Chapter 6

PROBLEMS

P6.1. (Partnership)

LJ, married, has two dependent minor brothers. He is a partner of a general

professional partnership. He is also engaged in trading business of his own. pr

following data were provided by L in 2020 taxable year:

LJ's gross income from his trading business P 1,000,000

LJ's expenses from his trading business

600,000

Interest income, BDO-Manila 20,000

Share from the net income of a general

400,000

professional partnerships

Royalty, books published in the USA 150,000

Salaries as part time accounting professor (gross) 450,000

Required: Determine the correct amount of the following:

1. Income tax due of the partnership P 0 EXEMPT

2. Income tax due of LJ 310,000

LJ's gross income from his trading business P 1,000,000

LJ's expenses from his trading business

( 600,000)

Share from the net income of a general

400,000

professional partnerships

Royalty, books published in the USA 150,000

Salaries as part time accounting professor (gross) 450,000

Basic Exemption n/a

Taxable Income 1,400,000

LJ’s

1ST 800,000 130,000

In excess 800,000 (600,000 X 30%) 180,000

Income tax payable 310,000

P6.2. (Partnership)

Data for 2020 taxable year of Rivera & Reyes (RR) Partnership including the

parthers own income are as follows:

RR Partnerships Rivera
Reyes

Gross Income P 2,000,000 800,000

1,000,000

Allowed Deductions 1,200,000 400,000

500,000

Drawing Accounts:

Rivera 150,000 30,000

0

Reyes 120,000 0
20,000

Civil Status Single

Married

Profit and Loss Ratio 40%; 60%

Case A

Assume the partnership is an ordinary partnership, compute the following:

1. Tax due of the partnership 240,000

2. Tax due of Rivera 30,000

3. Tax due of Reyes 55,000

RR Partnerships Rivera
Reyes

Gross Income P 2,000,000 800,000

1,000,000

Allowed Deductions (1,200,000) (400,000)

(500,000)

Drawing Accounts: _ _ _

TAXABLE INCOME 800,000 400,000

500,000

RR PARTNERSHIP

(800,000 X 30%) 240,000

Income tax payable 240,000

RIVERA

1ST 250,000 0

In excess 250,000 (150,000 X 20%) 30,000

Income tax payable 30,000

REYES

1ST 400,000 30,000

In excess 400,000 (100,000 X 25%) 25,000

Income tax payable 55,000

Case B: Assume the partnership in Case A is a general professional partnership,

Compute the following: 1. 1. Tax due of the partnership P 0 EXEMPT

2. Tax due of Rivera 110,000

3. Tax due of Reyes 184,000

RR Partnerships Rivera
Reyes

Gross Income P 2,000,000 800,000

1,000,000

Allowed Deductions ( 1,200,000) (400,000)

(500,000)

Drawing Accounts: - - -

Share of Partnership - 320,000

480,000

Taxable Income 800,000 720,000

980,000

(share of Partnership) Rivera

Reyes
Gross Income P 2,000,000 P
2,000,000

Allowed Deductions (1,200,000 )

(1,200,000 )

GPP’s distributable income 800,000

800,000

P&L 40% 60%

SHARE IN THE NET INCOME OF THE GPP’S 320,000

480,000

RIVERA

1ST 400,000 30,000

In excess 400,000 (320,000 X 25%) 80,000

Income tax payable 110,000

REYES

1ST 800,000 130,000

In excess 800,000 (180,000 X 30%) 54,000

Income tax payable 184,000

P6.3. (Partnership)
Villamin and Francis are partners in a commercial partnership. Their profit and loss

ratios were 3:6. During 2020, The following data were provided:

Data of the Partnership

Gross profit from sale of services P3,500,000

Direct cost of services 1,500,000

Business Expenses 700,000

Rental Income in business assets (net of tax) 142,500

Interest Income on peso bank deposits )

20,000

Interest income on U.S. $ deposits under the 50,000

expanded foreign currency deposit system

Capital gain on sale of real property classified

300,000

as capital asset located in Q.C

Selling Price-P2M; FMV-2.5M; Cost-1.7M

Quarterly tax payments 75,000

Data of the Partners:

Dividend Income from a resident foreign corporation

P120,500

earned by Villamin

Dividend Income from a domestic corporation

85,000

earned by Francis

Royalty Income from Philippines earned by Francis 35,000

Capital gain by Francis on sale of shares of 120,000

stock of a domestic corporation

Selling Price-P300,000 ;

FMV-300,000;
 Cost-180,000

Gross income from a sole-proprietorship

925,000

business of Villamin

Allowable business expenses of Villamin

670,000

Quarterly tax payments 12,500

Required: Determine the following:

1. Income tax payable of the partnership 352,500

2. Income tax payable of Villamin 12,600

3. Income tax payable of Francis P 0 (NO INCOME THAT IS SUBJECT TO

BTX)

4. Final tax on passive income of the partnership 11,500

5. Final tax on passive income of Villamin 40,783.33/ 40,783

6. Final tax on passive income of Francis 20,500

7. Capital gains tax of the partnership 150,000

8. Capital gains tax of Villamin P 0 ( NO DATA FROM THE GIVEN)

9. Capital gains tax of Francis 18,000

Partnership

Gross profit from sale of services P3,500,000

Direct cost of services (1,500,000)

Business Expenses (700,000)

Rental Income in business assets (net of tax) (142,500/95%)

150,000

Taxable Income 1,450,000

Tax Rate X 30%

Tax due 435,000

INCOME TAX PAYABLE (PARTNERSHIP)

Tax due 435,000

Quarterly tax payment (75,000)

Withholding tax on rent (150,000-142,500) (7,500)

Total income tax payable 352,500

FINAL TAX IN PASSIVE INCOME (PARTNERSHIP)

Interest Income on peso bank deposits (20,000x 20%) 4,000

Interest income on U.S. $ deposits under the (50,000 x 15%) 7,500

expanded foreign currency deposit system

Final Tax On Passive Income 11,500

CAPITAL GAINS TAX (PARTNERSHIP)

Selling Price-P2M; FMV-2.5M; Cost-1.7M 2,500,000

X 6%

Total Capital Gain Tax 150,000

DISTBUTABLE INCOME

Taxable income 1,450,000

Total income subject to final tax 70,000

Capital gain 300,000

Less:

Basic tax due (435,000)

Final Tax On Passive Income ( 11,500)

Capital Gain Tax (150,000)

DISTBUTABLE INCOME 1,223,500

Villamin

Gross income from a sole-proprietorship

925,000

business of Villamin

Allowable business expenses of Villamin

(670,000)

Dividend Income from a resident foreign corporation

120,500

earned by Villamin

Taxable Income 375,500

VILLAMIN

1ST 250,000 0

In excess 250,000 (125,500 X 20%) 25,100

TAX DUE 25,100

Quarterly tax payments (12,500 )

Income Tax Payable 12,600

FINAL TAX IN PASSIVE INCOME (Villamin)

DISTBUTABLE INCOME 1,223,500

P&L 3/9 X .33333333

407,833.33

X 10%

Final Tax In Passive Income 40,783.33/

40,783

FRANCIS

FINAL TAX IN PASSIVE (Francis)

Dividend Income from a domestic corporation (85,000 X 20%)

17,000

earned by Francis

Royalty Income from Philippines earned by Francis (35,000 X 10%)

3,500

Final Tax On Passive Income 20,500

CAPITAL GAINS TAX

Capital gain by Francis on sale of shares of

120,000

stock of a domestic corporation

X 15%

Total Capital Gains Tax

18,000
P6.4. (Partnership)

Louie and Floyd are partners in the following partnership:

Business Partnership GPP

Gross income P800,000 P500,000

Deductible expenses 420,000 375,000

Personal Income and Expenses: Louie Floyd

Gross Income Deductible expenses P 375,000 P

380,000

Deductible expenses 117,000

205,000

Dividend from Domestic Corporation 25,000

30,000

Dividend from foreign corporation 12,000

8,250

Prize, supermarket raffle 15,000 7,500

Royalty, books 10,000

18,000

Additional Information: Partners agreed to share partnership income and losses as

follows: Louie =30% (married with 2 dependent children); Floyd = 70% (single but

supporting her 15 year old sister dependent upon him for chief support).

Required: Determine the following:

1. Income tax payable of the business partnership 114,000

2. Income tax payable of the GPP P 0 (A GPP IS NOT SUBJECT TO INCOME TAX)
3. Income tax payable of Louie 11,500

4. Income tax payable of Floyd 4,150

Income Tax Payable (Business Partnership)

Gross income P800,000

Deductible expenses (420,000)

Taxable Income 380,000

X 30%

Income Tax Payable 114,000

DISTRIBUTABLE INCOME Louie Floyd

Gross income P 500,000 P 500,000

Deductible expenses (375,000) (375,000)

GPP’s Distributable Income 125,000 125,000

P &L X 30% X 70%

Share in the net of GPP’S 37,500 87,500

Louie Floyd

Gross Income Deductible expenses P 375,000 P

380,000

Deductible expenses (117,000) (205,000)

Dividend from foreign corporation 12,000 8,250

TOTAL 270,000 183,250

Add: share on GPP’S 37,500

87,500

Taxable income 307,500 270,750

LOUIE

1ST 250,000 0

In excess 250,000 (57,500 X 20%) 11,500

Income Tax Payable 11,500

FLOYD

1ST 250,000 0

In excess 250,000 (20,750 X 20%) 4,150

Income Tax Payable 4,150