PARTNERSHIP, CO-OWNERSHIP, JOINT VENTURE

Question 1

1. For purposes of taxation, partnership is
   I. Classified into two major categories, ordinary partnership (OP) and general professional
   partnership (GPP)
   II. Ordinary partnership is treated as corporate taxpayer
   III. General professional partnership is exempt from income tax
   a. I, II and III
   b. I and II only
   c. I and III only
   d. I only

Question 2

2. The members of this form of business organization shall be liable for income tax only on their
   individual capacity, and their share in the profits, whether distributed or otherwise, shall be
   returned for taxation. This applies to
   a. Duly registered general co-partnership
   b. Unregistered general co-partnership
   c. General professional partnership
   d. Joint-stock companies

Question 3

3. Statement 1: A general professional partnership is exempt from income tax, but a partner shall be taxable on his share in the partnership net income, that he should consolidate with his own income from other sources.
   Statement 2: A partnership that is not a general professional partnership is taxable as a
   corporation, and a partner shall report his share in the partnership net income, as dividend income,
   whether actually received or not.
   a. Both statements are correct
   b. Both statements are wrong
   c. The first statement is correct but the second statement is wrong
   d. The first statement is wrong but the second statement is correct

Final answer: C (Statement 2 is incorrect)
Rationale: Dividend income of a partner under ordinary partnership is subject to 10% FWT;
hence, it will not form part of the partner’s personal income tax return (ITR). Since it is subject
to FWT, the partnership will act as a withholding agent and pay the respective liability of the
partner.

Question 4

4. Which of the following statements is false?
   a. A partner’s share in the net profits of a general professional partnership is not
   compensation income
   b. A limited partnership is considered for tax purposes as a corporation, and the partnerships
   thereof likened to stockholders
   c. Tax income taxation rules application to corporations likewise apply to informal
   partnerships
   d. Registered general professional partnerships are subject to income tax

Question 5

5. Statement 1: 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 in the partnership for a taxable
   year after deducting the corresponding corporate tax.
   Statement 2: 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.
   a. Statements 1 and 2 are false
   b. Statement 1 is true but statement 2 is false
   c. Statement 1 is false but statement 2 is true
   d. Statements 1 and 2 are true

Question 6

6. Statement 1: For purposes of computing the distributive share of the partners of a general
   professional partnership, the net income of the partnership shall be computed in the same manner
   as a corporation.
   Statement 2: Partners of a taxable partnership are considered as shareholders and profits
   distributed to them by the partnership are considered as dividends.
   a. Statements 1 and 2 are false
   b. Statement 1 is true but statement 2 is false
   c. Statement 1 is false but statement 2 is true
   d. Statements 1 and 2 are true

Question 7

7. Statement 1: The share of the partner in the gross income of the GPP is added to his own gross
   income.
   Statement 2: The share of the partner in the net income of a GPP is also considered passive income.
   a. Statements 1 and 2 are false
   b. Statement 1 is true but statement 2 is false
   c. Statement 1 is false but statement 2 is true
   d. Statements 1 and 2 are true

Question 8

8. The share of a partner in the profits of a general professional partnership is regarded as received
   by him and thus taxable although not yet distributed. This principle is known as
   a. Advance reporting of income
   b. Actual receipt of income
   c. Accrual method of accounting
   d. Constructive receipt of income

Question 9

9. Statement 1: Under RA10963, an individual partner of a GPP applying optional standard deduction
   is not allowed for any deduction on his distributive shares.
   Statement 2: Under RA10963, an individual partner of a GPP may avail of 8% tax on his distributive
   share, in lieu of graduated tax rate.
   a. Only statement 1 is correct
   b. Only statement 2 is correct
   c. Both statements are correct
   d. Both statements are incorrect

Question 10

10. If a general professional partnership is on the accrual method of accounting, and a partner, on his
    own transactions, is on the cash method of accounting, in the partner’s determination of his
    taxable income for a year
    a. He can consolidate his share in the net income of the partnership, determined by the
    partnership under the accrual method, with his own income determined under the cash
    method
    b. He must convert his income from the partnership into cash method before consolidating
    it with his own income on the cash method
    c. He must convert his own income into accrual method before consolidating it with his own
    income from the partnership under the accrual method
    d. He does not have to report his income from the partnership because the partnership is
    exempt from income tax

Question 11

11. 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 return
    d. None of the above

Question 12

12. 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. Partnership
    b. Trust
    c. Joint account
    d. Co-ownership

Question 13

13. 1st Question: Is a co-ownership taxable? No, because the activities of the co-owners are limited to
    the preservation of the property and the collection of income therefrom.
    2nd Question: is the share of a co-owner in the net income of a co-ownership taxable? Yes, because
    each co-owner is taxed individually on his distributive share in the income of the co-ownership.
    a. Answers to both questions are correct.
    b. Answer to Question 1 is wrong, answer to Question 2 is correct
    c. Answer to Question 1 is correct, answer to Question 2 is wrong
    d. Answers to both questions are wrong

Question 14

14. Which of the following statements is correct?
    a. A joint venture for undertaking construction projects is not taxable as a corporation
    b. A consortium for energy operations pursuant to an operation consortium agreement
    under a service contract with the government is not taxable as a corporation
    c. 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
    d. All of the above

Question 15

15. Statement 1: Joint ventures, regardless of the purpose by they were created, are generally exempt
    from corporate income tax.
    Statement 2: The share of a co-venturer corporation in the net income of tax-exempt joint venture
    or consortium is subject to corporate income tax.
    a. Only statement 1 is correct
    b. Only statement 2 is correct
    c. Both statements are correct
    d. Both statements are incorrect

Question 16

16. Statement 1: The share of a co-venturer individual in the net income of a tax-exempt joint venture or consortium is subject to normal income tax.
    Statement 2: The share of a co-venturer individual in the net income of a tax-exempt joint venture or consortium is subject to creditable withholding tax of 20%.
    a. Only statement 1 is correct
    b. Only statement 2 is correct
    c. Both statements are correct
    d. Both statements are incorrect

Question 17

17. The share of a co-venturer individual in the net income after tax of a joint venture or consortium
    taxable as a corporation is
    a. Subject to creditable withholding tax of 10%
    b. Subject to final withholding tax of 10%
    c. Subject to capital gains tax
    d. Exempt from income tax

Question 18

18. The share of a co-venturer corporation in the net income after tax of a joint venture or consortium
    taxable as a corporation is
    a. Subject to creditable withholding tax of 10%
    b. Subject to final withholding tax of 10%
    c. Subject to capital gains tax
    d. Exempt from income tax

Question 19

19. Statement I: A joint venture for undertaking construction projects is not taxable as a corporation.
    Statement II: A consortium for energy operations pursuant to an operating consortium agreement
    under a service contract with the government is not taxable as a corporation.
    Statement III: A general partnership in trade is not taxable as a corporation.
    Statement IV: 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 taxable as a corporation.
    a. Only one (1) of the above statements is true
    b. Two (2) of the above statements are true
    c. Three (3) of the above statements are true
    d. All of the above statements are true