Chapter 11 Problem 11-1 True or False Write true if the statement is correct or false if the statement is incorrect. 1. All qualified dependents are granted an additional personal exemption of P50,000 as long as the maximum number of dependents is four. 2. A foreigner who stays in the Philippines for 180 days during the taxable year is deemed as doing business in the Philippines. 3. Nonresident aliens not engaged in business in the Philippines are allowed for personal exemptions and additional exemptions subject to reciprocity. 4. The basic personal and additional exemptions of a single mother with an unrecognized dependent child are P50,000 and P25,000. 5. Individual taxpayers are allowed of installment payment for their income taxes when the tax due is in excess of P2,000. 6. At the option of the taxpayer, income taxes paid in the foreign countries can be claimed as deduction from gross income or tax credit subject to limit. 7. A senior citizen’s passive income is subject to final income tax. 8. An individual taxpayer is exempted from filing income tax return if his sole income has been subjected to final withholding tax. 9. For self-employed taxpayers, his quarterly income tax return is not to be reduced by personal exemption. 10. Income earned outside the Philippines by domestic helpers is tax- exempt because they are considered nonresident citizens. 11. The personal exemption of a nonresident alien not engaged in business in the Philippines is subject to reciprocity. 12. A citizen who works abroad most of the time during the taxable year is a nonresident citizen. Problem 11-2 True or False Write True if the statement is correct or False if the statement is incorrect. 1. A man os woman who provides chief support to a brother who is 20 years old and incapable of self support is entitled to claim basic exemption of P50,000 and additional exemption of P25,000. 2. Payments for hospitalization not exceeding P2,400 per year is allowed as a deduction for individual taxpayers.
Transcript
Chapter 11
Problem 11-1 True or FalseWrite true if the statement is correct or false if the statement is incorrect.
1. All qualified dependents are granted an additional personal exemption of P50,000 as long as the maximum number of dependents is four.
2. A foreigner who stays in the Philippines for 180 days during the taxable year is deemed as doing business in the Philippines.
3. Nonresident aliens not engaged in business in the Philippines are allowed for personal exemptions and additional exemptions subject to reciprocity.
4. The basic personal and additional exemptions of a single mother with an unrecognized dependent child are P50,000 and P25,000.
5. Individual taxpayers are allowed of installment payment for their income taxes when the tax due is in excess of P2,000.
6. At the option of the taxpayer, income taxes paid in the foreign countries can be claimed as deduction from gross income or tax credit subject to limit.
7. A senior citizen’s passive income is subject to final income tax.8. An individual taxpayer is exempted from filing income tax return if his sole income has been subjected to
final withholding tax.9. For self-employed taxpayers, his quarterly income tax return is not to be reduced by personal exemption.10. Income earned outside the Philippines by domestic helpers is tax-exempt because they are considered
nonresident citizens.11. The personal exemption of a nonresident alien not engaged in business in the Philippines is subject to
reciprocity.12. A citizen who works abroad most of the time during the taxable year is a nonresident citizen.
Problem 11-2 True or FalseWrite True if the statement is correct or False if the statement is incorrect.
1. A man os woman who provides chief support to a brother who is 20 years old and incapable of self support is entitled to claim basic exemption of P50,000 and additional exemption of P25,000.
2. Payments for hospitalization not exceeding P2,400 per year is allowed as a deduction for individual taxpayers.
3. If the taxpayer dies during the taxable year, his estate may claim the personal exemption as if he died at the close of such year.
4. Tax on special aliens is 15% of their net income derived within the Philippines.5. Professional or talent fees for services rendered by an individual shall be subjected to a credible value
added tax.6. An individual taxpayer can claim additional exemption of P25,000 for supporting a senior citizen who can
show a certification from OSCA.7. An alien residing and doing business in the Philippines is allowed to have a tax credit for income taxes paid
in other country.8. If the professional fee of an entertainer exceeds P720,000, the credible withholding tax should be 20%.9. Gross income for computation of standard deduction includes business income plus other taxable income
not subjected to final tax.10. Interest income of a foreign currency deposit of a nonresident Filipino is subject to final withholding tax of
7.5%.
11. The financial position and profit and loss statements are to be attached in the annual income tax return if the business gross sales in any quarter exceed P50,000 but do not exceed P150,000.
12. The income of a professional entertainer can be reduced by optional standard deduction.
Problem 11-3 Multiple ChoiceSelect the letter that contains the best answer.
1. The following individual taxpayers are granted basic and additional personal exemption except.a. Resident citizen d. Nonresident alien subject to reciprocityb. Nonresident citizenc. Resident citizen
2. For Philippine income tax computation, which of the following individual is taxable also for income earned outside the Philippines?
a. Nonresident alien c. Resident alienb. Nonresident citizen d. Resident citizen
3. A foreign individual who have stayed in the Philippines during the taxable year for more than 180 days but less than one year is considered a
a. Nonresident alien doing business in the Philippinesb. Nonresident alien not doing business in the Philippinesc. Resident aliend. Resident alien doing business in the Philippines
4. Which of the following is taxable only on income earned within?i. Resident alienii. Nonresident alien doing business in the Philippinesiii.Nonresident alien not doing business in the Philippines
Choices:a. I,ii, and iii c. ii onlyb. Ii and iii only d. iii only
5. Which of the following individual is taxable at 15% on compensation income derived within the Philippines?
i. Compensation income of citizen earned from employment with regional or area headquarters of multi- National Corporation.ii. Compensation of alien earned from employment with the petroleum service contractor.iii. Compensation income of alien earned from employment with an offshore banking unit.
Choices:a. i,ii, and iii c. ii onlyb. Ii and iii only d. iii only
6. Which of the following is not required to file an income tax return?a. Resident citizen with respect to his business income earned outside the Philippinesb. An employee with only one employer and whose compensation income is fully collected with creditable withholding tax.c. Nonresident citizen with respect to his compensation income earned within the Philippines.d. Nonresident alien with respect to his business income earned within the Philippines.
7. Which of the following is not correct?a. A self-employed individual is required to file a quarterly income tax return.b. The income reported in quarterly tax return is cumulative during the year.c. Business expenses reduce the income reported in the quarterly income tax return.
d. The income reported in the quarterly tax return is reduced by personal exemption.
8. Statement 1: An alien who shall reside in the Philippines with no definite intention as to his tax is a resident of the Philippines.Statement 2: A foreigner who has acquired residency in the Philippines shall only become a nonresident alien when he actually departs with the intention of abandoning his residency in the Philippines.
a. Only statement 1 is correctb. Both statements are correctc. Only statement 2 is correctd. Both statements are incorrect
9. Statement 1: Compensation income is reduced by personal expenses to arrive at the taxable amount.Statement 2: Business income is reduced by business expenses to arrive at taxable amount.
a. Only statement 1 is correctb. Both statements are correctc. Only statement 2 is correctd. Both statements are incorrect
10. The following persons benefit from personal exemptions, excepta. Resident alien, not doing business in the Philippinesb. Nonresident alien, with only compensation income earned in the Philippinesc. Foreigner who stayed in the Philippines for more than 183 days and earned business income within.d. An alien with only business income earned within after a year of stay in the Philippines.
Problem 11-4 Multiple ChoiceSelect the letter of the best answer.
1. An individual taxpayer, whose personal exemption allowed in the lower amount provided between Philippine Tax Code and his country’s Tax Code.
Citizenship Residency Business incomea. Filipino Within Nob. Filipino Outside Yesc. Alien Within Nod. Alien Outside Yes
2. Statement 1: If both husband and wife are earning income, only one of them could claim for the additional personal exemption.Statement 2: The husband is the rightful claimant of additional personal exemption, unless he waives his rights in favor of his wife.
a. Only statement 1 is correctb. Both statements are correctc. Only statement 2 is correctd. Both statements are incorrect
3. Statement 1: A tax credit will reduce the taxable income.Statement 2: A tax credit will be available only when there is foreign income tax paid by resident Filipino for income earned without.
a. Only statement 1 is correctb. Both statements are correctc. Only statement 2 is correctd. Both statements are incorrect
4. One of the following is not creditable against the total computed tax per ITR.a. Final withholding taxb. Foreign income tax paid by resident citizenc. Creditable withholding tax on compensationd. Income tax paid for the first three quarters for the business income earned
5. For taxation purposes, A Filipino citizen who stayed outside the Philippines and worked abroad for 182 days during the taxable year is classified as
a. Nonresident citizen c. overseas contract workerb. Resident citizen d. special taxpayer
6. Which of the following statements is true?a. Resident citizen with income from foreign sources only is allowed a basic personal exemption only.b. Nonresident alien not engaged in business in the Philippines is allowed basic personal exemption only.c. Nonresident citizen engaged in business in the Philippines is allowed for basic and additional personal exemptions.d. Nonresident citizen with income from the Philippines only is allowed both basic and personal exemptions.
7. The personal exemption of the nonresident alien engaged in trade or business in the Philippines is equal to that allowed by the
a. Income tax law of his country to a citizen of the Philippines not residing there.b. Income tax law of his country to a citizen of the Philippines not residing there or the amount provided by the NIRC to a citizen or resident, whichever is lower.c. NIRC to a citizen or resident.d. Income tax law of his country allows to a citizen of the Philippines not residing there or the amount provided by the NIRC to a citizen or a resident alien, whichever is higher.
8. Which of the following taxpayers whose personal exemptions is subject to the law on reciprocity under the Tax Code?
a. Nonresident alien with respect to his income derived outside the Philippines.b. Nonresident alien who shall come to the Philippines and stay therein for an aggregate period of more than 180 days.c. Resident alien deriving income from a foreign country.d. Nonresident alien not engaged in trade or business in the Philippines whose country allows personal exemption to Filipinos who are not residing but deriving income from said country.
9. Statement 1: The maximum amount of hospitalization and health insurance allowed as deduction is P2,500 per year.Statement 2: The allowable hospitalization and health insurance is deductible from compensation income or business income whichever is applicable.
a. Only statement 1 is correct.b. Only statement 2 is correct.c. Both statements are correct.d. Both statements are not correct.
10. A net taxable income of a resident citizen sole proprietor of a proprietary educational institution is subject to a
a. Normal tax of individualsb. 10% special tax
c. 25% special taxd. 32% normal corporate tax
Problem 11-5 Multiple ChoiceSelect the letter that contains the best answer.
1. Which of the following is the correct amoumt of personal additional exemption?a. P50,000 for married individualb. P32,000 for head of the familyc. P25,000 for senior citizend. P25,000 for each qualified child (maximum of 4)
2. Which of the following is the correct basic personal exemption?a. P50,000 for single individual with his parent as dependentb. P50,000 for legally separated individual, with no dependentc. P50,000 for married individual with no dependentd. All of the above
3. Which of the following amount of winnings is subject to final tax of 20%?a. P10,000 winnings outside the Philippinesb. P10,000 winnings earned within the Philippinesc. P1,000,000 Philippines sweepstakes winningsd. P9,000 first prize singing contest
4. All of the following taxes are classified as income taxes, except a. 20% royalty tax b. 10% dividend tax c. ½% of 1% tax on the selling price of shares of stock traded in the local stock exchange d. 6% capital gain tax on sale of land
5. Which of the following is the correct income tax rate?a. 20% dividend income earned within by nonresident alien doing business income witb. 25% on gross income earned within by nonresident alien not doing business in the Philippinesc. 25% 0n more than P1,000,000 business income earned within by nonresident aliend. 20% on P50,000 compensation income earned by senior citizen
6. The normal tax rate on individual taxpayer is froma. 2% to 32%b. 5% to 32%c. 5% to 35%d. 2% to 32%
7. One of the following individual taxpayer could claim personal exemption as head of the familya. Single, supporting a 30 year old paralytic brotherb. Widow, with a 25 year old son under his custodyc. Legally separated with 21 year old sibling as qualified dependentd. Married but legally separated without dependent
8. All of the following dependents will entitle the taxpayer for additional personal exemption excepta. 25 year old, but mwentally retarded sonb. 20 year old, unmarried daughterc. 18 year old, unemployed sond. 19 year old sister
9. Which of the following is the correct creditable withholding tax on professional income? a. 15% on professional income of practicing lawyer earning P500,000 a year b. 20% on professional incomeof entertainer eartning P500,000 and below per year c. 10% o professional income of entertainer earning more than P720,000 per year d. 15% on professional income of entertainer earning more than P720,000 per year
11. In the year2009, P500,000 dividends from a domestic corporation and/or P500,000 share in the net income of a taxable partnership received by a citizen is subject to a final tax of a. 15% c. 20% b. 6% d. 10%
12. If an individual person is allowed to pay his tax on installment payment, the date would be a. May 15 for the first installment and July 25 for the second installment b. April 25 for the first nstallment and August 15 for the second installment c. April 15 for the frst installment and July 15 for the second installment d. May 15 for the first installment and August 15 for the second installment
Problem 11-6 Income subject to Philippine Income TaxJuan, single, is an OFW with a monthly income abroad amounting to P20,000. He has a sari-sari store in the Philippines with an average monthly income of P10,000. If Juan returned in the Philippines from March 1 of the taxable year and stayed to mange his sari-sari store,how much of his income is subject to tax in the Philippines after personal exemption?
a. P70,000 c. P110,000 b. P100,000 d. P120,000
Problem 11-7 Special TaxpayerMr. Roman Dinero (single), a Spaniard who is a resident general manger of Sbbot Laboratories- a multi-national company’s regional operating headquarters established in the Philippines- received a monthly salary of P250,000.
What is the amount of Mr. Roman Dinero’s income tax payable?
a. P12,500 c. P450,000b. P80,000 d. P918,600
Problem 11-8 Personal Exemption (Married Individual)What would be the maximum amount of personal exemption allowed to Filipino citizen couple that have five qualified dependent children during the taxable year?
a. P200,000 c. P100,000b. P150,000 d. P 75,000
Problem 11-9 Personal Exemption (Legally Separated)What would be the amount of Personal Exemptiion allowed to a citizen who is legally separated whose wife and minor son are living together in USA?
a. P100,000 c. P50,000b. P125,000 d. P75,000
Problem 11-10 Personal Exemption (Change of Status)What would be the personal exmption allowed to a citizen whose wife died in December of the taxable year after giving birth to their son?
a. P100,000 c. P125,000b. P 75,000 d. P 50,000
Problem 11-11 Personal and Additional ExemptionsThe taxpayer is a widow who supports the following:
(a) Legitimate child by a former marriage, 12 years old;(b) Recognized natural child with present common law husband, 6 years old;(c) Common law husband who is single; and(d) Widowed mother (senior citizen) of her common law husband.
The amount of her personal and additional exemptions isa. P50,000 c. P100,000b. P75,000 d. P125,000
Problem 11-12 Personal Exemption (Reciprocity)Mr. Ronal Baden, an American citizen and a resident of California, U.S.A., has business income derived in the Philippines amounting to P500,000 for the year. He is married and has 2 minor children.
How much will be allowed as his personal exemption for the computation of his income tax in the Philippines, if his country’s tax law is granting the same exemption to Filipino citizens, except for additional exemption where his country’s tax law is allowing P10,000 per dependent child,
a. P 50,000 c. P75,000b. P100,000 d. P -0-
Problem 11-13 Special DeductionHow much is the special deduction allowed for the payment of a premium on health insurance during the taxable year by a resident alien if the total amount paid is P3,000, total family income is P200,000 and payment was made in the month of December of the current year, covering one year period starting December of the current year of the taxable year.
a. P 200 c. P3,000b. P2,400 d. P2,000
Problem 11-14 Special DeductionMr. Tyrone Velasquez has total salary of P180,000 , and Mrs. Girlie Velasquez has P120,000 income for the year, both earned from employment in the Philippines.
They paid P150 per month health insurance policy for the months of June to December 200x. Mr. Velasquez as head of the family could claim special deductions for these payments equal to
a. P 900 c. P2,400b. P1,800 d. P-0-
Problem 11-15 Dependent Other than ChildrenMaria, Married and without income, receives her allowance amounting to P50,000 per month from her husband who is working in Brunei as Accountant. She supports her two siblings and parents who are qualified as dependent relatives.
How much is the total personal and additional exemptions to Maria?
a. P125,000 c. P50,000
b. P100,000 d. P-0- Problem 11-16 Income of Senior CitizenA senior citizen reported compensation income of P40,000 net of withholding tax. His net tax payable at the end of the taxable year would be
a. P-0- c. P2,500b. P2,000 d. P4,000
Problem 11-17 Taxpayers IncomeX, single, reported the following income and expenses during the taxable year:
Within WithoutCompensation Income P240,000 Professional Income 300,000 P200,000Interest Income 100,000 60,000Dividend Income 60,000 40,000
1. What is the amount of net income subject to tabular tax and final tax in the Philippines if X is a resident
Problem 11-18 Income of Husband and WifeThe net taxable income of husband and wife are P140,000 and P250,000 respectively. These incomes are net of withholding tax amounting to P20,000 and P45,000 respectively.Their income tax still due and payable would be
Husband Wifea. P22,500 P50,000b. P20,000 P45,000c. P20,000 P22,500d. P 2,500 P 5,000
Problem 11-19 Total Income Tax Due (Resident alien)Mr. Erection, a married Indian national, stays in the Phikippines with no definite intention. He received P600,000 Compensation income as researcher of Blue Good Ocean, a domestic corporation. In addition, he invested in thePhilippines some of his savings earning dividend income and interest income of P120,000 and P10,000 respectively.
If the interest income is a dollar deposit under the expanded currency deposit system, how much is the total income tax due of Mr. Erection in the Philippines?(One dollar is P50)
a. P 37,500 c. P146,760b. P190,500 d. P196,260
Problem 11-20 Capital Gains TaxMr. Jose Matbagan, a citizen and a resident of the Philippines had the stock transactions during 200x:
(a) Capital gain tax on sales directly to a buyer at P280,000 of shares of a domestic corporation,P80,000(b) Capital gain on sale directly to a buyer at P2,000,000 of land in Makati, Philippines,P300,000
The total capital gains tax paid during the year should be
a. P 19,400 c. P108,000b. P 22,000 d. P124,000
Problem 11-21 Final tax and Normal TaxIn 200x, Mr. Marvin Ebojo, a native of Pangasinan, received during the year the following:Proceeds from copyright royalty, net of tax P 11,250Proceeds from mineral claim 12,000Share from trading partnership, net of withholding tax 270,000
Assume that Mr. Ebojo is single, compute the following:
1. The final tax on Mr. Ebojo’s incomea. P50,000 c. P31,250b. P34,250 d. P 4,250
2. Income tax still due and payable per ITR
a. P50,000 c. P31,250b. P34,250 d. P-0-
Problem 11-22 Professional IncomeProfessional income of a VAT-registered person is subject to Output VAT and required to be withheld with income tax. If the net proceeds for the services rendered is P92,000, net of 20% withholding tax based on the service fee, the amounts of service fee, withholding tax and VAT would be
Service fee Withholding tax VATa. P112,000 P20,000 P12,000b. P100,000 P20,000 P12,000c. P 97,391 P19,478 P11,687d. P 32,000 P18,400 P22,080
Problem 11-23 Various IncomeMr. Crisanto Estrada, widower with three qualified dependent children and a practicing accountant has the following receipts and expenditures for the calendar year ended December 31, 2009.Receipts:Professional fees P 500,000Allowance as director of Corporation A 25,000Interest on time savings deposits, net of 20% final tax 16,000Commissions 5,000
Expenditures:Salaries of Assistants P 96,000Partial payment of loan 20,000Interest on the loan (The loan was used for the repair of theResidential house of Mr. Estrada) 3,850Travelling Expenses-business related 11,000
Light and water-office 7,890Light and water-residence 6,500Stationeries and supplies used in the office 1,960 Office rent 60,000 Contributions exclusively for religious purposes 38,500
1. The allowable deductions from the business gross income is
a. P209,165 c. P212,165 b. P210,725 d. P176,850
2. The net income for income tax purposes after itemized deduction but before personal and additional
exemptions isa. P317,835 c. P320,835b. P319,275 d. P36,459
3. The income tax due in ITR is
a. P56,550 c. P38,350 b. P50,000 d. P36,459 Problem 11-24 Determination of Correct Income (CPA Examination)Data from the records of Mr. Alex Valdez are:Net worth, December 31, 2008 P325,000Nontaxable income for 2009 2,000Nondeductible expenses for 2009 (excluding donations and contributions) 150,000Fully deductible donations 20,000Contributions subject to limitations 50,000Net Worth, December 31, 2009 375,000Reported/Declared net income subject to tax, 2009 24,200 Required: Compute for the following:
1. The correct income subject to normal graduated tax if Mr. Valdez is a widower, with four qualified dependent children.
2. The unreported taxable income for the year 2009 of Mr. Valdez.
Problem 11-25 Itemized vs. OSD (CPA Exam)Mr. George Estrada, Filipino resident, whose wife died during the taxable year, has six qualified dependents. He is a director of a business firm from which he received per diem and allowances amounting to P20,000 during the taxable year. The income tax withheld on his is P1,000.He also operates a hardware store which generated a gross income of P400,000. The total itemized expense of his business is P150,000 but he encounters difficulty in determining how much of these expenses can be classified as direct costs and deductible expenses. He asks you to prepare his income tax return.
Required: Compute the taxable income and tax still due payable by Mr. Estrada using: 1. Itemized deduction. 2. Optional Standard Deduction Problem 11-26 Taxable Income (With Capital Asset Transactions)The following data are the operating results and capital assets (not real estate, not corporate shares of stock) transactions of Mr. Jovito Galam, a contractor for the years 2009 and 2010.2009 Gross receipts from contracts P1,600,000
Less:Materials and supplies used P700,000 Labor 865,000 1,565,000 Net Income P35,000
Net Capital Loss Carryover to 2010 P45,000 2010 Gross receipts from Contracts P2,550,000 Less: Materials and supplies used P1,200,000 Labor 750,00 1,950,000
Net Income P600,000 Short term Capital gains 40,000 Long term Capital Gains 30,000 Short term capital loss 10,000
Required: If Mr. Galam is married and has three qualified dependent children,how much is the taxable income for the taxable income for the year ended December 31, 2010?
Problem 11-27 Compensation and Business incomeA resident citizen, single with qualified dependent chikd has the following income and expenses during the year:
Compensation Income, net of WTW P P240,00013th month pay 20,000 Personal Expenses 60,000Business Income 100,000Business Expense allowed 120,000Premium on health/hospitalization insurance paid 3,000
Required: Compute the following: 1. Taxable income 2. Income tax still due and payable per ITR
Problem 11-28 Monthly and Quarterly withholding taxesMs. Jennifer Bay-on, single has thefollowing data from January to December 2009:Monthly salary P 30,00013th month pay and bonus 35,000SSS contribution (one whole year) 3,000Medicare/Philhealth contribution 2,000Business income per quarter 200,000Business Expense per quarter 120,000 Capital asset transactions:Proceeds from the sale of Personal car 300,000 Cost of the car sold: The car’s estimated useful life is 8 years but used by Ms. Bay-on for 6 years 400,000
Required:
Compute the following:1. Monthly withholding taxes paid2. Quartely business income tax paid
Problem 11-29 Income tax of Professional IncomeRosanna Roses, a resident Filipina actress, earned P1,700.000 as an entertainment fee during the taxable year, net of related 15% creditable withholding tax. In addition, she earned the following from business: Gross Receipts Income tax paid
Required: Assume that Roses is single with four qualified dependent children, compute the following:
1.Net taxable income2.Income tax due3.Tax credit4.Income tax still due and payable
Problem 11-30 Income Tax of Husband and WifeMr. and Mrs. Bravo living with 8 qualified dependent children have the following income and expenses during the taxable year: Mr. Bravo Mrs. BravoCompensation net of WTW P200,000 P250,000Withholding tax on wages (WTW) 25,000 50,000Personal expenses in going to work 80,000 100,000Professional income net of withholding tax 100,000 Premium on health/hospitalization insurance paid 2,400The couple had communal property with a rent income of P300,000 during the year.
Required: Compute for tax still due and payable (ITR) of Mr. and Mrs. Bravo.
Problem 11-31 Income Tax of Various EarningsAn individual taxpayer, married with 4 qualified dependent children:Compensation income P300,00013th month pay and bonuses 40,000Business income 400,000Business expense allowed 300,000Dividend income 50,000Royalty income – literature 80,000Capital gain- long term 60,000Income taxes paid on: Compensation 50,000 Quarterly business income 20,000 Dividend 5,000 Royalty 8,000
Required: Compute the following:1. Taxable income subject to normal tax.2. Income tax still due and payable reportable in ITR
Problem 11-32 Compensation ProblemThe following data are taken from the books of the taxpayer:Sales P1,000,000Cost of sales 700,000Gain from sale of capital assets-short term 300,000Loss from sale of capital assets-long term 400,000Gambling winnings 200,000Gambling losses 250,000Compensation income net of tax withheld P20,000 180,00013th month pay, and other bonuses 35,000Proceeds from life insurance of his mother 100,000Business expenses, including robbery loss of P50,000, Contribution to church, P60,000,
And interest expenses, P30,000 250,000Bad debts recovery, not deducted previously 20,000Lotto winnings, USA 300,000Personal expenses 100,000Tuition fees of children 150,000Interest income 20,000
Required: Compute the income tax still due and payable, if the taxpayer is an individual Filipino resident, married and has 4 qualified dependent children.
Problem 11-33 Comprehensive ProblemAtty. Abo Gado, a CPA-Lawyer, has the following income and related expenses during the year 2009:Basic salary per month as a professor P25,000Clothing allowance – de minimis per year 4,50013th month pay 13,000Rice subsidy de – minimis per month 1,600Professional fees, inclusive of VAT 224,000Sales 5,000,000Cost of sales 3,200,000Operating expenses before contribution 900,000Contribution to 100,000Interest expense (included in the operating expenses) 50,000Interest income 75,000Total quarterly tax paid 20,000Health hospitalization insurance paid 5,000 The taxpayer married with six qualified dependent children.
Required: Compute for the following:1. Total nontaxable 13th month pay and other benefits.2. Estimated withholding tax from January to November.3. Total income tax still due and payable on December 31,2009.
Problem 11-34 Comprehensive ProblemA taxpayer named Ramsay Colorado, single, has the following income and expenses during the taxable year 2009: Philippines USACompensation income net of WT 10% P360,000 $2,250Interest income, net of WT 20% 50,000 1,200Commission income net of WT 5% 57,000 950Lotto winnings 100,000Dividend income net of WT 10% 9,000 1800One US dollar is equivalent to P50. All income derived without come from USA assume that withholding tax were applied to income derive within the Philippines.Required: Determine the income taxes due and payable of the taxpayer assuming that he is a;
1. Resident citizen2. Nonresident citizen3. Nonresident alien engage in business in the Philippines; and4. Nonresident alien not engage in business in the Philippines.
Chapter 12
Problem 12 – 1 True or FalseWrite True if the statement is correct or False if the statement is incorrect.
1. A corporation does not include general professional partnership. 2. Domestic corporation includes government owned and controlled corporations.3. Domestic and foreign resident corporations are taxed on income within and without.4. Resident foreign corporation in the Philippines are organized through the laws of foreign country
irrespective of the nationality of the stockholders.5. The gross income derived within by the nonresident foreign corporation is taxed in the Philippines with
35% normal tax.6. Nonstock and nonprofit educational institutions are exempt from the income tax.7. After three years of operation, the MCIT is applicable only to domestic and resident foreign corporation
that incurred a ner loss or zero taxable income or a normal income tax is lesser than the minimum income tax.
8. The excess of MCIT can be carried forward as tax credit against the normal tax for the three immediately succeeding years.
9. An expanded withholding tax can be deducted from MCIT.10. The capital gain earned outside the Philippines by resident foreign corporation is taxable based on the
normal corporate income tax.11. A sale of real property by nonresident foreign corporation is subject to a final tax of 35% based on gain.12. A domestic or resident corporation’s interest income under the expanded foreign currency deposit system is
subject to a final tax of 10%.13. The interest income from foreign currency loans granted to residents is subject to a passive income tax of
20%.
Problem 12 – 2 True or FalseWrite True if the statement is correct or False if the statement is incorrect.
1. All proprietory educational institutions are subject to a special income tax rate of 10%.2. The capital gains on sale of land located outside the Philippines of a resident foreign corporation is subject
to a capital gains tax of 6% based on the selling price or fair market value, whichever is higher.3. The offshore banking units are subject to 15% tax rate based on gross income.4. Regional operating head quarters are subject to a 10% tax rate based on their taxable income.5. The cooperative is subject to a 20% final tax on its interest income earned from the bank.6. Government owned and controlled corporations are exempt from income tax.7. The applicable tax on foreign international carrier is 2 ½% of the Gross Philippine Billings.8. A corporation should file a quarterly income tax return within 60 days after the end of each first three
quarters of the taxable year.9. The objective of imposing tax on the improperly accumulated income is to force the corporation to
distribute dividends to stockholders and to force corporations to expand their businesses.10. Investment of substantial amount in long-term debt securities is an improper accumulation of retained
earnings.11. In computing the surtax, NOLCO is to be added in the income per income tax return.12. If the corporate income has been subject to IAET, it shall no longer be subjected to IAET in later years,
even if not declared as dividend.
Problem 12 – 3 Multiple Choice
Select the letter that contains the best answer.
1. A corporation whose income within and without the Philippines is taxable.a. Domestic Corporationb. Foreign Corporationc. Resident Foreign Corporationd. Nonresident Foreign Corporation
2. A corporation is taxable on business income after business expenses, excepta. Domestic Corporationb. Foreign Corporationc. Resident Foreign Corporationd. Nonresident Foreign Corporation
3. Which of the following corporation is taxed based on gross income?a. Cooperativeb. Domestic Corporationc. Resident Foreign Corporationd. Nonresident foreign Corporation
4. What kind of income tax is subject to 2% of corporate gross income?a. Normal Corporate Income Taxb. Minimum Corporate Income Taxc. Gross Income Taxd. Capital Gains Tax
5. In paying corporate income tax, the excess of minimum corporate income tax could be used as a deduction within three immediate succeeding taxable years and such excess could only be deducted from
a. Normal corporate taxb. Minimum corporate taxc. Gross income taxd. Capital gains tax
6. The minimum corporate income tax shall be used in computing and paying the corporate income tax if the corporation has been
a. In its fourth yearb. Incurred net loss or zero taxable incomec. The normal income tax is lesser that minimum income taxd. All of the above
7. The gross income tax shall be applicable toa. Servicing and manufacturing firmsb. Manufacturing firms and merchandising firmsc. Merchandising and service firmsd. All of the above
8. Royalty income derived within the Philippines by a nonresident foreign corporation shall be subject toa. 20% final taxb. 7.5% final taxc. normal corporate taxd. minimum corporate tax
9. Capital gains of resident foreign corporation on sale or exchange or disposition of lands and or buildings located in the Philippines.
a. 6% of selling price or FMV whichever is higherb. 6% of selling price or FMV whichever is lowerc. ½ of 1% of the selling priced. Subject to normal corporate income tax
10. The following corporate income are subject to income tax, except,a. Cash dividends received from a domestic corporation by other domestic corporationb. Royalty income received from a domestic corporationc. Interest income on foreign loans
d. Inter-corporate dividends received by a non-resident foreign corporation form a domestic corporation.
11. The offshore banking units of resident foreign corporations are subject to 10% tax on income derived from:a. Foreign currency transactions with local commercial banksb. Foreign currency transactions with branches of foreign banks authorized by Bangko Sentralc. Interest income derived from foreign currency loans granted to residentsd. All of the above
12. The net taxable income of regional operating headquarters by multi-national companies engaged in administrative service is
a. Tax exemptb. Subject to 10% income taxc. Subject to 15% final taxd. Subject to 35% corporate tax
13. The tax imposed on intercorporate dividends received by a domestic corporation from a resident foreign corporation is
a. Tax exemptb. Subject to 10% income taxc. Subject to 15% final taxd. Subject to 35% corporate tax
Problem 12 – 4 Multiple ChoiceSelect the letter that contains the best answer.
1. For taxation purposes, the following are nontaxable corporation, excepta. SSSb. General professional partnershipc. General commercial partnershipd. PAGCOR
2. The following are corporations exempt from income tax, excepta. Non-stock and non-profit educational institutionsb. Government owned and controlled corporationsc. CDA registered cooperativesd. Government educational institution
3. The business income of a domestic corporation is subject to any of the following excepta. Minimum corporate income taxb. Normal corporate taxc. Optional gross income taxd. Final withholding tax
4. All of the following are subject to minimum corporate income tax excepta. Nonresident foreign corporationb. General commercial partnershipc. Resident foreign corporationd. Domestic corporation
5. The excess of minimum corporate income tax over the normal income tax is deductible from normal income tax for the succeeding
a. 1st yearb. 2 yearsc. 3 yearsd. 5 years
6. Which of the following is not correct income tax?a. Minimum corporate income tax on domestic corporation incurring operating loss for the year.b. 35% income tax on the net taxable business income of resident foreign corporationc. 10% income tax on proprietary educational institutiond. Zero income tax on business income of government owned and controlled corporation
7. The following is correct income tax, excepta. 25% on gross income within earned by nonresident foreign cinematographic film ownerb. 25% on gross receipts within received by foreign international carrierc. 4.4% on gross income within earned by nonresident lessor of vessel chartered by Philippine
nationalsd. 7.5 on gross income earned within by nonresident foreign lessor of aircraft
8. The tax imposed on intercorporate dividends received by a nonresident foreign corporation from a domestic corporation is
a. Tax exemptb. Subject to 10% income taxc. Subject to 15% final taxd. Subject to 35% corporate tax
9. Royalty income earned within the Philippines by a nonresident foreign corporation isa. Tax exemptb. Subject to 10% income taxc. Subject to 15% final taxd. Subject to 35% corporate tax
10. CDA registered cooperatives are income tax exempt, except ona. Income form business transacted with non-membersb. Interest income from depository bankc. Income from business transacted with membersd. Interest income earned from member’s loan
11. Statement 1: A domestic corporation subjected to normal corporate income tax is exempt from Improperly Accumulated Earning TaxStatement 2: Both domestic and resident foreign corporations are subject to improperly accumulated earning tax.
a. only statement 1 is correctb. only statement 2 is correctc. both statements are correctd. both statements are not correct
12. Statement 1: Once a profit has been subjected to IAET, the same shall no longer be subjected to IAET in the later years.Statement 2: Nonresident corporation’s interest income on foreign loans contracted on or after August 1, 1986 is subject to 20% final withholding tax.
a. only statement 1 is correctb. only statement 2 is correctc. both statements are correctd. both statements are not correct
Problem 12 – 5 Income Tax SitusThe following income and expenses are shown by X corporation:
Within Outside Gross income P8,000,000 P4,000,000Business expenses 3,500,000 3,000,000Sale of Land (capital asset, cost P2,000,000) 3,000,000
1. If X is a domestic corporation, how much is the taxable income and income tax due in the Philippines per annual ITR?
Taxable Income Income Tax Duea. P3,000,000 P1,050,000b. P4,000,000 P1,400,000c. P5,000,000 P1,750,000
d. P4,000,000 P1,200,000
2. If X is a resident foreing corporation, how much is the taxable income and income tax due in the Philippines per annual ITR?
Taxable Income Income Tax Duea. P3,000,000 P1,050,000b. P4,000,000 P1,200,000c. P3,000,000 P 900,000d. P7,000,000 P2,450,000
Problem 12 – 6 Income Tax SitusThe ABC corporation has the following income and deductions for the calendar year 2009:
Sources of income gross income deductionsPhilippines P2,800,000 P1,300,000USA 1,100,000 600,000Saudi Arabia 400,000 500,000
If ABC Corporation is a resident foreign corporation, the Philippine income tax due for 2009 isa. P175,000 c. P525,000b. P450,000 d. P700,000
Problem 12 – 7 Income Tax SitusUnicor is a nonresident foreign corporation. For the fiscal year ending March 31, 2010, it had the following income deductions:
Gross income ExpensesFrom the Philippines P 5,000,000From the USA 60,000,000 P30,000,000
The Philippine income tax payable Unicor for the fiscal year April 1, 2009 to March 31, 2010 isa. P12,250,000 c. P1,750,000b. P10,500,000 d. P1,500,000
Problem 12 – 8 Domestic vs. Foreign CorporationThe Tacurong Corporation has the following business income and deductions in year 2009:From Philippines sources: Gross income Deductions
From business P450,000 P290,000Dividends from domestic corporations 80,000
From other countries:Saudi Arabia P180,000 P 80,000Australia 75,000 25,000Japan 160,000 100,000
Total foreign income tax is P100,000
Required: Compute the income still tax due and payable if Tacurong Corporation is aa. Domestic corporationb. Resident Foreign Corporation
Problem 12 – 9 Tax-Exempt CorporationsThe Philippine Government maintains the following corporations with the following gross income and expenses:
Gross income ExpensesUniversity of the Philippines P50,000,000 P47,000,000GSIS 60,000,000 55,000,000PAGCOR 30,000,000 28,000,000
How much is the income tax due that can be collected by the Philippine Government?a. P – 0 – c. P600,000b. P700,000 d. P3,500,000
Problem 12 – 10 Tax-Exempt CorporationsThe following domestic corporations reported the following net income for operations:Philippine Charity Sweepstakes P10,000,000National Power Corporation 8,000,000UNLAD Cooperative 6,000,000National Bookstore 5,000,000Baguio Colleges Foundation 4,000,000
How much income tax due that can be collected by the Philippine Government?a. P6,300,000 c. P2,800,000b. P5,400,000 d. P – 0 –
Problem 12 – 11 Normal Corporate Income TaxA Corporation, a domestic corporation, shows the following data for the taxable year 2009:Gross sales P3,000,000Gain on sale of real property, net of capital gains tax 940,000Gross Profit 1,600,000Dividend income (domestic) 200,000Operating expenses including charitable contribution 600,000Charitable contribution 50,000
The income tax due and payable would be:a. P493,500 c. P350,000b. P420,000 d. P300,000
Problem 12 – 12 MCIT vs. NCITOn its 5th year of operation, a domestic corporation reported an operating loss of P200,000 after operating expenses of P1,000,000. Its income tax payable for the period is
a. P70,000 c. P20,000b. P24,000 d. P16,000
Problem 12 – 13 MCIT vs. NCITA ten-year domestic corporation reported in year 2005 a net income before tax, under GAAP amounting to P5,000,000. This amount is net of operating expenses which includes allowance for bad debts of P150,000 and actual contribution to government for public purposes of P300,000.
1. What is the amount of income tax due and payable?a. P1,553,000 c. P1,700,000b. P1,656,000 d. 1,812,125
2. How much would be the income tax due if the total amount of the total operating expenses per GAAP is P80,000,000?
a. P – 0 – c. P1,700,000b. 1,656,800 d. P1,812,125
Problem 12 – 14 Excess of MCITThe outstanding balance of excess of MCIT over normal tax in prior period is P100,000. During the current taxable year, the corporation has gross income of P8,000,000 and operating expenses of P7,850,000.
1. The income tax payable for the current year is
a. P160,000 c. P60,000b. P100,000 d. P52,000
2. Assuming that the operating expenses is P7,000,000 instead of P7,850,000, the income tax payable for the current year is
a. P350,000 c, P200,000b. 250,000 d. P160,000
Problem 12 – 15 Deferred Charges MCIT
In year 5, Arabohok Corporation provided the following data:
(in thousand of pesos)
Year 3 Year 4 Year 5
Gross profit – business P1,000,000 P1,200,000 P1,500,000
Business expenses (1,500,000) (1,000,000) (1,000,000)
Income (loss) (P 500,000) P 200,000 P 500,000
Assume that the corporation has been existing for five years, what is the amount of deferred charges MCIT applicable for year 4?
a. P – 0 – c. P 20,000b. P15,000 d. P(20,000)
Problem 12 – 16 Expanded Withholding TaxR Corporation, a real estate lessor, collected rental income amounting to P1,900,000, net of 5% expanded withholding tax. Total operating expenses of the business amounted P2,350,000. The corporation has a capital gain amounting to P500,000, not subjected to capital gains tax.
How much is the amount of income tax payable and tax refund if the excess of MCIT over NCIT in the previous year amounted to P40,000?
Income Tax Payable Tax refunda. P52,500 P 87,500b. P50,000 P100,000c. P45,000 P 95,000d. P – 0 – P 87,500
Problem 12 – 17 Investment in Real PropertyA domestic corporation sold its investment in real property carried at cost of P1,000,000 for P1,500,000. The related income tax on sale of real property would bea. P – 0 – c. P90,000b. P30,000 d. P175,000
Problem 12 – 18 Tax on Capital AssetsStar Corporation has the following sales of capital assets transactions for 200x:
a. Sold 12,000 investment in common shares of stock not traded in the local stock exchange for P1,600,000. The cost per stock is P110.
b. Sold 5,000 investment in preferred stock traded in the local stock exchange for P1,800,000. The cost per stock is P300.
c. Sold land located in Japan for P3,000,000. The cost of the land is P2,500,000.d. Sold land located in the Philippines for P1,000,000. The cost of land is P900,000 with a fair market value
of P1,200,000.
Star Diamond Corporation’s taxes payable (income tax and percentage tax) on sales of capital assets assuming the taxpayer is:
1. Domestic corporation (DC).a. P254,000 c. P269,000b. P264,000 d. P279,000
2. Resident Foreign Corporation (RFC).a. P104,000 c. P89,000b. P94,000 d. P79,000
3. Nonresident foreign corporation (NRFC).a. P104,000 c. P89,000b. P94,000 d. P – 0 –
Problem 12 – 19 Final Passive Income AssetsSan Miguel Corporation, a domestic corporation, has earned the following passive income within the Philippines for the taxable year 2009:Interest income from savings P3,000,000Royalty income 1,000,000
Interest from depository bank under expanded foreign currency deposit ($30,000 at P50 per $) 1,500,000Dividends from Jollibee, a domestic corporation 200,000Dividends from Microsoft, a nonresident foreign corporation 800,000
What is the total amount of final taxes on passive income subject to final tax?a. P800,000 c. P912,500b. P880,000 d. P992,500
Problem 12 – 20 Passive Income TaxesSilver Corporation has the following passive income within for the year 2009:Interest from depository bank under expanded FCDS $ 20,000Royalty income from mining P300,000Royalty income from franchising 100,000Interest income peso savings deposit 80,000
One dollar is P50.
Compute the passive income taxes of Silver Corporation assuming that the corporation is a:1. Domestic corporation.
a. P296,000 c. P96,000b. P171,000 d. P86,000
2. Resident Foreign Corporation.a. P296,000 c. P96,000b. P171,000 d. P86,000
3. Nonresident foreign corporation.a. P296,000 c. P168,000b. P171,000 d. P144,000
Problem 12 – 21 Final and Normal Income TaxesA Philippine Commercial Bank has been authorized to operate a Foreign Currency Deposit Unit by the BSP had the following revenue and expenses:a. Dividend income from Magnolia, a domestic corporation at P1,000,000.b. Interest income on US dollar loans from resident borrowers at $3,000. ($1 = P50)c. Interest on Philippine peso loans from borrowers at P2,000,000.d. Operating expenses of P900,000.
1. What is the total amount of normal corporate income tax of Philippine Commercial Bank?a. P15,000 c. P115,000b. P30,000 d. P215,000
2. What is the total amount of normal corporate income tax of Philippine Commercial Bank?a. P40,000 c. P385,000b. P330,000 d. P437,500
Problem 12 – 22 Educational InstitutionA proprietary educational institution reported an educational related income of P1,000,000 and other business income of P1,500,000. Its total operating expenses amount to P3,000,000. Its income tax payable for the period isa. P50,000 c. (P175,000)b. (P40,000) d. P – 0 –
Problem 12 – 23 Nonprofit Educational InstitutionSLU is a nonstock, nonprofit educational institution. For the taxable year, it reported the following revenue:Tuition fee P5,000,000Unrelated business income 2,000,000Operating expenses 4,000,000
The amount of income tax for the period would bea. P – 0 – c. P300,000b. P100,000 d. P1,050,000
Problem 12 – 24 Government Educational InstitutionA government owned and controlled institution reported an educational related income of P1,000,000 and other business income of P1,500,000. Its operating expenses amounted to P3,000,000. Its income tax payable for the period isa. P50,000 c. (P160,000)b. (P50,000) d. P – 0 –
Problem 12 – 25 Foreign International CarrierA resident foreign international carrier has the following data for the current year: Gross income of P700,00 and expenses of P200,000 from the Philippines; Gross income of P500,000 and expenses of P100,000 from Hongkong. What is the amount of income tax payable in the Philippines?a. P210,000 c. P160,000b. P17,500 d. P30,000
Problem 12 – 26 Foreign International CarrierFly Horse is a resident foreign international carrier. Its records of income and expenses are as follows:
a. Continuous flight from Manila to Beijing = 2,000 tickets at P5,000 per ticket.b. Ticket sold for flight from Manila to Hongkong: transfer flight from Hongkong to Beijing = 4,000 tickets at
P6,000 per ticket.c. Direct flight from Manila to Hongkong = 2,000 tickets at P,3000 per ticket.d. Total operating expenses is P10,000,000.
What is the amount of Fly Horse’s income tax payable in the Philippines?a. P700,000 c. P6,300,000b. P750,000 d. 7,350,000
Problem 12 – 27 Special Nonresident Foreign CorporationThe following nonresident foreign corporations operate in the Philippines with their respective income and expenses:
A. Dragon Film, cinematographic film distributor: Within Outside
Gross Receipts P10,000,000 P200,000,000Cost of Film distributed 6,000,000 120,000,000Operating expenses 3,000,000 50,000,000
B. American Aircraft, a lessor of airplanes to the Philippine Airlines Within Outside
Gross income P20,000,000 P100,000,000Operating expenses 15,000,000 80,000,000
What is the amount of Philippine income taxes to be paid by Dragon Film and American Aircraft?Dragon Film American Aircraft
a. P2,500,000 P375,000b. P1,000,000 P225,000c. P1,000,000 P1,500,000d. P250,000 P1,250,000
Problem 12 – 28 CooperativeA multi-purpose cooperative, registered with CDA reported a business income of P500,000, operating expenses of P300,000 and interest income of P80,000, net of 20% final tax. Its income tax would be
a. P70,000 c. P16,000b. P20,000 d. P – 0 –
Problem 12 – 29 CooperativeUnlad Cooperative is registered with CDA reported the following business income and expenses:Sale of land (classified as ordinary asset) to its members P800,000Sale of groceries to its members 900,000Interest income from its members 600,000Dividend income from Jollibee 60,000Cost of land sold 700,000Cost of groceries 500,000Operating expenses 400,000Interest expenses on loan for expansion 100,000
What is the amount of income tax of Unlad Cooperative?a. P – 0 – c. P60,000b. P48,000 d. P175,000
Problem 12 – 30 Quarterly Income TaxA domestic corporation has the following data:Excess tax credits from 2009 P 10,000
For year 2010 (cumulative amount): 1 st Quarter 2 nd Quarter Income, net of 1% withholding tax P495,000 P792,000Deductions 480,000 700,000
How much is the income tax still due and payable in the second quarter?a. P18,000 c. P10,000
b. P15,000 d. P6,000
Problem 12 – 31 Tax on Interest IncomeA domestic corporation reported the following income within before tax:Business income P1,000,000Business Expenses 900,000Interest income from peso savings bank 100,000Interest income from expanded foreign currency deposit 100,000
Its total income tax isa. P105,000 c. P57,500b. P70,000 d. P55,000
Problem 12 – 32 Tax on Interest IncomeA nonresident foreign corporation reported the following income within before tax:Interest income from peso savings bank P 100,000Interest income from expanded foreign currency deposit 100,000
Its total income tax isa. P70,000 c. P30,000b. P35,000 d. P – 0 –
Problem 12 – 33 Dividend Income TaxA resident foreign corporation reported the following income before income tax:Cash dividend from domestic corporation P100,000Cash dividend from a resident foreign corporation with 100% earnings in the Philippines 100,000
Its total income tax isa. P70,000 c. P30,000b. P40,000 d. Tax-exempt
Problem 12 – 34 Dividend Income TaxA nonresident foreign corporation earned the following income before income tax:Cash dividend from domestic corporation P100,000Cash dividend from a resident foreign corporation, 40% earned within 100,000
Its total income tax isa. P64,000 c. P30,000b. P40,000 d. P20,000
Problem 12 – 35 Passive Income TaxA resident foreign corporation reported an interest income of P100,000; royalty income of P200,000 and cash dividend of P500,000 all earned outside the Philippines.
Based on the earnings presented, how much is the total income tax payable in the Philippines?
a. P160,000 c. P60,000b. P100,000 d. P – 0 –
Problem 12 – 36 Passive Income TaxAbbott Corporation, a resident foreign corporation, has earned the following passive income for the taxable year 200x:
Interest from savings deposits – Metrobank P3,000,000Royalty income – Philippine Mining Company 1,000,000Interest from a depository bank under expanded foreign currency deposit
($30,000 at P50 per US dollar – PCI Bank) 1,500,000Dividends from Jollibee, a domestic corporation 200,000Dividends from Xerxes, a resident foreign corporation (income within) 500,000Dividends from Microsoft, a nonresident foreign corporation 800,000
Required: How much is the total final passive income tax for the year 200x?
Problem 12 – 37 Quarterly Income TaxMasikap Corporation, a domestic corporation, has the following information regarding its income and expenses for the taxable year 2009:
Assume that the amounts are cumulative for first quarter to fourth quarter, the income tax credit and income tax still due and payable in the fourth quarter would be
Income tax credit Income tax still duea. P56,320 P15,360b. P61,600 P16,800c. P52,800 P14,400d. P61,600 (P39,200)
Problem 12 – 38 Amount subject to Surtax (IAET)The following data are taken from the records of Pandak Corporation:Income tax per annual income tax return P300,000Income tax for the first three quarters 240,000Final tax on passive income at 20% 60,000Capital gain tax at 5%, 10% 35,000
What is the amount subject to surtax if the above taxes were paid during the taxable year?a. P1,255,000 c. P1,305,000b. P1,285,000 d. P1,000,000
Problem 12 – 39 Tax CreditIntern Corporation, a domestic corporation, has the following data for calendar year 2009. The corporation signified its intention to claim tax credits on income taxes paid to foreign countries.
Country Gross income Allowed Deduction Income tax paidPhilippines P1,000,000 P800,000United States 400,000 200,000 P80,000Japan 300,000 200,000 30,000
Required: Compute the income tax still due in the Philippines.
Problem 12 – 40 Income after TaxA domestic corporation reported a net income before normal tax of P10,000,000. This amount includes the following:
1. Gain from sale of shares of stocks in the local stocks in the local stock exchange, net of P5,000 percentage tax – P25,000.
2. Loss from sale of shares of stocks outside stock market – P5,000.3. Gain from sale of short-term debt securities – P10,000.4. Sale of real property not related in business, net of final withholding tax (cost, P4,400,000) – P9,400,000.
Required: Compute the total income after normal tax.
Problem 12 – 41 Income Tax Refundable/PayableA travel agency is earning its income at 5% of total collections from plane tickets sold. Its collections are made through credit card which imposes 3% services charges. The credit card company withholds ½% of total collectibles as expanded withholding tax on income of travel agency.
During the year, the total revenue is P1,000,000, and the total operating expenses reported by the travel agency amounted to P10,000.
Required: Compute for the net income tax refundable/payable by the travel agency.
Problem 12 – 42 Improperly Accumulated IncomeABC Corporation, a domestic corporation was determined to have improperly accumulated earnings for the taxable year 200x based on its records as follows:
Taxable income at normal tax rate P900,000Dividends actually or constructively paid 150,000Income tax paid for the year 200,000Income subject to final tax 60,000Income exempt from tax 50,000Income excluded from gross income 10,000Amount of NOLCO deducted 50,000
Required: Compute the tax on improperly accumulated income.
Problem 12 – 43 Computation of SurtaxP Corporation showed the following income tax paid for a taxable year:Income tax per annual income tax return P450,000Income tax for the first three quarters 420,000Final tax on passive income at 7.5% 37,500Capital gain tax on shares sold outside the stock exchange 40,000
If it is determined that P Corporation has an unreasonable accumulated income, what is the corresponding surtax if the said taxes were paid during the taxable year?
Problem 12 – 44 Income Tax of Educational InstitutionUniversity of the Philippines, Baguio reported the following:Tuition and miscellaneous fees P5,000,000Rental income (not related to educational activities) 6,000,000Gain from capital assets (long term) 100,000Loss on capital assets (short term) 20,000Business expenses, inclusive of P50,000 allowance for uncollectible accounts 10,050,000Miscellaneous income 20,000Required: Compute for the income tax, assuming that the school has been in existence for more than five years.
Problem 12 – 45 Income Tax of Educational InstitutionThe following information came from the records of the Cordillera University, Inc., a private educational institution for the fiscal year ended May 31, 200x:
Income: Miscellaneous fees P 362,600Tuition fees 2,843,100Income from rents 60,000Net income, school canteen 36,200Net income, book store 24,800Dividends 15,000Interest on time deposits 45,000
Expenses: Payroll and administrative salary 1,425,420Other operating expense 762,330Interest on P750,000 bank loan 82,100Depreciation, new six room building 37,500
In the first month of the fiscal year, the school secured a loan from a bank in the amount of P750,000. The proceeds of the loan were spent in the construction of a new six-room building.
Required: Compute the income tax payable for 200x.
Problem 12 – 46 Surtax (IAET)
The retained earnings of the Panday Corporation at the start of the year has a credit balance of P2,500,000 which is equal to its paid-in capital. During the year, the corporation reported the following data but no dividend income was distributed:Net income after tax of 30% P1,050,000Interest income, net of 20% final tax 120,000Capital gain on shares of stock net of income tax 230,000Income tax paid for the first 3 quarters 350,000NOLCO deducted from taxable operating income 100,000
Required: Compute for the following:1. Total Income for GAAP reporting.2. Total income tax paid for the year, before IAET.3. GAAP income after tax.4. Total IAET.
Problem 12 – 47 Reconciliation from GAAP to Tax Code ReportingThe income statement of X Corporation prepared under GAAP rules is as follows:
Sales P10,000,000Less: Cost of Sales 6,000,000Gross profit P 4,000.000Less: Operating expenses:
