Professional Documents
Culture Documents
REVIEW QUESTIONS
Page |1
Taxable Non
taxable
49, Money acquired through illegal means
50. Philippine lotto winnings, P10,000
51. Separation pay received resulting from business merger
52. Income derived by Quezon City Government in leasing Building
53. Availed vacation leave with pay
X
VARIOUS PROCEEDS/INCOME
26 Final Tax
27 Exempt
28 Exempt
29 Exempt
30 Exempt
Problem 3:
Ramon Magsaysay award P50,000
Athlete of the year award 100,000
Prize for winning an Olympic Medal 500,000
Gift from Mayor Erap 250,000
Gift from Honda Cars
1,000,000
Total amount exempt from income tax P1,900,000
Problem 4: (Prize and awards)
1. How much Is gross income inclusion to Anthony?
A. P2,100,000
P1,400, 000 C. P42,000,000 D. P12,000,000
2. How much is qross income inclusion to Pacman?
Page 2
A. P42,000,000 B. P1,400.000 C. P67,000,000 D. P12.000.000
Problem 5: Paolo was sideswiped by Jun In a vehicular accident in 20x8. Consequently, he incurred and paid medical
expenses of P400,000 and legal fees of P200,000 during the year. Later during the year, he accepted the P800,000
settlement offered by Jun.
Problem 7: Belen took out a life insurance policy for P1,000,000 naming her son as beneficiary. Under the terms of the
policy, the insurer, BBB Insurance Corporation will pay Belen the amount of P1,000,000 after the 25th year of the policy,
and her beneficiary, should she died before that date. Belen outlive the policy and received the proceeds. The premiums
paid on the policy was P600,000.
Problem 9: Mac retired at the end of 20x8 after rendering 25 years of continuous service for ABC Corporation which
him immediately after his graduation from college.
employterrmine the gross "compensation income" of Mac
Salary for the first quarter P180,000
Honorarium as speaker in one of ABC's team building activities 10,000
Retirement pay: (Taxable, failed to meet the age requirement) 2,500,000
Commissions 30,000
Fee as a member of ABC's board of irectors (compensation income if he is an 50,000
employee at the same time)
10 days monetized vacation leave Exempt
interest income from time deposit FW TaxsE
Productivity incentive pay and 13h month pay Exempt
(Productivity pay= 1 P10,000 is de minimis under RR 1-2015)
(Total of excess of productivity of P10,000 +60,000 bonus is not more than
P90,000, hence tax exempt)
Total compensation income subject to tax P2,770,000
1. Problem 10: (Retirement Benefits) Mr. Mario Matiyaga, Compensation income (P5,000 x 10) P 50,000
The amount is taxable to Nilo. Separation pay is exemnpt from income tas if the cause of separation trom
serrice is death, sickness, physical disability, or any cause beyond the control of the emploree.
None of the abore-mentioned can be pointed out as the rery cause of his separation from service.
Inefticiency in serice due to frequent tardiness caused by heary traffic is not berond the control of the
employee.
Problem 12: (Items of gross income)
1. How much was total exempted/excluded income?
2. How much was the total final withholding taxes on passive income?
3. How much was the total capital gain tax?
4. HoW much was the total gross income subject to the 30% corporate income tax?
1. P460,000
2. (40,000 x 20%) + (80,000 x 20%) + (60,000 x 15%) + (70,000 x 20%) = p47,000
3. (300,000 x 6%) + (50,000 x 15%) = P25,500
4. P2,690,000
Page4
due Income
tax 4.
to
tax subject income
not Total 3.
income passive taxes final Total
on 2.
graduated
rate subjected
to income Gross 1,
presented Louis Mr. Problem
14:
incom Taxable
(40a) oSD
J525,000
620,000 110,00Þ
gambling
Winnings-illegal
10,000 government
bonds Interest
4,000 20% 20,000 rewardinformer's Tax
50,000 10% 500,000 Premium
150,000 wife hisBroceeds
of
50,000 1,000,000
300,000 Sepearaton
Bay
250,000 years) bonds-
(6 ofsale from Gain
5,000 Lotto-Philippines
4.000
20% 20,000 Lotto-Philinoint
10.000
2,000 20% 10,000 Winnings-Philippines
20.000 20b 100,000 joined prize-did
not
60.000 EAP-Philippines joined Prize-
he
10.000 ioined
20% 100.000
BusinesDrihere-
20,000
10,000 20% 50,000
(200.000) sales ofCost
(1.000.000) sales Gross
deductions Itemized to
tax Final Subject Exempted Excluded
or
INCOME SUBJECT TO BASIC TAX:
Basic salary (P900,000+P300,000) P1,200,000
Director's fee
200,000
Business income:
Retail business 250,000
Apartment rental (P190,000/95%) 200,000
Dividend income from a resident corporation 50,000
13h, Xmas and MidYear Bonus =(P180,000-1 5,000 as de minimis 85,000
- P90,000 exclusions)
Gross Income subject to basic tax (Q#1) P1,985,000
LESS:
Business expenses (125,000)
Basic exemption
Net Taxable income
P1,860,000
Income tax due- TRAIN Law (Q4): [P130k +(P860k x 30%)] P448,000
Page |6
TAXATION MASTERY
INCOME TAX
PROBLEM I
X is a resident citizen who had the following information for the first
quarter of taxable year 2018:
Gross Sales P1,400,000
Cost of Sales 500, 000
Other non-operating income 200, 060
Itemized Deductions 300,000
Creditable Taxes Withheld 15,00O
PROBLEM II
Mia dela Torre, an OFW working in Barcelona, is married to Ely
Antonio, who used to work in Barcelona but returned to the Philippines
after finishing his master's degree in 2015. For the year 2018, Ely
had the following information:
Gross Compensation Income 3, 500, 000
SSs, PAGIBIG, Philhealth 82,000
Employer's share in sss, PAGIBIG, Philhealth 150, 000
Union Dues 60, 000
Rice Allowance 24, 000
Laundry Allowance 3,600
Employee Cash Achievement Award 10,000
Christmas Bonus 80, 000
Productivity Bonus 80, 000
Medical Cash Allowance to Dependents
3, 000
Monetized SL credits (rate of P1, 000 per 10, 000
day)
Monetized VL credits (same rate) 15,000
Uniform Allowance given in cash 6, 000
13th and 14th month pay
Actual medical assistance
80,000
10,000
The sss, PAGIBIG, Philhealth Contributions and union dues were
included in the gross compensation income.
8. HOwW much is total exempt income of Ely (Exempt, De Minimis and other
Benefits) ?
9. How much is Ely's taxable income?
10.In relation to the above, if Ely sold the family car for a gain of
P50, 000 and incurred P400, 900 in the tuition fees of their 2
chíldren. Likewise, the spouses earned P1, 900, 000 in rental income
for a conjugal property leased to a friend in Barcelona. How much
Would be the additional taxable income of Ely?
11.If Ely received a housing benefit as a manager of the Company,
where the latter purchased a house and lot with a fair market value
of P1, 000, 000 and Ely paid P600, 000, which represents 50% of the
selling price, how much is the FBT due on such benefit?
PROBLEM III
Mimiyuuuh, single, had the following data for the taxable year 2018 (all
in pesos) :
Compensation Income 1, 200, 000
Business Income, Philippines 2,000, 000
Business Income, abroad 500, 000
Business Expenses, Philippines 1, 300, 000
Business Expenses, abroad 350, 000
Dividend income, domestic corporation 40,000
Dividend income, non-resident foreign corporation (a) 30,000
Interest income, BPI Manila branch 20,00
Interest income, BPI New York branch
10,000
Interest income, BPI Manila branch, FCDU
10,000
Creditable Taxes Withheld 200, 000
Taxes withheld from compensat ion 220,060
Household expenses 1, 800, 000
Gain on sale of house and lot inherited from parents (b) 250, 000
Gain on sale of 10,000 shares of stock of a domestic
corporation not listed or traded in a local stock
exchange (the shares were originally bought for 100, 000
P40, 000) (c)
Additional Information:
a. The non-resident foreign corporation fr om which dividends were
earned did not earn any income from the Philippines in the last
three Market
b. Fair
years prior to declaration of dividends
Value at the time of inheritance was P1,5060, 000;
Zonal Value is P1, 000,000 and Fair Market Value of the house as
per local assessor is P600, 000, while the land had a fair market
value of P800, 000.
C. The domestic Corporation had net assets
P15,000,000, with 1, 000, 000 outstanding shares ofamounting
stock; among
its assets 1s land with a book value of P3, 000, 000 but the Falr
Market Value is P3,500, 000.
12. How much is Mimiyuuuh's income tax still payable if she is a
non
resident citizen for the year 2018?
13.If the year was 2e17, hoW much is taxable income of
14. HOw much is Mimiyuuuh's total capital gains tax due? Mimiyuuuh?
15.Assuming the house and lot sold was the principal residence and
Mimiyuuuh was able to use P1, 487, 500 of the proceeds to acquire a
new principa1 residence wi thin 18 months from disposal, how much is
CGT due?
16.Assuming the shares of stock were purchased 18 months ago, how much
is the cGT due?
PROBLEM IV
Gwiyomi, a writer off KathNiel series in twitter, earned the following
passive income for the taxable year 2018:
Royalty income from copyright P1, 200, 000
Royalty income from trademarks 350, 000
Raffle draw winnings
10, 000
Philippine lottery winnings 150,000
Dividend income from domestic corporation
Dividend income from foreign corporation* 10,000
15, 000
Interest income from FCDU of PNB
Interest income on peso deposits in Maybank 20,000
10,000
*the foreign corporation earned 609% of its income from within the
Philippines in the last three years prior to declaration of dividends.
17. How much is the final tax due if Gwiyomi is a/an:
a. Resident Citizen
b. Resident Alien
C. Non-Resident citizen
d. Non-Resident Alien Engaged in Trade or Business
e, Non-Resident Alien Not Engaged in Trade or Business
PROBLEM V
The following data were taken from the accounting books of XYZ
Corporation for the year 2018:
Gross Sales P 18, 000, 000
Cost of Sales
(4, 000, 000)
Gross Income from sales 14, 000, 000
Other non -operating income
Interest from receivables 400, 000
Interest from peso deposits 200, 000
Interest income on US dollar deposits 500,000
(400,000 from FCDU; 100, 000 from BPI USs
Branch)
Gain on sale of land (cost P2,500, 000; 500,000
FMV 2, 800,000)
Gain on sale of shares of stock (cost 400,000
P2, 300, 000)
Dividend income (100, 000 from domestic 300,000
Corporation; 200,000 from resident
foreign corporation)
Rental Income (gross of 5% withholding 700, 000 3,000, 000
tax)
Total Gross Income P 17,000,000
Expenses
Operating Expenses
Depreciation Expense (2, 216, 000)
Loss on sale of building held as capital (200, 000)
asset (cost is P1, 200, 000; FMV 1, 100, 000)
Provision for bad debts (net of P500, 000 (3, 000, 000)
written-off)
Taxes and Licenses (4, 000, 000)
Interest Expense (300, 000)
Contributions to Retirement Fund (3,500, 000)
Senior Citizen Discounts (250,000)
Impairment Loss (300, 000)
Loss from fire (carrying amount of the (400, 000)
machinery)
Selling and Admin Expenses (6, 100, 000) (20,266, 000)
Net Loss (P 3,266, 000)
Note:
a. Taxes and Licenses consists of the following:
Mayor's Permit and Registration Costs 100,000
LOcal Business Tax 1,200, 000
Real Property Tax 1, 000, 000
Capital Gains Tax 280, 000
Output Value-Added Tax 1,420, 000
b. Per actuarial report, the current service cost for the pension fund
of the employees is P2,500,000.
C. Machinery lost in the fire had a carrying amount of P400, 000 and was
insured. Amount recovered from the insurance company is P200, 000.
1. Pedro, a resident of Isabela Province had the following data for taxable year 2018: (exchange
rate $1 -P 40)
Philippines Abroad
Salaries 165,000
Business income 450,000 6,000
Business expenses 120,000 1,500
Interest income:
Personal receivable 10,000
FCDU S 2,500
On bank deposit (20% long term) 25,000 3,000
Royalty income (20% from books) 22,000 1,000
Prize won in contest 10,000
Winnings from PCSo 80,000
Sales of shares of stocks of a domestic corp.
directly to the buyer (cost P 10,000) 30,000
Additional information:
Pedro received the following dividend income during the taxable year:
P 70,000 from a domestic corp. 30% of its income is attributed to its operations
abroad.
P 60,000 from a resident foreign corporation. The ratio of its gross income the
Philippines over worldwide income for the past three years is only 40%.
P 80,000 from a non -resident foreign corporation. The ratio of its gross income
in the Philippines over worldwide income for the past three years is 10%.
Note: The taxpayer is a resident citizen, hence his tax situs is within and without the Philippines.
1. Salaries 165,000
Business income 450,000 + (6,000 x 40) 690,000
Business expenses 120,000 + (1,500 x 40) (180,000)
Interest on bank deposit, abroad (3,000 x 40) 120,000
Royalty income, abroad (1,000x 40) 40,000
Prize won in contest 10,000
Interest income from personal receivable 10,000
Dividend income from resident corp. 60,000
Dividend income from non-resident foreign corp. 80,000
Taxable income 995,000
Note:
8 The 20% long term deposit within the Philippines is exempt from income tax.
Under the TRAIN LAW, the civil status and the number of dependents does not matter,
because the law provides for a fixed exemption of P 250,000.
The predominance test does not apply because the taxpayer is a resident citizen.
2. Final Tax on Passive Income (resident citizen)
Salaries 165,000
Personal receivable 10,000
Interest on bank deposits 25,000
Royalty income 22,000
Prize won in contest 10,000
Winnings from PCSo 80,000
Dividend income forn domestic 70,000
Total 382,000
Tax due (382,000 x 25%) 95,500
CGT 243,000
Total income tax 338,500
Note:
NRA-NETB, the interest income fron long term deposit is not exempt.
0 Based on the predominance test, the dividend income received from resident and
non-resident foreign corporation are treated as without the Philippines.
2. Mr. and Mrs. Dela Cruz, both CPAS and resident of the Philippines, with 5 minor children had
the following data for taxable year 2018.
Salaries, wife P 1,200,000
13th month pay and other bonuses, wife 140,000
Professional fees, (net of 5% CWT) 1,710,000
Expenses - practice of profession (15% nondeductible) 800,000
Rental income (net of 5% WT) 190,000
Rental expenses 80,000
Other income, husband (20% non - taxable) 80,000
Solution:
Mr. Mrs.
Salaries 1,200,000
13th month pay, and other 50,000 (140T-90T)
Professional fees 900,000 900,000
Expenses (800T x 85%) (340,000) (340,000)
Rental income 100,000 100,000
Rental expenses (40,000) (40,000)