Abbott (an S Corporation), Bell, Costello, and Dilbertson form Best Partnership,

Question

Abbott (an S Corporation), Bell, Costello, and Dilbertson form Best Partnership, an equally-shared partnership. Each partner but Abbott has a December 31 tax year-end; Abbott's is June 30. The partners would like to choose a partnership tax year other than one ending December 31, but do not have a valid business purpose for doing so. Which of the following is an acceptable tax year-end they may choose for Best Partnership?

December 31

September 30

June 30

im thinking its 1 and 3 because they dont have a valid business purpose to change the date

Explanation / Answer

I and III only.

Partnership must change its tax year 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.

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