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Application - Regular Income Tax On Individuals and Corporations
Application - Regular Income Tax On Individuals and Corporations
Regular tax
1. Carlo. Married, with two dependent children, received the following income:
1.1 and 1.2 Solution: (RC) – within and without the Philippines
Business income, Hongkong 200,000
Interest deposit in Hongkong (HK$10,000 x P 5) 50,000
Prize won in contest in US 300,000
Lotto winning in US 100,000
Taxable regular income 1,650,000
2. Ana, a resident citizen provided the following data for the current taxable year:
Gross income from business (gross of P 12,000 CWT) P 700,000
Business expenses 300,000
Royalty from books 40,000
Gain on sale to buyer of shares of stock of domestic
Corporation held as capital asset 70,000
Loss on sale of land in the Philippines held as capital asset
With cost of P 1,500,000 when the zonal value is P 1,200,000 500,000
Solution:
Gross income from business 700,000
Business expenses (300,000)
Taxable net income 400,000
For CGT, even the disposal resulted to a loss, it is subject to tax because the tax basis is
the higher amount between the selling price of FMV. To get the selling price,
Loss (500,000)
Cost 1,500,000
SP 1,000,000 (lower than the zonal value, hence the zonal value
prevails.
CWT is an advance payment of income tax. It must be deducted from the tax due.
3. Juan, married, supporting his three (3) minor children had the following data for the current
taxable year (exchange rate $1 = P 50):
Philippines Abroad
Business income P 1,000,000 $ 20,000
Professional income 400,000 10,000
Salaries 200,000
Business and professional expenses 250,000 8,000
Income tax paid 4,000
If Juan is a resident citizen and taxable year is 2018, his income tax payable is?
Solution:
Business income 2,000,000
If Juan is a nonresident citizen and the taxable year is 2018, his income tax payable is:
Solution:
Business income 1,000,000
Professional income 400,000
Salaries 200,000
Business and professional expenses (250,000)
Taxable income 1,350,000
Solution:
Salaries 200,000 x 25% = 50,000
If he is a special alien employee, disregarding professional and business data, the total
income tax that should be withheld from his income assuming the taxable year is 2018
should be?
4. Lorna, a self – employed resident citizen provided the following data for year 2018:
Sales P 2,800,000
Cost of sales 1,125,000
Business expenses 650,000
Gain in sale of shares of foreign corporation 50,000
Interest income from peso bank deposit 80,000
Interest income from bank deposit under FCDS 120,000
Gain on sale of shares of DC (non – listed) 150,000
Gain on sale of shares of DC (listed in the local stock exchange) 200,000
Gain on sale of land in the Philippines held as
Capital asset with cost of P 1.5M when the zonal value is P 1.2M 500,000
How much is the total income tax expense of Lorna for the year?
Solution:
Sales 2,800,000
Cost of sales (1,125,000)
Business expenses (650,000)
Gain in sale of shares of foreign corporation 50,000
Taxable net income 1,075,000
Tax due:
1st 800,000 130,000
Excess 82,500
Tax due 212,500
Excluded: STT: Gain on sale of shares of DC (listed in the local stock exchange)
200,000
How much is the total income tax of Lorna assuming she opted to be taxed at 8%?
Solution:
Sales and other income (2,800,000 + 50,000) 2,850,000
Exemptions (250,000)
Net 2,600,000 x 8%
Assuming Lorna is a VAT – registered, how much is her total income tax expense
assuming she opted to be taxed at 8% income tax rate?
a. P 321,500 c. P 384,500
c. P 351,500 d. P 389,000
Sales 3,800,000
Cost of sales (1,125,000)
Business expenses (650,000)
Gain in sale of shares of foreign corporation 50,000
Taxable net income 2,075,000
Tax due:
1st 2,000,000 490,000
Excess 24,000
Tax due 514,000
FT 56,500
CGT 120,000
Total 690,500
7. Pedro, single, a minimum wage earner of Makibaka Corporation. In addition to his basic
minimum wage of P 180,000 for the year, he also received the following benefits:
Holiday pay, P 32,000; OT P 25,000; NSD, P 18,000
MWE is exempt from tax including his holiday pay, over time, night shift differential,
and hazard pay.
Benefits of MWE in excess of the exemptions are taxable.
If MWE is a mixed income earner, his compensation is exempt while his other income is
taxable.
Jimenez Corporation, a domestic corporation has the following records of computation of its
income tax during the three (3) consecutive taxable years:
Solution:
2018 2017 2016
Sales P 3,000,000 P 3,400,000 P 4,300,000
Less: Cost of sales 1,800,000 2,450,000 2,250,000
Add: net capital gain 80,000
Gross income P 1,280,000 P 950,000 P 2,060,000
Less: deductions 800,000 925,000 1,945,000
Taxable income P 480,000 P 25,000 P 115,000
Rate of tax 30% 30% 30%
Normal income tax P 144,000 P 7,500 P 34,500
MCIT: 2018 (1,280,000 x 2%)P 25,600
MCIT: 2017 (950,000 x 2%) P 19,000
MCIT: 2016 (2,060,000 x 2%) P 41,200
Income tax due P 144,000 P 19,000 P 41,200
Less: Excess of MCIT last year 18,200
Income tax payable P 125,800 P 19,000 P 41,200
IAET
In 2018, the corporation suffered an operating loss of P 130,000. This amount was carried
forward and claimed as deduction from gross income in 2018:
The IAET is –
Solution:
Income from sales P 1,500,000
Gain on sale of business assets 60,000
Total gross income P 1,560,000
Less: Expenses 600,000
NOLCO 130,000
Taxable net income P 830,000
Tax due (830,000 x 30%) 249,000
Less: Withholding tax (1.5M x 1%) 15,000
Tax payable P 234,000