Question

In: Accounting

Tall Tree LLC was recently formed with the following members: Name Tax Year End Capital/Profits %...

Tall Tree LLC was recently formed with the following members:

Name

Tax Year End

Capital/Profits %

Eddie Robinson

December 31

35%

Pitcher Lenders LLC

June 30

40%

Perry Homes Inc.

October 31

25%

What is the least aggregate deferral if the required taxable year-end for Tall Tree LLC is October 31st? (Carry your answer to one decimal e.g., 5.2)

Solutions

Expert Solution

Eddie Robinson, Pitcher Lenders, and  Perry Homes Inc. form Tall Tree LLC where members do not have particular tax year-end. Robinson uses calendar year i.e, Dec 31st, whereas for Pitcher Lenders it's June 30th and for Perry Homes, it is Oct 31st.

The Majority interest taxable year rule does not apply because

  • Each partner uses a different taxable year.
  • None of the partners own more 50% of capital & profits of the partnership.

Hence principal partnership taxable year rule does not apply.Therefore Least aggregate deferral of income method will be used , where tax year for partnership would be chosen and minimum defferal of income is calculated.

Taxpayer Months of Deferral Profit % Deferral Months* Profit percentage
Eddie Robinson 10 35% 3.5
Pitcher Lenders LLC 4 40% 1.6
Perry Homes Inc. 0 25% 0
Total 5.1

Hence least deferral of income of partners would be 5.1 months.


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