Timothy Reiner B. Cartaňo BSA-191-E ACTIVITY 2 Income Taxation nd 2 Week, April 13, 2021 EXERCISE DRILL 1 – THE CONCEPT OF INCOME. Check the appropriate box whether the following are exempt or Taxable. ITEMS TAXABLE EXEMPT 1. Winning from gambling / 2. Income from swindling / 3. Indemnity for moral damages / 4. Harvested fruits from an orchard / 5. Compensation income / 6. Interest income / 7. Amount received by the insured in excess of insurance premiums paid / 8. Proceeds of life insurance received by the heirs of the insured / 9. Gain on sale of goods by the home office to its branches / 10. Gain on sale of goods and services between relatives / 11. Gain on sale of goods by a parent corporation to a subsidiary corporation / 12. Appreciation in the value of land / 13. Birth of animal offspring 14. Income of a registered Barangay Micro Business Enterprise 15. Cancellation of debt out of gratuity of the creditor 16. Cancellation of debt by the creditor in exchange of services rendered by the debtor / 17. Matured interest from coupon bonds / / / / 18. Receipt of bank loan / 19. Salaries of a minimum wage earner / 20. PCSO or lotto winnings / EXERCISE DRILL NO.2 – INCOME TAXPAYER CLASSIFICATION. Indicate the appropriate classification of each of the following taxpayers: DC – Domestic Corporation RFC – Resident Foreign Corporation NRFC – Non-Resident Foreign Corporation NRA-ETB – Non-resident Alien engage in trade or business NRA-NETB – Non-resident Alien not engaged in trade or business RC – Resident Citizen NRC – Non-resident citizen RA – Resident Alien PERSON OR ENTITY Classification NRA-NETB 1. A fat Mexican tourist 2. A hardworking overseas Filipino worker NRC 3. An expatriate employer NRC 4. A Filipino who is privately employed in the Philippines RC 5. An unemployed Filipino residing in the Philippines RC 6. A Chinese businessman who has his domicile in the Philippines for six months NRA-ETB 7. A Japanese who married a beautiful Filipina and has been residing in the Philipp2ines for 2 years RA 8. A 2nd year Korean college student studying in the Philippines RA 9. A corporation incorporated under Philippine law DC 10. A foreign corporation doing business in the Philippines RFC 11. Trust designated by the donor as irrevocable RC 12. Trust designated by the donor as revocable RC 13. A business partnership DC 14. A joint venture organized under a foreign law and is not operating in the Philippines NRFC 15. An estate of a Filipino citizen judicially administered in Japan NRFC 16. An estate of a Filipino citizen judicially administered in the Philippine DC 17. A taxable joint venture organized in the Philippines DC 18. A non-profit corporation organized in the Philippines DC EXERCISE 3 – GENERAL INCOME TAX RULE - Check the box that properly correspond to the taxability of the following taxpayers. INCOME DESCRIPTION Within Without 60,000 40,000 1. Rey earned P100,000 interest income; 40% of these were from nonresident debtors 2. A finance company earned P1,000,000 royalties from a franchise, 40% of these were derived abroad 600,000 400,000 3. Rayment earned P100,000 rent from OFWs from his apartment in the US. He also earned P40,000 rent from his Philippine condominium unit 40,000 100,000 120,oo0 0 0 500,000 40,000 0 2,000,000 0 50,000 0 4. 5. 6. Chester, a resident citizen, works home online and submits his output to clients. He collected P100,000 service fee from foreign clients and p20,000 from resident clients. Mark rendered audit services to client in Afghanistan for p500,000. The services were paid in Afghanistan Jun has store in tourist park in Baguio City; He earned a total of P40,000 gain from selling souvenir items. 40% were from foreign tourists 7. Don Mariano sold at a gain of p2,000,000 to a client abroad a commercial building located in Quezon City 8. John sold his stocks in a domestic corporation to a foreign investor at a gain of P50,000 9. Manzo received P20,000 dividends from a domestic corporation and P30,000 dividends income from a non-resident foreign corporation 20,000 30,o00 10. Andrew received P40,000 dividends from a resident foreign corporation; 60% of its historical income is from the Philippines. 24,000 16,000 100,000 0 150,000 300,000 40,000 60,000 11. 12. 13. CDO Inc., manufactures in the Philippines and sells to unaffiliated export clients. A total of P100,000 gross income was earned during the period ABC manufactures abroad and sells to its Philippine branch at market prices. Production cost abroad were P200,000. Billings to branch totaled P300,000 while branch sales totaled P450,000 James received P100,000 dividends from a resident foreign corporation which realized 40% of its income in the Philippines 14. Ellis received P20,000 dividend from a non-resident foreign corporation 0 20,000 15. Davao plant manufactures tables and sells to resident clients. A total of P400,000 gross income was realized during the period. 400,000 0 EXERCISE DRILL 4. LOCATION AND SITUS OF INCOME. Compute how much is earned within and earned outside the Philippines from each of the following independent cases. TAXPAYER World Income Philippine Income 1. Non-resident citizen / 2. Resident Alien / 3. Non-resident alien engaged in trade or business / 4. Resident Foreign Corporation / 5. Resident Citizen 6. Non-resident alien not engaged in business / 7. Non-resident foreign corporation / 8. Domestic Corporation / / 9. Taxable Trusts established by a Filipino citizen in the Philippine 10. Taxable estate of a non-resident citizen judicially administered abroad / /