Mrs.

Reyes, a resident citizen, married, with two qualified dependent children, reported the following
income and expenses from January to December taxable year 201A.

Sales 2,000,000
Cost of sales 1,200,000
Gain from sale of Capital Assets (Long Term) 100,000
Loss from sale of Capital Assets (Short Term) 100,000
Gambling Winnings 50,000
Gambling Losses 80,000
Compensation Income, Net of withholding tax 20,000 230,000
13th Month pay and other bonuses 36,000
Proceeds from Insurance of his Mother 500,000
Lotto Winnings PCSO 300,000
Entertainment Expense 3,000
Interest Income – Philippines 20,000
Interest Expense 10,000
Dividend Income from Domestic Corporation 35,000
Prizes and Winnings 20,000

Mrs. Reyes incurred and paid the following taxes and licenses:

VAT paid to BIR 180,000

Documentary Stamp Tax used in Business Operation 300
Real Estate tax on principal residence 5,000
Income tax paid for taxable year 2006 120,000
Interest for late payment of tax 4,000
Surcharge for late payment of income tax 30,000
Compromise penalty 2,000
Community Tax 2,000
Real Estate tax on Business property 6,000
Donor's Tax 3,000
Special Assessment for Business Purposes 1,500
Fringe Benefit Tax 8,000
Municipal Licenses 3,000

Compute the following:

1. Gross Taxable Income

2. Taxable Net Income
3. Net Taxable Income
4. Income Tax Due
5. Income subject to final tax
6. Final tax due
Solutions:

Documentary Stamp Tax used in Business Operation 300

Community Tax 2,000
Real Estate tax on Business property 6,000
Fringe Benefit Tax 8,000
Municipal Licenses 3,000
Deductible Taxes 19,300

Sales 2,000,000
Cost of Sales - 1,200,000
Gross Profit 800,000
Compensation Income 250,000
Gambling Winnings 50,000
Gain from sale of Capital Assets (Long Term) 50,000
Loss from sale of Capital Assets (Short Term) - 100,000
Interest Expense - 3,400
Deductible Taxes - 19,300
Taxable Net Income 1,027,300
Personal Exemption 50,000
Additional Exemption 50,000
Net Taxable Income 927,300

In excess 125,000
Over 500,000 143,136
Income Tax Due 268,136

Subject to FT Rates FT Due

Interest Income 20,000 20% 4,000
Dividend Income from Domestic Corporations 35,000 10% 3,500
Prizes and Winnings 20,000 20% 4,000
75,000 11,500