Computation of Partnership\'s Required Tax Year Under the Least Aggregate Deferr

Question

Computation of Partnership's Required Tax Year Under the Least Aggregate Deferral Method (LO. 6)

Cerulean, Inc., Coral, Inc., and Crimson, Inc. form the Three Cs Partnership on January 1 of the current year. Cerulean is a 50%partner, and Crimson and Coral are 25% partners. For reporting purposes, Crimson uses a fiscal year with an October 31 year-end, Coral uses the calendar year, and Cerulean uses a fiscal year with a February 28/29 year-end.

Round your intermediate computations and final answers to two decimal places.

a. What is the aggregate number of deferral months under the following, using the least aggregate deferral method:

Explanation / Answer

Cerulean, Inc., uses a fiscal year with a February 28/29 year-end

Aggregate number of deferral months 3

Coral, Inc., uses a Calander year

Aggregate number of deferral months 6

Crimson, Inc., uses a Calander year

Aggregate number of deferral months 9

Since 3 (for 2/28) is smaller than 6 or 9(for 1/31 and 10/31, respectively), the required tax year for the partnership is Feburary 28, under the least aggregate deferral method.

Partner Year Ends Profit Interest Months of Deferral Profit Interest x Months of Deferral Cerulean, Inc. 2/28 50% 0 0 Coral, Inc. 1/31 50% 2 1 Crimson, Inc 10/31 50% 4 2

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