Professional Documents
Culture Documents
AUTHOR’S CONTACT
Our taxation system in the Philippines is besmirched by reported abuses in tax administration and
pervasive corruption. These disheartened many taxpayers not to properly reflect their taxes rationalizing
on corrupt government practices.
Our solemn duty as academician is to lay the foundation for the future correction of this defect in our
society by providing the best tax education our students deserve. Tax malpractices and corruption can be
limited by adequate public tax education.
Most schools fail on their duty in transforming their graduates as agents of change in society because
teaching tends to be too basic or too theoretical to be applied. As our mission, let us give our students more
practical knowledge by giving them the totality of taxation. Even if they are not tax majors, they should be
given the option and the chance to attain high level proficiency in taxation. This could transcend to career
opportunity for them.
Teach well and you will live forever! Your influence will forever stay in the minds and hearts of your
students. That excellence will multiply. Let us give our students a legacy of true competence. Let us give
them the best tax education we can give. Let us give them the type of excellence which is not feigned, not
masked, but real. Always remember that your service to fellow man is a service to God.
Let us join hand to promote a better tax education. Contact me whenever you need assistance. I will assist
in the best way I could. God bless you!
Being a teacher myself, I strongly admit that books are excellent partners in classroom teaching. Creating
high quality books requires enormous time investments and efforts. I wrote this book over years of
continuous technical research, tax practice and conceptual refinement through my actual teaching in the
undergrad and in the review.
I am not an entrepreneur. Like you, I am a full-blooded teacher. I teach and write books to empower and
transform people. I hope and pray that you respect the dignity of my work in the same way you value
yours. I am praying that you will NEITHER give the students or reviewees copies of the solution
manual NOR tolerate the photocopying of my book in your classes. As accountants, we must collectively
act under our conscience to be true guardians of integrity. Please help stop book piracy. Please report
suspected counterfeit books to realexcellence@yahoo.com.ph. God bless you!
Please be advised that the book is not written to impress tax experts. The book is intended as a guide to
students for them to understand and master the totality of the income taxation. Because of this, the book is
prepared in a sequential organization of topics. To optimize understanding and concept recall, some topics
may be briefly re-opened for discussion in future chapters of the book. This is not repetition. This is
deliberately intended for students to connect and interrelate new concepts with previous ones.
The book devised a vertical presentation of income taxation and diverted from the usual horizontal or NIRC
approach followed by most tax books. Under the horizontal approach, the tax schemes are discussed
separately for individuals and corporations. It is repetitive, time consuming and results to less accurate
understanding because students do not see the comparison of the two tax schemes for each class of
taxpayers. The vertical approach discusses the tax schemes for both individuals and corporations
simultaneously resulting in efficiency and better accuracy.
To maximize the effectiveness of your lecture, please follow the concept organization of the book. Do not
devise other concept arrangements based on other books. Doing otherwise will only confuse your
students. Other authors have their own methods. We have ours. The income tax teaching methodology of
the book is long proven in the undergrad and in the professional review to optimize understanding and
instill mastery.
Here is a list of some of the numerous student testimonials regarding our book:
1. “I am thanking you because without your books, siguradong nahirapan po ako sa taxation… I know you
are God’s blessing to me, to us. I hope na marami pa po kayong matulungan na students especially sa taxation.”
- May Anne Reyes from UST Manila (Top 7 in the October 2015 CPA Board Exam)
2. “Aminado pu ako wala akong natutunan sa undergrad sa tax kaya binasa ko po ng mabuti yung book nyo
during review. Ang galing po ng pagkakaorganize ng topics at yung presentation madaling
maintindihan. Salamat po!” - Ednel Tanhueco Datu, Pampanga
3. “I am a working student, so pagdating ko sa school di na ako masyado nakikinig sa school sa sobrang pagod.
Weekend lang po ang time ko mag-aral. Pero sa tuwing binabasa ko ang book niyo, para na rin may nag-
eexplain na teacher sa akin… Salamat po! Pinadali ninyo buhay ko.” Francis Reyes Remegio – Holy Angel
University, Angeles City
4. “Very helpful po ng book niyo sa tax Sir. I’m not a student of yours Sir nor have met you in person but one
thing is for sure, many students like me owe so much from you for introducing to us your taxation book.
God bless po.” Angelica Balubal, Tuguegarao City
5. Replying to a social media user inquiry of which tax book is best, Paulo Relucio Dula replied, “Tax – Rex
Banggawan. Bago lang pero sobrang personal teacherna yung book kapag binabasa”
6. “Good day Sir! Just drop by to say thanks for your wonderful masterpiece, Income Taxation. Truly
simplified, principle-based approach.” – Jhoven Mabaquiao from Divine World College of Legaspi
7. “…. We are using your textbooks both Income and Business and Transfer Taxation. I am very happy with the
way the topics are presented and the books help me a lot in understanding our lessons very well….” –
Joshtien Adorable, BSA student FEU Makati
8. “Good evening Sir. I am an accountancy student from Pampanga. Your book for taxation is amazing. I was
able to appreciate tax even more…” – Mark Angelo Mallari
9. “...Dumali ang taxation dahil sa book mo… Yung dating minememorize lang namin, ngayon naisapuso
na namin even without memorizing kasi the way you illustrate the topic eh naiintindihan agad.” -
Kusela Mae Uganiza from University of St. Louis Tuguegarao
10. “We find your book comprehensive, simple and direct to the point.” Alberto Calubaquib, Jr. – University of
Saint Louis – Tuguegarao City
The book is your teaching partner. You can capitalize on its teaching capability to lessen extensive lectures.
By following and reinforcing the concept arrangement as the lecture progresses, it will save you more time
and effort; thus, giving you more time in monitoring and assessing student understanding and skills in
applying the tax concepts and procedures.
In teaching, focus on the basics and main points. Let students take care of the details. Do not consume your
time discussing the details. The book is designed to be self-teaching. It can teach students even with
minimal teacher supervision. Students also need some extent of self-learning to develop their self-esteem.
This is particularly vital to their future professional development.
CONCEPTS TO FOCUS
A. Fundamental principles of taxation
1. Theories of cost allocation
2. Tax as a lifeblood to the government (Lifeblood doctrine)
3. Limitations of the taxation power
4. The concept of situs
5. The concept of double taxation and the remedies to double taxation
B. The concept of income – discuss what income is taxable under the NIRC
1. The concept of gross income
a. The different concepts of capital (with finite and infinite values)
b. The meaning of realized benefit – connect this to the ability to pay theory
2. The classification of income taxpayers
a. Individuals (RC, NRC, RA, NRA-ETB, NRA-NETB)
b. Corporations (DC, RFC, NRFC)
3. The situs of income – students need to know the place of taxation of each type of income
4. The difference between active and passive income
d. Tax bases and computational procedures to the capital gains tax on real properties
1. Exemption rule and alternative taxation rule
2. Pay as you file and installment payment
5. Deductions – discusses expenses of business that are deductible from gross income
a. Itemized deductions
1. Cost of sales or cost of services
2. Regular allowable itemized deductions
3. Special allowable itemized deductions
4. Net operating loss carry-over
b. Optional standard deduction – in lieu of itemized deductions
TRUE OR FALSE 1
1. False (This is police power.)
2. True
3. True
4. True
5. False (The receipt of benefit is conclusively presumed.)
6. False (Taxation power is inherent to the State.)
7. True
8. False (It is inherent power not requiring Constitutional mandate.)
9. True
10. True
TRUE OR FALSE 2
1. False (Property tax only)
2. False (Different taxpayers warrants different tax treatments.)
3. True
4. True
5. True (It will result to violation of substantive due process)
6. True
7. False (The constitutional guarantee for non-imprisonment applies to debt not tax)
8. False (The Constitution guarantees the sanctity of contract by its non-impairment clause)
9. False (The Constitution requires the majority of all members of congress to pass a tax exemption law
10. False (It will not produce additional benefit if the government taxes itself.)
1. B 16. D 32. D
2. A 17. D 33. C
3. C 18. D 34. A
4. C 19. C 35. C
5. B (best answer, RPT is 20. D 36. D
local tax as to collection) 21. D 37. B
6. A 22. B 38. D
7. A 23. A 39. D
8. B 24. B 40. A
9. C 25. B 41. B
10. D 26. A 42. A
11. A 27. D 43. D
12. B 28. B 44. A
13. B 29. B 45. A
14. C 30. C
15. C 31. D
1. B 8. D 16. D
2. C (LGU for assessed 9. C 17. C
value.) 10. A 18. A
3. A 11. A 19. C
4. A 12. D 20. D
5. D 13. B 21. D
6. B 14. D 22. B
7. B 15. C
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
1. C 7. B 13. C
2. D 8. B 14. D
3. A 9. B 15. D
4. A 10. B 16. A
5. A 11. B
6. D 12. B
1. A 9. A 15. C
2. B 10. A 16. A
3. B 11. C 17. D
4. C 12. B 18. C
5. D 13. A (The partnership is
6. B presumed organized
7. C herein if silent.)
8. A 14. D
1. B 4. B 7. D
2. A 5. D
3. A 6. D
Case Problem 1
Within Without
P10,000 interest income from a non-resident Japanese friend P 10,000
P40,000 interest income from Philippine residents P 40,000
P500,000 rent income from a commercial complex located in the USA
leased to resident Filipinos 500,000
P200,000 rent income from a boarding house in Baguio City,
Philippines 200,000
P200,000 professional fees rendered to Chinese clients in Hong Kong 200,000
P300,000 salary from a resident employer 300,000
P100,000 gain from sale of merchandise imported and sold to
Filipino residents 100,000
P50,000 gain on sale of merchandise purchased locally and sold
during his business travel in Hong Kong 50,000
P400,000 gain on sale of the boarding house located in Baguio City to
a non-resident buyer 400,000 -
Total P1,040,000 P 760,000
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Within Without
P500,000 royalty fees from local Hot Burger outlets P 500,000
P200,000 royalty fees from foreign Hot Burger outlets P 200,000
P100,000 gain from sales of equipment to foreign franchisees 100,000
P200,000 gain from sales of equipment to local franchisees 200,000
P50,000 gains from sale of investment in domestic stocks to foreign
investors 50,000
P40,000 gains from sale of investments in foreign stocks to Filipino
investors (The stock is presumed stocks of a non-resident foreign
corporation.) - 40,000
Total P 950,000 P 340,000
Case Problem 3
In this problem, billing is based on free market conditions. TC bills its foreign outlet (branch) at the same
rate as it bills foreign clients. The transfer pricing is considered arms’ length.
TRUE OR FALSE 2
1. True (Advanced income is taxable upon receipt)
2. True (Deductible as they are used up or are expired in the business of the taxpayer.)
3. True
4. True (The mix of the different methods is referred to as hybrid method.)
5. True
6. False (Contract price is the total amount receivable in money or property from the buyer. This amount
is usually the selling price but will differ when there is an encumbrance on the property to be assumed
by the buyer.)
7. True (Crop year method is not an accounting period)
8. False (Based on percentage of progress of the construction project)
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Note teachers that the “exact day method” will be used for all assessment starting January 1,
2018 even if the assessment covers NIRC era tax deficiency or delinquency.
5. B, please check the Appendix (For unpaid tax amounting P50,000 but not exceeding P100,000, the
compromise penalty is P15,000).
6. The problem has no answer. April 16, 2020 to July 18, 2020 is 94 days. P1M x 12% x 94/365) =
P30,904. You may consider rewarding students who objectively answered P30,904. Good student
should have identified the lack of answer and objectively indicated their correct answer.
7. C (50% apply since he received a notice from the BIR before filing)
8. A (The return deadline is December 15, 2019. December 16, 2019 to June 6, 2020 is 174 days. Note that
February 2020 is 29 days since 2020 is a leap year. Hence, P500,00 x 12% x 174/365 = P28,603.
9. A (interest penalty + 500K + 25%xP500K)
TRUE OR FALSE 1
1. True (Final tax on interest covers only interest income from banks and trust funds)
2. False
3. False (Final tax applies only on identified passive income from sources WITHIN.)
4. True (They are considered deposits substitutes.)
5. False (Passive income are generally subject to final tax, but not ALL)
6. True
7. False (Only inter-corporate dividend from DOMESTIC corporation)
8. False (Only individual taxpayers are exempt)
9. True
10. False (REIT dividends are generally subject to 10% final tax.)
11. False (Stock dividend is generally exempt, except when it confers upon the recipient an interest
different from what he previously owned or when the declaration of stock dividends amounts to a
declaration of cash dividends.)
12. False (The NIRC did not contemplate final taxation of prizes on corporations, hence, corporate prizes is
deemed subject to regular income tax.)
13. False (subject to final tax of 10%)
14. False (They are exempt from any income tax.)
15. True (Only resident aliens are subject to 7.5% final tax.)
16. False (Active royalties are subject to regular tax. Passive royalties are subject to final tax.)
17. False (It applies only to non-resident foreign corporations)
TRUE OR FALSE 2
1. False
2. False
3. False (Passive income abroad, including winnings are subject to regular tax.)
4. False (This rule applies to taxable price.)
5. False (PCSO / lotto winnings are now generally subject to 20% final tax)
6. True
7. False
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
Note to Professors:
You may assign the special tax rules in capital gains or loss measurement (wash sales and tax-free
exchanges) to student for their detailed study at home. These are time consuming topics which may eat too
much classroom time. You may focus on the basic rules of the 5% and 10% CGT and the 6% CGT. These
specialized topics may be skipped for non-accountancy students.
Need emphasis:
In law, documentary stamp tax (DST) is payable by either the seller or buyer. If paid by the seller, the same
is deducted in the measurement of the gain. If assumed by the buyer, it should not be deducted against the
gain.
TRUE OR FALSE 1
1. True 11. True
2. True 12. True
3. True 13. True
4. False 14. False
5. False 15. False
6. False (See sales of RFC and the RIT option on 16. False (only domestic stocks)
individual sale to government) 17. True
7. False 18. False (tax is based on selling price)
8. True 19. False (tax is based on SP or FMV)
9. True 20. False (only real property capital assets
10. True within)
TRUE OR FALSE 2
1. True 12. False
2. False (or the fair value whichever is lower) 13. True
3. False (by moving average method) 14. True
4. False (adjusted basis of the shares received) 15. False (Assessed Value and Zonal value are
5. True independent valuations)
6. True 16. True
7. False (not downpayment but initial payment) 17. False (foreign corporations are exempt)
8. True 18. True
9. False (not selling price but contract price) 19. False (Only on domestic stocks.)
10. True 20. True
11. True
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Deadline is March 22 since February 2019 is a 28-day period. March 22 to July 20, 2019 is 90 days. 360
days was inadvertently used in the interest computation resulting into 630 interest. This would yield
P26,880, the question answer. Consider rewarding students who indicated the exact answer.
Note to professors:
In the CPA Exam, examinees must be able to identify defective assumptions of the examiner in the problems when
the exact technical solution is not with the choices. They are not supposed to shade letter E. When the most correct
solution does not yield an answer, examinees must test every possible assumption the examiner used. The rule of
the game is getting the “intended answer” when the technical answer is not with the choices.
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
**No. 11:
Higher of selling price or fair value (P9,000 /1.5%) P 600,000
Multiply by: Tax rate 6%
Capital gains tax P 36,000
TRUE OR FALSE 1
1. True 6. True (As a rule)
2. False (NRA-NETB and NRFC are subject to FIT) 7. False
3. False 8. True
4. False 9. False (only in lieu of personal expense)
5. True 10. True
TRUE OR FALSE 2
1. True 6. True
2. False 7. True
3. False (only against business gross income) 8. True
4. True 9. True
5. False (deductions apply to individuals and 10. True (effectively, yes)
corporations)
TRUE OR FALSE 1
1. True 6. True 12. True
2. True 7. True 13. False
3. False 8. False 14. False
4. False 9. True 15. False
5. False (Other requisites 10. True
exist.) 11. True
TRUE OR FALSE 2
1. False 7. True 12. True
2. True 8. True (As a rule) 13. False
3. False (It depends on 9. False (They are still 14. True
source and amount) taxable on income from 15. False (The rule is total
4. True unrelated operations.) asset, not net asset)
5. True 10. True
6. False 11. False (More than 5 years)
TRUE OR FALSE 1
1. True 9. True 16. False (Taxable if there is
2. True 10. True an alternation in interest
3. False 11. True after declaration.)
4. True 12. False 17. True
5. False 13. True 18. False
6. True 14. True 19. True
7. True 15. False (Subject to RIT, as a 20. True
8. True rule)
TRUE OR FALSE 2
1. True (Not final tax) 10. False (GPPs are also 16. False
2. False (Not taxable) exempt from FIT and 17. True
3. True CGT.) 18. True
4. True 11. False 19. False
5. False (FIT do not apply 12. False (It depends. There is 20. False (applicable to all
abroad) tax benefit to the excess of taxpayers)
6. True the recovery over the 21. True
7. True (generally, exception loss.) 22. False (not required)
is when no tax benefit is 13. True (No tax benefit) 23. True
derived) 14. False (This is carried over 24. False (including domestic)
8. False (This is a normal as NOLCO in the future 25. True
realization of income) measurement of the 26. False
9. False (No tax benefits). income of the GPP.) 27. True
15. False (Accounting
method)
Multiple Choices – Theory: Part 1
1. D 8. B 15. A
2. A 9. B 16. A
3. C 10. C 17. C
4. C 11. B 18. D
5. B 12. D (This is withholding tax) 19. B (No CGT on real
6. C 13. D property for FCs.)
7. D 14. A 20. A
*D is the best answer. Passive royalties are generally subject to final tax; hence, non-reportable. However, passive
royalties earned from sources abroad are subject to regular tax, hence reportable. The capital gain on sale of stocks
through PSE is not subject to tax; hence, non-reportable.
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*The employee will not be subject to final tax notwithstanding satisfaction of the compensation threshold test because he is not a
managerial or technical employee
TRUE OR FALSE 1
1. True (This is an NIRC 8. True (As a rule) 15. False (Under current rule,
concept.) 9. True only those listed by the
2. False 10. False regulations)
3. True 11. False 16. False (rank and file only)
4. True 12. True 17. False (Vacation leave
5. True 13. True (As a rule) credits not sick leave
6. False (Generally taxable) 14. False (No limit for credits)
7. False (Considered resident government employees) 18. True
citizens and taxable)
TRUE OR FALSE 2
1. False 6. False (still MWE, but 9. False (For a foreign bank,
2. True taxable on business FCDU or EFCDU for a local
3. False income) bank)
4. False (There are directors 7. True 10. False (Note position and
who are part of 8. False (whichever is function test)
management.) higher) 11. True
5. True 12. False
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
1. P 48,000
2. P 97,000*
*13th month pay do not exceed the P90,000 threshold; hence, not taxable
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7. C (P1,090 + 240 + 5)
8. C (P258K regular – P24K + P20K supplemental + P0 excess)
9. A (P780K regular + P43K supplemental + P19K excess computed as [P65K + (P22K –P10K) + P32K) –
P90K]
10. B (P780K regular + P43K supplemental + P0K excess computed as [P65K – P90K]
4. Please disregard choices. There was a computational slippage. Consider giving extra points for
students who provided the correct amount of answer.
Exempt de minimis: P 24,000 rice allowance + P5,000 Christmas gift = P29,000
6. Supplemental compensation:
Commission income P 12,000
Excess 13th and other benefits
(P45,000 + P45,000 + P2,000 + 3,000 – P90,000) 5,000
Total supplemental compensation P 17,000
8. A [P1,080 + 5 x 12 + (95-90)]
9. D
Regular compensation (P1,044K – P62K) P 982,000
Supplemental compensation
(P87+5K+24K addcom + 100x 12 – 90K) 27,200
Taxable compensation income P 1,009,200
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12. B
13th month P 28,000
Excess de-minimis (P8,000 – P3,600*) 4,400
13th and other benefits (i.e. below P90K) P 32,400
De minimis ( P5,000 + 3,600) 8,600
Total non-taxable income P 41,000
*P3,600. Note that the P500/month rate given does not match with the P8,000 annual total indicating
that additional allowances were given. Hence the P8,000 shall be used in the computation.
*(A is the intended answer but the most appropriate answer to this question is (50% x 5%) or 2.5% since the problem
talks about percentage of the fair value)
** (The problem speaks bout percentage of the depreciation value)
TRUE OR FALSE 1
1. True 9. False (bonds & debentures only)
2. True 10. False (within one year, not less than)
3. True 11. False (more than one year)
4. True 12. False
5. False 13. False
6. True 14. False
7. True 15. True (ordinary loss is deductible in full)
8. False
TRUE OR FALSE 2
1. True 9. True
2. True 10. False
3. True 11. False (one to five persons)
4. False (fair value or cost to original donor- 12. False (this is an ordinary exchange
purchaser w/e is lower) transaction)
5. False 13. True
6. True 14. True (the wash sales rule)
7. True 15. False (SP – cost)
8. False (as a rule both is not recognized, but
gain may be recognized when there is cash or
other assets received as consideration)
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
Exercise Drill No. 4 (You can skip this for classroom drills. It is complicated and time consuming. It
may be given as an assignment. )
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
1. NDE
2. DE
3. CE
4. NDE
5. CE
6. NDE
7. CE
8. NDE
9. DE
10. CE
11. NDE
12. NDE
13. NDE
14. NDE
15. NDE
16. DE
17. CE
18. CE
19. CE
20. DE
21. DE
22. DE
23. NDE
24. NDE
25. NDE
26. NDE
27. DE
28. NDE
29. NDE
30. NDE(best answer but this is not an expense)
TRUE OR FALSE 1
1. True 6. True
2. False** 7. True
3. False 8. False *
4. True 9. False
5. False 10. True
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
TRUE OR FALSE 1
1. False (non-deductible)
2. True
3. False (no qualification)
4. True
5. False
6. True
7. False
8. True
9. False (as tax expense, basic only)
10. True
11. False
12. False
13. True
14. False
15. True
TRUE OR FALSE 2
1. True 7. True 12. True (This is recovery
2. False 8. True of lost profits)
3. False 9. False 13. True
4. True 10. True 14. False
5. True 11. False 15. True
6. True
TRUE OR FALSE 3
1. True 9. True 16. False
2. True 10. True 17. True
3. True 11. True 18. True* (not less than)
4. False (tax basis of value 12. False (expensed or 19. False
given) capitalized) 20. True
5. True 13. False (5%) 21. False
6. True 14. False (fixed by law as 10
7. True years)
8. True 15. False
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TRUE OR FALSE
1. False (25%) 11. True (deductible amount in total is twice the
2. False (additional 50%) amount of expense)
3. True 12. True
4. False (only distribution of income) 13. True
5. True 14. True
6. True 15. True
7. False 16. False
8. True 17. True
9. False (20%) 18. False
10. False (15%) 19. True*
20. True (Note: acquirer’s own NOLCO)
*(Both of them however can be carried over so long as both of them did not arise from the same year. In other words the
NOLCO occurred earlier than the NCLCO)
Exercise Drills
Deduction incentive Incentive limit
1. 15% of salaries to senior citizen None
2. 25% of salaries paid to disabled persons None
3. 50% of training expense None
4. 50% of the cost of improvement None
5. 50% of the contribution None
6. 100% of the compliance expense None
7. Value of pro-bono services 10% of gross income
8. 50% of productivity incentive bonus None
TRUE OR FALSE
1. True 12. True
2. False 13. True
3. False (Note: or gross income) 14. False
4. True 15. True
5. False 16. False
6. False 17. False
7. False (when OSD is used, 60% of sales or 18. True
gross receipts) 19. False (Note that NCLCO is used in the
8. True measurement of an item of gross income (i.e.
9. True net capital gain) and is not an expense.
10. True 20. False
11. False
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
True or False
1. True 6. True 12. True
2. True 7. True 13. True
3. False (some are not 8. False 14. True
subject to FIT) 9. True 15. False
4. True 10. True
5. True 11. False
Multiple Choice Theory – Part 1
1. A 5. A 9. A
2. C 6. B 10. D
3. D 7. A 11. B
4. A 8. D 12. D
34
Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
9. B
Salaries expense P 100,000
Depreciation expense 15,000
Rent and other expense 50,000
Interest expense (P30K – 33% x P16K/80%) 23,400
Total deduction P 188,400
10. B
Gross profit from operation P 500,000
Interest income from notes 12,000
Total gross income subject to regular tax P 512,000
Less: Total deductions 188,400
Net income P 323,600
11. C
35
Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
13. A
Tax due
Compensation income P 820,000
Less: Non-taxable compensation 20,000
Taxable compensation income P 800,000 P 130,000
Gross receipts P 1,800,000
Less: Cost of services -
Gross profit from operations P 1,800,000
Other income subject to RIT 100,000
Total receipts and other income P 1,900,000
Multiply by: 8% 152,000
Total tax due P 282,000
14. C
Sales P 2,500,000
Less: Cost of sales 1,000,000
Gross income from operations P 1,500,000
Add: Other income
Share in GPP net income 200,000
Total gross income subject to RIT P 1,700,000
Less: Deductions 700,000
Net income P 1,000,000
Tax due of P1M per tax table P 190,000
15. C
Sales P 2,500,000
Add: Other income
Share in GPP net income 200,000
Total sales and other income P 2,700,000
Less: Annual income exemption 250,000
Total P 2,450,000
Multiply by: 8%
Tax due P 196,000
Problem 1:
1. D (P350K Total TI x 30%) 6. A (P350K Total TI x 30%) 11. C (P400K PH GI x 7.5%)
2. A (P200K PH TI x 30%) 7. B (P400K PH GI x 2.5%) 12. B (P350K Total TI x 60%)x
3. B (P400K PH GI x 30%) 8. C (P200K PH TI x 10%) 30%
4. B (P350K Total TI x 10%) 9. C (P400K PH GI x 25%)
5. D 10. A (P400K PH GI x 4.5%)
Problem 2:
1. A (P300K Total TI x 30%)
2. C (P300K Related GI x 10%)
3. B (P100K Unrelated TI x 30%)
Problem 3:
1. B (P3M FCDU II to other residents x 10%)
2. B (P1.2M RBU NI x 30%)
Problem 4:
1. A [(P500K GI-P200K DD- 3. D 7. C
P62.5K Allocated 4. C 8. B (P500K PH GI X30% FT)
CE)x30%] 5. D
2. D 6. C
Problem 5:
1. D (P1.5M Total NI x 30%)
2. B (P3M Outgoing GR x 2.5%)
Problem 6:
1. D [(P1M AUS)+(1K X P750 RUS)+P1.5M JAP]X2.5%; The P750 is computed as P1.5M/2K which is from
PH-JAP
2. B [(P1M+P1.25M+P2M+P1.5M)-P3M GE] X 30%
Problem 7:
1. C (P4M X 2.5%)
2. C (P4M X 4.5%)
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Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
Problem 9:
1. D (P2M X 10%) Dominant test is passed.
2. D (Same answer. The Constitutional exemption for income actually, directly and exclusively for
educational purposes relates to non-profit, non-stock educational institutions.)
Integrative Illustration… (You can handle this. Contact me via facebook if you need support.)
38
Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.
Integrative Illustration (You can handle this. Contact me via facebook if you need support.)
Your recommendations and suggestions are highly valued. For feedback and suggestions, please
reach me out at rexbanggawan@ymail.com.
Thank you so much and May God bless you and your family!
39
Unauthorized distribution of book manual (current or prior editions) is an infringement of copyright punishable by law.