Practice question
A sole proprietor validly elects OSD and reports stipulated gross sales ofP 2,000,000. He first subtractsP 1,000,000 cost of sales to obtain gross income, applies 40% to that amount, and then claims his ordinary itemized operating expenses as an additional deduction. Which correction is proper?
- Use 40% of gross sales as the individual OSD base and do not add deductions displaced by that OSD election
- Use the corporate gross-income base because all businesses are identical
- Allow both OSD and all displaced itemized deductions
- Use 40% of gross assets
- Treat the OSD as a direct credit against the tax due
Legal references
- NIRC Section34(L), as amended by RA10963: https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/80559
- RA9504, Section3: https://lawphil.net/statutes/repacts/ra2008/ra_9504_2008.html
- RR16-2008, Sections3–4 (individual and corporate OSD bases): https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/10/43850
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