INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS CHA,TER 5

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EXCLUSION -ROM GROSS INCOME

Problem 5 1 TAXABLE 1. Nontaxable 2. Taxable 3. Nontaxable 4. Nontaxable with IT 5. Taxable 6. Taxable 7. Nontaxable 8. Nontaxable 9. Taxable 10. Nontaxable OR 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. NONTAXABLE with income tax Taxable 21. Taxable Nontaxable 22. Nontaxable Taxable Nontaxable Nontaxable Nontaxable Taxable Taxable Nontaxable Taxable

Problem 5 2 TAXABLE OR NONTAXABLE with income tax 1. Nontaxable 12. Nontaxable, if not exceeding 10 days 2. Nontaxable 13. Taxable 3. Nontaxable 14. Taxable (based on pro eeds or sellin! pri e or "onal #al$e% whi he#er is hi!her&. 4. Nontaxable 15. Taxable 5. Nontaxable 16. Taxable 6. Nontaxable 17. Taxable% ex ept when 'I( re!istered with 50 )ear old retiree* 10 )ears ser#i e and +irst ti,e to a#ail. 7. Nontaxable 18. Taxable 8. Taxable 19. Nontaxable i+ -hilippine .weepsta/es and 0otto 9. Nontaxable 20. Taxable 10. Taxable 21. Taxable 11. Taxable 22. Nontaxable Problem 5 3 TRUE OR AL!E 1. 1alse 2 nontaxable 2. Tr$e 3. Tr$e 4. 1alse 2 -ro eeds o+ li+e ins$ran e is not taxable re!ardless o+ whoe#er wo$ld be the re ipient% ex ept when the ins$red person o$tli#ed his li+e ins$ran e and re ei#ed the pro eeds. The ex ess o+ pro eeds o#er pre,i$, paid is taxable. 5. 1alse 2 in l$de in !ross in o,e 6. 1alse 2 'e3$est is a personal propert). 7. Tr$e 8. Tr$e 9. Tr$e 10. 1alse 2 Nontaxable 11. Tr$e 12. 1alse 2 Nontaxable 13. 1alse 2 .o,e pri"es and awards are not taxable. 4!. (a,on 5a!sa)sa) 6wards 14. Tr$e 15. Tr$e 16. 1alse 2 In l$de in !ross in o,e be a$se in o,e +ro, !i+t is s$b7e t to in o,e tax. 17. 1alse 2 4xe,pt +ro, in o,e tax. 18. Tr$e Problem 5 "# 1. 6 2. 8 3. 9 4. 8 5. 8 6. ' 7. 6 8. 6 9. 9 10. 9 11. 6 12. 8 13. 8 14. 6 15. ' Problem 5 $ % 6#ailed 10:da) si / lea#e pa) Problem 5 "5 1. ' 2. 8 3. 6 4. 8 5. 9 6. 8 7. 9 8. 9 9. 9 10. 9

-1%500

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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C !"t#$ 5: E%&'()ion *$o+ G$o)) In&o+#

Problem 5 & ' Ta/e ho,e pa) Nontaxable 13th ,onth pa) ;ithholdin! tax <ther in o,e s$b7e t to nor,al tax Taxable in o,e

-212%000 ( 17%500& 13%500 20%000 -228%000

In !eneral% a 5;4 is not s$b7e t to ;T; and in o,e tax on his o,pensation in o,e. '$t i+ he has other in o,e that is s$b7e t to nor,al tax% his entire in o,e d$rin! the )ear will be s$b7e t to in o,e tax% his o,pensation in o,e% howe#er% will not be s$b7e t to ;T;. Problem 5 ( ' Taxable -265%000 50%000 6%000 (27%000& ( 5%000& . -289%000 Taxable -13%000 Nontaxable

Net pa) ;ithholdin! tax 6d#an es 3th ,onth pa) 9hrist,as bon$s (de ,ini,is& ... ontrib$tion Totals Problem 5 ) '

-27%000 5%000 4%000 -36%000 Tax:exe,pt -300 100 100

Net ta/e ho,e pa) ... ontrib$tions -6=:I'I= ontrib$tions >nion d$es ontrib$tions <++i e part) ontrib$tions 9haritable ontrib$tion (ded$ tible onl) +ro, b$siness in o,e& ;ithholdin! in o,e tax Totals Problem 5 1* 5onthl) salar) Problem 5 11 (ent o+ apart,ent (ei,b$rse,ent Taxable bene+its Problem 5 12 (eportable taxable in o,e %

75 25 400 -13%500

. -500 -15%000

A - 50%000 20%000 -70%000 % - : 0 : -500%000 40%000 (490%000& - 50%000

Problem 5 13 B -ro eeds o+ li+e ins$ran e re ei#ed b) ins$red person (et$rn o+ pre,i$, Total pre,i$, paid Taxable in o,e Problem 5 1# Problem 5 15 % % Nontaxable 6 t$al da,a!es +or $nreali"ed pro+it Interest on non:taxable da,a!es 6 t$al da,a!es +or lost prod$ ts 4xe,plar) da,a!es 5oral da,a!es 6 t$al li3$idated da,a!es Total -200%000 50%000 50%000 80%000 P380,000
?ero% be a$se% the -270%000 ash s$rrender #al$e is 7$st a ret$rn o+ ontrib$tion o+ -360%000.

Taxable -100%000 20%000

. P120,000

Problem 5 1$ Taxable in o,e Problem 5 1&

A - :0: % Taxable Nontaxable

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS
Ter,inal pa) 0i+e ins$ran e ... death bene+it 8onations Totals Problem 5 1( A The ter,ination is d$e to a$se within the ontrol o+ @alos7os. Problem 5 1) % 0ast pa) $7pon resi!nation +ro, his +irst e,plo)er Problem 5 2* A ?ero% all ite,s en$,erated are not s$b7e t to in o,e tax. Problem 5 21 % -50%000 b$siness in o,e +or )ear 4 Problem 5 22 ' Interest in o,e +ro, ban/ sa#in!s deposit Problem 5 23 % ?ero. 6ll !i+ts en$,erated are not s$b7e t to in o,e tax. Problem 5 2# % Total in o,e (-100%000 x 10 ,onths& Total a#era!e expenses (-20%000 x 10 ,onths& In o,e s$b7e t to in o,e tax

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. - : 0 :

- 60%000 500%000 10%000 40%000 -610%000

-100%000

-4%000

-1%000%000 ( 200%000& - 800%000

Problem 5 25 % ?ero. 6ll winnin!s re ei#ed b) 5iss 0ara are s$b7e t to tax be a$se she has entered into a ontest as 5iss International. Problem 5 2$ 0otto -hilippine winnin!s A -10%000%000 50%000 100%000 500%000 250%000 1%000%000 100%000 -2%000%000 -

Problem 5 2& B (a,on 5a!sa)sa) award 6thlete o+ the )ear award -ri"e +or winnin! the sil#er <l),pi ,edal =i+t +ro, 5r. 0i, =i+t +ro, Nissan ;innin!s 2 -hilippine sweepsta/es Total winnin!sA awards not s$b7e t to in o,e tax

Problem 5 2( % ?ero. Interest and !ain on sale o+ in#est,ent in a 5:)ear !o#ern,ent bonds is exe,pt +ro, in o,e tax. Problem 5 2) B Interest re ei#ed +ro, bond in#est,ent Problem 5 3* B Interest in o,e 5$ltiplied b) +inal tax rate on interest in o,e In o,e tax Problem 5 31 % Interest on expanded +orei!n $rren ) deposit - 120%000 -120%000 20B - 24%000 -100%000

Problem 5 32 A In o,e +ro, sale o+ in#ented prod$ ts .ale o+ te hnolo!) Total re#en$e 0essC (esear h and de#elop,ent osts Nontaxable in o,e

-5%000%000 2%000%000 -7%000%000 800%000 -6%200%000

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS
NoteC The ost o+ prod$ t prod$ ed need not to be ded$ ted an),ore be a$se o+ the ter, Din o,e +ro, sale o+ in#ented prod$ ts.E Problem 5 33 ' Interest in o,e on ban/ sa#in!s deposit Problem 5 3# ' Interest in o,e +ro, +orei!n $rren ) deposit (-2%000%000 x 7.5B& Interest in o,e +ro, ti,e deposit (-1%000%000 x 20B& In o,e tax paid b) ''9 Problem 5 35 1. 9o,pensation in o,e (-5%000 x 10& 2. (etire,ent bene+its .alar) earned =ross in o,e

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-10%000 -150%000 200%000 -350%000 - 50%000 -500%000 50%000 -550%000 - 50%000

3. .a,e answer with No. 1 Problem 5 3$ ;innin!s +ro, harit) horse ra e sweepsta/es +ro, -9.< Interest on !o#ern,ent debt se $rities 8a,a!es +or brea h o+ ontra t (-1%000%000 x 60B& =ains +ro, rede,ption o+ shares in ,$t$al +$nd =ain +ro, sale o+ bonds with ,at$rit) o+ ,ore than +i#e )ears =i+ts +ro, +riends Total ex l$sion +ro, !ross in o,e Problem 5 3& -ro eeds o+ his li+e ins$ran e (-2%000%000& 2 (-15%000 x 25& -ro eeds o+ his ,otherFs li+e ins$ran e 9ash !i+t Inheritan e (ent in o,e Total 4x l$de - 375%000 1%000%000 50%000 3%000%000 . -4%425%000

- 500%000 100%000 600%000 300%000 60%000 200%000 -1%760%000 In l$de -1%625%000

100%000 -1%725%000

Problem 5 3( No% the -1%500%000 trans+er to be re ei#ed b) 5iss Tandana is to be in l$ded +or in o,e taxation be a$se the trans+er is in re o!nition o+ her ser#i es rendered. It is not to be in l$ded as a part o+ estate tax. Problem 5 3) 6ll en$,erated ite,s are not s$b7e t to nor,al (tab$lar& tax.