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Taxation Of Partnership Business: Assignment

   

Added on  2020-03-16

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TAXATIONTaxation Of Partnership BusinessStudents' NameCourse Title Instructor’s NameInstitutional AffiliationCity and State Date of Submission

TAXATIONThe partnership involves doing business with the sole aim of distributing the gain or losses between the parties. The business nature allows smooth and efficient running of operations since the control via decision makings as well as gross liability misfortunes are directly felt by the parties. Most of the operations in a partnership business are mostly guided by a partnership agreements that stipulates each and every approach to events surrounding thebusiness.Partnership businesses basically involve profits and losses hence tasking the venture to declare tax return. Unlike individual income tax where prescribed tax bracket is outlined hence creating guaranteed tax obligation, in partnership the latter depends on the performanceand operation of the businessPartnership agreement outlines how loss or gain, expenses or benefits, assets or liabilities are to be accounted for to the extent of stipulating respective ratios Pickering(2012.Pg 67). The agreement stands as the constitution and no operations are expected to contravene anything in the agreement. The Two B’s partnership business in question just like any other form of the partnership business is seen to be governed by an agreed document signed by Sally Brown and Mary Brown.For tax purposes there exist a little bit difference while accounting for a partnership business this is mostly so since most of the operations controls and respective direct impact isfelt by the partners thus the operations is to some extent not deemed independent Weichenrieder(2007.Pg 8). A partnership business is not allowed by the law to pay and report on any tax obligatory on the profits earned instead it tasks individual partners to do so as the portion of their income Chetty(2009.Pg 40)as they file income tax return. The individual parties are obliged to pay the partnership profit share as per the available tax tie brackets in place at the time of reporting.

TAXATIONLikewise for taxation basis we expect partnership profit and losses to be the one subjected to tax, it’s there clear that tax burden depends on the declaration hence flexible in nature thus if the profit is less we expect low capture on tax while when its high the vice versa takes the stand. The worst of all is when losses are suffered there is no tax that is being charged.ATO further expects the partnership business to be filing annual partnership return defining the income and expenses earned and incurred respectively Abdul-Jabbar(2008.Pg 290).The partnership is also expected to register and account for goods sales tax if any upon making sales turnover of $75000 or above. With all these information in mind, we are now comfortable to compute The Two B’S partnership taxable income and respective individual tax obligations.Notes Used In the StatementsA: Calculation of Cost of Sales of Good =Opening Stock=$370000 + =Purchases = $320000 -Closing Stock valued at cost =Closing Stock=$490000 COGS=$370000+$320000-$490000=$200000B: The purchase of the motor vehicle, treadmill and exercise bikes since they are entirely used for the business purpose they are supposed to be allowed as the expense but ONLY GSTcredit should be settled off upon keep of records from the tax payable Halabi(2010.Pg 165).C: Franking credits on dividend received should like be set off from the tax payable Franking credits=1/ (0.725/0.275)*10500=1/2.636*10500=3983.3

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