XYZ, LLC, has several individual and corporate members. Abe and Joe, individuals with 4/30 year-ends, each have a 23percent profits and capital interest. RST, Incorporated, a corporation with a 6/30 year-end, owns a 4percent profits and capital interest, while DEF, Incorporated, a corporation with an 8/30 year-end, owns a 4.9percent profits and capital interest. Finally, 30 other calendar year-end individual partners (each with less than a 2percent profits and capital interest)own the remaining 45percent 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 owners. In this case, Abe and Joe are the majority owners with a combined 46% 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