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    2018 Tamayo - Comprehensive Tax Cases PDF

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    Chapt Cr ipter 19 OMPREHENSIVE TAX CASES “IPT had stayed for, other people to ST had ney make my tools and things for me, ‘made anything.” - Isaac ‘Newion © es Multiple Choice: Choose the best Possible answer. 1, The following are the rey, cece and Expenses of a domeenu® items taken from Statement of Income Stic corporation for the year 2018: Sales Cost of sales stp 000! Gain from sale of an office equipment 20,000 Gain from sale of land not used in business ; _(selling Price P300,000) 100,000 Gain from sale of shares of stock directly to the buyer 50,000 Gain from sale of shares of stock through the stock exchange (selling price, P200,000) 10,000 Interest income from bank deposit, Philippines 40,000 Yield from a debt instrument within the coverage of deposit substitute, Philippines 80,000 Yield from a debt instrumenf‘not within the coverage of deposit substitute, Philippines 70,000 Interest on PHifippine Government debt instrument and securities (number of lenders at the time of the origination below the required number) 50,000 Interest income from long-term deposit or investment evidenced by certificates issued by BSP 100,000 Interest income received from depository bank under EFCDS, Philippines 60,000 ° Interest income from bank deposit, USA _ 400,000 Interest on trade notes receivable, Philippines 30,000 Advance rent for two (2) years, Philippines 600,000 Royalties, Philippines 7,000 Royalties, USA : ¢ , Dividend received from domestic corporation 150,000 Dividend received from a foreign corporation 350,000 Prizes and winnings, Philippines. 400,000 Refund of Philippine value-added tax 100,000 Bad debt recovery 411 Chapter 19; Comprehensive Tax Cases estion 1: How much is total exempted/excluded income? a. P323,000 c. P260,000 b. P302,500 d. P250,000 Question 2; How much is the total final withholding taxes on passive income? a. P63,000 * @. P42,500 b. P52,500 d. P20,500 Question 3: How much is the total capital gains tax? a. P63,000 c. P42,500 b. PS0,000 d. P25,500 Question 4: How much is the total gross income subject to regular corporate income tax? ‘a. P2,820,000 c. P2,320,000 b. P2,350,000 d. P2,250,000 Answers: Question 1-C Question 2-B Question 3-D Question 4- A ASuestion 1 - Total exempted/excluded income Gain from sale of shares of stock through the stock exchange P 10,000 Dividend received from domestic corporation 150,000 Refund of Philippine value-added tax 100,000 Total B.260,000 estion 2 - Tot wit taxes on passive income Interest income from bank deposit, Philippines (40,000 X 20%) - P 8,000 Yield from a debt instrument within the coverage of deposit yubstitute, Philippines {P80,000 X:20%}— 16,000 Interest on Philippine Government debt instrument and securities (number of lenders at the time of the origination below the required number) (P50,000 x 20%) M pegocksss of nue 10,000 Interest income received from depository‘bank | |q -4D¢7 Tul ‘under EFCDS, Philippines (P60,000 X 74%) 500 Royalties, Philippines (P70,000 X 20%) = © % 14,000 Total Ez IFoo 3 ~ Total tax Presumed gain from sale of land not used in business (P300,000 X 6%) P 18,000 Gain from sale of shares of stock directly to the buyer (P50,000 X 15%) 7,500 Total B2ss00 412 Chapter 19; Comprehensive Tax Cases uestion 4 ~ T. Sales otal income subject to corporate income tax 00 Less: Cost of sales P 300.000) Gross income ‘500,000 Other income cer Gain from sale of an office equi 7 equipment Yield from a debt instrument not within the coverage of deposit substitute, Philippines 70,000 Interest income from long-term deposit or investment evidenced by certificates issued 20,000 by BSP — (4, 100,000 Interest income from bank deposit, USA 400,000 Interest on trade notes receivable, Philippines 30,000 Advance rent for two (2) years, Philippines jc 600,000 Royalties, USA f<"5% 300,000 Dividend received from a foreign corporation 350,000 Prizes and winnings, Philippines ¢ 400,000 Bad debt recovery rj j.ate enon t 50,000 Total gross income B.2,820,000 2. Aresident citizen, 50 years old, married, with three (3) qualified dependent children asks you to assist him in computing his taxable net income for the year 2018: Gross professional income, net of 15% withholding tax P 800,000 Professional expenses 300,000 Retirement benefits received from his previous employer that maintained a reasonable private pension plan (he served the company for 12 years) 250,000 Lump sum benefits received from SSS 200,000 Prize in a sports tournament sponsored by a group of businessmen promoting health products 50,000 Gain from sale of bonds (maturity period is 4 years) 10,000 Interest income from bonds with a maturity period of 7 years 20,000 Interest on long term deposits with maturity period of 5 years 30,000 Philippine Lotto winnings 500,000 Share in the net income of a business partnership 100,000 Question 1; How inuch is the total amount of excluded or exempted income? a, P1,150,000 : c. P980,000 b. P1,000,000 d. P480,000 Question 2; How much is the final withholding tax on certain income? a. P34,000 c. P24,000 b. P30,000 a. P20,000 Al3 Chapter 19: Comprehensive Tax Cases Question 3: How much is the taxable net income? a. P651,176 c. P385,000 b. P516,176 . P375,000 Question 4: How much is the tax due and payable? a. P81,544 cc. P42,094 : b. P61,544 d. None of the choices Question 5: How much is the total income tax expenses for the year? a. P81,544 c. P42,094 “ b. P61,544 d. None of the choices Answers: Question 1-B Question 2 - D | Question 3-A Question 4-2 Question 5-4! Question 1 - Total amount of excluded or exempted income ‘Retirement benefits received from his previous employer that maintained a reasonable private pension plan (he served the company for 12 years) P_ 250,000 Lump sum benefits received from SSS * 200,000 Interest income from bonds with a maturity period of 7 years 20,000 Interest on long term deposits with maturity period of 5 years 30,000 Philippine Lotto winnings 500,000 Total 11,000,000 estion 2 ~ Final wit! on certain income Prize in a sports tournament sponsored by a group of, I businessmen promoting health products vote (vu,o0 (Soyo (P50,000 X 20%) P 10,000 ‘Share in the net income of a business partnership (P100,000 X 10%) 10,000 Final withholding taxes Question 3 - Taxable net income Gross professional income, net of 15% withholding tax (P800,000/85%) P 941,176 Other income: : Gain from sale of bonds (maturity period is 4 year: 100, Total gross income ee ya Less: Professional expenses ane Taxable net income pasLize 414 Question 4 ~ Tax = Taxable net inet Ad Payable Tax due at:d'pa7—bN6 400,099 PIG 5% Veta 76 x 25% Question 5 - Incom, Regular income tay % S&PoMses for the year Final tax on pa sive inco Total ce Note: The incon e i WU) 4% iaivori past wes include the regular income tax, final come and capital gains tax, if any. tax 6x) 3, Aresident citizen, widower, with a dependent minor brother, has the following data on income and expenses for 2018: Gross business income, P500,000; Business expenses, P200,000; Interest from savings deposit, BPI-Makati, Philippines, P50,000; Prize in a literary contest he joined, P100,000; Prize received for achievement in literature (did not join the contest), P10,000; Gain from sale of bonds (maturity is 6 years), P5,000; Separation pay from his former job (resigned), P250,000; Cash he inherited from his uncle, P300,000; Proceeds of his wife’s life insurance (revocable beneficiary), P1,000,000; Amount received as return of premium (premium paid, 150,000), P200,000; Tax Informer’s Reward, P500,000; Interest income from Government bonds, P20,000; Winnings from illegal gambling, P10,000. Question 1: How much was the total amount of excluded or exempted income? a. P1,465,000 c. P1,450,000 b. P1,460,000 d. P 465,000 Question 2: How miuch was the total final tax from certain income? a. P134,000 c. P80,000 b. P 84,000 d. P30,000 Question 3; How much was the taxable net income subject to Section 24 (A)? S peso.000 &. None of the choices Question 4: How much was the tax due and payable? . #136; B00 a. None of the choices Question 5: How much was the income ter ‘p48, 800 relent . Tee d. None of the choices 415 Chapter 19: Comprehensive Tax Cases Answers: Question 1 - A Question 2- B Question 3 - A Question 4-3 | Question 5 - A ‘Question 1 - Total amount of excluded or exempted income Prize received for achievement in literature {did not join the contest) P 10,000 Gain from sale of bonds (maturity is 6 years) 5,000 Cash he inherited from his uncle 300,000 Proceeds of his wife's life insurance (cevocable beneficiary) 1,000,000 ‘Amount received as return of premium 150,000 Total amount of excluded/exempted income P.1,465,000 Question 2 ~ Total final tax from certain income Interest from savings deposit, BPI-Makati, Philippines (P50,000 X 20%) P 10,000 Prize in a literary contest he joined (P100,000 X 20%) 20,000 ‘Tax Informer’s Reward (P500,000 X 10%) 50,000, Interest income from Government bonds (P20,000 X 20%) 4,000 | Total final tax | Question 3 - Taxable net income | Gross compensation income (separation pay) P 250,000 | Gross business income P 500,000 | Other income: Excess of amount received as return | of premium: 50,000 | ‘Winnings from illegal gambling 10,000 ‘Total gross income P 560,000 Less: Business expenses 200,000) 360,000 Taxable net income Ze10.000 Question 4 - Tax due and payable | ‘Taxable net income Tax due and payable (Section 24 A) 400,000 30,000 | 210,000 x 25% 52,500 P $2,500 j ‘Question 5 ~ Income tax expenses for the vear Regular income tax Final tax on passive income FR Lert ne eid) Note: The income tax expenses include the regular it id panites inestat endl npltal pain tens Wenge Se eee 416 ene Tax Cases 4, Mr. John Juan, sin, dependent illegitimn , Tesidey ‘nt citizen an late son, id supporting a qualified Gross sales of goods” has the following data for year 2018: Sales returns and al P 1,000,000 Cost of sales Howances 50,000 Interest income, Phi} 300,000 Share in the net income of CarenY bank deposit 10,000 net of 10% withholding tax ss Partnership, Salaries of employees, net of pa 90,000 withholding eae” 0,000 creditable Value-added tax ATO 000 Business permit and licenses ao Ooo Community tax 10,000 Interest paid on business loan which has already y prescribed 20.000 Contributions to pension trust 2 (P20,000 covers past year’s cost) 50,000 Entertainment expenses 10,000 Interest expense 50,000 Research and development costs (deferred) benefits realized starting July 1, 2018 60,000 Purchase of equipment (estimated life is 5 years, acquired on October 1, 2018) 50,000 Fringe benefits expenses 68,000 Fringe benefits tax expense 32,000 Question 1: How much is the total itemized deductions? a. P584,950 ©. P506,950 b. P566,950 d. P504,450 sstion 2: Assuming Mr. Juan fails to indicate in the return his es choice of deductions, how much is the taxable net income? 10 c. P150,000 be Bi7s-000 d. P £8089 143,050 ‘on 3: Assuming Mr. Juan chooses optional standard Question 3: Assutrion, how much is the taxable net income? a. P4@BS090 572,00 . pao b., P368,050 “ Nv 417 eres Chapter 19: Comprehensive Tax Cases Answers: Question 1- C Question 2- D Question 3- A ‘Question 1 Salaries expense (P270,000 + P30,000) 300,000 Business permits and licenses 2,000, Community tax 10,000 Contributions to pension trust Current service cost P30,000 Past service cost (P20,000/ 10 years) _2,000 32,000 Entertainment expenses Actual : P.10,000 Limit (.005 X P9S0,000) P_4,750 4,750 Deductible interest expense Interest expense 50,000 Reduction (33% X P10,000) 3,300 46,700 Research and development cost {P60,000/60 months X 6 months) 6,000 Depreciation expense, equipment (P50,000/5 X 3/12) 2,500 Fringe benefits expenses 68,000 Fringe benefits tax expense 32,000 Total itemized deductions 2.506.950 Gross sales 1,000,000 Less: Sales returns and allowances 30,0 Net sales P 950,000 Less: Cost of sales 01 Gross income 650,000 Less: Itemized deductions (see no. 1) (__506,950) Taxable net income P_143,050 estion 3 Deduetior Gross sales, 1,000,000 Less: Sales returns and allowances (___s0.000) Net sales, P 950,000 Less: Optional standard deduction (40% X P950,000) (__380,000) ‘Taxable net income P_570,000 418 Chapter 19: Comprehensive Tax Cases, 5, (Phil. CPA Modified) Fr still due from a domestic. or a business. For the calendar yon P150,000, after considering ain lowing data, compute the income tax ‘ation engaged in merchandising 2018, the net income per books is long others: Non-taxable income (o the 5, Inter-corporate dive P30 Net capital loss 3200 Bad debts written off 2200 Non-deduetibe expenses (others) 12,000 Contino to a non-profit religious organization 12,000 nto Government’s priority program 1,500 Quarterly income tax payments 65,000 Provision for bad debts 8,000 The net pone Per books should be reconciled with the provisions of the Tax Code, meaning, items which are not taxable must be excluded and items which are not deductible are to be added back. How much is the net tax due and payable? a. P66,240 c. P1,240 b. P62,100 d._ None of the choices Answer: C Net income per books P 150,000 Add (Deduct): ‘Non-taxable income (others) (5,500) Inter-corporate dividends (5,000) Net capital loss 2,500 Bad debts written off (6,500) Non-deductible expenses (others) 12,000 Quarterly income tax 65,000 Provision for bad debts __8,000 Net income after charitable and other contributions 220,500 ‘Add: Charitable and other contributions (P12,000 + P1,500) 13,500 Net income before charitable and other contributions P 234,000 Less: Charitable and other contributions Deductible in full (P 1,500) Deductible with limit ‘Actual «p12,000) Limit (5% X P234,000) (B11,200) (11.700) (__13,200) Taxable net income P.220,800 Tax due (30%) P 66,240 tate Oe frst 3 quarters (__65.000) Tax payable P__1,240 419 Chapter 19: Comprehensive Tax Cases 6. (Phil. CPA) The following were taken from the income statement of ‘ABC Corporation for the taxable year 2018: Gross profits from sales P 800,000 Less: Business expenses (P 440,000) Provision for bad debts (80,000) (_ 520,000) Net income before tax B.280,000 Additional information: 1,) Accounts written off during the year and charged to allowance for bad debts, P50,000; 2.) Recoveries on accounts receivable previously written off in 2017 and credited to allowance for bad debts: Allowed as deduction by BIR P30,000 Disallowed as deduction by BIR P20,000 How much was the taxable net income? a. P390,000 ¢. P340,000 b. P360,000 d. P280,000 Answer: C Net income per books P.280,000 Add (Deduct): Provision for bad debts 80,000 Bad debt recovery 30,000 Accounts written off (__50,000) Taxable net income 7. A married individual taxpayer with two qualified dependent children has the following cumulative data for the year 2018; First. Second Third uarter_ _Quarter_ _Quarter_ Year Gross sales P900,000 P1,400,000 P1,800,000 P3,000,000 Cost of sales 750,000 1,100,000 1,300,000 2,000,000 Business expenses 50,000 150,000 300,000 += 400,000 Question 1: How much is the tax payable for the first quarter? a. P14,500 ¢. P9,000 b. P13,000 d. None of the choices Question 2: How much is the tax payable for the second quarter? a. P25,000 ¢. Po, b. P10,500 : 4. None of the choices Question 3: How much is the tax payable for the third quarter? a. P95,000 ¢. P66,000 b. P79,000 d. P50,000 420 a _thap tor 19: Comprenen Question 4: How m ta 80,000 b. P30,000 is tax payable for the whole year? ¢. P27,000 ad. None of the choices Question 5 : How much is the tax due and taxpayer opts to pay the o graduated ince ee able for the year, if the ate of 8% in liew of the a. P240,000 ec, P96,000 EP raa 000: i. None of the choices Answers: Question 1-D Question 2-D Question 3 - D Question 4- A Question 5 - B INDIVIDUAL TAXPAYER (PURE BUSINESS INCOME EARNER) Questions 1 to 3 - Quarterly Declarations (Returns) FirstQ SecondQ _Thint Q_ Gross sales P900,000 P S00,000 FP 400,000 | Less: Cost of sales 750,000 350,000 __! | Gross income 150,000 150,000 200,000 | Less: Deductions ($0,000) { 100,000) ( 150,000) | Taxable income, this quarter 100,000 50,000 50,000 Add: Taxable income, previous quarters __= 200,000 150,000 Taxable income to date 100,000 P150,000 200,000 Tax due Section 24 (A) Exempt Exempt Exempt Question 4 - Annual Income Tax Return Gross sales P3,000,000 Less: Cost of sales (2.000.000) Gross income 1,000,000 Less: Deductions ss | t income — 500,000 | ieee ran 400,000 P 30,000 | Tax due Section 24 (A) arg 200,000 x 25% 50,000 . B__80,000 First Q SecohdQ | _ThindQ | Fourth Q Sesaa Gales | P900,000__| P 1,400,000_| P1,800,000 | 5,000,000 Less: Exempt 7 250,000 |" 280,000. | 230 Teneo m_|_P 52,000 _| P 92,000 | P_ 124,000 | P 220,000] } } { 38,000) { 73,500) Previous quarters. Creditable tax withhetg, Me cy 2,000) ( 4,000) this quarter ; Tax payable (overpayment (2.000) 2,000) (__2,000) Annual Return Gross taxable Bote Gross receipts "P* sation income P 160,000 Less: Cost of services F 1,680,000 Gross taxable business, (480,000) professional income P 1,400,000 Add: Other taxabie 1 400, Pe ries Less: Deductions i sees Net income 930,000 Less: Excess of deductions over GTCI 2 Taxable business income 930,000 Total taxable income 030,000 Tax due Section 24 (A) P 217,000 Less: Tax credits/payments Prior year’s excess credits (ee Tax payments, first 3 quarters (106,500) Creditable tax withheld, first 3 Qs (6,000) Creditable tax withheld, fourth quarter {20003 Foreign tax credits ‘Tax payable (overpayment) ) 423 Chapter 19: Comprehensive Tax Cases wn 2 - Optional Standard Deduction (OSD) ai ms Quarterly Declarations (Returns) eee et Gross receipts (GR) 600,000 P400,000 —P 280,000 Less: OSD (40% x Total GR) 240,000 160,000 112,000 Gross income 360,000 240,000 168,000 ‘Add: Share in net income of GPP 20,000 __20,000 20,000 Taxable income this quarter 380,000 260,000 188,000 ‘Add: Taxable income, previous quarters = 380,000 __640,000 Taxable income to date Bgg0.000 Bedo.o00 P.828,000 Tax due Section 24 (A) P 26,000 P 90,000 P 138,400 Less: Tax credits/payments Prior year’s excess tax credit ( Ae : r ) Tax payments, previousQs ( - ) ( 24,000) ( 86,000) Creditable tax withheld, previous quarters (=) ) (2,000) (4,000) Creditable tax withheld, this quarter (__2,000) (___2,000) (___2,000) Tax payable 24.000 B_62,000_ P_46,400 Annual Return Gross taxable compensation income P 160,000 Gross receipts P 1,880,000 Less: OSD (40% X P1,880,000) (__752,000) Net 1,128,000 ‘Add: Other taxable income 80,000 Net income P 1,208,000 Less: Excess of deductions over GTC! Taxable business income 1,208,000 Total taxable income P1.368.000 Tax due Section 24 (A) P 300,400 Less: Tax credits /payments Prior year’s excess credits fcead Tax payments, first 3 quarters (132, 400) Creditable tax withheld, first 3 Qs - (6,000) Creditable tax withheld, fourth quarter (2,000) Foreign tax credits ( ) ee. 2150.00 424 Chapter 19: Comprehensive Tax Cases . The 2018 ini 9 gata: come tax return Income tax due Less: Tax credits 280,000 Quarterly pay Excess tax payments the first three quarters (S90. Alice Corporati credit ie rion opts to claim the excess payments in 2017 as tax over to succeeding quarters of 2018. of Alice Corporation shows the following The following cumulative data are presented: First Second Third Sales, gross of 1% Quarter Quarter _Quarter_ _Year — withholding tax P 500,000 1,100,000 P1,500,000 P2,200,000 Cost : 250,000 650,000 800,000 1,200,000 Operating expenses 50,000 150,000 300,000 500,000 Question 1: How much is tax payable for the first quarter? a. P60,000 ‘c. P23,000 b. 24,000 a. P'5,000 Question 2: How much is tax payable for the second quarter? a, P90,000 c. 23,000 b. P24,000 d. P5,000 Question 3: How much is tax payable for the third quarter? a. P120,000 c, P26,000 b. P 90,000 d. P23,000 Question. 4: How much is tax payable for the whole year? a. P26,000 cc. P23,000 b. P24,000 d. P5,000 425 Chapter 19: Comprehensive Tax Cases Answers: Question 1-D Question 2-B Question 3-C Question 4-C CORPORATE TAXPAYER (Questions 1 to 3 - Quarterly Declarations (Returns) Question 4 - Annual Return Sales Less: Cost of sales Gross income from operation Add: Non-operating and other income Total gross income Less: Deductions Taxable income Tax rate Income tax due Less: Tax credits/payments Prior year’s excess credits ‘Tax payments, first 3 quarters Creditable tax withheld, first 3 quarters Creditable tax withheld, fourth quarter ‘Tax payable (overpayment) First Q ‘Second Q Sales 500,000 600,000 Less: Cost of sales (250,000) (_490,000) Gross income 250,000 200,000 Add: Other income eer Total gross income 250,000” 200,000 Less: Deductions 50,000) (__100,000) Taxable income, this quarter 200,000 ‘100,000 Add: Taxable income, previous quarters = — 200,000 Total taxable income to date P-200,000 P 300,000 Tax rate 30% ___30% Tax due P 60,000 P 90,000 Less: Tax credits /payments Prior year’s excess tax credit (50,000) ( 50,000) Tax payments, previousQs ( - ) ( 5,000) Creditable tax withheld, previous quarters (=) (5,000) Creditable tax withheld, this quarter (__ 6,000) Third Q P 400,000 150,000) 250,000 250,000 150,000) 100,000 300,000 P 400,000 30% P 120,000 (50,000) (29,000) (11,000) (4,000) Tax payable (overpayment) 3500) B_24,000 — P_26,000 P 2,200,000 (_1,200,000) P 1,000,000 P 1,000,000 (__500,000) P 500,000 - 30% P 150,000 (50,000) (| 55,000) (| 15,000) (___7,000) P__23,000 426 Chapter 19: Comprehensive Tax Cases followi i TE assent OTe ee data were taken from quarterly income SOR in 2012, The dat corporation, which was registered with the » The data were for the year 2018. First. Second Third Fourth sales Qustter, Quarter Quarter Quar n ; * ¥ 000 500,00' Beginning inventory 500,000 Tien Pa,209,000 P.1,50 Saline ncaog Benes 200,000 400,000 500,000 10 Rent income, gross 000 300,000 300,000 600, 0 of 5% withholding fe 150,000 150,000 200,000 ~ ling expenses 250,000 350,000 150,000 300,000 Question 1: Howamicl is the tax payable for each quarter and the enlire year aesuming the taxpayer uses itemized First Second ‘Third —Quarter_ Quarter _Quaster_ Annual, P150,000 P360,000 * P915,000 —P300,000 P135,000 P324,000 —-P684,000-P918,000 P142,500 P202,500 —-P545,000 300,000 P127,500 P181,500 P350,000 —-P234,000 poop Question 2: How much is the tax payable for each quarter and the entire year assuming the taxpayer uses optional standard deduction’ First Second Third Quarter Quarter Quarter Annual P1s0,000 P360,000 915,000 P300,000 135,000 P324,000 -P684,000 918,000 142500 P202,500 —-P545,000_—_-P300,000 Pia7soo , Piei,sco — Paso,0no, ._P294,000 poop 427 Chapter 19: Comprehensive Tax Cases Answers: Question 1 - C Question 2-D ‘Question 1 - Corporate Taxpayer (Itemized Deduction: Quarterly Declarations (Returns) First Q. Second Q ‘Third Q Sales P 1,200,000 P 1,000,000 _P 2,200,000 Less: Cost of sales (600,000) (___100,000) (___400,000) Gross income P 600,000 P 900,000 P 1,800,000 Add: Other income 150,000 150,000 200,000 Total gross income P 750,000 P 1,050,000 P 2,000,000 Less: Deductions 250,000) (___350,000) (__180,000) Taxable income, this quarter P 500,000 P 700,000 P 1,850,000 ‘Add: Taxable income, previous quarters = 500, 1,200,000 Total taxable income to date P 500,000 P 1,200,000 _P 3,050,000 Tax rate 30% 30% 30% Tax due P 150,000 P 360,000 P 915,000 Less: Tax credits/payments . Prior year’s excess tax credit OPE EE BAEC eT 2 a 2) ‘Tax payments, previous quarters (

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