Problems 04

(for class seatwork, recitation, homework)

Instruction/Required: For each of the following cases in the current taxable year 2019, in good form
compute and present the solutions leading to the correct answer using the appropriate
formats/formulas.

Problem 01: Mr. Malakas with a recognized natural child as dependent, had the following data for 2019:
Gross profit from sales in Philippines P580,000
Gross profit from sales in foreign country 680,000
Rental income in Philippines 36,000
Interest income on money market placement in foreign country 5,600
Dividend income from domestic corporations 12,000
Dividend income from a foreign corporation abroad 24,000
Royalty income on musical composition in Philippines 30,000
Royalty income in a foreign country 60,000
Interest income on bank deposit in Philippines. 7,500
Interest income on bank deposit abroad 15,000
Interest income on a trust fund in Philippines. 21,000
Awards, prizes from contests in Philippines 14,000
Awards. prizes from competitions abroad 18,000
Share in net income of an ordinary partnership in Philippines 60,000
Sales of shares of stocks domestic corp. held as capital asset 245,000
and sold outside the local stock exchange (cost price P120,000)
Business expenses in Philippines 480,000
Business expenses abroad 530,000

Compute the basic income tax the total final income due assuming that the taxpayer is:

1. A Resident Citizen 2. A Non-Resident Citizen

Problem 02. In December of the current year 2019, Mr. X, a resident citizen, sold his residential house
and lot located in the Philippines held us capital asset, Additional data are as follows:
a. Cost price in 2012 P1,600,000
b. Depreciated value/book in the current year 2019 1,200,000
c. Book value in 2012 1,400,000
d. Current fair market value in the current year 2019 2,700,000
e. Sales price in December of the current year 2019 2,300,000

1. Compute the final capital gains tax is said property is a principal residence but all the requirements
exemption have been complied with.
2. Determine the final capital gains tax if said property is not a principal residence.
3. Compute the final capital gains if tax within 18 calendar months a new principal residence was acquired
but only 65% of the sales proceeds was utilized in the purchase of the new principal residence.

Problem 03. A sole proprietor Of a dealer Of rice and corn products, unmarried, with a young sister
dependent revealed to us the following data for the current year 2019:
 In Phil. Abroad
Income from employment P280,000 P260,000
Interest income on personal loans 6,000 3,000
Interest income on bank deposits 10,800 4,2000
Interest income on money market placement 7,500 1,600
Dividend income from a domestic corp. 5,700 0
Dividend income from a foreign corp. 6,800 2000
Royalty income 90,000 50,000
Awards/prizes from sports contest 80,000 30,000
Winnings/prizes from lotteries, raffle draws 45,000 16,900
Prizes from singing contest 5,600 0
Share in net income of an ordinary partnership 60,000 40,000
Share in the net income or a general 35,000 45,000
professional partnership
Prizes/winnings from Charity Sweepstakes 150,000 50,000
Gross profit from sales of goods in business 850,000 960,000
Business expenses 610,000 630,000

 In February of the current year 2019, the taxpayer bought a lot located in USA, deemed as
capital asset. The acquisition cost was P840.000. He sold said lot in the same year for
P1,600,000

Required:
1.Determine the taxable net income, income tax due and the total final income tax if a resident
citizen.
2.Compute the taxable net income, income tax due and the total final income tax if a resident
alien.

Problem 04. Mr. Masipag has the following data in the current year 2019:
a. Compensation Income from P275,000
b. Lease income from abroad 165,000
c. Interest income on bank deposits Philippines 7,300
d. Interest income on bank deposits-abroad 4,500
e. Interest income on US dollars bank deposits in $1,200
Philippines on Expanded FCDS
f. Lotto draw winnings in USA 15,000
g. Lotto draw winnings from PCSO, Philippines P250,000
h. Prizes/winnings from billiard contest abroad $15,000
L Dividend income from domestic corporation in Phil. P3,750
j. Royalty income from Philippines P45,000
Conversion rate is P50.00 to $1.00

Determine the total final income tax. Taxable net income and income tax due if the tax payer is a:
1. Resident citizen, 2. Resident alien,

Problem 05. A resident citizen taxpayer, during the current year 2019, sold her real properties located in
the Philippines, held as capital assets:
 a. Sale of house and lot in Makati City.
Cost price P6SO,000, Sales price P650,000, Fair market value P1,300,000
b. Sale of land in Manila City; cost price is P850,000, gross sales price of P600,000, with a Fair
Market value on the date of sale of P500,000

Required:
1. In general, the final income taxes are?
2. If the property in Makati City was sold as principal residence, the final income tax is?
3. If property in Makati City was sold as a principal residence but only P450,000 was used to buy
a new principal residence, the partial final income tax due is?

Problem 06. A resident Alien taxpayer, during the current year 2019, sold his shares Of Stocks Of
domestic corporations held as capital assets:

a. 350 Shares Of stocks Of XYZ Corporation, par value P3S.00(), cost price
b. SOO Shares of ABC Corporation, book value P65,000, cost price at P50,000, sales price of
P180.000.

1. If sold thru the local stock market, the percentage tax is?
2. If sold outside the local stock exchange, the final income taxes are?

Problem 07. A resident special Filipino employee of an offshore banking unit established in the
Philippines had the following financial data for the current year 2019:

a. Salary from employment P570,600

b. Allowances from employment 65,000
c. Interest income on bank deposit 16,500
d. Sales price of real property in Philippines held as capital asset: 790,000
Cost price P450,000, Fair share market value P600,000
e. Cash dividends form a domestic corporation 17,000
f. Sale of shares of stocks of a domestic corp. not listed not traded in
the local stock exchange. Sales price P190,000, Cost price P35,000
g. Interest income on bank deposits in Philippines under the expanded
foreign currency deposit system 9,600
h. Taxpayer is a widower, with a 27 years old mentally retarded child as
dependent.

Determine the income tax on gross compensation income and the total final income tax on income.
 Multiple Choice Questions 04
(for class recitation, seatwork, homework)

Instructions/Required: For each of the following cases in the current taxable year 2018, in good form,
compute and present the solutions leading to the correct answers using the appropriate
formats/formulas.

Data: On different dates, as listed below. Mr. Santos purchased common stocks of ABC Corporation:

Lot No. Date Purchased No. of Shares Cost per Share Total Cost

1 Oct. 15 2015 400 100 P40,000

2 Jan. 15, 2016 300 120 36,000

3 March 15, 2017 200 140 28,000

4 May 15, 2018 100 160 16,000

On June 30, 2018, Mr. Santos sold outside the local stock exchange 500 shares at P150.00/share. Using
the First In-First Out method the gain or loss of Mr. Santos is:

a. P7,000 b. P23,000 c. P25,000 d. no answer

Data: A resident of the Philippines had the following data in the current taxable year 2018:

a. Gross business income, P850,000

b. Gross income from practice of profession, P395,000
c. Dividend income from domestic corporations, P31,600
d. Interest income on personal loans to friends, P6,500
e. P130,000 capital gain from sale of stocks of domestic corporations sold directly to buyers,
f. Interest income on Philippine currency bank deposit, P4,150
g. Capital gain from sale of a land in Manila City, (sales price of P1,650,000), P420,000
h. Interest income on private bonds/securities, P12,900
i. P15,200 sales price on stocks on domestic corporation, thru a local stock exchange cost is
P28,600
j. Business and professional expenses, P921,400

Q03. The final capital gains tax on sale of capital assets is:

a. P99,000 b. P107,000 c. P21,000 d. no answer

Q04. The total income tax on other passive income is:

a. P3,900 b. 3,160 c. 830 d. no answer

Q05. The taxable net income is:

a. P273,600 b. 280,100 c. P293,000 d. no answer

Q06. Which of the following income derived from within the Philippines by a resident individual is not
subject to the basic income tax rates of 0% to 35%?

a. Share in the net income of an ordinary partnership

b. A passive income in the form of prize won in a raffle draw amounting to P8,500
c. A gain from sale of a motor vehicle as other income of a fixed income taxpayer
d. A gain from sale of a personal property for a private use of the taxpayer’s family

Q07. Which of the following passive income from the Philippines is subject to 10% final income tax?

a. Winnings from an on-line Bingo draw

b. Winning from a PCSO lotto draw
c. Royalty income from a patented invention
d. Royalty income form literary compositions

Data: Lady Carmina is a Filipino, single but with a minor brother as dependent. She is an employee of
Jollibee Company and a sole proprietor of a trading company. Her data in 2018 are as follows
Philippines Abroad

a. Basic and overtime salary from employment P348,000 P249,000

b. Business income 945,000 672,500
c. Business expenses 715,200 524,700
d. Interest on Bank Deposit 12,000 5,000
e. Prizes won in raffle draws 15,000 7,000
f. Royalty income on patented invention 65,000 40,000
g. Dividend income from a domestic corporation 4,500 0

Q08. If a resident citizen, the taxable net income is:

a. P528,600 b. P953,600 c. P978,600 d. no answer

Q09. If a resident citizen, the total final income tax is:

a. P18,850 b. P19,300 c. P15,850 d. no answer

Q10. If a non-resident citizen, the taxable net income is:

a. P503,600 b. P528,600 c. 978,600 d. no answer

Data: A resident alien had the following capital asset transactions on his common shares of stock of
domestic corporations in the current year 2018.

Lot 1 Purchased 300 shares at P210 per share

 Lot 2 Purchased 100 shares at P180 per share

Lot 3 15% stock dividends on Lot 1 and Lot 2

Sold to his friend 180 shares, after the stock dividends, at P250 per share

Q11. The final capital gains tax using the LIFO costing method is:

a. P117 b. P1,584 c. 360 d. no answer

Q12. The final capital gains tax using the Moving Average costing method is:

a. P117 b. P1,584 c. 360 d. no answer

Data: In the current year 2018, a non-resident citizen sold his shares of stocks of domestic corporations
in the Philippines as follows:

a. 850 shares of X Corporation sold outside the local stock exchange at P150 per share but
acquired a P180 per share. The par value per share was P200.
b. 625 shares of Y Corporation sold not thru the local stock market at P315 per share. The
acquisition value per share and the book value per share were P86 and P200 respectively.

Q13. The total final tax on said items is:

a. P9,312 b. P9,843 c. P19,687 d. no answer

Data: A resident citizen, who is a head of family, had the following Philippine data in the year 2018:

Compensation Income P96,400

Business Income 725,300
Business Expenses 540,000
Winning from PCSO Lotto Draw 65,000
Cash prize from a billiards tournament 50,000
Royalty income from literary, musical compositions 30,000

Q14. The taxable net income is:

a. P261,700 b. P281,700 c. P231,700 d. no answer

Q15. The total Income tax is:

a. P13,000 b. P8,000 c. P16,000 d. no answer

Q16. Which of the following is not passive income final tax?

a. Prizes from a sports contest in the Philippines accounting to P125,000
b. Winnings from the Philippine Charity Sweepstakes
c. Share in the Net income of a general professional partership
d. Divident income received by an individual from a domestic corporation.
Data: In the current year 2018, Cyril Vance sold his lot in San Juan City, held as capital asset at a sales
price of P3,500,000. The acquired cost of the land 2 years ago was P2,700,000. Said property had a fair
market value of P4,300,000 on date of sale, but with a mortgage payable of P300,000 to be assumed by
the buyer. The necessary cost of disposing said property (except the final tax was P56,000)

Q18. The final capital gain tax is:

a. P210,000 b. P162,000 c. P258,000 d. no answer

Q19. If a principal residence and only P2,000,000 was utilized in constructing a new principal residence,
the final capital gains tax due is:
a. P 0 b. P147,428 c. P110,571 d. no answer

Data: A house and lot situated in the Philippines, a capital asset, was sold by a resident citizen in June of
the current taxable year 2018:
a. Sales price of property, P2.500,000
b. Zonal value of fair market value of Property, P1,800,000
c. Cost price of the property, P1,200,000
d. Mortgage payable on the property assumed by the seller, P150,000
e. Necessary expenses in the purchase of said property when acquired by the seller, P5,000

Q20. The final capital gains tax is:

a. P 150,000 b. P108,000 c. P72,000 d. no answer

Q21. If a principal residence and only 75% of the sales proceeds was used to buy a new principal residence,
the final capital gains tax due is:
a. P37,500 b. P150,000 c. P112,500 d. no answer

Data: A self-employed individual, head of family, had the following financial data in the year 2018:

a. Income from employment in USA, P 125,000

b. Business income from the Philippines, P 950,000
c. Business income from USA, P 725,000
d. Interest income on expanded foreign currency deposit system in Phil., P 18,200
e. Interest income on bank deposit in USA, P 6,750
f. Informers reward from the BIR/Philippine govt., P 540,000
g. Winnings from raffle draws and contest in Philippines, P 25,000
h. Interest income on money market placement in USA, P 13,400
i. Dividend income from resident foreign corporations in the Philippines, P 7,250
j. Royalty income in USA, P 65,000
k. Actual Health and hospitalization insurance premiums payments, P 2,150
l. Business expense in Philippines, P 812,400
m. Business expenses in USA, P 600,000
Q22. If a resident citizen, the total final income tax is:
a. P60,350 b. P61,715 c. P60,365 d. no answer

Q23. If a non-resident citizen, the total final income tax is:

a. P65,350 b. P61,715 c. P60,365 d. no answer

Q24. If a resident citizen, the taxable net income is:

a. P94,850 b. P423,250 c. P416,000 d. no answer