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TAXATION OF PARTNERSHIPS AND PARTNERS

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by

Marie Reynoso

on 12 September 2013

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Transcript of TAXATION OF PARTNERSHIPS AND PARTNERS

TAXATION OF PARTNERSHIPS AND PARTNERS
CLASSIFICATION OF GENERAL PARTNERSHIPS IN TAXATION
1. General professional partnerships

2. General co-partnership (compania colectiva)

ITEMIZED DEDUCTIONS OR OPTIONAL STANDARD DEDUCTIONS FOR GPPs
GENERAL
CO-PARTNERSHIPS
is one which is not a general professional partnership.
are considered as corporations and are taxed as corporations.
Partners are considered stockholders.
Profits distributed to partners are considered as dividends subject to a final tax of 6% in 1998, 8% in 1999 and 10% in 2000.

GENERAL PROFESSIONAL PARTNERSHIP
is one formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.
A GPP (General professional partnership) shall not be subject to the income tax but is required to file an annual income tax/return for information about the share of each of the partner in the partnership.
It does not pay national income taxes rather, it just serves as a conduit or pass-through where its income is ultimately taxed to the partners comprising it.

GENERAL PROFESSIONAL PARTNERSHIP
Partners in a GPP shall be liable for income tax in their separate and individual capacities.
Partner’s corresponding share in the partnership’s losses are as follows:
a. Where the result of operation is a loss, the loss will be divided according to the agreement of the partners.
b. In the absence of an agreement on the distribution of losses, the losses shall be distributed according to the profit sharing ratio.

GENERAL PROFESSIONAL PARTNERSHIP
Net income of a GPP is to be computed in the same manner as that of a corporation ( Section 26 of the NIRC)
The GPP may claim either the allowed itemized deductions or the optional standard deduction (OSD) allowed to corporations (not exceeding 40% of their gross income).

GENERAL
CO-PARTNERSHIPS
Partner’s distributive share in the partnership is equal to the net income of the partnership after deducting the corresponding corporate income tax.
The taxable income declared by the partnership for a taxable year shall be deemed to have been actually or constructively received by the partners in the same taxable year.
If the partnership sustains a loss, the individual may deduct their respective shares in the net operating loss from their individual gross income.

Chapter 6
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