Question 1

Describe three factors that have been used to distinguish joint venture arrangements from partnership arrangements.

Accepted Answer

Factors that could be listed here include:
• co-venturers contractually do not have the power to bind other co-venturers;
• co-venturers retain ownership of property contributed to the undertaking;
• co-venturers are not jointly and severally liable for debt of the undertaking;
• co-venturers share gross revenues, not profits; and
• while partnerships may be formed for the same purpose as a joint venture, they are usually of longer duration and involve more than a single undertaking.

Question 2

Describe the treatment of partnership taxable dividends received in the determination of a partner's Net Income For Tax Purposes and the adjusted cost base on his partnership interest. The partner is an individual.

Accepted Answer

The partner's share of the partnership dividends will be included in his Net Income For Tax Purposes in the year in which the dividends are received by the partnership. The partner will gross up the allocated amount and be entitled to a dividend credit against Tax Payable. The partner's share of the partnership dividends will be added to the adjusted cost base of his partnership interest on the first day of the following taxation year. This amount will not include the gross up.

Question 3

Briefly describe the three basic elements that are required in the formation of a partnership.

Accepted Answer

The three elements are:
1. There must be two or more persons (taxable entities)involved.
2. These persons must be carrying on a business.
3. The business must be carried on with a view to making a profit.

Question 4

In converting accounting business income to Net Business Income (for tax purposes), is there a need to make an adjustment for drawings?

Accepted Answer

The answer of In converting accounting business income to Net...

Question 5

The degree to which partners have responsibility for partnership debts depends on the type of partnership. In terms of this responsibility, briefly describe the three types of partnerships that are discussed in your text.

Accepted Answer

The answer of The degree to which partners have responsibility...

Question 6

In determining the Net Business Income (for tax purposes)of a partnership, how are salaries to the partners dealt with?

Accepted Answer

The answer of In determining the Net Business Income (for...

Question 7

What are the rules for determining the taxation year of a partnership?

Accepted Answer

The answer of What are the rules for determining the...

Question 8

Adjustments to the adjusted cost base of a partnership interest can sometimes result in a "negative" amount. What are the tax consequences of this to the partner?

Accepted Answer

The answer of Adjustments to the adjusted cost base of...

Question 9

In determining the adjusted cost base of a partnership interest, briefly describe the treatment of each of the following items:
• capital contributions,
• partner's share of partnership Net Business Income, and
• partner's drawings.

Accepted Answer

The answer of In determining the adjusted cost base of...

Question 10

An individual wishes to become a member of an existing partnership. What are this individual's alternatives for acquiring this interest?

Accepted Answer

The answer of An individual wishes to become a member...

Question 11

The various types of income earned in a partnership retain their tax characteristics when allocated to the partners. Explain this statement.

Accepted Answer

The answer of The various types of income earned in...

Question 12

A member of a partnership, because of losses on other investments, would like to maximize his partnership income. To this end, he has asked that no CCA be deducted from his share of the partnership income. Should the other partners agree to this request?

Accepted Answer

The answer of A member of a partnership, because of...

Question 13

Partnership organizations sometimes make donations to registered charities. How are these amounts dealt with in the determination of Net Business Income (for tax purposes)at the partnership level?

Accepted Answer

The answer of Partnership organizations sometimes make donations to registered...

Question 14

Describe the treatment of capital gains in the conversion of accounting net income to Net Business Income (for tax purposes)of a partnership.

Accepted Answer

The answer of Describe the treatment of capital gains in...

Question 15

Under the provisions of the Income Tax Act, only individuals, corporations, and trusts are considered to be taxable entities. Given this, explain how the business income, capital gains, and property income earned by a partnership will be taxed.

Accepted Answer

The answer of Under the provisions of the Income Tax...

Question 16

Mr. Johns, Mr. Klien, and Ms. Langley are all Chartered Professional Accountants who trained in large national firms. However, for the last few years they have each operated a small private practice. They are currently discussing the possibility of forming a partnership to combine their practices. List four major points to be considered in the formation of such a partnership and in drawing up a partnership agreement.

Accepted Answer

The answer of Mr. Johns, Mr. Klien, and Ms. Langley...

Question 17

If the partnership agreement does not specify how profits will be shared, how will the profit allocation be determined?

Accepted Answer

The answer of If the partnership agreement does not specify...

Question 18

Describe the treatment of partnership capital gains in the determination of a partner's Net Income For Tax Purposes and the adjusted cost base on his partnership interest.

Accepted Answer

The answer of Describe the treatment of partnership capital gains...

Question 19

CCA can only be taken on property that is owned by the taxpayer. As a partnership is not a legal entity, it cannot own property. Does this mean that a partnership cannot deduct CCA in determining its income? Explain your conclusion.

Accepted Answer

The answer of CCA can only be taken on property...

Question 20

What is the basic difference between the tax procedures applicable to joint ventures and the tax procedures applicable to partnerships?

Accepted Answer

The answer of What is the basic difference between the...

Quiz 18: Partnerships