1. **Problem Statement:** Calculate the tax due for Lili Corp. under two scenarios: availing Optional Standard Deduction (OSD) and availing Itemized Deductions for the year 2021. 2. **Given Data:** - Gross Sales = 7,500,000 - Cost of Sales = 3,000,000 - Itemized Deductions = 2,500,000 3. **Formulas and Rules:** - OSD is 40% of Gross Sales. - Taxable Income = Gross Sales - Cost of Sales - Deductions (OSD or Itemized) - Corporate tax rate assumed at 30% (standard corporate tax rate). --- ### When OSD is availed (Questions 1 to 3): 1. Deduction allowed = 40% of Gross Sales $$\text{OSD} = 0.40 \times 7,500,000 = 3,000,000$$ 2. Taxable Income: $$\text{Taxable Income} = 7,500,000 - 3,000,000 - 3,000,000 = 1,500,000$$ 3. Tax Due: $$\text{Tax Due} = 0.30 \times 1,500,000 = 450,000$$ --- ### When Itemized Deductions are availed (Questions 4 to 6): 4. Deduction allowed = Itemized Deductions = 2,500,000 5. Taxable Income: $$\text{Taxable Income} = 7,500,000 - 3,000,000 - 2,500,000 = 2,000,000$$ 6. Tax Due: $$\text{Tax Due} = 0.30 \times 2,000,000 = 600,000$$ --- 7. Comparison: Tax due when OSD is availed (450,000) is **lower** than when Itemized Deductions are used (600,000). **Final answers:** 1. 3,000,000 2. 1,500,000 3. 450,000 4. 2,500,000 5. 2,000,000 6. 600,000 7. Lower