Income Tax on Special Corporations Read and analyze the following scenarios and apply the principles and concept of income taxation on special corporations. Pioneer College, a private educational institution, has presented the following data for the year: Gross Income, related activitiesP5,000,000Gross Income, unrelated activities (except rental income)5,000,000Rental income (gross of 5% WT)2,000,000Expenses, related activities2,000,000Expenses, unrelated activities3,000,000Dividend income from a domestic corporation100,000Quarterly income tax paid for the first three quarters500,000Compute the income tax payable. Advanced Learning Institute, an educational institution, provided the following data for the current taxable year:Income from tuition feesP 3,500,000School Miscellaneous Fees1,500,000Dividend Income: Domestic Corporation2,000,000Foreign Corporation2,000,000Rent Income (Net of 5% withholding tax)1,900,000Operating Expenses4,000,000 Compute the tax payable of the school. Norte De University, a proprietary educational institution, has the following selected information for the taxable year 2X18: Tuition FeesP 12,800,000Miscellaneous Fees1,800,000Interest on Bank Deposits12,300Rent Income350,000Salaries and Bonuses, all personnel7,500,000Other Operating Expenses3,500,000Quarterly Income Tax Payments48,000 An additional school building was built and finished on April 1, 2X18 at the cost of P2,000,000 with a depreciable life of 50 years.Compute the income tax payable assuming the university opted to claim the cost of construction as an outrightCompute the income tax payable assuming the university opted to capitalize the cost of building A non-profit domestic hospital has the following data during the year 2x18: Gross income from hospital operationP2,000,000Operating Expenses (excluding depreciation for the new hospital building)500,000Rent income of commercial space, hospital ground floor, net of 5% withholding taxes190,000Interest on bank deposit, net of 20% withholding tax40,000Dividend income from a domestic corporation100,000 An additional hospital building was built and finished on June 30, 2X18 at the cost of P4,000,000 with a depreciable life of 25 years.Compute the income tax still due and payable inAssume the hospital was organized for profit, compute the income tax still due and payable in Pacific Airlines, an international carrier, showed the following gross receipts for 2X18: Point of OriginDestinationGross ReceiptsPhilippinesUnited States of AmericaP 8,000,000United States of AmericaUnited Kingdom4,000,000United States of AmericaPhilippines3,750,000United KingdomPhilippines2,100,000 Additional information:Forty percent (40%) of the shipments from the Philippines to the United States were later shipped to the UnitedTwenty-five percent (25%) of all its revenues were from the transport of cargoes and Compute the income tax payable for 2X18. China Airlines , a resident foreign corporation, has the following data for the taxable year 2x18: Passengers airfare from China to the PhilippinesP 1,800,000Passengers airfare from the Philippines to China1,500,000Airfare for cargoes from China to the Philippines700,000Airfare for cargoes from the Philippines to China1,300,000 Compute the income tax payable. Y Corporation, a family-closed corporation, had the following selected data for 201A, the accumulated earnings for which year the BIR considered to be improper: Non-taxable gain on life insurance of Y Co.’s presidentP900,000Income tax due 201A780,000Quarterly income tax paid580,000Dividend declared and paid during the year440,000Reserve for maturing bonds in 201B300,000Tax-exempt dividend income from resident corporation200,000Net-operating loss carry-over (NOLCO) deducted100,000Capital gain on direct sale to the buyer of shares of another domestic corporation, net of final tax85,000Interest income on peso deposit, net of final tax16,000 Compute the amount of improperly accumulated earnings tax (IAET). A closely-held corporation, deemed committed unreasonably accumulating its income, shows the following data: Paid-up capitalP 10,000,000Accumulated Earnings – unrestricted8,000,000Accumulated Earnings – restricted2,000,000Income tax per annual income tax return300,000Income tax for the first three quarters240,000Final tax on passive income at 20%60,000Capital gains tax at 15%45,000 Compute the amount of improperly accumulated earnings tax (IAET).

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Income Tax on Special Corporations

Read and analyze the following scenarios and apply the principles and concept of income taxation on special corporations.

Pioneer College, a private educational institution, has presented the following data for the year:

Gross Income, related activities	P5,000,000
Gross Income, unrelated activities (except rental income)	5,000,000
Rental income (gross of 5% WT)	2,000,000
Expenses, related activities	2,000,000
Expenses, unrelated activities	3,000,000
Dividend income from a domestic corporation	100,000
Quarterly income tax paid for the first three quarters	500,000

Compute the income tax payable.

Advanced Learning Institute, an educational institution, provided the following data for the current taxable year:

Income from tuition fees	P 3,500,000
School Miscellaneous Fees	1,500,000
Dividend Income:
Domestic Corporation	2,000,000
Foreign Corporation	2,000,000
Rent Income (Net of 5% withholding tax)	1,900,000
Operating Expenses	4,000,000

Compute the tax payable of the school.

Norte De University, a proprietary educational institution, has the following selected information for the taxable year 2X18:

Tuition Fees	P 12,800,000
Miscellaneous Fees	1,800,000
Interest on Bank Deposits	12,300
Rent Income	350,000
Salaries and Bonuses, all personnel	7,500,000
Other Operating Expenses	3,500,000
Quarterly Income Tax Payments	48,000

An additional school building was built and finished on April 1, 2X18 at the cost of P2,000,000 with a depreciable life of 50 years.

Compute the income tax payable assuming the university opted to claim the cost of construction as an outright
Compute the income tax payable assuming the university opted to capitalize the cost of building

A non-profit domestic hospital has the following data during the year 2x18:

Gross income from hospital operation	P2,000,000
Operating Expenses (excluding depreciation for the new hospital building)	500,000
Rent income of commercial space, hospital ground floor, net of 5% withholding taxes	190,000
Interest on bank deposit, net of 20% withholding tax	40,000
Dividend income from a domestic corporation	100,000

An additional hospital building was built and finished on June 30, 2X18 at the cost of P4,000,000 with a depreciable life of 25 years.

Compute the income tax still due and payable in
Assume the hospital was organized for profit, compute the income tax still due and payable in

Pacific Airlines, an international carrier, showed the following gross receipts for 2X18:

Point of Origin	Destination	Gross Receipts
Philippines	United States of America	P 8,000,000
United States of America	United Kingdom	4,000,000
United States of America	Philippines	3,750,000
United Kingdom	Philippines	2,100,000

Additional information:

Forty percent (40%) of the shipments from the Philippines to the United States were later shipped to the United
Twenty-five percent (25%) of all its revenues were from the transport of cargoes and

Compute the income tax payable for 2X18.

China Airlines , a resident foreign corporation, has the following data for the taxable year 2x18:

Passengers airfare from China to the Philippines	P 1,800,000
Passengers airfare from the Philippines to China	1,500,000
Airfare for cargoes from China to the Philippines	700,000
Airfare for cargoes from the Philippines to China	1,300,000

Compute the income tax payable.

Y Corporation, a family-closed corporation, had the following selected data for 201A, the accumulated earnings for which year the BIR considered to be improper:

Non-taxable gain on life insurance of Y Co.’s president	P900,000
Income tax due 201A	780,000
Quarterly income tax paid	580,000
Dividend declared and paid during the year	440,000
Reserve for maturing bonds in 201B	300,000
Tax-exempt dividend income from resident corporation	200,000
Net-operating loss carry-over (NOLCO) deducted	100,000
Capital gain on direct sale to the buyer of shares of another domestic corporation, net of final tax	85,000
Interest income on peso deposit, net of final tax	16,000

Compute the amount of improperly accumulated earnings tax (IAET).

A closely-held corporation, deemed committed unreasonably accumulating its income, shows the following data:

Paid-up capital	P 10,000,000
Accumulated Earnings – unrestricted	8,000,000
Accumulated Earnings – restricted	2,000,000
Income tax per annual income tax return	300,000
Income tax for the first three quarters	240,000
Final tax on passive income at 20%	60,000
Capital gains tax at 15%	45,000

Compute the amount of improperly accumulated earnings tax (IAET).

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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