Unformatted text preview: ure
partnership profits from the same business (s
A corporate partner can set-off its share of
partnership loss against its profits from other
trade for the same YA. Any excess loss not so
applied would be c/f to off-set firstly
c/f its share of profit from the partnership & then
its share the assessable profits from other trade in
subsequent years (s 19C(5)).
33 Limited Partnership
Limited The share of loss which a limited partner can
use to set-off against his other income cannot
exceed the amount of his contribution (ie
capital + unwithdrawn profits/gains) to the
partnership (s 22B).
(s 34 Corporation or Body of Persons Losses arising from one trade
can be off-set against profits of
other trades carried on by the
same company during that year
(including its share of
assessable profits of a
partnership in which it is
partner). Any unrelieved trade
loss can be c/f to set-off
against any future profits of
the company (s 19C(4)).
35 MEANING OF PARTNERSHIP Partnership is defined as 'the relation which exists
between persons carrying on a business in common
with a view of profit' (s 3(1) Partnership Ordinance).
Partnership is not a legal person/entity, but is a tax
person. Under IRO s22(1), a single entity of
assessment and assessable profits are computed in one
sum in the name of the partnership.
Precedent partner is the responsible person to file out
returns and to do all such acts as required to be done
under the IRO, etc, on behalf of the partnership.
Tax recovery under (s22( 4) & (5)) from assets of the partnership, or
any partner (including former partner for outstanding tax
before the cessation of partnership) .
36 COMPUTATION of PARTNERSHIP
PROFITS/LOSSES The same rules of computation of assessable profits
apply to sole proprietor businesses, partnerships and
corporations, deduction of rent paid by a partnership to a partner or
his/her spouse is restricted to the assessable value of
the relevant property (s 16(1)(b)) there is no deduction for salaries, or remuneration,
interest on capital or loans paid to a partner or his/her
spouse (s 17(2))
37 Allocation of Partnership Profit / Loss
Loss loss of a partner b/f can only be used to set off
against his subsequent share of profit (s 19C(2))
the ability of a limited partner to use his share of
loss to set off his other income is restricted to the
contribution to the partnership as at end of the
YA in which the loss is sustained (s 22B). 38 Example 1 Au, Bau and Chan have been in partnership
for many years.
They share profits & losses equally.
The profit and loss account for the year
ending 31 Dec 2007 contains the following
information: 39 P/L AC Gross profit
Salary to Mrs Au 50,000
Interest on capital
14,000 $350,000 (237,000)
Other expenses (all allowable) (50,000)
63,000 40 Solution to example 1
Au, Bau & Chau
Basis period: year ended 31 Dec 2007
Profit per account
Add: Partners' salaries
Salary to partner's spouse 50,000
Interest on capital
View Full Document
- Spring '14
- Corporation, Limited partnership, Types of business entity