PAGE 1

EXERCISE 21
1. The query should be addressed to the Commissioner of Internal Revenue
2. I will inform him that a compromise is not allowed anymore
3.

Piolo is correct.

4.

I will request for a compromise of the assessed tax on ground that the financial position of the
taxpayer demonstrates clear inability to pay the assessed tax.

5.

The claim for refund should be denied on ground of prescription.

6. The Commissioner may not grant the refund when there is a deficiency tax assessment against the
claimant-taxpayer.
7.

Yes.

8.

a. The counting of the two (2) year period commences to run from the date of final payment.
b.

Augusto has thirty days from receipt of the decision of the CIR to file an appeal with the CTA

c.

He is given 30 days from receipt of the CIRs decision but not exceeding 2 years from the date
of final payment.

EXERCISE 2-2. MULTIPLE CHOICE

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

PAGE 2

11

12.

13.

14.

15.

EXERCISE 2-3
1.

2.

3.

4.

5.

EXERCISE 24
The proper party to question, or seek a refund of an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed by law and who paid the
same even if he shifts the burden thereof to another.

EXERCISE 3-1
1.

The partnership is not liable to pay income tax.

2.

The contention of Judge Nitafan is wrong. .

3.
Income subject to tax/Fair discounted
value
b.

80,000

PAGE 3
Income subject to tax, 2011

10,000

c. Income reportable in 2012 ( 20,000 x

50%)
4.

P 10,000

Whenever a stockholder is indebted to the corporation and said creditor

corporation decides to condone the debt, such condonation has the effect of a
payment of dividend to the stockholder.
.

5.

Hilario is not required to report income on the condonation considering that

the condonation of debt was given without requiring him to render services.

6.

Yes.

7.

Under the tax benefit rule, whenever a bad debt is claimed as deduction from
gross income and it resulted to a reduction in its tax liability, the recovery of
such is subject to tax.

8.

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.

9.

a.
b.
c.
d.

Value-added tax
Real property tax
Income tax
Stock transaction tax
Special assessment
Occupation tax
Estate tax
Income tax paid to a foreign
country
Community tax
Excise tax

not taxable
taxable
not taxable
not taxable
not taxable
taxable
not taxable
taxable if claimed as deduction

- taxable
- taxable

Yes,
subject to a final tax of 10%
They are not subject to tax.
both the stockholders who were paid stocks and cash dividends are subject to
final tax.

10. a. Dividends received from domestic

not taxable
b. Dividends received by resident foreign from
- not taxable
domestic
c. Dividends received by nonresident foreign corporation from domestic 15%
final tax if the country in which the nonresident foreign corporation is
domiciled shall allow tax credit of 15% in its income tax payable in such
foreign country.
11. a
.

Miss Supsup is entitled to 10% of the value of confiscated smuggled goods

but not exceeding P1,000,000.

b. The reward received by Miss Supsup is subject to a final withholding tax of

PAGE 4
10%.
12. a
.

she has to report an income of P100,000 on the leasehold improvement and

P48,000 (P4,000 x 12) on the rent, or a total amount of P148,000.

b. Rent (P4,000 x 12)

Add: Income on leasehold improvement
Cost of improvement
Less: Accumulated depreciation
(100,000/25 x 18.5)
Book value, end of lease
(26,000 / 18.5 x )
c
.

P
48,000
P 100,000
74,00
0
26,000
703
48,703

Rent ( 4,000 x 6)
Leasehold improvement:
Cost
Less: Depreciation (7/1/09 6/30/10)
(100,000 / 25)
Book value upon termination
Less: Amount already reported as
income
Income of lessor in 2013

EXERCISE 3 2

1. T
2. T
3. T
4. T
5. F
6. T
7. F
8. T
9. F
10. T
11. F
12. F
13. F
14. T
15. F

24,000
P 100,000
4,0
00
96,000
703

95,29
7
119,29
7

PAGE 5

3-3. TAX BENEFIT RULE

3ANSWER: B
3.1:
Case 1 P 40,000
Case 2 - 20,000
Case 3 - 40,000
Case 4 70,000
33.2:

(1) ANSWER: D

33.3:

(2) ANSWER: D

(3) ANSWER: B

EXERCISES 3 3.4. MULTIPLE CHOICE

THEORY
1.

ANSWER: C

2.

ANSWER: C

3.

ANSWER: D

PAGE 6

EXERCISE 3-4
34.1:

LEASEHOLD
IMPROVEMENT

1.

ANSWER: B

2.

ANSWER: D

3.

ANSWER: A

4.

ANSWER: C

5.

ANSWER: B

6.

ANSWER: B

7.

ANSWER: C

PAGE 7

EXERCISE 3-4.2:
1.

ANSWER: A

2.

ANSWER: C

3.

ANSWER: C

EXERCISE 34.3:
ANSWER: B

EXERCISE 34.4
1. ANSWER: A

2.

ANSWER: C

PAGE 8

3.

ANSWER: D

EXERCISE 3-5
EXERCISE 35.1:

1.

ANSWER: D

2.

ANSWER: D

EXERCISE 35.2:

1.

ANSWER:

2.

ANSWER: B

EXERCISE 35.3:

1.

ANSWER: C

EXERCISE 3-6. MULTIPLE CHOICE

1.

ANSWER: B

2.

ANSWER:

3.

ANSWER:

PAGE 9
4.

ANSWER: C

5.

ANSWER: B

6.

ANSWER: D

7.

ANSWER: C

8.

ANSWER: D

9.

ANSWER: C

1
0

ANSWER: D

1
1

ANSWER: B

1
2

ANSWER: C

1
3

ANSWER: A

PAGE 10
1
4

ANSWER:

1
5

ANSWER: C

1
6

ANSWER: D

1
7

ANSWER: A

1
8

ANSWER: D

1
9

ANSWER: A

EXERCISE 3 -7.
Yes.

PAGE 11

EXERCISE 41. CROSSWORD PUZZLE

2

E
R

&

I
N

G
3

O
0

EXERCISE 4 2
1. T
2. F
3. F
4. F
5. T
6. F
7. T
8. F
9. T
10.

11.

12.

13.

14.

I
S

PAGE 12
15.

EXERCISE 4-3

1
.

a
.
b
.
c
.
d
.
e
.
f.
g
.

Interest on corporate
bonds
Salary

- Taxable

Tips

- Taxable

Winnings in lotto

- Not taxable (expressly exempt under

the law)
- Taxable (income from whatever source
derived)
- Taxable (income from whatever source
derived)
- Not taxable (de minimis benefit)

Winnings in jueteng
Money stolen from
mothers purse
Rice subsidy of P325 per
month

- Taxable

2
.

The value of the free meals and lodging is not taxable to Yaya

3
.
4
.

No..

The free parking and courtesy discounts are subject to fringe benefit tax

The rice allowance is considered as a de minimis benefit which is exempt

from income.

The excess of the laundry allowance in the amount of P450 (P750300) is part of gross compensation income if such excess is beyond the
P30,000 ceiling for other benefits.
The rental value of the residential property is subject to fringe
benefits tax which is subject to final tax. .
6
.

The cost of the educational assistance extended by De la Salle University

to Prof. Ferdinand
should not be part of the gross compensation income of Prof. Romero.
The cost of the tuition fee is attributable to the operation and
conduct of business of the employer. Therefore, the same shall be
deducted from the gross income of the school.

EXERCISE 4 4

1.

ANSWER:

PAGE 13

2.

ANSWER:

3.

ANSWER:

4.

ANSWER:

EXERCISE 4-5

1.

ANSWER: B

2.

ANSWER: B

3.

ANSWER:

PAGE 14

4.

ANSWER:

EXERCISE 4-6

1.

ANSWER: C

2.

ANSWER: C

3.

ANSWER: D

4.

ANSWER: D

5.

ANSWER: D

6.

ANSWER: D

7.

ANSWER: B

8.

ANSWER: B

9.

ANSWER: D

10 ANSWER: D
.
EXERCISE 4-7
1.

ANSWER: C

PAGE 15

2.

ANSWER: A

3.

ANSWER: B

4.

ANSWER: D

5.

ANSWER: D

6.

ANSWER: B

7.

ANSWER: C

PAGE 16

8.

ANSWER: A

9.

ANSWER: D

10.

ANSWER: A

11.

ANSWER:

12.

ANSWER:

PAGE 17

EXERCISES 5-1
1.

None.

2.
a.

None.
b Fernando must report P20,000 [(P12,000 x 10) 100,000] as income.

.
c No.
.
3.

None

4.

Rodolfo must report an income of P75,000.

5.
a.

Both actual and moral damages are not subject to tax.

b not taxable.
.
Not included in the gross income..

c.
Taxable.
d.
Not taxable.
e.
6. 6. No, because all the requisites for exemption from income tax are
present:
7.

The amount is taxable to Nilo.

8.
a.

Taxable.
b Taxable.

PAGE 18

.
c Not taxable.
.
9.

taxable.

10.

Answer: P38,000

EXERCISES 52.1:
1.

ANSWER:

2.

ANSWER: B

3.

ANSWER: C

4.

ANSWER:

Prob 5-2.2

1.

ANSWER: C

PAGE 19

2.

ANSWER: D

Prob 5-2.3

ANSWER: D

Prob 5-2.4:

ANSWER:

Prob 5-2.5:

ANSWER:

Prob 5-3.1

ANSWER:

Prob 5-3.2

ANSWER:

Prob 5-3.3

ANSWER: B

Prob 5-3.4

ANSWER: D

Prob 5-3.5

ANSWER: A

PAGE 20

Prob 5-3.6

ANSWER: D

EXERCISES 54.
Prob 54.1
ANSWER: C
Prob 5-4.2
ANSWER: A

Prob 5-4.3

ANSWER: C

Prob 5-4.4

ANSWER:

EXERCISES 55

EXERCISE 5
5.1:
ANSWER:

EXERCISES 55.2
a. The P350,000 value of the car is subject to a final tax of 20%.

PAGE 21

b. The P5,000 is subject to graduated tax to be reported in the income tax

c.

return.
The cash prize and the equivalent amount of the 100 shares are subject
to 20% final tax.

EXERCISES 5-5.3

a.

The income of $75,000 is taxable to her unless she has acquired the
status of a contract worker.

b. The talent fees P100,000 is a professional income subject to graduated

rates of tax.
c.

The $5,000 value of the trophy is not taxable

PROBLEM 5-6.1
ANSWER:

EXERCISE 5 7
1. None.
2 P147,500
.

EXERCISES 5 8

PAGE 22

1.

ANSWER:

2.

ANSWER:

3.

ANSWER:

4.

ANSWER:

5.

ANSWER:

6.

ANSWER:

7.

ANSWER: C

8.

ANSWER: D

9.

ANSWER: A

10.

ANSWER: C

11.

ANSWER: C

12.

ANSWER: D

13.

ANSWER: D

PAGE 23

14.

ANSWER: D

15.

ANSWER: B

16.

ANSWER: D

17.

ANSWER: A

EXERCISES
6-1
1.

CLASSIFICATION

SITUS
OF
TAXABLE
INCOME
a. Nonresident citizen
Within only
b. Nonresident
alien
Within only
(NETB)
c. Nonresident citizen
Within only
d. Resident alien
Within only
e. Nonresident
alien
Within only
(NETB)
f. Nonresident
alien
Within only
(ETB)

2. a. No.
b. No. .
c. Yes.
d. Yes.
e. No.
3. a. In the absence of an agreement, John has the right to claim the
additional exemption.
b. If Marsha could prove that she provided chief support over the

PAGE 24

children, both spouses would be disqualified to claim additional

exemption.
c. None.
4. a. None.
5. a. None. .
b. None.
c. None.
d. None.
e. P 100,000.
6. a. No.
b. Yes.
c. Income tax P23,750

d.

Income tax

7. a. Taxable income

35,000

175,0
00

PAGE 25

b. Income tax Jim

Income tax Pat
Total income tax

P
11,500
31,250
42,750

8. a.

2.00

b.

500

c.
Income tax
d.

724.54
50,000

e.
Income tax due

112,034

Income tax due

324,440.
41

9 a. Salary
.
b. Interest on bank deposit

- Compensation

f.

- Passive income tax exempt (long-

PAGE 26

term)
- Compensation income
- Ordinary business income (not exceeding
P10,000)
e. Lotto winnings
- Tax exempt
f. Income from farming
- Business income
g. Royalties on books
- Passive income (10%)
h. Dividends from domestic - Passive income (10%)
company
i. 13th month pay
- Exempt up to P 30,000
j. Interest on preterminated - Passive income (12%)
deposits
c. Honorarium
d. Prizes

10 a. Juan
.

Income tax payable

( 6,6
00)

b. Maria

Income tax Juan

Income tax Maria
Income tax payable /
refund

( 6,600
)
( 5,50
0)
(12,10
0)

PAGE 27

11 a
.
.
Deductible health insurance premium

1,800

Deductible health insurance premium

2,400

b
.

c
.

None.

d
.
Deductible health insurance premium
1
2.

1,600

a
.

Income tax due

14,50
0

b
.

Income tax due

c
.

1,500

PAGE 28

Income tax due

1
3.

Taxable income

EXERCISE 6 2
1. ANSWER: B

2. ANSWER: D

3. ANSWER: B

14,50
0
Case 1
186,6
00

Case 2
155,00
0

PAGE 29

4. ANSWER: B
EXERCISE 6 - 3
Resident
or citizen
20%

NRA
ETB
20%

Tax table
20%
20%
10%
Tax table
20%
Exempt
20%
Exempt
5%
10%
10%

Not taxable
20%
20%
10%
Tax table
20%
Exempt
20%
Exempt
5%
20%
20%

7.5%

Exempt

INCOME
1. Interest on bank deposit with Banco de
Oro- Php
2. Interest on bank deposit with a bank in the
United States in U.S. dollar
3. Earnings from interest on money market
4. Royalties on inventions
5. Royalties on books
6. Prizes amounting to P7,500
7. Prizes amounting to P20,000
8. Winnings in lotto Philippines
9. Winnings in lottery
10. Interest on long-term investment
11. Interest on deposit for 4 years
12. Cash dividends domestic corp.
13. Share of partner in net income of taxable
partnership
14. Interest income under expanded foreign
currency deposit system

EXERCISE 64.1
1.

ANSWER:

EXERCISE 64.2
INCOME

RC

1. Rent on apartment in the

YES

RA,
NRC
YES

Phils.
2. Rent on apartment in

YES

NO

NO

NO

Canada
3. Dividend-domestic

YES

YES

YES

YES

corporation
4. Dividend-foreign corporation
5. Lotto winnings in the Phils.
6. Lotto winnings in U.S.A.
7. Cash prize on contest, Phils.
8. Cash prize on contest, U.S.A.
9. Interest, bank deposit in

YES
NO
YES
YES
YES
YES

NO
NO
NO
YES
NO
NO

NO
NO
NO

NO
NO
NO

NRA(ETB NRA(NET
)
B)
YES
YES

YES

YES

NO
NO

NO
NO

PAGE 30

U.S.A.
10. Interest bank deposit Phils.
Problem 6
4.3
1.
ANSWER: C

2.

ANSWER: C

3.

ANSWER: A

YES

YES

YES

YES

PAGE 31

4.

ANSWER: B

5.

ANSWER: A

6.

ANSWER: B

7.

ANSWER: D

8.

ANSWER:

EXERCISE 65.1
ANSWER:

PAGE 32

EXERCISE 65.2
ANSWER:

PROBLEM 6-5.3
1.

ANSWER: A

2.

ANSWER:

PAGE 33

PROBLEM 6-5.4

1. ANSWER:

2. ANSWER:

EXERCISES 6-6.1: PERSONAL

EXEMPTIONS
1.

ANSWER:

2.

ANSWER:

3.

ANSWER:

4.

ANSWER:

5.

ANSWER:

PAGE 34

6.

ANSWER:

7.

ANSWER:

8.

ANSWER:

9.

ANSWER:

10.

ANSWER:

EXERCISES
6.2

6-

1.

ANSWER:

2.

ANSWER:

3.

ANSWER:

PAGE 35

4.

ANSWER: C

5.

ANSWER: D

6.

Answer: A

7.

Answer: C

8.

Answer: C

PAGE 36

EXERCISES 6 7. CLASSIFICATION OF INDIVIDUAL INCOME

TAXPAYERS
1.

ANSWER:

.
2.

ANSWER:

3.

ANSWER:

4.

ANSWER:

5.

ANSWER:

6.

ANSWER:

7.

ANSWER: C

EXERCISES

68.1.
PREMIUM
PAYMENTS
ON
HOSPITALIZATION INSURANCE

1.

ANSWER:

2.

ANSWER:

3.

ANSWER:

HEALTH

AND/OR

PAGE 37

EXERCISE 6.8.2
Case
1:

None.

Case
2:

None..

Case
3:

The husband can only claim a maximum amount of P1,600

Case
4:

P1,200.

EXERCISES 6-9
1.

ANSWER:

2.

ANSWER: D

3.

ANSWER: D

4.

ANSWER: C

PAGE 38

5.

ANSWER: D

6.

ANSWER: A

7.

ANSWER: D

8.

ANSWER: A

PAGE 39

9.

ANSWER: B

10
.

ANSWER: B

11
.

ANSWER: B

PAGE 40

12
.

ANSWER: B

13
.

ANSWER: A

14
.

ANSWER: C

15
.

Answer: B

EXERCISE 6-10.
The petition has merit.
Cooperatives are not required to withhold taxes on interest from savings and time deposits of their
members based on a BIR Ruling.