Problem 1

Salary 1,800,000.00
Profit Sharing 300,000.00 supplementary
Less: Mandatory Deductions (30,400.00)
Income subject to 90,000 limit Exempt Subject to limit
13th month pay 150,000.00
Clothing allowance 6,000.00 9,000.00
Laundry allowance 3,600.00 8,400.00
Christmas gift 5,000.00 20,000.00
Monetized unused VL credits 60,000.00 30,000.00
Monetized unused SL credits 60,000.00
277,400.00

Limit 90,000.00 187,400.00

mandatory deduction 30,400.00
Total exempt compensation 195,000.00
Total taxable compensation 2,257,000.00

Sales revenues 950,000.00 Review: Basis of OSD for individuals: 40% of total sales
COGS (400,000.00) Basis of OSD for corporations: 40% of gross income
Gross Income 550,000.00 For both individuals and corporations: Other operating income
Less: Expenses
Salaries Expense (195,000.00)
Rent Expense (50,000.00)
Utilities Expense (25,000.00)
Taxable income from business 280,000.00

Total income subject to regular tax / normal tax 2,537,000.00

Interest income from BPI (amount received) 9,600.00

Gross-up (divide by 80%) 80%
Total income subject to final tax 12,000.00
uals: 40% of total sales
0% of gross income
ions: Other operating income are included, non-operating income are not
Income Tax Due under graduated tax regime
Basic Tax 402,500.00
Excess over 2,000,000 537,000.00
30% of excess 161,100.00
Income Tax Due under graduated tax regime 563,600.00
Tax Credit (402,500.00)
Income Tax STILL due 161,100.00

Income Tax Due under 8% income tax

Basic Tax 402,500.00 Note: taxable compensation income will still be subjected to graduate rates
Excess over 2,000,000 257,000.00
30% of excess 77,100.00
Income Tax Due on taxable comp. income 479,600.00

Sales of pet shop business 950,000.00

Multiply by 8% rate 8%
Income Tax due of business 76,000.00

Income Tax Due under 8% income tax 555,600.00

duate rates
 Itemized OSD
Sales 9,000,000.00
Sales Returns (100,000.00)
Net Sales 8,900,000.00
Cost of Sales (2,700,000.00)
Gross Income 6,200,000.00 6,200,000.00
Optional Standard Deduction 2,480,000.00
Depreciation expense 250,000.00
Rent expense 150,000.00
Utilities expense 100,000.00
Salaries expense 320,000.00
Taxes and Licenses 20,000.00
Mandatory contributions 55,000.00
Taxable Income 5,305,000.00 3,720,000.00

RCIT 1,326,250.00 930,000.00

MCIT 124,000.00 124,000.00

Tax due (Higher between RCIT and MCIT) 1,326,250.00 930,000.00

Tax Credits (790,000.00) (790,000.00)
Tax STILL due 536,250.00 140,000.00

2. tax benefit or tax cost of employing itemized deduction over OSD

--> compute both tax due under itemized and osd and compare
Tax due under itemized deduction 1,326,250.00
Tax due under OSD 930,000.00
Tax COST of employing itemized deduction 396,250.00

OSD is more beneficial, this, Marites incurred tax cost in employing itemized deduction.