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

Under the principal partner test, the partnership must use the year-end of the principal partners if they all have the same tax year-end. A principal partner is a partner that holds 5% or more in partnership profits or capital. Under this definition, Abe and Joe are the only principal partners. Since both have the same tax year-end, XYZ must use their year-end, or 4/30.

XYZ, LLC Has Several Individual and Corporate Members