PROBLEMS:

ZERO. All the prizes and winnings provided (P4,000,000) are subject to tax.
1.
2. Ramon Magsaysay award P50,000
Athlete of the year award 100,000
Prize for winning the silver Olympic medal 500,000
Cash award from Mr. Alfred Lim 250,000
Car from Nissan as a Gift 1,000,000
AWARDS NOT SUBJECT TO INCOME TAX P1,900,000

3. Interest Income P60,000

TAXABLE INCOME P60,000
Interest income derived from investments in government securities are subject to 20% final tax
while gainsfrom sale of bonds are exempted.

4.Winning from charity horse race sweepstakes from PCSO P500,000

Gains from redemption of shares in mutual fund 300,000
Gain from sale of bonds with maturity of more than five years 60,000
Gifts from friends 200,000
TOTAL EXCLUSION FROM GROSS INCOME P1,060,000

5. EXCLUSION INCLUSION
Proceeds of his life insurance P2,000,000
Proceeds of his mother’s life insurance P1,000,000
Cash gift P50,000
House and lot inherited from his mother P3,000,000
Rent Income P100,000

TOTAL P6,050,000 P100,,000

6. Total exclusion in gross income

(Mandatory contributions & Labor Union dues) P135,000( P125,000 +10,000)

Problem 1: Determining the Taxability of an Item

Indicate whether the item is taxable or nontaxable with income tax

1. NT Novel prize received for achievement civic achievements.
2. T Prizes and awards in sports competition, not sanctioned by their respective national association accredited by POSC.
3. T World Bank’s income earned in the Philippines.
4. NT Cost of Living Allowance.
5. NT Union due Contribution.
6. NT Proceeds of from life insurance policy, revocable designation of beneficiary.
7. T Pensions, in general.
8. NT Income of PAGCOR.
9. T Proceeds from the sale of land (capital asset) P100.000: costs P120,000
10. NT Income of government from holders of public utility franchise.
11. T Interest income.
12. T Board of director’s fee.
13. NT Mandatory retirement pay
14. T Professional athlete’s salary.
15. T Winnings from Philippine Sweepstakes or Lotto.
16. T Income derived from smuggling.
17. NT Interest received from life insurance’s annuity.
18. NT Annual clothing allowance of P4,000.00
19. NT Hazard pay received by MWE.
20. NT Gains from redemption of shares in mutual fund.
21. NT Magsaysay awards.
22. NT GSIS Retirement benefits.
23. T Cash surrender value received from insurance in excess of premium paid.
24. NT Proceeds from life insurance of a deceased employee received by the employer.
25. T Dividend income derived in the Philippines by the Taiwan Government.
26. T Gains from the sale of bond with a maturity of four years.
27. NT Gains from the sale of certificate of indebtedness with a maturity of six years.
28. T Cancellation of debt in lieu to services rendered.
29. NT Shares of stock received due to professional service rendered.
30. NT Accumulated vacation and sick leave credits for government employees converted into cash at the end of employment
contract.