Professional Documents
Culture Documents
INCOME TAXATION
2018 Edition
By: TABAG & GARCIA
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
CHAPTER 2 - INDIVIDUAL TAXPAYERS
ERRATUM:
(1) PAGE 77, TABLE 2-2;
Citizens and NRA-ETB NRA-ETB
Residents
ROYALTY ON BOOKS AS WELL AS OTHER LITERARY WORKS….. 10% 10% 25%
(2)
FROM CHANGE TO:
PAGE 75 PAGE 75
1) 1)
2) Assume the SEP opted to avail the 8% tax under the 2) Assume the SEP opted to avail the 8% tax under the
TRAIN Law, determine the tax due. TRAIN Law, determine the tax due.
v Answer: P364,000 v Answer: P384,000
Solution: Solution:
PROBLEMS
2-1
1. RC 4. NRA-NETB
2. RC 5. NRC
3. RC 6. RA
2-2
TAX TYPE Tax RATE TAX TYPE Tax RATE
1 FWTx 20% 19 Exempt -
2 FWTx 7.5%/ 15%TL 20 FWT 20%
3 BTx Tax Table 21 FWTx 25%
4 FWTx 20% 22 BTx Tax Table
5 Exempt - 23 Exempt -
6 BTx Tax Table 24 FWTx 25%
7 BTx Tax Table 25 FWTx 20%
8 BTx Tax Table 26 FWTx 20%
9 BTx Tax Table 27 FWTx 10%
10 BTx Tax Table 28 BTx Tax Table
11 FWTx 20% 29 BTX Tax Table
12 FWTx 10% 30 FWTx 20%
13 FWTx 20%* 31 FWTx 25%
14 BTx Tax Table* 32 CGT 5%&10%/15%
15 BTx Tax Table 33 Exempt Sub.to OPT***
16 FWTx 20% 34 BTx Tax Table
17 FWTx 20% 35 BTx Tax Table****
18 BTx Tax Table
*Prizes received from Philippine sources exceeding P10,000 are subject to 20% final tax rate.
On the other hand, Other WINNINGS (regardless of amount) are subject to 20% final tax rate.
**PCSO/Lotto winnings under TRAIN Law:
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Amount RC, NRC, RA, NRAET NRANET
≤ P10,000 exempt exempt 25%
> P10,000 20% FWT 20% FWT 25% FWT
***Stock Transaction Tax on sale of shares of DC listed in the Local Stock Exchange:
Prior to TRAIN Law = ½ of 1% of GSP
TRAIN Law = 6/10 of 1% of GSP
****CGT on Real Properties
Must be pertaining to a real property classified as capital asset located in the Philippines. However, if it is sold
to the Government, the tax may either be CGT or Basic Tax at the option of the individual taxpayer.
2-3
1.
a. Exempt
b. Exempt
c. Income Tax Due = P130,000
d. P746,000 computed as follows:
Tax Due:
1st P2,000,000 P490,000
Excess over P2M = (P800,000 x 32%) 256,000
Total P746,000
5. The 8% optional tax is not applicable because the total of the gross sales and other operating income exceeded the revised vat threshold of P3,000,000.
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
6. Income Tax Payable = P222,500 computed as follows:
Gross receipts P4,000,000
Cost of direct services (1,800,000)
Other operating expenses (825,000)
Taxable net income P1,375,000
Tax Due:
1st P800,000 P130,000
Excess over P800,000M = (P575,000 x 30%) 172,500
Tax Due P302,500
Less: CWT (80,000)
Income Tax Payable P222,500
7. The 8% optional tax is not applicable because the gross receipts exceeded the revised vat threshold of P3,000,000.
9. The 8% optional tax is applicable because gross sales did not exceed the revised vat threshold of P3,000,000. The income tax payable shall be computed
as follows:
Gross sales 2,800,000
x 8%
8% Tax on sales P224,000
ADD: Tax due on compensation income
1st P800,000 P130,000
Excess over P800,000 = (P600,000 x 30%) 180,000 310,000
Tax Due P,000 P534,000
Less: CWT
On compensation income (310,000)
On business income (80,000)
Income Tax Payable P144,000
& For mixed income earners, P250,000 is not deducted for purposes of computing the 8% tax
& The 8% tax is not applicable to compensation income.
2-4
1. Taxpayer is a resident citizen
1.1 Taxable income = P1,050,000
1.2 Income tax payable = P80,000
1.3 Final tax on passive income = P57,500
1.4 Total income tax expense = P262,500
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Gross business income, Philippines P1,000,000
Gross business income, USA 500,000
Business expenses, Philippines (700,000)
Business expenses, USA (430,000)
Compensation income, Philippines 600,000
Dividend income-foreign corp. 40,000
Interest income-bank deposit abroad 30,000
Raffle draw winnings 10,000
Basic personal exemption -
Taxable income P1,050,000
Basic income tax due P205,000 The question is tax expense; ignore
Final taxes on passive income 57,500 the income tax payable of P80,000.
Total income tax expense P262,500
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
4. Taxpayer is a nonresident alien engaged in trade or business
4.1 Taxable income = P910,000 (same answer with #2.1; nonresident citizen)
4.2 Income tax payable = P38,000 (same answer with #2.2; nonresident citizen)
4.3 Final tax on passive income = P16,500
4.3 Total income tax expense = P179,500
Dividend income – DC (50k x 20%) P10,000 Use 20% rate for DI from DC instead of 10%
Interest income bank deposit-Phls.@20% 4,000
Interest income FCDS deposit @ 15% exempt
Royalty income from composition @10% 2,500
PCSO winnings Exempt**
Final Tax on Passive Income P16,500
& **Unfortunately, unlike RCs, NRCs and RAs, the PCSO exemption of NRAET under TRAIN Law was retained.
2-5
1. Taxpayer is a resident citizen
a. Taxable net income = P1,076,100
b. Income tax payable = P212,830
c. Final tax on passive income = P68,030
d. Capital gains tax = P120,600
Solution:
From Phils. From Abroad
Total
Income from employment P180,000 P280,000 P460,000
Business income 850,000 960,000 1,810,000
Deductible business expenses (610,000) (730,000) (1,340,000)
Interest income on personal loans** 6,000 3,000 9,000
Dividend income from foreign corp. 6,800 2,000 8,800
Prizes from singing contest 5,600 - 5,600
Interest income on bank deposits 4,200 4,200
Interest income on money market placements 1,600 1,600
Royalty income 50,000 50,000
Winnings/ prizes from lotteries, raffles 16,900 16,900
Lotto winnings --- 50,000 50,000
Basic Personal exemption -
Additional exemption -
Taxable income P1,076,100
TAX DUE:
First P800,000 P130,000
Excess = P276,100 @ 30% 82,830
**All incomes regardless of source are taxable. However, personal expenses are not allowed as deduction from P212,830
the gross income
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Final Tax on Passive income:
Interest income on bank deposits 10,800
Interest income on money market placements 7,500
Royalty income 90,000
Lotto winnings 150,000
Winnings/ prizes from lotteries, raffle draws 45,000
Total P303,300
@ 20% P60,660
Solution:
From Phils.
Income from employment P180,000
Business income 850,000
Deductible business expenses (610,000)
Interest income on personal loans 6,000
Dividend income from foreign corp. 6,800
Prizes from singing contest 5,600
Basic Personal exemption -
Additional exemption -
Taxable income P438,400
TAX DUE:
First P400,000 P30,000
Excess = P38,400 x 25% 9,600
P39,600
Final Tax on Passive income:
§ As long as there is no interest income from foreign currency bank deposit under FCDS/FCDU, the final tax on passive income of a nonresident
citizen is the same with that of a resident citizen.
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Final Tax on Passive income:
Interest income on bank deposits 10,800
Interest income on money market placements 7,500
Royalty income 90,000
Dividend income from domestic corp 5,700 rate is 20%
Winnings/ prizes from lotteries, raffle draws 45,000
Total P159,000
@ 20% P31,800
Dividend income from domestic corp.@ 20% - -
Royalty income from sale of books 68,000 -
@ 10% 6,800
TOTAL FINAL TAX ON PASSIVE INCOME P38,600
2-6
a. Taxable income of the husband = P1,165,000
b. Taxable income of the wife = P890,000
c. Consolidated tax due of the husband and the wife = P396,500
Husband Wife
INCOME:
Compensation income P 850,000 P650,000
Income-Profession [P800,000/2)] 400,000 400,000
Income from trading business 250,000 -
LESS:
Expenses-practice of profession [ P320,000/2)] (160,000) (160,000)
Expenses – trading business (100,000) -
Basic Personal exemption - -
Additional exemption (75,000) -
TAXABLE INCOME P1,165,000 P890,000
Tax due:
First P800,000 P130,000 P130,000
In excess of P500,000 @ 30% 109,500 27,000
Total P239,500 P157,000
Consolidated Tax Due P396,500
Note: Personal expenses are not deductible. The Personal exemptions and Premium payments for health insurance are no longer deductible
beginning Jan. 1, 2018 under TRAIN Law.
2-7
a. Total capital gains taxes
Sale of shares of domestic corp. directly to a buyer (P150,000 x 15%*) P22,500
Capital gain on sale of land in the Philippines classified as capital asset (P5M x 6%) 300,000
Total capital gains tax P322,500
& *CGT on shares of DC under TRAIN Law
& Sale of shares in the local stock exchange is subject to transaction tax of 6/10 of 1% of GSP under TRAIN Law
b.
Dividend income from domestic corp. P40,000 x 10% P4,000
Interest income on Philippine bank deposit (3,200 + 2,400 + 8,000)/80% x 20% 3,400
Interest income on Phl. bank deposit under FCDU (4,000 + 4,000 + 2,000) x 15% 1,500
Interest income on government bonds = P10,000 x 20% 2,000
Royalty – literary = P10,000 x 10% 1,000
Royalty other than literary = P12,000 x 20% 2,400
Total Final tax on passive income of Daniel and Kat P14,300
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
c.
Business income P600,000
Rental income net of tax (P200,000/95%)/2 100,000
Dividend income from nonresident corp. (P10,000/2) 5,000
Interest income on notes receivable [P6,000 + (P2,000/2)] 7,000
Interest income on bank deposit abroad [P5,000 + (P5,000/2)] 7,500
Capital gain on sale of land abroad (P500,000/2) 250,000
Gain on sale of shares – New York Stock Exchange P30,000/2 15,000
Expenses [P350,000 +(75,000/2)] (387,500)
Personal exemption -
Taxable net income of Daniel P597,000
d.
Gross income from practice of profession (P360,000/90%) P400,000
Rental income net of tax (P190,000/95%)/2 100,000
Dividend income from resident corp. 20,000
Dividend income from nonresident corp. (P10,000/2) 5,000
Interest income on notes receivable [P4,000 + (P2,000/2)] 5,000
Interest income on bank deposit abroad [P5,000 + (P5,000/2)] 7,500
Capital gain on sale of land abroad (P500,000/2) 250,000
Gain on sale of shares – New York Stock Exchange P30,000/2 15,000
Expenses [P200,000 +(75,000/2)] (237,500)
Personal exemption -
Taxable net income of Kat P565,000
2-8
1. Income tax payable, first quarter = P-
2. Income tax payable, second quarter = P17,600
3. Income tax payable, third quarter = P38,427.5
4. Income tax payable, fourth quarter = P67,297.5
5. Final tax on passive income = P15,800
6. Capital gains tax = P600,000 x 6% = P36,000
1st Q 2nd Q 3rd Q Q4/Year
Gross Profit from Sales P300,000 P600,000 P910,000 P1,200,000
Business e-xpenses (120,000) (262,000) (405,890) (426,700)
Personal exemption -
Taxable income P180,000 P338,000 P304,110 P773,300
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
b. The Taxpayer is a Special Filipino Employee (SFE), however, the income tax due is based on the old graduated tax table. The 15%
preferential rate is not applicable because the compensation income is lower than P975,000.
TNI = 750,000 + 100,000 – basic personal exemption of P50,000 = P800,000
Basic Tax Due (old rate) = 125,000 + (300,000 x 32%) = P221,000
c. The Taxpayer is a Special Filipino Employee (SFE) employed by an OBU.
Income Tax Due = P850,000 x 15% = P127,500
d. The Taxpayer is a Special Filipino Employee (SFE) employed by an PC/SC.
Income Tax Due = P850,000 x 15% = P127,500
CASE B: 2018 Taxable Year; The Preferential Tax Rate of 15% is no longer applicable
2-10
a. P6M x 6% = P360,000
b. ZV P2.2M vs. SP of P2.5M**; CGT = P2.5M x 6% = P150,000; **SP = Cost + Gain
c. Unutilized Proceeds = none; the proceeds were fully utilized; CGT = P0
d. Unutilized Proceeds = P5M x 20% = P1M; CGT = 1/5 x 6M x 6% = P72,000
2-11
a. P15M x 6% = P900,000
b. P20M x 6% = P1,200,000
c. P0
MULTIPLE CHOICE
1. D 16. B 31. D
2. C 17. A 32. C
3. A 18. A 33. (P9,500)
4. A 19. B 34. B
5. A 20. D 35. C
6. A 21. C 36. D
7. D 22. B 37. D
8. D 23. D 38. D
9. B 24. D 39. C
10. D 25. A 40. D
11. B 26. B 41. B
12. A 27. D 42. B
13. D 28. B 43. B**
14. D 29. D 44. D
15. C 30. D 45. B
**Under the TRAIN Law, 1st Quarterly payment shall be on or before May 15 of the following year.
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Supporting Computations (Multiple Choice):
(2)
Gross income, Philippines P800,000
Gross income, USA 600,000
Expenses, Philippines (400,000)
Expenses, USA (300,000)
Basic personal exemption -
Taxable income P700,000
(3 to 5)
Gross income, Philippines P800,000
Expenses, Philippines (400,000)
Basic personal exemption -
Taxable income P400,000
(19)
Copyright (11,250/90%)x10% P1,250
Royalty (12,000/80%) x 20% 3,000
Share from Trade Partnership 30,000
(treated as dividend income)
(270,000/90%) x10%
FWT P34,250
(21)
Interest from FCDU (212,500/85%)x15% P37,500
Royalty (94,500/90%) x 10% 10,500
DI from DC (144,000/90%) x10% 16,000
FWT P64,000
(22)
Interest from FCDU (212,500/85%)x15% exempt
Royalty (94,500/90%) x 10% 10,500
DI from DC (144,000/80%) x20% 36,000
FWT P46,500
(32)
Gross sales P1,650,000
Rental income (P308,750/95%) 325,000
Cost of sales (500,000)
Business expenses (425,000)
Taxable Net Income P1,050,000
TAX DUE:
1st P800,000 P130,000
In excess = P250,000 x 30% 75,000
Total P205,000
Less: CWTx (65,000)**
Quarterly tax payments (82,500)
Income Tax Payable P57,500
& Assume inclusive of the CWT from rental income
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
(33)
Gross sales P1,650,000
Rental income (P308,750/95%) 325,000
Less (250,000)
Taxable Net Income P1,725,000
TAX DUE:
x 8%
Total P138,000
Less: CWTx (65,000)
Quarterly tax payments (82,500)
Income Tax Payable (P9,500)
(34)
Gross sales P1,650,000
Rental income (P308,750/95%) 325,000
Taxable Net Income P1,975,000
TAX DUE:
x 8%
Total P158,000
Less: CWTx (65,000)
Quarterly tax payments (82,500)
Basic Tax on Compensation income
[P30,000 + (P200,000 x 25%)] 80,000
Income Tax Payable P90,500
(35)
Professional income, gross P600,000
Rental income, gross 50,000
Wagering gains 50,000
Kickbacks from suppliers 40,000
Professional expenses (325,000)
Taxable net income P415,000
(36)
Interest income – BDO; P20,000 x 20% P4,000
Interest income FDCU – P50,000 x 15% 7,500
Total FWT P11,500
(37)
CGT, residential house, P5M x 6% P300,000
CGT, shares = P150,000 x 15% 22,500
Total CGT P322,500
(38)
Gross sales, Phils. P5,000,000
Gross sales, Ukraine 3,000,000
Sales returns and allowances (500,000)
Sales returns and allowances-Ukraine (200,000)
Cost of sales, Philippines (1,500,000)
Cost of sales, Ukraine (800,000)
Business expenses, Philippines (500,000)
Business expenses, Ukraine (300,000)
Taxable net income P4,200,000
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
CHAPTER 3 – FRINGE BENEFITS
CHANGES IN THE THRESHOLD OF DE MINIMIS in Page 161 (with the publisher already when the RR was issued):
1.
2.
3. Medical cash allowance to dependents of employees not exceeding P1,500 per semester or P250 a month.
4. Rice subsidy of not more than P2,000 per month or 1 sack (50kg.) rice per month.
5. Uniforms given to employees by the employer not exceeding P6,000 per annum (as amended by RR 8-2012).
PROBLEM SOLVING
P3.1
Subject to FBT Subject to Basic Tax Exempt
1. P120,000 - -
2. - - P80,000
3. 50,000 - -
4. - - 5,000/ yr. (RR 8-2012)
5. - - 360,000
6. 250,000 - -
7. - - 45,000
8. - - 15,000
9. 60,000 - -
10. - - 1,500
P3.2
a) Yes
b) GUMV = P325,000/65%=P500,000
c) No. FBT is a final tax, hence, nonreturnable
d) FBT = P500,000 x 35% = P175,000
e) Within 10th day of the month following the end of the calendar quarter in which the fringe benefits were granted to the recipient.
f) No. It is subject to basic tax instead of FBT.
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Compensation income P540,000
De Minimis Taxable
Benefits Benefits
13th month pay and mid-year bonus P67,500
Christmas gift P5,000 5,000
Uniform allowance (7,500-5,000) 5,000 2,500
Actual Medical allowance (P15,000-10,000) 10,000 5,000
Medical allowance to dependents (P2,000-1,500) 1,500 500
Rice subsidy [entire amount is de minimis] 18,000 -
Monetized vacation leave [24,000-(2,000x 10)] 20,000 4,000
Total 13th Month Pay & Other Benefits 84,500
Tax Exempt 13th Month Pay & Other Benefits; TRAIN Law 90,000 -
Taxable income P540,000
P3.5
1. 4.
a) P165,000 x 50% = P82,500 a. P1,200,000
b) P82,500/65% x 35% = P44,423 b. P1,200,000/65% x 35% = P646,154
5.
2. a. P800,000
a. P4.5M x 5% /4 x 50% = P28,125 b. P800,000/65% x 35% = P430,769
b. P28,125/65% x 35% = P15,144 6.
3. a. P1,200,000/5 = P240,000
a. P4.5M b. P240,000/65% x 35% = P129,230
b. P4.5M/65% x 35% = P2,423,077
TRUE OR FALSE
1. FALSE 6. FALSE 11. FALSE
2. FALSE 7. TRUE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. TRUE 9. TRUE 14. TRUE
5. TRUE 10. TRUE 15. TRUE
MODIFIED IDENTIFICATION
1. B 6. B 11. A 16. A
2. B 7. B 12. A 17. B
3. A 8. B 13. B 18. B
4. B 9. B 14. A 19. B
5. B 10. B 15. B 20. B
MULTIPLE CHOICE
1. C 11. C 21. D 31. D 41. D
2. A 12. A 22. A 32. B 42. C
3. D 13. A 23. D 33. A 43. D
4. D 14. B 24. C 34. D 44. D
5. D 15. B 25. D 35. A 45. A
6. D 16. D 26. A 36. C 46. A
7. B 17. C 27. D 37. C 47. A
8. A 18. B 28. B 38. D 48. B
9. D 19. C 29. D 39. B 49. D
10. C 20. D 30. B 40. D 50. A
51. D
52. D
53. C
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Cash Pxx
Consequently, from the journal entry shown above, the account debited as “fringe benefit tax expense” in revenue regulations should not form part of the
employer’s “Taxes Expense” but as a component of the employer’s “Compensation expense”.
(23)
To managerial – fringe benefit expense P1,300,000
Fringe benefit tax expense (P1.3M/68% x 35%) 700,000
Rank and File 5,000,000
Total P7,000,000
(24)
Expenditure attributable to Managerial employees
(P1.2M x 20%) P240,000
Divide by GUMVF 65%
Grossed-up monetary value P369,231
x FBT rate 35%
Fringe Benefit Tax P129,231
(27)
Allowance not subject to liquidation P48,000
Divide by GUMVF 65%
GUMV P70,588
x FB rate 35%
FBT P25,846
(29)
Annual rental P637,500
x 50%
Monetary value of housing benefit P318,750
Divide by GUMVF 65%
GUMVF P490,385
X FBT rate 35%
FBT P171,635
Add: Annual Rental 637,500
Total Deductible Expense P809,135
(30) (33)
v P2,000,000 x 5% x 50% = P50,000 v (P5,000,000-2,000,000) = P3,000,000
v P50,000/ 65% x 35% = P26,923 v P3M/ 65% x 35% = P1,615,385
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(31) (35)
v P3,000,000 x 5% x 50% / 12 = P6,250 v P1,000,000 / 65% = P1,538,462
v P6,250/ 65% x 35% = P3,365 v P1,538,462 x 35% = P538,462
(32) (36)
v P5,000,000 v P800,000 / 65% = P1,230,769
v P5M/ 65% x 35% = P2,692,308 v P1,230,769 x 35% = P430,769
(37)
v (P1,000,000/5) / 65% = P130,000
v P130,000 x 35% = P45,500
PROBLEM SOLVING
P4.1
1. Income tax payable of the estate = P26,000
2. Income tax payable of Louie = P0
3. Income tax payable of Floyd = P8,150
Louie Floyd Estate
Gross income (gross of 5% tax) P 325,000 P 380,000 P800,000
Deductible expenses (117,000) (105,000) (420,000)
Dividend from foreign corporation 12,000 8,250
Prize, supermarket raffle 7,500
Taxable income P220,000 P290,750 P380,000
P4.2
1. Income tax payable of the estate = P30,000
2. Income tax payable of Louie = P4,000
3. Income tax payable of Floyd = P18,150
Estate
Rental income of the estate P1,000,000
Deductible operating expenses (estate) (500,000
Income distributed to Louie (50,000)
Income distributed to Floyd (50,000)
Taxable income P400,000
Tax due/payable P30,000
Louie Floyd
Gross Income P 325,000 P 380,000
Deductible expenses (117,000) (105,000)
Dividend from foreign corporation 12,000 8,250
Prize, supermarket raffle 7,500
Amount received from the Income of the estate 50,000 50,000
Taxable income P270,000 P340,750
Income Tax Due/Payable P4,000 P18,150
P4.3
1. Income tax payable of the trust = P220,000
2. Income tax payable of Pedro = P113,475
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Gross income of the Trust P3,000,000
Deductible business expenses of the trust (1,800,000)
Income distributed to Pedro during the year (200,000)
Dividend income from resident foreign corporation 100,000
Net Taxable income P1,100,000
Income Tax payable P220,000
MULTIPLE CHOICE
1. D 16. D 31. B
2. A 17. C 32. D
3. D 18. C 33. D
4. D 19. D 34. C
5. D 20. D 35. C
6. A 21. B 36. D
7. D 22. B 37. B
8. C 23. D 38. D
9. A 24. C 39. D
10. A 25. D 40. D
11. D 26. C 41. B
12. B 27. D 42. D
13. A 28. D 43. C
14. D 29. D 44. B
15. A 30. D 45. A
39.
Compensation income P1,500,000
Business income 1,000,000
Income of the trust taxable to the grantor 1,000,000
Taxable income of Ramos P3,500,000
41.
Trust’s income P10,000,000
Business expenses (2,000,000)
Income distributed to Princess (1,500,000)
Taxable income of the Trust P6,500,000
42.
Compensation income (Gross amount) P2,500,000
Income of the trust received Princess 1,500,000
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Taxable income of Princess P4,000,000
43-45.
# 44 TRUST 1 # 45 TRUST 2
Taxable Net income P4,000,000 Net income P6,000,000
Tax due: Tax due:
1st P2,000,000 P490,000 1st P2,000,000 P490,000
Excess @ 32% 640,000 Excess @ 32% 1,280,000
Tax due/paid 1,130,000 Tax due/paid 1,770,000
Versus allocated tax due 1,244,000* Versus Share 1,866,000**
Income Tax Payable-Trust 1 P114,000 Income Tax Payable-Trust 2 P96,000
# 43
Consolidated:
Taxable Net income P10,000,000
Tax Due (Consolidated):
1st P8,000,000 P2,410,000
Excess @ 32% 700,000
Total Consolidated TAX DUE P3,110,000
Less Paid:
Trust 1 (1,130,000)
Trust 2 (1,770,000)
Consolidated Income Tax Payable 210,000
Trust 2
(5,980/9,960) 1,866,000**
PAGE 234
TABLE 5-3: Capital Gains subject to CAPITAL GAINS TAX (CGT)
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PROBLEM SOLVING:
(P5.1)
CASE A (Domestic Corporation) – TRAIN Law:
1. P1,674,000
2. P92,500
3. P562,500
Solution
Philippines Abroad Total
Gross sales P10,000,000 P5,000,000 P15,000,000
Sales returns 200,000 (200,000)
Cost of goods sold 3,500,000 2,250,000 (5,750,000)
Operating expenses 2,800,000 1,100,000 (3,900,000)
Interest income from trade receivable 100,000 50,000 150,000
Interest income from BPI deposits-USA - 80,000 80,000
Interest income from money market placement 100,000 100,000
Dividend income-resident foreign corp. 45,000 - 45,000
Dividend income-nonresident foreign corp. - 30,000 30,000
Royalty income - 25,000 25,000
Taxable income P5,580,000
Tax rate 30%
Normal Corporate Income Tax Due P1,674,000
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CASE C (Non-Resident Foreign Corporation) – TRAIN Law:
7. P2,059,750 computed as follows:
Gross sales P10,000,000
Sales returns (200,000)
Cost of goods sold (3,500,000)
GROSS INCOME P6,300,000
ADD:
Interest income from trade receivable 100,000
Interest income from BPI deposits-Phils. 100,000
Income from money market placement 200,000
Dividend income-resident foreign corp. 45,000
Royalty income 50,000
Total “Gross” Income P6,795,000
Tax rate 30% P2,038,500
ADD:
Dividend income from DC = P75,000 x 15% 11,250
CGT on shares of DC:
[(P100k x 5%) + P50k x 10%)] 10,000
TOTAL FINAL TAXES P2,059,750
(P5.2) P0. A foreign corporation is taxable only on its income derived from sources within the Philippines. The incomes provided in the problem were all
derived in U.S.
(P5.5)
(P5.6)
1. P120,000
2. P690,000
3. P210,000
4. P495,000
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Q1 Q2 Q3 Q4
Tax Due 2018 NCIT P300,000 MCIT P990,000 NCIT P1,410,000 NCIT P2,010,000
Excess MCIT 2017 (90,000) - (90,000) (90,000)
Excess W/holding Tax 2017 (30,000) (30,000) (30,000) (30,00)
W/holding - 2018 (60,000) (150,00) (270,000) (375,000)
Quarterly Tax Payments (120,000) (810,000) (1,020,000)
Tax Payable P120,000 P690,000 P210,000 P495,000
(P5.7)
Case A (Taxable Joint Venture)
1. Taxable income of the joint venture = P20M
2. Income tax payable of the joint venture = P6M
3. Taxable income of ABC Company = P10M
4. Income tax payable of ABC Company = P3M
5. Taxable income DEF Company = P5M
6. Income tax payable of DEF Company = P1.5M
Joint Venture ABC Co. DEF Co.
Gross income P50,000,000 P30,000,000 P20,000,000
Business expenses (30,000,000) (20,000,000) (15,000,000)
Taxable income P20,000,000 P10,000,000 P5,000,000
Tax Rate (RCIT) 30% 30% 30%
Tax Due P6,000,000 P3,000,000 P1,500,000
(P5.8)
Case A:
1. Taxable income of the joint venture = P20M
2. Tax due of the joint venture = P6,000,000
3. Taxable income of Bryan = P10M
4. Taxable income Rianne = P5M
5. Final tax due of Bryan (10%) = P980,000
6. Final tax due of Rianne (10%) = P420,000
Joint Venture Bryan Rianne
Gross income P50,000,000 30,000,000 20,000,000
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Case B:
7. Taxable income of the joint venture = nil; tax exempt
8. Income tax payable of the joint venture = nil; tax exempt
9. Taxable income of Bryan = P24,000,000
10. Taxable income Rianne = P11,000,000
11. Final tax due of Bryan = P0 ; subject to basic and creditable withholding tax
12. Final tax due of Rianne = P0 ; subject to basic and creditable withholding tax
(P5.9)
1. [(P6M-4M) + (($50,000-$20,000)x45)] = P3,350,000 x 30% = P1,005,000
2. (P6M-4M) x 30% = P600,000
3. P6M x 30% = P1,800,000
4. P6M x 2.5% = P150,000
5. P6M x 1.5% = P90,000
6. P6M x 25% = P1,500,000
7. P6M x 4.5% = P270,000
8. P6M x 7.5% = P450,000
9. *P3,350,000 x 10% = P335,000; * from #1
10. P1,005,000; same computation with #1
11. nil; exempt
(P5.10)
1. [8M] x 2.5% = P200,000
2. [8M x 1%) = P80,000
3. nil; tax exempt on the basis of reciprocity
(P5.11)
1.Related 4.Related
2.Related 5.Related
3.Related 6.Unrelated
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(P5.13)
Question 1:
Tuition fees P9,500,000
Miscellaneous fees 1,200,000
Income from bookstore 350,000
Income of school canteen 180,000
Salary, allowances and bonus (6,400,000)
Other operating expenses (2,600,000)
Depreciation expense-classrooms (75,000)
Depreciation expense-furniture and equipment (50,000)
Taxable income P2,105,000
x Tax Rate 10%
Tax Due P210,500
Question 2:
Tuition fees P9,500,000
Miscellaneous fees 1,200,000
Income from bookstore 350,000
Income of school canteen 180,000
Salary, allowances and bonus (6,400,000)
Other operating expenses (2,600,000)
Construction of additional classrooms (1,300,000)
Acquisition of furniture and equipment (400,000)
Taxable income P530,000
x Tax Rate 10%
Tax Due P53,000
(P5.14)
1. Income Tax Due (Payable) = P249,000 – CWT 15,000 = P234,000
2. Improperly accumulated earnings tax = P46,425
Solution:
Gross income (gross of 1% WT) P1,500,000
Business expenses (600,000)
Gain on sale of business asset 60,000
NOLCO in 2016 (130,000)
Taxable income P830,000
ADD:
2016 NOLCO 130,000
Interest on peso bank deposit (P5,000/80%) 6,250
Dividends from a domestic corporation 35,000
Gain on sales of shares, not listed and traded subjected to capital gains
tax (P150,000-115,000) 35,000 206,250
DEDUCT:
NCIT (P830,000 x 30%; higher than MCIT) 249,000
Final Tax on Passive income (6,250 x 20%) 1,250
Capital gains tax on shares (35,000 x 5%) 1,750
Dividends paid during the year 120,000 (372,000)
BALANCE P664,250
RE Jan. 1 200,000
RE Dec. 31, 2017 P864,250
LESS: Amount that may be retained (Par of Outs. Sh.) (400,000)
IMPROPERLY ACCUMULATED EARNINGS P464,250
x IAET RATE 10%
IMPROPERLY ACCUMULATED EARNINGS TAX P46,425
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(P5.15)
1. P103,000
2. P117,000
Solution:
2017:
CGT on Land = P1.5M x 6% P90,000
CGT on shares:
1st P100,000 capital gain @ 5% P5,000
In excess of P100,000 capital gain @ 10% 8,000 13,000
Total capital gains tax P103,000
2018:
CGT on Land = P1.5M x 6% P90,000
CGT on shares = P180,000 x 15% 27,000
Total capital gains tax P117,000
(P5.16)
1. P16,500
2. P36,000
Solution:
2017:
Sale#3; capital gain = P190,000:
1st P100,000 capital gain @ 5% P5,000
In excess of P100,000 capital gain @ 10% 9,000 P14,000
2018:
Sale#3; capital gain = P190,000:
CGT = P190,000 x 15% P28,500
Sale#4; capital gain = P50,000; CGT@ 5%
CGT = P50,000 x 15% 7,500
Sale#5; capital loss = P30,000; CGT = none -
Total capital gains tax P36,000
TRUE OR FALSE
1. TRUE 11. TRUE 21. FALSE
2. FALSE 12. TRUE 22. TRUE
3. TRUE 13. FALSE 23. FALSE
4. TRUE 14. TRUE 24. FALSE
5. FALSE 15. FALSE 25. TRUE
6. TRUE 16. TRUE 26. TRUE
7. TRUE 17. FALSE 27. TRUE
8. TRUE 18. FALSE 28. TRUE
9. TRUE 19. TRUE 29. TRUE
10. FALSE 20. TRUE 30. FALSE
(10) it shall be “prolonged labor dispute” resulting from temporary closure of the business
(15) treated as inter-corporate dividend, hence, nontaxable
(17) should be from “within and without”
(17) shall be ROHQ
(21) shall be IAET
(24) only if the taxpayer is a financial institution
(30) passive incomes are not subject to branch remittance tax
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MULTIPLE CHOICE
1. D 21. D 41. A 61. A
2. B 22. B 42. D 62. A
3. C 23. A 43. D 63. A
4. B 24. C 44. B 64. A
5. D 25. D 45. B 65. B
6. D 26. B 46. C 66. C
7. C 27. D 47. C 67. C
8. B 28. D 48. A 68. B
9. B 29. A 49. D 69. A
10. B 30. C 50. D 70. A
11. A 31. B 51. D 71. A
12. D 32. C 52. A 72. D
13. B 33. A 53. B 73. A
14. D 34. D 54. B 74. A
15. C 35. C 55. D
16. B 36. D 56. C
17. C 37. C 57. B
18. B 38. B 58. C
19. C 39. B 59. B
20. D 40. C 60. D
(5).
Gross profit from sales P3,000,000
Business expenses (1,800,000)
Dividend income from a resident corporation 50,000
Dividend income from a nonresident corporation 40,000
Capital gain on sale of land in China 200,000
Interest income from notes receivable 20,000
Taxable income P1,510,000
Tax Due @ 30% P453,000
(6).
Sale of land-Phils. P2M x 6% P120,000
Sale of shares of DC = P120,000 x 15% 18,000
Capital gains tax P138,000
(7).
Interest income on peso bank deposit @ 20% P6,000
Interest income on foreign currency bank deposit @ 15% 3,750
Interest income on treasury bills @ 20% 2,000
Total final taxes on passive income P11,750
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(8).
To Louie @ 10% P10,000
To Floyd @ 10% 10,000
To Zeus @ 10% 10,000
To JJ @ 20% 20,000
To Francis @ 25% 25,000
To Chen, a domestic corporation Exempt
To a resident foreign corporation Exempt
To a nonresident foreign corporation @ 15% 15,000
Total withholding taxes P90,000
(10).
Final W. Tax = $3,000 x P45 x 10% = 13,500
(11).
Interest income from loans P10,000,000
OPEX (P12M x 10/15) (8,000,000)
Taxable income P2,000,000
Income Tax Rate 30%
Income Tax Due P600,000
(27).
Gross income, related activities P5,000,000
Gross income, unrelated activities (except rental income) 5,000,000
Rental income from commercial spaces (gross of 5% WT) 2,000,000 P12,000,000
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(28).
Income from tuition fees P3,500,000
Miscellaneous school fees 1,500,000
Dividend income from foreign corp. 2,000,000
Rental income (gross of 5% WT) 2,000,000 P9,000,000
OPEX (4,000,000)
Taxable income P,000,000
Tax rate (related income>unrelated income) 10%
Tax due P500,000
Less: Withholding tax on rental income (100,000)
Income Tax payable P400,000
(29).
Tuition and other fees P5,000,000
Rental income (gross of 5% WT) 50,000
OPEX (1,500,000)
CAPEX (2,000,000)
Taxable income P1,550,000
Tax rate (related income>unrelated income) 10%
Tax due P155,000
Less: Withholding tax on rental income (2,500)
Income Tax payable P152,500
(30).
Gross Receipts P8,500,000
Rental income (gross of 5% WT) 1,500,000
OPEX (8,200,000)
Taxable income P1,800,000
Tax rate (not a non-profit hospital) 30%
Tax due P540,000
Less: Withholding tax on rental income (75,000)
Tax payable P465,000
(31).
Tuition fees P4,800,000
Rental income (gross of 5% WT) 5,200,000
OPEX (9,450,000)
Taxable income P550,000
Tax rate (unrelated income is higher) 30%
Tax due P165,000
Less: Withholding tax on rental income (260,000)
Tax payable (P95,000)
(#s 38 TO 45).
2008 2009 2010 2011 2012 2013 2014 2015
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CHAPTER 6 – PARTNERSHIPS, ESTATES AND TRUSTS
PROBLEM SOLVING
P6.1
1. Income tax due of the partnership = P0 (tax exempt)
2. Income tax due of LJ = P310,000
LJ
LJ’s gross income from his trading business P1,000,000
LJ’s expenses from his trading business (600,000)
Share from the net income of a GPP 400,000
Royalty, books published in USA 150,000
Salaries, gross of withholding tax 450,000
Basic exemption NA
Taxable income P1,400,000
Tax Due (TRAIN Law); P130k + (P600k x 30%) P310,000
P6.2
Case A (Ordinary Partnership):
1. Tax due of the partnership = P240,000
2. Tax due of Rivera = P30,000
3. Tax due of Reyes = P55,000
RR Partnership Rivera Reyes
Gross Income P2,000,000 P800,000 P1,000,000
Allowed Deductions (1,200,000) (400,000) (500,000)
Basic exemption - - -
Taxable income P800,000 P400,000 P500,000
Tax Rate 30% TRAIN Table TRAIN Table
Tax Due P240,000 P30,000 P55,000
Note: The partners’ share in the net income of the partnership is treated as dividend income subject to a final tax rate of 10%.
P6.3
1. Income tax payable/(refundable) of the partnership = P352,500
2. Income tax payable/(refundable) of Villamin = P12,600
3. Income tax payable/(refundable) of Francis = P0
4. Final tax on passive income of the partnership = P11,500
5. Final tax on passive income of Villamin = P40,783
6. Final tax on passive income of Francis = P95,767
7. Capital gains tax of the partnership = P150,000
8. Capital gains tax of Villamin = P0
9. Capital gains tax of Francis = P18,000
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Partnership:
Gross profit from sale of services P3,500,000
Direct cost of services (1,500,000)
Business Expenses (700,000)
Rental Income in business assets (gross) 150,000
(P142,500/95%)
Taxable income P1,450,000
X tax rate 30%
Tax due P435,000
Quarterly tax payments (75,000)
Withholding tax on rent (7,500)
Income tax payable P352,500
Villamin:
Gross income from sole-proprietorship business 925,000
Allowable business expenses (670,000)
Dividend Income-resident foreign corp. 120,500
Basic exemption -
Taxable income P375,500
Tax due (TRAIN Table) P25,100
Quarterly tax payments (12,500)
Income tax payable P12,600
Final Tax; share in partnership income = (P1,223,500 x 3/9 X 10%) P40,783
Capital gains tax - Villamin P0
Francis:
Income Tax payable P0
(No income subject to basic tax)
P6.4
1. Income tax payable of the business partnership = P114,000
2. Income tax payable of the GPP = P0
3. Income tax payable of Louie = P-
4. Income tax payable of Floyd = P-
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Business
Partnership GPP
Gross income P800,000 P500,000
Deductible expenses (420,000) (375,000)
Net or Taxable income P380,000 P125,000
Tax rate 30%
Income tax due/payable P114,000 EXEMPT
NOTE:
§ The share in the net income of the business partnership, the dividend income from a domestic corporation and royalty from books are subject to
a final tax rate of 10%.
§ The prize in a supermarket raffle by Louie (more than P10,000) is subject to 20% final tax
MULTIPLE CHOICE
1. A 6. A 11. D 16. A
2. C 7. A 12. A 17. D
3. B 8. C 13. B 18. B
4. B 9. B 14. C 19. B
5. B 10. C 15. B 20. B
17.
Partnership net profit (net of 30% tax) P560,000
(P800,000 x 70%)
Other Income:
Interest income, net 8,000
Dividend income (tax exempt) 20,000
Total distributive income P588,000
19.
Share in GPP’s income P125,000
Own income (P150,000-70,000) 80,000
Basic exemption -
Taxable income of Ramos P205,000
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20.
Gross income P750,000
Expenses (200,000)
x 70%
Net income after corporate tax 385,000
Add:
Dividend received from a domestic corp. (tax exempt) 20,000
Bank interest income, Metrobank (net of final tax) 80,000
Distributable net income P485,000
Supporting Computations:
32. P300,000 4/12 = P100,000
33.
Gain on sale of personal property purchased in the Philippines P-
and sold in Hongkong
Compensation received for personal services in the Philippines 200,000
Rent income from real property in Malaysia -
Gain from sale in the Philippines of shares of a foreign corporation 100,000
Deductions identified with:
Philippine income (80,000)
Foreign income -
Deductions unidentified with any particular income (P30,000 x 300,000/1,000,000) (9,000)
Philippine Net Income P211,000
34.
Gross Receipts P600,000
Rental expenses (120,000)
Salaries expense (100,000)
Basic exemption (50,000)
Taxable income P330,000
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36. Final Tax Withheld on dividend income from domestic corp. = (P90,000 + 72,000)/ 90% x 10% = P18,000
38. (Resident Foreign Corp = Taxable on income from Philippine sources only
Gross Income P10,000,000
Allowable deductions (4,000,000)
Dividend income from domestic corp. exempt
Dividend income foreign corp. (80% from R.P.) 800,000
(P1M X 80%=considered from Phil. sources)
Dividend income foreign corp. (60% from R.P.) 480,000
(P800,000 x 60%)
Dividend income foreign corp. (25% from R.P.) -
(entire amount is considered income from sources outside of
the Phils.)
Taxable income P7,280,000
39.
DI-Microsoft -
DI-Intel (P400,000 x 60% x 30%) P72,000
DI - IBM -
Interest income – BDO @ 20% 120,000
FCDS deposit @ 7.5% 60,000
Royalty income @ 20% 20,000
Total final taxes on passive income P272,000
40.
DI-Microsoft & Intel @ 30% basic tax P270,000
DI - IBM -
Interest income – BDO @ 20% 120,000
Interest income U.K. @ 30% 210,000
FCDS deposit @ 15% 120,000
Royalty income @ 20% 20,000
Total final taxes on passive income P740,000
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INCOME SUBJECT TO FINAL TAX:
Cash dividend from a domestic corporation @ 10% P5,000
Interest from savings deposit @ 20% 4,000
Royalties from book publications @ 10% 5,000
Prizes from contest won @ 20% 10,000
PCSO winnings @ 20% 10,000
Total final taxes on passive income (Q2) P34,000
P8.2
1) P10,000
2) P15,000
3) P715,000 computed as follows:
Gross profit from sales (P2.5M – P1.5M) P1,000,000
Taxable recovery-receivables 10,000
Taxable tax refunds (P30,000 x 50%) 15,000
Rent income excluding security deposit 250,000
Operating expenses excluding bad debts (500,000)
Write-off during the year (60,000)
Taxable income P715,000
P8.3
1) 2016 income = (P240,000 x 2) + 60,000 = P540,000
2) 2017 income = only the annual real property tax of P60,000
3) 2018 income (lump-sum) = P240,000 + 60,000 + P3,000,000 = P3,300,000
4) 2018 income (spread-out) = P400,000 computed as follows:
Annual rental P240,000
Annual real property tax 60,000
Annual income from leasehold improvement:
Cost P3,000,000
x 5/10
Remaining BV after lease term P1,000,000
Divide by remaining lease term 10 years P100,000
Total income 2018 P400,000
P8.4
Ramon Magsaysay award P50,000
Athlete of the year award 100,000
Prize for winning an Olympic Medal 500,000
Gift from Mayor Erap 250,000
Gift from Honda Cars 1,000,000
Total amount exempt from income tax P1,900,000
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P8.9
Salary for the first quarter P180,000
Honorarium as speaker in one of ABC’s team building activities 10,000
Retirement pay; (Taxable; failed to meet the age requirement) 2,500,000
Commissions 30,000
Fee as a member of ABC’s board of directors (compensation income if he is an 50,000
employee at the same time)
10 days monetized vacation leave Exempt
Interest income from time deposit FW Tax/E
Productivity incentive pay and 13th month pay Exempt
(Productivity pay= 1st P10,000 is de minimis under RR 1-2015)
(Total of excess of productivity of P10,000 + 60,000 bonus is not more than
P90,000, hence tax exempt)
Total compensation income subject to tax P2,770,000
P7.10
INCOME Q#1 Q#2 Q#3 Q#4
Income within Income without Taxable Taxable
income (RC) income (NRC)
A. Rental income (gross)
• From an apartment unit in USA, - P240,000 P240,000
• From a parcel of land in Makati P180,000 180,000 P180,000
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P7.11
DIVIDEND INJURIES/DAMAGES PRIZES/AWARDS
1. 10% F.Tax 8. Exempt 15. Basic tax
2. 10% F.Tax 9. Exempt 16. Exempt
3. Basic Tax 10. Basic Tax 17. Exempt
4. Exempt 11. Exempt 18. Exempt
5. Basic Tax 12. Basic Tax 19. Exempt
6. Exempt 13. Exempt 20. Basic Tax/FWT Depending on the
7. N.taxable 14. Basic Tax 21. Basic Tax/FWT amount
22. 20% FWT; TRAIN Law
23. Basic Tax
24. 20% final tax (individual taxpayer)
25. Basic Tax (abroad)
VARIOUS PROCEEDS/INCOME
26. Final Tax
27. Exempt
28. Exempt
29. Exempt
30. Exempt
TRUE OR FALSE
1. TRUE 8. TRUE 15. FALSE 22. TRUE
2. FALSE 9. TRUE 16. FALSE 23. FALSE
3. TRUE 10. TRUE 17. TRUE 24. TRUE
4. FALSE 11. TRUE 18. FALSE 25. FALSE
5. FALSE 12. TRUE 19. FALSE
6. TRUE 13. TRUE 20. FALSE
7. FALSE 14. FALSE 21. FALSE
#7 – should be CWT not FWT
#14 – should be upon recovery
#20 - if not in single sum (like installment or annuity), it may include an interest, subject to tax
#21 – the interest is subject to tax
MULTIPLE CHOICE
1. C 16. A 31. D*** 46. A
2. B 17. D* 32. C**** 47. D
3. D 18. C 33. C 48. D
4. D 19. B 34. A 49. B
5. B 20. C** 35. D 50. B******
6. B 21. D 36. C 51. C
7. B 22. C 37. C 52. B
8. B 23. A 38. D 53. C
9. C 24. C 39. D***** 54. D
10. A 25. C 40. A (TRAIN Law) 55. D
11. C 26. D 41. D 56. D
12. C 27. D 42. B 57. C
13. B 28. D 43. D 58. A
14. C 29. C 44. D 59. B
15. B 30. D 45. D 60. B
61. C
*the P40,000 is subj. to FWT
**should be from banks only
***indirect dividends are subj. to FWT
**** Statement “II” is subject to FWT
*****ERRATUM: letter “D” shall be real property not used in business
******The interest is subject to FWT
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia
Supporting Computations (Multiple Choice):
No. 13.
Write-off 2013 2013 Income (Loss) before 2014 Recovery 2014 TAXABLE
write off RECOVERY
P50,000 P350,000 P20,000 P20,000
10,000 (50,000) 10,000 -
30,000 20,000 30,000 20,000
P40,000
No. 14.
Case A Case B Case C
2013 Income(loss) before write-off P120,000 P60,000 (P40,000)
Write-off 40,000 40,000 50,000
2014 Recovery P40,000 P10,000 P50,000
TAXABLE RECOVERY P40,000 P10,000 P0
No. 17.
Interest from Philippine Currency Certificate = subject to 20% final tax; non-returnable income
Refund of income tax = not an income
No. 25.
Rent for 2015 and 2016 (prepaid rent is taxable yr. of receipt P3,600,000
regardless of accounting method)
Annual real property tax 30,000
Total annual income P3,630,000
No. 26.
2016 2017 2018
Rent - P2,400,000 P2,400,000
Annual real property tax P30,000 30,000 30,000
Income from improvement None; completed 1,200,000
[(P36M x **5/15) / 10] only end of 2017
Total annual income P2,430,000 P3,630,000
No. 28.
Royalty – as an author @ 10% P10,000
Other royalties P800,000
x 20% 160,000
Total final tax on royalty income P170,000
No. 47.
Proceeds from the taxpayers life insurance P2,000,000
Less premiums paid (P15,000 x 25) (375,000) P1,625,000
Rent income from inherited properties 200,000
Taxable income P1,825,000
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Solutions Manual-Income Taxation(2018 Edition) by Tabag & Garcia