ACT 3152 TAXATION 2 (EXECUTIVE)

TRIMESTER III, 2019/2020

ASSESSMENT 1

Question 1

Situation 1

Mr. Kanita commenced operating a beauty salon in Klang on 1 February 2018. She
recruited two beauticians and paid them monthly allowances and provided free
meals. At the end of the accounting period, she determined her net profit after
deducting all operating expenses. She then drew 80% of the net profit as salary for
herself and distributed the balance among the two beauticians as a share of profits.

Situation 2

A consortium is formed between Alpha Pte Ltd and Behta Sdn Bhd to initiate a
construction project in Malaysia. Each party would be required to perform their
function as stipulated in the contract entered into with the state government. All
contract income and expenses will be shown in the consortium’s account. The net
profit of the consortium shall be allocated as follows;

Alpha Pte Ltd 45%

Behta Sdn Bhd 55%

Based on both situation, you are required to explain with reasons whether the above
arrangement constitute a partnership business.

Question 2

The following information is available for Bala and Teo Enterprise, a partnership for
the basis year 2019.

Sales 150,000
Less: cogs 50,000
Gross profit 100,000
Less: administrative expenses 50,000
Partners’ salaries
Bala 22,000
Teo 14,000
36,000
Partners’ interest
Bala 3000
Teo 3000
6000
 ACT 3152 TAXATION 2 (EXECUTIVE)
TRIMESTER III, 2019/2020
ASSESSMENT 1

Partners’ private expenses

Bala 2000 94,000
Net profit 6,000

Bala and Teo have agreed to share their income equally. The capital allowances for
the partnership business for YA 2019 is RM 8000.

You are required to determine the partners’ divisible income and partners’ statutory
income for the YA 2019.

Question 3

Kee and Swee have been carrying on a sand excavation partnership business since
1st January 2012. The accounts are prepared to 31 December each year. The
partnership agreement provides for the following:

Interest on capital : 10% per annum for each partner

Capital contribution:
Kee 100,000
Swee 150,000

Salary per month:

Kee 3000
Swee 5000

Share of divisible income/loss:

Kee 2/5
Swee 3/5

On June 2019, Kee left the partnership and withdrew his accumulated capital and
profits up to the date.

On 1 July 2019, Bala joined the partnership and the new partnership agreement
provides for the following:

Interest on capital : 10% per annum for each partner

Capital contribution:
Swee 150,000
Bala 150,000

Salary per month:

Swee 5000
Bala 5000
 ACT 3152 TAXATION 2 (EXECUTIVE)
TRIMESTER III, 2019/2020
ASSESSMENT 1

Share of divisible income/loss:

Swee ½
Bala ½

The partnership’s trading, profit and loss account for the year ended 31 December
2019 is as follows:

Income from sand extraction contract 9,400,000

Less: cost of purchase (7,184,000)
Profit from sand extraction 2,216,000
Other income 142,000
2,358,000
Less: general overheads (648,000)
Net profit for the year 1,710,000

Included in general overheads are:

Partners’ salary 108,000

Partners’ interest on capital 27,500
Depreciation on fixed assets 67,000

Capital allowances for the YA 2019 is RM 80,000

You are required to calculate the statutory income for the partnership for YA 2019.

Question 4

Explain what do you understand by the term Limited Liability Partnership (LLP) and
what are the salient features of LLP from a corporate tax perspective?