Answer Key Tax 501 by Ampongan

EXERCISE 2–1

1. The query should be addressed to the Commissioner of Internal Revenue

2. I will inform him that a compromise is not allowed anymore

3. Piolo is correct.

4. I will request for a compromise of the assessed tax on ground that the financial position of the taxpayer demonstrates clear inability to pay the assessed tax.

5. The claim for refund should be denied on ground of prescription.

6. The Commissioner may not grant the refund when there is a deficiency tax assessment against the claimant-taxpayer.

7. Yes.

8. a. The counting of the two (2) year period commences to run from the date of final payment.

b. Augusto has thirty days from receipt of the decision of the CIR to file an appeal with the CTA

c. He is given 30 days from receipt of the CIR’s decision but not exceeding 2 years from the date of final payment.

EXERCISE 2-2. MULTIPLE CHOICE

1. C

2. C

3. A

4. B

5. D

6. C

7. B

8. A

9. D

10. D

11 C

12. D

13. B

14. B

15. C

EXERCISE 2-3

1. D

2. A

3. D

4. C

5. D

EXERCISE 2–4

The proper party to question, or seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.

EXERCISE 3-1

1. The partnership is not liable to pay income tax.

2. The contention of Judge Nitafan is wrong. .

3.

Income subject to tax/Fair discounted value

80,000

b. Income subject to tax, 2011 10,000

c. Income reportable in 2012 ( 20,000 x P 10,000

50%)

4. Whenever a stockholder is indebted to the corporation and said creditor corporation decides to condone the debt, such condonation has the effect of a payment of dividend to the stockholder.

.

5. Hilario is not required to report income on the condonation considering that the condonation of debt was given without requiring him to render services.

6. Yes.

7. Under the tax benefit rule, whenever a bad debt is claimed as deduction from gross income and it resulted to a reduction in its tax liability, the recovery of such is subject to tax.

8. a. Value-added tax - not taxableb. Real property tax - taxablec. Income tax - not taxabled. Stock transaction tax - not taxablee. Special assessment - not taxablef. Occupation tax - taxableg. Estate tax - not taxableh. Income tax paid to a foreign

country- taxable if claimed as deduction

i. Community tax - taxablej. Excise tax - taxable

9. a. Yes, b. subject to a final tax of 10%c. They are not subject to tax.d. both the stockholders who were paid stocks and cash dividends are subject to

final tax.

10. a. Dividends received from domestic – not taxableb. Dividends received by resident foreign from domestic

- not taxable

c. Dividends received by nonresident foreign corporation from domestic – 15% final tax if the country in which the nonresident foreign corporation is domiciled shall allow tax credit of 15% in its income tax payable in such foreign country.

11. a.

Miss Supsup is entitled to 10% of the value of confiscated smuggled goods but not exceeding P1,000,000.

b. The reward received by Miss Supsup is subject to a final withholding tax of 10%.

12. a.

she has to report an income of P100,000 on the leasehold improvement and P48,000 (P4,000 x 12) on the rent, or a total amount of P148,000.

b. Rent (P4,000 x 12) P 48,000

Add: Income on leasehold improvement Cost of improvement P 100,000 Less: Accumulated depreciation (100,000/25 x 18.5)

74,000

Book value, end of lease 26,000 (26,000 / 18.5 x ½ ) 703

48,703

c.

Rent ( 4,000 x 6) 24,000

Leasehold improvement: Cost P 100,000

Less: Depreciation (7/1/09 – 6/30/10) (100,000 / 25)

4,0 00

Book value upon termination 96,000 Less: Amount already reported as income

703 95,29 7

Income of lessor in 2013 119,297

EXERCISE 3 – 2

1. T2. T3. T4. T5. F6. T7. F8. T9. F10. T11. F12. F13. F14. T15. F

3-3. TAX BENEFIT RULE

3- ANSWER: B

3.1:Case 1 – P 40,000Case 2 - 20,000 Case 3 - 40,000Case 4 - 70,000

3-3.2:

(1) ANSWER: D

3-3.3:

(2) ANSWER: D

(3) ANSWER: B

EXERCISES 3 – 3.4. MULTIPLE CHOICE THEORY

1. ANSWER: C

2. ANSWER: C

3. ANSWER: D

EXERCISE 3-4

3- LEASEHOLD

4.1: IMPROVEMENT

1. ANSWER: B

2. ANSWER: D

3. ANSWER: A

4. ANSWER: C

5. ANSWER: B

6. ANSWER: B

7. ANSWER: C

EXERCISE 3-4.2:

1. ANSWER: A

2. ANSWER: C

3. ANSWER: C

EXERCISE 3–4.3:ANSWER: B

EXERCISE 3–4.4

1. ANSWER: A

2. ANSWER: C

3. ANSWER: D

EXERCISE 3-5EXERCISE 3–5.1:

1. ANSWER: D

2. ANSWER: D

EXERCISE 3–5.2:

1. ANSWER: C

2. ANSWER: B

EXERCISE 3–5.3:

1. ANSWER: C

EXERCISE 3-6. MULTIPLE CHOICE

1. ANSWER: B

2. ANSWER: C

3. ANSWER: C

4. ANSWER: C

5. ANSWER: B

6. ANSWER: D

7. ANSWER: C

8. ANSWER: D

9. ANSWER: C

10

ANSWER: D

11

ANSWER: B

12

ANSWER: C

13

ANSWER: A

14

ANSWER: D

15

ANSWER: C

16

ANSWER: D

17

ANSWER: A

18

ANSWER: D

19

ANSWER: A

EXERCISE 3 -7.

Yes.

EXERCISE 4–1. CROSSWORD PUZZLE

2 1 5 2 % D 3

Y T 4 W E L V E

E M

R 5 A N K & F I L E

R N

S G 6 S I S

3 7 M

C 8 L O T H I N G

0 S

EXERCISE 4 – 2

1. T

2. F

3. F

4. F

5. T

6. F

7. T

8. F

9. T

10. F

11. T

12. F

13. T

14. T

15. T

EXERCISE 4-3

1.

a.

Interest on corporate bonds

- Taxable

b.

Salary - Taxable

c.

Tips - Taxable

d.

Winnings in lotto - Not taxable (expressly exempt under the law)

e.

Winnings in jueteng - Taxable (income from whatever source derived)

f. Money stolen from mother’s purse

- Taxable (income from whatever source derived)

g.

Rice subsidy of P325 per month

- Not taxable (de minimis benefit)

2.

The value of the free meals and lodging is not taxable to Yaya

3.

No..

4.

The rice allowance is considered as a de minimis benefit which is exempt from income.

5.

The free parking and courtesy discounts are subject to fringe benefit tax

The excess of the laundry allowance in the amount of P450 (P750-300) is part of gross compensation income if such excess is beyond the P30,000 ceiling for “other benefits.”

The rental value of the residential property is subject to fringe benefits tax which is subject to final tax. .

6.

The cost of the educational assistance extended by De la Salle University to Prof. Ferdinand

should not be part of the gross compensation income of Prof. Romero.

The cost of the tuition fee is attributable to the operation and conduct of business of the employer. Therefore, the same shall be deducted from the gross income of the school.

EXERCISE 4 – 4

1. ANSWER: C

2. ANSWER: C

3. ANSWER: A

4. ANSWER: B

EXERCISE 4-5

1. ANSWER: B

2. ANSWER: B

3. ANSWER: D

4. ANSWER: AEXERCISE 4-6

1. ANSWER: C

2. ANSWER: C

3. ANSWER: D

4. ANSWER: D

5. ANSWER: D

6. ANSWER: D

7. ANSWER: B

8. ANSWER: B

9. ANSWER: D

10.

ANSWER: D

EXERCISE 4-7

1. ANSWER: C

2. ANSWER: A

3. ANSWER: B

4. ANSWER: D

5. ANSWER: D

6. ANSWER: B

7. ANSWER: C

8. ANSWER: A

9. ANSWER: D

10. ANSWER: A

11. ANSWER: D

12. ANSWER: D

EXERCISES 5-1

1. None.

2. a.

None.

b.

Fernando must report P20,000 [(P12,000 x 10) – 100,000] as income.

c.

No.

3. None

4. Rodolfo must report an income of P75,000.

5. a.

Both actual and moral damages are not subject to tax.

b.

not taxable.

c.

Not included in the gross income..

d.

Taxable.

e.

Not taxable.

6. 6. No, because all the requisites for exemption from income tax are present:

7. The amount is taxable to Nilo.

8. a.

Taxable.

b.

Taxable.

c.

Not taxable.

9. taxable.

10. Answer: P38,000

EXERCISES 5–2.1:

1. ANSWER: D

2. ANSWER: B

3. ANSWER: C

4. ANSWER: C

Prob 5-2.2

1. ANSWER: C

2. ANSWER: D

Prob 5-2.3

ANSWER: D

Prob 5-2.4:

ANSWER: B

Prob 5-2.5:

ANSWER: C

Prob 5-3.1

ANSWER: C

Prob 5-3.2

ANSWER: C

Prob 5-3.3

ANSWER: B

Prob 5-3.4

ANSWER: D

Prob 5-3.5

ANSWER: A

Prob 5-3.6

ANSWER: D

EXERCISES 5–4.

Prob 5–4.1

ANSWER: C

Prob 5-4.2

ANSWER: A

Prob 5-4.3

ANSWER: C

Prob 5-4.4

ANSWER: D

EXERCISES 5–5

EXERCISE 5–

5.1:

ANSWER: C

EXERCISES 5-5.2

a. The P350,000 value of the car is subject to a final tax of 20%.

b. The P5,000 is subject to graduated tax to be reported in the income tax

return.

c. The cash prize and the equivalent amount of the 100 shares are subject to 20% final tax.

EXERCISES 5-5.3

a. The income of $75,000 is taxable to her unless she has acquired the status of a contract worker.

b. The talent fees P100,000 is a professional income subject to graduated rates of tax.

c. The $5,000 value of the trophy is not taxable

PROBLEM 5-6.1

ANSWER: D

EXERCISE 5 – 7

1. None.

2.

P147,500

EXERCISES 5 – 8

1. ANSWER: D

2. ANSWER: C

3. ANSWER: C

4. ANSWER: A

5. ANSWER: A

6. ANSWER: B

7. ANSWER: C

8. ANSWER: D

9. ANSWER: A

10. ANSWER: C

11. ANSWER: C

12. ANSWER: D

13. ANSWER: D

14. ANSWER: D

15. ANSWER: B

16. ANSWER: D

17. ANSWER: A

EXERCISES

6-1

1. CLASSIFICATION SITUS OF TAXABLE INCOME

a. Nonresident citizen Within onlyb. Nonresident alien

(NETB)Within only

c. Nonresident citizen Within onlyd. Resident alien Within onlye. Nonresident alien

(NETB)Within only

f. Nonresident alien (ETB)

Within only

2. a. No.

b. No. .

c. Yes.

d. Yes.

e. No.

3. a. In the absence of an agreement, John has the right to claim the additional exemption.

b. If Marsha could prove that she provided chief support over the children, both spouses would be disqualified to claim additional exemption.

c. None.

4. a. None.

5. a. None. .

b. None.

c. None.

d. None.

e. P 100,000.

6. a. No.

b. Yes.

c. Income tax P23,750

d. Income tax 35,000

7. a. Taxable income 175,000

b. Income tax – Jim P 11,500

Income tax – Pat 31,250Total income tax 42,750

8. a. 2.00

b. 500

c.

Income tax 724.54

d. 50,000

e.

Income tax due 112,034

f.

Income tax due 324,440. 41

9.

a. Salary - Compensation

b. Interest on bank deposit - Passive income – tax exempt (long-term)

c. Honorarium - Compensation income d. Prizes - Ordinary business income (not exceeding

P10,000)e. Lotto winnings - Tax exemptf. Income from farming - Business incomeg. Royalties on books - Passive income (10%)h. Dividends from domestic

company- Passive income (10%)

i. 13th month pay - Exempt up to P 30,000j. Interest on preterminated

deposits- Passive income (12%)

10.

a. Juan

Income tax payable ( 6,600)

b. Maria

Income tax – Juan ( 6,600)

Income tax – Maria ( 5,500)

Income tax payable / refund

(12,100)

11.

a.

Deductible health insurance premium 1,800

b.


c.

None.

d.


12.

a.


b.


c.

Income tax due 14,50 0

Case 1 Case 213.

Taxable income 186,600

155,000

EXERCISE 6 – 2

1. ANSWER: B

2. ANSWER: D

3. ANSWER: B

4. ANSWER: B

EXERCISE 6 - 3

I N C O M E Resident or citizen

NRA ETB

1. Interest on bank deposit with Banco de Oro- Php

20% 20%

2. Interest on bank deposit with a bank in the United States in U.S. dollar Tax table Not taxable

3. Earnings from interest on money market 20% 20%4. Royalties on inventions 20% 20%5. Royalties on books 10% 10%6. Prizes amounting to P7,500 Tax table Tax table7. Prizes amounting to P20,000 20% 20%8. Winnings in lotto – Philippines Exempt Exempt 9. Winnings in lottery 20% 20%10. Interest on long-term investment Exempt Exempt 11. Interest on deposit for 4 ½ years 5% 5%12. Cash dividends – domestic corp. 10% 20%13. Share of partner in net income of taxable

partnership10% 20%

14. Interest income under expanded foreign currency deposit system 7.5% Exempt

EXERCISE 6–4.1

1. ANSWER: A

EXERCISE 6–4.2

INCOME RC RA, NRC

NRA(ETB)

NRA(NETB)

1. Rent on apartment in the

Phils.

YES YES YES YES

2. Rent on apartment in

Canada

YES NO NO NO

3. Dividend-domestic

corporation

YES YES YES YES

4. Dividend-foreign corporation YES NO NO NO

5. Lotto winnings in the Phils. NO NO NO NO

6. Lotto winnings in U.S.A. YES NO NO NO

7. Cash prize on contest, Phils. YES YES YES YES

8. Cash prize on contest,

U.S.A.

YES NO NO NO

9. Interest, bank deposit in

U.S.A.

YES NO NO NO

10. Interest bank deposit – Phils. YES YES YES YES

Problem 6–

4.3

1. ANSWER: C

2. ANSWER: C

3. ANSWER: A

4. ANSWER: B

5. ANSWER: A

6. ANSWER: B

7. ANSWER: D

8. ANSWER: D

EXERCISE 6-5.1

ANSWER: D

EXERCISE 6-5.2

ANSWER: B

PROBLEM 6-5.3

1. ANSWER: A

2. ANSWER: D

PROBLEM 6-5.4

1. ANSWER: C

2. ANSWER: C

EXERCISES 6-6.1: PERSONAL

EXEMPTIONS

1. ANSWER: B

2. ANSWER: A

3. ANSWER: C

4. ANSWER: B

5. ANSWER: C

6. ANSWER: C

7. ANSWER: D

8. ANSWER: B

9. ANSWER: D

10. ANSWER: C

EXERCISES 6-6.2

1. ANSWER: C

2. ANSWER: B

3. ANSWER: D

4. ANSWER: C

5. ANSWER: D

6. Answer: A

7. Answer: C

8. Answer: C

EXERCISES 6 – 7. CLASSIFICATION OF INDIVIDUAL INCOME TAXPAYERS

1. ANSWER: D

.

2. ANSWER: A

3. ANSWER: D

4. ANSWER: D

5. ANSWER: B

6. ANSWER: A

7. ANSWER: C

EXERCISES 6–8.1. PREMIUM PAYMENTS ON HEALTH AND/OR HOSPITALIZATION INSURANCE

1. ANSWER: D

2. ANSWER: D

3. ANSWER: C

EXERCISE 6.8.2

Case 1:

None.

Case 2:

None..

Case 3:

The husband can only claim a maximum amount of P1,600

Case 4:

P1,200.

EXERCISES 6-9

1. ANSWER: A

2. ANSWER: D

3. ANSWER: D

4. ANSWER: C

5. ANSWER: D

6. ANSWER: A

7. ANSWER: D

8. ANSWER: A

9. ANSWER: B

10.

ANSWER: B

11.

ANSWER: B

12.

ANSWER: B

13.

ANSWER: A

14.

ANSWER: C

15.

Answer: B

EXERCISE 6-10.

The petition has merit.

Cooperatives are not required to withhold taxes on interest from savings and time deposits of their members based on a BIR Ruling.

Answer Key Tax 501 by Ampongan

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