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

Question

Abbott (an S Corporation), Bell, Costelk), 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? I. December 31 II. September 30 III. June 30 a. I and II only c. I, II or III b. I only d. I and III only 2. Lajoie, Bhatti, and Jenkins are going to form LBJ Partnership. The ownership interests and tax years of the partners are as follows: According to Reg. § 1. 706-l(b) (3), what Is LBJ Partnership's retjuired tax year-end? Assume no business purpose for a different taxable year. a. January 31 c. December 31 b. July 31 d. June 30 3. Slater Slopes is a newly-formed ski resort partnership with a natural business year ending May 31. The ownership and tax years of hs three partners are as follows: Which of the following is an acceptable year-end for Slater Slopes? Consider both §706 and §444. I. May 31 II. November 30 III. September 30 a. II only c. I only b. I and II only d. I, II and III 4. The cash method of accounting may be used for tax reporting purposes by which of the following taxpayers? a. A partnership with a C Corporation one with annual revenue exceeding $5 million as a partner b. AC Corporatkm with annual revenue of $2. 5 million, which has physical inventory levels that are material in amount c. A farming corporation d. A partnership with a personal service C corporation one with annual revenue beloe $5 million-as a partner

Explanation / Answer

1. Correct answer is A.

In general , Partnership is required to adopt a tax year that coincides with the tax year of majority of the partners which would be december 31 and generally is required to have a business purpose to select another tax year . However an alternate tax year can be selected provided deferral period of taxable year selected is no longer than 3 months , so this would also include 30 september

3. Correct answer is D

In general , Partnership is required to adopt a tax year that coincides with the tax year of majority of the partners which would be November 30 and generally is required to have a business purpose to select another tax year which would be May 31 . However an alternate tax year can be selected provided deferral period of taxable year selected is no longer than 3 months , so this would also include 30 september

4. Correct answer is D

Cash method cannot be used by the corporation or the corporation as a partner in the partnership with the average annual gross receipts exceeding $5,000,000. A corporation engaged in farming or a partnership engaged in farming with a corporate partner is required to compute taxable income on accrual basis . A personal service corporation is treated as a individual taxpayer So as a result a personal service corporation as a partner with a annual gross receipts of less than $5 million may use cash basis

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