Itemized deductions
Tax Credit for foreign Income Tax Paid
Illustration 1
An individual taxpayer had the following results of operations during the period:
Philippines Japan USA
Gross income P1,000,000 1,500,000 2,500,000
Deductions 400,000 600,000 1,000,000
Net income 600,000 900,000 1,500,000
Income taxes paid 150,000 200,000 500,000
Required: Determine the tax payable or overpayment if:
The taxpayer is a
Resident citizen Resident alien
1. Tax expense
2. Tax credit
NOLCO
Illustration 2
An individual taxpayer reported a net operating income of P280,000 after the following:
Net operating loss carry over-last year P250,000
Net capital loss – current 80,000
Net capital loss – last year 70,000
Ordinary loss 50,000
Special deductions 40,000
Required: Compute the NOLCO deduction in the current taxable year.
Illustration 3
The following relates to a proprietorship business which started in 2018:
2018 2019 2020
Sales P2,000,000 P2,500,000 4,000,000
Cost of sales 1,200,000 1,400,000 1,500,000
Ordinary deductions 1,200,000 1,200,000 1,200,000
Required: Compute the NOLCO and the taxable income in each year assuming
1. The business was sold to another proprietor at the start of 2019
2. The business was BOI-registered with graduated on its ITH at the end of 2018
Comprehensive
Mr. Fafi reported the following income and expenses in 2022:
Gross compensation income P600,000
Gross professional fees 800,000
Dividend income 10,000
Interest income from deposit 15,000
Cash donation to the government for public purpose 60,000
FV of property donation to accredited Non-profit institutions 120,000
(property book value is P80,000)
Interest on borrowings 24,000
Personal and family expenses 200,000
Entertainment and recreational expense 8,000
Other operating expenses of practice 120,000
Mandatory payroll deductions 20,000
Exempt benefits 40,000
Required: Compute the following
a. Deductible contribution expense
b. Taxable compensation income
c. Net income
d. Taxable income
e. Tax due
Optional Standard Deduction
Illustration 1
Xerxes Department Store reported the following income and deductions during the period
Require: Compute the OSD assuming that
The accounting method employed is Xerxes is a proprietorship Xerxes is a corporation
Cash basis
Accrual basis
Illustration 2
