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    Special Allowable Itemized Deductions

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    Sandia Espejo
    Compute the taxable income for each year. Solution: 2015 2016 2017 2018 2019 Net Income (NOLCO) - 100.00 - 130.00 30.00 60.00 160.00 NOLCO Application 100.00 130.00 - - - - - 30.00 60.00 160.00 Taxable Income: 2015 - Nil 2016 - Nil 2017 - P30,000 2018 - P60,000 2019 - P160,000

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    Special Allowable Itemized Deductions

    Uploaded by

    Sandia Espejo
    68 views13 pages
    Compute the taxable income for each year. Solution: 2015 2016 2017 2018 2019 Net Income (NOLCO) - 100.00 - 130.00 30.00 60.00 160.00 NOLCO Application 100.00 130.00 - - - - - 30.00 60.00 160.00 Taxable Income: 2015 - Nil 2016 - Nil 2017 - P30,000 2018 - P60,000 2019 - P160,000

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    Compute the taxable income for each year. Solution: 2015 2016 2017 2018 2019 Net Income (NOLCO) - 100.00 - 130.00 30.00 60.00 160.00 NOLCO Application 100.00 130.00 - - - - - 30.00 60.00 160.00 Taxable Income: 2015 - Nil 2016 - Nil 2017 - P30,000 2018 - P60,000 2019 - P160,000

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    68 views13 pages

    Special Allowable Itemized Deductions

    Uploaded by

    Sandia Espejo
    Compute the taxable income for each year. Solution: 2015 2016 2017 2018 2019 Net Income (NOLCO) - 100.00 - 130.00 30.00 60.00 160.00 NOLCO Application 100.00 130.00 - - - - - 30.00 60.00 160.00 Taxable Income: 2015 - Nil 2016 - Nil 2017 - P30,000 2018 - P60,000 2019 - P160,000

    Copyright:

    © All Rights Reserved
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    Download as xlsx, pdf, or txt
    of 13

    Illustration

    Don Mariano transferred a commercial lot and a P1m stock investment in irrevocable trust in favor of his son, Ritchie.
    Trust earned the following income in 2017:

    Rent Income on the lot 1,200,000.00


    Less: Leasing expenses 200,000.00
    Rental Net Income 1,000,000.00
    Dividend Income, net of final tax 36,000.00
    Trust net income 1,036,000.00

    In Accordace with the trut indenture, the truste distributed half of the gross rentals and the entire dividends to Ritchie.

    The Net Income of the trust shall be computed as follows:

    Gross Rent Income 1,200,000.00


    Less:
    Regular allowable deductions 200,000.00
    Special allowable deductions
    Income Distribution to beneficiary 600,000.00 800,000.00
    Net Income 400,000.00
    st in favor of his son, Ritchie.

    he entire dividends to Ritchie.


    Illustration

    Lowland Coop summarized the following income and expenses from its exempt related activities and taxable unrelated activi

    Related Activities Unrelated Activities Total


    Sales 2,000,000.00 1,000,000.00 3,000,000.00
    Cost of Sales 1,200,000.00 600,000.00 1,800,000.00
    Gross Income 800,000.00 400,000.00 1,200,000.00
    Operating Expenses 500,000.00 150,000.00 650,000.00
    Net Income 300,000.00 250,000.00 550,000.00

    In compliance with the Cooperative Development Act, Lowland Coop appropriate 10% of profit to the reserve fund, plus addi
    and optional funds.

    The amount of special deduction and the taxable net income of the cooperative shall be comptuted as;

    Gross Sales from unrelated activities 1,000,000.00


    Cost of Sales 600,000.00
    Gross Income from Unrelated Activities 400,000.00
    Less: Regular Itemized Deductions 150,000.00
    Net Income before statutory reserves 250,000.00
    Less: Special Itemized deduction
    Appropriation to reserve fund (250Kx10%) 25,000.00
    Taxable Net Income 225,000.00
    and taxable unrelated activities:

    the reserve fund, plus additional 40% to other required


    Illustration 1
    Goodhealth Drugstore Inc. recorde a P1,200,000 total deductible expense and the following sales:

    Regular Senior Citizens


    Gross Sales 5,000,000.00 1,200,000.00
    Cost of Sales 3,000,000.00 800,000.00

    Goodhealth adopts a policy of giving senior citizens a 25% discount. Consequently, it granted P300,000 total senior citizens' d

    The taxable net income of Goodhealth shall be computed as:

    Gross Sales (P5M+P1.2M) 6,200,000.00


    Cost of Sales 3,800,000.00
    Gross income from operations 2,400,000.00
    Less:
    Regular Itemized Deductions 1,200,000.00
    Special itemized Deductions
    Senior Citizen's Discounts 240,000.00 1,440,000.00
    Taxable net income 960,000.00
    300,000 total senior citizens' discounts during that period.
    Illustration
    Nexus Corporation incurred a net operating loss during the year:

    Gross Income 1,500,000.00


    Less:
    Regular Itemized Deductions 1,200,000.00
    Special Deductions under NIRC 700,000.00
    Deduction Incentives under special laws 300,000.00 2,200,000.00
    Net Operating Loss - 700,000.00

    The NOLCO shall be recomputed as follows:

    Gross Income 1,500,000.00


    Less:
    Regular Itemized Deductions 1,200,000.00
    Special Deductions under NIRC 700,000.00 1,900,000.00
    Net Operating Loss - 400,000.00
    Illustration
    A corporate taxpayer reported the following net income and loss from business:

    2012 2013 2014 2015


    Gross Income 400,000.00 500,000.00 720,000.00 900,000.00
    Less: Deduction 600,000.00 450,000.00 610,000.00 650,000.00
    Net Income (NOLCO) - 200,000.00 50,000.00 110,000.00 250,000.00

    Required: Compute the taxable net income from 2013 to 2015.

    The 2013 taxable net income is nil. The NOLCO application and the 2012 NOLCO balance as of December 31, 2013 are as follo

    2012 2013 2014 2015


    Net Income (NOLCO) - 200,000.00 50,000.00 110,000.00 250,000.00
    NOLCO Deduction 50,000.00 - 50,000.00
    NOLCO Balance - 150,000.00 -

    The 2014 taxable net income is nil. The NOLCO application and the 2012 NOLCO balance as of December 31, 2014 are as follo

    2012 2013 2014 2015


    Net Income (NOLCO) - 150,000.00 - 110,000.00 250,000.00
    NOLCO Deduction 110,000.00 - 110,000.00
    NOLCO Balance - 40,000.00 -

    The 2015 taxable net income shall be P210,000 computed as:

    2012 2013 2014 2015


    Net Income (NOLCO) - 40,000.00 0 0 250,000.00
    NOLCO Deduction 40,000.00 - 40,000.00
    - Adjusted Net Income 210,000.00
    of December 31, 2013 are as follows:

    of December 31, 2014 are as follows:


    Illustartion
    In 2018, Mr. Tan started a Hot Siopao manufacturing plant with less than P3M capitalization and was registered as a Barangay
    at the start of 2019, Mr. Tan's certificate of authority to operate as BMBE was revoked when he upscaled his business operati

    2018 2019 2020


    Gross Income 400,000.00 700,000.00 1,500,000.00
    Less: Business Expense 650,000.00 800,000.00 1,000,000.00
    Net Income (NOLCO) - 250,000.00 - 100,000.00 500,000.00

    Required: Compute the net income in 2020

    2018 2019 2020


    Net Income (NOLCO) - 250,000.00 - 100,000.00 500,000.00
    2018 NOLCO Application 100,000.00 - 100,000.00
    - 400,000.00
    n and was registered as a Barangay Micro Business Enterprise
    n he upscaled his business operations.
    Illustration
    An individual taxpayer compiled the following income, expense and personal exemptions

    2013 2014 2015 2016


    Compensation Income 20,000.00 220,000.00 80,000.00 75,000.00
    Business Gross Income 470,000.00 400,000.00 500,000.00 500,000.00
    Deductions 500,000.00 420,000.00 420,000.00 340,000.00
    Personal Exemptions 50,000.00 50,000.00 100,000.00 125,000.00

    Required: Determine the annual taxable income

    Solution:

    2013 2014 2015 2016


    Compensation Income 20,000.00 220,000.00 80,000.00 75,000.00
    Less: Personal Exemptions 50,000.00 50,000.00 100,000.00 125,000.00
    Taxable Compensation Income - 30,000.00 170,000.00 - 20,000.00 - 50,000.00

    2013 2014 2015 2016


    Business Gross Income 470,000.00 400,000.00 500,000.00 500,000.00
    Deductions 500,000.00 420,000.00 420,000.00 340,000.00
    Net Income NOLCO - 30,000.00 - 20,000.00 80,000.00 160,000.00
    30,000.00 20,000.00 - 50,000.00
    30,000.00 160,000.00
    Taxable Income - 170,000.00 10,000.00 110,000.00
    Illustration 1

    A corporate taxpayer reported the following from 2015 to 2019

    2015 2016 2017 2018 2019


    Gross Income 400.00 320.00 480.00 400.00 500.00
    Less: Deductions 500.00 450.00 450.00 340.00 340.00
    Net Income (NOLCO) - 100.00 - 130.00 30.00 60.00 160.00

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