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Gold Corporation, Silver Corporation, and Platnium Corporation are partners in the GSP Partnership, which was formed...

Gold Corporation, Silver Corporation, and Platnium Corporation are partners in the GSP Partnership, which was formed on July1, 2018. Gold and Silver use a calendar tax year, and Plantinum's tax year ends June 30th. Platinum owns 65% of the partnership. GSP is not a seasonal business.

a. GSP must use a tax year ending December 31st.

B. GSP must use a tax year ending June 30th.

C. GSP may use a tax year ending either June 30th or December 31st. .

D. GSP may elect its tax year without regard tot he partners tax years.

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Answer #1

There are few rules to follow in determining the tax year of partnership.
If a partner or a group of partners have more than 50% share in the partnership, i.e. majority interest in the capital and partnership profits, then the tax year of the partnership must be the same tax year of the majority partner or a group of partners.

In the above question, Platinum owns 65% of the partnership which is more than 50% share and is a majority interest in the GSP partnership. Plantinum's tax year ends June 30th. So, GSP Partnership must also use the same tax year as Plantinum. GSP must use a tax year ending June 30th.

Answer is B. GSP must use a tax year ending June 30th.

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