Research Problem 1. Barry, an individual, and Aldrin, Inc., a domestic C corporation, have decided to form BA LLC. The new LLC will produce a product that Barry recently developed and patented. Barry and Aldrin, Inc., will each own a 50% capital and profits interest in the LLC. Barry is a calendar year U.S. taxpayer, while Aldrin, Inc., uses a July 1–June 30 fiscal year. The LLC does not have a “natural business year” and elects to be taxed as a partnership.
BA LLC, your client, would like to know what taxable year it must use under the Code and Regulations.
The partners would also like to know what would happen in various hypothetical situations. For example, what would happen if two years after formation of the LLC Barry were to sell half of his interest (25%) to Aldrin, Inc.? Could the LLC retain the taxable year determined in part (a)? Why or why not?
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