Exercise Drill No.
1: Return of capital and Return on capital
Return capital of Return on
Consideration For the loss of Capital
1. P 1,000,000 Health 1,000,000 0
2. P 500,000 P 400,000 car 400,000 100,000
3. P 300,000 P 350,000 300,000 0
building
4. P 600,000 Income 0 600,000
5. P 1,200,000 Life 1.2M 0
Exercise Drill No. 2: Income tax and transfer tax
Transaction Income tax Transfer tax
1. Barter of properties
2. Sales of goods
3. Rendering of services
4. Donation of properties
5. Transfer of properties from a √
decedent to the heirs upon death
6. Transfer for less than full and √ √
adequate consideration
Exercise Drill No. 3: The tax concept of income
Transaction Taxable Exempt
1. Winnings from gambling
2. Income from swindling
3. Indemnity for moral damages
4. Harvested fruits from an orchard
5. Compensation income
6. Interest income
7. Amount received by the insured in excess of insurance premiums √
paid
8. Proceeds of life insurance received by the heirs of the insured √
9. Gain on sale of goods by the home office to its branch
10 Gain on sale of goods and services between relatives √
.
11 Gain on sale of goods by a parent corporation to a subsidiary √
corporation
12. √
13. Birth of animal offspring √
14 Income of a registered Barangay Micro- √
. Business Enterprise
15 Cancellation of debt out of gratuity of the creditor √
.
16 Cancellation of debt √
. By the creditor in exchange of services rendered by the debtor
17 Matured interest from coupon bonds
.
18 Receipt of bank loan
.
19 Salaries of a minimum wage earner
.
20 PCSO or lotto winnings
.
21 Benefits from GSIS, SSS, Pag-ibig or √
. PhilHealth
22 Discovery of hidden treasure
.
Exercise Drill No. 4: Income taxpayer classification
Person or Entity Classification
1. A fat Mexican tourist NRA-NETB
2. A hardworking overseas Filipino worker NRC
3. An expatriate employee NRC
4. A Filipino who is privately employed in the Philippines RC
5. An unemployed Filipino residing in the Philippines RC
6. NRA-NETB
A Chinese businessman who has his domicile in the
Philippines for 6 months.
7. A Japanese who married a beautiful Filipina and has been RA
residing in the Philippines for 2 years
8. A 2nd year Korean college student studying in the RA
Philippines
9. A corporation incorporated under Philippine law DC
10. A foreign corporation doing business in the Philippines RFC
11. Trust designated by the donor as irrevocable RC
12. Trust designated by the donor as revocable NT
13. A business partnership DC
14. A joint venture organized under a foreign law and is not NFRC
operating in the Philippines
15. An estate of a Filipino citizen judicially administered in NRC
Japan
16. An estate of a Filipino citizen extra-judicially administered NT
in the Philippines
17 A taxable joint venture organized in the Philippines DC
18. A non-profit corporation organized in the Philippines DC
Exercise Drill No. 5: General Income Tax Rule
Taxpayer World Philippine
income income
1. Non-resident citizen √
2. Resident alien √
3. Non-resident alien engaged in trade or business
4. Resident foreign corporation
5. Resident citizen
6. Non-resident alien not engaged in business
7. Non-resident foreign corporation
8. Domestic corporation
9. Taxable trusts established by a Filipino citizen in the Philippines √
10. Taxable estate of a non-resident citizen judicially administered abroad √
Exercise Drill No. 6: Location and situs of income
Income description Within Without
1. Rim Gonzales earned P100,000 interest income; 40% of these were 60,000 40,000
from non-resident debtors.
2. A finance company earned P1,000,000 royalties from a franchise; 40% 600,000 400,000
of these were derived abroad.
3. Ray Gatchi earned P100,000 rent from OFWs from his apartment in the 40,000 100,000
US. He also earned P40,000 rent from his Philippine condominium
unit.
4. Chester, a resident citizen, works home online and submits his 120,000 0
output to clients. He collected P100,000 service fee from foreign
clients and P20,000 from resident clients.
5. Mark rendered audit services to client in Afghanistan for 0 500,000
P500,000. The services were paid in Afghanistan.
6. July has a store in a tourist park in Baguio City, Philippines. He 40,000 0
earned a total of P40,000 gain from selling souvenir items. 40%
were from foreign tourists.
7. Don Flores sold at a gain of P2,000,000 to a client abroad a 2,000,000 0
commercial building located in Quezon City, Philippines.
8. John sold his stocks in a domestic corporation to a foreign 50,000 0
investor at a gain of P50,000.
9. Villanueva received P20,000 dividends from a domestic 20,000 30,000
corporation and P30,000 dividend income from a non-resident
foreign corporation.
10. Andrew Johnson received P40,000 dividends from a resident 24,000 16,000
foreign corporation; 60% of its historical income is from the
Philippines.
11. Abreeza, Inc. manufactures in the Philippines and sells to 100,000 0
unaffiliated export clients. A total of P100,000 gross income was
earned during the period.
12. Marawi manufactures abroad and sells to its Philippines branch at 150,000 100,000
market prices. Production cost abroad were P200,000. Billings to
branch totaled P300,000 while branch sales totaled P450,000.
13. James Fernandez received P100,000 dividends from a resident 0 100,000
foreign corporation which realized 40% of its income in the
Philippines
14. Kevin received P20,000 dividend from a nonresident foreign 0 20,000
corporation.
15. Macahambus plant manufactures tables and sells to resident 400,000 0
clients. A total of P400,000 gross income was realized during the
period.
