TAX Chapters 7-8 - solman tabag PDF

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1 | P a g eCHAPTER 7 – CONCEPT OFINCOMEMULTIPLE CHOICE1. C 13. C 25. D 37. C2. D 14. D 26. B 38. D3. B 15. C 27. B 39. D4. A 16. B 28. A 40. C5. D 17. D 29. D 41. C6. D 18. A 30. A 42. C7. A 19. C 31. D 43. D8. D 20. C 32. D 44. A9. B 21. A 33. B10. D 22. D 34. B11. C 23. D 35. B12. A 24. D 36. BSup...

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CHAPTER 7 – CONCEPT OF INCOME MULTIPLE CHOICE 1. 2.

C D

13. 14.

C D

25. 26.

D B

37. 38.

C D

3.

B

15.

C

27.

B

39.

D

4.

A

16.

B

28.

A

40.

C

5.

D

17.

D

29.

D

41.

C

6.

D

18.

A

30.

A

42.

C

7.

A

19.

C

31.

D

43.

D

8.

D

20.

C

32.

D

44.

A

9.

B

21.

A

33.

B

10.

D

22.

D

34.

B

11.

C

23.

D

35.

B

12.

A

24.

D

36.

B

Supporting Computations: 32. P300,000 4/12 = P100,000 33. Gain on sale of personal property purchased in the Philippines Pand sold in Hongkong Compensation received for personal services in the Philippines 200,000 Rent income from real property in Malaysia - Gain from sale in the Philippines of shares of a foreign corporation 100,000 Deductions identified with: Philippine income (80,000) Foreign income Deductions unidentified with any particular income (P30,000 x 300,000/1,000,000) (9,000) Philippine Net Income P211,000

34. Gross Receipts Rental expenses Salaries expense Basic exemption Taxable income

P600,000 (120,000) (100,000)

(Resident Alien) Gross Income P2,000,000 Business expenses (1,200,000) Dividend income from foreign corp. (50,000 x 30,000 60%) Basic exemption P830,000 Taxable income 36. 37.

Final Tax Withheld on dividend income from domestic corp. = (P90,000 + 72,000)/ 90% x 10% = P18,000 (Domestic Corp = Taxable on income within and without Gross Income P10,000,000 Allowable deductions (4,000,000) Dividend income from domestic corp. exempt Dividend income foreign corp. (95% from R.P.) 1,000,000 Dividend income foreign corp. (60% from R.P.) 800,000 Dividend income foreign corp. (25% from R.P.) 400,000 Taxable income P8,200,000

38. (Resident Foreign Corp = Taxable on income from Philippine sources only Gross Income Allowable deductions Dividend income from domestic corp. Dividend income foreign corp. (80% from R.P.) (P1M X 80%=considered from Phil. sources) Dividend income foreign corp. (60% from R.P.) (P800,000 x 60%) Dividend income foreign corp. (25% from R.P.)

P10,000,000 (4,000,000) exempt 800,000 480,000 -

(entire amount is considered income from sources outside of the Phils.) Taxable income

P7,280,000

39.

1 | Page SolutionsManual-IncomeTaxation(2020Edition)byTabag&Garcia

DI-Microsoft

-

DI-Intel (P400,000 x 60% x 30%)

P72,000

DI - IBM

-

Interest income – BDO @ 20% FCDS deposit @ 7.5%

120,000 60,000

Royalty income @ 20% Total final taxes on passive income

40. DI-Microsoft & Intel @ 30% basic tax DI - IBM Interest income – BDO @ 20% Interest income U.K. @ 30% FCDS deposit @ 15% Royalty income @ 20%

P270,000

Total final taxes on passive income

P740,000

120,000 210,000 120,000 20,000

CHAPTER 8 – INCLUSIONS AND EXCLUSIONS FROM GROSS INCOME PROBLEM SOLVING: P8.1

Gross Income subject to basic tax (Q#1) LESS: Business expenses Basic exemption Net Taxable income

P1,985,000 (125,000) P1,860,000

INCOME SUBJECT TO BASIC TAX: Basic salary (P900,000+P300,000) Director’s fee Business income: Retail business Apartment rental (P190,000/95%) Dividend income from a resident corporation Taxable 13th, X’mas and MidYear Bonus (P180,000 – 1st 5,000 as de minimis – P90,000 exclusions) Income tax due – TRAIN Law (Q#4); [P130k + (P860k x 30%)] INCOME SUBJECT TO FINAL TAX: Cash dividend from a domestic corporation @ 10% Interest from savings deposit @ 20% Royalties from book publications @ 10% Prizes from contest won @ 20% PCSO winnings @ 20% (TRAIN Law)

P5,000 4,000 5,000 10,000 10,000

Total final taxes on passive income (Q#2)

P34,000

P1,200,000 200,000 250,000 200,000 50,000 85,000

P448,000

INCOME EXEMPT FROM TAX: Xmas Bonus and other benefits (P5k de minimis + P95,000 90,000) Stock dividend from a domestic corporation 25,000 Damages received from injuries and sickness 85,000 Proceeds-life insurance coverage of his father Total income exempt from tax (Q#3)

P8.2 1) 2) 3)

P10,000 P15,000 P715,000 computed as follows: Gross profit from sales (P2.5M – P1.5M)

P1,000,000

Taxable recovery-receivables Taxable tax refunds (P30,000 x 50%) Rent income excluding security deposit Operating expenses excluding bad debts

10,000 15,000 250,000 (500,000)

2 | Page SolutionsManual-IncomeTaxation(2020Edition)byTabag&Garcia

Write-off during the year Taxable income

(60,000) P715,000

P8.3 1) 2) 3)

2018 income = (P240,000 x 2) + 60,000 = P540,000 2019 income = only the annual real property tax of P60,000 2020 income (lump-sum) = P240,000 + 60,000 + P3,000,000 = P3,300,000 4) P400,000 computed as follows: Annual rental P240,000 Annual real property tax Annual income from leasehold improvement: Cost x Remaining BV after lease term Divide by remaining lease term Total income 2018

2020 income (spread-out) =

60,000

P3,000,000 5/10 P1,000,000 10 years P100,000 P400,000

P8.4 Ramon Magsaysay award Athlete of the year award Prize for winning an Olympic Medal Gift from Mayor Erap Gift from Honda Cars Total amount exempt from income tax

P50,000 100,000 500,000 250,000 1,000,000 P1,900,000

P8.5 P0; The P800,000 should be exempt from income tax P8.6 P1,000,000; The interest income from expanded foreign currency deposit P8.7 Taxable Proceeds = P1,000,000 – P600,000 = P400,000 P8.8 Salary for the first quarter P180,000 Honorarium as speaker in one of ABC’s team building activities 10,000 Retirement pay; (Taxable; failed to meet the age requirement) 2,500,000 Commissions 30,000 Fee as a member of ABC’s board of directors (compensation 50,000 income since he is at the same time an employee of the company) 10 days monetized vacation leave Exempt Interest income from time deposit FW Tax/E ***Productivity incentive pay and 13th month pay (refer to explanation below) (However, the total of the productivity bonus amounting to P20,000 Exempt + 60,000 bonus is not more than P90,000, hence tax exempt) P2,770,000 Total compensation income subject to tax ***NOTE: for Productivity incentive pay – refer to BIR Ruling No. 293-2015 ◊ If not more than 10k = exempt de minimis ◊ If more than 10k = the entire amount is considered part of “other benefits” subject to P90,000 limit.

P8.9. Change the Problem # from P8.11 to P8.9 DIVIDEND INJURIES/DAMAGES 1. 10% F.Tax 8. Exempt 2.

10% F.Tax

9.

3. 4. 5. 6. 7.

Basic Tax Exempt Basic Tax Exempt N.taxable

10. 11. 12. 13. 14.

26.

PRIZES/AWARDS 15. Basic tax

Exempt

16. Exempt

Basic Tax Exempt Basic Tax Exempt Basic Tax

17. 18. 19. 20. 21. 22. 23. 24. 25.

VARIOUS PROCEEDS /INCOME Final Tax

Exempt Exempt Exempt Basic Tax/FWT Depending on the amount Basic Tax/FWT Depending on the amount 20% FWT; TRAIN Law Basic Tax; (“abroad”) 20% final tax (individual taxpayer) Basic Tax (abroad)...