Deductions Claimed Against a Partner's Distributive Share in Professional Partnership Income

January 27, 1989 BIR RULING NO. 008-89 29 000-00 008-89 Gentlemen : This refers to your letter dated November 7, 1988 requesting a ruling as to whether deductions can be claimed against a partner's distributive share in professional partnership income. cdtech It is represented that certain BIR Examiners contend that no further deductions can be claimed on the ground that the income is already net as the partnership has already claimed the deductions; that it is probably not unknown to the BIR that a law partner incurs deductions which are not passed on to the partnership for some reason or another, i.e. he buys his own lawbooks, sometimes he pays his own dues in professional organizations and entertains clients without passing the bills to the partnership, he buys a car for use in law practice and the partnership does not advance the purchase price nor does it take title to the car; and that certainly, the expenses of the car and depreciation thereon are allowable. In reply thereto, I have the honor to inform you that in computing taxable income subject to tax under Section 21(a) of the Tax Code, as amended, there shall be allowed as deductions the items specified in paragraphs (a) to (i) of Section 29 also of the Tax Code, as amended. In the case of an individual, the optional standard deduction under paragraph (K) of Section 29 shall be allowed in lieu of itemized deductions under said paragraphs (a) to (i). In addition, the appropriate personal and additional exemptions allowed under paragraph (1) may be claimed by an individual whose income is subject to the tax under Section 21(a) provided that no deductions other than the deduction provided in paragraph (1) may be allowed from compensation income arising from personal services rendered under an employer-employee relationship. Such being the case, and since a partner's share in the net profits of a general professional partnership is not considered compensation income the items of deductions from gross income under Section 29 of the Tax Code, as amended may be claimed as deduction by a partner from his distributive share in the net profits of a general professional partnership. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner