Fern,Inc. ,Ivy Inc. ,and Jason formed a general partnership,each contributing equally.Fern,Inc.files its tax return on a July 1 - June 30 fiscal year;Ivy Inc.files on a September 1 - August 31 fiscal year;and Jason is a calendar year taxpayer.Which of the following statements is true regarding the taxable year the partnership can choose?
A)The partnership must choose the calendar year since it has no principal partners.
B)The partnership can choose the taxable year of any of its "principal partners" without obtaining IRS permission.
C)The partnership can choose a January 31 fiscal year without obtaining IRS permission,if the partnership can prove that the January 31 fiscal year will reduce the cost of preparing the partnership tax return.
D)The partnership can choose the taxable year that provides for the "least aggregate deferral" without obtaining IRS permission.
E)None of the above.

Question

Quizplus · Accepted Answer

The partnership can choose the taxable year that provides for the "least aggregate deferral" without obtaining IRS permission. This means that the taxable year chosen should result in the least amount of time between when income is earned and when it is reported on the partnership's tax return. Since each partner has a different fiscal year, the partnership will need to choose a taxable year that minimizes this deferral for all partners. This choice may require obtaining IRS permission, but it is the best option for minimizing tax deferral.

Fern,Inc ,Ivy Inc