TAX ON PARTNERSHIP

THEORIES
1. For purposes of income taxation, which of the following is not considered a corporation?
a. General professional partnership
b. Business partnership
c. Unregistered partnership
d. Joint stock companies

2. A general professional partnership is exempt from income tax, but is required to file an annual income
information return:
a. For statistical purposes
b. Because the net income of the partnership will be traced into the income tax return of the partners
c. Because all income earners are required to file income tax returns
d. None of the above

3. The members of this form of organization shall be liable to income tax only on their individual capacity and their
share in the profits, whether distributed or otherwise, shall be returned for taxation. This applies to:
a. Duly registered co-partnership
b. Unregistered co-partnership
c. General professional partnership
d. Joint-stock companies

4. The share of the partner in the profits of general professional partnership is regarded as received by him and
thus taxable although not yet distributed. This principle is known as:
a. Advance reporting of income
b. Actual receipt of income
c. Accrual method of accounting
d. Constructive receipt of income

5. Each partner shall report as income in his distributive share in the net income of GPP. The share of a partner
shall be subjected to:
a. Final Tax
b. Creditable Withholding Tax
c. Regular Income Tax
d. Regular Corporate Income Tax

PROBLEM 1
TAYO, a business partnership, has the following data in 2016:

Gross Income 750,000

Expenses 200,000
Dividend from a Domestic Corporation 75,000
Interest of on Bank Deposit (gross of tax) 10,000

Partners E Cao and A Co share profits and losses in the ratio of 55% and 45% respectively.

Required:
The income tax payable of TAYO Partnership; and
The tax due on the share of the partners.

PROBLEM 2
Aba and Kada is a general professional partnership, with Aba, married and Kada, single, participating equally in the
partnership. The following are data for the partnership and the partners in 2016:

Abakada Partnership Aba Kada

Gross Receipts 600,000 150,000 200,000
Expenses 350,000 80,000 120,000

The gross income of Aba from the partnership; and

The taxable income of Kada.
PROBLEM 3
Money and Penny, CPAs, a partnership of CPAs, had a gross receipts of 220,000 and expenses of 85,000 in 2016.
The following information is presented to you:

Money Penny
P/L Ratio 75% 25%
Income from other business 125,000 325,000
Expenses 80,000 190,000
Amount withdrawn from the partnership 30,000 12,500
Filing Status Married Unmarried
Dependent Children None 2

Required:
The income tax payable by the partnership; and
The taxable income of Money and Penny.

PROBLEM 4
King, single, and Kong, married with 2 dependent children, are partners in the following partnerships. King holds
60%, while the remainder in held by Kong. The partnership data in the taxable year are as follows:

Profits Withdrawn
Partnership Income Expenses Net King Kong
GPP 1 400,000 200,000 200,000 60,000 40,000
GPP 2 400,000 500,000 (100,000) - -
Business Par 1 500,000 200,000 300,000 40,000 20,000
Business Par 2 200,000 300,000 (100,000) - -

The partnership remitted to the BIR the corresponding withholding tax. The Partner’s personal income and expenses
are shown below:

King Kong
Gross income from business 400,000 600,000
Business expenses 240,000 380,000
Other income:
Rent, net of 5% CWT 57,000
Gain on sale of Residential House, SP is 1,000,000 250,000
Dividend from Domestic Company, gross of tax 50,000 70,000
Royalty, net of tax 40,000
Interest on Bank Deposit, net of tax 60,000 20,000

Required:
The capital gains tax paid by Kong;
The final tax paid by King;
Taxable income of King; and
Tax payable of Kong.

TAX ON ESTATES AND TRUSTS

PROBLEM 1
Na Tay died on January 1, 2016, leaving a gross estate of 10,000,000. Judicial testamentary proceedings were
instituted for the settlement of the estate. In 2016, the estate realized a gross income from business of 1,000,000 and
incurred business expenses in the amount of 300,000. Income of the estate for the same year were also distributed
to the following children beneficiaries:

Ti Tay, married with one dependent child, 250,000

with income of 320,000 and expenses of 100,000
Ka Tay, single, 14 years old 250,000

Required:
Tax due from the esate; and
The income tax due of beneficiaries.
PROBLEM 2
Charice created two trusts, Trust 1 and Trust 2 as fiduciaries, and Jake Zyrus as common beneficiary. The following
are the data on income and expenses of Trust 1 and Trust 2 in 2016:

Trust 1 Trust 2
Gross Income 180,000 160,000
Deductible Expenses 50,000 80,000
Distribution made out of income 20,000

Required:
Income tax due under consolidation; and
Income tax still due from each trust.

END