Timothy Reiner B.

Cartaňo
BSA-191-E

ACTIVITY 2
Income Taxation
nd
2 Week, April 13, 2021

EXERCISE DRILL 1 – THE CONCEPT OF INCOME. Check the appropriate box whether the
following are exempt or Taxable.

ITEMS TAXABLE EXEMPT

1. Winning from gambling /

2. Income from swindling /

3. Indemnity for moral damages /

4. Harvested fruits from an orchard /

5. Compensation income /

6. Interest income /

7. Amount received by the insured in excess of insurance premiums paid /

8. Proceeds of life insurance received by the heirs of the insured /

9. Gain on sale of goods by the home office to its branches /

10. Gain on sale of goods and services between relatives /

11. Gain on sale of goods by a parent corporation to a subsidiary /

corporation

12. Appreciation in the value of land /

13. Birth of animal offspring /

14. Income of a registered Barangay Micro Business Enterprise /

15. Cancellation of debt out of gratuity of the creditor /

16. Cancellation of debt by the creditor in exchange of services rendered /

by the debtor

17. Matured interest from coupon bonds /

 18. Receipt of bank loan /

19. Salaries of a minimum wage earner /

20. PCSO or lotto winnings /

EXERCISE DRILL NO.2 – INCOME TAXPAYER CLASSIFICATION. Indicate the appropriate

classification of each of the following taxpayers:
DC – Domestic Corporation
RFC – Resident Foreign Corporation
NRFC – Non-Resident Foreign Corporation
NRA-ETB – Non-resident Alien engage in trade or business
NRA-NETB – Non-resident Alien not engaged in trade or business
RC – Resident Citizen
NRC – Non-resident citizen
RA – Resident Alien

PERSON OR ENTITY Classification

1. A fat Mexican tourist NRA-NETB

2. A hardworking overseas Filipino worker NRC

3. An expatriate employer NRC

4. A Filipino who is privately employed in the Philippines RC

5. An unemployed Filipino residing in the Philippines RC

6. A Chinese businessman who has his domicile in the Philippines for NRA-ETB
six months

7. A Japanese who married a beautiful Filipina and has been residing RA

in the Philipp2ines for 2 years

8. A 2nd year Korean college student studying in the Philippines RA

9. A corporation incorporated under Philippine law DC

10. A foreign corporation doing business in the Philippines RFC

11. Trust designated by the donor as irrevocable RC

12. Trust designated by the donor as revocable RC

13. A business partnership DC

 14. A joint venture organized under a foreign law and is not operating NRFC
in the Philippines

15. An estate of a Filipino citizen judicially administered in Japan NRFC

16. An estate of a Filipino citizen judicially administered in the DC

Philippine

17. A taxable joint venture organized in the Philippines DC

18. A non-profit corporation organized in the Philippines DC

EXERCISE 3 – GENERAL INCOME TAX RULE - Check the box that properly correspond to
the taxability of the following taxpayers.

INCOME DESCRIPTION Within Without

1. Rey earned P100,000 interest income; 40% of these were from 60,000 40,000
nonresident debtors

2. A finance company earned P1,000,000 royalties from a franchise, 40% 600,000 400,000
of these were derived abroad

3. Rayment earned P100,000 rent from OFWs from his apartment in the 40,000 100,000
US. He also earned P40,000 rent from his Philippine condominium unit
4. 120,oo0 0
Chester, a resident citizen, works home online and submits his output
to clients. He collected P100,000 service fee from foreign clients and
p20,000 from resident clients.

5. Mark rendered audit services to client in Afghanistan for p500,000. The 0 500,000
services were paid in Afghanistan
6. 40,000 0
Jun has store in tourist park in Baguio City; He earned a total of
P40,000 gain from selling souvenir items. 40% were from foreign
tourists

7. Don Mariano sold at a gain of p2,000,000 to a client abroad a 2,000,000 0

commercial building located in Quezon City

8. John sold his stocks in a domestic corporation to a foreign investor at a 50,000 0

gain of P50,000
 9. Manzo received P20,000 dividends from a domestic corporation and 20,000 30,o00
P30,000 dividends income from a non-resident foreign corporation

10. Andrew received P40,000 dividends from a resident foreign 24,000 16,000
corporation; 60% of its historical income is from the Philippines.
11. 100,000 0
CDO Inc., manufactures in the Philippines and sells to unaffiliated
export clients. A total of P100,000 gross income was earned during the
period
12. 150,000 300,000
ABC manufactures abroad and sells to its Philippine branch at market
prices. Production cost abroad were P200,000. Billings to branch
totaled P300,000 while branch sales totaled P450,000

13. James received P100,000 dividends from a resident foreign corporation 40,000 60,000
which realized 40% of its income in the Philippines

14. Ellis received P20,000 dividend from a non-resident foreign corporation 0 20,000

15. Davao plant manufactures tables and sells to resident clients. A total of 400,000 0
P400,000 gross income was realized during the period.

EXERCISE DRILL 4. LOCATION AND SITUS OF INCOME. Compute how much is earned
within and earned outside the Philippines from each of the following independent cases.

TAXPAYER World Philippine

Income Income

1. Non-resident citizen /

2. Resident Alien /

3. Non-resident alien engaged in trade or business /

4. Resident Foreign Corporation /

5. Resident Citizen /

6. Non-resident alien not engaged in business /

7. Non-resident foreign corporation /

8. Domestic Corporation /
9. Taxable Trusts established by a Filipino citizen in the Philippine /

10. Taxable estate of a non-resident citizen judicially administered abroad /