Answers Tax

I.
Multiple CHoice (pages 43-58)
1. B. one of the special characteristic of tax is it is unlimited in amount.

2. D. neither “a” nor “b”
3. B. only statement 2 is correct
4. C. taxes may be increased in periods of prosperity to curb spending power and halt
inflation or lowered in periods of slump to expand business and ward-off depression.
5. B. taxes may be imposed for the equitable distribution of wealth and income in
society
6. B. lifeblood theory
7. D. b & c
8. D. Imposition of tax
9. B. Levy
10. C. Both statements are correct
11. B. Not Valid because those who did not pay their taxes are favored than those who
have paid their taxes.
12. B. No, because the law is arbitrary in that it takes income that has already been spent.
13. C. No, the BIR is not allowed to reverse its ruling.
14. A. I only
15. B. II only
16. B. When allowed by the constitution
17. A. Only statement 1 is correct
18. B. No; Yes; Yes
19. A. The power to tax is supreme, plenary, comprehensive and without any limit because
the existence of the government is a necessity.
20. B. I and II only
21. C. Prescribing rules of taxation
22. C. Collection of tax
23. D. Statements 1 & 2 are true
24. The strongest of all inherent powers of the state
25. B. The legislative branch of the local government only
26. A. Constitutional grant
27. C. Statement 1 is false but statement 2 is true
28. D. Subject to the approval of the people
29. B. The principle implies that an imposition of lawful regulatory taxes would be
destructive to the taxpayers and business establishments because the government can
compel payment of tax and forfeiture of property through t5he exercise of police power.
30. B. Due process of law
31. B. A graduated tax table in consonance with the statement
32. A. Rule of law that in the performance of its government functions, the state cannot be
estopped by the neglect of its agents and officers
34. A. Political in nature
35. B. A regulatory measure
36. C. Revenue regulations
37. B. Statements 1 is is true but statement 2 is false
38. B. Liberally in favor of the government and taxpayer
39. C. Strictly against the government and liberally In favor of the taxpayer
40. D. None of the above
41. B. III, IV, V and VI only
42. B. Property
43. A. Ad valorem
44. D. Indirect
45. D. Inferior to non-impairment clause in the Constitution
46. B. III and IV only
47. B. Fiscal Adequacy
48. A. Equality and theoretical justice
49. C. Administrative feasibility
50. B. Statement 1 is true but statement 2 is false
51. B. II only
52. A. I and II only
53. B. Exercise of taxation is subject to international comity
54. A. The rule on taxation shall be uniform and equitable
55. D. All of the above
56. A. It is a privilege or freedom from tax burden
57. A. Statements 1 & 2 are false
58. C. III only
59. A. Not declaring all taxable income
60. D. All of the above
62. C. All of the above
63. A. Violates substantive due process
64. A. Statements 1&2 are false
65. A. Yes, since Ligaya is a stock and for profit educational institution.
II. Exercise 2-7 (Page 121)
a. Total Capital gains taxes paid by the spouses = P310,000

b. Total final taxes withheld on passive income of the spouses = P13,550
c. Taxable income of Daniel = P547,000
d. Taxable income of Kat = P515,000
Computation:
Sales of shares of domestic corp. Directly to a buyer P10,000

(P100,000 x 5%) + P50,000 x 10%
Capital gain on sale of land in the philippines classified as capital asset 300,000
(P5M x 6%)
Total Capital gains taxes paid by the spouses P310,000
Dividend income from domestic corp. At 10% P4,000
Interest income on Philippine bank deposit 3,400

(3200+2400+8000)/80% x 20%
Interest income on Philippine Bank deposit under FCDU 750

(4000+4000+2000) x 7.5%
Interest income on government bonds 2,000
Royalty -literary 1,000
Royalty - other than literary 2,400
Total final taxes withheld on passive income of the spouses P13,550
Business income P600,000
Rental income of tax (P200,000/95%)/2 100,000
Dividend income from nonresident corp. (P10,000/2) 5,000
Interest income on notes receivable [6,000 + (P2,000/2)] 7,000
Interest on income on bank deposit abroad [5,000 +(5000/2)] 7,500

Capital gain on sale of land abroad (500,000/2) 250,000
Gain on sale of shares-new york stock exchange (P30,000/2) 15,000
Expenses [P350,000 +(75,000/2)] (387,500)
Personal exemption (50,000)
Taxable income of Daniel P547,000
Gross income from practice of profession (P360,000/90%) P400,000
Rental income net of tax (P190,000/95%)/2 100,000
Dividend income from resident corp. 20,000
Dividend income from nonresident corp. (P10,000/2) 5,000
Interest income on notes receivable [P4,000 + (P2,000/2)] 5,000
Interest income on bank deposit abroad [P5,000 + (P5,000/2)] 7,500
Capital gain on sale of land abroad (P500,000/2) 250,000
Gain on sale of shares – New York Stock Exchange P30,000/2 15,000
Expenses [P200,000 +(75,000/2)] (237,000)
Taxable net income of Kat P515,000
III. Exercise 2-8 (Page 122)
a. Income tax payable, first quarter = P32,500

b. Income tax payable, second quarter = P14,500
c. Income tax payable, third quarter = P19,233
d. Income tax payable, fourth quarter = P59,823
e. Total final taxes (for the year) on passive income = P15,800
f. Total capital gains tax = P600,000 x 6% = P36,000
Computation:
1st 2nd 3rd 4th

Gross Profit from sales P300,000 P500,000 P710,000 P980,000
Business expenses (120,000) (262,000) (405,890) (426,700)
Taxable income P180,000 P238,000 P304,110 P503,300
Tax due (Tax table) P32,500 P47,000 P66,233 P126,056
Less: Tax paid
Q1 - (32,500) (32,500) (32,500)
Q2 - (14,500) (14.500)
Q3 - (19.233)
Income tax Payable P32,500 P14,500 P19,233 P59,823
Amount % Tax
Dividend received from domestic corp. 30,000 10 3,000
Interest income from
BPI 16,000 20 3,200
UCPB 18,000 20 3,600
Metrobank 30,000 20 6,000
Total final tax on passive income P15,800

III. Exercise P3.5 (Page 161)
1. a) P165,000 x 50% = P82,500
b) P82,500/68% x 32% = P38,824
2. a) P4.5M x 5% /4 x 50% = P28,125
b) P28,125/68% x 32% = P13,235
3. a) P4.5M
b) P4.5M/68% x 32% = P2,117,647
4. a) P1,200,000
b) P1,200,000/68% x 32% = P564,705

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I.

Multiple CHoice (pages 43-58)

1. B. one of the special characteristic of tax is it is unlimited in amount.

a. Total Capital gains taxes paid by the spouses = P310,000

Sales of shares of domestic corp. Directly to a buyer P10,000

Total Capital gains taxes paid by the spouses P310,000

Dividend income from domestic corp. At 10% P4,000

Interest income on Philippine bank deposit 3,400

Interest income on Philippine Bank deposit under FCDU 750

Interest income on government bonds 2,000

Royalty -literary 1,000

Royalty - other than literary 2,400

Total final taxes withheld on passive income of the spouses P13,550

Business income P600,000

Rental income of tax (P200,000/95%)/2 100,000

Dividend income from nonresident corp. (P10,000/2) 5,000

Interest income on notes receivable [6,000 + (P2,000/2)] 7,000

Interest on income on bank deposit abroad [5,000 +(5000/2)] 7,500

Gain on sale of shares-new york stock exchange (P30,000/2) 15,000

Expenses [P350,000 +(75,000/2)] (387,500)

Personal exemption (50,000)

Taxable income of Daniel P547,000

Gross income from practice of profession (P360,000/90%) P400,000

Rental income net of tax (P190,000/95%)/2 100,000

Dividend income from resident corp. 20,000

Dividend income from nonresident corp. (P10,000/2) 5,000

Interest income on notes receivable [P4,000 + (P2,000/2)] 5,000

Interest income on bank deposit abroad [P5,000 + (P5,000/2)] 7,500

Capital gain on sale of land abroad (P500,000/2) 250,000

Gain on sale of shares – New York Stock Exchange P30,000/2 15,000

Expenses [P200,000 +(75,000/2)] (237,000)

Personal exemption (50,000)

Taxable net income of Kat P515,000

III. Exercise 2-8 (Page 122)

a. Income tax payable, first quarter = P32,500

1st 2nd 3rd 4th

Business expenses (120,000) (262,000) (405,890) (426,700)

Personal exemption (50,000)

Taxable income P180,000 P238,000 P304,110 P503,300

Tax due (Tax table) P32,500 P47,000 P66,233 P126,056

Less: Tax paid

Q1 - (32,500) (32,500) (32,500)

Income tax Payable P32,500 P14,500 P19,233 P59,823

Dividend received from domestic corp. 30,000 10 3,000

Interest income from

BPI 16,000 20 3,200

UCPB 18,000 20 3,600

Metrobank 30,000 20 6,000

Total final tax on passive income P15,800

1. a) P165,000 x 50% = P82,500

b) P82,500/68% x 32% = P38,824

2. a) P4.5M x 5% /4 x 50% = P28,125

b) P28,125/68% x 32% = P13,235

b) P4.5M/68% x 32% = P2,117,647

b) P1,200,000/68% x 32% = P564,705

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