Republic of the Philippines

BATANGAS STATE UNIVERSITY LIPA CITY

Lipa City

COLLEGE OF ACCOUNTANCY BUSINESS AND ECONOMICS

TAX 101/301-INCOME TAXATION
MODULE 8
GROSS INCOME

GROSS INCOME

Gross Income (also known as gross taxable income) means total income of the taxpayer
subject to tax. It means, in its broad sense, all income from whatever source, derived within or
without the Philippines, legal or illegal. The tax code does not distinguish legal and illegal income.
Proceeds of embezzlement or swindling, for instance, are income because embezzler or swindler
already has complete dominion over them and can use such for his economic benefit.
“Income” means all wealth which flows into the taxpayer, other than return of capital. It
imports something distinct from principal or capital. On the other hand, “Capital” constitutes the
investment which is the source of income. Therefore, Capital is fund while Income is the flow.
Capital is the wealth while income is the service of the wealth. Capital is the tree while the income
is the fruit (Vicente Madrigal et al. v. James Rqfferty, 38 Phil. 414).

Example of Return of Capital and Other than Return of Capital:

Mere Return of Capital

 Collection of loans receivable
 Liquidating dividend
 A mere increased in the value of property ( merely an unrealized increase in capital
Receipt other than mere Return of Capital
 Interest paid on loans receivable
 Condonation of debt for services rendered
 Excess of selling price over the cost of an asset sold

Form of Income
Income may be “realized in any form, whether in money, property, services, indirect
economic benefit. Items indirectly benefitting taxpayers are excluded from gross income. Income
includes the forms of income specifically described as gains derived from sale or other disposition
of capital. It also refers to the amount of money coming to a person or corporation within a
specified time, whether as payment of services, interest or profits from investment.

Valuation of Income

The amount of income recognized is generally the value received or which the taxpayer has
a right to receive. If the services were rendered at a stipulated price, in the absence of any
evidence to the contrary, such price shall be presumed to be the fair market value of the
compensation received. transfer of land made by a person to another in payment of services
rendered in the form of attorney’s fees shall be considered as part of the gross income of the latter
valued at either the fair market value or the zonal valuation, whichever is higher, in the taxable
year received.(BIR Ruling#017-2003)

CLASSIFICATION OF INCOME
1. Income as to source
a. Compensation Income
b. Professional Income
c. Business Income
d. Other Income
2. Income as to territorial source
a. Income within the Philippines
b. Income without the Philippines
c. Mixed Income(partly within and without)
3. As to taxability
 Taxable Income
a. Ordinary or Regular Income subject to basic/normal tax or scheduler tax under
Sec24(A) of the Tax Code
 Reportable ITR (Quarterly, Annually, Substituted Filing)
 Subject to Expanded withholding tax, if applicable
 rates based on tax tables
 Tax credits
 Catch-all or basket of other income
TAX 101- INCOME TAXATION-GROSS INCOME 1
 b. Passive Income subject to final taxes
 Subject to final taxes
 Withholding taxes constitutes final payment of income tax
 Payor is obliged to withhold and remit the corresponding tax
 No need to include in the income tax return
 BIR will run after the withholding agent
 Applicable only to certain passive income derived from sources within
the Philippines
c. Capital gains subject to capital gains taxes
 Sale of shares of stock of a domestic corporation directly to buyer
 Sale of real properties classified as capital assets located in the
Philippines
d. Special Income subject to special taxes. Subject to special rates and rules (i.e.
income of PEZA and BOI registered companies)
 Tax exempt income
a. By constitutional mandate
b. By statute (general or special)
c. By international comity( i.e. bilateral agreements, treaties)

TAXABLE INCOME

“Taxable Income” means the pertinent items of gross income specified in the Tax Code,
less the deductions and/or persona; and additional exemptions, if any, authorized for such type of
Income by the Tax Code or other special laws. (Sec.31, Code). It does not include income excluded
by law, or which are exempt from income tax (Sec 32, Code) as well as income subject to final
taxes. Hence, it pertains to all income subject to basic and creditable withholding taxes. It includes
the gains, profits, and income derived from whatever source, whether legal or illegal.

Requisites for Income to be Taxable

a) There must be gain

The gain need not to be in cash derived from sale of assets. It may occur as a result
of exchange of property, payment, assumption, reduction or cancellation of the taxpayer’s
indebtedness (except gifts) or other profit realized from completion of a transaction.
b) The gain must be realized OR received
A mere increase in the value of property without actual realization, either through
sale or other disposition, is not taxable. The realization of income need not take the form of actual
receipt or the property by the taxpayer as it may occur as where there is a constructive receipt of
the income by the taxpayer.

There is constructive receipt of income when;

 Payment is credited to payee’s account or
 Payment is set aside for the payee, or otherwise made available so the payee may
draw upon it at any time, or so the payee could have drawn upon it during the
taxable year if notice of intention to withdraw had been given without substantial
limitations. Hence, there is no constructive receipt of income when:
 Constructive receipt is subject to substantial limitations
 Payor does not have funds necessary to make payment
 The amount is not available to taxpayer/payee.
c) The gain must not be excluded by law from taxation
Incomes that are exempt from tax or treaty are not considered in determining gross
income. Income is recognized in the year it is actually or constructively received in cash or cash
equivalent.

Characteristics of Philippine Income Tax

1. National Tax
It is imposed and collected by the National Government throughout the
country
2. General Tax
It is levied without specific or predetermined purpose. Hence, the revenue
from income tax maybe appropriated for general purposes.
3. Excise Tax
It is imposed on the right or privilege of a person to receive or earn an income
4. Direct Tax
It is payable by the person upon whom is directly imposed by law. It cannot be
shifted or passed on to others
5. Progressive Tax
It is based upon one’s ability to pay. The rate of income tax increases as the
tax base increases.
TAX 101- INCOME TAXATION-GROSS INCOME 2
INCOME TAX SYSTEMS

1) Schedular Tax System vs, Global Tax System

SCHEDULAR GLOBAL
Tax Treatment  Income tax rules varies and  Uniform tax
made to depend on the kind or treatment or rules
category of taxable income of
the taxpayer (Tan vs, del
Rosario)
Characteristics:
1. Classification of  Categorizes or classifies  Does not
Income income “generally’
categorize or
classify income
2. Tax rates  Imposes different tax  Imposes uniform
treatment and rates tax rates
3. Applicability  Individual taxpayers  NRFC,NRA-NETB
(example)
Approach used in the Philippines
Partly scheduler (i.e. income tax for individuals) and partly global (i.e. income tax for
corporations)

2) Gross Income Taxation vs. Net Income Taxation

Gross Income Taxation Net Income Taxation

Deductions and  No deductions or exemptions  Allows
Exemptions allowed deductions/exemptions
 Example: Income  Example:
subject to final taxes Returnable income
Tax Base  Gross Income  Taxable Income
Applicability  NRA-NETB  Individual taxpayers
 Non-resident corp. except
 Corporate taxpayers
except non-resident
foreign corp.
Advantages  Minimizes source of graft  Just, fair and reasonable
and corruption due to  Equitable relief
minimization of margin of (deductions and
discretion exercised by exemptions) to taxpayers
revenue district officers  More revenue to the
 Simplifies tax system government
 Minimizes tax evasion
(subject to
counterchecking by the
BIR)

BASIC FEATURES OF PHILIPPINE INCOME TAXATION

1. It has adopted a comprehensive tax situs by using the nationality, Residence

and source rules. This makes citizens and resident aliens taxable on their income
derived from all sources while non-resident aliens are taxed only on their income
derived from within the Philippines. Domestic Corporations are also taxed on
universal income while foreign corporations are taxed only on income from within.
2. The individual tax system is mainly progressive in nature in that it provides
graduated rates of income tax. Corporations in general are taxed at a flat rate of
thirty five percent (35%) of net income.
3. It has retained more scheduler than global features with respect to individual
taxpayers but has maintained a more global treatment on corporations.

SITUS (SOURCE/PLACE) OF INCOME

Gross Income may be derived entirely from sources within the Philippines, entirely
from sources without the Philippines. For income tax purposes, “source” refers to the activity, or
property, or labor that gave rise or produced the income. Source, therefore, is the origin of the
income. “Situs” means the place of taxation of the income or the country which has jurisdiction to

TAX 101- INCOME TAXATION-GROSS INCOME 3

impose the tax (CIR v. Marubeni Corp.) The general rule is that taxing power cannot go
beyond the territorial limits of the taxing authority.
Knowledge of the “situs” of a particular income is vital in determining the taxable
income as some taxpayers are taxable on their income from all sources (income within and without
such as in case of resident citizens and domestic corporations) while others are taxable only on
their income from sources within the Philippines only. Knowledge of “situs” also avoids taxpayer’s
risks of failing to declare income which are taxable in the Philippines and likewise ensure that only
income which are taxable in the Philippines is assessed by the regulatory bodies, specifically the
Bureau of Internal Revenue. Factors affecting Situs of income are as follows:
 Residence or domicile
 Nationality
 Source of Income

RULES in determining the “situs” of income:

1. Interest
Interest income refers to income derived from interest on bonds, notes or
other interest bearing obligations of residents, corporate or otherwise. The test of source of income
is the residence of the debtor.
2. Income from services
Refers to compensation for labor or personal services performed. The test of
source of income is the place or performance of the service rendered. When services are performed
partly within the Philippines and partly without the Philippines, the allocation should be based on
“time” rendered within and without the Philippines computed as follows:
No. of days of performance in RP
No. of days of performance in RP & outside of RP × Compensation received

3. Rentals and Royalties

The test of source of income is the location of the property or the place where
the intangible is used. Rentals and royalties refer to rentals and royalties from property or from any
interest in such property, including rentals and royalties for:
a. The use of or the right of privileged to use in the Philippines any copyright, patent,
design or model, plan, secret formula or process, goodwill, trademark, trade brand
or other like property or right:
b. The use of or the right to use in the Philippines any industrial, commercial or
scientific equipment
c. The supply of scientific, technical, industrial or commercial knowledge or
information
d. The supply of any assistance that is ancillary and subsidiary to, and is furnished as
a means of enabling the application or enjoyment of, any such property or right as
in mentioned in paragraph (a). any such equipment as is mentioned in paragraph
(b) any such knowledge or information as is mentioned in paragraph (c):
e. The supply of services by a non-resident person or his employee in connection
with the use of property or rights belonging to, or the installation or operation of
any brand, machinery or other apparatus purchased from such non-resident
person:
f. Technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial
undertaking, venture, project or scheme, and the use of or the right to use:

 Motion picture films,

 Films or video tapes for use in connection with television and
 Tapes for use in connection with radio broadcasting
4. Gain on sale of real property
The test of source of income is the location of the real property.
5. Gain on sale of personal property
The test of source of income is the “place of sale” except sales of shares of
stocks of a domestic corporation. Gains, profits and income derived from the purchase of personal
property within and its sale without the Philippines, or from the purchase of the personal property
without and its sale within the Philippines shall be treated as derived entirely from sources within
the country in which it is sold.
6. Dividend Income
Maybe considered as purely income within or purely income without the
Philippines or partly income within and without. The following rules shall be observed:

TAX 101- INCOME TAXATION-GROSS INCOME 4

Source of Dividend Source of Income
Domestic Corporation Income is purely from Philippine sources
Foreign Corporation
 Base on the ratio of the Gross Income
(GI) of the foreign corporation for the
preceding 3 years prior to declaration of
dividends derived from Philippine
sources. If Ratio is:
Ratio:  < 50% income is treated as entirely
GI-Philippines derived from sources outside of the
GI- world × Dividend Philippines
 > 50% income is derived partly from
sources within and partly without the
Philippines

7. Mining
The test of source of income is the place where mine is located
8. Farming
The test of source of income is where the farm is located
9. Manufacturing Business

Source of Income
 Produced and sold within Within
 Produced and sold without Without
 Produced in whole/part within and sold Partly within and without
without
 Produced in whole/part without and sold Partly within and without
within

The term “produced” includes created, fabricated, manufactured, extracted, processed, cured or
aged (Sec. 42 (F) Code).

TAX 101- INCOME TAXATION-GROSS INCOME 5

 Republic of the Philippines
BATANGAS STATE UNIVERSITY LIPA CITY
Lipa City

COLLEGE OF ACCOUNTANCY, BUSINESS AND ECONOMICS

CHAPTER QUIZ
TAX-101-INCOME TAXATION
GROSS INCOME

Name:_____________________________ SR Code:________________
Course/Year:______________________ Score :___________________

MULTIPLE CHOICE. Choose the letter of the correct answer.

1. Income, for tax purposes:

I. Means all income from whatever source (legal or illegal), unless specifically excluded
under the Tax Code
II. Means all wealth which flows into the taxpayer other than return of capital
III. Is recognized in the year it is actually received in cash or cash equivalent
IV. Refer to the amount of money coming to a person or corporation within a specified
time, whether as payment of services, interests, or profits from investment.
a. I, II and III only c. I,II,III,IV
b. I and IV only d. None of the above
2. The sources from which income is derived
a. Labor
b. The use of capital
c. Profits derived from sale or exchange of capital assets
d. All of the above
3. The sources from which income is derived

A. B. C. D.
Labor True True True False
Gifts and True False False False
Inheritance
Use of Capital True True False False

4. Which of the following is a characteristic of income?

A. B. C. D.
Increase in True True True False
taxpayer’s
wealth
Realization of True False False False
gain
Return on True True False False
taxpayer’s
wealth

5. Which of the following is a requisite for an income to be taxable?

a. There must be gain
b. The gain must be realized or received
c. The gain must not be excluded by law from taxation
d. All of the above
6. Which of the following is not an income for income tax purposes?
a. Gain delivered from labor
b. Return on capital
c. Excess of selling price over cost of asset sold
d. Gift received
7. Which of the following is not an income for income tax purposes?
a. Collection of loans receivable
b. Condonation of debt for services rendered
c. Excess of selling price over the cost of an asset sold
d. None of the above
8. Which of the following is not a characteristic of income?
a. Increase in taxpayer’s wealth

TAX 101- INCOME TAXATION-GROSS INCOME 6

 b. Realization or receipt of gain
c. Earnings constructively received
d. Return of taxpayer’s wealth
9. Which is not a valid definition of income?
a. Income is the return from capital invested
b. Income is a fund at one distinct point of time
c. Income means all wealth which flows into the taxpayer other than a mere return
of capital
d. Income means cash or its equivalent unless otherwise specified
10. The share in a profit of a partner in a general professional partnership is regarded as
received by him and thus taxable although not yet distributed. This principle is known as
a. Actual receipt of income
b. Advance reporting of income
c. Accrual method of accounting
d. Constructive receipt of income
11. Which of the following is considered or construed as an example of “constructive receipt”?
a. Retirement benefits, pensions, gratuities
b. Fees paid to a public official
c. Interest coupons that have matured and are payable but have not been cashed
d. Deposits for rentals to answer for damages, restricted as to use
12. Constructive Receipt occurs when the money consideration or its equivalent is placed at the
control of the person who rendered the service without the restriction by the payor. The
following are examples of constructive receipt, except
a. A security deposit to ensure the faithful performance of certain obligations of the
lessen to the lessor
b. Deposit in bank which are made available to the seller of services without
restrictions;
c. Issuance by the debtor of a notice to offset any debt or obligation and acceptance
thereof by the seller as payment for services rendered
d. Transfer of the accounts retained by the payor to the account of the contractor
13. There is constructive receipt of income when:
a. Payment is credited to payee’s account
b. Payment is set aside to the payee, or otherwise made available so the payee may
draw upon it at any time, or so the payee could have drawn upon it during the
taxable year if notice of intention to withdraw had been given without substantial
limitations
c. Both “a” and “b”
d. Neither “a” nor “b”
14. As a rule, income from whatever source is taxable from whatever source may come from:
I. Gains arising from expropriation of property
II. Gambling gains
III. Income from illegal business or from embezzlement
IV. Recovery of receivables previously written off
V. Tax refunds
VI. Compensation for injury suffered
VII. Gratuitous condonation of debt
a. I and II only c. I, IV, V and VI only
b. I, IV and V only d. I, II, III, IV and V only
15. When different types of income are subjected to common tax rate, the tax system is
described as
a. Global tax system c. Scheduler tax system
b. Gross income tax system d. Final tax system
16. Situs of taxation on income from sale of property purchased.
a. Place of the seller c. Place of buyer
b. Place of sale d. As determined by the Commissioner
17. Which of the following test of source of income is incorrect?
a. Interest income – residence of the debtor
b. Income from services – place of performance
c. Royalties – place of use of intangible
d. Gain on sale of real property – place of sale
18. Situs of taxation on income from sale shares of a domestic corporation.
a. Always treated as income derived from within the Philippines
b. Always treated as income derived without the Philippines
c. May be treated as income within or without the Philippines depending on the
place of sale
d. May be treated as income within or without the Philippines depending where the
shares are kept

19. Situs of taxation on income from sale shares of a foreign corporation.

a. Always treated as income derived from within the Philippines
b. Always treated as income derived without the Philippines
TAX 101- INCOME TAXATION-GROSS INCOME 7
 c. May be treated as income within or without the Philippines depending on the
place of sale
d. May be treated as income within or without the Philippines depending where the
shares are kept
20. Pedro earned interest income from a promissory note issued to him by Juan, a resident of
California, U.S.A. Assuming that Pedro is a non-resident citizen, the interest income is
a. Subject to basic income tax
b. Subject to final tax
c. Not subject to income tax
d. Partly subject to scheduler and partly subject to final tax
21. It is important to know the source of income for tax purposes (i.e., from within or without the
Philippines) because:
a. Some individual and corporate taxpayer are taxed on their worldwide income
while others are taxable only upon income from sources within the Philippines
b. The Philippines imposed income tax only on income from sources within
c. Some individual taxpayers are citizens while others are aliens
d. Export sales are not subject to income tax
22. Situs, for taxation purposes will depend upon various factors, including
I. The nature of the tax and the subject matter thereof
II. The possible protection and benefit that my accrue both to the
government and to the taxpayer
III. Domicile or residence
IV. Source of income
a. I and IV only c. I, III, IV and V
b. I, III and IV only d. I, II, III, IV and V
23. Which of the following taxpayers is taxable on income from all sources within and outside
the Philippines?
a. Domestic Corporation c. Resident Citizen
b. Resident Foreign Corporation d. Both “a” and “c”
24. Which of the following is NOT true about source of income?
a. In case of income derived from labor, source is the place where the labor is
performed
b. In case of income derived from use of capital, source is the place where the
capital is employed
c. In case of profits from the sale r exchange of capitals assets, source is the place
or transaction occurs
d. None of the above
25. Which income from sources partly within and partly outside the Philippines is allocated on
the time basis?
a. Income of the international shipping corporation with vessels touching Philippine
ports
b. Income of a telegraph company with transmission from the Philippines to points
abroad
c. Income from goods produced in whole or in part in the Philippines and sold in a
foreign country, or vice-versa
d. Income from personal services performed in part in the Philippines and in pat
abroad
26. All of the following are correct except one. Which is the exception?
a. The source of interest income is the country where the debtor resides
b. The soured of interest income is the country where the creditor resides
c. Rents or royalties are considered derived from the country where the property is
located
d. Income from personal services is considered derived from the county where the
services were rendered
27. Statement 1: A gain from sale of share of a domestic corporation shall be considered from
the Philippines regardless of where the shares were sold
Statement 2: A gain from a sale of shares of a foreign corporation shall be considered
derived from the country where the corporation was created or organized.
a. Statement 1& 2 are false
b. Statement 1 is true but Statement 2 is false
c. Statement 1 is false but Statement 2 is true
d. Statements 1 and 2 are true
28. Which of the following is not an income derived from sources within the Philippines for
income tax purposes?
a. Interest derived from bonds issued by a foreign corporation
b. Interests on notes or other interest- bearing obligations of residents
c. Both “a’ and “b”
d. Neither “a” nor “b”
29. Which of the following statements is correct with respect to valuation of income?
a. The amount of income recognized is generally the value received or which the
taxpayer has a right to receive
TAX 101- INCOME TAXATION-GROSS INCOME 8
 b. If the services were rendered at a stipulated price, in the absence of any evidence
to the contrary, such price shall be presumed to be the fair market value of the
compensation received
c. Transfer of land made by a person to another in payment of services rendered in
the form of attorney’s fees shall be considered as part of the gross income of the
latter valued at either the fair market value or the zonal valuation, whichever is
higher, in the taxable year received.
d. All of the above.
30. A cash dividend of P100, 000 received by a taxpayer in 2015 from a foreign corporation
whose income from Philippine sources is 40% of its total income is
Statement 1: partly taxable if he is a resident citizen
Statement 2: partly taxable if he is a non-resident alien
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
31. Using the above data, which of the following is correct? The cash dividend is:
a. Exempt from income tax if he is a resident citizen
b. Partly taxable if he is a resident alien
c. Taxable in full if he is a non-resident citizen
d. Exempt from income tax if he is a non-resident alien
32. A taxpayer is employed by a shipping company touching Philippine and foreign ports. In
2007, he received a gross payment for his services rendered of P 300, 000. In that year, the
vessels on board of which he rendered services had a total stay in Philippine ports of four
months. His gross income from the Philippine was
a. P 300, 000 c. P 150, 000
b. P 0 d. P 100, 000
33. Assume the following:
Gain on sale of personal property purchased P 400, 000
in the Philippines and sold in Hongkong
Compensation received for personal services 200, 000
in the Philippines
Rent Income from real property in Malaysia 300,000
Gain from sale in the Philippines of shares of 100,000
a foreign corporation
Deductions identified with:
Philippine income 80,000
Foreign Income 120,000
Deductions unidentified with any particular 30,000
income
The Philippine net income is:
a. P 220, 000 c. P 190, 000
b. P 211, 000 d. P 111, 000
34. An operator of an illegal horse betting business, single, has the following data in 2018:
Receipt from illegal bets P600, 000
Rent of space where bets are received, gross of 120, 000
5% withholding tax
Salaries of assistants, gross of creditable 100,000
withholding tax
Bribe money to obtain protection from arrest 50,000
and prosecution

How much is the taxable income

a. P 380,000 c. P180, 000
b. P330, 000 d. P150, 000

Use the following data for the next two (2) questions:
A resident alien had the following data in 2018:
Gross Income, Philippines P 2, 000, 000
Business expenses 1, 200, 000
Dividends received:
From domestic Corporation (net)
60% of its income came from the Philippines
40% of its income came from the Philippines
From resident foreign corporation (gross)
60% of its income came from the Philippines 50, 000
40% of its income came from the Philippines 40, 000

TAX 101- INCOME TAXATION-GROSS INCOME 9

 35. The taxpayer’s taxable income is
a. P 750, 000 c. P 796, 000
b. P 830, 000 d. P 800, 000
36. The final withholding taxes on dividends amount to
a. P 16, 200 c. P 25, 200
b. P 18, 000 d. P 26, 000
Use the following data for the next two (2) questions:
F5 Corporation, a domestic corporation had the following data during the calendar year 2012
Gross Income, Philippines P 10, 000, 000
Allowable itemized deductions/expenses 4, 000, 000
Dividend income FROM:
a. Domestic Corporation 1, 000, 000
b. Foreign Corporation, 80% of its gross 1, 000, 000
income were derived from the Philippines
c.Foreign Corporation, 60% of its gross 800, 000
income were derived from the Philippines
d.Foreign Corporation, 25% of its gross 400, 000
income were derived from the Phiippines
37. The taxable income is
a. P 9, 200, 000 c. P 8, 200, 000
b. P 7,500, 000 d. P 7, 430, 000
38. Assume that F5 Corporation is a resident foreign corporation, how much is the taxable
income?
a. P 9, 200, 000 c. P 8, 200, 000
b. P 7, 500, 000 d. P 7, 280, 000
Use the following data for the next two (2) questions:
Lenovo,Inc., a resident foreign corporation, has earned the following income during 2018
taxable year;
Dividend Income from:
Microsoft, a non-resident corporation P 500, 000
Intel, a resident foreign corporation 400, 000
IBM, a domestic corporation 300, 000
Interest Income from:
Current account, BDO 600, 000
Savings deposit, ABN-AMRO bank, UK 700, 000
US dollar deposit (FCDU)- BPI Makati 800, 000
Royalty income from various domestic corporations 100, 000
Additional Information:
 The ratio of Microsoft’s gross income in the Philippines over worldwide income for the past
three years is 40%
 The ratio of Intel’s gross income in the Philippines over worldwide income for the past three
years is 60 %
 the ratio of IBM’s gross income in the Philippines over worldwide income for the past three
years is 80%

39. How much is the total income tax expense of Lenovo?

a. P 200, 000 c. P 320, 000
b. P 400, 000 d. P 272, 000
40. Assuming Lenovo is a domestic corporation, how much is its total income tax expense of
Lenovo?
a. P 200, 000 c. P 740, 000
b. P 560, 000 d. P 680, 000
Use the following data for the next three (3) questions:
Sandara, a non-resident Korean stockholder, received a dividend income of P 300, 000 in
2015 from Super Bowl Corporation, a foreign corporation doing business in the Philippines. The
gross income of the foreign corporation from sources within and without the Philippines for the past
three years preceeding 2015 is provided as follows:
Source 2012 2013 2014
Philippines P 16, 000, 000 P 15, 000, 000 P 17, 000, 000
Abroad 8, 000, 000 11, 000, 000 13, 000, 000
41. The amount of income subject to tax should be:
a. P 0 c. P 180, 000
b. P120, 000 d. P300, 000
42. Sandara is subject to:
a. Basic income tax on P180, 000
b. Basic income tax on gross income of P300, 000
c. Final withholding tax of 25% on P180, 000
d. Final withholding tax of 25% on gross income of P300, 000
43. Assuming Super Bowl is a domestic corporation, the amount of income subject to tax should
be:
a. P0 c. P180, 000
TAX 101- INCOME TAXATION-GROSS INCOME 10
 b. P120, 000 d. P300, 000
44. Sandara, a non-resident citizen, received a dividend income of P300, 000 in 2015 from Super
Bowl Corporation, a foreign corporation doing business in the Philippines. The gross income
of the foreign corporation from sources within and without the Philippines for the past three
years preceding 2015 is provided as follows:
Source 2012 2013 2014
Philippines P 14, 000, 000 P 10 000, 000 P 12, 000, 000
Abroad 10, 000, 000 16, 000, 000 18, 000, 000

The amount of income subject to tax should be:

a. P0 c. P165, 000
b. P135,000 d. P300, 000

TAX 101- INCOME TAXATION-GROSS INCOME 11