Lesson 12
Individual Income Taxation: Integration
DRILLS
Illustration 1
Mr. Sinipag, a self-employed VAT taxpayer, has the following quarterly income details
during the year:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Gross receipts, net of 2% P980,000 P1,019,200 P1,078,000 P1,136,800
CWT
Less: Cost of services 240,000 400,000 500,000 540,000
Gross income P740,000 P619,200 P578,000 P596,800
Dividend income 3,000 0 2,000 0
Less: Deductible expenses 200,000 260,000 240,000 280,000
Net income P543,000 P359,200 P340,000 P316,800
Required:
1. Determine the following under the regular tax option – itemized deduction
a. Income tax payable or overpayment in the three BIR Form 1701Q and their
deadline of payment
b. Income tax payable or overpayment in the BIR Form 1701 and the deadline of
payment
2. Determine the following under the regular tax option – optional standard deduction
a. Income tax payable or overpayment in the three BIR Form
b. income tax payable or overpayment in the BIR Form 1701A
Illustration 2
Mr. Batugan, opted to the 8% commuted tax at the start of the year:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Gross receipts P650,000 P600,000 P700,000 P800,000
Less: Cost of services 240,000 400,000 500,000 540,000
Gross income P410,000 P200,000 P200,000 P260,000
Interest income on 3,000 1,000 2,000 3,000
deposits
Ordinary gains 0 50,000 30,000 0
Total income P413,000 P251,000 P232,000 P263,000
Less: Deductible expenses 100,000 120,000 110,000 130,000
Net income P313,000 P131,000 P122,000 P133,000
BIR Form 2307 P13,000 P12,000 P14,000 P16,000
Required: Compute the following
1. Income tax payable or overpayment in the quarterly Form 1701Q
2. Income tax payable or overpayment in the BIR Form 1701A
Illustration 3
Mr. Rey Munding, a mixed income earner registered as a non-VAT taxpayer, had the
following in 2020:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Taxable compensation P200,000 P250,000 P300,000 P210,000
Sales P800,000 P700,000 P600,000 P750,000
Less: Cost of sales 220,000 180,000 300,000 440,000
Gross income P580,000 P520,000 P300,000 P310,000
Itemized deductions 200,000 330,000 120,000 140,000
Net income P380,000 P190,000 P180,000 P170,000
Totals of BIR Form 2307s P8,000 P7,000 P6,000 P7,500
Amount under BIR Form 2316 P93,750
Required:
1. Determine the following under the regular tax option
a. Income tax payable or overpayment in the three BIR Form 1701Q
b. Income tax payable or overpayment in the BIR Form 1701
c. Percentage tax due in the BIR Form 2551Q and their deadline
2. Determine the following under the 8% commuted tax option
a. Income tax payable or overpayment in the three BIR Form 1701Q
b. Income tax payable or overpayment in the BIR Form 1701
Illustration 4
During the first quarter of 2020, Miss Alexa, a non-VAT registered mixed income
earned, had the following:
Professional fees, net of CWT P665,000
Interest income – deposit, net of final tax 8,000
Gain on sale of investment in bonds – held 3 years 20,000
Interest income – client’s notes 5,000
Total income P698,000
1
Lesson 12
Individual Income Taxation: Integration
Less: Expenses
Entertainment, amusement and recreation P10,000
Donation to the government for educational purpose 60,000
Interest expense 26,300
Bad debt expense (1% of professional fees) 7,000
Fringe benefits paid to supervisor 52,000
Other operating expenses 86,000
Net income P456,700
Accounts receivable and allowance for bad debts increased by P120,000 and P3,000,
respectively at the end of the quarter.
Required: Compute the following
Assuming the taxpayer opted to Income tax payable Percentage
Accrual basis Cash basis tax due
1. Itemized deduction
2. Optional standard deductions
3. 8% commuted tax
Illustration 5
Mr. X, a bachelor, died on August 30, 2019. His estate underwent judicial settlement.
Mr. X’s executor summarized the following information for purposes of computing his
income tax and estate tax:
Total assets as of 12/31/2018 P15,000,000
Less: Loan as of 12/31/2018 1,200,000
Net worth as of 12/31/2018 P13,800,000
Rent income (net of CWT), earned evenly during 2019 P1,140,000
Net income of X’s business (40% earned after death) 1,000,000
Teaching income of Mr. X 350,000
Funeral and other expenses of X’s death 400,000
Fire loss of business properties (ordinary assets), 25% incurred before 300,000
death
Medical expenses of Mr. X just prior to death 200,000
The executor decided to claim the loss as deduction for income tax purposes. Mr. X
paid estimate income tax payments of P195,000 before his death. The loan has a 10%
periodic interest to be paid annually every December 31. The loan was borrowed from
X’s friends to finance the purchase of a commercial space for rent. Pursuant to X’s
last will and testament, the executor paid P100,000 each of the rent income to X’s
heirs X1 and X2. X1 and X2 are employed with separate incomes of P400,000 and
P500,000, respectively during 2019.
Required: Compute the following
1. Mr. X’s income tax payable (overpayment)
2. Income tax payable (overpayment) of X’s estate
3. Income tax due of X1
Illustration 6
During 2020, Mr. John transferred several properties to his sons who were all in
college. Details of the transfers were as follows:
Date Property Fair value Monthly Transfer Recipient
income mode son
Commercial Irrevocable
May 1 P10,000,000 P300,000 Peter
building trust
Revocable
June 30 Dormitory P8,000,000 P400,000 James
trust
Direct
September 1 Leased lot P12,000,000 P200,000 Jude
donation
Pursuant to the trust indenture, P600,000 and P800,000 were given to Peter and James,
respectively. John died on November 1 leaving behind other properties worth
P40,000,000. His estate underwent extrajudicial settlement. No transfer tax was paid
during the period.
Required: Compute the following
1. Taxable income of the trust
2. Taxable income of son
a. Peter
b. James
c. Jude
2
Lesson 12
Individual Income Taxation: Integration