Question

What tax year-end must unincorporated entities with only one owner adopt?

1) The entity is free to adopt any tax year-end
2) The entity must adopt the same year-end as its owner
3) The entity must adopt a calendar year-end
4) The entity may adopt any year-end except for a calendar year-end

Answer 1

In the case of an unincorporated entity with one owner, the owner is free to choose any tax year-end that suits their business needs and preferences.

Step-by-step explanation:

In the case of an unincorporated entity with only one owner, the owner can choose to adopt any tax year-end for their business. They are free to select a year-end that aligns with their business needs and preferences. This flexibility allows the owner to consider factors such as their accounting cycle, seasonal fluctuations in income, and availability of accounting resources.

For example, if the owner operates a sole proprietorship and prefers to have a tax year-end that matches the calendar year, they can adopt a calendar year-end of December 31st. This simplifies the process of filing tax returns as it aligns with the traditional year-end period.

It is important to note that the owner's choice of year-end can have implications for their reporting and financial record-keeping requirements. It is recommended for owners to consult with a tax professional or accountant to determine the most suitable year-end for their specific business situation.