PROBLEMS IN INCOMET

(UPDATED)

H, husband, is married to W. H is earning a monthly salary of P100,000.00 and W is earning

P50,000.00 per month. Every month their salaries are being deducted for the following:

H W

SSS Contribution P 500 300

Medicare 100 100
Pag-ibig 100 100
Union Dues 100
Car Loan 1,000
Salary Loan 1,000

On February 2015, W caught H dating his secretary and after a series of quarrels they separated-in-
fact. They have four children ages 10, 15, 19 and 21. All children are under the custody of W. H
procured a health insurance for which he paid an annual premium of P2500. For taxable year 2015:

1. The income tax of H is ____________________

SOLUTION:

GROSS INCOME

Monthly Salary 100,000 x 12 1,200,000

13th month 100,000 100,000
______
1,300,000

EXCLUSIONS
1st P82,000 82,000
SSS Contribution (500) x 12 6,000
Medicare (100) x 12 1,200
Pag-ibig (100) x 12 1,200
_______
(90,400)

DEDUCTIONS

Personal Exemption (50,000) (50,000)

Additional Exemptions
(25,000 per dependent) (100,000) (100,000)
---------------
(150,000)
________________________________________________________________________
TAXABLE INCOME 1,059,600

INCOME TAX

Up to 500,000 125,000
Excess: 559,600x.32 179,072
---------
304,072

=====
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 2. The income tax of W is ____________________

SOLUTION:

GROSS INCOME

Monthly Salary 50,000 x 12 600,000

13th Month Pay 50,000

_______
650,000
EXCLUSIONS

13TH Month 50,000

SSS Contribution (300) x 12 (3,600)
Medicare (100) x 12 (1,200)
Pag-ibig (100) x 12 (1,200)
Union dues (100) x 12 (1,200)
_____
(57,200)

DEDUCTIONS

Personal Exemption (50,000) (50,000)

_________________________________________________________________________
TAXABLE INCOME 542,800

INCOME TAX

Up to 500,000 125,000
Excess: 42,800 x .32 13,696
--------
138,696
=====

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 3. Mr. A is single. He has a five-year old child and a 19 year old daughter who is married.
His children, son-in-law and grandchild, 1 year old, all live with him and are totally
dependent on him for their support. For taxable year 2015, his monthly salary is
P120,000. Every month he contributes a total of P800.00 for his SSS, Pag-ibig and
Medicare. For 2015 , he received a performance bonus equivalent to two months salary.
For taxable year 2015, the income tax of A is ___________________.

SOLUTION:

GROSS INCOME

Monthly Salary 120,000 x 12 1,440,000

13th month pay 120,000 120,000
Performance Bonus
(2 months salary) 240,000 240,000
-----------
1,800,000
EXCLUSIONS

1ST P82,000 82,000

SSS, Pag-ibig and Medicare 800 x 12 (9,600)
_____
(91,600)

DEDUCTIONS

Personal Exemption 50,000 (50,000)

Additional Exemption 25,000 (25,000)
-----------
75,000
TAXABLE INCOME 1,633,400

INCOME TAX

Up to P500,000 125,000
Excess: 1,133,400 x .32 362,688
-----------
487,688
======

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For taxable year 2009, X Corporation which has been incorporated in 2007, has a gross income of
P2,000,000. The total allowable deductions amount to P1,000,000.

4. The income tax of X corporation is _________________.

SOLUTION:

GROSS INCOME 2,000,000

DEDUCTIONS (1,000,000)
TAXABLE INCOME 1,000,000

INCOME TAX

1,000,000 X .30 300,000

=======
5. The income tax of X Corporation under the Optional Standard Deduction is
____________________.

SOLUTION:

GROSS INCOME 2,000,000

DEDUCTION UNDER OSD x .40

--------------
(800,000)
TAXABLE INCOME 1,200,000

INCOME TAX

1,200,000 X .30 360,000

=======
6. The Minimum Corporate Income Tax is Zero (0) (no mcit yet)

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Mr. A is single. He owns a beauty salon. For taxable year 2015, his gross business income amounted
to 300,000 and his total allowable deductions amounted to P150,000.00

7. Mr. A’s income tax is _____________________

SOLUTION:

GROSS INCOME 300,000

DEDUCTIONS

Allowable Itemized Deductions (150,000)

Personal Exemption (50,000)
-----------
(200,000)
TAXABLE INCOME 100,000

INCOME TAX

Up to 70,000 8,500
Excess: 30,000 x .20 6,000
--------
14,500
=====
8. His income tax under the Optional Standard Deduction is _______________________.

SOLUTION:

GROSS INCOME 300,000

DEDUCTIONS
Under the OSD X (.40)
------------
(120,000)
Personal Exemption (50,000)
-----------
(170,000)
TAXABLE INCOME 130,000

INCOME TAX

Up to 70,000 8,500
Excess: 60,000 x .20 12,000
--------
20,500
=====

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 9. H, husband, is a Filipino citizen and is married to W, wife. W is a housewife and is taking
care of their daughter, Ana, 22 years old who is comatose, and Angelo, 5 years old, their
legally adopted son. For taxable year 2015, H received a monthly salary of P85,000.
Every month his employer deducts from his salary the following contributions: P500,
SSS; P100, Pag-ibig; 100, Medicare. At the end of 2015, he received his performance
bonus of P55,000. For taxable year 2015, the income tax of H is
________________________.

SOLUTION:

GROSS INCOME

Monthly Salary 85,000 x 12 1,020,000

13th month
85,000 85,000
Performance Bonus 55,000 55,000
----------
1,160,000

EXCLUSIONS

First P82,000 82,000

SSS 500 x 12 (6,000)
Pag-ibig 100 x 12 (1,200)
Medicare 100 x 12 (1,200)
_______
(90,400)
DEDUCTIONS

Personal Exemption 50,000 (50,000)

Additional Exemptions
( 2 dependents) 50,000 (50,000)

----------
(100,000)

TAXABLE INCOME 969,600

INCOME TAX

Up t0 500,000 125,000
Excess: 469600 x .32 150,272
-----------
275,272
======

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 10. X, Y and Z are doctors and formed a partnership where they put a small clinic to ender
medical services. For taxable year 2015, the gross income of the partnership amounts to
p700,000.00 and the total deductions amounted to p450,000. The income tax of the
partnership is Zero (0).
REASON: General Professional Partnership is exempted from the payment of income
tax.

11. A, B and C are Certified Public Accountants (CPAs). They formed a partnership where
they decided to put up a restaurant. For taxable year 2015, the partnership has a total
income of P890,000 and total allowable deductions of P530,000. The income tax of said
partnership is ______________________.

SOLUTION:

GROSS INCOME 890,000

DEDUCTIONS 530,000
TAXABLE INCOME 360,000

INCOME TAX

360,000 X .30 108,000

======

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Given for taxable year 2015 (for numbers 12 to 20)

Gross Business Income 250,000

Gross Compensation Income 250,000
Allowable Deductions (Itemized) 125,000
Personal Exemption 50,000
Additional Exemption 25,000
Premium on Health Insurance 850
Date of Incorporation January 1, 2001

For taxable year 2009:

12. The income tax of A Corporation is _____________________

SOLUTION:

GROSS INCOME

Gross Business Income 250,000

DEDUCTIONS

Allowable Deductions (Itemized) (125,000)

TAXABLE INCOME 125,000

INCOME TAX

125,000 x .30 37,500

13. The income tax of A Corporation under Optional Standard Deduction is

_________________________.

SOLUTION:

GROSS INCOME

Gross Business Income 250,000

DEDUCTIONS

OSD X (.40)
---------
100,000
TAXABLE INCOME 150,000

INCOME TAX

150,000 X .30 45,000

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 14. The Minimum Corporate Income Tax of A Corporation is ______________________

SOLUTION:

GROSS INCOME

GROSS BUSINESS INCOME 250,000

X (.02)
----------
INCOME TAX 5,000
====

15. The income tax of b Partnership, a general professional partnership is Zero (0)

16. The income tax of Mr. C who is earning purely compensation income is
______________________.

SOLUTION:

GROSS INCOME

GROSS COMPENSATION INCOME 250,000

DEDUCTIONS

Personal Exemption (50,000)

Additional Exemption (25,000)
Premium on Health Insurance (850)
----------
(75,850)
TAXABLE INCOME 174,150

INCOME TAX

Up to 140,000 22,500
Excess: 34,150 x .25 8,537.50
----------
31,037.50
========

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 17. The income tax of Mr. C who is earning business income is ________________________.

SOLUTION:

GROSS INCOME

Gross Business Income 250,000

DEDUCTIONS

Allowable Deductions (Itemized) (125,000)

Personal Exemption (50,000)
Additional Exemption (25,000)
Premium on Health Insurance (850)
-----------
(200,850)
TAXABLE INCOME 49,150

INCOME TAX

Up to 30,000 2,500
Excess: 19,150 x .15 2,872.50
-----------
5,372.50
=======
18. The income tax of Mr. D who is earning business income under the Optional Standard
Deduction is _____________________.

SOLUTION:

GROSS INCOME

Gross Business Income 250,000

Deduction under OSD (.40)
---------
(100,000)
Personal Exemption (50,000)
Additional Exemption (25,000)
Premium on Health Insurance (850)
-----------
(175,850)
__________________________________________________________
TAXABLE INCOME 74,150

INCOME TAX
Up to 70,000 8,500
Excess: 4,150x .20 830
-------
9,330
=====

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 19. The income tax of Mr. E earning both compensation and business income is
_________________________.

SOLUTION:

GROSS INCOME

Gross Business Income 250,000

Gross Compensation Income 250,000
----------
500,000

DEDUCTIONS

Allowable Deductions (Itemized) (125,000)

Personal Exemption (50,000)
Additional Exemption (25,000)
------------
(200,000)
TAXABLE INCOME 300,000

INCOME TAX

Up to 250,000 50,000
Excess: 50,000 x .30 15,000
--------
65,000
=====
20. The income tax of Mr. E earning both compensation and business income but elects the
Optional Standard Deduction is_______________________.

SOLUTION:

GROSS INCOME
Gross Business Income 250,000
Gross Compensation Income 250,000
---------
500,000
DEDUCTIONS
OSD (GBI x .40) (250,000 x .40)
--------
(100,000)
Personal Exemption (50,000)
Additional Exemption (25,000)
-----------
(175,000)
TAXABLE INCOME 325,000

INCOME TAX
Up to 250,000 50,000
Excess: 75,000 x .30 22,500
---------
72,500
=====

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Given for taxable year 2015: (for nos. 21 to 30)

Gross Business Income 1,200,000

Gross Compensation Income 550,000
Allowable Deductions (Itemized) 738,000
Personal Exemption 50,000
Additional Exemption 75,000
Premium on Health Insurance 2,400
Date of Incorporation January 1, 2003

For Taxable year 2009:

21. The income tax of A Corporation is ________________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,00

DEDUCTIONS

Allowable Deductions (Itemized) 738,000

TAXABLE INCOME 462,000

INCOME TAX (X .30)

----------
138,600
=======

22. The income tax of A Corporation under the Optional Standard Deduction is
______________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

OSD (.40)
-------------
(480,000)
TAXABLE INCOME 720,000

INCOME TAX (.30)

-----------
216,000
======

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 23. The Minimum Corporate Income Tax of A Corporation is _______________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

(.02)
------------
24,000
======

24. The income tax of B Partnership, a general professional partnership is Zero (0).
25. The income tax of C Partnership which sells books is __________________________.
SOLUTION:

GROSS INCOME

Gross Business Income 1,200,00

DEDUCTIONS

Allowable Deductions (Itemized) 738,000

TAXABLE INCOME 462,000

INCOME TAX (X .30)

----------
138,600
=======
26. The income tax of Mr. D who is earning purely compensation income is
_________________________.
SOLUTION:

GROSS INCOME

Gross Compensation Income 550,000

DEDUCTIONS

Personal Exemption (50,000)

Additional Exemption (75,000)
----------
(125,000)
TAXABLE INCOME 425,000

INCOME TAX
Up to 250,000 50,000
Excess: 175,000 x .30 52,500
---------
102,500
======
13
 27. The income tax of Mr. E who is earning business income is
________________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

DEDUCTIONS

Allowable Deductions (Itemized) (738,000)

Personal Exemption (50,000)
Additional Exemption (75,000)
-----------
863,000
TAXABLE INCOME 337,000

INCOME TAX

Up to 250,000 50,000
Excess: 87,000 x .30 26,100
----------
76,100
=====
28. The income tax of Mr. E who is earning business income under the Optional Standard
Deduction is ____________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

DEDUCTIONS

OSD (x. 40)

------------
(480,000)
Personal Exemption (50,000)
Additional Exemption (75,000)
-----------
(605,000)
TAXABLE INCOME 595,000

INCOME TAX

Up to 500,000 125,000
Excess: 95,000 x .32 30,400
----------
155,400
=======

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 29. The income tax of Mr. F earning both compensation and business income is
_____________________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

Gross Compensation Income 550,000
-----------
1,750,000

DEDUCTIONS

Allowable Deductions (Itemized) (738,000)

Personal Exemption (50,000)
Additional Exemption (75,000)
-----------
(863,000)
TAXABLE INCOME 887,000

INCOME TAX

Up to 500,000 125,000
Excess: 387,000 x .32 123,840
-----------
248,840
======

15
 30. The income tax of Mr. F earning both compensation and business income but elects
under the Optional Standard Deduction is ____________.

SOLUTION:

GROSS INCOME

Gross Business Income 1,200,000

Gross Compensation Income 550,000
-------------
1,750,000

DEDUCTIONS

OSD (GBI X .40) (1,200,000 X .40)

---------------------
(480,000)
Personal Exemption (50,000)
Additional Exemption (75,000)
-----------
(605,000)
TAXABLE INCOME 1,145,000

INCOME TAX

Up to 500,000 125,000
Excess: 645,000 x .32 206,400

------------
331,400
======

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