Income Taxation
2 Week, April 13, 2021
nd
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
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
50,000
0
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
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
100,000
0
150,000
300,000
40,000
60,000
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
/
/