How much is the taxable income/(loss) if Mr. Sy is a resident alien, given the following income and expense information for the taxable year 2023? Gross income from operations: Wi... How much is the taxable income/(loss) if Mr. Sy is a resident alien, given the following income and expense information for the taxable year 2023? Gross income from operations: Within: P8,000,000 Outside: P7,000,000 Capital gain on sale of land (Cost - P2 million): Within: 5,000,000 Outside: 0 Prizes: Within: 30,000 Outside: 70,000 Interests from US$ bank deposits (in Pesos): Within: 50,000 Outside: 100,000 Operating expenses: Within: 8,500,000 Outside: 6,000,000
Understand the Problem
The question provides income and expense details for Mr. Sy, broken down into "within" and "outside" categories. It asks to calculate the total taxable income or loss for Mr. Sy, given that he's a resident alien. We need to understand how resident alien status affects tax calculations and which income sources are taxable.
Answer
$3,750,000$
Answer for screen readers
The total taxable income for Mr. Sy, a resident alien, is $3,750,000$.
Steps to Solve
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Calculate the Net Income from Operations Subtract the operating expenses from the gross income for both "within" and "outside" sources. Within: $8,000,000 - 8,500,000 = -500,000$ Outside: $7,000,000 - 6,000,000 = 1,000,000$
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Calculate the Capital Gain on Sale of Land The capital gain is calculated as the selling price minus the cost. The problem states the cost as P2,000,000 and the sale amount as P5,000,000 (within). Capital Gain (Within): $5,000,000 - 2,000,000 = 3,000,000$ Capital Gain (Outside): $0$
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Calculate the Total Income Sum all income sources, including net income from operations, capital gains, prizes, and interest income, from both within and outside sources. Total Income (Within): $-500,000 + 3,000,000 + 30,000 + 50,000 = 2,580,000$ Total Income (Outside): $1,000,000 + 0 + 70,000 + 100,000 = 1,170,000$
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Calculate the Total Taxable Income for a Resident Alien A resident alien is taxed on their worldwide income. Therefore, sum the "within" and "outside" total income to arrive at the total taxable income. Total Taxable Income: $2,580,000 + 1,170,000 = 3,750,000$
The total taxable income for Mr. Sy, a resident alien, is $3,750,000$.
More Information
Resident aliens are taxed on their worldwide income, which is the sum of their income from sources both within and outside the country. The calculation involves summing all income items (gross income from operations, capital gains, prizes, and interests) and subtracting the operating expenses.
Tips
A common mistake is only considering the "within" income and expenses, forgetting that resident aliens are taxed on their worldwide income. Another mistake is incorrectly calculating the capital gain by not subtracting the cost basis of the land. Forgetting to include all income items (prizes and interest) can also lead to an incorrect answer.
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