Income Derived and Taxes Prior to and Until the Organization of the Partnership

March 17, 1958 BIR RULING NO. 187-58 Mr. Thomas Diokno 1121 Narra St. Manila S i r : Reference is made to your letter dated February 7, 1958, requesting information as to whether or not, under the following circumstances, it will be necessary for you to report, for purposes of the income tax, the income you will derive from January 1, 1958 to the date the partnership is formed. You also wish to be informed of the taxes to which you will be liable by reason of the contemplated partnership. cdpr "I am the owner of a Printing Press and wish to admit a partner. That I have already filed my 1957 income tax return and likewise have fully paid all outstanding tax liabilities. I have entered into agreement to admit a partner which therefore may result in dissolving my single proprietor firm and form a new partnership at the latter part of April. In forming this new partnership the 1958 books of account of the single proprietorship will be maintained as transactions since January 1st has already been recorded." In answer thereto, I have the honor to inform you that, based on the facts above quoted, you should file an income tax return for the year 1958, covering the income derived by you as owner of the aforesaid printing press during the period from January 1, 1958 to the date immediately preceding the organization of the partnership, as well as your share in the profits of the partnership and other income, if any, derived from other sources. Another income tax return should be filed for the partnership, covering its income from the date it was organized to December 31, 1958. Unless the partnership is a duly registered general partnership, the same will be subject to the corporate income tax prescribed in Section 24 of the National Internal Revenue Code, as amended. LLpr Upon organization of the partnership, the same shall immediately be liable to the corporate basic residence tax of P5.00, and at the end of the current year it may be further subject to the additional residence tax, depending upon the assessed value of the real property owned by it during said year and/or the amount of gross receipts derived from its business during the same year, pursuant to Section 2 of Commonwealth Act. No. 405 (Residence Tax Law). On the assumption that the privilege tax of P20.00 due on your said business for this year had already been paid, no further privilege tax need be paid thereon after the partnership is organized in accordance with Section 198 of the Tax Code. It is, however, necessary that the name appearing on your privilege tax receipt should be changed to that of the partnership. The amount and manner of paying the percentage tax due on your business remain the same under Section 191, in relation to Section 183 (a) of the aforesaid Code. In this connection, it may be stated that you should, within ten (10) days after the partnership is organized, register with the Regional Director, Regional District No. 3, Manila, the name or style, place of business and location of the partnership, and the names and residences of the persons constituting the same. prll Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue