Problems- Income Taxation

TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY INTEGRATION BATCH 2012-2013 BUSINESS LAW AND TAXATION

TAXATION INCOME TAXATION PROBLEMS

D.S. FIGUEROA

TAX ON INDIVIDUAL 1. In 2012, Brad P., legally separated from wife, Angel, had gross compensation income of P 620,000; Angel, on the other hand, had P 810,000. Brad was granted by the court custody of one child while Angel will have custody over three of their four children. a. b. c. d. e. f. g. h.

The basic personal exemption of Brad is The additional exemption of Brad is His net compensation income/ taxable income is The basic personal exemption of Angel is The additional exemption of Angel is Her net compensation income/ taxable income is Brad’s tax due is Angel’s tax due is

2. Mr. Brendan F., married, ha the following data for the taxable year 2012: Gross Income, Philippines Gross Income, United States Expenses, Philippines Expenses, United States

557,588 413,143 388,475 325,143

a. If the taxpayer is a resident citizen, his taxable income is b. If the taxpayer is a citizen of the Philippines, with residence in the United States, the taxable income is c. If the taxpayer is a non-resident alien engaged in business in the Philippines, allows full reciprocity on personal exemption, the taxable income is d. If the taxpayer is a non-resident alien not engaged in business, taxable income is 3. Ellen B., single with two legally adopted sons, is a resident citizen employed as chief accountant in a government office. Below are data related to her income for 2012: Gross Compensation Income Premium payment on health insurance Lotto Winnings Bribes, kickback, under the table transactions a. b. c. d.

252,000 2,400 35,000 98,000

Her total personal exemptions is Total deductions and exemptions are Her taxable income Tax due for the year is 1 of 4

SOURCES: INCOME TAXATION & TRANSFER AND BUSINESS TAXATION, BALLADA. Questions modified and exemplified to illustrate pertinent provisions of the Tax Code.

TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY INTEGRATION BATCH 2012-2013 BUSINESS LAW AND TAXATION

4. Linda F., a non-resident alien, is employed by a petroleum contractor. She is married and has three children. She paid premiums for her family’s hospitalization insurance for 12,000. Her gross compensation income in 201 is 1,350,000. a. b. c. d. e.

Her basic personal exemption is ____________ Additional exemption is __________________ Premium payments allowed is _____________ Taxable income is _______________________ Tax due is _____________________________

5. Ashley J., a non-resident alien, not engaged in business is a single parent, with one child. She also supports her nieces. She has the following information for 2012: Gross Income Royalties from a patented invention Deductions a. b. c. d. e.

2,100,523 261,450 1, 046,972

Taxable income is _____________ Final Taxes on royalties ____________ Total personal exemptions __________________ Tax due on taxable income __________________ Total taxes payable ______________________

PASSIVE INCOME: Identify the tax base and tax due applicable 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

Interest income from local currency deposit of a resident alien, 25,000 Interest from long term deposits by a resident citizen having 5 years maturity, 50,000 Interest income from FCDS of a resident alien, 25,000 Royalties from an invention by a resident alien, P150,000 Sweepstakes winnings of a resident alien, 100,000,000 Royalties as a musical composer received by a non-resident citizen 200,000 Bingo Winnings of a non-resident citizen, 50,000 Prizes in an amateur singing contest by a resident citizen, 8,000 Prizes in an amateur dance contest by a resident alien, 18,000 Cash dividend from domestic corporation of a nonresident citizen, 100,000 Cash dividend from domestic corporation of a nonresident alien ETB, 100,000 Cash dividend from domestic corporation of a nonresident alien NETB 100,000 Property dividend by a non resident alien ETB, 50,000 Interest from BDO Bank deposit under FCDS of a non-resident citizen, 300,000 Informer’s reward of a resident citizen, amount of inventory appropriated is 25,000,000 Stock dividend of a resident citizen from domestic corporation, 100,000 Stock dividend of a resident alien which increased his shareholdings from 10%-12%, 100,000 Share in the income of a partner, a resident citizen from business partnership, 75,000 2 of 4

SOURCES: INCOME TAXATION & TRANSFER AND BUSINESS TAXATION, BALLADA. Questions modified and exemplified to illustrate pertinent provisions of the Tax Code.

TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY INTEGRATION BATCH 2012-2013 BUSINESS LAW AND TAXATION

TAX ON CORPORATIONS 1. Dynasty Corporation just completed its third year of operations. It has the following financial information for the taxable year 2013, its third year.

Gross Income Deductions

Philippines P1, 250,000 945, 000

China P800, 000 540,000

a. b. c. d.

Assuming the taxpayer is domestic corporation, the taxable income and tax due is Assuming the taxpayer is a resident foreign corporation, the taxable income and tax due is Assuming the taxpayer is a nonresident foreign corporation, the taxable income and tax due is Assuming the taxpayer is a n international carrier whose gross Philippine billings and expenses are the amounts stated in Philippines, tax due is e. Assuming the taxpayer is a nonresident owner of aircrafts and its gross rentals and expenses are those stated in China, tax due is f. Assuming the taxpayer is a nonresident owner of vessels and its gross rentals and expenses are those stated in Philippines, tax due is g. Assuming the taxpayer is a proprietary educational institution, its income from tuition fees and expenses are those stated in Philippines, and income in unrelated business and expenses are those in China, tax due is h. Assuming the taxpayer is a proprietary educational institution, its income from tuition fees and expenses are those stated in China, and income in unrelated business and expenses are those in Philippines, tax due is 2. Variety Corporation, a resident foreign corporation was on its sixth year of operations. The following data pertain to its operations in the Philippines for the years 2012 and 2013:

Gross income Business expenses a. b. c. d. e.

2012 P620, 000 530, 000

2013 P720, 000 612, 000

Normal income tax for 2012 Income tax due for 2012 MCIT for 2013 Income tax due for 2013 Assuming the taxpayer is a nonresident foreign corporation, tax due for 2013 is

3 of 4 SOURCES: INCOME TAXATION & TRANSFER AND BUSINESS TAXATION, BALLADA. Questions modified and exemplified to illustrate pertinent provisions of the Tax Code.

TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY INTEGRATION BATCH 2012-2013 BUSINESS LAW AND TAXATION

TAX ON PARTNERSHIP AND PARTNERS 1. DRRK and Co., a GPP is engaged in auditing, tax and assurance services. Partners share in the net profits are equally distributed. For the year 2012, the following data where gathered:

Gross Income of the GPP Allowable Itemized Deductions of the GPP Gross Income of Partner D, business Allowable Itemized deduction of Partner D, business Gross Income of Partner D, business Allowable Itemized deductions of Partner D, business a. b. c. d. e. f. g.

P4, 000,000 2, 000, 000 500, 000 125, 000 300, 000 115, 000

Distributable Income of the GPP using itemized deduction Taxable income of Partner D Taxable income of Partner K Assuming the taxpayer is a business partnership, using I.D., the tax due of DRRK and Co. is Assuming the taxpayer is a business partnership ,using I.D, taxable income of Partner D Assuming the taxpayer is a business partnership , using OSD, taxable income of Partner K Assuming the taxpayer is a business partnership , final taxes due of the partnership is

ESTATES AND TRUST 1. Lady Morgana created two irrevocable trusts naming her favorite granddaughter, Alyssa, now 18 years old as beneficiary of both trust. It is provided in the trust that starting the year 2012, when Alyssa turns 18, she is to receive 25% of the net income of both trusts to her education. Below are additional information: Trust 1 Trust2 Gross Income P600, 000 P900, 000 Deductions before distribution 180,000 280,000 a. b. c. d.

Taxable Income of Trust1 is Taxable Income of Trust2 is Consolidated tax due is Share of each trust on the consolidated tax due is

4 of 4 SOURCES: INCOME TAXATION & TRANSFER AND BUSINESS TAXATION, BALLADA. Questions modified and exemplified to illustrate pertinent provisions of the Tax Code.