BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS

Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES

CHAPTER 1

INTRO. TO INTERNAL REVENUE TAXES

Problem 1-1
1. True as to the object of tax
2. True as a general rule, except if the merchandise is sold outside the Philippines not subject
to business tax in the Philippines. If the resident Filipino citizen is within the subsistence
livelihood earnings, tax-exempt.
3. False business tax is another Internal Revenue Tax distinct from income tax.
4. True
5. False it is the other way around.
6. True
7. True
8. True
9. True
10. False citizens, resident or nonresident are subject to transfer tax for transfers within..
11. False on the 20th of the month following the taxable month.
12. True
13. False only income earned within will be taxable against resident alien
14. False should be at least P1,000,000 per year.
Problem 1-2
1. A
2. A
3. C
4. B
5. A
6. B
7. A
8. D
9. C
10. A
11. D
12. A
13. C

Problem 1-3
1. D
2. A
3. C
4. A
5. C
6. A
7. D
8. A
9. C
10. C
11. D
12. D
13. A

Problem 14

1. A
Subject to business tax is P6,000,000. Only sales within are subject to business tax.
Subject to income tax:
Total sales (P6,000,000 + P4,000,000)
Total cost of sales (P2,000,000 + P1,500,000)
Gross income

P10,000,000
( 3,500,000)
P 6,500,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS

Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES

Subject to transfer tax (P3,000,000 + P2,000,000)

P 5,000,000

Since the donor is a citizen, all of his properties donated within and without is subject to
donors tax.

2. B

Subject to business tax is P6,000,000. Only sales within are subject to business tax.

Subject to income tax:

Sales within
Cost of sales within
Gross income

P6,000,000
(2,000,000)
P4,000,000

Subject to transfer tax (P3,000,000 + P2,000,000)

P5,000,000

Since the donor is a citizen, all of his properties donated within and without is subject to
donors tax.
Problem 15
1. B
2. O
3. O
4. O
5. O

6. B
7. B
8. O
9. T
10. T

Problem 16

Sales
Gross income

Within

Without

Res. Citizen

3,000,000
600,000

2,000,000
400,000

3,000,000
1,000,000

1.

Taxpayer is a resident citizen

a. P1,000,000 = [P5,000,000 (P5,000,000/1.25)]
b. P3,000,000

2.

Taxpayer is a resident alien

a. P600,000 = [P3,000,000 (P3,000,000/1.25)]
b. P3,000,000

3.

Taxpayer is nonresident alien

a. P600,000 = [P3,000,000 (P3,000,000/1.25)]
b. P3,000,000

Problem 17
1.

P720,000 = (P600,000 x 1.2)

Taxable Amount
Res. Alien
3,000,000
600,000

Non-Res.
Alien
3,000,000
600,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS

Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES

2.

P180,000 = (P720,000 P600,000) + (P660,000 P600,000)

Problem 18
1. Tax returns:
a. BIR Form 2551 for business tax
b. BIR Form 1701Q for quarterly income tax return
c. BIR Form 1701 for annual income tax return
2.

Dates of filing and payments:

a. On or before the 20th of each month (BIR Form 2551)
b. April 15, August 15, and November 15 for the first 3 quarters and April 15 of the
following year for the annual tax return