Activity # 2

Name: Mancio, Catherine C.

Subject: OLCBTAX01 /Course: BSBA- Major in Operations Management
Section: OLCA233A02

ESSAY:
Direction: Explain the following statements/question in not less than 5 sentences. DO NOT USE
THE COPY-PASTE METHOD.

1.Define the capital gains tax

Answer: A capital gains tax is levied on the profit made from selling an asset and is often in
addition to corporate income taxes, frequently resulting in double taxation. Capital gains taxes
create a bias against saving, leading to a lower level of national income by encouraging present
consumption over investment. Capital Gains Tax is a tax imposed on the gains presumed to
have been realized by the seller from the sale, exchange, or other disposition of capital assets
located in the Philippines, including pacto de retro sales and other forms of conditional sale.
Also, A capital gains tax is the tax on profits realized on the sale of a non-inventory asset. The
most common capital gains are realized from the sale of stocks, bonds, precious metals, real
estate, and property. The capital gains tax is the levy on the profit that an investor makes when
an investment is sold. It is owed for the tax year during which the investment is sold.

2.Differentiate the ordinary income and passive income

Answer: Ordinary income is subject to the IRS-determined federal tax rates based on your
annual earnings. This rate, called a marginal tax rate, raises with higher levels of income.
Ordinary income, or earned income, is the money you receive from business activities or
employment. These earnings are subject to ordinary, or marginal, income tax rates outlined by
the IRS. In most cases, you earn ordinary income as a direct result of your labor. Also, Ordinary
income from an employer can be hourly wages, annual salary, commissions or bonuses. If you
work for yourself, your ordinary income would be your self-employment earnings. Ordinary
income is any type of income that's taxable at ordinary rates. Examples of ordinary income
include salaries, tips, bonuses, commissions, rents, royalties, short-term capital gains,
unqualified dividends, and interest income.

On the other hand, passive income can happen in the background such as an asset appreciating
in value. Passive income is that active income is earned through effort or output. In contrast,
passive income requires upfront work. Income generated from investments, properties or side
hustles. It's a steady flow of cash not earned from active work, such as traditional employment
or full-time entrepreneurship. Also, Passive income includes regular earnings from a source
other than an employer or contractor. The Internal Revenue Service (IRS) says passive income
can come from two sources: rental property or a business in which one does not actively
participate, such as being paid book royalties or stock dividends. Passive income is generally
subject to different tax rules than ordinary income. For example, passive income may be
subject to a lower tax rate, and losses from passive income activities can only offset other
passive income rather than ordinary income.

3. Are senior citizen and PWD's subjected to income tax? If yes what are the reasons they are
exempted? If not on what kind of taxes are they exempted?

Answer: For me, Yes Persons With Disability (PWD)”, senior citizens and PWDs are entitled to a
20% discount and VAT exemption on specific purchases of goods and services such as
medicines, domestic transportation (i.e., land, air, and sea), food in restaurants,
accommodation in hotels, and admission to recreational places such as cinema houses and
concert halls. They are also entitled to another 5% discount on purchase of necessities and
prime commodities. These necessities include rice, corn, bread, meat, eggs, milk, vegetables,
fruits, sugar, salt, soap, candles, liquified petroleum gas, and kerosene. Prime commodities
include flour, onions, vinegar, soy sauce, fertilizers, pesticides, poultry feeds, school supplies,
construction materials, batteries, and light bulbs. Technically, senior citizens refer to any
Filipino citizen who is a resident of the Philippines and is sixty (60) years old or above, although
they also include dual citizens, provided they prove their citizenship and have at least six (6)
months residency in the Philippines. PWDs include those persons suffering from restriction of
different abilities, as a result of mental, physical, or sensory impairment, to perform an activity
in the manner or within the range considered normal for a human being.