Chapter 7 (Multiple Choice - Problems 1)

Problem 1
Compensation income ₱ 450,000.00
Taxable income ₱ 450,000.00

*Personal expenses are non-deductible to compensation income.

Problem 2
Compensation income ₱ 400,000.00
Interest income from lending ₱ 3,000.00
Taxable income ₱ 403,000.00

*Investment in time deposits is subject to final tax.

Problem 3
Business net income ₱ 300,000.00
Commission fee ₱ 5,000.00
Taxable income ₱ 305,000.00

*Dividends from a domestic corporation is subject to final tax.

Problem 4
Gross receipts ₱ 800,000.00
Less: Business expenses ₱ 300,000.00
Taxable Income ₱ 500,000.00

*Domestic stocks sold directly to a buyer is subject to final tax.

*Gain on lot sold is subject to capital gains tax.

Problem 5
Gross compensation income ₱ 200,000.00
Taxable compensation income ₱ 200,000.00

*Non-taxable compensation income is not included in compensation income.

*Business income and its expenses cannot be offset with compensation income.
*Book royalties are subject to final tax.
*Personal expenses are non-deductible to compensation income.
*Interest from promissory notes are part of business income.

Problem 6
Business income ₱ 500,000.00
Less: Business expenses ₱ 200,000.00
Gross business income ₱ 300,000.00
Add: Interest income from promissory notes ₱ 8,000.00
Net Income ₱ 308,000.00

Problem 7
Gross compensation income ₱ 200,000.00
Net Income - Business ₱ 308,000.00
Total taxable income ₱ 508,000.00

Problem 8
Compensation income ₱ 120,000.00
Business net income ₱ 300,000.00
Add: Other Income
Prize from competition ₱ 8,000.00
Taxable income ₱ 428,000.00

Problem 9
Gross income
Philippines ₱ 4,000,000.00
Abroad ₱ 6,000,000.00 ₱ 10,000,000.00
Interest income on deposits - Abroad ₱ 80,000.00
Less: Deductions
Philippines ₱ 2,000,000.00
Abroad ₱ 3,600,000.00 ₱ 5,600,000.00
Taxable Income if Resident Citizen ₱ 4,480,000.00

*Interest income on deposits derived from Philippines is subject to final tax.

Problem 10
Gross income - Philippines ₱ 4,000,000.00
Less: Deductions ₱ 2,000,000.00
Taxable Income if Non-resident Citizen ₱ 2,000,000.00