Flathead Boat Company operates as a general partnership. It is owned equally by its two partners, Cody and Codys father, Jim. Cody manages the day-to-day operations, and he is the face of the shop. The boat shop has been in operation for several years. Although the company sells boats all year, Cody has observed over time a significant surge in sales occur during the months of June and July. After July, sales decline. This is because the harsh winters at Flathead Lake reduce the interest in boating during the winter months. Currently, Flathead Boat Company has a calendar year-end for tax and financial reporting purposes. It has occurred to Cody that it would be better to close the books for management purposes at the end of July, which seems to be just after the end of the companys natural business year. But he has felt constrained by the required tax year for partnerships with calendar year partners. Recently, a friend told Cody that he can change the year-end for his bicycle shop if the natural business year ends during a month other than December. His friend has suggested that he get some tax advice on changing his year end.

Information on sales of Flathead Boat Company for the past three years is provided below. Y

Year	August - May sales	June sales	July sales	Total Sales
2019-2020	452,700	79,600	87,100	619,400
2020-2021	458,230	76,250	83,750	618,230
2021-2022	430.800	74,850	90,050	595,700

Note: June and July are the only months when there is a surge in sales.

Cody has approached you to find out if a July 31st year-end would qualify as a natural business year-end for his business, and whether he can make the switch to a July 31st year-end.

The IRS has provided information on natural business years in Reg. 1.442-1(b)(2) and Rev. Proc. 2002- 39 (May 10, 2002). A copy of this revenue procedure is available to you. You should read through the revenue procedure focusing on the information about natural business years.

Required: Based on the facts for Flathead Boat Company and your analysis of Rev. Proc. 2002-39, write a short memo for your file which addresses Codys question about changing the year-end of his partnership to July 31