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An ordinary trading partnership has three partners: the senior partner, the managing partner, and the junior partner. The three partners share income profits equally and capital profits in accordance with their capital contributions as follows:
Senior partner: 50%
Managing partner: 30%
Junior partner: 20%
Five years ago, the firm purchased office premises. The premises have just been sold for a profit, realising a chargeable gain.
Who will be liable to pay tax on the gain realised on the sale?
A. Each partner will be liable to pay Capital Gains Tax on one third of the gain and the firm will have no liability.
B. The firm will be liable to pay Corporation Tax on the entire gain and the partners will have no liability.
C. Each partner will be liable to pay Income Tax on one third of the gain and the firm will have no liability.
D. The senior partner will be liable to pay Capital Gains Tax on 50% of the gain, the managing partner on 30% of the gain and the junior partner on 20% of the gain.
E. The senior partner will be liable to pay Income Tax on 50% of the gain, the managing partner on 30% of the gain and the junior partner on 20% of the gain.
D - The senior partner will be liable to pay Capital Gains Tax on 50% of the gain, the managing partner on 30% of the gain and the junior partner on 20% of the gain.
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