CHAPTER 13 INCOME TAXES OF PARTNERSHIPS, CO-OWNERSHIP & JOINT VENTURES Problem 13-1 TRUE ORFALSE 1. True 2. True because it is withheld with final tax. 3. True 4. False trading business income will make the partnership a commercial partnership. 5. False still subject to final tax of 10%. 6. False not all partnership, partnership, only commercial partnership. 7. False tax exempt, but required to file. 8. False the tax withheld is not a final tax but a creditable tax. 9. True starting on the 4th year of operation. 10. True Problem 13-2 TRUE ORFALSE 1. False Partners contributions to a partnership are not subject to tax. 2. False subject to normal tax of individuals 3. True if created through gratuitous transfer, transfer, not more than 10 years and no contribution is made by the co-owners. 4. False the income should be sourced from a general profession al partner s hi p. 5. True 6. True 7. True 8. True 9. True 10. False co ventures are taxable. 11. True 12. False tax exempt. Problem 13-3 1. C 2. A 3. B 4. A 5. B 6. C 7. A 8. B 9. B 10. A Problem 13-4 1. B or C 2. C 3. B 4. B 5. C 6. A 7. A 8. B
9. A 10. A INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 118 Chapter 13: Income Taxes of Partnerships, Co-ownership & Joint Ventures Problem 13 5 D Net income from trading busine s s as sole proprietor Less: Share from net loss ofthe partner s hip Net income before person al exemption Less: Basic person al exemption Net income P500,00 taxable 0 200,000 P300,00 0 50,000 P250,00 0 The general profession al part ners hi p is not a taxable entity for income tax purpose s since it is only acting as a pass throug h entity where its income is ultimately taxed to the part ner s comprising it. (Sec. 2, Rev. Regs. No. 2 2010) Accordingly, the partners share from net loss of general profession al partner s hip is allowed to be deducted from his net income deriving from other busines s becau se the GPP is only a pass thro ug h entity. The partners share in the net loss of the general profession al partner s hi p operation is deductible from the gross income ofthe individual part ner. Ageneral profession al partner s hi p is not in itself an income taxpayer. (Tax vs. Del Rosario, Jr. 55 SCAD, 237 SCRA324 [1994]) Problem 13 6 B Net income from trading busine s s as sole proprietor Less: Basic person al exemption Net taxable income P500,00 0 50,000 P450,00 0 Acommercial partner s hi p is taxable as a corporation, [Sec. 22 (B),NIRC]. Accordingly, the partners share from net income or loss of a commercial part ners hi p shall not be considered as addition or deduction (as the case may be)from his net income. Problem 13 7 A Net profit from trading busine s s ofthe part ner s hip Less: Income tax (P400,000 x30%) Income after tax Interest income, net offinal withholding tax Dividend income Total income for distrib ution to part ners Divide by profit and loss ratio Share ofeach partner Multiply by dividend tax rate Income tax on the distrib utive share ofMitzi Baguin
