the BDC partnership has 3 partners with the following partnership interest percentages and tax-year ends: B...

the BDC partnership has 3 partners with the following partnership interest percentages and tax-year ends: B has a 35 percent ownership and a dec. 31 year end; D owns 45 percent and has a June 30 year end, and C owns 35 percent and has a Oct. 30 year end. What method must be used to determine the partnership year end and which year end is required?

Expert Solution

there are 3 tests to determine partnership year

a) Principal partners test - acc to this test , the year which is common for principal partners (having more than 5%) will be the partnership year.in this case all partners are principal partners and none of them have a common year , hence this test cannot be followed.

b) Majority test - in this test , year of that partner will be chosen who had the majority (>50%) interest will be chosen.since no partners had majority , hence this test also can not be followed.

c) Least aggregate defferal of income - in this test , weighted avg of defferred months calculated for each kind of year and then partnership year with least defferal will be chosen.

Dec 31

partner name	Deffered period (months)	interest	weighted avg
B	0	35%	0
D	6	45%	2.7
C	10	35%	3.5
Total			6.2

June 30

partner name	Deffered period (months)	interest	weighted avg
B	6	35%	2.1
D	0	45%	0
C	4	35%	1.4
Total			3.5

Oct 30

partner name	Deffered period (months)	interest	weighted avg
B	2	35%	0.7
D	8	45%	3.6
C	0	35%	0
Total			4.2

Since June 30 has the least aggregate deferral of income , June 30 will be the year end.

ekkarill92 answered 2 years ago

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