Subject Code: BAINCTAX

Subject Title: Income Taxation

No. of Units: 3

MODULE 9:
GROSS INCOME
I. Pre-test / Activity
1. As a rule, this is not part of taxable income.
A. Profit sharing
B. Hazard pay
C. Overtime pay
D. 13th month pay
2. This is a taxable income.
A. Retrenchment pay
B. SSS/GSIS benefits
C. Separation pay due to resignation
D. Refund of Philippine Income Tax
II. Content
A. INCOME TAX SYSTEMS
1. Global – System employed where the tax system views indifferently the tax base and generally treats in
common all categories of taxable income of the individual. All items of gross income and deductions are
reported in one income tax return and a single tax is imposed on all income received or earned, regardless of
the activities which produces the income. All income in one basket = taxing the entire basket.
2. Schedular – System employed where the income tax treatment varies and is made to depend on the kind or
category of taxable income of the taxpayer. Different types of activities are subjected to different types of tax
rates. The tax rates depend on the classification of taxable income and activities which produced the income.
3. Semi-schedular or semi-global – All compensation income, business or professional income, capital gain,
passive income, and other income not subject to final tax are added together to arrive at the gross income.
After deducting the allowable deductions from the gross income, the taxable income is subjected to one set
of graduated tax rate for individual or normal corporate income tax rate for corporation (Mamalateo, 2014).
It is the system followed in the Philippines. Schedular means that tax rates will differ based on the tax based.

B. CONCEPT OF INCOME
Income refers all wealth which flows into the taxpayer, other than as mere return of capital. It includes the forms of
income specially described as gains and profits, including gains derived from the sale or other disposition capital
assets. (Sec. 36, RR No. 2)

It imports something distinct from principal or capital. On the other hand, "Capital" constitutes the investment which
is the source of income. Therefore, capital is fund while income is the flow. Capital is wealth, while income is the
service of wealth. Capital is the tree while income is the fruit (Vicente Madrigal et al v. James Rafferty, 38 Phil.
414).

C. REQUISITES OF INCOME TO BE TAXABLE

1. There must be gain or profit
The gain need not be in cash derived from sale of assets. It may occur as a result of exchange of property,
payment, assumption, reduction or cancellation of the taxpayer's indebtedness (except gifts) or other profit
realized from completion of a transaction.
2. The gain must be realized or received
A mere increase in the value of property without actual realization, either through sale or other disposition,
is not taxable. The realization of income need not take the form of actual receipt or property by the taxpayer
as it may occur as where there is a constructive receipt of the income by the taxpayer.
3. The gain must not be excluded by law or treaty from taxation
Incomes that are exempt from tax by law or treaty are not considered in determining gross income.
Income is recognized in the year it is actually or constructively received in cash or cash equivalent.
D. ITEMS OF GROSS INCOME
Items of gross income can be classified as follows:
1. Gross income subject to final tax
2. Gross income subject to capital gains tax
3. Gross income subject to regular tax

E. GROSS INCOME
Gross income means, in its broad sense, all income from whatever source, derived within or without the Philippines,
whether legal or illegal. The tax code does not distinguish legal and illegal income. Proceeds of embezzlement or
swindling for instance, are income because embezzler or swindler already has complete dominion over them and
can use such for his economic benefit. In the case of James vs. United States, the Supreme Court of the U.S. held
that "If a taxpayer receives income, legally or illegally, without consensual recognition of obligation to repay, that
income is automatically taxable."

Gross income means all income derived from whatever source, including (but not limited to) the following items:
1. Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages,
commissions, and similar items.
2. Trade, business or exercise of a profession
3. Gains derived from dealings in property
4. Interests – these refers to interest other than those subject to final taxes
5. Rents
Rent income may be in the form of:
 Cash received at stipulated price
 Obligation of the lessor to third persons paid or assumed by the lessee in consideration of the contract
of lease such as real property taxes assumed by the lessee on the property being leased, insurance or
other fixed charges. Such payments shall be considered rental payments to be reported by the lessor
as part of its taxable income.
 Advance payment, which may be in the form of prepaid rent (reported in full in the year of receipt).
Rental income shall be taxable on the year received, whether earned or unearned, provided, there is
no restriction as to its use, and regardless of method of accounting employed.
 Security deposit, in general, is not a taxable income. It shall be recognized as a liability of the lessor
to the lessee. The lessor has the obligation to return the amount to the lessee upon the expiration of
the lease term. However, security deposit shall be considered as taxable income:
1. Upon forfeiture in favor of the lessor; or
2. Upon application as rental payments.
 Leasehold improvements
Improvements made by the lessee shall be treated as income of the lessor if:
1. The improvements will be owned by the lessor (transfer of ownership) at the end of the lease;
2. The lessor is not required to pay the lessee the value of such improvements.
Income from leasehold improvements is reported as follows:
Method Taxable Amount
1. Outright FMV of improvement

2. Spread-out Annual =BV, end of the lease term

Income Remaining term of lease
 Pre-termination of lease
If for any reason other than a bona fide purchase from the lessee by the lessor, the lease is terminated,
the lessor realized additional income for the year to the extent that the value of such improvement
exceeds the amount already reported as income on account of such improvement.
The additional income arising from the pre-termination is computed follows:
FMV upon pre-termination ₱xx
Income already recognized/reported (xx)
Income, year of pre-termination xx
  Non-taxable rent
Non-taxable rent income of the lessor may in the form of:
1. Advance rentals representing option money
2. Security deposits to insure faithful performance of certain obligations of the lessee.

 Formula
Rental Payments ₱xx
Expenses of the lessor assumed by the lessee xx
Income from leasehold improvements xx
Total rental income xx

6. Royalties
 From sources within the PH subject to final tax
1. Royalties on books, other literary works and musical composition received by individual
taxpayers (other than NRA-NETB - 25%), subject to 10% final tax.
2. Royalties other than above, is subject to 20% final tax
3. Royalties received by Domestic and Resident Corporation, subject to 20% final tax. Non-
resident corporation regular tax.
 From sources outside the PH are subject to regular tax.

7. Dividends
 Kinds:
4. Cash dividend
Cash dividends shall be taxable upon declaration.
5. Property dividend
Paid in non-cash properties including stock of another corporation. Taxable upon declaration
at the fair market value of the property received as dividend.
6. Stock dividend
General rule: distribution of stock dividend is not taxable because they are not realized income.
Exception: a stock dividend constitutes income if it gives the shareholder an interest different
from that which his former stockholdings represented (i.e., the corporation gave shareholders
the option to received either cash or property dividend instead of stock dividend).
7. Liquidating dividend
Liquidating dividends are exempt up to the extent of the cost of investment being a mere return
of capital. However, anything in excess of the cost shall be considered income and therefore
taxable. Any loss is deductible only to the extent of capital gain.

 Situs of dividend income (Section 42 of the tax code; RMC 62-2021)

Sources of dividend Sources of Income
Domestic Corporation Income is purely from Philippines
Foreign Corporation
Ratio: If ratio is:
<50%, dividend income is treated as entirely derived from sources
GI-PH x Dividend outside of the PH
GI-World ≥50%, dividend income is treated as entirely derived from sources
within the PH (RMC 62-2021)

 Dividend income received by DC from RFC

The tax treatment of dividends received by a domestic corporation from RFC will depend on the
sources of income of the RFC. Under Section 42(AJ(2Xb) of the Tax Code, as amended, "dividend
received from a foreign corporation shall be treated as income derived from sources within the
Philippines, unless less than fifty percent (50%) of the gross income of the foreign corporation for the
three-year period ending with the close of its taxable year preceding the declaration of such dividends
(or for such part of the period as the corporation has been in existence) was derived from sources
within the Philippines.
 Illustration:
Corporation X, an RFC, has gross income for the three-year period of ₱500,000,000 from sources
within the Philippines. However, it also derived gross income from outside of the Philippines,
amounting to ₱300,000,000. In 2021, it declared dividend amounting to Ten Million pesos
(₱10,000,000). Five Million pesos (₱5,000,000) of which was paid to Corporation Z, a domestic
Corporation.

To determine the tax treatment of the dividend received by the domestic corporation, there is a need
to determine if the dividend paid by the RFC is sourced within the Philippines or not. In this scenario,
it qualified as sourced within the Philippines since the gross income of Corporation X from within is
more than fifty percent (50%) of its total gross income. Hence, it is exempt from income tax sans
compliance with the conditions imposed under Section 5 of RR No. 5-2021. Conversely, if the gross
income of Corporation X from within is less than 50% of its total gross income, then, the dividend
received shall be considered as sourced without and, therefore, must comply with the conditions
imposed under Section 5 of RR No. 5-2021 to warrant its income tax exemption.

8. Annuities
Annuity income refers to specified income payable at stated intervals for a fixed or a contingent period, often
for the recipient's life, in consideration of a stipulated premium paid either in prior installment payments or
in a single payment. Annuity payments received by a taxpayer represent a part which is taxable and not
taxable.
The amount received representing return of premium is considered return of capital, hence, should be
excluded in the determination of taxable income.

In contrast, the annuity received representing interest or amounts over the premiums paid are considered
return on capital, thus, should form part of the recipient's taxable income.

9. Prizes and winnings

Summary rules of prizes and winnings for individual taxpayers (except NRA-NETB):
Within PH Outside PH
Prizes:
₱10,000 and below Regular Tax Regular Tax
More than ₱10,000 Final Tax Regular Tax
PCSO & Lotto Winnings:
₱10,000 and below Exempt
More than ₱10,000 Final Tax
Other Winnings (regardless of amount) Final Tax Regular Tax

10. Pensions; and

11. Partner's distributive share from the net income of the general professional partnership

F. OTHER SOURCES OF GROSS INCOME

1. Farming
Taxation of farming gross income requires classification of the following:
a. Livestock and farm product raised and sold – the selling price of the livestock or farm products is
considered gross income.
b. Livestock and farm purchased and sold – only the accounting gross income (sales less cost of sales)
is included in gross income.
Taxation Rules:
a. Taxpayer may follow accrual or cash basis in accounting for inventories.
b. Expenses in raising the livestock and farm products are deductions from computed gross income.
c. The proceeds of crop insurance or livestock insurance constitute gross income because it represents
recovery of lost profits rather than lost capital.
 2. Tax benefits
When a taxpayer gains an advantage by an income tax deduction claimed in the past but were subsequently
recovered, the tax benefit should be included in income in the year recovered as item of gross income.
Examples:
a. Bad debt recovery
General rule: the recovery of bad debts previously written off constitute a receipt of taxable income.
Bad debts claimed as a deduction in the preceding year(s) but subsequently recovered shall be included
as part of the taxpayer’s gross income in the year of such recovery to the extent of the income tax
benefit of said deduction. There is an income tax benefit when the deduction of the bad debt in the
prior year resulted in lesser income and hence tax savings for the company.
b. Tax refund
General rule: refund of taxes that entered the determination of taxable income should be reverted back
to gross income.
Hence, refunds of the following taxes that will not enter the determination of taxable income will not
be included in gross income:
a. Philippine income tax, except the fringe benefit tax
b. Estate or donor’s tax
c. Special assessment
d. Income tax paid or incurred to a foreign country, if the taxpayer claimed a credit for such tax
in the year it was paid or incurred.
e. Stock transaction tax
Note: the above items are not deductible against gross income in any case hence they could
not give rise to a tax benefit to the taxpayer.
3. Unamortized cost of property abandoned and written off but was subsequently re-entered into use
General rule: the cost previously expensed should be reverted back into gross income in the year extraction
operation is resumed.
Exception to Recoveries of Losses and Expenses: Tax Benefit Rule
When the write-off or tax expense is did not cause a reduction in the income tax liability in the period it is
claimed, the recovery or refund is exempt because of absence of tax benefit.

4. Cancellation of indebtedness
a. In consideration of service – treated as compensation income.
b. As an act of gratuity – not an income but a gift taxable under Donor’s Taxation.
c. By a corporation in favor of a shareholder – treated as dividend income subject to final tax.
d. As capital transaction such as forfeiting the right to receive dividend in exchange of the debt – treated
as dividends and is subject to dividend taxation rules.
5. Damage Recovery
a. Compensatory damages – this constitute return of capital and hence, not taxable. For example: moral
damages from personal action such as libel, slander, and breach of promise to marry.
b. Recovered damages – this constitute taxable income since they are recoveries of lost profit. For
example: damages recovered from patent infringement suit.

G. EXCLUSIONS FROM GROSS INCOME

Exclusions from gross income refer to items that are not included in the determination of gross income either
because:
 They represent return of capital or are not income, gain or profit.
 They are subject to another kind of internal revenue tax.
 They are income, gain or profit that is expressly exempt from income tax.
Exclusion vs. Deduction vs. Tax Credit
 Exclusion: not included in the computation of gross income. Refers to income received or earned but is not
taxable as income because of exemption by virtue of a law or treaty.
 Deduction: included in the gross income but later deducted.
 Tax Credit: paid beforehand and is deducted from the tax liability of the taxpayer.
1. Under the constitution
Sec. 4(3) Art. XIV of the 1987 Constitution provides that all assets and revenues of a non-stock, non-profit
educational institution used directly, actually and exclusively for private educational purposes shall be
exempt from taxation.

2. Under the tax code

a. Gifts, bequests and devises
b. Income exempt under treaty
To the extent required by any treaty obligation binding upon the PH govt.
c. Amount received by insured as return of premium
Under life insurance, endowment, or annuity contracts, received either during the term or at the
maturity of the terms or upon surrender of the contract.
d. Proceeds of life insurance policies paid to the heirs/beneficiaries upon the death of the insured
If such amounts are held by the insurer under an agreement to pay interest, the interest payments shall
be included in the gross income.
e. Compensation for injuries or sickness
Received through Accident/Health Insurance or Workmen’s Compensation Act, as compensation for
personal injuries/sickness plus amount of damages received on account of such injuries/sickness
(Must be physical injury, not injury to rights).
f. Retirement benefits received under Republic Act No. 7641 and those received by officials and
employees of private firms, whether individual or corporate, in accordance with a reasonable
private benefit plan maintained by the employer: Provided, that the
i. Retiring official or employee has been in the service of the same employer for at least ten
(10) years and is
ii. Not less than fifty (50) years of age at the time of his retirement: Provided, further,
iii. That the benefits granted under this subparagraph shall be availed of by an official or
employee only once.
g. Any amount received by an official or employee or by his heirs from the employer as a consequence
of separation of such official or employee from the service of the employer because of death sickness
or other physical disability or for any cause beyond the control of the said official or employee.
h. The provisions of any existing law to the contrary notwithstanding, social security benefits,
retirement gratuities, pensions and other similar benefits received by resident or nonresident
citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign
government agencies and other institutions, private or public.
i. Payments of benefits due or to become due to any person residing in the Philippines under the laws
of the United States administered by the United States Veterans Administration.
j. Benefits received from or enjoyed under the Social Security System in accordance with the
provisions of Republic Act No. 8282.
k. Benefits received from the GSIS under Republic Act No. 8291, including retirement gratuity
received by government officials and employees.
l. Income Derived by the Government or its Political Subdivisions – Income derived from any public
utility or from the exercise of any essential governmental function accruing to the Government of the
Philippines or to any political subdivision thereof.
m. Income derived by foreign government – Income derived from investments in the Philippines in
loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the
Philippines by
i. Foreign governments,
ii. Financing institutions owned, controlled, or enjoying refinancing from foreign governments,
and
iii. International or regional financial institutions established by foreign governments.
n. Prizes and awards in sports competition – All prizes and awards granted to athletes in local and
international sports competitions and tournaments whether held in the Philippines or abroad and
sanctioned by their national sports associations.
o. Prizes and awards – Prizes and awards made primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic achievement but only if:
 i. The recipient was selected without any action on his part to enter the contest or proceeding;
and
ii. The recipient is not required to render substantial future services as a condition to receiving
the prize or award.
p. 13th Month Pay and Other Benefits – Gross benefits received by officials and employees of public
and private entities: Provided, however, That the total exclusion under this subparagraph shall not
exceed ninety thousand pesos (₱90,000) which shall cover:
i. Benefits received by officials and employees of the national and local government pursuant
to Republic Act No. 6686;
ii. Benefits received by employees pursuant to Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986;
iii. Benefits received by officials and employees not covered by Presidential decree No. 851, as
amended by Memorandum Order No. 28, dated August 13, 1986; and
iv. Other benefits such as productivity incentives and Christmas bonus. (As amended by RA No.
10653 (February12, 2015), RA No. 10963 (December 17, 2017)).
q. De minimis benefits
r. GSIS, SSS, Medicare and other contributions – GSIS, SSS, Medicare and Pag-ibig contributions,
and union dues of individuals.
s. Gains from the sale of bonds, debentures or other certificate of indebtedness – Gains realized
from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with
a maturity of more than five (5) years.
t. Gains from redemption of shares in mutual fund – Gains realized by the investor upon redemption
of shares of stock in a mutual fund company as defined in Section 22 (BB) of this Code.

H. INCOME FROM DEALINGS IN PROPERTY

Classification of Assets
1. Ordinary assets – assets that are used primarily in the ordinary course of trade or business, such as
a. Stock in trade of taxpayer
b. Property which would properly be included in an inventory of the taxpayer, if on hand
c. Merchandise inventory
d. Depreciable assets used in the trade/business
e. Real property used in trade/business

The sale of the above assets will result in either ordinary gain or loss. The ordinary gain is included in the
gross income, while the ordinary loss is deductible from gross income.

2. Capital assets – All assets not classifiable under ordinary assets

a. Net capital gain - added to ordinary gain.
b. Net capital loss - not deductible from ordinary gain.

Short term capital gain vs. Long term capital gain (holding period)
In case of individuals, the percentages of gain or loss to be taken into account shall be:
1. Short term - 100% if the capital asset has been held for 12 months or less; and
2. Long term - 50% if the capital asset has been held for more than 12 months.
In case of a corporation, the holding period is not applicable; the capital gain and loss are to be reported
in full amount regardless of the number of years the capital asset is held.

Net Capital Loss Carry-Over

1. Corporations cannot carry over a net capital loss
2. If net capital loss is sustained in any taxable year, such loss is treated in the succeeding taxable year as a
loss from the sale/exchange of a capital asset held for not more than 12 mos. (100% deduction)
3. Such net capital loss that should be carried over should not exceed the net income for the year Incurred
(prior year’s net income)
4. Example:
Net income in 2022 = ₱ 6,000
Net capital loss in 2022 = 10,000
 5. Amount deductible in 2023 is ₱6,000 only since it should not exceed the net income of the taxable year
where the loss was incurred. Note that the allowable capital loss to be deducted in 2023 (i.e. ₱6,000) is only
to the extent of the capital gain for 2023.

III. Activity
Problem 1
Trish leased a facility from Divergent Company in January 1, 2021. Terms the lease were as follows:
Annual rental..................................................................... ₱240,000
Annual real property tax assumed by Trish....................... 60,000
Security deposit................................................................. 300,000
Lease term.......................................................................... 12 years

Trish agreed to the pay entire amount of the fees above including the annual rental for 2022. In addition to annual rental
and real property taxes, part of the lease agreement was for Trish to improve the facility. The improvement was
completed on January 1, 2023. Details of the improvements were as follows:
Cost of leasehold improvement............................. ₱3,000,000
Estimated useful life of improvement.................. 15 years

Required: Determine the following:

1. The income to be reported by Divergent in 2021.
2. The income to be reported by Divergent in 2022.
3. The income to be reported by Divergent in 2023 assuming the company opted to report income from improvement
using the outright method.
4. The income to be reported by Divergent in 2023 assuming the company opted to report income from improvement
using the spread-out method.

Problem 2
Totoy Bibo, a national athlete, received the following during 2022:
Ramon Magsaysay award.............................................................. ₱50,000
Prize............................................................................................... 5,000
Prize mandated by law for winning an Olympic Medal............... 500,000
Gift from Mayor Erap................................................................... 250,000
Car from Honda Cars Philippines, as a gift................................. 1,000,000
Winnings - Philippine lotto........................................................... 100,000
Gambling winnings..................................................................... 500,000
Required: Determine the total amount exempt from income tax

Problem 3
Pedro D. Maingat was sideswiped by Juan in a vehicular accident on June 1, 2022. Consequently, he incurred and paid
medical expenses of ₱400,000 and legal fees of ₱200,000 during the year. During the following month he accepted the
settlement offered by Juan amounting to ₱800,000.
Required: Determine the amount of income taxable to Pedro in 2022.

Problem 4
Bernielyn took out a life insurance policy for ₱1,000,000 naming her son as beneficiary. Under the terms of the policy,
the insurer, Malayan Insurance Corporation will pay Bernielyn the amount of ₱1,000,000 after the 25th year of the
policy, and her beneficiary, should she die before that date. Bernielyn outived the policy and received the proceeds. The
premiums paid on the policy was ₱600,000.
Required: How much of proceeds from the insurance policy is taxable?
Problem 5
Determine whether the following income/proceeds received in 2022 is taxable. If applicable, determine the appropriate
tax rate.
Dividend income:
1. Dividend income received by a resident citizen from domestic
corporations ___________________
2. Dividend income received by a resident alien from domestic
corporations ___________________
3. Dividend income received by a resident citizen from foreign
corporations ___________________
4. Dividend income received by a domestic corporation from another
domestic corporation ___________________
5. Dividend income received by a domestic corporation from a resident
foreign corporation (assume the ratio of gross income derived in the
Philippines for the past three (3) years was 70%) ___________________
6. Dividend income received by a resident foreign corporation from
domestic corporation ___________________
7. Dividend income received by a resident foreign corporation from another
resident foreign corporation. The ratio of income in the Philippines over
its world income for the last three (3) years was 40% ___________________

Proceeds from injuries and damages:

1. Actual damages for injuries suffered ___________________
2. Moral damages for grief, anxiety and physical sufferings ___________________
3. Interest on moral damages ___________________
4. Exemplary damages ___________________
5. Interest from nontaxable damages ___________________
6. Damages for loss of goods and other belongings ___________________
7. Damages for unrealized profits ___________________

Prizes and awards:

1. Prize from a golf competition in South Africa by a resident citizen
___________________
2. The Nobel Peace Prize ___________________
3. Prize won as the Most Valuable Player in FIBA Asia representing
Philippines under SBP, the national sports association for basketball in
the Philippines ___________________
4. Award for being a model employee ___________________
5. Award for being the Most Outstanding Teacher of the year ___________________
6. ₱5,000 prize won in an essay contest ___________________
7. ₱100,000 prize won in Pilipinas Got Talent ___________________
8. ₱100,000 Philippine Lotto winnings ___________________
9. Lotto winnings abroad ___________________
10. ₱50,000 Raffle draw winnings by a resident citizen ___________________
11. ₱50,000 Raffle draw winnings abroad by a resident citizen ___________________

Various proceeds/income:
1. Royalties, in general ___________________
2. Separation pay received by a 50-year old employee due to the
retrenchment program of the employer ___________________
3. Income derived from investments in the Philippines in loans, stocks,
bonds or other domestic securities by foreign governments, financing
institutions owned, controlled or enjoying refinancing from foreign
governments and international or regional financial institutions
established by foreign governments
___________________
 4. Income derived from interest on deposits in banks in the Philippines by
foreign governments, financing institutions owned, controlled or
enjoying refinancing from foreign governments and international or
regional financial institutions established by foreign governments
___________________
5. Income from business transacted by CDA registered cooperatives with
its members ___________________

Problem 6
The following data on net income, bad debt, write-off and recovery show:
2021: Case A Case B Case C
Net income (loss) before write-off........................... ₱120,000 ₱60,000 (₱40,000)
Less: Bad debt written-off claimed as deduction..... 40,000 40,000 50,000
Net income (loss) after write-off.............................. 80,000 20,000 (90,000)
2022:
Subsequent recovery................................................ 40,000 10,000 50,000
The taxable recovery in 2022 should be _____.

Problem 7
Sandy, a nonresident Korean (not engaged in trade) stockholder, received dividend income of ₱300,000 in 2022 from
Super Bowl Corporation, a foreign corporation doing business in the Philippines. The gross income of the foreign
corporation from sources within and without the Philippines for the past three years preceding 2021 were provided as
follows:
Source 2019 2020 2021
Philippines 16,000,000 15,000,000 17,000,000
Abroad 8,000,000 11,000,000 13,000,000
Required: How much is the final tax withheld from Sandy’s dividend income?

Problem 8
A, resident citizen had the following data for the years 2019 to 2022.
2019 2020 2021 2022
Ordinary taxable Income ………….. ₱200,000 ₱250,000 ₱300,000 ₱350,000
Gain from sale of capital assets:
Held for 12 months ……………. 20,000 2,000 100,000 57,000
Held for 13 months ……………. 8,000 10,000 20,000 28,000
Loss from sale of capital assets:
Held for 19 months ……………. 22,000 20,000 60,000 10,000
Held for 7 months ……………... 3,000 30,000 50,000 5,000
Required: Compute for the taxable income of the taxpayer for the years, 2019 to 2022.

Problem 9
A domestic corporation had the following data for taxable year 2021 and 2022:
2021 2022
Taxable income before capital assets transaction …... ₱ 400,000 ₱ 500,000
Gain from sale of capital assets:
Held for 12 months …………………………… 20,000 23,000
Held for 9 months ……………………………. 5,000 10,000
Loss from sale of capital assets:
Held for 15 months ………………………….. 7,000 15,000
Held for 22 months ………………………….. 25,000 12,000
Required: Compute for the taxable net income of the corporation for the years 2021 and 2022.