Decena, Neil Ryan

BSA-2nd Year
Income Tax on Partnership

P6.3
Villamin and Francis are partners in a commercial partnership. Their profit and loss ratios were
3:6. During 2021, the following data were provided:

Data of the partnership:

Gross profit from sale of services P35,000,000

Direct cost of services 15,000,000

Business Expenses 7,000,000

Rental Income in business assets (net of tax) 1,425,000

Interest Income on peso bank deposits 200,000

Interest income on U.S. $ deposits under the expanded foreign

500,000
currency deposit system

Capital gain on sale of real property classified as capital asset

located in QC 3,000,000
Selling price-P2M; FMV-2.5M; Cost-1.7M

Quarterly tax payments 750,000

Data of partners:

Dividend Income from a resident foreign corporation earned by

P120,500
Villamin

Dividend Income from a domestic corporation earned by Francis 85,000

Royalty Income from Philippines earned by Francis 35,000

Capital gain by Francis on sale of shares of stock of a domestic

corporation
Selling Price – P300,000; 120,000
FMV – 300,000;
Cost – 180,000

Gross income from a sole-proprietorship business of Villamin 925,000

Allowable business expenses of Villamin 670,000

Quarterly tax payments 12,500

Required: Determine the following:

1. Income tax payable of the partnership

2. Income tax payable of Villamin

3. Income tax payable of Francis

4. Final tax on passive income of the partnership

5. Final tax on passive income of Villamin

6. Final tax on passive income of Francis

SOLUTION :
Gross revenue from sale of services P35,000,000
Direct cost of services (15,000,000)
Business Expenses (7,000,000)
Rental Income in business assets (gross)
1,500,000
(P1,425,000/95%)
Taxable income P14,500,000
X tax rate 30%
Tax due P4,350,000
Quarterly tax payments (750,000)
Withholding tax on rent (75,000)
Income tax payable P3,525,000

Interest Income on peso bank deposits @ 20% P40,000

Interest income-FCDS @ 7.5% 37,500

Final Tax on passive income of the partnership P77,500

Capital gains tax on real property (2.5M x 6%) 1,500,000
DISTRIBUTABLE INCOME:
P14,500,000
Taxable income
Total income subject to final tax 70,000
Capital gain 3,000,000
Less:
Basic tax due (4,350,000)
Final tax due (77,500)
Capital gains tax (1,500,000)
DISTRIBUTABLE INCOME P18,572,500

Villamin:
Gross income from sole-proprietorship business 925,000
Allowable business expenses (670,000)
Dividend Income-resident foreign corp. 120,500
Basic exemption (50,000)
Taxable income P325,500
Tax due (tax table) P72,650
Quarterly tax payments (32,500)
Income tax payable P40,150
Final Tax – (P1,227,250/3 X 10%) P40,908
Capital gains tax - Villamin P0
Francis:
Income Tax payable
P0
(No income subject to basic tax)

Dividend Income @ 10% P8,500

Royalty Income @ 20% 7,000
Share in the distributive share of the partnership income
(P1,227,250/3 X 2 x 10%) 81,817
Total final tax on passive income P97,317

Capital gains tax on shares of stock

7,000
[(P100,000 x 5%) + (20,000 x 10%)]