Taxation in the United States and Net Taxable Income

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 127 Chapter 14: Income Taxes of Estates & Trusts CHAPTER 14 INCOME TAXES OF ESTATES & TRUSTS Problem 14 – 1 TRUE OR FALSE 1. False – P20,000 2. True 3. True 4. True 5. True 6. True 7. False – It shall be in writing either as trust inter-vivos or through a will. 8. False – A trustor is the person who establishes the trust, not the trustee. 9. True 10. True 11. True 12. True Problem 14 – 2 TRUE OR FALSE 1. False – A taxpayer is required to file ITR regardless of the result of business whether there is income or loss; hence, the ITR of irrevocable trust should be filed if its income is P20,000 and below. 2. True 3. True 4. True 5. False – The income is taxable. 6. True…show more content…
[Sec. 79(F), NIRC] 2. Letter A Income tax due – case 2 & case 3 (P2,500 + P4,000) Less: Income tax due – case 1 Income tax savings – 200y Gross income Itemized Amount distributed – child OSD (P200,000 x 40%) Net income before exemption Personal exemption Net taxable income Tax on P140,000 Tax on P30,000 Tax on excess: Case 1: (P40,000 x 25%) Case 3: (P10,000 x 15%) Income tax due P 6,500 32,500 (P26,000) Case 1* P500,000 (300,000) . P200,000 ( 20,000) P180,000 P22,500 10,000 . P32,500 Case 2* P500,000 (300,000) (150,000) . P 50,000 ( 20,000) P 30.000 Case 3* P150,000 ( 60,000) P 90,000 ( 50,000) P 40,000 P 2,500 P2,500 . P 2,500 1,500 P 4,000 *Case 1 – Income tax of the estate (no portion is distributed to heir). *Case 2 – Income tax of the estate (P150,000 is distributed to heir). *Case 3 – Income tax of the heir (P150,000 is received from estate). The tax saving is brought about by splitting the taxable income between taxpayers thus lowering the taxable income to lower tax rate and availing two personal exemptions. Problem 14 – 7 1. Letter C Gross income 200x P 5,000,000 200y P 6,000,000 130 INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS Chapter 14: Income Taxes of Estates & Trusts Operating expenses allowed Amounts given to beneficiaries 200x (P680,000/85%) 200y (P765,000/85%) Personal exemption Net taxable income Tax on P500,000 Tax on excess: 200x: (P880,000 x 32%) 200y: (P1,380,000 x 32%)

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