Problems 05

(for class seatwork, recitation, homework)

Instructions/Required: For each of the following cases in the current taxable year 2028, in good form,
present the solutions leading to the correct answers using the appropriate formats, formulas or
computational patterns as given/illustrated in the lectures.
Problem 01. The data in the Philippines of a married couple for the current year 2018 are as follows:

a. Net Income from employment of husband (after tax withheld ₱2,875) ₱380,150
b. Net Income from employment of wife (net of tax withheld ₱3,600) 420,250
c. Interest income on bank deposits 8,000
d. Royalty income (net of final income tax) 65,000
e. Dividend income of husband from a resident foreign corporation 3,500
f. Health hospitalization insurance premiums 3,600
g. Qualified dependent children, 3 legitimate and 1 legally adopted

Compute the taxable net income, income tax credit, income tax payable after tax credit.
Problem 02. A married resident, a sole proprietor, had the following business data in the year 2018:
Philippines In Denmark
Gross profit from sales ₱850,000 ₱650,000
Deductible business expenses 400,000 300,000
Non-deductible business expenses 125,000 63,500
Interest income on trade receivables 15,000 20,000
Interest income on bank deposits 7,500 5,000
Prizes, winnings from contest in Philippines 65,000 25,000
Dividend income from foreign corporations 5,000 10,000
Income tax paid in the year 0 45,000
Excess tax credit in prior year 15,600 0

Determine the following items:

1. If a resident alien, the taxable net income, total income tax credit allowed are?
2. If a resident citizen, the income tax due before and after the tax credits are?
3. If a resident citizen and the income tax abroad is treated as deductible business expense, the
taxable net income and income tax due after tax credits are?
Problem 03. A married entrepreneur engaged in merchandising business, had the following non-
cumulative financial data in the Philippines in the current year 2018:
1st Quarter 2nd Quarter
J. F. M. A. M. J.
Gross profit from Sales ₱460,000 ₱605,600
Other income (net of 5% WTAS) 47,000 25,000
Direct cost and expenses 206,000 398,500
Data for the 3rd quarter J. A. S. follows:
Gross sales ₱847,000
Cost of sales 439,200
Interest income on receivables 24,600
Prizes, winnings from contest 15,300
Dividend income from resident foreign corporation 17,000

He filed his quarterly income tax returns in the previous quarters and paid the corresponding quarterly
income taxes due.
Determine the taxable net income, income tax due, and the income tax credit allowed in each of the
period/quarter.
Problem 04. A resident citizen individual, who is a head of family, provided the following commercial
information for the current year 2018 as reflected from its accounting books and records:
Gross Income in Philippine ₱900,000
Gross Income in Malaysia 650,000
Gross Income in USA 700,000
Business Expense in Philippines 500,000
Business Expense in Malaysia 450,000
Business Expense in USA 400,000
Income tax paid in Malaysia 21,700
Income tax paid in USA 35,600
Prior’s quarters income tax paid 47,600

Compute the taxable net income, income tax credit and income tax due after tax credit, if the taxpayer
opted to treat the foreign income tax as:
1. Income tax abroad treated as part of tax credits.
2. Foreign income tax treated as part of allowed deduction from gross income.
Problem 05. A self-employed individual engaged in a merchandising business had these data in 2018:
Gross Income Expenses
January to March ₱750,000 ₱430,000
January to June 1,235,000 840,000
January to September 1,942,000 1,275,000
January to December 2,787,000 1,836,000
Excess Tax Credit in prior year ₱61,500

Quarterly non-cumulative WTAS are; ₱21,0000, ₱19,500, ₱18,000, ₱25,000 respectively.

The taxpayer is married and with three children dependents, one of whom is an adopted child without
legal Adopted papers, another is an illegitimate child whereas the third one is a natural child.
Determine the taxable net income, the income tax due before and after tax credits in each period.
Problem 06. An individual taxpayer in the Philippines is legally separated from his wife, he has three
dependent children and has the following data for the current year 2018:
Philippines Abroad
Gross compensation income ₱340,000 275,000
Gross business income 950,000 610,500
Other gross income 15,600 16,000
Business expenses 540,000 230,000
Royalty income 75,000 56,000
Income tax paid abroad 0 54,500
Withholding tax on wages 13,600 0
Withholding tax at source 18,000 0
Prior quarter Tax Payments 45,000 0

Compute the taxable net income, income tax due after tax credit if taxpayer is:
1. A resident citizen
2. A non-resident citizen
Problem 07. The financial data of a married resident citizen in the taxable year 2018 are as follows:
Business Compensation Business WTAS WTOW
Income Income Expenses
January to March ₱450,000 ₱165,000 ₱203,000 ₱2,500 ₱19,000
April to June 565,000 142,000 275,000 2,600 16,000
July to September 630,000 218,000 310,000 1,800 13,000
October to December 892,000 232,000 280,000 2,300 27,000

Dividend Income from resident foreign corporation in 2 nd quarter is ₱5,800

Dividend Income from domestic corporation in 3 rd quarter is ₱6,100
Interest income on bank deposit in Philippines in 1st quarter is ₱2,500
Rental income on business asset in 4th quarter in ₱36,000
Excess tax credit in prior year is ₱12,000

Determine the quarterly taxable net income, income tax credit, income tax still due after tax credits.
 Multiple Choice Questions 05
(for class seatwork, recitation, homework)

Instructions/Required: For each of the following cases in the current taxable year 2019, in good form, pre-
sent the solutions leading to the correct answers using the appropriate formats, formulas or
computational patterns as given/illustrated in the lectures.

Data: Mr. Y has the following data in the current year 2019:
1. Net Income in Hongkong, P300,000
2. Net Income in Australia, 500,000
3. Net Income in Philippines, 200,000
4. Income Tax Paid to Australia, 60,000
5. Income Tax Paid to Hongkong, P100,000
6.Unmarried but with a qualified sister a dependent.
7. The allowed personal exemption has not yet been deducted

Q01. The allowed tax credits for the income tax abroad, id a resident citizen is:
a. P215,200 b. P160,000 c. P140,700 d. no answer

Q02. If a resident citizen and elected to claim the foreign income taxes as deductions from gross income,
the income tax payable after tax credits is:
a. P233,800 b. P73,800 c. P133,800 d. no answer

Data: Mr. A, a legendary separated citizen, a resident of Makati city, has the following income and
expenses in the current taxable year 2019:
Items Philippines Abroad
1. Business Income P500,000 P900,000
2. Business Expenses 400,000 600,000
3. Income Tax Payments ? 70,000
4. Income Tax Withheld at Source 24,000 0
5. Excess Tax Credit in prior year 8,500 0

Q03. The total income tax allowed is:

a. P60,000 b. P92,500 c. P32,5000 d. no answer

Q04. The income tax after tax credit if claimed the foreign income tax as deduction from gross income:
a. P35,000 b. P50,500 c. P26,500 d. no answer

Data: An unmarried resident citizen of the Philippines, furnished us his data in the current taxable year
2019 as follows;
Items Business Income Business Expenses Income Tax Paid
In Philippines P800,000 P600,000 P ?
In Greece 300,000 200,000 16,000
In Turkey 400,000 250,000 40,500
 Income tax paid in first three (3) quarters in the Philippines P21,000
Withholding tax at source in the Philippines P12,500
Q05. The tax credit for income tax abroad is?
a. P 52,778 b. P47,667 c. P56,500 d. no answer

Q06. The income tax payable after tax credit is?

a. P 14,033 b. P38,500 c. P5,200 d. no answer

Q07. The taxable net income is:

a. P 343,500 b. P200,000 c. P400,000 d. no answer

Q08. Income tax payment to a foreign country, in the case of a resident citizen may be claimed as a:
a. Deduction from gross income only
b. Tax credit from income tax due only
c. Both deductions from gross income and tax credits at the same time
d. Either deduction from gross income or tax credit from income tax due

Q09. Which of the following is entitled to claim as tax credit for any foreign income tax payment?
a. A national of Hongkong, who is a resident in the Philippines.
b. A citizen of Australia, who is residing therein
c. A citizen of the Philippines and is a Filipino
d. No answer given

Q10. Which of the following is not claimable as tax credit by a resident alien?
a. Withholding tax at source
b. Excess tax credit in prior year
c. Income tax abroad
d. No answer given

Q11. The multiplier in the tax credit formulas under limitations A and/or B for foreign income tax payment
is:
a. Philippine income tax due based on the taxable net income-world.
b. Philippine income tax due based on the taxable net income in the Philippines.
c. Foreign income tax due based on the taxable net income abroad.
d. Answer not given

Q12. Income tax payments in foreign countries in the case of a Filipino who is resident of a foreign country
may be claimed as:
a. Deduction from income tax due
b. Deduction from gross income
c. Deduction from gross income and income tax due at the same time
d. None of the above
Data: A widower Filipino citizen residing in Quezon City had the following data in the year 2019;
Source of Income Net Income Foreign Income Tax
1. In the Philippines P600,000 P0
2. In Russia 200,000 60,0000
3. In Poland 400,000 100,000

Q13. Assuming that tax credit shall be claimed for the foreign income taxes paid, the income tax due
before tax credit is?
a. P157,000 b. P349,000 c. P333,000 d. no answer

Q14. The tax credit allowed is?

a. P155,500 b. P160,000 c. P166,500 d. no answer

Q15. Which of the following taxpayers is not required to file individual Income tax returns hence cannot
claim tax credit?

a. Non-resident citizen c. Resident alien

b. Resident citizen d. Non-resident alien not engaged in Philippine business

Q16. Which of the following can be claimed as tax credit in the case of a resident citizen?

a. Excess profit tax of a foreign country

b. National income tax to a foreign country
c. War profit tax to a foreign country
d. All of the above

Q17. 1st statement If a taxpayer is qualified to claim a tax credit for a foreign income tax, he may elect
to claim it as a deduction from the gross Income Instead.

2nd statement: The word "Foreign Income Tax" for which tax credit maybe claimed means
national income tax proper only, and shall exclude any interest, surcharge or any other penalty.

a. 1st statement is true, 2nd statement Is false

b. 1st statement is false, 2nd statement is true
c. Both statements are correct
d. Both statements are wrong

Q18. Income tax payment to a foreign country, in the case of a resident alien may be claimed as a:

a. Deductions from gross income only

b. Tax credits from Income tax due only
c. Both deductions from gross income and tax credits at the same time
d. None of the above