INCOME TAXATION

Name:___________________________ Date:______________________
Section:__________________________ Partnerships, Joint venture and Co-ownership

1. As regards a business partnership, which of the following is not correct?

a. The partnership must file quarterly and year end income tax returns
b. The distributable income available to the partners is the taxable income less the income tax thereon
c. The share of a partner in the distributable net income, even if not actually received is considered
constructively received by a partner
d. The share of a partner in the distributive net income whether actually received or not is subject to a
final withholding tax of 10% as if dividend

2. The following statements regarding taxable partnerships are correct, except

a. They file quarterly and year-end income tax returns.
b. They are subject to the rules on corporations for capital gain tax, final tax on passive income,
normal income tax, minimum corporate income tax and gross income tax.
c. The partners’ share in the distributable net income is subject to final tax.
d. They are subject to the improperly accumulated earnings tax.

3. As regards a general professional partnership, which of the following is not correct?

a. It shall not be subject to income tax
b. The partners shall be liable for income tax on their respective distributive share
c. Each partner shall report as gross income his distributive share in the partnership net income
d. The share of a partner shall be subject to a creditable withholding tax of 10% if his distributive share
is below P720,000 and 15% if greater P720,000

4. If 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 cash method

5. Which of the following statements is not correct?

a. When the co-owners invest the income of the property co-owned in business or in any income
producing properties or activities constituting themselves into a business partnership, such
partnership is consequently subject to tax as a corporation.
b. As a rule, a co-ownership is not subject to income tax because the activities of the co—owners are
limited to the preservation and enjoyment of the property and the collection of the income there
from.
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

6. As regards an ordinary partnership, which of the following statements is correct?

a. Partners’ share are subject to final tax, hence it need not file an ITR
b. Subject to improperly accumulated earnings tax
c. Treated like corporations, hence partners have limited liability
d. Partners’ share even if distributed will not be included in their ITR

7. As regards a general professional partnership, which of the following statements is correct?

a. Treated like a corporation, hence it is subject to the corporate income tax
b. It is exempt from income tax, hence it need not file an ITR
c. Partners’ share are subject to final tax

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 d. Partners’ share will be included in their respective ITREs whether distributed or not

8. Which of the following statements is correct?

a. Partners of a taxable partnership are considered as stockholders and profits distributed to them by
the partnership are considered as dividends
b. The share of each partner in net income of a taxable partnership shall be based on their capital
contribution
c. The share of an industrial partner in the net income of a taxable partnership shall be equal to the
share of a capitalist partner with the least capital contribution
d. The industrial partner shall contribute money and or property but not services
9. 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, as such partners and stockholders are not liable to creditors of the business
a. True, true b. false, false c. false, true d. true, false

10. Statement 1 – the general professional partnership may claim itemized deduction in computing its net
income and a partner may also claim itemized deduction in computing his net income
Statement 2 - the general professional partnership may claim optional standard deduction in computing
its net income while a partner may claim itemized deduction in computing his net income
a. True, true b. true, false c. false, true d. false, false

11. Statement 1 - the general professional partnership may claim itemized deduction in computing its net
income while a partner may claim optional standard deduction in computing his net income
Statement 2 - the general professional partnership may optional standard deduction in computing its
net income and a partner may also claim optional standard deduction in computing his net income
a. True, true b. true, false c. false, true d. false, false

12. Statement 1 – the share of the partner in the net income of an OP is added to his own gross income
Statement 2 – the share of the partner in the net income of a GPP is also considered as passive
income
a. True, true b. false, false c. false, true d. true, false

13. The net share received by a partner in a general professional partnership is

a. Part of his taxable income c. subject to 10% creditable withholding tax
b. Exempt from income tax d. subject to final tax

14. The net share received by a partner in a general co-partnership is

a. Part of his taxable income c. subject to 10% creditable withholding tax
b. Exempt from income tax d. subject to final tax

15. Which of the following statements is not correct?

a. A and B, both CPAs can form a general professional partnership to go into public accounting
b. W and Y both lawyers, can form a general professional partnership to practice law
c. C, a CPA and D, a lawyer can form a general professional partnership to go into the practice of
taxation as they have common field of practice
d. K, a doctor and L, a medical technologist can form a partnership to engage in the operation of
drugstore

16-19. AB partnership with A and B as partners had a net professional income amounting to P500,000 for
2016. Its other income included bank interest income of P8,000, net of final withholding tax and it received
dividend income from domestic corporation of P10,000. A is single and has a net income of P200,000. The net
taxable income of A who shares profit and loss equally with B is
a. P400,000 b. P440,000 c. P439,000 d. P409,000

17. The net share of B is

a. Php 250,000 b. P259,000 c. Php 225,000 d. Php 233,100

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 18. Using the preceding number, but it is a business partnership, the taxable income of the partnership is
a. Php 518,000 b. P500,000 c. Php 510,000 d. Php 508,100

19. Using the preceding number, the net distributable share of B is

a. Php 162,500 b. P157,500 c. Php 165,600 d. Php 154,350

20. A and B are partners in a Partnership which realized a gross income of P800,000 with a corresponding
P350,000 expenses in the year 2017. A is married with 2 qualified dependent children, he earned
P400,000 in his own business, incurring P230,000 allowable expenses while B, single had P450,000
and P250,000 gross income and expenses respectively. They share profits and losses at 4:6. If the
partnership is a GPP, the taxable income of A subject to 5-32% is
a. P276,000 b. P70,000 c. P302,000 d. P250,000

21. And the taxable income of B subject to 5-32% is

a. P150,000 b. P420,000 c. P450,000 d. P470,000

22. If the partnership is an OP, its tax due

a. P144,000 b. P148,500 c. P135,000 d. P157,500

23. A, B and C are partners sharing profits and losses 30%, 30% and 40% respectively. The following data
pertain to the partnership and the individual account of the members in their own business for the
taxable year 2017:
A B C Partnership
Gross Income P400,000 P300,000 P350,000 P900,000
Deductions 100,000 70,000 160,000 420,000
Civil Status Single Married Head of the Family

If the partnership is a GPP, the taxable income of C is

a. P332,000 b. P342,000 c. P357,000 d. P344,500

24. The taxable income of B is (GPP)

a. P301,000 b. P342,000 c. P265,000 d. P324,000

25. The taxable income of A is (OP)

a. P280,000 b. P394,000 c. P265,000 d. P250,000

26. The taxable income of B is (OP)

a. P180,000 b. P198,000 c. P165,000 d. P189,000

27. The taxable income of C is (OP)

a. P152,500 b. P198,000 c. P165,000 d. P140,000

28. The income tax due of the partnership if OP

a. P153,600 b. P168,000 c. P37,000 d. P144,000

29. 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 (gross of 5% tax) and expenses related to rental activity of P300,000
but 10% is not deductible for the year 2017. A and B share in the profits at 75% and 25% respectively.
A withdrew P50,000 from 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
a. P102,400 b. P76,800 c. P80,000 d. P0

30. The taxable income of A before exemption

a. P172,500 b. P150,000 c. P122,500 d. P0

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 31. Suppose A and B did mot divide but instead invested the entire profit in another business venture
where they earned a net income after deductions of P450,000 the tax due of the co-ownership is
a. P135,000 b. P144,000 c. P157,500 d. P0

32. For the calendar year 2016, AB Partnership, a general partnership in trade,and Mr. A a partner, single,
had the following data:
Gross Income of AB P 1,400,000
Business expenses of AB 960,000
Participation of A 60%
Own gross income from profession of A 1,000,000
Own expenses of A, practice of profession 360,000
Income tax withheld from practice of profession 100,000
Determine:
a. Final tax payable on the share of Mr. A in AB partnership income
b. The income tax due (refundable of Mr. A)

33. A Co. and B Co., both in construction business, formed a joint venture to build houses for the poor, a
government project, with an agreed equal sharing in net income. Data on income and expenses for the
year:

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:
a. The income tax liability of the joint venture.
b. The income tax liability of A Co.

34. A Co. and B Co. both engaged in transportation business operating in Northern and Central Luzon
formed a joint venture agreeing to distribute the net income of the joint venture equally. In a taxable
year, the joint venture had a gross income of P 5,000,000 and expenses of P3,500,000.
Determine:
a. The income tax liability of the joint venture.
b. The share of A Co. in the distributable net income.

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