Itemized Deductions

Which of the following statements is true?

• Payments which constitutes bribes, kickbacks, and others of similar nature which are necessary to realize the profit are allowed as deduction from gross income

• The taxes which are deductible from gross income include the taxes, interest and penalties incident to tax delinquency

• Deductions are amounts allowed by the Tax Code to be deducted from gross income to arrive at the income tax liability of a taxpayer.

• Losses from wagering transactions shall be allowed only up to the extent of the gains from such transactions.

No deductions shall be allowed where the transaction is between “related taxpayers” for:

1. Losses from sales or exchanges of property

2. Interest expense

3. Bad debts

• 1 and 2 only

• 2 and 3 only

• 1 and 3 only

• 1, 2 and 3

Which is not a requisite of a deductible loss?

• It must be sustained by the taxpayer in the current year.

• It must be reported to the BIR within 45 days from the occurrence of the loss.

• It must be compensated by insurance or indemnity contracts.

• It must pertain to a property connected to the trade, business or profession of the taxpayer.

Bad debt expenses include

• Uncollectible debts due to the taxpayer.

• Securities becoming worthless.

• Both A and B

• Neither A nor B

Wagering losses are deductible

• In full

• To the extent of capital gains

• Up to the extent of gains on wagering transactions

• Are treated as deferred charge subject to amortization over 60 months.

A taxpayer engaged in business incurred a partial loss of property as follows:

Book value of the asset at the time of loss

Asset 1 P200,000

Asset 2 P200,000

Cost to restore the property back to its normal operating condition

Asset 1 P120,000

Asset 2 P300,000

Insurance recovery

Asset 1 P50,000

Asset 2 None

Salvage

Asset 1 None

Asset 2 P40,000

The deductible loss for asset 1 is

• P120,000

• P70,000

• P30,000

• P80,000

A taxpayer engaged in business incurred a partial loss of property as follows:

Book value of the asset at the time of loss

Asset 1 P200,000

Asset 2 P200,000

Cost to restore the property back to its normal operating condition

Asset 1 P120,000

Asset 2 P300,000

Insurance recovery

Asset 1 P50,000

Asset 2 None

Salvage

Asset 1 None

Asset 2 P40,000

The deductible loss for asset 2 is

• P300,000

• P200,000

• P160,000

• P240,000

The following relates to a taxpayer:

Interest expense P 400,000

Interest income - promissory notes

P 100,000

Compute the deductible interest expense

• P 400,000

• P 367,000

• P 333,000

• P 300,000

MDG Corporation is engaged in trading business. The reported income and expenses for taxable year 2010 show:

Sales P10,000,000

Cost of sales 6,000,000

General business expenses 1,000,000

Interest on time deposit (gross) 100,000

Interest expense on loans payable 180,000

The net taxable income is

• P2,858,000

• P2,820,000

• P3,000,000

• P2,862,000

Who cannot claim foreign income tax credit?

• Resident citizens

• Domestic corporation

• Resident aliens

• None of these