Garcia, Ramos, Toribio and Co., CPAS (GRT & Co.), are partners of an accounting firm.

The 2018 financial

records of the firm disclosed the following:

Service Revenue P4,490,000

Cost of Services 1,610,000

Operating expenses 800,000

Rental income 500,000

Interest income from bank deposit 200,000

Interest income from from FCDS deposit 280,000

Ramos is also engaged in business with the following data for the year:

Sales P2,500,000

Cost of Services 1,250,000

Operating 550,000

Expenses

How much is the distributable income of the GPP?

a. P992,667 c. P2,578,000

b. P1,019,333 d. P2,978,000

• Answer: D

Net income of the firm firm (4,490k-1,610k-800k+500) P2,580,000

Interest income from bank deposit, net (P200,000 x 80%) 160,000

Interest income from FCDS transaction, net (P280,000 x 85%) 238,000

Total distributable income of the GPP P2,978,000

Divide 3

Distributive share/partner P992,667

How much is the distributive share of each partner in the total income of the GPP?

a. P992,667 c. P2,578,000

b. P1,019,333 d. P2,976,000

• Answer: A

How much is the taxable income of Ramos in 2018?

a. P860,000 c. P1,560,000 b. P1,510,000 d. P2,580,000

• Answer: C

Solution:

Net income from GPP's operations P2,580,000

Divide by 3

Share in GPP's ordinary income per partner P860,000

Add: Ramos' own net income (2.5M-1.25M-550k) 700,000

Taxable net income of Ramos P1,560,000

• The partners' share in the other income of the GPP (i.e., subj. to FWT and CGTs) are non-returnable
income

of the partners.

How much is the taxable income of Ramos in 2018 assuming GRT & Co. opted to use Optional Standard

deduction?

a. P1,376,000 c. P1,692,000

b. P1,426,000 d. P1,860,600

• Answer: A

Solution:

GPP's Gross Income (4,490K-1,610k+500k) P3,380,000

X 60%

GPP's net income under OSD P2,028,000

Divide 3

Share of Ramos in the ordinary income of the GPP P676,000

Add: Ramos' own net income (2.5M-1.25M-550k) 700,000

Taxable net income of Ramos P1,376,000

• Under the TRAIN Law, the partner may use either itemized deduction or OSD.

• Under the TRAIN Law, apply OSD only if the taxpayer indicated the same in its ITR. Hence, unless clear,

itemized deduction must be applied.