No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

Income Taxation of Partnership, Estate and Trust TAX03-05

1. First Statement - Partnerships, no matter how created, are subject to income taxation like a
corporation.

Second Statement – A partnership, like a corporation, are allowed to claim itemized deductions
or optional standard deduction to determine taxable income or net distributable income.

a. True, True
b. True, False
c. False, False
d. False, True

2. A taxable partnership may be subject to the following taxes:

1) Minimum corporate income tax
2) Regular corporate income tax
3) Improperly accumulated earnings tax

a. 1, 2 and 3
b. 1 and 2 only
c. 1 only
d. None of the given choices

3. A partnership formed by persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade or business:

a. General business partnership

b. General professional partnership
c. Co-ownership with capital contribution of the co-owners
d. Corporation by estoppel

4. A general professional partnership is exempt from income tax, but is required to file an income
tax return:

a. For statistical purposes

b. Because the net income of the partnership will be reported as gross income of the
individual partners
c. Because all income earners are required to file income tax returns
d. None of the above

5. Which of the following statements is wrong?

a. A general partnership in trade is not taxable as a corporation.

b. A joint venture for undertaking construction projects is not taxable as a corporation.
c. A consortium for energy operations pursuant to an operating consortium agreement
under a service contract with the government is not taxable as a corporation.
d. A co-ownership where the activities of the co-owners are limited to the preservation of
property and collection of income from the property is not taxable as a corporation.

1|P a g e AESCARTIN/TLOPEZ/JPAPA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

6. First Statement - When the co-owners invest the income of the property co-owned in a 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.

Second Statement - 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 therefrom.

a. True, True
b. True, False
c. False, False
d. False, True

7. The partner’s share in the profits of a partnership is regarded as received by the partners
although not yet distributed. This concept of income reporting under the Tax Code is known
as:

a. Installment basis of reporting income

b. Accrual basis of reporting income
c. Constructive receipt basis of reporting income
d. Hybrid method of reporting income

8. The share in the net income, received by a partner of a general professional partnership is:

a. Part of his gross income in his income tax return

b. Exempt from income tax
c. Subject to fringe benefit tax
d. Subject to final withholding tax

9. The share in the distributable income after tax, received by a partner of a general co-partnership
is:

a. Part of his gross income in his income tax return

b. Exempt from income tax
c. Subject to fringe benefit tax
d. Subject to final withholding tax

Numbers 10 to 14 are based on the following set of facts:

TR & Co was established as early as 2010. Partners Troy and Ruby are sharing profits 75:25. The
following are the data on income and expenses for the year ended December 31, 2020.

TR & Co Troy Ruby

Gross Income P 750,000 P 1,250,000 P 750,000
Expenses 200,000 400,000 300,000
Dividend from a Domestic Corporation 20,000 2,000 1,500
Interest from currency deposit (gross) 100,000
Total Assets 11,000,000

10. The corporate income tax due of the partnership as reported in its income tax return is:

a. P137,500
b. P 15,000
c. P850,000
d. P 40,000

2|P a g e AESCARTIN/TLOPEZ/JPAPA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

11. The taxable income of Troy in his income tax return is:

a. P165,000
b. P 15,000
c. P850,000
d. P 40,000

12. Assuming Ruby opted to pay the 8% preferential income tax during the year 2020, income tax
liability of Ruby is:

a. P165,000
b. P 15,000
c. P850,000
d. P 40,000

13. Amount of final taxes to be withheld on the respective shares of Troy and Ruby:

a. P21,175.00 P17,325.00
b. P38,437.50 P12,812.50
c. P25,025.00 P20,475.00
d. P25,116.50 P20,587.50

14. Assuming the partnership is a general professional partnership, the taxable income of Ruby is:

a. P650,000
b. P612,500
c. P485,000
d. P162,500

15. It arises when two or more heirs or beneficiaries inherit an undivided property from a decedent,
or when a donor makes a gift of an undivided property in favor of two or more donees:

a. Joint account
b. Partnership
c. Estate
d. Co-ownership

Numbers 16 to 18 are based on the following set of facts:

Toto, Rick and Jane and Tarzan, brothers and sisters, are the heirs of Don Facundo. The latter died,
without leaving behind a last will and testament, and left a sole property, i.e., a building with an annual
rent income of P15,000,000. During the year 2020, the expenses of the property is P1,500,000.
During the same year, Toto had gross income of P3,000,000 and expenses of P500,000.

16. The income tax liability of the co-ownership is:

a. P4,050,000
b. P0
c. P 300,000
d. P2,000,000

17. The taxable income of Toto during the year ended December 31, 2020:

a. P5,875,000
b. P2,500,000
c. P2,000,000
d. P4,050,000

3|P a g e AESCARTIN/TLOPEZ/JPAPA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

18. Assuming the year is 2021 and the heirs decided to invest their own money, property and
industry into the building that they co-own. The income tax liability of the co-ownership
assuming a taxable income of P13,500,000:

a. P3,375,000
b. P0
c. P 300,000
d. P2,000,000

Numbers 19 to 21 are based on the following set of facts:

Jeje Construction Inc and Monmon Construction, Inc formed a joint venture to create a 55-storey
residential building along EDSA and agreed to share profits equally Both parties including the JV are
duly registered with the Philippine Construction Accreditation Board. During the year ended December
31, 2020, the parties presented the following:

Joint Venture Jeje Monmon

Gross Income P 50,000,000 P 30,000,000 P 20,000,000
Business Expenses 35,000,000 20,000,000 15,000,000

19. The income tax of the JV is:

a. P4,500,000
b. P1,500,000
c. P0
d. P5,250,000

20. The income tax of Jeje is:

a. P4,500,000
b. P1,500,000
c. P0
d. P4,812,500

21. Assuming Jeje was not able to obtain a PCAB Accreditation Certificate. The total income tax of
MonMon, who did not qualify as an MSME, is:

a. P4,500,000
b. P1,375,000
c. P0
d. P5,250,000

22. First Statement - Where the estate is under judicial administration, the income of the estate
shall be taxable to the fiduciary or trustee.

Second Statement - Where the estate is not under judicial administration, the income of the
estate shall be taxable to the heirs and beneficiaries.

a. True, True
b. True, False
c. False, False
d. False, True

4|P a g e AESCARTIN/TLOPEZ/JPAPA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

23. First Statement - When an estate, under administration, has income-producing properties, the
annual income of the estate becomes part of the taxable gross estate.

Second Statement - When an estate, under administration, has income-producing properties

and its income during the year is distributed to the heirs, the income so distributed is taxable
to the heirs as part of their gross income for the year.

a. True, True
b. True, False
c. False, False
d. False, True

Numbers 24 to 26 are based on the following set of facts:

On December 31, 2019, Steve Armstrong died. Leaving behind an estate valued at P150,000,000.
Steve’s heirs are John, Bert and Jamie. In February 2020, his brother John was designated in a judicial
proceeding as the administrator of Steve’s estate. For the year ended December 31, 2020, the estate
earned gross income of P2,500,000 and business expenses of P1,750,000. John distributed to the
heirs P200,000 each, as their share in the income of the estate. Bert had gross income of
P1,000,000 and P800,000 expense during the year ended December 31, 2020.

24. Income tax of the estate is:

a. P30,000
b. P0
c. P20,000
d. P40,000

25. Income tax of Bert is:

a. P30,000
b. P0
c. P20,000
d. P40,000

26. Assuming that there is no executor nor administrator of Steve’s estate, Bert’s income tax is:

a. P30,000
b. P0
c. P20,000
d. P42,500

27. Which of the following is correct?

a. Income of the revocable trust is taxable to the trustee

b. Income of an irrevocable trust not taxable to the trustee
c. Determination of income tax of an irrevocable trust is the same to that of a corporation
d. An irrevocable trust is subject to income tax like an individual

Numbers 28 to 30 are based on the following set of facts:

Mr. Bones created a trust naming his minor son Nerf as the beneficiary of the same. Ms. Tee is
designated as the trustee of the Trust amounting to P50,000,000. During the year ended December
31, 2020, the trust earned net income of P3,500,000 whereby Ms. Tee distributed P750,000 to
Nerf as his share in the income of the trust.

5|P a g e AESCARTIN/TLOPEZ/JPAPA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com

28. How much is the income tax of the trust assuming Mr. Bones can revoke the trust?

a. P0
b. P730,000
b. P250,000
c. P345,600

29. How much is the income tax of the trust assuming the Trust is irrevocable?

a. P0
b. P730,000
b. P250,000
c. P345,600

30. How much is the income tax of Nerf for the year ended December 31, 2020?

a. P0
b. P730,000
b. P117,500
c. P345,600

That in all things, God will be glorified.

6|P a g e AESCARTIN/TLOPEZ/JPAPA

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