Lincoln, Inc., Washington, Inc., and Adams, Inc., form Presidential Suites Partnership on February 15, 20X9. Now, Presidential Suites must adopt its required tax year-end. The partners' year-ends, profits interests, and capital interests are reflected in the table below. Given this information, what tax year-end must Presidential Suites use, and what rule requires this year-end? Presidential Suites Partnership Year-EndProfitsCapitalLincoln, Inc.3/3135%30%Washington, Inc.7/3130%40%Adams, Inc.11/3035%30%
What will be an ideal response?
Because the partners all have different tax year-ends, neither the majority interest taxable year nor the taxable year of the principal partners applies in this situation. Therefore, the least aggregate deferral test must be applied to determine the appropriate tax year-end for Presidential Suites. Under the least aggregate deferral test (see calculations below) Presidential Suites must use a November 30th year-end. Note that the least aggregate deferral test requires the use of the profits interest percentages only.
| LEAST AGGREGATE DEFERRAL TEST | |||||||||
| 31-Mar | 31-Jul | 30-Nov | |||||||
| Profits Interest | Deferral Months | Total | Profits Interest | Deferral Months | Total | Profits Interest | Deferral Months | Total | |
| Lincoln, Inc. | 35% | 0 | 0 | 35% | 8 | 2.8 | 35% | 4 | 1.4 |
| Washington, Inc. | 30% | 4 | 1.2 | 30% | 0 | 0 | 30% | 8 | 2.4 |
| Adams, Inc. | 35% | 8 | 2.8 | 35% | 4 | 1.4 | 35% | 0 | 0 |
| Total | 100% | 4.0 | 100% | 4.2 | 100% | 3.8 | |||
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