TAX 1 2018 SolMan Chapters 1 8

SOLUTIONS MANUAL INCOME TAXATION 2018 Edition By: TABAG & GARCIA

CHAPTER 1 – PRINCIPLES OF TAXATION

TRUE OR FALSE-SET A 1. FALSE 2. TRUE 3. TRUE 4. TRUE 5. TRUE 6. FALSE 7. TRUE 8. FALSE MULTIPLE CHOICE 1. A 2. C 3. B** 4. D 5. C

9. 10. 11. 12. 13. 14. 15. 16.

TRUE TRUE TRUE TRUE FALSE FALSE FALSE FALSE

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

FALSE FALSE FALSE TRUE TRUE TRUE TRUE FALSE

25. 26. 27. 28. 29. 30.

FALSE TRUE FALSE TRUE TRUE FALSE

21. 22. 23. 24. 25.

D D D D B

41. 42. 43. 44. 45.

D A A B C

61. 62. 63. 64. 65.

C C C C A

46.

C

6.

B

26.

A

7.

C

27.

A

47.

B

8.

C

28.

D

48.

A

9.

D

29.

C

49.

C

10.

D***

30.

C

50.

D

11.

A

31.

A

51.

D

12.

D

32.

C

52.

C

13.

D

33.

D

53.

B

14.

C

34.

C

54.

D

15.

C

35.

A

55.

A

16.

D

36.

C

56.

A

17.

A

37.

D

57.

A

18.

A

38.

C

58.

D

19.

C

39.

D

59.

C

20.

B

40.

A

60.

A

**Statement 1 – False; similarity of tax from license fee, not a distinction. ***Statement 1 – False; should be “jurisdiction” instead of “symbiotic relation”. Statement 2 – False; should be “symbiotic relation” instead of “jurisdiction”

!#! " # $

Solutions Manual- Income Taxation(2018 Edition) by Tabag & Garcia

Trusted by over 1 million members

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.













CHAPTER 2 - INDIVIDUAL TAXPAYERS ERRATUM: (1) PAGE 77, TABLE 2-2;

Citizens and Residents

NRA-ETB

NRA-ETB

10%

10%

25%

ROYALTY ON BOOKS AS WELL AS OTHER LITERARY WORKS….. (2)

FROM

CHANGE TO: PAGE 75

1) 2)

PAGE 75

Assume the SEP opted to avail the 8% tax under the TRAIN Law, determine the tax due. ! Answer: P364,000

Solution:

1) 2)

Assume the SEP opted to avail the 8% tax under the TRAIN Law, determine the tax due. 384,000 ! Answer: P 384,000

Solution:

On his compensation i ncome: ncome:

Tax on First P800,000 In excess of P400,000 (P100,000 x 30%) On his business income =

P130,000 30,000

On his compensation i ncome: ncome:

Tax on First P800,000 In excess of P400,000 (P100,000 x 30%)

P160,000

204,000

**(P2.8M – P250,000) x 8% TOTAL Tax Due

P130,000 30,000

On his business income = **(P2.8M – P250,000 P250,000)) x 8%

P364,000

TOTAL Tax Due

RC RC RC

4. 5. 6.

NRA-NETB NRC RA

2-2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

TAX TYPE FWTx FWTx BTx FWTx Exempt BTx BTx BTx BTx BTx FWTx FWTx FWTx BTx BTx FWTx FWTx BTx

Tax RATE 20% 7.5%/ 15%TL Tax Table 20% Tax Table Tax Table Tax Table Tax Table Tax Table 20% 10% 20%* Tax Table* Tax Table 20% 20% Tax Table

19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

TAX TYPE Exempt FWT FWTx BTx Exempt FWTx FWTx FWTx FWTx BTx BTX FWTx FWTx CGT Exempt BTx BTx

224,000 P384,000

PROBLEMS 2-1

1. 2. 3.

P160,000

Tax RATE 20% 25% Tax Table 25% 20% 20% 10% Tax Table Tax Table 20% 25% 5%&10%/ 15% Sub.to OPT*** Tax Table Tax Table****















Amount RC, NRC, RA, NRAET NRANET P10,000 exempt exempt 25% > P10,000 20% FWT 20% FWT 25% FWT ***Stock Transaction Tax on sale of shares of DC listed in the Local Stock Exchange: Prior to TRAIN Law = ! of 1% of GSP TRAIN Law = 6/10 of 1% of GSP ****CGT on Real Properties Must be pertaining to a real property classified as capital asset located in the Philippines. However, if it is sold to the Government, the tax may either be CGT or Basic Tax at the option of the individual taxpayer. !

2-3 1.

a. b. c. d.

Exempt Exempt Income Tax Due = P130,000 P746,000 computed as follows: Tax Due: 1st P2,000,000 Excess over P2M = (P800,000 x 32%) Total

2.

Income Tax Payable = P95,000 computed as follows: Gross sales Cost of sales Operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P150,000 x 30%) Tax Due Less: CWT Income Tax Payable

3.

P2,800,000 (1,200,000) (650,000) P950,000 P130,000 45,000 P175,000 (80,000) P95,000

Income Tax Payable = P124,000 computed as follows: Gross sales Less Balance subject to 8% tax x Tax Due Less: CWT Income Tax Payable

4.

P490,000 256,000 P746,000

P2,800,000 (250,000) P2,550,000 8% P204,000 (80,000) P124,000

Income Tax Payable = P215,000 computed as follows: Gross sales Rental income (P380,000/95%) Cost of sales Operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P550,000 x 30%) Tax Due

P2,800,000 400,000 (1,200,000) (650,000) P1,350,000 P130,000 165,000 P295,000















6.

Income Tax Payable = P222,500 computed as follows: Gross receipts Cost of direct services Other operating expenses Taxable net income Tax Due: 1st P800,000 Excess over P800,000M = (P575,000 x 30%) Tax Due Less: CWT Income Tax Payable

P4,000,000 (1,800,000) (825,000) P1,375,000 P130,000 172,500 P302,500 (80,000) P222,500

7.

The 8% optional tax is not applicable because the gross receipts exceeded the revised vat threshold of P3,000,000.

8.

Income Tax Payable = P212,000

computed as follows:

Compensation income Gross sales Cost of sales Operating expenses Taxable net income Tax Due: 1st P2,000,000 Excess over P2M = (P350,000 x 32%) Tax Due Less: CWT On compensation income On business income Income Tax Payable 9.

P1,400,000 2,800,000 (1,200,000) (650,000) P2,350,000 P490,000 112,000 P602,000 (310,000) (80,000) P212,000

The 8% optional tax is applicable because gross sales sales did not exceed the revised vat threshold of P3,000,000. The income tax payable shall be computed as follows: Gross sales x 8% Tax on sales ADD: Tax due on compensation income 1st P800,000 Excess over P800,000 = (P600,000 x 30%) Tax Due Less: CWT On compensation income On business income Income Tax Payable " "

Taxpayer is a resident citizen

1.1 1.2 1.3 1.4

P130,000 180,000 P,000

310,000 P534,000 (310,000) (80,000) P144,000

For mixed income earners, P250,000 is not deducted for purposes of computing the 8% tax The 8% tax is not applicable to compensation income.

2-4 1.

2,800,000 8% P224,000

Taxable income = P1,050,000 Income tax payable = P80,000 Final tax on passive income = P57,500 Total income tax expense = P262,500















Gross business income, Philippines Gross business income, USA Business expenses, Philippines Business expenses, USA Compensation income, Philippines Dividend income-foreign corp. Interest income-bank deposit abroad Raffle draw winnings Basic personal exemption Taxable income

Tax Due [(P130,000)+(250,000 x 30%)] Creditable withholding tax on bus. income Income Tax Payable

P1,000,000 500,000 (700,000) (430,000) 600,000 40,000 30,000 10,000 P1,050,000

P205,000 (125,000) P80,000

Dividend income – DC (50k x 10%) Interest income bank deposit-Phls.@20% Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings (P200,000 x 20%)

2.

Final Tax on Passive Income

P57,500

Basic income tax due Final taxes on passive income

P205,000 57,500

Total income tax expense

P262,500

The question is tax expense; ignore the income tax payable of P80,000.

Taxpayer is a nonresident citizen

2.1 2.2 2.3 2.4

Taxable income = P910,000 Income tax payable = P38,000 Final tax on passive income = P51,500 Total income tax expense = P214,500 Gross business income, Philippines

P1,000,000

Business expenses, Philippines Compensation income, Philippines Dividend income-foreign corp. Raffle draw winnings Basic personal exemption

(700,000) 600,000 *** 10,000 -

Taxable income

P910,000

Tax Due [(P130,000)+(110k x 30%)] Creditable withholding tax on bus. Income

P163,000 (125,000)

Income Tax Payable

3.

P5,000 4,000 6,000 2,500 40,000

P38,000

Dividend income – DC (50k x 10%) Interest income bank deposit-Phls.@20%

P5,000 4,000

Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings (P200,000 x 20%)

exempt 2,500 40,000

Final Tax on Passive Income

P51,500


P163,000 51,500


P214,500

Taxpayer is a resident alien

3.1 3.2

Taxable income = P910,000 (same answer with #2.1; nonresident citizen) Income tax payable = P38,000 (same answer with #2.2; nonresident citizen)

***Assume situs is without the Phls.

Assume the tax withheld pertain to Income derived in the Phls.















4.

Taxpayer is a nonresident alien engaged in trade or business

4.1 4.2 4.3 4.3

Taxable income = P910,000 (same answer with th #2.1; nonresident citizen) Income tax payable = P38,000 (same answer with #2.2; nonresident citizen) Final tax on passive income = P16,500 Total income tax expense = P179,500 Dividend income – DC (50k x 20%) Interest income bank deposit-Phls.@20% Interest income FCDS deposit @ 15% Royalty income from composition @10% PCSO winnings Final Tax on Passive Income "

5.

P10,000 4,000 exempt 2,500 Exempt**

Use 20% rate for DI from DC instead of 10%

P16,500

**Unfortunately, unlike RCs, NRCs and RAs, the PCSO exemption of NRAET under TRAIN Law was retained.


P163,000 16,500


P179,500

Taxpayer is a nonresident alien not-engaged in trade or business

Compensation income, Philippines Dividend income - DC Dividend income from foreign corp. Interest income bank deposit, Phls. Interest income on FCDS deposit Royalty income from composition Raffle draw winnings PCSO winnings Total GROSS Income x

P600,000 50,000 20,000 Exempt 25,000 10,000 200,000 P905,000 25%

Income Tax Due/expense

P226,250

Assume situs is “without or abroad”

2-5 1.

Taxpayer is a resident citizen

a. b. c. d.

Taxable net income = P1,076,100 Income tax payable = P212,830 Final tax on passive income = P68,030 Capital gains tax = P120,600

Solution: From Phils. Income from employment Business income Deductible business expenses Interest income on personal loans** Dividend income from foreign corp. Prizes from singing contest Interest income on bank deposits Interest income on money market placements Royalty income Winnings/ prizes from lotteries, raffles Lotto winnings Basic Personal exemption Additional exemption Taxable income TAX DUE:

From Abroad

P180,000 850,000 (610,000) 6,000 6,800 5,600

---

P280,000 960,000 (730,000) 3,000 2,000 4,200 1,600 50,000 16,900 50,000

Total P460,000 1,810,000 (1,340,000) 9,000 8,800 5,600 4,200 1,600 50,000 16,900 50,000 P1,076,100

















Final Tax on Passive income:

Interest income on bank deposits Interest income on money market placements Royalty income Lotto winnings Winnings/ prizes from lotteries, raffle draws Total @

10,800 7,500 90,000 150,000 45,000 P303,300 20%

Dividend income from domestic corp. Royalty income from sale of books Total @

5,700 68,000 P73,700 10%

TOTAL FINAL TAX ON PASSIVE INCOME

Total 2.

P63,600 57,000 P120,600

Taxpayer is a non-resident citizen

a. b. c. d.

Taxable income = P438,400 Income tax payable = P39,600 Final tax on passive income = P68,030 Capital gains tax = P120,600

Solution: Income from employment Business income Deductible business expenses Interest income on personal loans Dividend income from foreign corp. Prizes from singing contest Basic Personal exemption Additional exemption Taxable income TAX DUE:

First P400,000 Excess = P38,400 x 25%

7,370 P68,030

Capital Gains Tax:

Sale of lot (P1,060,000 x 6%) Sale of house and lot (P950,000 x 6%)

P60,660

From Phils. P180,000 850,000 (610,000) 6,000 6,800 5,600 P438,400

P30,000 9,600 P39,600















Final Tax on Passive income:

Interest income on bank deposits Interest income on money market placements Royalty income Dividend income from domestic corp Winnings/ prizes from lotteries, raffle draws Total @ Dividend income from domestic corp .@ 20% Royalty income from sale of books @

10,800 7,500 90,000 5,700 45,000 P159,000 20% 68,000 10%

rate is 20%

TOTAL FINAL TAX ON PASSIVE INCOME

P31,800 6,800 P38,600

2-6

a. b. c.

Taxable income of the husband = P1,165,000 Taxable income of the wife = P890,000 Consolidated tax due of the husband and the wife = P396,500 Husband

Wife

INCOME:

Compensation income Income-Profession [P800,000/2)] Income from trading business

P 850,000 400,000 250,000

P650,000 400,000 -

(160,000) (100,000) (75,000)

(160,000) -

P1,165,000

P890,000

P130,000 109,500

P130,000 27,000

P239,500

P157,000

LESS:

Expenses-practice of profession [ P320,000/2)] Expenses – trading business Basic Personal exemption Additional exemption TAXABLE INCOME

Tax due: First P800,000 In excess of P500,000 @ 30% Total

Consolidated Tax Due P396,500 Note: Personal expenses are not deductible. The Personal exemptions and Premium payments for health insurance are no longer deductible

beginning Jan. 1, 2018 under TRAIN Law. 2-7 a.

Total capital gains taxes Sale of shares of domestic corp. directly to a buyer (P150,000 x 15%*)

P22,500















c.

Business income Rental income net of tax (P200,000/95%)/2 Dividend income from nonresident corp. (P10,000/2) Interest income on notes receivable [P6,000 + (P2,000/2)] Interest income on bank deposit abroad [P5,000 + (P5,000/2)] Capital gain on sale of land abroad (P500,000/2) Gain on sale of shares – New York Stock Exchange P30,000/2 Expenses [P350,000 +(75,000/2)] Personal exemption

P600,000 100,000 5,000 7,000 7,500 250,000 15,000 (387,500) -

Taxable net income of Daniel

P597,000

Gross income from practice of profession (P360,000/90%) Rental income net of tax (P190,000/95%)/2 Dividend income from resident corp. Dividend income from nonresident corp. (P10,000/2) Interest income on notes receivable [P4,000 + (P2,000/2)] Interest income on bank deposit abroad [P5,000 + (P5,000/2)] Capital gain on sale of land abroad (P500,000/2) Gain on sale of shares – New York Stock Exchange P30,000/2 Expenses [P200,000 +(75,000/2)] Personal exemption

P400,000 100,000 20,000 5,000 5,000 7,500 250,000 15,000 (237,500) -

Taxable net income of Kat

P565,000

d.

2-8 1. 2. 3. 4. 5. 6.

Income tax payable, first quarter = PIncome tax payable, second quarter = P17,600 Income tax payable, third quarter = P38,427.5 Income tax payable, fourth quarter = P67,297.5 Final tax on passive income = P15,800 Capital gains tax = P600,000 x 6% = P36,000 1st Q

Gross Profit from Sales Business e-xpenses Personal exemption Taxable income Tax Due (Tax Table) Less: Tax Paid Q1 Q2

2 nd Q

3rd Q

Q4/Year

P300,000 (120,000)

P600,000 (262,000)

P910,000 (405,890)

P180,000

P338,000

P304,110

P1,200,000 (426,700) P773,300

-

P17,600

P56,027

P123,325

-

-

(17,600)

(17,600)















b.

c. d.

The Taxpayer is a Special Filipino Employee (SFE), however, the income tax due is based on the old graduated tax table. The 15% preferential rate is not applicable because the compensation income is lower than P975,000. TNI = 750,000 + 100,000 – basic personal exemption of P50,000 = P800,000 Basic Tax Due (old rate) = 125,000 + (300,000 x 32%) = P221,000 The Taxpayer is a Special Filipino Employee (SFE) employed by an OBU. Income Tax Due = P850,000 x 15% = P127,500 The Taxpayer is a Special Filipino Employee (SFE) employed by an PC/SC. Income Tax Due = P850,000 x 15% = P127,500

CASE B: 2018 Taxable Year; The Preferential Tax Rate of 15% is no longer applicable Answers for letters a-d are the same computed as follows: TNI = P850,000 Income Tax Due = P130,000 + (P50,000 x 30%) = P145,000 2-10

a. b. c. d.

P6M x 6% = P360,000 ZV P2.2M vs. SP of P2.5M**; CGT = P2.5M x 6% = P150,000; **SP = Cost + Gain Unutilized Proceeds = none; the proceeds were fully utilized; CGT = P0 Unutilized Proceeds = P5M x 20% = P1M; CGT = 1/5 x 6M x 6% = P72,000

2-11

a. b. c. 2-12 2-13 2-14 2-15

P15M x 6% = P900,000 P20M x 6% = P1,200,000 P0

C.G. Tax = none; the transaction resulted to a loss C.G. Tax = P100,000 x 15% = P15,000; TRAIN Law C.G. Tax = (P150,000 x 15%) = P22,500; TRAIN Law C.G. Tax = none; subject to business tax of 6/10 of 1% of GSP; TRAIN Law

TRUE OR FALSE 1. TRUE 2. TRUE 3. TRUE 4. TRUE 5. TRUE

6. 7. 8. 9. 10.

FALSE FALSE; Train Law TRUE FALSE FALSE; Abroad

11. 12. 13. 14. 15.

TRUE TRUE FALSE; TRAIN Law TRUE; Prior to 2018 FALSE;

MULTIPLE CHOICE 1. D 2. C

16. 17.

B A

31. 32.

D C















Supporting Computations (Multiple Choice): (2)

Gross income, Philippines Gross income, USA Expenses, Philippines Expenses, USA Basic personal exemption

P800,000 600,000 (400,000) (300,000) -

Taxable income

P700,000

Gross income, Philippines Expenses, Philippines Basic personal exemption

P800,000 (400,000) -

Taxable income

P400,000

(3 to 5)

(19)

Copyright (11,250/90%)x10% Royalty (12,000/80%) x 20% Share from Trade Partnership (treated as dividend income) (270,000/90%) x10%

P1,250 3,000 30,000

FWT

P34,250

Interest from FCDU (212,500/85%)x15% Royalty (94,500/90%) x 10% DI from DC (144,000/90%) x10%

P37,500 10,500 16,000

FWT

P64,000

Interest from FCDU (212,500/85%)x15% Royalty (94,500/90%) x 10% DI from DC (144,000/80%) x20%

exempt 10,500 36,000

FWT

P46,500

(21)

(22)

(28)

CGT = 1.5/4 X P4M X 6% = P90,0000

(32)

Gross sales Rental income (P308,750/95%)

P1,650,000 325,000

















(33)

Gross sales Rental income (P308,750/95%) Less Taxable Net Income TAX DUE: x Total Less: CWTx Quarterly tax payments Income Tax Payable

P1,650,000 325,000 (250,000) P1,725,000 8% P138,000 (65,000) (82,500) (P9,500)

(34)

Gross sales Rental income (P308,750/95%) Taxable Net Income TAX DUE: x Total Less: CWTx Quarterly tax payments Basic Tax on Compensation income [P30,000 + (P200,000 x 25%)] Income Tax Payable

P1,650,000 325,000 P1,975,000 8% P158,000 (65,000) (82,500) 80,000 P90,500

(35)

Professional income, gross Rental income, gross Wagering gains

P600,000 50,000 50,000















CHAPTER 3 – FRINGE BENEFITS

CHANGES IN THE THRESHOLD OF DE MINIMIS in Page 161 (with the publisher already when the RR was issued):

1. 2. 3. 4. 5.

Medical cash allowance to dependents of employees not exceeding P1,500 per semester or P250 a month. Rice subsidy of not more than P2,000 per month or 1 sack (50kg.) rice per month. Uniforms given give n to employees by the employer not exceeding P6,000 per annum (as amended by RR 8-2012).

PROBLEM SOLVING P3.1 Subject to FBT

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Subject to Basic Tax

P120,000 50,000 250,000 60,000 -

P3.2

a) b) c)

Yes GUMV = P325,000/65%=P500,000 No. FBT is a final tax, hence, nonreturnable

Exempt

-

P80,000 5,000/ yr. (RR 8-2012) 360,000 45,000 15,000 1,500















Compensation income

P540,000 De Minimis Benefits

13th month pay and mid-year bonus Christmas gift Uniform allowance (7,500-5,000) Actual Medical allowance (P15,000-10,000) Medical allowance to dependents (P2,000-1,500) Rice subsidy [entire amount is de minimis] Monetized vacation leave [24,000-(2,000x 10)] Total 13th Month Pay & Other Benefits

P5,000 5,000 10,000 1,500 18,000 20,000

Tax Exempt 13th Month Pay & Other Benefits; TRAIN Law Taxable income P3.5 1.

Taxable Benefits

P67,500 5,000 2,500 5,000 500 4,000 84,500 90,000

P540,000

4.

a) b)

P165,000 x 50% = P82,500 P82,500/65% x 35% = P44,423

a. b.

P1,200,000 P1,200,000/65% x 35% = P646,154

a. b.

P800,000 P800,000/65% x 35% = P430,769

a. b.

P1,200,000/5 = P240,000 P240,000/65% x 35% = P129,230

5. 2.

a. b.

P4.5M x 5% /4 x 50% = P28,125 P28,125/65% x 35% = P15,144

a. b.

P4.5M P4.5M/65% x 35% = P2,423,077

6.

3.

TRUE OR FALSE

1. 2.

FALSE FALSE

6. 7.

FALSE TRUE

11. 12.

FALSE TRUE















Cash Pxx Consequently, from the journal entry shown above, the account debited as “fringe benefit tax expense” in revenue regulations should not form part of the employer’s “Taxes Expense” but as a component of the employer’s “Compensation expense”. #22.

P97,500/65% = P150,000

(23)

To managerial – fringe benefit expense Fringe benefit tax expense (P1.3M/68% x 35%) Rank and File

P1,300,000 700,000 5,000,000

Total

P7,000,000

(24)

(25) (26)

Expenditure attributable to Managerial employees (P1.2M x 20%) Divide by GUMVF Grossed-up monetary value x FBT rate

P240,000 65% P369,231 35%

Fringe Benefit Tax

P129,231

Total deductible expense = P1,200,000 + 129,231 = P1,329,231

Salaries and wages gross of CWT Fixed monthly allowance**

P816,000 60,000

Total compensation income subject to graduated rate

P876,000

*Fixed Allowances received regularly per payroll are considered part of regular compensation subject to graduated rate (RR 10-2008)















(31)

(35) ! !

P3,000,000 x 5% x 50% / 12 = P6,250 P6,250/ 65% x 35% = P3,365

!

P5,000,000 P5M/ 65% x 35% = P2,692,308

(32)

! !

P1,000,000 / 65% P1,538,462 x 35%

= P1,538,462 = P538,462

! !

P800,000 / 65% P1,230,769 x 35%

= P1,230,769 = P430,769

! !

(P1,000,000/5) / 65% = P130,000 P130,000 x 35% = P45,500

(36) !

(37)

(52) (53)

Pedro is taxable on excess benefits only Pedro is exempt as a minimum wage earner but his business income is taxable

CHAPTER 4 – CO-OWNERSHIP, ESTATES AND TRUSTS PROBLEM SOLVING P4.1

1. 2. 3.

Income tax payable of the estate = P26,000 Income tax payable of Louie = P0 Income tax payable of Floyd = P8,150 Louie

Gross income (gross of 5% tax) Deductible expenses Dividend from foreign corporation Prize, supermarket raffle Taxable income Tax Due/Payable (TRAIN Law)

Floyd

P 325,000 (117,000) 12,000

Estate

P800,000 (420,000)

P220,000

P 380,000 (105,000) 8,250 7,500 P290,750

P0

P8,150

P26,000

P380,000

















Gross income of the Trust Deductible business expenses of the trust Income distributed to Pedro during the year Dividend income from resident foreign corporation Net Taxable income

P3,000,000 (1,800,000) (200,000) 100,000 P1,100,000

Income Tax payable

Compensation income of Pedro Rental income (gross) Rental expenses Dividend from foreign corporation Taxable income Tax Due Tax payments (Quarter 1-3) CWTx on rent Income Tax Payable-Pedro MULTIPLE CHOICE

P220,000

P800,000 500,000 (80,000) 8,250 P1,228,250 P258,475 (120,000) (25,000) P113,475















Taxable income of Princess

P4,000,000

43-45. # 44

TRUST 1

Taxable Net income Tax due: 1st P2,000,000 Excess @ 32% Tax due/ paid Versus allocated tax due Income Tax Payable-Trust 1

# 45

P4,000,000 P490,000 640,000 1,130,000 1,244,000 * P114,000

Net income Tax due: 1 st P2,000,000 Excess @ 32% Tax due/ paid Versus Share Income Tax Payable-Trust 2

# 43 Consolidated:

Taxable Net income Tax Due (Consolidated): 1st P8,000,000

TRUST 2

P10,000,000 P2,410,000

P6,000,000 P490,000 1,280,000 1,770,000 1,866,000 ** P96,000















PROBLEM SOLVING: (P5.1) CASE A (Domestic Corporation) – TRAIN Law:

1. 2. 3.

P1,674,000 P92,500 P562,500

Solution

Gross sales Sales returns Cost of goods sold Operating expenses Interest income from trade receivable Interest income from BPI deposits- USA Interest income from money market placement Dividend income-resident foreign corp. Dividend income-nonresident foreign corp. Royalty income Taxable income Tax rate

Philippines P10,000,000 200,000 3,500,000 2,800,000 100,000 45,000 -

Abroad P5,000,000 2,250,000 1,100,000 50,000 80,000 100,000 30,000 25,000

Total P15,000,000 (200,000) (5,750,000) (3,900,000) 150,000 80,000 100,000 45,000 30,000 25,000 P5,580,000 30%















CASE C (Non-Resident Foreign Corporation) – TRAIN Law: P2,059,750 computed as follows: 7.

Gross sales Sales returns Cost of goods sold GROSS INCOME

P10,000,000 (200,000) (3,500,000) P6,300,000

ADD:

Interest income from trade receivable Interest income from BPI deposits-Phils. Income from money market placement Dividend income-resident foreign corp. Royalty income Total “Gross” Income Tax rate

100,000 100,000 200,000 45,000 50,000 P6,795,000 30%

P2,038,500

ADD:

Dividend income from DC = P75,000 x 15% CGT on shares of DC: [(P100k x 5%) + P50k x 10%)] TOTAL FINAL TAXES

11,250 10,000 P2,059,750















Q1

Tax Due 2018 Excess MCIT 2017 Excess W/holding Tax 2017 W/holding - 2018 Quarterly Tax Payments

Q2

NCIT P300,000 (90,000) (30,000) (60,000)

Tax Payable

P120,000

Q3

MCIT P990,000

Q4

(30,000) (150,00) (120,000)

NCIT P1,410,000 (90,000) (30,000) (270,000) (810,000)

NCIT P2,010,000 (90,000) (30,00) (375,000) (1,020,000)

P690,000

P210,000

P495,000

(P5.7) Case A (Taxable Joint Venture)

1. 2. 3. 4. 5. 6.

Taxable income of the joint venture = P20M Income tax payable of the joint venture = P6M Taxable income of ABC Company = P10M Income tax payable of ABC Company = P3M Taxable income DEF Company = P5M Income tax payable of DEF Company = P1.5M Gross income

Joint Venture P50,000,000

ABC Co. P30,000,000

DEF Co. P20,000,000

















Case B: Taxable income of the joint venture = nil; tax exempt 7.

8. 9. 10.

Income tax payable of the joint venture = nil; tax exempt Taxable income of Bryan = P24,000,000 Taxable income Rianne = P11,000,000















(P5.13) Question 1:

Tuition fees Miscellaneous fees

P9,500,000 1,200,000















(P5.15)

1. 2.

P103,000 P117,000 Solution: 2017:















MULTIPLE CHOICE 1. D 2. B 3. C 4. B

21. 22. 23. 24.

D B A C

41. 42. 43. 44.

A D D B

61. 62. 63. 64.

A A A A















(8).

To Louie @ 10% To Floyd @ 10% To Zeus @ 10% To JJ @ 20% To Francis @ 25% To Chen, a domestic corporation

P10,000 10,000 10,000 20,000 25,000 Exempt





























































































































TAX 1 2018 SolMan Chapters 1 8

Recommend Documents