Jackie, a resident citizen, purchased a parcel of land, measuring 1,000 square meters at a price of P2,000,000), on January 5, 2021. Due to the construction of a subway station a few hundred meters away from Jackie's parcel of land, the fair market value of the land increased to P15,000,000 by 2022. Jackie procured an appraiser to determine the new value of the land, and the appraiser affirmed the increase to P15,000,000. The land was used as a collateral to secure a loan amounting to P10,000,000 by way of a real estate mortgage. The proceeds of the loan were used by Jackie to construct buildings on the land for leasing. Is Jackie subject to income tax? A. No. Loans are exempt from all internal revenue taxes. B. Yes. The amount that will be subject to income tax is P13,000,000. C. Yes. The amount that will be subject to income tax is P15,000,000. D. No. The increase in value of the land is not subject to income tax.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter3: Income Sources
Section: Chapter Questions
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Jackie, a resident citizen, purchased a parcel of land, measuring 1,000 square meters at a price of P2,000,000), on January 5, 2021. Due to the construction of a subway station a few hundred meters away from Jackie's parcel of land, the fair market value of the land increased to P15,000,000 by 2022. Jackie procured an appraiser to determine the new value of the land, and the appraiser affirmed the increase to P15,000,000. The land was used as a collateral to secure a loan amounting to P10,000,000 by way of a real estate mortgage. The proceeds of the loan were used by Jackie to construct buildings on the land for leasing.

Is Jackie subject to income tax?

A. No. Loans are exempt from all internal revenue taxes.
B. Yes. The amount that will be subject to income tax is P13,000,000.
C. Yes. The amount that will be subject to income tax is P15,000,000.
D. No. The increase in value of the land is not subject to income tax.
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