93-04 - Partnership Tax
93-04 - Partnership Tax
93-04 - Partnership Tax
4. A partner, on his own transactions, is on the cash method of accounting while the general professional
partnership is on the accrual method of accounting. In the partner’s determination of his taxable income
for the year, he
a. Must convert his income from the partnership into cash method.
b. Must convert his own income into accrual method.
c. Does not report his income from the partnership because the partnership is exempt from income tax.
d. Can consolidate his share in the net income of the partnership under accrual method with his own
income under the cash method.
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c. A co-owner is subject to income tax on his share in the net income of the co-ownership actually or
constructively received.
d. All partnerships, no matter how created or organized, are considered corporations subject to
corporate income tax.
8. Statement 1 – A CPA and a Lawyer may form a general co-partnership to sell law and accounting
books.
Statement 2 – Partnerships and Corporations have separate juridical personalities distinct from the
owners. Therefore, partners and stockholders are not liable to creditors of the business.
a. True; true
b. False; false
c. False; true
d. True; false
9. Statement 1 – The general professional partnership may claim itemized deductions in computing its
net income and a partner may also claim itemized deductions in computing his net taxable income.
Statement 2 – The general professional partnership may claim the optional standard deduction in
computing its net income while a partner may claim itemized deductions in computing his net taxable
income.
a. True; true
b. True; false
c. False; true
d. False; false
10. Statement 1 – The general professional partnership may claim itemized deductions in computing its
net income while a partner may claim the optional standard deduction in computing his net taxable
income.
Statement 2 - The general professional partnership may claim the optional standard deduction in
computing its net income and a partner may also claim the optional standard deduction in computing
his net taxable income.
a. True; true
b. True; false
c. False; true
d. False; false
13-15) A and B are partners in a Partnership which realized a gross income of ₱800,000 with a
corresponding ₱350,000 in expenses in the year 2021. A is married with 2 qualified dependent
children, with his own business generating net sales of P400,000, and incurring cost of sales and
deductible expenses of ₱30,000 and P230,000, respectively. B, single, also has his own business
generating ₱450,000 in net sales, and incurring cost of sales and deductible expenses of ₱200,000
and ₱50,000, respectively. They share profits and losses of their partnership at 4:6.
If the partnership is a GPP, the taxable income of A who avails of the OSD is:
a. P 420,000
b. P 70,000
c. P 302,000
d. None of the above
Solution below:
13) Partner A
Sales/Revenues/Receipts/Fees 400,000
Less: Cost of Services (0 is OSD) -
Gross Income from Operation 400,000
Less: OSD (40%) (160,000)
Net income from Operations 240,000
Add: Non-operating income -
Share in the GPP Net income, gross 180,000 180,000
Total taxable income 420,000
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16– 19) AB partnership with A and B as partners (both resident citizens) had a net professional income
amounting to P500,000 for 2021. Its other income included bank interest income of P8,000, net of final
withholding tax and royalty income of P10,000, net of the final withholding tax. Total assets of the
partnership amount to ₱50.0 Million.
A is single and has his own separate eatery business. In 2021, his business had net sales of ₱1,000,000,
cost of sales of ₱600,000, and operating expenses of ₱200,000.
16) The share of A in the income of the GPP, net of the 15% CWT, is
a. Php250,000 c. Php225,000
b. Php259,000 d. Php220,150
17) The net taxable income and income tax payable of A who shares profit and loss equally with B in
their GPP is:
a. P450,000; P3,650
b. P400,000; P10,450 17) Graduated Rates
c. P439,000; P9,670
Sales/Revenues/Receipts/Fees
d. None of the above.
Less: Cost of Services
Gross Income from Operations
Less: Itemized Deductions
Net income from Operations
Add: Non-operating income
Share in the GPP Net income
Total taxable income
Tax due (table)
Less: CWT
Tax Payable
18) Using the preceding number, but it is a business partnership, the taxable income of the partnership is
a. P518,000
b. P500,000
c. P510,000
d. P508,000
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19) Using the preceding number, the net distributable share of B (resident citizen) is
a. P162,500
b. P157,500
c. P188,100
d. P154,350
Net taxable income of AB
Tax rate
Tax due
20) A lawyer was rejected by his extremely sexy and gorgeous secretary. He became so enraged that he
raped her 10 times within 15 minutes. Since then, he became known in the media as the “Machine Gun
Rapist.” For his defense, he obtained the services of ACCRA, the biggest law partnership in the
Philippines. ACCRA asked for a fee of ₱10,000,000 for its legal services in defending him. How much
should the lawyer withhold as CWT from ACCRA’s fee?
a) 10% b) 15% c) 5% d) None.
21) A and B are co-owners by virtue of a property given to them by their father. The co –ownership had a
gross rental income of P500,000 and expenses related to rental activity of P300,000 but 10% is not
deductible for the year 2021. A and B share in the profits at 75% and 25%, respectively. A withdrew
P50,000 from the co-ownership net income for the year; B did not withdraw any amount. A and B are
both single. The income tax liability of the co-ownership is
a. ₱ 102,400 c. ₱ 80,000
b. ₱ 76,800 d. ₱ -0-
23) Suppose in the next year, the co-owned property has the same gross rental income of ₱500,000 and
expenses related to rental activity of ₱300,000 but 10% thereof is not deductible.
In that same year, A and B did not divide but instead invested the entire profits from the co-owned
property in a business venture offering property management services. In the same year, this business
had revenues of ₱750,000, cost of revenues of ₱300,000, operating expenses of ₱135,000, and non-
operating income of ₱55,000.
b. P 232,500
c. P 0
d. None of the above.
24) X and Y (both resident citizens) are partners in the following partnerships:
X Y
Gross Income P 400,000 P 280,000
Deductible expenses 250,000 120,000
Dividend from domestic corporation 20,000 30,000
Dividend from foreign corporation 10,000 8,000
Prize, supermarket raffle 15,000 8,000
Royalty, books 10,000 12,000
a. P148,000, P258,000
b. P88,000, P132,000
c. P248,000, P308,000
d. None of the above.
GPP
Gross Income
Expenses
Net income
X – 40% Partner
Gross Income
Less: Itemized Deductions
Net income from Operations
Add: Non-operating income (Div. from FC)
Share in the GPP Net income (40%)
Total taxable income
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Y – 60% Partner
Gross Income
Less: Itemized Deductions
Net income from Operations
Add: Non-operating income:
Div. from FC
Prize - Supermarket
Share in the GPP Net income (60%)
Total taxable income
25) A Co. and B Co., domestic corporations, both in the construction business, formed a joint venture to
build houses for the poor, a government project, with an agreed equal sharing in net income. The joint
venture, A Co., and B Co. are all licensed by the PCAB. Data on income and expenses for the calendar
year 2021 show:
Joint Venture A Co. B Co.
Gross Income P 80,000,000 P 2,000,000 P 3,000,000
Expenses 60,000,000 1,200,000 2,000,000
Determine:
JV
Gross Income
Expenses
Net income
A Co.
Gross Income from Operations
Add: Other taxable income not subject to FT:
50% Share in NI of JV
2,000,000
Total Gross Income
Less: Itemized Deductions
10,000,000
Net taxable income
12,000,000
Tax rate
(1,200,000)
Income tax due
10,800,000
30%
3,240,000
26) A Co. and B Co., domestic corporations, both engaged in the transportation business with operations in
Northern and Central Luzon formed a joint venture agreeing to distribute the net income of the joint
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venture equally. In calendar year 2021, the joint venture had a gross income of P5,000,000 and expenses
of P3,500,000.
Determine:
i) The income tax liability of the joint venture.
a. P 375,000 c. P1,050,000
b. P 5,000,000 d. P 0
ii) The share of A Co. in the distributable net income of the JV:
a. P 562,500 c. P 472,500
b. P 52,500 d. P1,050,000
iii) Final tax on the share of A Co. in the distributable net income of the JV:
a. P 562,500 c. P78,750
b. P105,000 d. 0
The End!!
Tax 93-04
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