KASNEB PASTPAPERS · CPA STUDY MATERIALS Advanced Taxation — Taxation of Business Income: Partnerships and Companies — PREVIEW Course: CPA — Certified Public Accountant | Level: Advanced Level 1 This is a free preview. It shows the exam-paper layout used throughout the full document, plus the introduction section. Contents (full paper) 1. Who is taxed: partnerships vs companies — included in this preview 2. Legal nature of a partnership for tax purposes — full version only 3. Is there really a partnership? Tests and case law — full version only 4. Computing partnership taxable income — full version only 5. Full worked question — partnership profit allocation — full version only 6. Corporate residence and corporation tax rates — full version only 7. Special corporate tax regimes — full version only 8. Instalment tax for companies — full version only 9. Capital allowances — the modern framework — full version only 10. Distribution of profits and dividends — full version only 11. Branches of foreign companies vs subsidiaries — full version only 12. Groups of companies — full version only 13. Full worked question — corporate tax computation — full version only 14. Practice examination — KASNEB-style paper — Question One shown below; Questions Two–Five full version only 15. Marking guide — model answers to the practice examination — full version only 16. Exam technique and revision checklist — full version only 1. Who is taxed: partnerships vs companies Kenyan income tax treats these two common business vehicles very differently: A partnership is not a taxable "person" in its own right. Its profits are computed at partnership level, then allocated to and taxed on the individual partners, at their personal graduated tax rates. A limited company is a separate legal person and a separate taxable person. It pays corporation tax on its own profits, and shareholders are taxed separately (if at all) on what the company distributes to them. This single distinction — taxable entity vs taxable-income pass-through — drives almost everything else in this chapter. Sample of the practice examination (Question One of Five) Note on format. The full paper includes a complete practice examination laid out the way a real KASNEB CPA Advanced Taxation paper is laid out — timed, five compulsory 20-mark questions — so you can rehearse the exact exam format before sitting the real thing. This is an original practice paper, not a reproduction of any actual KASNEB past paper. CPA ADVANCED LEVEL 1 — ADVANCED TAXATION (PRACTICE PAPER) TIME ALLOWED: 3 HOURS Instructions to candidates: Answer ALL FIVE questions. Each question carries 20 marks. Show all workings clearly. QUESTION ONE (a) Explain, using the concept of "substance over form," why a document titled "Partnership Deed" does not by itself prove that a partnership exists for tax purposes. (6 marks) (b) Outline the treatment of partners' salaries and interest on capital when computing the adjusted taxable profit of a partnership. (6 marks) (c) Explain the steps followed in allocating a partnership's adjusted taxable profit between its partners. (8 marks) (Total: 20 marks) Questions Two, Three, Four and Five — plus the full marking guide with model answers to all five questions — are in the full version. Unlock the full paper The complete version includes the legal tests for whether a partnership exists (with case-law principles), a full worked partnership profit-allocation question, corporate residence and tax rates, special corporate tax regimes, instalment tax, the modern consolidated capital-allowance framework, current dividend/distribution rules (including why "compensating tax" no longer applies), branch vs subsidiary taxation, group-of-companies rules, a full worked corporate tax computation, the complete five-question KASNEB-style practice examination with a full marking guide, and an exam technique and revision checklist. Purchase the full paper to continue.