Kin

Chapter 5
Higher zonal value 5,200,000
Exercise 5-1 B
Multiplied by capital gains tax 6%
Selling price 4,000,000
Capital gains tax 312,000
Less:
=======
Acquisition cost 900,000
Exercise 5-6 B
Attorneys fee 20,000
Exercise 5-7 B
Taxes 40,000
2008 2009
Improvement
Business income 900,000 800,000
(150,000 70,000) 80,000 1,040,000
Allowable expenses 500,000 600,000
Gain on sale 2,960,000
Taxable business income 400,000 200,000
=======
Add (Less) Capital gain (loss)
Exercise 5-2 D
Short-term capital gain 60,000 -
Exchange price (FMV) 5,000,000
Long-term capital gain - 200,000
Add: Cash added 400,000
Short-term capital loss 190,000 -
Total 5,400,000
Less: Book value
(4,300,000 1,720,000) 2,580,000
Gain on exchange 2,820,000
Net capital gain (loss) (130,000) 200,000

Capital loss carry over - 130,000 70,000
=======
Gross taxable income 400,000 270,000
Exercise 5-3 C
Less: Basic exemption 50,000 50,000
Business income
Additional 50,000 100,000
(2,000,000 1,600,000) 400,000
Net taxable income 300,000 170,000
Add: Short term capital gain 90,000
====== ======
Long-term capital gain
Exercise 5-8 A
(40,000 x 50%) 20,000

Total capital gain 110,000
Selling price 700,000
Less: Short-term capital loss 60,000
Less: Cost 400,000
Long-term capital loss
Acquisition
(50,000 x 50%) 25,000
expenses 60,000
Total capital loss 85,000
Selling expenses 40,000
Gross taxable income 425,000
500,000
======
Gain on sale 200,000
Exercise 5-4 B
======
Business income
Exercise 5-9 D
(4,300,000 3,000,000) 1,300,000

Gain on sale of business assets
(700,000 580,000) 120,000
Capital gain (120,000 x 50%) 60,000
Capital loss (90,000 x 50%) 45,000 15,000
FMV (higher) 720,000

Less: Cost 500,000
Gain on exchange 220,000
======
Exercise 5-10 C
Gross taxable income 1,435,000
Gain on sale (P1,500,000 P600,000) 900,000
Exercise 5-5 D
======
FMV 4,800,000
Capital gain tax
Zonal value (800 sq. x 6,500) 5,200,000
On the 1st P100,000 x 5% 5,000
Problem 5-3
On excess (900,000-100,000) x 10% 80,000
Feb. 1 May 1 July 1 Oct. 1 Cumulative
85,000
Net sales 192,000 318,500 135,000 485,000 1,130,500
======
Less: Cost 125,000 262,000 144,000 450,000 981,000
Exercise 5-11 A No capital gain shall be recognized, since Gain (loss) 67,000 56,500 (9,000) 35,000 149,500
the sale of the shares resulted to a loss.
Exercise 5-12 D
Cap. tax rate .005 .005 - .005 .005
Selling price (higher) 6,000,000
Capital gains tax 335 282.50 - 175 747.50
Multiplied by 6%
===== ====== ====== ======
Capital gains tax 360,000
Less: Taxes paid (335 + 282.50 + 175) 792.50
=======
Net capital gains tax ( 45.00 )
Problem 5-1
=======
Business income (450,000/90%) 500,000
Problem 5-4
Compensation income (268,000 +32,000) 300,000
Salary (380,000 + 20,000) 400,000
Interest income on trade receivable 40,000
Christmas bonus (60,000 30,000) 30,000
Short-term capital gain (80,000 x 100%) 80,000
Gain on sale of jewelries
Long term capital loss (60,000 x 50%) (30,000)
(120,000 80,000) 40,000
50,000
Cash dividend from non-resident
Gain on sale of ordinary assets 52,000
foreign corporation 20,000
Loss from sale of ordinary assets (30,000)
Cash dividend from resident
Dividend income
resident foreign corporation 25,000
Business income 950,000
======
=======
Problem 5-2
1. Ordinary assets Computer Motor Commer- Total
Problem 5-5
Vehicle cial Lot
1. Sales (200 x 95) 19,000
Selling price 42,000 400,000 6,000,000 6,442,000
Less: Cost (200 x 100) 20,000
Less: Book value 44,625 480,000 2,500,000 3,024,625

Ordinary gain
(loss) ( 2,625) ( 80,000) 3,500,000 3,417,375
Non-deductible loss (1,000)

=====
The loss is considered non-deductible, because the sales and
subsequent acquisition were within the 61-day period (wash
sale).
====== ====== ======= =======

2. Capital assets Coml. Lot Jewelry Equipment Net
2. Sales 36,000
gain (loss)
Less: Cost (300 x 110) 33,000
Selling price 4,920,000 650,000 150,000
Taxable gain 3,000
Less: Book value 5,520,000 300,000 84,000

Capital gain (loss) ( 600,000) 350,000 66,000
Holing period 50% 50% 100%
Net capital
gain (loss) ( 300,000) 175,000 66,000 ( 59,000 )
======= ====== ===== =======
=====
Problem 5-6
1. Downpayment 150,000
Additional payments
within the year 50,000
Excess of mortgage assumed 100,000
Initial payment 300,000
======
========
2. Selling price 1,080,000
Problem 5-8
Less: Mortgaged assumed
Gross profit (3,500,000 1,400,000) 2,100,000
by the buyer 700,000
=======
Balance 380,000
Initial payment
Add: Excess of mortgaged
([400,000 + 300,000 +
over cost (700,000 600,000) 100,000
(1,400,000 1,500,000)] 800,000
Contract price 480,000
======
=======
Percentage of initial payment
3. Gross profit
to selling price (800,000/3,500,000) 22.86%
(1,080,000 600,000) 480,000
======
=======
Contract price
Selling price 1.080,000
(P3,500,000+ P100,000
Less: Initial payment
P1,500,000) 2,100,000
Actual 200,000
=======
Mortgage assumed 700,000 900,000
Income to be reported:
Balance 180,000
2009
Divided by 3
(2,100,000/2,100,000 x 800,000) 800,000
Annual collection 60,000
2010
=======
(2,100,000/2,100,000 x 700,000) 700,000
Annual income 1st year
2011
(480,000/480,000 x 300,000) 300,000
(2,100,000/2,100,000 x 600,000) 600,000
2nd year
Total 2,100,000
(480,000/480,000 x 60,000) 60,000
=======
3rd year 60,000
Problem 5-9
4th year 60,000
Gross profit (P2,800,000 P2,000,000) 800,000
Total 480,000
======
======
Income
Problem 5-7
2009
Gross profit
Cash 1,000,000
(P2,000,000 P1,200,000) 800,000
FMV of notes
======
(90% x P1,800,000) 1,620,000
Percentage of initial payment
Total 2,620,000
to selling price (P400,000/P2,000,000) 20%
Less: Cost 2,000,000 620,000
====
Income to be reported:
2009
(800,000/2,000,000) x 400,000 188,235.29
2010
(800,000/2,000,000) x 800,000 376,470.59
2011
(800,000/1,700,000) x 500,000 235,294.12
Total 800,000.00
2010
Cash 1,800,000
Less: FMV of notes
received in 2009 1,620,000 180,000
Total income 800,000
=======
Problem 5-10
Mr. AA Mr. BB
Selling price 200,000 450,000
Less: Cost (2,000/5,000 x 600,000) 240,000
Less: Business expenses 620,000
Less: Cost (3,000/5,000 x 600,000) 360,000
Net income 1,009,000
Loss on sale 60,000 --
Less: Basic personal
Gain on sale -- 90,000
exemption (M) 50,000
====== ======
Additional exemp 50,000 100,000
No capital gain tax since
Net taxable income 909,000
the sale resulted to a loss --
=======
Capital gain tax (P90,000 x 5%) 4,500

Chapter 6
Exercise 6-1 D
Downpayment 3,000,000
Installment (1,000,000 x 4.111) 4,111,000
Exercise 6-7 C
Monetary value
(150,000/32%) x 68% 318,750
Exercise 6-8 C
Value of fringe benefits 7,111,000
Grossed-up monetary value
=======
(150,000/32%) 468,750
Exercise 6-2 A
======
Actual value 7,111,000
Exercise 6-9 B
Percentage of
Fringe benefit tax
managerial employees 20%
(255,000/68%) x 32% 120,000
Total 1,422,200
======
=======
Exercise 6-10 D
Monetary value
Salary 280,000
(1,422,200 x 5%) x 50% 35,500
Christmas bonus
=======
(25,000 + 30,000) 30,000 25,000
Exercise 6-3 A
Cash fringe benefits 15,300
Other fringe benefits 25,500
(35,555/68%) 52,287
=====
======
Exercise 6-4 A
Exercise 6-11 B
Salary 280,000
Fringe benefit tax (52,287 x 32%) 16,732

=====
Christmas bonus 25,000

Exercise 6-12 A (Fringe benefit provided to rank-and-file is
not subject to fringe benefit tax)
Exercise 6-13 B
Exercise 6-5 C
Gross income from business 1,200,000
Rental 150,000
Fringe benefits (51,000/68%) 75,000
RATA 204,000
=======

[(15,300 + 25,500)/68%] 60,000
=====
Exercise 6-14 A (The amount of 765,000 is a fringe benefit
and subject to fringe benefit tax)
Exercise 6-15 B
Fringe benefit tax
(765,000/85%) x 15% 135,000
Exercise 6-6 C
======
Problem 6-1
1. Total value of fringe benefit tax

(956,250 + 430,750 + 750,000) 2,137,000
80% value 1,280,000.00

2,560,000.00
768,000.00
=======
Divided by 68% 85% 75% -
2. Fringe benefit tax to supervisor
GUMV
1,882,352.94
3,468,549.02
(956,250/68%) x 32% 450,000

Fringe benefit tax to non-resident alien
Fringe
Total fringe benefit tax 700,000
benefit
tax
908,549.02
Problem 6-2
602,352.94
135,529.41
Motor vehicle benefits
Chapter 7
Downpayment 400,000
Exercise 7-1 C
Installment
Allowable deduction under OSD
(400,000 x 4 years) 1,600,000 2,000,000
(1,800,000 x 40%) 720,000
Total fringe benefit expenses 2,382,500
======
=======
Exercise 7-2 B
Compensation income
(380,000 + 45,000) 30,000 395,000
(382,500/68%) x 32% 180,000.00

On motor vehicle
[(750,000/5)/68%] x 32% 70,588.24
Total fringe benefit tax 250,588.24
========
Problem 6-3
1. Local travel 420,750
De minimis benefits 80,000
Total value of fringe benefits 500,750
======
2. Grossed-up monetary value
(420,750/68%) 618,750
======
3. Fringe benefit tax (618,750 x 32%) 198,000
======
Problem 6-4
1.Grossed-up monetary
value (GUMV) 3,468,549.02
==========
2. Total fringe benefit tax 908,549.02
========
Resident Special NRA-NEBT Total
Citizen Alien
170,666.67
========= ======= ======= =======
1. Cash payment for grocery items 382,500
2. On grocery items
682,666.67
Tax rate 32% 15% 25% -
(750,000/75%) x 25% 250,000
=======
903,529.41
512,000.00
Business income 1,800,000

Deduction under OSD 720,000 1,080,000
Taxable income
before personal exemption 1,475,000
=======
Exercise 7-3 C
Salaries rank-and-file 2,700,000
Salaries supervisory positions 900,000
Fringe benefits rank-and-file 300,000
Fringe benefits supervisory positions
(326,400/68%) 480,000
Total bonus 272,400
Total deductible salaries 4,652,400
=======
Exercise 7-4 D
Net annual salaries 3,200,000
Total amount withheld 580,000
Christmas bonus 250,000
Fringe benefits 180,000
Total deductible salaries 4,210,000
=======
Exercise 7-5 D
Fringe benefits foreign travel
Plant ticket first class
($3,500 x 30%) x P50 52,500
personal exemption 866,400
Meals ($3,000 - $1,800) x P50 60,000
=======
Plant ticket economy (tax exempt) -
Exercise 7-11 D
Meals ($1,500 - $900) x P50 30,000
Net salaries 8,750,000
Total value of fringe benefits 142,500
Add: Employees SSS contribution 300,000
======
Withholding tax 650,000
Allowable travel expenses of the taxpayer:
Employees Medicare contribution 100,000
Foreign plane ticket, meals and lodging
Cash advances 200,000 1,250,000
($3,500 + $3,000 + $1,200
Gross payroll 10,000,000
+ $ 1,500) x 50 460,000.00
Add: Fringe benefits to employees 1,500,000
Domestic travel 400,000.00
Fringe benefits to key officers
(2,040,000/68%) 3,000,000 4,500,000
(142,500/68%) 209,559,82
Total deductible salaries/compensation 14,500,000
Total allowable
========
Trave expenses 1,069,558,82

========
Exercise 7-6 A (The loss is partial; hence the amount of
deductible loss is the book value or replacement cost, Exercise 7-12 D
whichever is lower)
Transportation expenses
Exercise 7-7 B
within the Philippines 600,000
Deductible charitable contributions
Fringe benefits (170,000/68%) 250,000
(2,500,000 1,700,000) x 10% 80,000
Transportation, pouch man 60,000
Exercise 7-8 C
Transportation expenses outside 1,800,000
Business expense, exclusive
Fringe benefits (544,000/68%) 800,000
of interest expense (750,000 25,000) 725,000
Total deductible expenses 3,510,000
Add: Deductible interest expense
=======
[25,000 (50,000 x 33%)] 8,500
Exercise 7-13 C
Total allowable expenses 733,500
Annual rent (P180,000/12 x 7 months) 105,000
======
Real estate tax 3,500
Exercise 7-9 B
Insurance premium
Gross receipts from profession 800,000
(P30,000/12 x 7 months) 17,500
Rental income (136,800/68%) 144,000
Leasehold amortization
Total income from business/exercise
(P600,000/5 x 7/12) 70,000
of profession 944,000
Total deducible rent 196,000
Multiplied by OSD rate 40%
======
Allowable deduction under OSD 377,600
======
Exercise 7-10 A
Gross receipts 944,000
Add: Compensation income
(P255,000 + 45,000) 300,000
Total 1,244,000
Less: Allowable deduction 377,600
Taxable income before
Exercise 7-14 B
Interest expense on borrowings 300,000
Less: Reduction based on interest
income (P150,000 x 33%) 49,500
Deductible interest expense 250,500
======
Exercise 7-15 B
Charitable contributions subject to limitation for:
Public purpose 100,000
(7,500,000 x 60%) 4,500,000
UCCP Church 50,000
Less: Expenses before donation 2,705,000
Flood victims 50,000
Income before donation 1,795,000
Total - actual 200,000
10% limit 10%
Limit
Allowable deductible donation 179,500
(P5,000,000 2,000,000
Problem 7-3
1,000,000) x 5% 100,000
1. Municipal taxes 1,200
Lower 100,000
Community tax 1,000
Charitable contribution
Documentary stamp tax
deductible in full for education 300,000
(P910 80 30) 870
Total deductible charitable contributions 400,000

Problem 7-1
1. Advance rental is not a deposit
Cash basis Accrual basis
Monthly rental (starting Sept. 1) 600,000 600,000
Real estate tax 6,000 6,000
Interest expense (12,000/2) 6,000 6,000
Insurance premium (7,500/2) 3,750 3,750
Advance rental (applicable
for July and August) 300,000 300,000
License (P4,000 500 100) 3,400

Total deductible taxes 6,470
=====
2. Representation and traveling allowance 15,000
Interest on documentary stamp tax 30
Interest on borrowings 10,000
Interest on license 100
Compensation to key personnel
- fringe benefit (P10,200/68%) 15,000
Compensation to employees 6,000
Total of other deductible expenses 46,130
Total 915,750 915,750
=======
====== ======
The interests on documentary stamp tax and on license fees

are not classified as taxes but rather interest expense. Fringe
benefits of key personnel are subject to fringe benefit tax;
hence, the amount was grossed-up.
2.Advance rental is a deposit with restriction

Cash basis Accrual basis
Monthly rental (starting July. 1) 900,000 900,000
Real estate tax 6,000 6,000
Interest expense (12,000/2) 6,000 6,000
Problem 7-4
Insurance premium (7,500/2) 3,750 3,750
Business losses 200,000
Advance rental as deposit 300,000 Total 1,215,750 915,750

Problem 7-2
Salaries (870,000 + 30,000 + 150,000) 1.050,000
Fringe benefits rank-and-file 450,000
Fringe benefits managerial employee
(340,000/68%) 500,000
Representation and traveling allowance 150,000
Rent expense 180,000
Commission (7,425,000 + 75,000) x 5% 375,000
Business expense before donation 2,705,000
Partial loss on equipment

Book value (P800,000 480,000)
x 80% 256,000
Replacement cost 240,000
Deductible loss lower 240,000
Total loss on machinery
Acquisition cost 2,000,000
Less: Accumulated depreciation
(P2,000,000/10) x 6 1,200,000
Book value 800,000
Less: Recoverable amount 200,000 600,000
Donation subject to limitation (see below) 179,500
Deductible loss 1,040,000
Total deductible expense 2,884,500
=======
=======
Problem 7-5
Gross income from business
1. Other business expenses 1,800,000
FB to employees 120,000
Actual 150,000
FR to employees subject to
Limit (P2,900,000 1,305,000
fringe benefit tax (P204,000/68%) 300,000
85\62,500) = 732,500 x 10% 73,250
Interest expense on bank loan 60,000
Lower 73,250
Net operating loss carry over 70,000
Total deductible expenses 935,750
Entertainment
======
Actual 40,000
2.Gross income
Limit (5,600,000 50,000 20,000)
(P2,900,000 1,305,000) 1,595,000
= 5,530,000 x 1/2% 27,650
Less: Allowable deduction 935,750
Lower 27,650
Net income before
Total deductible business expense 2,377,650
personal exemption 659,250
=======
Less: Personal Exemption
2. Net sales 5,530,000
(P50,000 + 100,000) 150,000
Less: Cost of sales 2,200,000
Taxable net income 509,250
Gross income 3,330,000
=======
Add: Interest income
Chapter 8
on bank loan in USA 90,000

Total gross income 3,420,000
Less: Deductible expenses 2,377,650
Net income before exemption 1,042,350
Less: Personal exemption
(50,000 + 100,000) 150,000
Problem 7-6
1. Salaries 400,000
Losses on embezzlement 50,000
Advertising 20,000
Depreciation 50,000
Taxes (P190,000 P90,000) 100,000
Pension contribution present
(P230,000 P100,000) 130,000
Pension contribution past
(P100,000/10) 10,000
Entertainment
Actual 35,000
Limit (P2,900,000 x 1%) 29,000
Lower 29,000
Interest expense on bank deposit
Actual 90,000
Less: Reduction due to interest
income (P50,000 x 33%) 16,500 73,500
Total before charitable contribution 862,500
Charitable contribution for public purpose
Exercise 8-1 A
Gross income (2,500,000 1,500,000) 1,000,000
Less: Allowable business expense 450,000
Taxable income before exemption 550,000
(P50,000 + 100,000) 150,000
=======
Exercise 8-2 C
On P250,000 50,000.00
On excess (P400,000 250,000) x 30% 45,000,00
Total 95,000,00
Add: Surcharge (P95,000 x 25%) 23,750,00
Interest (P95,000 x 20% x 139/360) 7,336.11
Total tax due and payable 126,086.11
========
Exercise 8-3 D
Net salaries subject to tax
(490,000 6,000 4,000) 480,000
Net business income subject to tax
(P1,800,000 950,000) 850,000
Taxable net income before
personal exemption 1,330,000
(P100,000 + 75,000) 175,000
Taxable net income 1,155,000
=======
Exercise 8-4 B
Total 145,800.00
On 500,000 125,000.00
Less: Tax previously paid on P415,000
On excess (P1,155,000 500,000)
On P250,000 50,000
x 32% 209,600.00
On excess
Total 334,600.00
(415,000 250,000) x 30% 49,500 99,500.00
Less: Quarterly tax paid 180,000.00
Deficiency tax 46,300.00
Withholding tax on wages 60,000.00 240,000.00
Add: Surcharge (46,300 x 50%) 23,150.00
Tax due before penalties 94,600.00
Interest
Add: Surcharge (P94,600 x 25%) 23,650.00
(P46,300 x 20% x 107/160) 2,752.78 25,902.78
Interest (P94,600 x 20% x 35/260) 1,839.44

Total taxes still due and payable 120,089.44
========
Exercise 8-5 B
Gross income (4,000,000 2,200,000) 1,800,000
Add: Interest income
on notes receivable 20,000
Total gross income 1,820,000
Less: Business expenses 1,100,000
Interest expense
Total tax still due 72,702.78

========
Exercise 8-8 C
Total deficiency assessment 72,702.78
Add: Surcharge (P72,702.78 x 25%) 18,175.70
Interest (72,702.78 x 20% x 15/360) 605.86
Total 91,484.34
=======
Exercise 8-9 A
Gross income (5,000,000 + 3,000,000) 8,000,000
[70,000 (90,000 x 33%) 40,300 1,140,300
Less: Business expense
Income before charitable contribution 679,700
(P3,500,000 + 2,400,000) 5,900,000
Less: Charitable contribution
Income taxes paid in Australia 200,000 6,100,000
Actual 80,000
Net business income 1,900,000
Limit (P679,000 x 10%) 69,970 69,970
Add: Interest income Australia 30,000
Taxable income before personal exemption 611,730
Royalty income Australia 20,000 50,000
Less: Personal exemption (P50,000 + 100,000) 150,000

=======
Exercise 8-6 A

(P50,000 + 75,000) 125,000
Net taxable income 1,725,000
On P250,000 50,000.00
=======
On excess (461,730 250,000) x 30% 63,519.00
Exercise 8-10 B
Total 113,519.00
Tax on P500,000 125,000
Less: Quarterly tax payment 95,000.00
Tax on excess
Balance 18,519.00
(P1,725,000 500,000) x 32% 393,000
Add: Surcharge (P18,519.00 x 25%) 4,629.75
Total tax before tax credit 517,000
Total tax due and payable 23,148.75
Less: Taxes paid 300,000
========
Income tax still due 217,000
Exercise 8-7 B
=======
Total taxable income
Exercise 8-11 D
(P415,000 + 150,000) = 565,000
Gross income (5,000,000 + 3,000,000) 8,000,000
On P500,000 125,000.00
Less: Business expense
On excess
(P3,500,000 + 2,400,000) 5,900,000
(565,000 500,000) x 32% 20,800.00
Net business income 2,100,000
Add: Interest income Australia 30,000
[80,000 (60,000 x 38%)] 57,200
Royalty income Australia 20,000 50,000
Fringe benefits to supervisor
(40,800/68%) 60,000 2,942,200
Income before donation 2,180,800
(P50,000 + 75,000) 125,000
Less: Donation actual
(150,000 + 25,000) 175,000
=======
- limit (2,180,000 x 10%) 218,080
Exercise 8-12 C
- lower (actual) 175,000
Tax on P500,000 125,000
Net income before personal exemption 2,005,800
Tax on excess
Less: Basic personal exemption 50,000
(P1,925,000 500,000) x 32% 456,000
Additional exemption 50,000 100,000
Total tax due 581,000

Less: Tax credit
Philippine taxes paid 300,000
Taxes paid in Australia
Net taxable business income 1,905,800

=======
3. Taxable net Tax due
Actual 200,000
Income
Limit
On 500,000 125,000
(P600,000/2,100,000)
On excess (1,905,800 500,000)
x 581,000 166,000
x 32% 1,405,800 449,856
Lower 166,000 466,000
Total 1,905,500 574,856
Income tax still due after tax credit 115,000
=======
=======
Less: Quarterly tax paid 175,000
Problem 8-1
Tax due and payable 399,856
1. Gross business income 4,500,000
======
Cash dividend from non-resident

Property dividend from resident
Salary and allowances 500,000
Gain on sale of jewelry (80,000 35,000) 45,000
Interest earned on premium 10,000
Christmas and incentive
4. Tax due and payable 399,856.00

Add: Surcharge (399,856 x 25%) 99,964.00
Interest (399,856 x 20% x 4.5/12) 29,989.20
Tax due and payable September 1 529,809.20
========
Problem 8-2
(28,000 + 15,000) 30,000 13,000
1. Installment method not adopted by taxpayers
Interest income on deposit abroad 10,000
Carlos Daisy(Spouse)
Compensation income
=======
First Coml. Corp.

Salary (480,000 + 55,000) 535,000
2. Gross taxable income 5,123,000

Less: Cost of sales and
other allowable expenses 2,800,000
Past pension cost
(250,000/10) 25,000
Interest expense
13th month pay

(55,000 30,000) 25,000
Greater Libungan
(60,000 + 14,400) 74,400
Brownies Corporation
(240,000 + 35,000) 275,000
Total gross compensation 634,400 275,000
Tax due 90,500 35,250
Less: Tax credit 25,000
exemption (M) 50,000 50,000
Tax due and payable 90,500 10,250
Additional (25,000 x 3) 75,000
====== =====
125,000 50,000
Problem 8-4
Net taxable income 509,400 225,000
Resident Citizen Non-resident
====== ======
Gross profit from sales 6,000,000 3,600,000
Tax due 128,008 43,750
Gross compensation income 525,000 525,000

Gain from sale of business assets 195,000 195,000
Less: Tax withheld 69,400 35,000
Rental income 150,000 150,000
Tax due and payable 58,608 8,750
Interest income Singapore 115,000
====== =====
Royalty income Singapore 255,000 -
2. Taxpayers adopted installment payment of tax
Total 7,240,000 4,470,000
Tax due before tax credit 128,008 43,750
Other gross income partly within and without 225,000
Divided by 2 2
(4,320,000/7,240,000) x 225,000 134,254
Total 64,004 21,875
Gross income 7,465,000 4,605,254
Less: Tax withheld 69,400 35,000

First installment payment of tax
(for credit on second
installment ( 5,396) (13,125)
====== =====
Second installment 64,004 21,875
Less: Excess of 1st installment ( 5,396 ) (13,125)
Tax due on 2nd installment 58,608 8,750
====== =====
======= =======
Problem 8-5
1. a. 8,102,000
b. 5,250,182
Resident Non-resident
Gross business income 7,800,000 5,000,000
Compensation income
(150,000 + 12,000) 162,000 162,000
Interest on loan 5,000 Property dividend 25,000 -
Problem 8-3
Rental income 50,000 50,000
Edwin Nancy (Spouse)
Cash dividend from resident foreign corporation 60,000
Compensation income
(7,000,000/11,000,000)
(216,000 + 25,000) - 241,000
= .636363 x 60,00 38,182
Business income
Gross taxable income 8,102,000 5,250,182
Sales (net) 2,788,000
======= =======
Less: Cost of sales 1,775,000
2. Gross taxable income abroad
Gross profit 1,013,000
Gross business income Malaysia 2,800,000
Less: Allowable business expenses 503,000 -
Interest on loan 5,000
Net income/compensation
Property dividend 25,000
before exemption 510,000 241,000
Cash dividend partly abroad 38,182
Total 2,868,182
exemption 50,000 50,000
=======
Additional exemption 75,000 125,000 50,000

Taxable net income 385,000 191,000
======= ======
Problem 8-6
1.
Gross business income
(P6,000,000 + 4,000,00) 10,000,000
Less: Business expenses
Tax on excess (P2,450,000 500,000) x 32% 624,000
(P4,000,000 + 3,500,000) 7,500,000
Total 749,000
Taxes paid in Singapore 300,000
Less: Tax credit
7,800,000
Philippines income tax paid 500,000
Net income before other income 2,200,000
Singapore
Add: Royalty Singapore 50,000
Actual 300,000
Interest on bank deposit
Limit (P500,000/2,500,000) x 749,000 149,800
Singapore 50,000
Lower 149,800 649,800
100,000
========
Problem 8-7
(P50,000 + 100,000) 150,000
Taxable income Philippines 3,000,000
- Malaysia 2,000,000
=======
- Taiwan 500,000
Tax on P500,000 125,000

Tax on excess (P1,950,000 500,000) 32% 464,000
Total 589,000
Less: Philippine taxes paid 450,000
=======
2.
Gross business income
(P6,000,000 + 4,000,00) 10,000,000

Less: Business expenses
(P4,000,000 + 3,500,000) 7,500,000
Net income before other income 2,500,000
Add: Royalty Singapor 50,000
Interest on bank
deposit Singapore 50,000
100,000
Total 5,500,000
=======
Tax on P500,000 125,000.00
Tax on excess
(P5,500,000 500,000) x 32% 1,600,000.00
Total 1,725,000.00
Less: Tax credit
Philippine quarterly tax 700,000.00
Malaysia
Actual 600,000.00
Limit
(P2,000,000/5,500,000) x 1,725,000 627,272.72
Lower 600,000.00
Taiwan
Actual 250,000.00
Limit
(500,000/5,500,000) x 1,725,000 156.818.18
(P50,000 + 100,000) 150,000
Lower 156,818.18 1,456,818.18
Philippine income tax still due
========
After tax credit 268,181.
Tax on P500,000 125,000

Kin

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Chapter 5

Higher zonal value 5,200,000

Multiplied by capital gains tax 6%

Selling price 4,000,000

Capital gains tax 312,000

Acquisition cost 900,000

Attorneys fee 20,000

Business income 900,000 800,000

(150,000 70,000) 80,000 1,040,000

Allowable expenses 500,000 600,000

Gain on sale 2,960,000

Taxable business income 400,000 200,000

Add (Less) Capital gain (loss)

Short-term capital gain 60,000 -

Exchange price (FMV) 5,000,000

Long-term capital gain - 200,000

Add: Cash added 400,000

Short-term capital loss 190,000 -

Net capital gain (loss) (130,000) 200,000

Gross taxable income 400,000 270,000

Less: Basic exemption 50,000 50,000

Additional 50,000 100,000

(2,000,000 1,600,000) 400,000

Net taxable income 300,000 170,000

Add: Short term capital gain 90,000

Long-term capital gain

(40,000 x 50%) 20,000

Selling price 700,000

Less: Short-term capital loss 60,000

Less: Cost 400,000

Long-term capital loss

(50,000 x 50%) 25,000

Total capital loss 85,000

Selling expenses 40,000

Gross taxable income 425,000

Gain on sale 200,000

(4,300,000 3,000,000) 1,300,000

FMV (higher) 720,000

Gross taxable income 1,435,000

Gain on sale (P1,500,000 P600,000) 900,000

Capital gain tax

Zonal value (800 sq. x 6,500) 5,200,000

On the 1st P100,000 x 5% 5,000

On excess (900,000-100,000) x 10% 80,000

Feb. 1 May 1 July 1 Oct. 1 Cumulative

Net sales 192,000 318,500 135,000 485,000 1,130,500

Less: Cost 125,000 262,000 144,000 450,000 981,000

Cap. tax rate .005 .005 - .005 .005

Selling price (higher) 6,000,000

Capital gains tax 335 282.50 - 175 747.50

===== ====== ====== ======

Capital gains tax 360,000

Less: Taxes paid (335 + 282.50 + 175) 792.50

Net capital gains tax ( 45.00 )

Business income (450,000/90%) 500,000

Compensation income (268,000 +32,000) 300,000

Salary (380,000 + 20,000) 400,000

Interest income on trade receivable 40,000

Christmas bonus (60,000 30,000) 30,000

Short-term capital gain (80,000 x 100%) 80,000

Gain on sale of jewelries

Long term capital loss (60,000 x 50%) (30,000)

(120,000 80,000) 40,000