Partnerships

Question 1

1. A contract whereby two or more persons bind themselves to contribute money property, or industry to a common fund, with the intention of dividing the profits among themselves.
2. ___________ has a juridical personality separate and distinct from that of each of the partners. It may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. Generally taxable as a corporation.
3. Formed by persons for the purpose of exercising their common profession, no part of income of which is derived from engaging in trade or business. Also known as professional partnership. Not a taxable entity for income tax (also not subject to CWT) purposes since it is only acting as a passed-through entity where its income is ultimately taxed to the partners comprising it. Exempt only sa ordinary income, subject to final withholding on passive income and CGT.
4. The ___________ shall be liable for income tax only on their separate and individual capacities. Each partner shall report as gross income his or her distributive share (actual or constructive) in the net income of the partnership
5. Creditable Withholding Tax on income payments to the partners of a GPP
   Income payments made periodically or at the end of the taxable year made by a GPP to the partners, such as drawing, advances, sharings, allowances, stipends, etc:
   ___% if the gross income for the current year does not exceed P_____
   ___% if the gross income for the current year exceeds P_____

Answer 1

1. Partnership
2. Partnership
3. GPP
4. Partners of GPP
   5.
   10% ≤ 720k
   15% > 720k

Question 2

1. S1: The distributive share of a partner in the net income of a taxable partnership is equal to each partner’s distributive share of the net income declared by the partnership for a taxable year after deducting the corresponding corporate tax.
   S2: If a taxable partnership sustains net operating loss, the partners shall be entitled to deduct their respective shares in the net operating loss from their individual gross income.

2.S1: All partnerships are taxed in the same manner as corporation.
S2: The income of a general commercial partnership is also subject to MCIT or RCIT, whichever is applicable

3. 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 traced into the income tax return of the partners
   c. because all income earners are required to file income tax returns
   d. none of the above
4. When their parents died, romeo and juliet inherited 5 hectares of land in isabela. They decided to invest capital and developed the land into a subdivision, with small lots being sold either on installment or cash basis
   Q1. Have they formed an unregistered partnership subject to tax?
   Q2. Are they subject to final tax on their respective share in the income of the partnership?
5. S1. A CPA and a dentist may form a GPP or an ordinary partnership.
   S2. Partnership and corporation have separate juridical personalities distinct from the owners

Answer 2

1. True, False
   Partners cannot deduct their share of a net operating loss sustained by a taxable partnership from their own individual gross income.
   A partner’s distributive share in net income is taxed in their hands.
   But if the partnership incurs a net operating loss (NOL), that loss stays with the partnership—it’s not passed through to the individual partners.
   Only General Professional Partnerships (GPPs) allow pass-through treatment of net income (not losses).
   Taxable partnerships, being treated like corporations, follow corporate tax rules—including rules for carrying forward NOLs at the entity level, not at the individual level.
2. False, True
3. b
4. Yes yes
5. false true
   GPP need same profession

Question 3

1. S1. A partner of a GPP is not required to include in his personal gross income his share in the distributable income of the GPP
   S2. Corporations may form a taxable partnership but not GPP.
2. S1. For purposes of computing the distributive share of the partners of a GPP, the net income of the partnership shall be computed in the same manner as a corporation.
   S2. Partners of a taxable partnership are considered as shareholders and profits distributed to them by the partnership are considered as dividends.
3. The partner’s share in the profits of a GPP 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
   b. Accrual basis of reporting income
   c. Constructive receipt basis of reporting income
   d. Hybrid method of reporting income
4. S1. A GPP shall not be subject to income tax
   S2. Income payments to a GPP shall be considered exempt from withholding tax.
5. S1. The share of a partner in the gross income of a GPP is added to his own gross income
   S2. The share of a partner in the net income of a GPP is also considered passive income

Answer 3

1. false false
2. true true
3. c
4. true true
5. true false

Question 4

1. Which of the following options is correct?
   I. Part of distributable income of the partner
   II. Returnable income of the partner
   III. Subject to CWT

Share in the income of the GPP I II III
a. from its operations yes yes no
b. from its passive income yes yes no
c. from its capital gains subject to CGT no no no
d. from its tax exempt income yes no no

2. Which of the following options is correct?
   I. Part of distributable income of the partner
   II. Returnable income of the partner
   III. Subject to FWT
   Share in the income of commercial partnership
   a. from its operations yes no no
   b. from its passive income yes no yes
   c. from its capital gains subject to CGT no no no
   d. from its tax exempt income yes no no
3. TGT & Co. is a general partnership in trade and on its fourth year of operations. During 2025
   taxable year, it had a gross profit from sales and business expenses of P20,000,000 and P10M
   respectively. The partnership assets amounted to P50M. Partners T, G,
   and T share equally in the profits and losses of the partnership.

The income tax due of the partnership in 2025 should be:
a. P2M
b. P2.5M
c. P2.75M
d. P3M

4. The income tax payable of the partners as a consequence of being a partner in the
   Partnership is:
   a. 0
   b. P680k
   c. P770k
   d. P800k
5. TG partnership reported net income before tax from trading amounting to P8M during the taxable year. The other income included interest income of P80k, net of 20% final withholding tax and dividend income from domestic corporation of P200k. Assuming T and G share profits and losses equally, how much is the final withholding tax on the distributive share of T in the earnings of the partnership?
   a. 0
   b. 250k
   c. 300k
   d. 314k

Answer 4

1. D
2. B
   C is incorrect capital gains part of the distributable income. And subject to FWT
   D is incorrect, subject to FWT
3. B
   para 20%
   Asset not exceed 100M
   Net taxable income not exceed 5M
4. A
5. D