Question

Match the three possible partnership year-ends with the order in which the steps must be examined.

Instructions
a 1st step
b 2nd step
c 3rd step

Answer 1

The three possible tax year ends for partnerships are

• Step 1 Majority interest taxable year
• Step 2 Principle partners test
• Step 3 Least aggregate deferral.

The tax year end for partnerships means date on which a partnership entity concludes its fiscal accounting period for tax purposes. These are expected to align with the calendar year-end or a specific fiscal year-end chosen by the partnership.

In majority interest taxable year, the taxable year of one or more partners who together own more than 50% of the capital and profits interests in the partnership

In principle partners test, the required tax year means the taxable year the principle partners all have in common. These partners are those that have 5 percent or more interest in the partnership profits and capital.

In least aggregate deferral, the test that is used among the tax years of the partners that provides the partner group as whole with the smallest amount of aggregate tax deferral.