XYZ, LLC, has several individual and corporate members.Abe and Joe, individuals with 4/30 year-ends, each have a 23 percent profits and capital interest.RST, Inc., a corporation with a 6/30 year-end, owns a 4 percent profits and capital interest, while DEF, Inc., a corporation with an 8/30 year-end, owns a 4.9 percent profits and capital interest.Finally, 30 other calendar year-end individual partners (each with less than a 2 percent profits and capital interest)own the remaining 45 percent of the profits and capital interests in XYZ.What tax year-end should XYZ use, and which test or rule requires this year-end?
A)4/30, principal partners test.
B)4/30, least aggregate deferral test.
C)12/31, principal partners test.
D)12/31, least aggregate deferral test.

Question

Quizplus · Accepted Answer

The principal partners test requires the tax year-end to be the same as the tax year-end of the majority interest partners. In this case, Abe and Joe are the majority interest partners with a combined 46 percent interest, and they both have a 4/30 year-end. Therefore, XYZ must use a 4/30 year-end.

XYZ, LLC, Has Several Individual and Corporate Members