Research Problem 2. Barney Chang and Aldrin, Inc., a domestic C corporation, have decided to form BA LLC. The new entity will produce a product that Barney recently developed and patented. Barney and Aldrin each will own a 50% capital and profits interest in the LLC. Barney is a calendar year taxpayer, and Aldrin is taxed using a June 30 fiscal year-end. BA does not have a “natural business year” and elects to be taxed as a partnership.

a. Determine the taxable year of the LLC under the Code and Regulations.

b. Two years after formation of BA, Barney sells half of his interest (25%) to Aldrin.

Can BA retain the taxable year determined in part (a)? Why or why not?