Chapter 11 Answer KeyTrue or False1) False- As a rule, personal exemption are deducted first from compensation income.2) True3) False-SSS premium is nontaxable.4) False- Royalty income is subject to final tax; hence, it should not be included in the computation of income subject to schedular tax.5) False- In computing the income tax, a fractional part of a peso less than 0.50 shall be disregarded.6) False- If the fractional part is 0.50 or more, it should be rounded off to 1.00.7) True8) False- The personal exemption is allowed only in his annual income tax return, when all his income is consolidated in one annual income tax return.9) False- The withholding tax rate used is 15% because the total professional income exceeds 720,000 in a year.10) True11) False- A citizen of the Philippines residing therein is taxable for all income derived from sources within and without the Philippines.12) False- A nonresident citizen is taxable only on income derived from sources within the Philippines.13) True14) True15) True

Multiple Choice1) CMrs. LeeMr. LeeTotalBasic Personal Exemption -0-50,00050,000Add: Additional Exemptions (25,000x3) -0-75,00075,000Total personal exemption -0-125,000125,0002) CMr. GarciaMrs. GarciaBasic Personal Exemption50,00050,000Add: Additional Exemption (25,000x4)100,000Total personal exemption150,00050,000

3) D4) B5) B6) B

7) CBasic Personal Exemption50,000Add: Additional Exemption (25,000x1)25,000Total personal exemption75,000

8) C9) D10) D11) A12) A13) D14) B15) BProblem ACompensation Income (20,000x12mos.)+ (15,000x12mos.)300,000Less: Personal Exemption 50,000 Additional Exemption (25,000x2) 50,000Total Taxable Income200,000

Income tax on 140,00022,500Income tax on excess (200,000-140,000)x 25%15,000Income tax due37,500Less: Tax credit-withholding tax35,000Income tax still due and payable 2,500

*over 140,000 but not over 250,00022,500 + 25% excess of 140,000

Problem BCompensation Income (18,000x12mos.)+ (30,000x12mos.)+120,000372,000Less: Personal Exemption 50,000 Additional Exemption (25,000x3) 75,000Total Taxable Income247,000

Income tax on 140,00022,500Income tax on excess (247,000-140,000) x 25%26,750Income tax due49250Less: Tax credit-withholding tax60,000Income tax still due and payable(10750)

*over 140,000 but not over 250,00022,500 + 25% excess of 140,000

Problem CCompensation Income (30,000x12mos.)360,000Less: Personal Exemption 50,000 Additional Exemption (25,000x4)100,000Total Taxable Income210,000

Income tax on 140,00022,500Income tax on excess (210,000-140,000) x 25%17,500Income tax due40,000Less: Tax credit-withholding tax (3,350x12)39,000Income tax still due and payable 1,000

*over 140,000 but not over 250,00022,500 + 25% excess of 140,000

Problem DCompensation Income (40,000x12mos.)480,000Less: Personal Exemption 50,000 Additional Exemption (25,000x3) 75,000Total Taxable Income355,000

Income tax on 250,00050,000Income tax on excess (355,000-250,000) x 30%31,500Income tax due81,500Less: Tax credit-withholding tax (3500x12)42,000Income tax still due and payable39,500

*over 250,000 but not over 500,00050,000 + 30% excess o 250,000Problem EMr. DavisMrs. DavisNet taxable income, net of withholding tax190,00095,000

Tax on 140,00022,500Tax on excess (50,000 x 25%)12,500Tax on 70,0008,500Tax on excess (25,000 x 20%)5,000Less: withholding tax20,0008,000Net taxable payable15,0005,500

Problem F1.Compensation income 400,000Less: Personal exemption- basic50,000Net taxable compensation income350,000

2.Tax on 250,00050,000Tax on excess (100,000 x 30%)30,000Total income tax from compensation80,000Dividend income tax (120,000 x 10%) 12,000Interest income tax (500,000 x 7.5%)37,500Total income tax due 129,500

Problem G1. Compensation income (250,000 + 30,000)280,000Less: Personal exemption (75,000 + 25,000)100,000Net taxable compensation180,000Business income 150,000Less: Business income20,00030,000Net taxable income210,0002. Tax on 140,00022,500Tax on excess (70,000 x 25%)17,500Income tax due40,000Less:Tax credit30,000Income tax still due and payable10,000

Problem H

1. 425,000Compensation income 300,000Taxable 13th month pay and bonuses (50,000-30,000)20,000Net business income (600,000-400,000)200,000Capital gain32s- long-term (60,000 x 50%)30,000Less: Personal exemptions (50,000 + 75,000)125,000Net taxable income425,000

2. 32,500Tax on 250,000 50,000Tax on excess (175,000 x 30%)52,500Total income tax due102,500Less: Income tax paid on: Compensation 50,000 Quarterly business income 20,00070,000Income tax refund 32,500

Problem Solving

Problem AMs. Herrera is unmarried with two legal dependents. The following information is used to determine his income tax.Monthly salary20,000Monthly overtime pay 1,500Monthly gas and food allowance 3,500Withholding tax35,000

Problem BMrs. Jolie Sy is employed as a sales manager. Her husband is unemployed for three years now. They have four children, the eldest is 25 years old, the second is 20 years old, the third is 18 years old and the youngest is 15 years old. For the additional information:Monthly salary18,000Monthly allowance3,000Annual Commission120,000Withholding tax 60,000

Problem CMr. Salazar is married with five legal dependents, His salary is 30,000 per month. Tax withheld per month 3,250.

Problem DMs. Santiago is head of the family with three legal dependent. Her monthly salary is 40,000. Tax withheld per month is 3,500.

Problem EThe net taxable income of Mr. Davis and Mrs. Davis are 190,000 and 95,000, respectively. These incomes are net of withholding taxes amounting to 20,000 and 8,000, respectively. Their respective income tax still due and payable would be:

Problem FMr. Craige, a married indian national, stays in the Philippines with no definite intention. He received 400,000 compensation as a researcher of Blue Good Ocean, a domestic corporation. In addition, he invested in the Philippines some of his savings earning dividend income and interest income of 120,000 and 500,000, respectively.

Required:a. Net taxable compensation incomeb. Total income tax due

Problem GMrs. Quin Davis, single with a qualified dependent child, has the following income and expenses during the year:

Compensation Income, net of WTW 30,000250,00013th month pay15,000Personal expenses 60,000Business income150,000Business expenses allowed20,000Premium on health/hospitalization insurance paid5,000

Required: a. Taxable incomeb. Income tax still due and payable per ITR

Problem HAn individual taxpayer, married with 3 qualified dependent children, reported the following:

Compensation income 300,00013th month pay50,000Business income600,000Business expenses allowed400,000Dividend income60,000Royalty income- literature70,000Capital gains- long-term60,000Withholding income taxes paid on:Compensation50,000Quarterly business income20,000Dividend5,000Royalty 8,000

Required: a. taxable income subject to normal tax.b. income tax still due and payable or tax refund reportable in ITR.

Chapter 11

True or False1. As a rule, personal exemption are added first from compensation income.2. Income earned outside the Philippines by a nonresident alien is not subject to tax in the Philippines.3. SSS Premium is taxable.4. Royalty income is subject to final tax; hence, it should be included in the computation of income subject to schedular tax.5. In computing the income tax, a fractional part of a peso less than 0.50 shall be regarded.6. If the fractional part is 0.50 or more, it should not be rounded off to 1.00.7. For a self-employed taxpayer, his quarterly ITR (Income Tax Return) is not be reduced by personal exemption.8. The self-employed taxpayer is allowed only in his annual income tax return, when all his income is consolidated in one annual income tax return.9. The withholding tax rate used is 20% because the total professional income exceeds 720,000 in a year.10. A foreigner who shall live in the Philippines with no definite intention as to his stay is a resident.11. A citizen of the Philippines residing therein is not taxable for all income derived from sources within and without the Philippines.12. A nonresident citizen is nontaxable only on income derived from sources within the Philippines.13. Personal exemptions of nonresident alien engaged in trade or business in the Philippines shall be subject to reciprocity.14. Withholding tax on salaries are income taxes that are temporarily based on estimate. 15. Self-employed individual is an individual taxpayer whose income is derived solely from his own business.

Multiple Choice

1. Mr. Lee is married and his wife is a plain housewife. He has three legal dependent with a compensation income of 150,000. How much is the personal exemption of the couple?a. 130,000c. 125,000b. 126,000 d. 124,5002. Mr. and Mrs. Garcia, both Filipinos and legally separated, with four legal dependent under the custody of Mrs. Garcia, have compensation income during the year amounting to 500,000.The personal exemption of Mr. and Mrs. Garcia would be:a. 50,000; 150,000c. 150,000; 50,000b. 50,000; 125,000d. 125,000; 50,0003. It is one who conceived and born outside marriage.a. legitimate childc. legally adopted childb. natural childd. illegitimate child4. Mr. Tan, a Filipino citizen with income within, married to Miss Taylor, an American citizen residing in USA, has a compensation income of 200,000 in the Philippines. He would like to know their personal exemption.The personal exemption of Mr. Tan is:a. 75,000c. 100,000b. 50,000d. 25,0005. It is the arbitrary amounts allowed by law as a deduction from the gross compensation income and/or net business income and/or professional income as the case may be, for personal, or family expenses.a. additional exemptionc. special taxpayerb. personal exemptiond. individual taxpayer6. A Filipino Citizen who stayed permanently in the Philippines or stayed outside the Philippines for less than 183 days during the taxable year.a. nonresident citizenc. seamanb. resident citizend. resident alien7. Ms. Liza is a single mother with one legal dependent. She has a compensation income amounting to 300,000. How much is her personal exemption?a. 50,000c. 75,000b. 25,000d. 80,0008. It is an income earned from allowing other use ones rights, or game of chance or investment, which the taxpayer merely awaits for the income to come in.a. Capital gain taxc. passive incomeb. income tax dued. taxable income

9. How many percent if the annual income exceeds 720,000?a. 20%c. 30%b. 10%d. 15%10. These are those alien individuals or Filipino citizens who are taxed with a fifteen percent tax based on their gross compensation income.a. seamanc. alienb. individual taxpayerd. special taxpayer11. Deductible allowance in addition to the basic personal exemption allowance for qualified dependent children of an individual taxpayer.a. additional exemptionc. special taxpayerb. personal exemptiond. dependent12. Natural person with income derived within the territorial jurisdiction of a taxing authority.a. individual taxpayerc. alien individualb. special taxpayerd. resident citizen13. Foreign-born person who is not qualified to acquire Philippine citizenship by birth or after birth.a. resident alienc. nonresident alienb. resident citizend. alien14. One conceived of parents who, at the time of conception, without being married, were qualified to marry.a. legitimate childc. dependentb. natural childd. illegitimate child15. An individual taxpayer whose income is derived solely from his own business.a. special taxpayerc. alien individualb. self-employed individuald. individual taxpayer