The BCD Partnership is being formed by three equal partners, Beta Corporation, C
ID: 2427442 • Letter: T
Question
The BCD Partnership is being formed by three equal partners, Beta Corporation, Chi Corporation, and Delta Corporation. The partners’ tax year-ends are June 30 for Beta, September 30 for Chi, and October 31 for Delta. The BCD partnership’s natural business year ends on January 31.
What tax year(s) can the partnership elect without IRS permission?
What tax year(s) can the partnership elect with IRS permission?
How would the answer in part a and b change if Beta, Chi, and Delta own 4%, 4%, and 92%, respectively, of the partnership?
Explanation / Answer
What tax year(s) can the partnership elect without IRS permission?
The least aggregate deferral of income is on June 30. The partners should adopt june 30 as the tax year without taking IRS permission if they want to use 52 -53 week tax year
b.What tax year(s) can the partnership elect with IRS permission
The partnership changes to the tax year resulting in the least aggregate deferral(june 30), it must file a Form 1128 with the short period return showing the computations used to determine that tax year.
How would the answer in part a and b change if Beta, Chi, and Delta own 4%, 4%, and 92%, respectively, of the partnership?
If there is no majority interest tax year, the partnership must use the tax year of all its principal partners. A principal partner is one who has a 5% or more interest in the profits or capital of the partnership.
a. Tax Year would be october 31st
b.With IRS permission tax year could be calander year or fiscal year.The partnership makes an election under section 444 of the Internal Revenue Code to have a tax year other than a required tax year by filing Form 8716.
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