Harry and Sally Are Considering Forming a Partnership

question 92

Essay

Harry and Sally are considering forming a partnership. Both taxpayers use the calendar year and are cash basis taxpayers. The partnership will not be a tax shelter. The partners are uncertain as to whether the partnership should use the cash or accrual method of accounting. Also, the idea of a tax deferral in the first year of operations has led them to consider using a June 30 fiscal year-end for the partnership.
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As their tax adviser, identify the issues that must be considered in selecting an accounting method and tax year for the partnership.

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Definitions:

Rectal Thermometer

A medical device used to accurately measure body temperature via the rectum.

Impaired Thermoregulation

A condition where the body cannot maintain its normal temperature due to disrupted heat production or loss processes.

Impaired Cognition

A reduction in an individual's ability to think, concentrate, formulate ideas, reason, and remember, which may affect daily functioning.

Occupational Exposure

The potential encounter with hazardous substances, conditions, or practices at the workplace that could pose health risks to workers.