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PARTNERSHIPS
TOPIC OUTLINE:
10.1 Definition of Partnership
10.2 Types of Partners
10.3 Basis Period
10.4 Computation of Provisional Adjusted
Income & Divisible Income
10.5 Computation of Adjusted Income &
Statutory Income
10.6 Changes in Partnership
OBJECTIVES OF STUDY:
To define what is partnership and to
tax
Definition
Section 2, ITA 1967
Partnership an association of any kind
between parties who have agreed to combine
any of their rights, powers, property, labor or
skill, for the purpose of carrying on a business
and sharing the profits therefrom.
Sec. 3, Partnership Act 1961:
The relation which subsists between
persons, carrying on business in common
with a view of profit.
Definition cont.
Chargeable person:
Partnership is not a chargeable person
for income tax purpose. Income tax is
levied on the individual partners on their
share of income.
The source of income:
As partnership is the relationship
comprises 2 or more persons (restricted
to a maximum of 20 persons) carrying
on business in common with a view of
profit, the source is a business income.
Existence of Partnership
Example
Basis Period
Example
20
Partnership expense
Salary:
AB
2
AC
2
Interest on capital
AB
1.5
AC
1.5
Food consumed by AB
Net profit
3
3
(830)
900
Divisible income
XTRA
Changes in partnership
Example
Suggested solution
Capital Allowances
Continue
Adjusted income
+ Balancing charge
xx
xx
xx
- Capital allowance
(inclusive unabsorbed and
balancing allowance)
Statutory income
xx
(xx)
Partnership Losses
NEXT TOPIC:
INCOME TAX
ADMINISTRATION