INCOME TAX

Compute income earned within/without. Taxable

Description: Within Without
1 A Filipino earned P100,000 interest income which was 60 40 Situs of INTEREST: residence of debtors
deposited to his BPI account. 40% were from non-resident
debtors.
2 Jollibee earned P1M royalties from a Philippine franchise. 500 500 Situs of ROYALTIES: where used
300K was paid for a branch in India, 200K was paid for a
branch in London, and 500k for branches in Manila.

3 Raymond earned P100K rent from OFWs from his apartment 40 100 Situs of REAL PROPERTY: where property located
in the US. He also earned P40K rent from his condo in the
Philippines.
4 Chester, a resident citizen, works online from his home in 120 Situs of SERVICE: place of performance
Cubao and submits his output to clients through viber. He
collected P100K service fee from foreign clients and P20K
from resident clients.
5 Mark rendered audit services to a client in Iran for P500K. 500 Situs of SERVICE: place of performance
The services were paid in Manila.
6 Jun earned P40k from his souvenir shop in Baguio. 40% were 40 Situs of PERSONAL PROPERTY: place of SALE/TITLE Passage Rule
from Korean tourists.
7 On his trip to New York Mariano sold to a New York client a 2M Situs of REAL PROPERTY: where property located
commercial building in Bacolod at a gain of P2M.

8 John sold his stocks in Jollibee Foods Corporation to a foreign
investor in Spain at a gain of P50K.
9 Manny received P20K dividends from Ayala Corp. and P30K
dividends from Amazon USA.
10 Andy received P40k dividends from Deutsche Bank with 60%
of its historical income from the Phil.
11 CDO, Inc. manufactures in the Phil. And sells to unaffiliated
export clients. A total of P100,000 gross income was earned.
50 Situs of SHARES: place of incorporation of corporation whose shares are sold
20 30 Situs of DIVIDENDS: residence of corporation paying the dividends;
if FC, also apply Sec. 42(A)(2)(b)
24 16 Since gross income of FC derived from sources within the Philippines is >50% for a 3-
year period preceding declaration of such dividends or for such part of such period as
the FC has been in existence,
the dividends from the FC are considered within or without depending on ratio to such
dividends as the gross income of the FC for such period derived from sources within the
Phil. bears to its gross income from all sources.
-Sec. 42(A)(2)(b)
100 Since all MANUFACTURED goods were sold to local clients --
Situs of PERSONAL PROPERTY: place of SALE/TITLE Passage Rule

12 ABC manufactures abroad and sells to its Phil. Branch at 150
market prices. Production cost abroad were P200,000.
Billings to branch totaled 300,000 while the branch sales
totaled P450,000
13 James received P100,000 dividends from Cathay Pacific
Airlines which realized 20% of its income in the Phil.
100 Since goods were MANUFACTURED (in whole or in part) without and sold within the
Phil., income shall be treated as derived partly from sources within and partly from
sources without the Phil.
-Sec. 42(E)
100 All the dividends from the FC are considered without bec gross income of FC derived
from sources within the Phil. is <50% for a 3-year period preceding declaration of such
dividends or for such part of such period as the FC has been in existence.
-Sec. 42(A)(2)(b)

14 Ellis received P20,000 dividend from Harrods Dept. Store 20 All the dividends from the FC are considered without bec gross income of FC derived
which has no presence in the Phil. from sources within the Phil. is <50% for a 3-year period preceding declaration of such
dividends or for such part of such period as the FC has been in existence.
-Sec. 42(A)(2)(b)

15 Ayala Corp. received P200,000 dividends from Jollibee Corp. 0 0 Intercorporate Dividends exempted - Sec. 27(D)(4), Sec. 28(A)(D)

Compute Taxable Return on Capital Taxable

1 B paid P20k annual premium on a life insurance contract which would
pay P1M in case of B's death. After paying for 4 years, B assigned the 40 =120,000-(20,000*4)
policy to C for P120K.
2 Dan purchased the P1M life insurance policy of Ben for P120,000. Dan
paid the P20k annual premiums on the policy for 4 years after which 800K =1,000,000-(120,000+(4*20,000))
Ben died and Dan collected the proceeds.
3 A purchased a P1,500,000 life insurance policy for P100,000. During
the year, A died and her heirs collected the entire proceeds. 0 Sec. 32(B)(1)

4 B insured his newly constructed building costing P1,000,000. Within a

few days, the building was totally destroyed by fire. The insurance
company reimbursed B P1,500,000 which is the fair market value of 500 =1,500,000-1,000,000
the building.
5 Philux manufacturers wooden furniture for local and export markets.
It has an outlet abroad which handles foreign sales. It bills all WITHOUT
customers, including the foreign outlet, 50% above manufacturing WITHOUT:
=3000000-(3000000/2)
costs. The foreign outlet bills its customers 100% above Philux's billing 1,500,000
price. Philux reports P1,500,000 in total sales, exclusive of sales to WITHIN
foreign outlet. The foreign outlet reports P3,000,000 total sales to WITHIN:
=(1500000-(1500000/1.5))+
customers. Compute manufacturing income within and without. 1,000,000
((3000000/2)-(3000000/2/1.5))