Susan Liu and Gordon Chee are partners in SG Tax Consulting LLP which provides regional tax and

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Question:

Susan Liu and Gordon Chee are partners in SG Tax Consulting LLP which provides regional tax and business consulting services in Singapore. They have agreed to share the partnership profits and losses equally. The net accounting profit of the LLP for the year ended 30 September 2019 is $21,000 after charging/crediting the following items:

Receipts

- Dividend income of $24,000 received from Big Brother Co Limited in Country Z. The dividend was deposited into UOB Bank, an approved bank in Singapore on 6 September 2019. Country Z does not impose taxes on any income derived in Country Z.

- Write-back of provision for impairment on accounts receivable of $6,000.

Expenses

- Reimbursement of Gordon's entertainment expenses of $25,000. Of this amount, $16,000 was in respect of business entertainment.

- Reimbursement of overseas travel expenses of $20,000 incurred by Susan for attending tax conferences and client meetings overseas.

- Susan and Gordon were each paid an annual salary of $60,000.

- Gordon's wife is the office manager and her annual salary is $72,000. The market rate for a similar position is $66,000 per annum.

- Depreciation of office equipment of $25,000.

- Gordon and 2 staff members took part in an approved overseas business development trip to Cambodia. The total cost of the trip was $30,000 ($10,000/person).

Required: (a) Calculate the adjusted and divisible profit for the LLP for YA 2020. All items of income and expenses in the question are to be accounted for. Where no adjustment is required, please insert in "0". (11 marks)

(b) Compute the statutory income of Gordon for YA 2020, taking into consideration the following information:

- Gordon's capital contribution is $50,000 as at 30 September 2019 and his past relevant deduction is $40,000.

- Gordon has unabsorbed capital allowances brought forward from YA2018 and 2019 of $30,000 and $40,000 respectively.

- Gordon's share of capital allowances from the LLP for YA 2020 is $14,000.

- Gordon derived speaking fees of $12,000 at a tax symposium in Hong Kong that was organized by Wolters Kluwer Hong Kong. He was invited in his personal capacity. The fees were paid into Gordon's bank account with DBS Singapore on 18 November 2019. All items of income and donations, if any allocated from the LLP as well as those stated above must be accounted for in your answer. Where the income is not taxable, please insert "0".

(c) Steven and Gordon are considering merging their business with another tax consultancy whose area of expertise was in indirect taxes. They are considering whether to continue with the use of the LLP structure or a Singapore incorporated company for the merged business. Discuss any three (3) tax differences between a LLP and an incorporated company.