ACTIVITY IV: INCOME TAX FOR PARTNERSHIPS/GROSS INCOME

Direction: Explain the following statements/question in not less than 5 sentences. DO NOT USE THE COPY-PASTE
METHOD.
Enumerate the kinds of partnerships
For tax purposes there are 2 kinds of partnership:
 GENERAL PARTNERSHIP – it is a commercial arrangement whereby two or more parties concur to split the
duties, resources, income, and legal and financial liabilities of a jointly owned company. Parties
acknowledge that their personal liability may be indefinite. There is no cap on liabilities like there would
be in, say, a partnership that was founded as a limited liability partnership or a limited liability company.
Partners are accountable for the debts, and an owner’s assets may be seized. Also, any partner could be
held liable for the obligations of the company. Each partner reports their share of partnership profits or
losses on their individual tax returns since a general partnership is pass-through organization, where
revenue is sent directly to the owners. The partnership is exempt from taxation.

 GENERAL PROFESSIONAL PARTNERSHIP or GPP – a partnership for the practice of a profession may be
formed by two or more people in addition to the typical corporate partnership. According to article 1767,
New Civil Code of the Philippines this sort of partnership is known as a general professional partnership.
According to the LGC, a General Professional partnership is a group of people who have joined forces
solely for the purpose of practicing their shared profession and who receive none of their income from
carrying on any sort of trade or company. It is also subjected to taxes in their individual capacities for tax
reasons. Also, the partners are exempted from local taxes if they are paying professional taxes. This was
the court of tax appeal’s most recent ruling.
Describe and explain the meaning of gross income
 GROSS INCOME – it is a total amount of money earned before taxes and other deduction. We can receive
our earned income in a variety of ways; including salary, wages, bonuses, tips, rental income, and interest
on savings accounts. People in the less conventional but expanding “gig” economy can make a living from
a variety of part-time, contract, or freelance jobs. Our gross income would be determined by the total
amount of money we made form these jobs. The importance of this is to be aware that firms have a varied
definition of gross income in order to prevent misunderstandings. Also, it is a line item in a profit and loss
statement. For a business, gross profit, is the total money collected through sales less the cost of those
things sold.
Example:
A company engaged in the sale of bike parts earned a revenue of P50,000 during the year 2022. The
company incurs the following expenses during the year.
Revenue 50,000
Raw materials cost 6,000
labor wages 8000
Sales commission 1,500
To calculate the cost of good sold add the sum of raw material cost, labor cost, and sales commission
=6,000 + 8,000 + 1,500
Cost of Goods Sold =15,500
To calculate the Gross Income: Revenue less Cost of goods sold
= 50,000 – 15,500
Gross Income = 34,500