CHAPTER 5 – INCOME TAX FOR CORPORATIONS

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

Philippines Final Tax

Interest income from BPI deposits-Phils. @ 20% 100,000 P20,000
Interest income from FCDS @ 15% 150,000 22,500
Income from money market placement @ 20% 200,000 40,000
Royalty income @ 20% 50,000 10,000
Final tax on passive income P92,500

Capital Gains Tax

Gain on sale of shares sold directly to a buyer P22,500
[(150,000x 15%)
Sale of real property in the Philippines 540,000
(SP of P9M** x 6%)
Total Capital Gains Tax P562,500
**SP = Cost + Gain = P4M + 5M = P9M; SP is higher than FMV

CASE B (Resident Foreign Corporation) – TRAIN Law:

4. P1,093,500
5. P81,250
6. P10,000
Solution:
Gross sales P10,000,000
Sales returns (200,000)
Cost of goods sold (3,500,000)
Operating expenses (2,800,000)
Interest income from trade receivable 100,000
Dividend income-resident foreign corp. 45,000
Taxable income P3,645,000
Tax rate 30%
Normal Corporate Income Tax Due P1,093,500

Philippines Final Tax

Interest income from BPI deposits-Phils. @ 20% 100,000 P20,000
Interest income from FCDS @ 7.5% (not 150,000 11,250
amended)
Income from money market placement @ 20% 200,000 40,000
Royalty income @ 20% 50,000 10,000
Final tax on passive income P81,250

Capital Gains Tax

Gain on sale of shares sold directly to a buyer
[(100,000 x 5%) + (50,000 x 10%)] P10,000

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
P2,059,75
0
(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.

(P5.3) RFC –TRAIN Law:

Current account, BDO @ 20% P120,000
Savings deposit, BPI @ 20% 100,000
Interest income from government bonds @ 20% 40,000
Royalty income from various domestic corporations @ 20% 20,000
US dollar deposit, FCDU @ 7.5% 60,000
Total final taxes on passive income P340,000

(P5.4) – TRAIN Law

Q1 Q2 Q3 Q4
Gross profit from sales P1,600,000 P3,200,000 P4,800,000 P6,200,000
Business expenses (1,200,000) (2,400,000) (3,400,000) (4,200,000)
Taxable income 400,000 800,000 1,400,000 P2,000,000
RCIT 120,000 240,000 420,000 600,000
MCIT (Gross Profit x 2%) 32,000 64,000 96,000 124,000

TAX DUE (Higher) P120,000 P240,000 P420,000 P600,000

Less: Income tax withheld (30,000) (70,000) (130,000) (230,000)
Tax Paid Q1 - (90,000) (90,000) (90,000)
Tax Paid Q2 (80,000) (80,000)
Tax Paid Q3 - (120,000)
Income Tax Payable P90,000 P80,000 P120,000 P80,000

(P5.
5) Year 4 Year 5 Year 6 Year 7 Year 8
MCIT 100,000 60,000 50,000 40,000 20,000
RCIT 30,000 70,000 60,000 30,000 90,000
TAX DUE (Higher) P100,000 P70,000 P60,000 P40,000 P90,000
Excess MCIT
Year 4 - (70,000) - - -
Year 7 (10,000)
Income Tax Payable P100,000 P0 P60,000 P40,000 P80,000

(P5.
6) 1. P120,000
2. P690,000
3. P210,000
4. P495,000
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

Case B (Tax Exempt Joint Venture)

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 ABC Company = P24M
10. Income tax payable of ABC Company = P7.2M
11. Taxable income DEF Company = P11M
12. Income tax payable of DEF Company = P3.3M
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)
Share in the income of the joint venture - 14,000,000 6,000,000
Net/ Taxable income P20,000,000 P24,000,000 P11,000,000
Tax Rate (NCIT) 30% 30%
Tax Due P0 P7,200,000 P3,300,000
(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
Business expenses (30,000,000) (20,000,000) (15,000,000)
Taxable income P20,000,000 P10,000,000 P5,000,000
Less: Tax Due @ 30% (6,000,000)
Distributable income P14,000,000
Share in income
Bryan @ 70% P9,800,000
Rianne @ 30% 4,200,000

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
Joint Venture Bryan Rianne
Gross income P50,000,000 30,000,000 20,000,000
Business expenses (30,000,000) (20,000,000) (15,000,000)
Net income P20,000,000 P10,000,000 P5,000,000

Distributable income P20,000,000

Share in income
Bryan @ 70% P14,000,000 14,000,000
Rianne @ 30% 6,000,000 6,000,000
Taxable income P24,000,000 P11,000,000

(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

(P5.12) Proprietary Educational Institution:

Gross income, related activities P5,000,000
Gross income, unrelated activities (excluding rental 5,000,000
income)
Rental income from commercial spaces (gross of 5% WT) – 2,000,000
unrelated
Expenses, related activities (2,000,000)
Expenses, unrelated activities (3,000,000)
Taxable income P7,000,000
Tax Rate (RCIT); Unrelated income  Related income 30%
Tax Due 2,100,000
Less: CWT on rental income (P2M x 5%) (100,0000)
Quarterly tax payments for the first 3 quarters (500,000)

(P5.1 Question 1:
3)
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

(P5.1
4) 1. Income Tax Due (Payable) = P249,000 – CWT 15,000 = P234,000
2. Improperly accumulated earnings tax = P46,425
Solutio
n:
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

(P5.1
5) 1. P103,000
2. P117,000
Solutio
n:
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

(P5.1
6) 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

Sale#4; capital gain = P50,000; CGT@ 5% 2,500

Sale#5; capital loss = P30,000; CGT = none -
Total capital gains tax P16,500
 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

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

Supporting Computations (Multiple Choice):

(4).
Domestic RFC NRFC
Gross Income, Philippines P975,000 P975,000 P975,000
Expenses, Philippines (750,000) (750,000)
Gross Income, Malaysia 770,000
Expenses, Malaysia (630,000)
Interest on bank deposit - - 25,000
Taxable income 365,000 225,000 P1,000,000
Tax Rate 30% 30% 30%
Tax Due P109,500 67,500 300,000

(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
(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

(12 and 13)

Solution:
Joint Venture ABC Co. DEF Co.
G Income P5,000,000 P3,000,000
P2,000,000 Expenses
(3,000,000) (2,000,000)
(1,500,000) TNI P2,000,000
P1,000,000
P500,000
NCIT 30% 30% 30%
Tax Due P600,000 P300,000 P150,000
(14).
Joint Venture ABC Co. DEF Co.
G Income P5,000,000 P3,000,000 P2,000,000
Sh. in Inc. 1,400,000 600,000
Expenses (3,000,000) (2,000,000) (1,500,000)
TNI P2,000,000 P2,400,000 P1,100,000
NCIT - 30% 30%
Tax Due - P720,000 P330,000

(17). Income Tax Due = (P10M-P4M) x 30% = P1,800,000

(18). Income Tax Due = P10M x 2.5% = P250,000
(20). Income Tax Payable = P8M x 2.5% = P200,000
(21). Tax Expense (Income Tax & Common carrier’s
tax):
= (P8M x 2.5% ) + (P8M x 25% x 3%CCT) = P200,000 + 60,000 = P260,000
(22). Branch Remittance Tax = P2M x 15%

= P300,000 (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

Expenses, related activities 2,000,000

Expenses, unrelated activities 3,000,000 (5,000,000)
Taxable income P7,000,000
Tax rate (unrelated income>related income) 30%
Tax due P2,100,000
Less: Quarterly tax payments P500,000
Withholding tax on rental income 100,000 (600,000)
Income Tax payable P1,500,000

(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).
2012 2013 2014 2015 2016 2017 2018 2019

NCIT P25,000 P130,000 P200,000 P0 P100,000 P150,000 P8,000 P1,000

MCIT 100,000 150,000 190,000 300,000 50,000 60,000 40,000 50,000
DUE (Higher) 100,000 150,000 200,000 300,000 100,000 150,000 40,000 50,000
EXCESS MCIT 75,000 20,000 - 300,000 - - 32,000 49,000
TAX DUE P100,000 P150,000 P200,000 P300,000 P100,000 P150,000 P40,000 P50,000
MCITCO -
2012 (75,000)
2013 (20,000)
2015 (100,000) (150,000) -
TAX PAYABLE P100,000 P150,000 P105,000 P300,000 P0 P0 P40,000 P50,000

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 P310,000
30%)

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%.

Case B (General Professional Partnership):

3. Tax due of the partnership = P0; exempt
4. Tax due of Rivera = P110,000
5. Tax due of Reyes = P184,000
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 -
Share in partnership income - 320,000 480,000
Taxable income P800,000 P720,000 P980,000
Tax Rate EXEMPT TRAIN Table TRAIN Table
Tax Due P0 P110,000 P184,000
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

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

Interest Income on peso bank deposits @ 20% P4,000

Interest income-FCDS @ 15% 7,500
Final Tax on passive income of the partnership P11,500
Capital gains tax on real property (2.5M x 6%) 150,000
DISTRIBUTABLE INCOME:
Taxable income P1,450,000
Total income subject to final tax 70,000
Capital gain 300,000
Less:
Basic tax due (435,000)
Final tax due (11,500)
Capital gains tax (150,000)
DISTRIBUTABLE INCOME P1,223,500

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 P40,783
3/9 X 10%)
Capital gains tax - Villamin P0

Francis:
Income Tax payable P0
(No income subject to basic tax)

Dividend Income @ 10% P8,500

Royalty Income @ 20% 7,000
Share in partnership income (P1,223,5003 X 6/9 x 81,567
10%)
Total final tax on passive income P95,767

Capital gains tax on shares of stock 18,000

(P120,000 x 15%)
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-

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

Louie and Floyd Loui Floyd

e
Gross Income P 325,000 P 380,000
Deductible expenses (117,000) (205,000)
Dividend from foreign corporation 12,000 8,250
Prize, supermarket raffle - 7,500
 Share in income of GPP 37,500 87,500
Basic exemption - -
Additional exemption - -
Taxable income P57,500 P178,250
Income tax payable (TRAIN Law) P- P-
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. D 13. B 18. B
4. B 9. B 14. C 19. B
5. B 10. C 15. B 20. B

Supporting Computations (Multiple Choice):

15. (P2M-1M) x 30% = P300,000
16. P0; Subject to 10% final tax
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

Share of T (50%) P294,000

Applicable tax (10% final tax)

P29,400 18.

P600,000 – P350,000 x 50% = P125,000

19.
Share in GPP’s income P125,000
Own income (P150,000-70,000) 80,000
Basic exemption -
Taxable income of Ramos P205,00
0

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

Juan: P485,000 x 55% x 10% P26,67

Ponce: P485,000 x 45% x 10% 5
P21,28
5