INCOME TAXATION – GENERAL PRINCIPLES AND INDIVIDUAL TAXATION 4.

4. Jake and Amy, husband and wife, have the following data in 2017.
TRUE OR FALSE Jake Amy
1. To raise revenue to defray the necessary expenses of the government is a Compensation income P125,000 P60,000
secondary purpose of taxation. Rent Income (net of 5% WT) 76,000
2. A building being leased by its owner to a private educational institution for Royalties on books 70,000
use as classrooms is exempt from property tax. Dependent children 6
3. Tax laws may originate from the Senate and on which same bill the House During the year, the spouses had an income of P120,000 and expenses of
of Representatives may propose amendments. P65,000 which cannot be identified as solely earned by the wife or the
4. Reciprocity is when the property of one country may not be taxed by another husband.
country. a. Determine the taxable income of Jake.
5. No person shall be imprisoned for non-payment of poll tax. b. Determine the taxable income of Amy if she is a minimum wage
6. The Congress can enact tax laws even in the absence of a constitutional earner.
provision granting said body the power to tax. c. Determine the final withholding tax on the passive income.
7. The actual effort exerted by the government to effect the exaction of what
is due from the taxpayer is known as levy. 5. Tyrion sold the following shares of stock of domestic corporations which
8. Civil and administrative penalties are usually imposed when there is a tax he bought for investment purposes:
amnesty. Listed and Traded Not Listed and Traded
9. Symbiotic relation in taxation is the basis for the situs of income taxation. Selling Price P250,000 P143,680
10. Adopted child of the taxpayer may not qualify him for additional exemption. Selling Expense 12,000 3,680
11. Power to tax does not involve power to destroy. Cost 118,000 80,000
12. Tax credit is allowed to be availed of by certain tax payers to provide relief Determine the capital gains tax.
from burden of taxation.
13. The nature of our tax laws is political in nature. 6. Mr. Garcia sold a 500 square meter residential house for P3,000,000. The
14. Regressive taxation is a practice where the burden of taxation is borne not house was acquired in 2008 for P2,000,000. On the date of sale, the fair
by the person liable for the tax but another. market value of the house as shown in the real property declaration was
15. Lifeblood theory in taxation states that without taxes, a government would P2,500,000 and the market value in the tax declaration amounted to
be paralyzed for lack of power to activate and operate it, resulting in its P2,200,000. The zonal value was P7,000 per square meter.
destruction. a. Determine the capital gains tax.
b. Determine the capital gains tax payable assuming Mr. Garcia will
PROBLEMS utilize only P1,500,000 of the proceeds in acquiring a new
1. The following data were provided as of December 31, 2018: residence.
Gross Business Income Business Expenses
Period PH Abroad PH Abroad 7. Cheryl, resident citizen, single, supporting three minor illegitimate children,
Jan. 1-June 30 P300,000 P200,000 P100,000 P50,000 one of them living abroad, has the following data for taxable year 2017:
July 1-Dec.31 600,000 400,000 150,000 50,000 Salary from Pearson Co. (net of P40,000 withholding tax) P350,000
What is Rachel’s taxable income if she: Professional fee (net of 10% withholding tax) 135,000
a. Left the Philippines on July 1, 2018 to go abroad and work there for Expenses incurred (25% pertains to living expenses) 80,000
5 years Health and/or hospitalization insurance premium paid 5,000
b. Arrived from abroad on July 1, 2018 to permanently resettle in the a. Determine her income tax payable.
Philippines after working abroad for 5 years b. Determine her taxable income assuming her salary from Pearson
c. Did not leave Philippines at all Co. is P80,000 (gross of withholding tax).

2. Harvey, married, with two dependent children, received the following

income:
Rent, Philippines P1,000,000
Rent, Hongkong 200,000
Interest, peso deposit 100,000
Interest, US$ deposit, BDO ($10,000 x P42) 420,000
Interest, deposit in Hongkong (HK$10,000 x P5) 50,000
Prize (cash) won in a local contest 8,000
Prize (TV) won in a local lottery 50,000
PCSO/Lotto winnings 2,000,000
Prize won in contest in U.S. 300,000
Lotto winning in U.S. 100,000
Dividend, domestic company 600,000
a. Determine the taxable net income.
b. Determine the total final tax.

3. Connor, married, supporting his three minor children had the following
data for the current taxable year (Exchange Rate $1 = P50).
Philippines Abroad
Business Income P1,000,000 $20,000
Professional Income 400,000 10,000
Salaries 200,000 -
Business and Professional Expenses 250,000 8,000
Income Tax Paid - 4,000
Determine his income tax payable.