Income Taxation-Partnership Estate Trust

Taxation review
Income taxation-
partnership, trust and
estate
168. when dina mathay died, she left real properties
to her husband and three (3) small children. The
husband administered the property, the rental
income of which he accumulated and later used in
buying a passenger bus.

Are the income of he inherited properties and the
bus subject to tax?
a. yes, yes
b.yes, no
c. no, yes
d. no, no
c
inherited properties are co-ownership of the father and the
three children because they did not divide the ownership of
the properties among themselves. Co-ownership is not
subject to income tax

however, the income of the passenger bus is a partnership
income taxable as a corporation because by using their
respective share in the income of the property in buying the
bus, they have constituted themselves into a partnership
169. andok and baliwag contributed money and purchased
five hectares of land in 2010. In the same year, they sold the
land at a higher price. In 2011, they bought a bigger parcel
and sold it after three months at double the price. They paid
the corresponding capital gains taxes.

Q1: have they formed an unregistered partnership subject to
tax
Q2: are their respective shares in the income taxable to them

Yes or no
B no, yes
Andok and baliwag have not formed an
unregistered partnership. The mere sharing of gross
returns does not in itself establish a partnership.
Moreover, there was no showing that the joint
purchases were for the purpose of earning profits to
be divided between them.

However, they are taxable on their respective share
in the profit on both transactions.
170. when their parents died, Cherry and Gil
inherited five hectares of land in ANtipolo City.
They decided to invest capital and developed the
land into a subdivision which they named as Cherry
Gil Subdivision , with small lots being sold either
on installment or in cash basis.

Q1: is a partnership created by Cherry and Gil?
Q2: are they subject to final tax on their respective
share in the income?

C, yes yes
By investing capital, converting the land into
a subdivision, and entering into series of
transactions in selling each parcel, they have
undoubtedly entered into a contract of
partnership
The share of an individual partner in the

distributable net income after tax of a taxable
partnership is subject to a final tax of 10%
171. 1st Q: Is a co-ownership taxable? No,
because the activities of the owners are
limited to the preservation of the property
and the collection of income therefrom.

2nd Q: is the share of a co-owner in the net
income of a co-ownership taxable? Yes,
because each co-owner is taxed individually
on his distributive share in the income of the
co-ownership?

True or false
True, true
172. the members of this form of business
organization shall be liable for 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 general co-partnership
b. unregistered general co-partnership
c. GPP
d. Joint stock companies
c. GPP
173. the share of a partner in the profits of a
GPP 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
d. constructive receipt of income
174. under the NIRC, income is received not
only when it is actually or physically
transferred to a person but even when it is
merely constructively received is
a. rental payments refused by the lessor,
when the lessee tendered payment and the
latter made a judicial deposit of the rental
due.
b. interest coupons not yet due and payable
c. interest on savings deposit not yet credited
to the account of the depositor
d. advanced deposit made by the lessee
a. rental payments refused by the lessor,
when the lessee tendered payment and the
latter made a judicial deposit of the rental
due.
175. which of the following is considered or construed as an
example of constructive receipt?
a. retirement benefits, pensions, gratuities

b. fees paid to a public official
c. interest coupons that have matured and are payable but
have not been cashed
d. deposits for rentals to answer for damages, restricted as to
use
c. interest coupons that have matured and are
payable but have not been cashed
176-177

Bimbam and company, a business partnership, had
the following date of income and expenses:

Gross income= 750,000
Expenses=200,000
Dividend from a domestic corporation=75,000
Interest on bank deposit (gross of tax)=10,000

Partners Bim and Bam share profits and losses in
the ratio of 55% and 54% respectively
176. the income tax payable by Bimbam and Company
a. 218,750
b. 187,500
c. 165,000.
d. 192,500
GI 750,000
Less: Expenses 200,000
TI 550,000
Rate of tax 30%
Income tax 165,000
Business partnerships are subject to income tax at a rate

similar to that of a corporation because partnerships are
considered as corporations subject to corporate tax.
177. the final taxes on the respective share of BIm
and Bam in the partnership income
Bim Bam
A 25,740 21,060
B 31,157.5 25,492.50
C 24,227.50 19,822.50
d 30,250.00 55,045.00
Taxable income 550,000
Add: Other income
Dividend 75,000
Interest, net of tax 8,000 83,000
(10,000 x 80%)
Total 633,000
Less: Inocme tax paid 165,000
Income for 468,000
distribution Final taxes on share of individual
Bim Bam
Income or distribution 468,000 468,000
Share in P/L ratio 55% 45%
Patrner’s share in the 257,400 210,600
income
Rate of tax 10% 10%
Final tax 25,740 21,060
178-179
Ping, Pong and Company, a partnership of CPAs, had a
gross income of 220,000 and expenses of 85,000 during the
year:
Ping Pong
Share In P/L ratio 75% 25%
Income from other 125,000 325,000

business
Expenses 80,000 190,000
Amount withdrawn from 30,000 12,500

partnership
Filing status Married Unmarried
Dependent children None 2

178. the income tax payable by the partnership is
a. 72,600
b. none
c. 44,550
d. 45,900
b
GPP are not subject to income tax. However, they are
required to file an income tax return for the purpose of
furnishing information as to the share inn the gains or profits
which each partner shall include in their individual income
tax return
179. the taxable income of Ping and Pong is
a. 69,250 and 0, respectively
b. 114,250 and 127,750, respectively
c. 101,250 and 33,750, respectively
d. 96,250 and 68,750, respectively
Ping Pong
GI( 220-85) 135,000 135,000
Share in P/L ratio 75% 25%
Share in partnership income 101,2500 33,750
Add: NI from other business
Ping (125-80) 45,000
Pong (325-190) 135,000
Total 146,250 168,750
Less: Personal & Additional
exemptions
Ping 50,000
Pong (50+(25*2) 100,000
TI 96,250 68,750
184. the property, rights and obligations of a person which
are not extinguished by his death and also those which have
accrued thereto since the opening of the succession
a. estate
b. legacy
c. trust
d. will
a. estate
185. an heir who inherits personal property by will is called
a. legatee
b. devisee
c. trustor
d. beneficiary
a. legatee
186. an heir who inherits real property by will is called
a. legatee
b. devisee
c. trustor
d. beneficiary
b. devisee
187. Tino died on January 1, 2011. He left a gross estate
with a cost of 4,000,000 but valued at 3,500,000 under an
administrator. During the year, the gross income derived
from the business of the estate was 400, 000 while the
related expenses amounted to 150,000. Beneficiaries Felipe
and Khadafi were given 100,000 each

The income tax due on the estate of Tinong is
a. 30,000
b. 2,500
c. 5,500
d. 50,000
GI 400,000
Less: Deductions
Expenses 150,000
Distribution to beneficiaries 200,000 350,000
(100,000 x 2)
NI 50,000
Less: Personal Exemption 20,000
Taxable income 30,000
Tax on 30, 000 2,500

188. an arrangement under which title to property is
passed to another for investment, with the income
and ultimately the principal to be distributed in
accordance with the direction of the creator is
a. will
b. trust
c. an inheritance
d. pacto de retro
b. trust
189. which of the following is not subject to
tax
a. estate under judicial settlement
b. irrevocable trust
c. unregistered partnerships
d. revocable trust
d
revocable trusts render the trustor, not the trust
itself subject to income tax. Hence, they are exempt
from tax. If the trust is irrevocable, its income is
subject to tax
numbers 190-191

during the year, Lucas created two separate trusts
for his son Barabas and appointed Caipas and Judas
as trustees. The business income of the trusts are as
follows:
Trustee-Caipas Trustee-Judas
NI 120,000 200,000
Income from 50,000 75,000

trusts distributed
during the year
190. the consolidated taxable income of trusts is
a. 143,000
b. 23,250
c. 175,000
d. 300,000
NI, Trustee-Caipas 120,000
NI, Trustee-Judas 200,000
Consolidated net 320,000

income
Less: Exemption 20,000
Consolidated taxable 300,000

income
191. the income taxes payable by Trustee caipas and Trustee
Judas are
Caipas Judas
A 24,375 24,375
B 24,375 40,625
C 26,000 39,000
d 65,000 23,250
Tax on 250k 50,000
50k x 30% 15,000
Income tax 65,000
ITP by:
Caipas (120/320)*65 24,375
Judas (200/320)*65 40,625

Endo 

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Taxation review

The share of an individual partner in the

a. retirement benefits, pensions, gratuities

Business partnerships are subject to income tax at a rate

Share In P/L ratio 75% 25%

Income from other 125,000 325,000

Amount withdrawn from 30,000 12,500

Filing status Married Unmarried

Dependent children None 2

Tax on 30, 000 2,500

Income from 50,000 75,000

NI, Trustee-Judas 200,000

Consolidated net 320,000

Consolidated taxable 300,000

50k x 30% 15,000

Income tax 65,000

Judas (200/320)*65 40,625

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