UNIVERSITY OF BATANGAS

College of Law
Assignment Income Taxation
Problem Solving. Compute for the item required in the following problems.
1. Taxpayer has the following data for the taxable year:
Net income-business
Gain on sale of business machinery (held for 2 years)
Gain on sale of equipment not used in business (held for 5 years)
Loss on sale of non-business car (held for 12 months)

P 200,000
40,000
50,000
15,000

a. Assuming the taxpayer is a single individual supporting a 70-year old uncle, how much is his
taxable income?
b. Assume the same facts, except that the taxpayer is a corporation. How much is the
corporations taxable income?
2. Yangyang Corporations computed normal tax and MCIT, and the creditable income taxes withheld from
1st to 4th quarters including excess MCIT and excess withholding taxes from prior year/s are as follows:
1st
2nd
3rd
4th
Normal Income tax
100, 000
120, 000
250, 000
200,000
MCIT
80, 000
250, 000
100, 000
100, 000
Taxes Withheld
20, 000
30, 000
40, 000
35, 000
Excess MCIT Prior Year
30, 000
Excess Withholding Tax
Prior Year
10, 000
a.
b.
c.
d.

How much is the income tax payable for the first quarter?
How much is the income tax payable for the second quarter?
How much is the income tax payable for the third quarter?
How much is the annual income tax payable?

3. Mr. Billy Dollar, a Filipino and married to Mrs. Milly Dollar, has two minor legitimate sons. Mr. and Mrs.
Dollar reside in San Diego, California, U.S.A. In 2010, the couple realized the following income in the
U.S.A.
Mr. Dollar, salary and commission, net of $2, 000 withholding tax
$18, 000
Mrs. Dollar, salary and commission, net of $1, 500 withholding ta
15, 000
Dividends, American Corporation
2, 000
Interest in PNB, expanded foreign currency deposit
3, 000
Business Income in the Philippines
P400, 000
Business expenses in the Philippines
250, 000
Exchange rate: $1.00:P40.00
a.
b.
c.
d.

Compute the taxable income of Mr. Dollar.

Compute the taxable income of Mrs. Dollar.
Compute the income tax due of Mr. Dollar.
Compute the income tax due of Mrs. Dollar.

4. In 2011, Vicor Co., a domestic corporation has net income from within the Philippines, P200, 000 and
from the USA, P300, 000. Income tax paid on income from USA is P95, 000. Compute for the tax
credit on income tax paid to US government.
5. International Corporation, a domestic corporation, has the following data for the calendar year. The
corporation signified its intention to claim tax credits on income taxes paid to the foreign countries:
Gross
Allowable
Country
Income
deductions
Tax paid
Philippines
1, 000, 000
800, 000
P
United States
400, 000
200, 000
80, 000
Japan
300, 000
200, 000
25, 000
Compute for the tax payable.
6. Penafrancia D. Caceres, single has the following data during the year:
Gross income, Philippines
P 120, 000
Gross income, USA
200, 000
Expenses, Philippines
80, 000
Expenses, USA
40, 000
Federal income tax paid
8, 500

a. Compute for the income tax due if the foreign tax paid is claimed as deduction.
b. If you are the taxpayer will you opt to claim the foreign tax paid as tax credit or as a deduction?
7. Bravo Company purchased a piece of land with a building thereon for P1, 500, 000 allocated under a
contract of sale at P1, 000, 000 for the land and P500, 000 for the building. It had no use for the
building at the time of purchase and it was its intention to remove the building in order to build its
factory. It incurred demolition cost of P50, 000. It sold its scrap for P15, 000. The construction of the
new building cost the company P2, 500, 000. Compute for the total value of the land.
8. Carlo Construction Corporation, a domestic corporation had the following data:
Year 2010
Gross income from services
Operating expenses
Rent income of heavy equipment
Dividend received from Johna Corporation, a domestic corporatio
Capital gain on sale of shares of stocks (not listed)
Year 2011
Gross income from services
Operating Expenses

P3, 200, 000

3, 450, 000
70, 000
36, 500
12, 250
P3, 560, 000
1, 250, 000

In 2011, Carlo Corporation incurred the following losses:

Fire loss of a company building: Total loss
Cost
Accumulated Depreciation
Amount recovered from Paratago Insurance Co.
Scrap (taken away by the insurance company)

P5, 000, 000

3, 000, 000
750, 000
5, 000

Accident loss of a company dump truck: Partial loss

Cost of dump truck
Accumulated depreciation
Restoration Cost
Amount recovered from Madulag Insurance Co.

500, 000
250, 000
150, 000
65, 000

a. How much is the net operating loss carry over to 2011?

b. How much is the casualty loss in 2011?
c. How much is the income tax due in 2011?
9. Floriano had the following records of income, expenses and losses during the year:
Wagering gains (wagering losses, P50, 000)
P30, 000
Temporary decline in the value of stocks of Ty Co. .
12, 500
Sale of typewriters which were rendered obsolete by computers
(book value P115, 000)
80, 000
Compute for the deductible loss?
10. The following are the records of Badeth Company:
2009
Gross sales
3, 300, 000
Cost of sales
2, 400, 000
Dividend resident foreign corporation
140, 000
Interest income of notes receivable
28, 000
Capital gain
Capital loss
20, 000
Deductions
1, 475, 000

2010
2, 340, 000
1, 070, 000
16, 400
13, 000
1, 025, 000

2011
825, 000
380, 000
32, 000
18, 500
22, 000
459, 000

Case 2

Case 3

50, 000
68, 000
(18, 000)

50, 000
30, 000
20, 000

a. Compute for the taxable income/operating loss in 2009.

b. Compute for the taxable income/operating loss in 2010.
c. Compute for the operating loss carry over in 2011.
11. Sharon, single, has the following data in 2010 and 2011:
2010
Case 1
Net income before personal exemption
And bad debt
50, 000
Less: Bad debt written off
70, 000
Net income after bad debt
(20, 000)

2011
Bad debts recovered

70, 000

60, 000

30, 000

Compute for the taxable amounts before personal exemption in 2011.

12. A store building was constructed on January 2, 2006 with a cost of P570, 000. Its estimated useful life
is 16 years with scrap value of P70, 000 after 16 years. In January 2011, replacement if some worn-out
parts of the building costing of P50, 000 was spent. After the repairs, the building was appraised with a
fair market value of P770, 000. Compute for the allowable deduction for depreciation for the year 2011.
13. What would be the allowable deduction for P10, 000 Contribution made by a resident alien to a
charitable institution, from his P60, 000 Net Income before contribution?
14. Notre Dame Corporation had the following data in 2011:
Gross income
Deductions (except contributions)
Donation to Cultural Center of the Philippines
Donation to the Rehabilitation of the Veterans Inc.
Donation to Roman Catholic Church

500, 000
400, 000
3, 000
2, 000
1, 500

Compute for the taxable income of the corporation.

15. The taxpayer had the following data in 2011:
Gross receipts
Cost of services
Deductions
Capital gain
Capital loss

1, 450, 000
565, 300
325, 800
25, 500
6, 000

a. Assuming the taxpayer is single with one dependent child, compute for the taxable income if he
availed of the optional standard deduction.
b. Assuming the taxpayer is a domestic corporation, compute for the taxable income if it availed of
the optional standard deduction.