Red Corporation and Green Corporation are equal partners in the R & G Partnership. Red Corporation's tax year ends September 30th, and Green Corporation is a calendar year taxpayer. The greatest aggregate deferral of income would occur if the partnership used a calendar year for tax purposes.

Question

Quizplus · Accepted Answer

If the partnership uses a calendar year tax year, both Red and Green Corporations will have the same tax year, allowing them to defer income to the following year if necessary. If they use Red Corporation's tax year, any income earned after September 30th by Red Corporation would be taxed immediately, while Green Corporation would have to wait until their following calendar year to be taxed on their share of the income. This would result in a less efficient deferral of income.

Red Corporation and Green Corporation Are Equal Partners in the R