year) it can select. Generally, a calendar year is required, unless the partnership meets a set of rules or unless the partnership can establish a valid business purpose for a different taxable year. For example, if one or more of the partners having a majority interest in the partnership's capital and profits have the same taxable year, the partnership must use that taxable year. If the partners owning a majority interest in partnership profits and capital do not have the same taxable year, the partnership must use the same taxable year as all of its "principal" partners. If neither of those two rules applies, the partnership must use the taxable year that results in the least aggregate deferral of income to the partners.

Choice "b" is incorrect. A personal service corporation must generally use a calendar year unless a valid business purpose for a different taxable year is established. There are also other restrictions.