Selecting accounting method-fiscal year-end

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Tom and Jerry 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.

As their tax adviser, identify the issues that must be considered in selecting an accounting method and tax year for the partnership.

Reference no: EM1363285

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