Income Tax Mock Board Exam Solutions PDF

INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL 8) All of the following are taxable on income within only, except: 1) All of the following are administrative functions of taxation A. Resident alien excep...

INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL 8) All of the following are taxable on income within only, except: 1) All of the following are administrative functions of taxation A. Resident alien except: B. Nonresident citizen A. Selection of object of tax C. Resident citizen B. Equalization of assessment D. Nonresident alien C. Valuation of property for taxation D. Collection of taxes 9) Optional standard deduction is allowed on: A. Resident alien 2) Who among the following is a non-resident alien? B. Nonresident alien engaged in trade or business A. An alien who comes to the PH for a definite purpose which C. Nonresident alien not engaged in trade or business in its nature may be promptly accomplished. D. Nonresident foreign corporation B. An alien who comes to the PH for definite purpose which in its nature would require an extended stay. 10) When the power to tax is delegated to the local government C. An alien who has acquired residence in the PH. A. Only the local executive D. An alien who lives in the PH with no definite intention as to B. Only the legislative branch of the local government his stay. C. Local executive and legislative branch of the local government 3) Who among the following individual taxpayers is taxable on D. Neither local executive and legislative branch of the local income within and without? government A. Alcazar, a native of General Santos City, working as overseas contract worker in Iraq. 11) The power to demand proportionate contribution from persons B. Philander Rudyman, naturalized Filipino citizen and and property to defray the necessary expenses of the married to a Filipina. He had been living in Olongapo City government since 1970. A. Power of taxation C. Rodrigo de la Hoya, Spanish citizen, a resident of Madrin, B. Police power Spain, spent a one (1) week vacation trip in Boracay. C. Power of eminent domain D. Dao Ming So, Taiwanese singer, held a 3-day concert in D. Power of recall Manila. 12) Which of the following may not raise money for the government? 4) Which statement is wrong? A. Power of taxation A. The power of taxation may be exercised by the B. Police power government, its political subdivisions, and public utilities. C. Power of eminent domain B. Generally, there is no limit on the amount of tax that may D. Privatization of government’s capital assets be imposed. C. The money contributed as tax becomes part of public funds 13) All of the following are legislative aspect of taxation except: D. The power to tax is subject to inherent and constitutional A. Selection of the object or subject of tax limitations. B. Valuation of property for taxation C. Fixing of tax rates 5) Statement 1: Police power and the power of taxation are D. Prescribing the general rules of taxation exercised primarily by the legislature but not eminent domain. Statement 2: Taxation and eminent domain interfere with private 14) One of the following is not a characteristic or an element of tax. right and property but not with police power. A. It is levied by the legislature A. Only statement 1 is correct B. It is payable in money or in kind B. Only statement 2 is correct C. It is proportionate in character C. Both statements are correct D. It is an enforced contribution D. Both statements are incorrect 15) The basic principle of a sound taxation system, where, “Taxes 6) Where does taxing power of the provinces, municipalities and must be based on the taxpayer’s ability to pay” is called: cities precede from? A. Equality in taxation A. Constitutional grant B. Ability to pay theory B. Legislative enactment C. Theoretical justice C. Presidential decree or Executive act D. Equity in taxation D. Local legislation 16) No person shall be imprisoned for non-payment of this 7) Which of the following statements is true? A. Property tax A. The power of taxation and eminent domain are both B. Excise tax exercisable only by the government and its political C. Poll tax subdivision. D. Income tax B. In police power, the property taken is preserved for public use. 17) Statement 1: If an employee had multiple employers within the C. The power of eminent domain is created by the year, an income tax return must be filed at the end of the year. constitution. Statement 2: If an employee had three employers on D. The exercise of the power of eminent domain and police succession, for each of the past three years, substituted filing of power can be expressly delegated to the LGUs by the law- tax return is not allowed. making body. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL 18) Due to his expertise, Engr. Popoy Gonzales (a freelancer) was Compensation income (12,000 x 24) 288,000 hired by a foreign petroleum contractor in Thailand to provide Rent income (76,000 / 95%) 80,000 technical assistance for two months from February to March. He Self-employment income was hired again for the months of June to July and October to (500,000 – 105,000)/2 197,500 December of the same taxable year. Engr. Popoy is a: Taxable income 565,500 A. Resident citizen Tax on 400,000 22,500 B. Nonresident citizen 165,500 x 20% 31,100 C. Special Filipino employee Income tax due 55,600 D. None of the above Less: Withholding tax On rent (80,000 – 76,000) 4,000 19) Which of the following transactions is subject to 6% capital gains On compensation income 3,800 7,800 tax: Income tax payable 47,800 A. Sale of condominium units by a real estate dealer B. Sale of real property utilized for office use 23) The income tax payable of Alice for taxable year 2023 if she is C. Sale of apartment houses an MWE: D. Sale of vacant lot by an employee A. ₱ 27,500 C. ₱ 11,600 20) The 25% corporate income tax under CREATE Act is increase B. ₱ 37,500 D. None to 35% by the Congress for the purpose of raising revenue to be used for national road expansion project near Bonifacio Global Compensation income (MWE), not taxable City, a private corporation. Is the exercised of the taxing power Share in self-employment income 197,500 unconstitutional? Taxable income 197,500 A. Yes, because taxing power must be exercised exclusively for public purpose without any incidental benefit to any Tax on 197,500 EXEMPT private entity B. No, because it is exercised directly for public purpose and  MWEs are not subject to income tax on compensation income. the benefit to a private entity is only incidental. Moreover, the holiday pay, overtime pay, night shift differential C. Yes, because the increase in tax rate constitutes pay and hazard pay received by a minimum wage earner are deprivation of right to property of corporation without due exempt also from tax. process of law for being excessive and unreasonable. D. No, because the constitution does no expressly state that  However, if the taxpayer is a mixed income earner, the self- the power of taxation must be used only for public purpose, employment income (such as income from the conduct of thus, it may be used to benefit a private entity. trade, business or practice of profession, except income subject to final tax) and non-operating income are 21) A taxpayer gives the following reasons for refusing to pay a tax. returnable/taxable. Which of his reasons is not acceptable for legally refusing to pay the tax? 24) The final tax on the passive income: A. That he has been deprived of due process of law A. ₱ 14,000 C. None B. That there is lack of territorial jurisdiction B. ₱ 7,000 D. No answer C. That the prescriptive period for the tax has lapsed. D. That he will derive no benefit from the tax.  FWT = 70,000 x 10% = 7,000 Items 22 to 24 are based on the following information: 25) A non-resident alien derived interest income only in his bank Dong and Alice, husband and wife, have the following data in 2023: deposit in the Philippines under the FCDU system of a domestic Dong Alice bank. The interest amounted to $500. How much is the income Semi-monthly compensation income 12,000 8,000 tax due of the said alien? ($1 = ₱50). Rent income (net of 5% WT) 76,000 Royalties on books 70,000 A. ₱ 6,250 C. ₱ 5,000 Dependent children 6 B. ₱ 3,750 D. ₱-0- Withholding tax on compensation 3,800  Nonresident taxpayers are EXEMPT from income tax on During the year, the spouses had self-employment income ₱500,000 interest income derived from bank deposit under FCDS. and expenses of ₱105,000 which cannot be identified as solely earned by the wife or the husband. 26) A taxpayer received during the taxable year the following passive income derived within the Philippines: 22) The income tax payable (overpayment) for taxable year 2023 of Dong is: Interest on the bank deposit A. ₱ 3,000 C. ₱ (5,500) under FCDU (net) ₱231,250 B. ₱ 47,800 D. ₱ 63,575 Royalty on a software application (net) 76,000 Dividend income RFC (gross) 150,000 If taxpayer is a non-resident alien engaged in business, final tax on the above passive income amount to: A. ₱ 52,750 C. ₱ 28,250 B. ₱ 19,000 D. ₱ 37,750 FWT on royalty income = [(76,000 / 80%) x 20%] = 19,000 Interest income of FCDU deposit = exempt Dividend income from RFC= subject to basic tax INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL Items 27 to 30 are based on the following information: Gross income from business ₱700,000 Empoy received the following passive income in 2023: Business expenses (300,000) Taxable net income ₱400,000 Interest, peso deposit, MBTC 100,000 Interest, $ deposit, BDO ($10,000 x ₱42) 420,000 INCOME TAX DUE Interest, deposit in Hongkong (HK$10,000 x ₱5) 50,000 1st ₱250,000 ₱0 Prize (TV) won in a local lottery 50,000 In excess of ₱250,000 @ 15% 22,500 PCSO winnings 2,000,000 Less: CWTax (12,000) Prize won in contest in U.S. 300,000 Income tax payable ₱10,500 Lotto winnings in U.S. 100,000 Dividend, domestic company 600,000  If the question is income tax payable, compute only the 27) How much is the correct final withholding tax on passive income tax still due on income(s) subject to basic income tax. incomes in 2023 assuming that Empoy is resident citizen: A. ₱ 553,000 C. ₱ 560,500 32) How much is the total capital gains tax? A. ₱3,500 C. ₱ 72,000 B. ₱ 521,500 D. ₱ 640,500 B. ₱ 10,500 D. ₱ 82,500 28) How much is the correct final withholding tax on passive CGT on shares of stock (70,000 x 15%) ₱10,500 incomes in 2023 assuming that Empoy is nonresident citizen: CGT on real properties (1.2M x 6%) 72,000 A. ₱ 553,000 C. ₱ 90,000 SP = Cost – Loss = 1.5M – 5M = 1M B. ₱ 490,000 D. ₱ 574,000 ZV = 1,200,000 Total Capital Gains Tax ₱82,500 29) How much is the correct final withholding tax on passive incomes in 2023 assuming that Empoy is nonresident alien  When shares were sold directly to a buyer, it shall pertain to engaged in business: shares of a corporation not listed in the stock exchange. If A. ₱ 553,000 C. ₱ 490,000 silent, the shares shall pertain to that of a domestic B. ₱ 550,000 D. ₱ 150,000 corporation.  Unless provided otherwise, stock exchange shall refer to our 30) How much is the correct final withholding tax on passive local stock exchange, the Philippine Stock Exchange. incomes in 2023 assuming that Empoy is nonresident alien not  Sale of Real Property classified as capital asset situated in the engaged in business: Philippines is subject to 6% CGT (regardless of whether the A. ₱ 692,500 C. ₱ 90,000 transaction resulted to a gain or loss). B. ₱ 187,500 D. ₱ 687,500 33) How much is the total income tax expense of Risa in 2024? RC & NRA- A. ₱ 109,000 C. ₱ 159,500 RA NRC NRA-ET NETB B. ₱ 207,500 D. ₱ 156,000 Interest, peso deposit, MBTC @ 20% 20,000 20,000 20,000 25,000 Basic Income Tax ₱22,500 Interest, US$ deposit, Final Tax on Passive (Royalty) Income; BDO @15% 63,000 Exempt Exempt Exempt Prize (TV) won in a 40,000 x 10% 4,000 local lottery @20% 10,000 10,000 10,000 - Capital Gains Tax 82,500 Prize (TV) won in a Total Income Tax Expense ₱109,000 local lottery @20% - - - 12,500 PCSO winnings @ Items 34 to 38 are based on the folllowing information: 20% 400,000 400,000 400,000 - Tebas, accounting manager of XYZ Corporation, provided the PCSO winnings following data for 2024 taxable year: @25% 500,000 Dividend, domestic company @ 10% 60,000 60,000 - - Salaries @ ₱120,000 per month 1,440,000 Dividend, domestic Allowances subject to liquidation 50,000 company @ 20% - - 120,000 - Allowances not subject to liquidation 60,000 Dividend, domestic Rice allowance at ₱3,000 a month 36,000 company @ 25% - - - 150,000 Christmas gift/bonus 30,000 Total FWT 553,000 490,000 550,000 687,500 13th month pay and mid-year bonus 240,000 Productivity incentive pay covered by a CBA 25,000 Items 31 to 33 are based on the following information: Monetized unused vacation leave for 12 days 66,000 Risa, a resident citizen, provided the following data for 2024 taxable Monetized unused sick leave for 5 days 27,500 year: Medical cash allowance to dependents 3,000 Actual medical benefits 10,000 Gross income from business (gross of ₱12,000 Creditable withholding tax on compensation CWT) 700,000 income 397,150 Business expenses 300,000 Royalty from books 40,000 34) How much is the amount of exempt de minimis benefits? Gain on direct sale to buyer of shares of stock of A. ₱ 124,500 C. ₱ 107,000 a domestic corporation held as capital assets 70,000 B. ₱ 118,000 D. ₱ 97,000 Loss on sale of land in the Philippines held as capital asset with cost of ₱1,500,000 when the zonal value is ₱1,200,000 500,000 31) How much is the income tax payable of Risa in 2024? A. ₱ 10,500 C. ₱ 22,500 B. ₱ 12,000 D. nil INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL Rice allowance @ ₱2,000 a month only ₱24,000 37) How much is the income tax payable of Tebas for the year Christmas gift/bonus* 5,000 2024? Monetized unused vacation leave for 10 A. ₱ 130,000 C. ₱ 397,150 days 55,000 B. ₱ 267,500 D. ₱ 0 Medical cash allowance to dependents 3,000 Actual medical benefits 10,000 Salaries @ 120,000 per month ₱1,440,000 Total exempt de minimis ₱97,000 Taxable 13th month pay & other benefits (250,500) Note* Taxable net income ₱1,690,500  Included in the list of De Minimis Benefits under RR 10- 2008 as amended, are Gifts given during Christmas and INCOME TAX DUE: major anniversary celebrations not exceeding ₱5,000 per 1st ₱800,000 ₱102,500 employee per annum. In excess of ₱800,000 @ 25% =  It is further provided that any excess shall be included as 890,500 x 25% 222,625 part of “other benefits” subject to the ₱90,000 limit or Total 325,125 threshold. Gifts given during Christmas (regardless of the Less: CWTax (397,150) term used, Christmas gift or Christmas bonus) as follows: Income tax payable ₱0 o 1st ₱5,000 = De Minimis o In excess of ₱5,000 = Other benefits subject to 38) How much is the total allowable deduction from business ₱90,000 limit income of XYZ Corporation in relation to the information provided? 35) How much is the amount of de minimis and other benefits A. ₱ 2,019,808 C. ₱ 1,900,000 subject to basic tax? B. ₱ 2,016,808 D. ₱ 1,987,500 A. ₱ 280,000 C. ₱ 250,500 B. ₱ 251,500 D. ₱ 240,500 Salaries @ 120,000 per month 1,440,000 Allowances subject to liquidation 50,000 Amount Exempt Excess Allowances not subject to liquidation 60,000 Rice allowance ₱36,000 ₱24,000 ₱12,000 Rice allowance at 3,500 a month 36,000 Christmas gift/bonus 30,000 30,000 25,000 Christmas gift/bonus 30,000 13th month pay and mid-year 13th month pay and mid-year bonus 240,000 bonus 240,000 90,000 150,000 Productivity incentive pay, covered by Productivity incentive pay 25,000 - 25,000 CBA 25,000 Monetized unused VL 66,000 55,000 11,000 Monetized unused SL for 5 days 27,500 - 27,500 Monetized unused VL for 12 days 66,000 Medical cash allowance to Monetized unused SL for 5 days 27,500 dependents 3,000 3,000 - Medical cash allowance to dependents 3,000 Actual medical benefits 10,000 10,000 - Actual medical benefits 10,000 Total ₱250,500 Fringe benefit tax expense 32,308 Total OPEX of XYZ 2,019,808  Productivity Incentive Pay under BIR ruling No. 293-2015: o If not more than ₱10,000 – considered as Items 39 to 40 are based on the following information: exempt de minimis Spouses Carlos and Chloe, government employees, had the o If more than ₱10,000 – the entire amount shall following data in 2023: be included in the “other benefits” with ₱90,000 Carlos Chloe ceiling 13th month pay and other benefits 18,949 8,605 Note: This ruling is not applicable to other types of de SSS, Philhealth & HDMF contributions 24,549 4,559.75 minims benefits such as rice allowance. Basic salary (gross of statutory contributions) 310,438 68,426.25  Monetized unused: RATA (reimbursable) 96,000 o Vacation Leave – de minimis up to 10 days Personnel Economic Relief Allowance 6,000 o Sick Leave – not a de minimis benefit, unless the Overtime pay 12,450 4,457.04 employee is employed by the government Holiday pay 3,000 1,783.25 Hazard pay 6,000  Allowance subject to liquidation Total amount of taxes withheld 17,046 o Non-taxable income of Tebas but part of XYZ’s operating expenses 39) The income tax payable on Carlos is: A. ₱ 31.32 C. ₱ 363.16  Allowance NOT subject to liquidation B. ₱ 17,077.72 D. None o Taxable “Fringe benefit”, a final tax. Thus, no longer presented in the computation of income Basic salary 310,438 tax payable using the graduated tax rate. Add: Overtime pay 12,450 Holiday pay 3,000  Christmas gift or bonus in the amount of ₱5,000 is included Gross compensation income 325,888 in the list of de minimis benefits Less: Non-taxable (SSS, PHIC, HDMF) 24,549 Taxable compensation income 301,339 36) How much is the fringe benefit tax? A. ₱ 32,308 C. ₱ 80,000 Tax on 250,000 Exempt B. ₱ 48,000 D. ₱ 166,400 51,339 x 15% 7,700.85 Income tax due 7,700.85  FBT for the allowance not subject to liquidation Less: Withholding tax 17,046.40 = ₱60,000 / 65% x 35% = ₱32,308 Income tax payable - INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL 40) The income tax payable on Chloe if she is an MWE: 43) If Joshua is a non-resident alien not engaged in trade or A. ₱ 448.29 C. ₱ (983.19) business, disregarding professional and business data, the total B. ₱ 1,431.45 D. None income tax that should be withheld from his income is: A. ₱ 50,000 C. ₱ 31,500  Basic salary (MWE – not taxable) ₱ 68,462.25 B. ₱ 18,500 D. ₱ 338,500  Hazard pay, overtime pay, night shift differential pay and  Income tax due = Salaries of P200,000 x 25% = P50,000 holiday pay for MWE are not subject to withholding tax and income tax 44) Sene-ol Inc. paid for the monthly rental of the residential house of its branch manager amounting to ₱204,000. How much is the Items 41 to 43 are based on the following information: fringe benefit tax for the month? Joshua, married, supporting his three (3) minor children had the A. ₱0 C. ₱109,846 following data for 2023 taxable year (Exchange rate $1 = ₱50): B. ₱54,923 D. ₱54,628 Philippines Abroad Business income ₱1,000,000 $20,000 FBT = (Monthly Rent x 50% / Grossed-Up Monetary Value) x FBT Professional income 400,000 10,000 rate Salaries 200,000 - Business and professional expenses 250,000 8,000 FBT = (₱204,000 x ½ / 65%) x 35% Income tax paid - 4,000 FBT = ₱54,923 41) If Joshua is a resident citizen, his income tax payable should be: Journal Entry: A. ₱ 337,500 C. ₱ 589,000 B. ₱ 570,500 D. ₱ 509,000 Fringe benefit expense (MV) 204,000 Fringe benefit tax expense (FBT) 54,923 Philippines Abroad Total Cash 258,923 Business income (PH and Abroad) 1,000,000 1,000,000 2,000,000 The Fringe Benefit Expense is equal to the rental expense of the Professional income 400,000 500,000 900,000 employer. The 50% rule of the rentals is used only for the purposes of Salaries 200,000 - 200,000 computing the applicable Fringe Benefit Tax. Business and professional Fringe Benefit Tax is a final withholding tax imposed on the grossed- expenses (250,000) (400,000) (650,000) up monetary value of the fringe benefit furnished, granted or paid by Taxable net income 1,350,000 1,100,000 2,450,000 the employer to managerial or supervisory employees, whether such employer is an individual, professional partnership or corporation, INCOME TAX DUE: regardless of whether the corporation is taxable or not, or the 1st ₱2,000,000 ₱402,500 government and its instrumentalities. In excess of ₱2M; 450,000 x 30% 135,000 Income Tax Due 537,500 Items 45 to 51 are based on the following information: Less: Income Tax Credit Shiela, a self-employed resident citizen provided the following data Actual ($4,000 x 50) = 200,000 for the 2023 taxable year: VS Limit = 1,100/2,450 x ₱537,500 = 241,327 Allowed = Lower amount (200,000) Sales 2,800,000 Income tax payable ₱337,500 Cost of sales 1,125,000 Business expenses 650,000  NOTE: Income tax paid abroad is generally treated as Gain on sale of shares of foreign corporation 50,000 “income tax credit” (deduction from the income tax due), Interest income from peso bank deposit 80,000 unless the taxpayer opted to treat the same as part of Interest income from bank deposit under FCDS 120,000 operating expenses. Gain on sale of shares of DC (non-listed) 150,000 Gain on sale of shares of DC (listed in the local 42) If Joshua is a non-resident citizen, his income tax payable stock exchange) 200,000 should be: Gain on sale of land in the Philippines held as A. ₱ 240,000 C. ₱ 384,380 capital asset with cost of ₱1,500,000 when the zonal value is ₱1,200,000 500,000 B. ₱ 358,020 D. ₱ 357,000 45) How much is the basic income tax due of Shiela for the year? Business income (PH only) ₱1,000,000 A. ₱ 158,750 C. ₱ 173,750 Professional income 400,000 B. ₱ 171,250 D. ₱ 221,250 Salaries 200,000 Business and professional expenses (250,000) TAXABLE NET INCOME ₱1,350,000 Gross income from business (2.8M – 1.125M + 50K) ₱1,725,000 Business expenses (650,000) Income Tax Due (Graduated tax rates) Taxable Net Income 1,075,000 1st ₱800,000 ₱102,500 In excess of ₱800,000; ₱550,000 x 25% 137,500 Basic Income Tax Due INCOME TAX DUE ₱240,000 [102,500 + (275,000 * 25%)] 171,250  NOTE: Income tax credit on income tax paid abroad is applicable only to resident citizen taxpayers and domestic corporations. INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL 46) How much is the final withholding tax of Shiela for the year? 51) Using the same data except her gross sales for the year 2023 A. ₱ 34,000 C. ₱ 40,000 was ₱3,800,000, how much is her total income tax expense B. ₱ 38,500 D. ₱ 41,500 assuming she opted to be taxed at 8% income tax rate? A. ₱ 321,500 C. ₱ 425,000 FWT on peso bank deposit (80,000 x B. ₱ 351,500 D. ₱ 601,500 20%) 16,000 FWT on interest income from FCDS Basic income tax ₱425,000** deposit (120,000 x 15%) 18,000 FWT on peso bank deposit (80,000 x TOTAL FINAL WITHHOLDING TAXES 34,000 20%) 16,000 FWT on interest income from FCDS deposit (120,000 x 15%) 18,000 47) How much is the capital gains tax of Shiela for the year? CGT on shares of DC (150,000 x 15%) 22,500 A. ₱ 138,000 C. ₱ 147,000 CGT on real properties (2M x 6%) 120,000 B. ₱ 142.500 D. ₱ 150,000 SP = Cost + Gain = 2M vs. ZV = 1,200,000 CGT on shares of DC (150,000 x 15%) 22,500 TOTAL INCOME TAX EXPENSE ₱601,500 CGT on real properties (2M x 6%) SP = Cost + Gain = 2M **Basic Income Tax: vs. ZV = 1,200,000 120,000 Gross income from business (3.8M – TOTAL CAPITAL GAINS TAX 142,500 1.125M + 50K) ₱2,725,000 Business Expenses (650,000) 48) How much is the total income tax expense of Shiela for the Taxable Net Income 2,075,000 year? Tax Due (2,600,000 x 8%) ₱425,000 A. ₱ 321,500 C. ₱ 347,750 B. ₱ 351,500 D. ₱ 389,000  Sheila is NOT allowed to avail the 8% tax because her gross sales for the year exceeded the revised VAT threshold of Basic income tax ₱171,250 3,000,000. Consequently, she is subject to VAT (business tax) FWT on peso bank deposit (80,000 x in addition to income tax. The 8% tax is IN LIEU of Basic 20%) 16,000 Income Tax (Graduated Tax rate) and OPT under Section 116 FWT on interest income from FCDS of the Tax Code, as amended. Sheila, is subject to VAT, not deposit (120,000 x 15%) 18,000 OPT under Section 116. CGT on shares of DC (150,000 x 15%) 22,500 CGT on real properties (2M x 6%) 120,000 Number 52 to 54 are based on the following information: SP = Cost + Gain = 2M Cassandra is a minimum wage earner. In addition to his basic vs. ZV = 1,200,000 minimum wage of ₱180,000 for the year 2023, she also received the TOTAL INCOME TAX EXPENSE ₱347,750 following benefits:  De minimis, ₱140,000 excluding Productivity Incentive pay 49) How much is the total income tax of Shiela in 2023 assuming (₱80,000 over the ceiling) she opted to be taxed at 8%?  Productivity incentive pay as provided in the CBA, ₱28,000 A. ₱ 321,500 C. ₱ 358,000  13th month pay and other benefits, ₱112,000 B. ₱ 342,500 D. ₱ 384,500 52) How much is the income tax due of Cassandra in 2023? Basic income tax using 8% Tax rate ₱208,000** A. ₱ 80,000 C. ₱ 192,000 FWT on peso bank deposit (80,000 x B. ₱ 102,000 D. nil 20%) 16,000 FWT on interest income from FCDS Basic minimum wage Exempt deposit (120,000 x 15%) 18,000 De minimis – over the ceiling ₱80,000 CGT on shares of DC (150,000 x 15%) 22,500 13th month pay and other benefits including CGT on real properties (2M x 6%) 120,000 productivity incentive pay 140,000 SP = Cost + Gain = 2M Total ₱220,000 vs. ZV = 1,200,000 Tax exempt benefits (90,000) TOTAL INCOME TAX EXPENSE ₱384,500 TAXABLE NET INCOME ₱130,000 INCOME TAX DUE EXEMPT **Basic Income Tax: Gross Sales + Other income ₱2,850,000 53) How much is the income tax due of Cassandra in 2023 Less: Tax exempt income (250,000) assuming she also earned ₱450,000 derived from her business Taxable Net Income 2,600,000 of buying and selling various consumer products? Tax Due (2,600,000 x 8%) ₱208,000 A. ₱ 38,000 C. ₱ 58,500 B. ₱ 52,900 D. ₱ 75,000 50) Assuming Shiela is a VAT-registered taxpayer, how much is her total income tax expense assuming she opted to be taxed at 8% Business income ₱450,000 income tax rate? Basic minimum wage Exempt A. ₱ 321,500 C. ₱ 347,750 De minimis – over the ceiling 80,000 B. ₱ 351,500 D. ₱ 389,000 13th month pay and other benefits including productivity incentive pay 140,000  Same solution with number 48 because she is not allowed to Total ₱670,000 avail the 8% tax for being a VAT registered taxpayer. Tax exempt 13th month pay & other benefits (90,000) TAXABLE NET INCOME ₱580,000 INCOME TAX DUE (using graduated rates) ₱58,500 INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL BIR Ruling no. 293-2015 (CBA/CAN and Productivity Incentive Taxable Compensation Income ₱573,000 Pay)  If not more than 10,000 – considered as de minimis Income Tax Due (Graduated tax rates):  IF more than 10,000 – the ENTIRE AMOUNT shall be 1st ₱400,000 ₱22,500 included in the “other benefits” with 90,000 ceiling In excess of ₱400,000; ₱173,000 x 20% 34,600 INCOME TAX DUE ₱57,100 NOTE: Less: CWT on Compensation income 57,100 INCOME TAX PAYABLE ₱0  This ruling shall apply only to benefits under CBA and productivity incentive schemes.  Creditable withholding Tax (CWT) is not an internal  CBA is also referred to as CNA (Collective Negotiation revenue tax but a method of collecting income tax “in Agreement) advance” from the recipient of income through the payor thereof, which is constituted by law as the withholding 54) Use the same data in the immediately preceding number and agent of government. assume further that the productivity incentive pay amounted to  The most common example of CWT for an individual ₱10,000 only, how much is the correct income tax due in 2023? taxpayer is the tax withheld by an employer from the compensation income of the employee. The amount of tax A. ₱ 38,000 C. ₱ 58,500 B. ₱ 52,900 D. ₱ 75,000 withheld will be remitted by the employer to the BIR. Items 58 to 60 are based on the following information: Business income ₱450,000 Frontwow Inc. owns a condominium unit in “Grass Residences” Basic minimum wage Exempt De minimis – over the ceiling 80,000 which is near the factory and the plant’s administrative building. To Productivity incentive pay Exempt make it convenient to its executive, it allowed the latter to use the 13th month pay and other benefits excluding property as his residence. productivity incentive pay 112,000 Zonal value = ₱32,000,000 Total ₱642,000 FMV from real property tax declaration = ₱25,000,000 Tax exempt 13th month pay & other benefits (90,000) TAXABLE NET INCOME ₱552,000 58) How much is the fringe benefit expense? INCOME TAX DUE (using graduated rates) ₱52,900 A. ₱ 0 C. ₱ 25,000,000 B. ₱ 800,000 D. ₱ 32,000,000 Items 55 to 57 are based on the following information: The following data were taken from Peter, finance manager, for 2023  The property is assumed to be part of the employer’s PPE. taxable year: Hence, the cost of the property is assumed to have been or will Gross salaries @ P50,000 per month ₱600,000 be recovered as deductions from its gross income under SSS contributions 12,000 “depreciation expense” account (RR 3-98) Philhealth contributions 7,200 Pag-ibig contributions 4,800 59) How much is the fringe benefit tax expense? Union dues 3,000 A. ₱ 0 C. ₱ 376,470 Withholding tax on compensation income 73,250 B. ₱ 94,117 D. ₱ 430,769 Allowances, not subject to liquidation 100,000 Gasoline allowances, subject to liquidation 17,000 13th month pay 50,000 MV = higher between FMV in Real property declaration and Zonal De minimis benefits 12,000 value x 5% x 50% MV = P32M x 5% x 50% = P800,000 55) The taxable compensation income subject to graduated rate FBT = MV/GUMV Factor x 35% under Section 24(A) of the tax code is: FBT = P800,000 / 65% x 35% = P430,769 A. ₱465,000 C. ₱576,000 B. ₱573,000 D. ₱600,000 60) Assuming that the acquisition cost of the residential property is ₱26,000,000 and the remaining useful life is 12 years. How Gross salaries @ P50,000 per month ₱600,000 much is the fringe benefit expense? SSS contributions (12,000) A. ₱ 0 C. ₱ 2,666,667 Philhealth contributions (7,200) B. ₱ 500,000 D. ₱ 2,083,000 Pag-ibig contributions (4,800) Union dues (3,000)  Additional depreciation in the form of fringe benefit expense = Taxable compensation income ₱573,000 ₱32M – ₱26M over 12 years remaining life = ₱500,000 56) Based on the above data, the fringe benefit tax due is:  If the zonal value or the FMV of the said property is greater than A. ₱0 C. ₱47,059 its cost subject to depreciation, the excess amount shall be used B. ₱8,000 D. ₱53,846 in computing additional depreciation expense allowed as a deduction from the employer’s gross income as fringe benefit  Allowances, not subject to liquidation = subject to FBT expense and shall be amortized throughout the remaining useful  FBT = (100,000 / 65%) x 35% = 53,846 life (RR 3-98). 57) The income tax payable of Peter in 2023 should be:  The Journal entry for the month in this case as provided in the A. ₱0 C. ₱43,250 foregoing revenue regulation shall be: B. ₱30,000 D. ₱73,250 Debit Credit Fringe benefit expense XX Fringe benefit tax expense XX Income constructively realized XX Fringe benefit tax payable XX INCOME TAX INTEGRATION SY 2024-2025 SOLUTION MANUAL Items 61 and 62 are based on the following information: Income tax due (2023 and onwards rates) ₱420,500 Mr. and Mrs. Dela Rosa, both CPAs and residents of the Philippines, Less: QITR payments based on 8% tax rate (220,000) had the following data for 2024 taxable year: Annual income tax payable ₱200,500 Salaries, wife ₱1,200,000 66) How much is Raul’s total business tax due in 2024? 13th month pay and other bonuses, wife 140,000 A. ₱90,000 C. ₱450,000 Professional fees, (net of 10% CWT) 1,620,000 B. ₱195,000 D. ₱510,000 Expenses - Practice of professions (15% nondeductible) 800,000 OPT on the 1st P3M x 3% ₱90,000 Rental income (net of 5% withholding tax) 190,000 12% VAT in excess of P3M = P3.5M x 12% 420,000 Rental expenses 80,000 Annual income tax payable ₱510,000 Other income, husband (20% non-taxable) 80,000 Items 67 to 70 are based on the following information: 61) The taxable income of Mr. Dela Rosa is: On January 1, 2023, Rodrigo established a trust fund for the benefit of A. ₱ 484,000 C. ₱ 684,000 his daughter, Sarah. Rodrigo appointed Atty. Malupet as the trustee. B. ₱ 2,554,000 D. ₱ 1,870,000 The property transferred to the trust is a piece of land with a dormitory earning rental income. During the year, the trust earned ₱40,000,000 62) The taxable income of Mrs. Dela Rosa is: revenues and incurred expenses of ₱10,000,000. Out of the trust’s A. ₱ 410,000 C. ₱ 359,000 income, Atty. Malupet transferred ₱10,000,000 to Sarah. During the B. ₱ 371,000 D. ₱ 1,870,000 year, Sarah earned compensation income of ₱2,500,000. Mr. Mrs. 67) How much is the taxable income of the trust? Salaries - 1,200,000 A. ₱30,000,000 C. ₱19,980,000 Excess of 13th month pay B. ₱29,980,000 D. ₱20,000,000 over tax exempt benefit (140,000 – 90,000) - 50,000 Gross income - trust ₱40,000,000 Professional fees [(1,620,000 Expenses (10,000,000) / 90%) / 2] 900,000 900,000 Income of the trust given to Sarah (10,000,000) Rental income [(190,000 / Net taxable income - trust ₱20,000,000 95%) / 2] 100,000 100,000 Professional expenses 68) How much is the taxable income of the Sarah? [(800,000 x 85%) / 2] (340,000) (340,000) A. ₱2,950,000 C. ₱12,500,000 Rental expenses (80,000 / 2) (40,000) (40,000) B. ₱12,950,000 D. ₱11,450,000 Other income (80,000 x 80%) 64,000 - TAXABLE NET INCOME 684,000 1,870,000 Compensation income ₱2,500,000 Income of the trust distributed to Sarah (10,000,000) Items 63 to 66 are based on the following information: Net taxable income - Sarah ₱12,500,000 In 2024, Raul signified his intention to be taxes at 8% income tax rate on gross sales in his 1st quarter income tax return. His gross sales 69) The taxable income of the trust if it is administered abroad is? during the year exceeded the VAT threshold of P3M as follows: A. ₱30,000,000 C. ₱19,980,000 B. ₱29,980,000 D. ₱21,480,000 Q1 Q2 Q3 Q4 Sales 500,000 500,000 2,000,000 3,500,000 Gross income - trust ₱40,000,000 Cost of sales 300,000 300,000 1,200,000 1,200,000 Expenses (10,000,000) Gross income 200,000 200,000 800,000 2,300,000 Income of the trust given to Sarah NA Operating Net taxable income - trust ₱30,000,000 expenses 120,000 120,000 480,000 720,000 Net taxable income 80,000 80,000 320,000 1,580,0000 70) Based on the preceding number, the taxable income of Sarah should be? 63) How much is Raul’s quarterly payments based on 8% tax rate? A. ₱2,950,000 C. ₱11,500,000 A. ₱200,500 C. ₱420,500 B. ₱2,500,000 D. ₱11,450,000 B. ₱220,000 D. ₱2,060,000  Compensation income only  Quarterly tax payments (Q1 to Q3) based on 8% tax rate [(₱3,000,000 – ₱250,000) x 8%] = ₱220,000 64) How much is Raul’s annual income tax due in 2024? A. ₱200,500 C. ₱420,500 B. ₱220,000 D. ₱2,060,000 65) How much is Raul’s annual income tax payable in 2024? A. ₱200,500 C. ₱420,500 B. ₱220,000 D. ₱2,060,000 Sales ₱6,500,000 Cost of sales (3,000,000) Gross income ₱3,500,000 Operating expenses (1,440,000) Net taxable income ₱2,060,000