You are an assistant in the tax department of TX Tax Advisory Services. Your supervisor has asked you to compute the taxable income relating to the business of Taffy and Teddy who are in partnership. Their partnership agreement state that they share profits and losses in the ratio of 2:1 for Taffy and Teddy respectively. They are also entitled to annual salaries of P90,000 for Tarry and P60,000 for Teddy.

You are provided with the following information for the year ended 31 August 2022

Adjusted trading profits before capital allowances for the year P1,200,000

Capital transactions for the year

Asset at cost	Balance on 31 August 2021	Additions	Disposals
Plant and machinery Tarry’s car- 30% private use Teddy’s car Commercial vehicle Fixtures and fittings Computer equipment	2,250,000 100,000 80,000 275,000 150,000 -	150,000 125,000* - - - 25,000	200,000 100,000 - - 40,000 -

*Tom’s usage of the new car remained the same

Disposals

Plant and machinery was disposed for P105,000 and the Tax Written Down Value (TWDV) was P80,000.

Tarry’s old car was disposed for P90,000

Furniture and fittings was disposed for P7,500 and capital allowances of P17,500 had been granted.

Teddy earned P105,000 from his other business investments.

Required

Compute the tax liability for each partner and state the due date for submission of the tax return by each of the partners. (20 marks)

Explain how partnership business losses can be relieved. (5 mar

Answer rating: 100% (QA)

Taxable Income Taffy Adjusted trading profits before capital allowances P1200000 Capital transaction... View the full answer