MSJG Income Tax Chapter 3 Notes
MSJG Income Tax Chapter 3 Notes
MSJG Income Tax Chapter 3 Notes
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Capital Gain
ITR is a formal statement of the taxpayers taxable income and deductions,
reported in the BIR prescribed form, to be filed and paid using the normal or regular
tax rates.
Normal Tax VS Final Tax
Normal tax is the tax imposed on regular earnings; regular/customary/ordinary tax.
Final tax is the term used for tax which have been subjected to tax payment and
may no longer be reported in taxable income.
Normal tax Report in the year-end ITR
Compensation income
Business/Professional Income
Other passive income and capital gains not subject to final tax
Final tax For disclosure only, no need to be taxed again
Interest, dividend and royalty
Sales of real property, and stocks classified as capital asset
Income may be received in the form of cash, property, and service.
When approved by the BIR commissioner, a change in accounting period will
require a separate tax return made from the close of the former accounting year to
the close of the new accounting year.
Cash method income is reported in the year of collection whether earned and/or
unearned.
Accrual method - when earned and incurred
Installment method the reportable income derived on this sale is the proportion of
collection actually received during the year to the gross profit and contract price.
Gross profit
Reportable income = Installment received
Contract Price
Selling Price
Add: Cash received
Fair market value of property
Installment obligations
Mortgage assume by the buyer
Contract Price
Add: Selling price
Excess of Mortgage over cost
Less Mortgage assume by the buyer
Initial payments
Add: Downpayment
Installment received
Excess of mortgage over cost
Annual Installment Payments
Add: Selling price
Less: Initial payments
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