Problem 1. M Corporation provided you with the following records:

Payment for damages for unrealized profits deposited

in court by a competitor in favor of M Corporation P60,000

Interest credited on peso-savings deposit, net of tax 40,000

Decrease in value of investment in bonds, not yet collected 50,000

Matured interest on coupon bonds, not yet collected 80,000

Cancellation of indebtedness from J Corporation 120,000

Increase in the fair market value of ABC equity investments 30,000

Profit share in joint venture not yet received 200,000

Based on the foregoing information, how much is the total amount of realized income of M Corporation?

Problem 2: Mr. M received the following earnings during the year:

Winnings P8,000

Prizes 40,000

Capital gain from the sale of land; FMV 2M, Cost 1.7M 400,000

Salary, net of withholding tax of P30,000 300,000

Professional fee, net of 10% withholding tax 495,000

a.) How much of the income above is considered income subject to regular tax?

b.) Using the same information above, how much is the tax base subject to final tax?

Problem 3:

The records of ABC Trading for the current year show the following:

January 1, 2020 December 31, 2020

Assets 500,000 300,000

Liabilities 150,000 50,000

During the year, the sole proprietor made a total withdrawal from the business amounting to 240,000.

Using the information above, how much is the net taxable income using the Net Asset Approach?

Problem 4. Mr. X is an investor in ABC Corporation. In 2020, he has 1,000 share holdings acquired at P120 per share classified as capital asset. Mr. X uses FIFO in costing his investment holdings.

2021 Transactions:

Month Transactions

January 2 Received stock dividends 2 shares for every 10 share holdings.

March 15 Sold 500 shares of ABC Corporation for P120 per share

April 12 Purchased 300 shares of ABC Corporation for P150 per share.

May 18 Sold 500 shares of ABC Corporation for P90 per share.

a. What would be the net capital gain in March?

b. How much is the nondeductible loss in May?

c. Supposing that all the remaining shares were liquidated in December 2021 at 130 per share, what would be the capital gain(loss) to be recognized. NOTE: In this item, if your answer is a loss, enclose it with parentheses, e.g. (P45,000.00)

Problem 5. On March 1, 2021, Lala received a building property from her parents as inheritance with fair market value of P10,000,000.00. The property was acquired for P8,000,000.00 five years ago by her parents. The monthly rental income of the property is P100,000.00 with an average monthly expense of P20,000.00. Lala's taxable income for the year, if any is: