This document contains sample problems and solutions from Chapter 11 of the textbook "Income Taxation 5th Edition" by Valencia & Roxas. It discusses taxation of individuals, including personal exemptions, deductions, tax rates, and sample computations. The chapter contains true/false questions, word problems, and multi-step tax calculations for individuals with various sources of income such as employment, business, interest, dividends, and capital gains.
This document contains sample problems and solutions from Chapter 11 of the textbook "Income Taxation 5th Edition" by Valencia & Roxas. It discusses taxation of individuals, including personal exemptions, deductions, tax rates, and sample computations. The chapter contains true/false questions, word problems, and multi-step tax calculations for individuals with various sources of income such as employment, business, interest, dividends, and capital gains.
This document contains sample problems and solutions from Chapter 11 of the textbook "Income Taxation 5th Edition" by Valencia & Roxas. It discusses taxation of individuals, including personal exemptions, deductions, tax rates, and sample computations. The chapter contains true/false questions, word problems, and multi-step tax calculations for individuals with various sources of income such as employment, business, interest, dividends, and capital gains.
INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)
Chapte !!: In"o#e Ta$ o% Indi&id'a()
CHA*TER !! INCOME TAX O+ IN,IVI,-ALS Problem 11 1 TRUE OR FALSE 1. False Qualifed dependent parents and siblings are not entitled for additional exemption. 2. False must be more than 180 days. 3. False NRA NBT are not allowed for personal exemptions. 4. True 5. True 6. True 7. True 8. True 9. True 10.True 11.False No personal exemption is allowed to NRANEBT. 12.True Problem 11 2 TRUE OR FALSE 1. False additional exemptions are allowed only for qualifed dependent children. 2. False not payment for hospitalization but payment of premium for health and hospitalization insurance provided that the family income does not exceed P250,000 per year. 3. True 4. False 15% of gross income 5. False creditable withholding income tax. 6. False qualifed dependent parent and siblings are not entitled for additional exemption. 7. False Tax credit of income taxes paid outside the Philippines is allowed only for resident Filipino citizen. 8. False The creditable withholding tax is 15%. 9. False Gross income includes other income but not compensation income. 10.False Tax-exempt 11.True 12.True Problem 11 3 Problem 11 4 Problem 11 5 1. D 1. D 1. Not in the choices. P25,000 per child (R.A. 9504) 2. D 2. B 2. Not in the choices. P50,000 basic (R.A. 9504) 3. A 3. C 3. B 4. A 4. A 4. C 5. A 5. B 5. B 6. B 6. D 5. B 7. D 7. B 6. A, B & C 8. C 8. B 7. D 9. C 9. B 8. D 10. B 10. A 9. D 10. C Problem 11 6 A Income from the Philippines (P10,000 x 12) P120,000 Less: Personal exemption single 50,000 Income subject to tax in the Philippines P 70,000 Note: It is assumed that Juan works as OFW for more than 183 days. Income earned by OFW outside the Philippines is not subject to tax in the Philippines. The income from the sari-sari store in the Philippines is earned from January to December of the taxable year. Problem 11 7 C Gross compensation income Philippines (P250,000 x 12) P3,000,000 Multiplied by special income tax rate 15% Income tax payable P 450,000 69 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Problem 11 8 A Basic personal exemption of couple: Husband P50,000 Wife 50,000 Additional exemptions: 4 qualifed dependent children (P25,000 x 4) 100,000 Maximum amount of personal exemption P200,000 Problem 11 9 C Only P50,000 basic personal exemption because the taxpayers category is single. Problem 11 10 B Basic personal exemption Married P50,000 Additional exemption 25,000 Total personal exemptions P75,000 Problem 11 11 C Basic personal exemption P50,000 Additional exemption (a & b only) (P25,000 x 2) 50,000 Total personal and additional exemptions P100,000 Problem 11 12 A Basic personal exemption married P 50,000 Nonresident alien engaged in business in the Philippines is allowed of basic personal exemption subject to limit, but additional exemption is not allowed. Personal exemptions for foreigners are subject to the rule of reciprocity with limit of whichever is lower. Problem 11 13 A P200 per month. For the month of December only. Problem 11 14 D No special deduction is allowed. The family income exceeding P250,000 is not allowed for a special deduction for health insurance. Problem 11 15 D Zero. Maria has no income. Problem 11 16 A No net tax payable at the end of the taxable year because the senior citizens income does not exceed P60,000 during the year. The tax withheld from interest income is fnal tax. Problem 11 17 Subject to 1. Not in the choices = P790,000 & P160,000 Tabular tax Final tax Compensation income P240,000 Business and other income: Professional income (P300,000 + P200,000) 500,000 Interest income without 60,000 Dividend income without 40,000 Total net income before personal exemption P840,000 Less: Basic personal exemption single ( 50,000) Net income to ITR tabular tax P790,000 Interest income within P100,000 Dividend income within 60,000 Income subject to fnal tax P160,000 70 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() 2. A Compensation income P240,000 Business income: Professional income 300,000 Total net income before personal exemption P540,000 Less: Basic personal exemption single 50,000 Net income to ITR tabular tax P490,000 Interest income within P100,000 Dividend income within 60,000 Income subject to fnal tax P160,000 Note: The problem is silent as to whether the taxpayer opted for OSD, hence, OSD should not be deducted from the business gross income. In order to qualify for OSD, the taxpayer should indicate in his return that he is opting OSD instead of itemized deductions. (Sec. 34 (L), NIRC) Alternative Solution of Prob. 11-17:If X opted to use OSD Subject to 1. A Tabular tax Final tax Compensation income P240,000 Business and other income: Professional income (P300,000 + P200,000) 500,000 Interest income without 60,000 Dividend income without 40,000 Total business and other income P600,000 Less: OSD (P600,000 x 40%) ( 240,000) Net business income P360,000 Total net income before personal exemption P600,000 Less: Basic personal exemption single ( 50,000) Net income to ITR tabular tax P550,000 Interest income within P100,000 Dividend income within 60,000 Income subject to fnal tax P160,000 2. Not in the choices = P370,000 & P160,000 Compensation income P240,000 Business income: Professional income, net of OSD (P300,000 x 60%) 180,000 Total net income before personal exemption P420,000 Less: Basic personal exemption 50,000 Net income to ITR tabular tax P370,000 Interest income within P100,000 Dividend income within 60,000 Income subject to fnal tax P160,000 Problem 11 18 D Husband Wife Net taxable income P140,000 P250,000 Income tax P 22,500 P 50,000 Less: Withholding tax 20,000 45,000 Net tax payable P 2,500 P 5,000 Problem 11 19 D Compensation as researcher P 600,000 Less: Personal exemption married 50,000 Net taxable compensation income P 550,000 Tax on P500,000 P125,000 Tax on excess (P50,000 x 32%) 16,000 Total income tax from compensation P141,000 Dividend income tax (P120,000 x 10%) 12,000 71 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Interest income tax (P500,000 x 7.5%) 37,500 Total income tax due P190,500 Problem 11 20 D Capital gains tax on shares of stock (P80,000 x 5%) P 4,000 Capital gains tax on sale of land (P2,000,000 x 6%) 120,000 Total capital gains tax paid P124,000 Problem 11 21 B 1. B Final tax on copyright royalty (P11,250/90%) x 10% P 1,250 Final tax on mineral claim royalty (P12,000/80%) x 20% 3,000 Final tax on share from trading partnership as dividend (P270,000/90%) x 10% 30,000 Total fnal tax P34,250 2. Not in the choices None. All reported earnings are subject to fnal tax. Problem 11 22 B Percent of service 100% Add: Output VAT 12% Total 112% Less: Withholding tax 20% Percent of net proceeds 92% Net proceeds P 92,000 Divided by percent of net proceeds 92% Service fee P100,000 Withholding tax (P100,000 x 20%) P 20,000 VAT (P100,000 x 12%) P 12,000 Problem 11 23 1. A Salaries of assistants Traveling expenses Light and water, Ofce Stationeries and supplies Ofce rent Total expenses before contribution Add: Contribution subject to limit (P500,000 P176,850) x 10% Total allowable deductions P 96,000 11,000 7,890 1,960 60,000 P176,850 32,315 P209,165 2. C Professional fees Less: Allowable deductions Net income from business Add: Income from compensation: Allowance as director of Corporation A Commissions Net income before personal and additional exemptions P25,000 5,000 P500,000 209,165 P290,835 30,000 P320,835 3. D Net income before personal and additional exemptions Less: Personal and additional exemptions: Basic widower Additional exemptions (P25,000 x 3 qualifed children) Net taxable income P 50,000 75,000 P320,835 125,000 P195,835 Tax on P140,000 Tax on excess (P55,835) x 30% P 22,500 13,959 72 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Income tax due P 36,459 Problem 11 24 1. P164,200 Net worth, December 31, 2009 Less: Net worth, December 31, 2008 Unadjusted Net income for year 2009 Add back: Non-deductible expenses Contributions (P20,000 + P50,000) Total Less: Non-taxable income Income before contribution Less: Contributions: Deductible in full With limit Actual, P50,000 Limit, P268,000 x 10% = P26,800 Allowed Net income before personal exemptions Less: Personal exemptions (P50,000 +p100,000) Net taxable income P 20,000 26,800 P375,000 325,000 P 50,000 150,000 70,000 P270,000 2,000 P268,000 46,800 P221,200 150,000 P 71,200 2. P140,000 Corrected net taxable income Less: Reported net income subject to tax Unreported taxable income P 71,200 24,200 P 47,000 Problem 11 25 1. Itemized deduction Compensation income Gross income from business Less: Itemized deduction Total income before personal exemptions Less: Personal exemptions Basic personal exemptions Additional exemptions (P25,000 x 4) Taxable income P 400,000 150,000 P 50,000 100,000 P 20,000 250,000 P270,000 150,000 P120,000 Computation of income tax: Tax on P70,000 Tax on excess (P50,000) x 20% Income tax before withholding tax Less: Withholding tax Income tax due and payable P 8,500 10,000 P 18,500 1,000 P 17,500 2. Optional standard deduction Compensation income Gross income from business Less: Optional standard deduction (40%) Total income before personal exemptions Less: Personal exemptions Basic personal exemptions Additional exemptions (P8,000 x 4) Taxable income P 400,000 160,000 P 50,000 100,000 P 20,000 240,000 P260,000 150,000 P110,000 Computation of income tax: Tax on P70,000 Tax on excess (P40,000 x 20%) Income tax before withholding tax Less: Withholding Tax P 8,500 8,000 P 16,500 1,000 73 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Income tax due and payable P 15,500 Problem 11 26 2010 net income from business Capital gains transactions Short term capital gains (P40,000 x 100%) Long term capital gains (P30,000 x 50%) Short term capital loss (P10,000 x 100%) Capital gains Less: 2009 Capital loss carry over limit Income before personal exemptions Basic personal exemption- married Additional exemption (P25,000 x 3) Taxable income, 2010 P 40,000 15,000 (10,000) P45,000 35,000 P 50,000 75,000 P 600,000 10,000 P 610,000 125,000 P 485,000 Note: The applicable capital loss carry-over should only be limited to P35,000, because it should not exceed the net income from operation of such year (Sec. 39D, NIRC). Problem 11 27 1. Compensation income (P240,000 + P30,000) P270,000 Less: Personal exemption (P50,000 + P25,000) 75,000 Net taxable compensation P195,000 Business income P100,000 Less: Business expenses 120,000 Net loss from business (P20,000) 0 - Net taxable income P195,000 2. Tax on P140,000 P22,500 Tax on excess (P55,000 x 25%) 13,750 Income tax due P36,250 Less: Tax credit 30,000 Income tax still due and payable P 6,250 Problem 11 28 1. Salary (P30,000 x 12) P360,000 Add: Taxable 13 th month pay (P35,000 P30,000) 5,000 Total P365,000 Less: SSS contribution P3,000 Medicare/Philhealth contribution 2,000 5,000 Taxable compensation income before personal exemption P360,000 Less: Personal exemption 50,000 Net taxable compensation income P310,000 Estimated income tax due: Tax on P250,000 P50,000 Tax on excess (P60,000 x 30%) 18,000 Total income tax due per year P68,000 Divided by number of months in a year 12 Monthly withholding tax P 5,667 2. Quarterly business income tax Business income per quarter Less: Business expense per quarter Net income per quarter Tax on P70,000 Tax on excess (P10,000 x 20%) Quarterly business income tax frst quarter to third quarter P200,000 120,000 P 80,000 P 8,500 2,000 P 10,500 74 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Problem 11 29 1. Entertainment fee (P1,700,000/85%) P2,000,000 Business income Philippines 500,000 Japan 1,000,000 Net income before personal exemption P3,500,000 Less: Personal exemption - basic P50,000 Additional (P25,000 x 4) 100,000 150,000 Net taxable income P3,350,000 Note: The OSD is not used because the problem is silent that the taxpayer opted to utilize it. OSD is allowed only if the taxpayer indicated in his return that he is using it otherwise he is using itemized deduction. If the taxpayer did not indicate that he is using OSD and at the same time he has no itemized deduction, he cannot deduct expenses from his gross business income. (Sec. 34 (L), NIRC) 2. Tax on P500,000 P 125,000 Tax on excess (P2,850,000 x 32%) 912,000 Income tax due P1,037,000 3. Tax credit Creditable withholding tax on fees (P2,000,000 x 15%) P300,000 Business income tax paid - Philippines 40,000 Japan (P1,037,000 x 1,000,000/3,500,000)) P296,286 vs. actual P300,000, lower 296,286 P 636,286 4. Income tax still due (P1,037,000 P636,286)) P 400,714 Alternative Solution of Problem 11-29: If Rosanna Roces opted to use OSD 1. Entertainment fee (P1,700,000/85%) P2,000,000 Business income Philippines 500,000 Japan 1,000,000 Total gross income P3,500,000 Less: OSD (P3,500,000 x 40%) 1,400,000 Net income before personal exemption P2,100,000 Less: Personal exemption - basic P50,000 Additional (P25,000 x 4) 100,000 150,000 Net taxable income P1,950,000 2. Tax on P500,000 P 125,000 Tax on excess (P1,450,000 x 32%) 464,000 Income tax due P 589,000 3. Tax credit Creditable withholding tax on fees (P2,000,000 x 15%) P300,000 Business income tax paid - Philippines 40,000 Japan (P589,000 x 594,000*/2,100,000)) P166,603 vs. actual P300,000, lower 166,603 P 506,603 4. Income tax still due (P589,000 P506,603) P 82,397 Supporting computation of net taxable income before personal exemptions: Within Outside Total Gross receipts 2,500,000 1,000,000 3,500,000 Percent 71% 29% 100% 75 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Allocated OSD x percent 994,000 406,000 1,400,000 Net income before personal exemption 1,506,000 594,000 2,100,000 Problem 11 30 Mr. Bravo Mrs. Bravo Gross professional income (P100,000/90%) P111,111 Rent income (P300,000/2) 150,000 P150,000 Gross compensation income 225,000 300,000 Total P486,111 P450,000 Less: Personal exemptions 150,000 50,000 Net taxable income P336,111 P400,000 Tax on P250,000 P 50,000 P 50,000 Tax on excess: Mr. Bravo (P86,111 x 30%) 25,833 Mrs. Bravo (P150,000 x 30%) . 45,000 Income tax due P 75,833 P 95,000 Withholding tax on compensation ( 25,000) ( 50,000) Withholding tax on professional income (P111,111 P100,000) ( 11,111) . Income tax still due and payable P 39,722 P 45,000 Note: No OSD is allowed because the taxpayer did not opt to use it in lieu of itemized deduction. (Sec. 34 (L), NIRC) Alternative Solution of Prob. 11-30: If taxpayers opted to use OSD Mr. Bravo Mrs. Bravo Gross professional income (P100,000/90%) P111,111 Rent income (P300,000/2) 150,000 P150,000 Total gross income P261,111 P150,000 Less: OSD (40%) 104,444 60,000 Net income from business P156,667 P 90,000 Add: Gross compensation income 225,000 300,000 Total P381,667 P390,000 Less: Personal exemptions 150,000 50,000 Net taxable income P231,667 P340,000 Tax on P140,000/ P250,000 P 22,500 P 50,000 Tax on excess: Mr. Bravo (P91,667 x 25%) 22,917 Mrs. Bravo (P90,000 x 30%) . 27,000 Income tax due P 45,417 P 77,000 Withholding tax on compensation ( 25,000) ( 50,000) Withholding tax on professional income (P111,111 P100,000) ( 11,111) . Income tax still due and payable P 9,306 P 27,000 Problem 11 31 1. P290,000 Compensation income P300,000 Taxable 13 th month pay and bonuses (P40,000 P30,000) 10,000 Net business income (P400,000 P300,000) 100,000 Capital gains long-term (P60,000 x 50%) 30,000 Total P440,000 Less: Personal exemptions (P50,000 + P100,000) 150,000 Net taxable income P290,000 76 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() 2. (P8,000) Tax on P250,000 P 50,000 Tax on excess (P40,000 x 30%) 12,000 Total income tax due P 62,000 Less: Income tax paid on: Compensation P 50,000 Quarterly business income 20,000 70,000 Income tax refund (P 8,000) Problem 11 32 Gross income from business (P1,000,000 P700,000) P 300,000 Operating expenses (P250,000 P60,000 P30,000) ( 160,000) Deductible interest expense (P30,000) (P20,000 x 12/32) ( 22,500) Deductible contribution (P300,000 P160,000 P22,500) x 10% ( 11,750) Net business income P 105,750 Capital asset transactions: Capital gains short-term (P300,000 x 100%) P 300,000 Capital losses long-term (P400,000 x 50%) 200,000 100,000 Lotto winning, USA 300,000 Gambling winnings P 200,000 Gambling losses (excess cannot be deducted from other income) 250,000 Gross compensation income (P180,000 + P20,000) 200,000 Taxable 13 th month pay (P35,000 P30,000) 5,000 Net taxable income before exemption P 710,750 Less: Personal exemptions (P50,000 + P100,000) 150,000 Net taxable income P 560,750 Tax on P500,000 P 125,000 Tax on excess (P60,750 x 32%) 19,440 Total income tax due P 144,440 Less: Withholding tax on compensation 20,000 Income tax still due and payable P 124,440 Problem 11 33 1. 13 th month pay P25,000 Other benefts: Excess of clothing allowance (P4,500 P4,000) P 500 Excess of rice subsidy (P1,600 P1,500) x 12 1,200 1,700 Total (not exceeding P30,000) nontaxable P26,700 Allowable de minimis: Clothing allowance P4,000 Rice subsidy (P1,500 x 12) 18,000 22,000 Total 13 th month pay and other benefts P48,700 2. Basic salary (P25,000 x 12) P300,000 Less: Personal exemptions 150,000 Net taxable compensation income P150,000 Tax on P140,000 P22,500 Tax on excess (P10,000 x 25%) 2,500 Total income tax due P25,000 Withholding tax from January to November 2009 (P25,000/12) x 11 P22,917 3. Net taxable compensation income P150,000 Add: Net business income: Professional fees (P224,000/1.12) P 200,000 Gross income from sales (P5,000,000 P3,200,000) 1,800,000 77 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Less: Itemized deductions: P2,000,000 Operating expenses, net of interest expense (P900,000 P50,000) P850,000 Interest expense (P50,000 (P75,000 x 38%) 21,500 871,500 Net income before contribution P1,128,500 Less: Contribution, actual = P100,000, lower Contribution, limit (P1,128,500 x 10%)= P112,850 100,000 1,028,500 Net taxable income P1,178,500 Tax on P500,000 P125,000 Tax on excess (P678,500 x 32%) 217,120 Total income tax due P342,120 Less: Tax credits: WTW from Jan to Nov., 2009 P22,917 WT on Professional income (P224,000 P200,000) 24,000 46,917 Income tax still due and payable on December 31, 2009 P295,203 Problem 11 34 Note: OSD is not applicable unless the taxpayer signifed in his ITR that he opted to use OSD in lieu of itemized deductions. (Sec. 34 (L), NIRC) Ta$pa.e i) a e)ident "iti/en a.Normal (tabular) tax: Salaries: Philippines U. S. A. Total Within (P180,000/90%) P200,000 Without ($2,250/90%) x P50 P125,000 P325,000 Commissions: Within (P57,000/ 95%) 60,000 Without ($950/ 95%) x P50 50,000 110,000 Interest income-without 75,000 75,000 ($1,200/80%) x P50 Dividend-without ($1,800/90%) x P50 . 100,000 100,000 Totals P260,000 P350,000 P610,000 Less: Personal exemption basic 50,000 Taxable income P560,000 Tax on P500,000 Tax on excess (P60,000) x 32% Total Less: Tax credits: Compensation (P200,000 x 10%) Commission (P60,000 x 5%) Allowable tax credit - foreign* Income tax due and payable, after tax credits P20,000 3,000 40,000 P125,000 19,200 P144,200 63,000 P 81,200 *Allowable tax credit paid outside the Philippines is lower than tax limit or actual tax paid. The tax credit is computed as follows: Limit (P350,000/P610,000) x P144,200 Actual foreign taxes paid: Interest (P75,000 x 20%) Compensation (P125,000 x 10%) Dividend (P100,000 x 10%) Commissions (P50,000 x 5%) Total Allowable foreign tax credit - lower P82,738 P15,000 12,500 10,000 2,500 P40,000 P40,000 78 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() Note: The actual tax paid outside the Philippines is lower than the computed tax limit; hence, the actual tax paid without is the allowable tax credit. b.Passive income tax: Interest income within (P50,000/ 80%) x 20% Dividend income within (P9,000/ 90%) x 10% Total passive income tax for the year P12,500 1,000 P13,500 Note: Philippine Lotto winnings are tax-exempt. Ta$pa.e i) a none)ident "iti/en a.Normal (tabular) tax: Salaries - within (P180,000/90%) Commissions- within (P57,000/ 95%) Net income Less: Personal exemption - basic Taxable income P200,000 60,000 P260,000 50,000 P210,000 Tax on P140,000 Tax on excess (P70,000) x 25% Total tax due Less: Withholding taxes within (P20,000 + P3,000) Income tax due and payable P22,500 17,500 P40,000 23,000 P17,000 b.Passive income tax: Interest income within (P50,000/80%) x 20% Dividend income within (P9,000/90%) x 10% Total passive income tax for the year P12,500 1,000 P13,500 Note: Nonresident citizens are taxable only on income derived within the Philippines. Ta$pa.e i) a e)ident a(ien0 Solution is the same as nonresident citizen. Ta$pa.e i) a none)ident a(ien en1a1ed in tade o 2')ine)) in the *hi(ippine)0 The taxpayer cannot be regarded as doing business in the Philippines because he has no business income in the Philippines. If the taxpayer has stayed more than 180 days in the Philippines, he is regarded as doing business. The computation of his net income tax payable in the Philippines will be the same as in number 2 under the assumption that his country is granting the same privilege of reciprocity to nonresident Filipino doing business in that foreign country. Ta$pa.e i) a none)ident a(ien not en1a1ed in tade o 2')ine)) in the *hi(ippine)0 Nonresident aliens are subject to tax of 25% based on their gross income derived within the Philippines. In our illustration, let us assume that the source of income has been deducted with 25% tax on the income given to the taxpayer - that is, the amount shown in the problem is net of 25% fnal tax. The income tax of Mr. Ramsay Colorado would be: Salaries- within (P180,000/75%) P240,000 Commissions- within (P57,000/ 75%) 76,000 Interest income within (P50,000/ 75%) 66,667 Dividend income within (P9,000/ 75%) 12,000 Gross income within P394,667 Multiplied by tax rate 25% Income tax for the taxable year within P 98,667 Note: In computing the income tax, a fractional part of a peso less than P0.50 shall be disregarded. If the fractional part is P0.50 or more, its shall be rounded up to P1.00 (R.A. 590). 79 INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS) Chapte !!: In"o#e Ta$ o% Indi&id'a() 80