Chapter 4 Flashcards
What are the three income taxation schemes under the NIRC?
Final income taxation
Capital gains taxation
Regular income taxation
Are the tax schemes mutually inclusive or exclusive?
They are mutually exclusive meaning that an item of gross income that is subject to tax in one scheme will not be taxed by the other schemes.
This is characterized by final taxes wherein full taxes are withheld by the income payor at the source.
Final income taxation
This kind income is earned with very minimal or even without active involvement of the taxpayer in the earning process.
Passive income
This arises from transactions requiring a considerable degree of effort or undertaking from the taxpayer.
Active or regular income
These are all properties held by the taxpayer, whether or not connected with his trade of business, and which are not included among the properties considered as ordinary assets under Section 39 of the Tax Code.
Capital assets
These are all properties specifically excluded from the definition of capital assets.
Ordinary assets
This is imposed on the gain realized on the sale, exchange, and other dispositions of certain capital assets.
Capital Gains Tax
This is the length of time over which income is measured and reported.
Accounting period
This accounting period is 12 months in length.
Regular accounting period
This accounting period is less than 12 months.
Short accounting period
This accounting period starts from January 1 and ends December 31.
Calendar accounting period
This accounting period is any 12-month period that ends on any day other than December 31.
Fiscal accounting period
When is the deadline of filing the income tax return?
On the 15th day of the fourth month following the close of the taxable year of the taxpayer
What is the accounting period of a newly commenced business?
The start of the business until the designated year-end of the business
What is the accounting period of a business that will be dissolved?
The start of the current year to the date of dissolution
What is the accounting period of a business that changed accounting period?
the start of the previous accounting period to the designated year-end of the new accounting period
What is the accounting period of a dead taxpayer?
The start of the calendar year to the date of death
What is the accounting period of a taxpayer whose accounting period is terminated by the CIR?
Start of current year to the date of termination
If a taxpayer has more than one type of business, utilizing various accounting methods, should he report his income using a common one?
No kasi pwede naman magconsolidate
Under this basis of accounting, income is recognized when earned regardless of when received and expense is recognized when it is incurred regardless of when paid.
Accrual basis
Under this basis of accounting, income is recognized when received and expense is recognized when paid.
Cash basis
Under this method, gross income is recognized and reported in proportion to the collection from the installment sales.
Installment method
This means the total payment made by the buyer, in cash or in property, int he taxable year the sale was made.
Initial payment
This is the entire amount for which the buyer is obligated to the seller.
Selling price
This is the amount receivable in cash or other property from the buyer
Contract price
This is the value of the asset used in determining gain or loss upon sale. It is the difference between the purchase price and the accumulated depreciation.
Tax basis
This is the sale of properties of which the seller is not the dealer
Casual sale
This isa. variant of the accrual basis and is used in reporting income when a non-interest bearing note is received as consideration in a sale.
Deferred payment method
In this method, the estimated gross income from construction is reported base don the percentage of completion of the constriction project.
Percentage of completion method
These are tangible improvements made by the lessee to a property of the lessor
Leasehold improvements
In this method, the lessor may report as income the fair market value of such buildings or improvements subject tot he lease at the time when such building or improvements are completed.
Outright method
In this method, the lessor may spread over the life of the lease the estimated depreciated value of such buildings or improvements at the termination of the lease and report as income for each year of the lease an aliquot part thereof.
Spread-out method
This refers to the science of breeding and caring for farm animals.
Animal husbandry
These are those crops that yield harvests through years.
Perennial crops
These are crops that are harvested once after several years
One-time crops
Under this method, farming income is recognized as the difference between the proceeds of the harvest and expenses of the particular crop harvested. Here, the expenses of each crop are accumulated and deducted upon the harvest of the crop.
Crop year basis
What is the surcharge for failure to file or pay deficiency tax on time?
25% of basic tax
What is the surcharge for willful neglect to file and pay taxes
50% of basic tax
What is the penalty for wrong venue filing of tax?
25% of basic tax
What is the penalty for filing of fraudulent return?
50% of basic tax
What is the interest of tax penalty?
12% per annum (computed on actual days of delay)
This is an amount paid in lieu of criminal prosecution over a tax violation.
Compromise penalty
What is the compromise penalty of 20,000 to 50,000 tax unpaid.
10,000
What is the compromise penalty of 50,000 to 100,000 tax unpaid?
15,000
What is the compromise penalty of 100,000 to 500,000 tax unpaid?
20,000
