INCOME TAX

In the year 2018, Mr. A is in business, Mrs. A is in the practice of profession, and Mr. and Mrs. A had a gross
rent income and expenses related to it. From the data:

Gross Sales of Mr. A from business P1 500 000

Gross receipts of Mrs. A from practice of profession 900 000
Gross rent income (gross receipts) 500 000
Cost and Expenses, business of Mr. A 700 000
Cost and Expenses, profession of Mrs. A 200 000
Expenses on the rental property 200 000
Qualified Dependents = 3
HOW MUCH IS THE INCOME OF Mr. and Mrs. A?
Base on preceding question, assuming that the year is 2017, how much is the income OF Mr. and Mrs. A?

Answer on Page 9
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Mr. F had the following data in a calendar year:
Gross Sales from self-employment P 2 000 000
Interest on Philippine Currency Deposit 10 000
Capital Gain on sale of land in the Ph 1 000 000
(Selling price P 5 000 000)
Capital Gain on sale of share of stock of a 100 000
Domestic Corporation not listed
Deductible expenses and losses from income from 1 100 000

His income has been: Answer on Page 10

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Mr.C was a non-resident citizen in 2017. He returned to the Philippines on June 5, 2018 to reside
permanently in the Philippines. He had an income from January 1 to June 4 2018 from Philippines sources
of P300 000 and from foreign sources of P200 000. He had an income from June 6 to December 31 2018 of
P600 000 from the Philippine sources and P400 000 from foreign sources.

Determine his income tax expense for the said year.

Answer on Page 12
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A domestic corporation in its fourth year of operations had;

Gross profit from sales P 3 000 000
Expenses from operations 1 000 000
Quarterly income taxes paid 500 000
Dividend from domestic corporation 200 000
Gain on sales of capital asset:
Land and Building outside the Philippines on a selling price of
P15 000 000 and cost of P10 000 000
Shares of stock of a domestic corporation, not listed and traded
In a local stock exchange on a selling price of P350 000 and cost of
P100 000

What are the income taxes for the year? Answer on page 14
A domestic corporation had the following cumulative data in the year:
Year 5 Year 6 Year 7 Year 8 Year 9
MCIT P 400 000 P100 000 P 300 000 P 200 000 P 100 000
RCIT P 100 000 P200 000 P 200 000 P 100 000 P 400 000
How much the income tax due in each year of from year 5 to year 9? Answer page 16

A domestic corporation, for 2018 had:

Gross Income from business P 3 000 000
Dividend from domestic corporation 50 000
Capital gain on sale of land and building on a selling price of 1 000 000
P 3 600 000
Capital Gain on direct sale to buyer of shares of stock of 200 000
domestic corporation
Business expenses 2 000 000
Capital gain tax on land and building 216 000
Capital gain tax on shares of stock 15 000
Final tax on interest on bank deposit 20 000
Normal tax of the year (on which payments of P 260 000 were 350 000
made for the first three year quarters of the year)
Dividend declare within the year 500 000
Appropriation of retained earnings for plant expansion 700 000
Paid-in capital 1 000 000

How much is the IAET in the problem to be covered by the IAET return or on before January 15 2020?
Answer on page 16

AB & Co., a general professional partnership, had the following data for 2019:
Gross income from professional service P 2 000 000
Costs and expenses related to income 600 000
Interest on Philippine currency bank deposit 20 000

With a personal data of Partner A Partner B

Gross Sales/receipts P 400 000 P 300 000
Cost and expenses 250 000 100 000

(a) Taxable income of the partnership?

(b) Income tax of AB Partnership?
(c) Gross income of each partner from the partnership.
(d) How much is the income tax still due of each partner?
Answers on page 17

YZ & Co., a general partnership in trade, in its sixth year of operations had:
Gross sales from merchandising P 2 000 000
Cost and expenses related to income 600 000
Interest on Philippine currency bank deposit 20 000
Quarterly income tax paid 300 000
With personal data of Partner Y Partner Z
Gross Receipts /Sales P 400 000 P300 000
Costs and expenses 250 000 100 000
 (a) How much is the distributive share of a partner?
(b) How much is the distributive share taxed to him?
(c) How much is the income of the partnership?
Answer on page 17

An estate is under administration

The year is 2019

Gross receipts from the properties in the estate P 700 000

Cost and expenses on the properties 150 000
Distribution out of 2018 income, to Heir no. 1 20 000
Distribution out of the year’s (2018) income:
To Heir no. 1 50 000
To Heir no. 2 45 000
Distribution of property in the estate to Heir No. 2 60 000

Net income of the estate for 2019? a. P98 500 b. P105 500 c. P125 500 d. 112 400
Gross receipts of Heir no. 2 from the estate in 2019? a. P45 000 b. P95 000 c. P 100 000 d. P 145 000
Answer on page 20

C Co. and D Co. are transportation companies. A joint venture was entered into join efforts for
economy in scale, with C Co. operating its transportation units of south of Manila, and D Co. operating its
transportation units north of Manila. Data on the Joint venture and parties to the venue follow:

Joint Venture C Co. D Co.

Gross Income P 10 000 000 P 5 000 000 P 6 000 000
Expenses 4 000 000 3 000 000 2 500 000
Quarterly income tax paid 1 500 000 500 000 900 000

How much are the income taxes of the joint venture? “ C Co.? “ D Co.?
Answer on page 22

A lessee made a payments to a lessor in 2019:

Advance rental, applicable to two years P 480 000

Security deposit P 400 000

And made leasehold improvements on January 2 2019 that will belong to the lessor when the lease expires,
with the following data;
Cost of leasehold improvements P 2 000 000
Estimated useful life 25 years
Remaining term of the lease 10 years

How much was the income of the lessor in 2019?

Answer on page 27
In 2019, an individual had:
Refund of graduated tax P 500 000
Refund of fringe benefit tax 300 000
Refund of special assessment 50 000
Refund of donor’s tax 10 000
Refund of income tax paid to a foreign country 100 000
(Previously claimed as a deduction)
Refund of value-added tax 60 000
Refund of city business taxes 15 000
Damages recovered for physical injuries 40 000
Damages recovered for patent infringement 300 000
Prize won in an essay contest 10 000
Bad debt recoveries:
1. Write off in a year with a net income of 10 000
100 000 before write-off
2. Write off in a year with a net loss of 12 000
P 60 000 before write-off
3. Write off in a year with a net income of 20 000
P 5 000 before write-off
Cancellation of indebtedness to a friend to whom the 50 000
taxpayer rendered services

How much is the income?

Answer in page 28

Interest income on trade notes receivable P 30 000

Interest income from government bonds 50 000
Interest income from money market placement 20 000
Interest income on Bangko Sentral bonds 100 000
Interest income on bank savings deposit 60 000

(a) Interest income subject to final tax? And how much is the final tax?
(b) Interest income subject to basic tax?
Answer on page 29

From the data:

On a loss by fire of a warehouse where the insurance company

carted away the scrap:
Cost P 2 000 000
Accumulated Depreciation 800 000
Insurance Recovered 700 000
Loss on an embezzlement of bonded cashier, where there
is a P 50 000 loss coverage by a bonding company, and where
a case is filed in court for the entire amount of embezzlement of 150 000
On a loss by accident of a delivery equipment with the ff data:
Cost of the delivery equipment 1 500 000
Accumulated depreciation 500 000
Cost to restore normal operating condition 250 000
Insurance recovery 180 000
Determine the total allowable deduction.
Answer on page 34
A taxpayer had the following data in taxable year 2018:
Gross income from business P 2 000 000
Ordinary and necessary business expenses 1 000 000
Gain on sale of capital asset held for 6 months 400 000
Loss on sale of capital asset held for 2 years 250 000

(a) Taxable income if the taxpayer is a corporation

(b) Taxable income if the taxpayer is an individual with 2 qualified dependents and PWD cousin
Answer on page 36

The taxpayer is an individual with the following data in two years:

2018 2019
Gross income from the business P800 000 P900 000
Business expenses 710 000 700 000
Capital gain on asset held for 4 months 30 000
Capital gain on asset held for 5 years 120 000
Capital gain on asset held for 3 years 120 000
Capital loss on asset held for 2 months 10 000
Qualified dependent(s) 2 1

Taxable income in each year?

An alien employee of an offshore banking unit has the following income for the year 2017:
Salary received from the (OBU) P 10 000 000
Honoraria and allowances received from OBU 5 000 000
Interest income from domestic bank on his 50 000
peso deposits
Capital gain from sale of shares in a domestic 100 000
corporation

How much is the taxable gross income?

Answer on page 7 (Tamayo)

A store building was constructed on January 2 2014, with a cost of P 570 000. Its estimated useful
years is 16 years with a scrap value of P 70 000. In January 2019 replacement of some worn-out parts of the
building costing P 50 000 was spent. After the repairs, the building was appraised with a fair market value of
P 770 000.

How much is the allowable deductions for the year 2018?

Answer on page 31

A corporation manufactures goods in the Philippines, which are sold exclusively in foreign countries. The
following data are taken from the records of the corporation:
Gross sales without P 5 000 000
Gross income from sales, without 3 000 000
Operating expenses 2 100 000
Value of properties, Philippines 300 000
Value of properties without 600 000

How much is the taxable income from sources within and from sources without assuming no independent
factory or production price can be established to the satisfaction of the Commissioner?
Answer on page 97 (Tamayo)

A married citizen has two (2) qualified dependent children. He has the following data on income and
expenses for the year 2011.
Salary, Philippines, gross of withholding tax of P 5 000 P 60 000
Gross business income, Philippines 500 000
Business expenses, Philippines 80 000
Gross business income, USA 900 000
Business expenses, USA 100 000
Interest income from bank deposit, Philippines 50 000
Interest income from bank deposit, USA 70 000

How much is his taxable net income in the Philippines

Assuming the taxpayer is a non-resident citizen. Determine his taxable income.
Base on preceding number, if the taxable year is 2018 determine his taxable income and income tax due.

Answer on page 200

Mr. E married and has two (2) qualified dependents received the following for the year 2011:
Basic monthly salary P 45 000
Overtime pay for November 5 000
Thirteenth month pay 45 000
Other benefits 12 000

The withholding tax from January to November was P 98 082.

How much was the tax to be collected (refunded) for the month of December?

Answer on page 204 (Tamayo)

Aliw Service Corporation, registered with BIR in 2004, has the following data for the year 2011:
Gross Receipts P 1 000 000
Discounts given 100 000
Returns and allowance 150 000
Salaries of personnel directly involved in the supply services 300 000
Fees of consultant directly involved in the supply services 50 000
Rental of equipment directly used in the supply services 70 000
Operating expenses 420 000

How much is the income tax payable?

Answer on page 222 (Tamayo)