Professional Documents
Culture Documents
Intro. To Internal Revenue Taxes: Business and Transfer Taxation 6Th Edition (By: Valencia & Roxas) Suggested Answers
Intro. To Internal Revenue Taxes: Business and Transfer Taxation 6Th Edition (By: Valencia & Roxas) Suggested Answers
SUGGESTED ANSWERS
Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES
CHAPTER 1
INTRO. TO INTERNAL REVENUE TAXES
Problem 1-1
1. False – National Internal Revenue Taxes are collected by the BIR.
2. False – professional tax is collected by the local government.
3. True
4. False – Only sales within are subject to business tax in the Philippines.
5. False – business tax is another Internal Revenue Tax distinct from income tax.
6. False – When there is loss, business tax is paid but no income tax.
7. True
8. False – it is the other way around.
9. True
10. True
11. True
12. True
13. False – citizens whether resident or nonresident are subject to transfer tax within..
14. False – on the 20th of the month following the taxable month.
15. True
Problem 1-2
1. True
2. False – there is no double taxation because income tax is different from business tax.
3. True
4. True
5. False – Donation is without consideration; hence, not onerous transfer.
6. False – Sale of family home is not subject to business tax because a family home is not
business asset.
7. True – one for the first quarter and the other is the annual ITR.
8. False – monthly payment is both on the 20th of the next month.
9. True
10. False – the requirement is P100,000 in any quarter of the preceding year.
11. False – electronic filing and payment is required only to large taxpayers.
12. False – It is the BIR Commissioner that should recommend.
13. True
14. False – only income earned within will be taxable against resident alien
15. False – should be at least P1,000,000 per year.
Problem 1–6 A
Income tax due P270,000
Divided by normal corporate income tax rate 30%
Amount subject to income tax per ITR P900,000
Problem 1–7 B
Gross income from ordinary operation P3,300,000
Add: Cost of sales P2,170,000
Sale of scrap materials 30,000 2,200,000
Total amount subject to business tax P5,500,000
Problem 1–8 C
Cancellation of indebtedness from:
Abun Daboy, a friend P 50,000
Grace, current girlfriend 10,000
Kristita, his sister 5,000
Hacienda Luisita 100,000
Inheritance from Coritita, his mother 1,000,000
Amount included for transfer tax reporting P1,165,000
Problem 1–9 D
Fair market value, higher amount
Capital gains tax (P4,000,000 x 6%) P240,000
Add: Documentary stamp tax (P4,000,000 x 1.5%) 60,000
Total amount of taxes paid to the BIR P300,000
Problem 1–10 C
VAT (P10,000,000 x 12%) P1,200,000
Income tax:
Gross income (P10,000,000 – P6,000,000) P4,000,000
Less: OSD (P4,000,000 x 40%) – tax minimization 1,600,000
Net taxable income P2,400,000
Multiplied by normal corporate income tax 30% 720,000
DST (P10,000,000 x 1.5%) 150,000
Total national tax P2,070,000
Problem 1–11
1. Letter A
Subject to business tax is P6,000,000. Only sales within are subject to business tax.
Since the donor is a citizen, all of his properties donated within and without is subject to
donor’s tax.
2. Letter B
Subject to business tax is P6,000,000. Only sales within are subject to business tax.
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 3
SUGGESTED ANSWERS
Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES
Subject to income tax:
Sales – within P6,000,000
Cost of sales – within (2,000,000)
Gross income P4,000,000
Since the donor is a citizen, all of his properties donated within and without is subject to
donor’s tax.
Problem 1–12 A
a. The administrator of JC does not need to file and pay the Philippine estate tax because his
properties are not situated in the Philippines.
This is incorrect because the all properties of a Filipino citizen situated within and outside
the Philippines are object of Philippine estate tax.
Problem 1–13
1. B 6. B
2. O 7. B
3. O 8. O
4. O 9. T
5. O 10. T
Problem 1–14
Taxable Amount
Within Without Res. Citizen Res. Alien Non-Res.
Alien
Sales 3,000,000 2,000,000 3,000,000 3,000,000 3,000,000
Gross income 600,000 400,000 1,000,000 600,000 600,000
Problem 1–15
Problem 1–16
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
BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 4
SUGGESTED ANSWERS
Chapter 1: INTRODUCTION TO
INTERNAL REVENUE TAXES
Problem 1–17
1. a. Business tax (professional income-within) P500,000