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Chapter 11: Income Tax of Individuals

CHAPTER 11
INCOME TAX OF INDIVIDUALS
Problem 11 – 1 TRUE OR FALSE
1. False – interest income under expanded foreign currency deposit of a nonresident alien
is exempt from income tax in the Philippines.
2. False – taxable for income within only.
3. True
4. True
5. False – the installment payment of income tax due for individuals is allowed only when
the income tax due is more than P2,000.
6. True
7. False – the income of a senior citizen is to be tax just like a minimum wage earner.
8. True
9. False – the quarterly income tax return of a self-employed taxpayer is not subject to
personal exemption, only his adjusted annual income tax return.
10. True
11. False – No personal exemption is allowed to NRANEBT.
12. True

Problem 11 – 2 TRUE OR FALSE

1. True
2. False – a Filipino special taxpayer has the option to be taxed using final tax of 15% or
normal tax of 5% to 32%.
3. True
4. True
5. False – subject to creditable withholding income tax.
6. True.
7. False – Tax credit of income taxes paid outside the Philippines is allowed only for
resident Filipino citizen and domestic corporation.
8. False – The creditable withholding tax is 15%.
9. False – Gross income includes other income but not compensation income.
10. False – tax-exempt
11. True
12. False – Only Philippine lotto and sweepstakes are tax-exempt.

Problem 11 – 3 Problem 11 – 4 Problem 11 – 5

1. A 1. D 1. C
2. C 2. C 2. B
3. D 3. B 3. A
4. A 4. A 4. D
5. D 5. C 5. D
6. C 6. B 6. B
7. B 7. D 7. B
8. D 8. D 8. D
9. D 9. B 9. D
10. B 10. C 10. A

Problem 11 – 6 C
Basic personal exemption P50,000
INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) 90
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Additional exemptions for:

Mentally retarded legitimate son (40 years) old P25,000
Illegitimate daughter (10 years old) 25,000
Adopted child (6 years old) 25,000 75,000
Total deductions allowed P125,000

For additional exemption of the taxpayer’s dependent, the Tax Code defines a
“dependent” as a legitimate, illegitimate or legally adopted child chiefly dependent upon
and living with the taxpayer. Subject to the conditions that such dependent is not
more than twenty-one (21) years of age, unmarried and not gainfully employed or if
such dependent, regardless of age, is incapable of self-support because of mental or
physical defect. The additional exemption of P25,000 per child is granted to a
maximum of 4 qualified dependent children. [Sec. 35 (B), NIRC as amended by R.A.
9504]

A taxpayer supporting a senior citizen is not allowed to claim additional exemption.

The Baybay vs. CIR, CTA Case No. 5280 dated Dec. 20, 1996 is no longer applicable
because the most recent Tax Laws R.A. 8424 of January 1, 1998 and R.A. 9504 of
June 6, 2008 provides that additional exemption shall apply to qualified dependent
children. When the law does not include it excludes. The old CTA decision is
superseded by the two Special Laws – R.A. 8424 & R.A. 9504 which are superior to
CTA decision. Furthermore, Rev. Regs. No. 4 – 2006, Sec. 7 last paragraph provides
that “No personal exemption is allowed for senior citizen.”

It must be noted that the principle of “lex posteriori derogate priori” – the more
recent law governs.

Problem 11 – 7 C
Basic personal exemption P50,000
Additional exemption (a & b only) (P25,000 x 2) 50,000
Total personal and additional exemptions P100,000

Problem 11 – 8 Not in the choices = P70,000.

Basic personal exemption – reciprocity P 50,000
Add: Additional exemption – reciprocity (P10,000 x 2) 20,000
Basic personal exemption – married P 70,000

When there is reciprocity, nonresident alien engaged in business in the Philippines is allowed of
personal exemptions subject to limit. The term “personal exemption” in the Philippines includes
both the basic personal exemption (Sec. 35 (A), NIRC) and additional exemption for qualified
dependent children not exceeding four. (Sec. 35 (B), NIRC)

Problem 11 – 9 D
Zero. Maria has no income.

Problem 11 – 10 A
Income from the Philippines (P10,000 x 12) P120,000
Less: Personal exemption 50,000
Income subject to tax in the Philippines P 70,000
INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) 91
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Note: Income earned by OFW outside the Philippines is not subject to tax in the Philippines. The
income from the sari-sari store in the Philippines is earned from January to December of the
taxable year.

Problem 11 – 11 Not in the choices =P487,500.

Gross compensation income – Philippines (P250,000 x 12) P3,000,000
Add: 13 th month pay 250,000
Total taxable compensation P3,250,000
Multiplied by special income tax rate 15%
Income tax payable P 487,500

The entire compensation income is subjected to 15% tax rate.

Problem 11 – 12 C
Gross compensation income – within (P150,000 x 6) P 900,000
Add: Taxable 13 th month pay [(P150,000/2) 75,000
Bonus 50,000
Total amount subject to final tax P1,025,000
Multiplied by special income tax rate 15%
Income tax payable P 153,750

If the special taxpayer is an alien and qualifies to be taxed using 15% special tax rate, all of his
gross compensation income is subject to 15% final tax. Take note that the 13 th month pay
amounting to P30,000 is included as taxable compensation because the tax rate has been
reduced to 15%.

Problem 11 – 13 B
Annual salary (P65,000 x 12 months) P780,000
Annual cost of living allowance (P5,000 x 12 months) 60,000
13th month pay (P780,000/12) 65,000
Gross compensation income P905,000
Less: Nontaxable 13 th month pay 30,000
Taxable gross compensation income P875,000
Less: Personal exemption – basic 50,000
Net taxable income P825,000

Tax on P500,000 P125,000

Tax on excess [(P825,000 – P500,000) x 32%] 104,000
Income tax due P229,000

Since the compensation income is below the threshold of P975,000 per year of a Filipino Citizen
Employed by Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies, his compensation income shall be subject to a regular tax for
individuals. (Sec. 1, Rev. Regs. No. 11-2010)

Take note that if the special Filipino taxpayer opted to be tax using normal tax, the 13 th month
pay is deducted as nontaxable income.

Problem 11 – 14 C
Gross compensation income P200,000
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Add: Net income from rent

Rent income P50,000
Less: OSD (P50,000 x 40%) 20,000 30,000
Net income before personal exemption P230,000
Less: Basic personal exemption P50,000
Premium payments on hospitalization
insurance, limit 2,400 52,400
Net taxable income P177,600

For individual taxpayers, only gross sales or gross receipts are allowed as the basis of
OSD (Sec. 34(L), NIRC; RA 9504).

The Baybay vs. CIR, CTA Case No. 5280 dated Dec. 20, 1996 is no longer applicable
because the most recent Tax Laws R.A. 8424 of January 1, 1998 and R.A. 9504 of
June 6, 2008 provides that additional exemption shall apply to qualified dependent
children. When the law does not include it excludes. The old CTA decision is
superseded by the two Special Laws –R.A. 8424 & R.A. 9504 which are superior to CTA
decision. Furthermore, Rev. Regs. No. 4 – 2006, Sec. 7 last paragraph provides that “No
personal exemption is allowed for senior citizen.”

It must be noted that the principle of “lex posteriori derogate priori” – the more
recent law governs.

Problem 11 – 15
Subject to
1. Letter B Tabular tax Final tax
Compensation income P240,000
Business and other income:
Professional income (P300,000 + P200,000) 500,000
Interest income – without 60,000
Dividend income – without 40,000
Total business and other income P600,000
Less: OSD (P600,000 x 40%) ( 240,000)
Net business income P360,000
Total net income before personal exemption P600,000
Less: Basic personal exemption ( 50,000)
Net income to ITR – tabular tax P550,000

Interest income within P100,000

Dividend income within 60,000
Income subject to final tax P160,000

2. Letter A
Compensation income P240,000
Business income:
Professional income, net of OSD (P300,000 x 60%) 180,000
Total net income before personal exemption P420,000
Less: Basic personal exemption 50,000
Net income to ITR – tabular tax P370,000

Interest income within P100,000

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) 93
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Dividend income within 60,000

Income subject to final tax P160,000

Problem 11 – 16 D
Husband Wife
Net taxable income, net of withholding tax P140,000 P250,000

Tax on P140,000 P22,500

Tax on P250,000 P50,000
Less: Withholding tax 20,000 45,000
Net tax payable P 2,500 P5,000

Problem 11 – 17 B
Compensation as researcher P 600,000
Less: Personal exemption – basic 50,000
Net taxable compensation income P 550,000

Tax on P500,000 P125,000

Tax on excess (P50,000 x 32%) 16,000
Total income tax from compensation P141,000
Dividend income tax (P120,000 x 10%) 12,000
Interest income tax (P500,000 x 7.5%) 37,500
Total income tax due P190,500

Problem 11 – 18 D
Capital gains tax on shares of stock (P80,000 x 5%) P 4,000
Capital gains tax on sale of land (P2,000,000 x 6%) 120,000
Total capital gains tax paid P124,000

Problem 11 – 19
1. Letter B
Final tax on copyright royalty (P11,250/90%) x 10% P 1,250
Final tax on mineral claim royalty (P12,000/80%) x 20% 3,000
Final tax on share from trading partnership as dividend (P270,000/90%) x 30,000
10%
Total final tax P34,250

2. Letter D
None. All reported earnings are subject to final tax.

Problem 11 – 20 B
Percent of service 100%
Add: Output VAT 12%
Total 112%
Less: Withholding tax 20%
Percent of net proceeds 92%

Net proceeds P 92,000

Divided by percent of net proceeds 92%
Service fee P100,000

Withholding tax (P100,000 x 20%) P 20,000

VAT (P100,000 x 12%) P 12,000

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Problem 11 – 21
1. Letter A
Salaries of assistants P 96,000
Traveling expenses 11,000
Light and water, Office 7,890
Stationeries and supplies 1,960
Office rent 60,000
Total expenses before contribution P176,850
Add: Contribution subject to limit (P500,000 – P176,850) x 10% 32,315
Total allowable deductions P209,165

2. Letter C
Professional fees P500,000
Less: Allowable deductions 209,165
Net income from business P290,835
Add: Income from compensation:
Allowance as director of Corporation A P25,000
Commissions 5,000 30,000
Net income before personal and additional exemptions P320,835

3. Letter D
Net income before personal and additional exemptions P320,835
Less: Personal and additional exemptions:
Basic – widower P 50,000
Additional exemptions (P25,000 x 3 qualified children) 75,000 125,000
Net taxable income P195,835

Tax on P140,000 P 22,500

Tax on excess (P55,835) x 30% 13,959
Income tax due P 36,459

Problem 11 – 22
1. Using itemized deduction
Compensation income P 20,000
Gross income from business P 400,000
Less: Itemized deduction 150,000 250,000
Total income before personal exemptions P270,000
Less: Personal exemptions
Basic personal exemptions P 50,000
Additional exemptions (P25,000 x 4) 100,000 150,000
Taxable income P120,000

Computation of income tax:

Tax on P70,000 P 8,500
Tax on excess (P50,000) x 20% 10,000
Income tax before withholding tax P 18,500
Less: Withholding tax 1,000
Income tax due and payable P 17,500

2. Using o ptional standard deduction

Compensation income P 20,000
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Gross income from business P 400,000

Less: Optional standard deduction (40%) 160,000 240,000
Total income before personal exemptions P260,000
Less: Personal exemptions
Basic personal exemptions P 50,000
Additional exemptions (P8,000 x 4) 100,000 150,000
Taxable income P110,000

Computation of income tax:

Tax on P70,000 P 8,500
Tax on excess (P40,000 x 20%) 8,000
Income tax before withholding tax P 16,500
Less: Withholding Tax 1,000
Income tax due and payable P 15,500

Problem 11 – 23
1. P71,200
Net worth, December 31, 200B P375,000
Less: Net worth, December 31, 200A 325,000
Unadjusted net income for year 200B P 50,000
Add back: Non-deductible expenses 150,000
Contributions (P20,000 + P50,000) 70,000
Total P270,000
Less: Non-taxable income 2,000
Income before contribution P268,000
Less: Contributions:
Deductible in full P 20,000
With limit
Actual, P50,000
Limit, P268,000 x 10% = P26,800
Allowed 26,800 46,800
Net income before personal exemptions P221,200
Less: Personal exemptions (P50,000 +p100,000) 150,000
Net taxable income P 71,200

2. P47 ,000
Corrected net taxable income P 71,200
Less: Reported net income subject to tax 24,200
Unreported taxable income P 47,000

Problem 11 – 24
200B net income from business P 600,000
Capital gains transactions
Short-term capital gains (P40,000 x 100%) P 40,000
Long-term capital gains (P30,000 x 50%) 15,000
Short-term capital loss (P10,000 x 100%) (10,000)
Net capital gains P45,000
Less: 200A Capital loss carry over – limit 35,000 10,000
Income before personal exemptions P 610,000
Basic personal exemption- married P 50,000
Additional exemption (P25,000 x 3) 75,000 125,000
Taxable income, 200B P 485,000
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Note: The applicable capital loss carry-over should only be limited to P35,000, because it should
not exceed the net income from operation of such year (Sec. 39D, NIRC).

Problem 11 – 25
1. Compensation income (P240,000 + P30,000) P270,000
Less: Personal exemption (P50,000 + P25,000) 75,000
Net taxable compensation P195,000
Business income P100,000
Less: Business expenses 120,000
Net loss from business (P20,000) 0 -
Net taxable income P195,000

2. Tax on P140,000 P22,500

Tax on excess (P55,000 x 25%) 13,750
Income tax due P36,250
Less: Tax credit 30,000
Income tax still due and payable P 6,250

Problem 11 – 26
1. Salary (P30,000 x 12) P360,000
Add: Taxable 13 th month pay (P35,000 – P30,000) 5,000
Total P365,000
Less: SSS contribution P3,000
Medicare/Philhealth contribution 2,000 5,000
Taxable compensation income before personal P360,000
exemption
Less: Personal exemption 50,000
Net taxable compensation income P310,000

Estimated income tax due:

Tax on P250,000 P50,000
Tax on excess (P60,000 x 30%) 18,000
Total income tax due per year P68,000
Divided by number of months in a year 12
Monthly withholding tax P 5,667

2. Quarterly business income tax

Business income per quarter P200,000
Less: Business expense per quarter 120,000
Net income per quarter P 80,000

Tax on P70,000 P 8,500

Tax on excess (P10,000 x 20%) 2,000
Quarterly business income tax per quarter P 10,500

Problem 11 – 27
1. Entertainment fee (P1,700,000/85%) P2,000,000
Business income
Philippines 500,000
Japan 1,000,000
Total gross income P3,500,000
Less: OSD (P3,500,000 x 40%) 1,400,000
Net income before personal exemption P2,100,000
Less: Personal exemption - basic P50,000
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Additional (P25,000 x 4) 100,000 150,000

Net taxable income P1,950,000

2. Tax on P500,000 P 125,000

Tax on excess (P1,450,000 x 32%) 464,000
Income tax due P 589,000

3. Tax credit
Creditable withholding tax on fees
(P2,000,000 x 15%) P300,000
Business income tax paid - Philippines 40,000
Japan (P589,000 x 594,000*/2,100,000))
P166,603 vs. actual P300,000, lower 166,603 P 506,603

4. Income tax still due (P589,000 – P506,603) P 82,397

Supporting computation of net taxable income before personal exemptions:

Within Outside Total

Gross receipts 2,500,000 1,000,000 3,500,000
Percent 71% 29% 100%

Allocated OSD x percent 994,000 406,000 1,400,000

Net income before personal exemption 1,506,000 594,000 2,100,000

Problem 11 – 28
Mr. Bravo Mrs. Bravo
Gross professional income (P100,000/90%) P111,111
Rent income (P300,000/2) 150,000 P150,000
Total gross income P261,111 P150,000
Less: OSD (40%) 104,444 60,000
Net income from business P156,667 P 90,000
Add: Gross compensation income 225,000 300,000
Total P381,667 P390,000
Less: Personal exemptions 150,000 50,000
Net taxable income P231,667 P340,000

Tax on P140,000/ P250,000 P 22,500 P 50,000

Tax on excess:
Mr. Bravo (P91,667 x 25%) 22,917
Mrs. Bravo (P90,000 x 30%) . 27,000
Income tax due P 45,417 P 77,000
Withholding tax on compensation ( 25,000) ( 50,000)
Withholding tax on professional income (P111,111 – P100,000) ( 11,111) .
Income tax still due and payable P 9,306 P 27,000

Problem 11 – 29
1. P290 ,000
Compensation income P300,000
Taxable 13 th month pay and bonuses (P40,000 – P30,000) 10,000
Net business income (P400,000 – P300,000) 100,000
Capital gains – long-term (P60,000 x 50%) 30,000
Total P440,000
Less: Personal exemptions (P50,000 + P100,000) 150,000
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Net taxable income P290,000

2. (P8,000)
Tax on P250,000 P 50,000
Tax on excess (P40,000 x 30%) 12,000
Total income tax due P 62,000
Less: Income tax paid on:
Compensation P 50,000
Quarterly business income 20,000 70,000
Income tax refund (P 8,000)

Problem 11 – 30
1. 13 th month pay P25,000
Other benefits:
Excess of clothing allowance (P4,500 – P4,000) P 500
Excess of rice subsidy (P1,600 – P1,500) x 12 1,200 1,700
Total (not exceeding P30,000) – nontaxable P26,700
Allowable de minimis:
Clothing allowance P4,000
Rice subsidy (P1,500 x 12) 18,000 22,000
Total 13 th month pay and other benefits – nontaxable P48,700

2. Basic salary (P25,000 x 12) P300,000

Less: Personal exemptions 150,000
Net taxable compensation income P150,000

Tax on P140,000 P22,500

Tax on excess (P10,000 x 25%) 2,500
Total income tax due P25,000

Withholding tax from January to November 200A

(P25,000/12) x 11 P22,917

3. Net taxable compensation income P150,000

Add: Net business income:
Professional fees (P224,000/1.12) P 200,000
Gross income from sales (P5,000,000 – P3,200,000) 1,800,000
Less: Itemized deductions: P2,000,000
Operating expenses, net of interest expense
(P900,000 – P50,000) P850,000
Interest expense (P50,000 – (P75,000 x 33%) 25,250 824,750
Net income before contribution P1,175,250
Less: Contribution, actual = P100,000, lower
Contribution, limit (P1,175,250 x 10%)= P117,525 100,000 1,075,250
Net taxable income P1,225,250

Tax on P500,000 P125,000

Tax on excess (P725,250 x 32%) 232,080
Total income tax due P357,080
Less: Tax credits:
WTW from Jan to Nov., 200A P22,917
WT on Professional income (P224,000 – P200,000) 24,000 46,917
Income tax still due and payable on December 31, 200A P310,163
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Problem 11 – 31
Gross income from business (P1,000,000 – P700,000) P 300,000
Operating expenses (P250,000 – P60,000 – P30,000) ( 160,000)
Deductible interest expense (P30,000) – (P20,000 x 33%) ( 23,400)
Deductible contribution (P300,000 – P160,000 – P23,400) x 10% ( 11,660)
Net business income P 104,940
Capital asset transactions:
Capital gains – short-term (P300,000 x 100%) P 300,000
Capital losses – long-term (P400,000 x 50%) 200,000 100,000
Lotto winning, USA 300,000
Gambling winnings P 200,000
Gambling losses (excess cannot be deducted from other income) 250,000
Gross compensation income (P180,000 + P20,000) 200,000
Taxable 13 th month pay (P35,000 – P30,000) 5,000
Net taxable income before exemption P 709,940
Less: Personal exemptions (P50,000 + P100,000) 150,000
Net taxable income P 559,940

Tax on P500,000 P 125,000

Tax on excess (P59,940 x 32%) 19,181
Total income tax due P 144,181
Less: Withholding tax on compensation 20,000
Income tax still due and payable P 124,181

Problem 11 – 32
Note: OSD is not applicable unless the taxpayer signified in his ITR that he opted to use OSD in
lieu of itemized deductions. (Sec. 34 (L), NIRC)

Taxpayer is a resident citizen

a. Normal (tabular) tax:
Salaries: Philippines U. S. A. Total
Within (P180,000/90%) P200,000
Without ($2,250/90%) x P50 P125,000 P325,000
Commissions:
Within (P57,000/ 95%) 60,000
Without ($950/ 95%) x P50 50,000 110,000
Interest income-without 75,000 75,000
($1,200/80%) x P50
Dividend-without ($1,800/90%) x P50 . 100,000 100,000
Totals P260,000 P350,000 P610,000
Less: Personal exemption – basic 50,000
Taxable income P560,000

Tax on P500,000 P125,000

Tax on excess (P60,000) x 32% 19,200
Total P144,200
Less: Tax credits:
Compensation (P200,000 x 10%) P20,000
Commission (P60,000 x 5%) 3,000
Allowable tax credit - foreign* 40,000 63,000
Income tax due and payable, after tax credits P 81,200
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*Allowable tax credit paid outside the Philippines is lower than tax limit or actual tax
paid. The tax credit is computed as follows:
Limit (P350,000/P610,000) x P144,200 P82,738
Actual foreign taxes paid:
Interest (P75,000 x 20%) P15,000
Compensation (P125,000 x 10%) 12,500
Dividend (P100,000 x 10%) 10,000
Commissions (P50,000 x 5%) 2,500
Total P40,000

Allowable foreign tax credit - lower P40,000

Note: The actual tax paid outside the Philippines is lower than the computed tax limit;
hence, the actual tax paid without is the allowable tax credit.

b. Passive income tax:

Interest income within (P50,000/ 80%) x 20% P12,500
Dividend income within (P9,000/ 90%) x 10% 1,000
Total passive income tax for the year P13,500
Note: Philippine Lotto winnings are tax-exempt.

Taxpayer is a nonresident citizen

a. Normal (tabular) tax:
Salaries - within (P180,000/90%) P200,000
Commissions- within (P57,000/95%) 60,000
Net income P260,000
Less: Personal exemption - basic 50,000
Taxable income P210,000
Tax on P140,000 P22,500
Tax on excess (P70,000) x 25% 17,500
Total tax due P40,000
Less: Withholding taxes within (P20,000 + P3,000) 23,000
Income tax due and payable P17,000

b. Passive income tax:

Interest income within (P50,000/80%) x 20% P12,500
Dividend income within (P9,000/90%) x 10% 1,000
Total passive income tax for the year P13,500
Note: Nonresident citizens are taxable only on income derived within the Philippines.

Taxpayer is a resident alien. Solution is the same as nonresident citizen.

Taxpayer is a nonresident alien engaged in trade or business in the Philippines.

The taxpayer cannot be regarded as doing business in the Philippines because he has
no business income in the Philippines.

If the taxpayer has stayed more than 180 days in the Philippines, he is regarded as
doing business. The computation of his net income tax payable in the Philippines will
be the same as in number 2 under the assumption that his country is granting the
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same privilege of reciprocity to nonresident Filipino doing business in that foreign

country.

Taxpayer is a nonresident alien not engaged in trade or business in the Philippines.

Nonresident aliens are subject to tax of 25% based on their gross income derived
within the Philippines. In our illustration, let us assume that the source of income has
been deducted with 25% tax on the income given to the taxpayer - that is, the amount
shown in the problem is net of 25% final tax.

The income tax of Mr. Ramsay Colorado would be:

Salaries- within (P180,000/75%) P240,000
Commissions- within (P57,000/ 75%) 76,000
Interest income within (P50,000/ 75%) 66,667
Dividend income within (P9,000/ 75%) 12,000
Gross income within P394,667
Multiplied by tax rate 25%
Income tax for the taxable year within P 98,667
Note: In computing the income tax, a fractional part of a peso less than P0.50 shall be
disregarded. If the fractional part is P0.50 or more, it shall be rounded up to P1.00 (R.A. 590).

Problem 11 – 33
Gross income from business (P1,000,000 – P700,000) P 300,000
Operating expenses (P250,000 – P60,000 – P30,000) ( 160,000)
Deductible interest expense (P30,000) – (P20,000 x 33%) ( 23,400)
Deductible contribution (P300,000 – P160,000 – P23,400) x 10% ( 11,660)
Net business income P 104,940
Capital asset transactions:
Capital gains – short-term (P300,000 x 100%) P 300,000
Capital losses – long-term (P400,000 x 50%) 200,000 100,000
Lotto winning, USA 300,000
Gambling winnings P 200,000
Gambling losses (excess cannot be deducted from other income) 250,000
Gross compensation income (P180,000 + P20,000) 200,000
Taxable 13 th month pay (P35,000 – P30,000) 5,000
Net taxable income before exemption P 709,940
Less: Personal exemptions (P50,000 + P100,000) 150,000
Net taxable income P 559,940

Tax on P500,000 P 125,000

Tax on excess (P59,940 x 32%) 19,181
Total income tax due P 144,181
Less: Withholding tax on compensation 20,000
Income tax still due and payable P 124,181