Question

In the absence of an election to adopt an annual accounting period, the required tax year for a partnership is ______.

1) A tax year that results in the greatest aggregate deferral of income.
2) A tax year of one or more partners with a more than 50
3) A calendar year.
4) A tax year of a principal partner having a 10

Answer 1

The required tax year for a partnership, in the absence of an election, is a tax year of one or more partners with a more than 50% interest in partnership profits.

Step-by-step explanation:

The required tax year for a partnership, in the absence of an election, is a tax year of one or more partners with a more than 50% interest in partnership profits. This is known as the majority interest rule. It ensures that partnerships follow the tax year of the partners who have the most significant stake in the partnership.

For example, if Partner A and Partner B each have a 40% interest in the partnership profits, while Partner C has a 20% interest, the required tax year would follow the tax year of Partner A or Partner B, as they have more than a 50% interest combined.

Therefore, the correct option in this case would be 2) A tax year of one or more partners with a more than 50%.