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Solution Manual (2019) PDF
Solution Manual (2019) PDF
MULTIPLE CHOICE
1. D 12. C 23. D 34. D 45. B
2. A 13. C 24. B 35. B 46. C
3. D 14. B 25. D 36. B 47. D
4. C 15. D 26. D 37. D 48. D
5. C 16. C 27. B 38. B 49. A
6. A 17. B 28. D 39. D 50. B
7. B 18. D 29. A 40. D 51. A
8. A 19. C 30. D 41. B 52. D**
9. B 20. B 31. B 42. D 53. D
10. A 21. B 32. A 43. B 54. D
11. D 22. B 33. D 44. B 55. B
**Inheritance and repudiation takes effect upon death of the decedent
PROBLEM SOLVING
(P2.1) (1) P19,300,000 (2) P19,300,000 (3) P11,000,000 (4) P14,300,000
Citizen/ Resident NRA with R NRA w/o R
(# 1 & 2) (# 3) (# 4)
Family home in the Philippines P8,000,000 P8,000,000 P8,000,000
Parcel land of with vacation house in Malaysia 5,000,000
Farm land in the Philippines 3,000,000 3,000,000 3,000,000
Shares of stock of a DC 2,000,000 2,000,000
Shares of stock of a foreign corporation the entire business of which 500,000 500,000
is in the Philippines, deposited in a bank safety deposit box in
Malaysia
Receivable from a friend who has no property whatsoever 300,000 300,000
Receivables under insurance policies:
▪ Life insurance with his estate as revocable beneficiary 200,000 200,000
▪ Life insurance with his daughter as revocable beneficiary 300,000 300,000
▪ Life insurance with his son as irrevocable beneficiary - - -
▪ Life insurance (group) taken by the employer of the decedent - - -
TOTAL GROSS ESTATE P19,300,000 P11,000,000 P14,300,000
(P2.3)
Shares of stock (Frozen Co.)
[(P8M+3M)/800,000sh x 100,000 shares P1,375,000
Shares of stock (Divergent Co..)
100,000 shares x P15** 1,500,000
Shares of stock (Lenovo Co..)
100,000 shares x P12 1,200,000
Total Gross Estate P4,075,000
***Mean value shall be used only if the quotation price at the date of death is not determinable (RR 2-2003)
(P2.4) (1)P230,0000; (2)P1,100,000; (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] = P1,150,000
MODIFIED IDENTIFICATION
EXERCISE A
1. Included 6. Excluded
2. Included 7. Excluded *
3. Excluded 8. Included **
4. Included 9. Excluded
5. Excluded 10. Included***
*Designated by the prior decedent
**Exclusions from the gross estate. Nonetheless, the tax code requires these items to be included first in the gross
estate before deducting the same from the gross estate.
*** Bequests to charitable institutions are considered exclusions from the gross estate only if the problem clearly states
that not more than 30% were used for administrative purposes. However, even if not more than 30% of the bequests
were used for administrative purposes, since whether or not such is exempt will undergo scrutiny first by the BIR, these
items shall be included first in the gross estate before deducting the same for estate tax purposes.
EXERCISE B EXERCISE C
1. P0; valid sale 1. P10M
2. P0; valid sale 2. P20M
3. P0; valid sale 3. P5M
4. P4,000,000 4. P10M
5. P6,000,000 5. P0
TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. TRUE
3. TRUE 8. FALSE 13. TRUE 18. FALSE
4. FALSE 9. TRUE 14. FALSE 19. TRUE
5. TRUE 10. TRUE 15. FALSE 20. FALSE
MULTIPLE CHOICE
1. A 16. D 31. C 46. C 61. A
2. B 17. C 32. C 47. D 62. A
3. D 18. B 33. B 48. C 63. A
4. B 19. D 34. A 49. C 64. C
(22).
Common stock-Sunchamp [(P40+39)/2] x 2,000 shares P79,000
Common stock – AgriNurture (1,500 shares x P45) 67,500
Preferred stock – Greenery (3,000 shares x P50 par value) 150,000
Car @ FMV 400,000
Real properties @ zonal value 120,000
Total Exclusion from the gross estate P816,500
(23).
Bank deposit in the foreign branch of a domestic bank P500,000
Bank deposit in Makati branch of a foreign bank 300,000
Shares of stock issued by a domestic corporation 1,000,000
(certificate kept in Canada)
Franchise exercised in Manila 800,000
Receivable, debtor from Mindanao 200,000
Total Exclusion from the gross estate P2,800,000
(24).
House and lot, family home in Quezon City P1,500,000
Bank deposit in Makati branch of a foreign bank 300,000
Shares of stock issued by a domestic corporation 1,000,000
(certificate kept in Canada)
Franchise exercised in Manila 800,000
Receivable, debtor from Mindanao 200,000
Total Inclusion from the gross estate P3,800,000
(26).
Shares of stocks, domestic corp. P250,000
(certificate kept in UK)
Shares of stocks, domestic corp. 100,000
(certificate kept in Phils.)
Franchise exercised in the Phils. 200,000
Receivables, debtor is from Phils. 50,000
Intangibles subject to reciprocity P600,000
(27).
Land & building, Philippines P2,000,000
House and lot, Philippines 3,500,000
Shares of stocks, domestic corp. (certificate kept in UK) 250,000
Shares of stocks, domestic corp. (certificate kept in Phils.) 100,000
Franchise exercised in the Phils. 200,000
Receivables, debtor is from Phils. 50,000
Gross Estate P6,100,000
(48). Includible in the Gross Estate = FMV @ time of “+” less Consideration received = P300k-P100k =
P200,000
PROBLEM SOLVING
Case D: P250,000
Total Assets P1,200,000
Taxes payable (Gov’t is a priority creditor) (800,000)
Assets after deducting unpaid taxes P400,000
(P3.9)
Question 1: P7,308,013; (Decedent: Resident Citizen)
Question 2: P7,308,013; (Decedent: Resident Alien) (same computation with Q#1).
(P3.10)
Question No. 1
TFPU P300,000
House and Lot in Makati (Family Home) 1,500,000
Farm Lot 825,000
Other real properties 15,000,000
Claim against insolvent person 225,000
Transfer in contemplation of death 1,250,000
Total Gross Estate P19,100,000
Allowable Deductions
Funeral expenses -
Judicial expenses -
TFPU (correct amount) (300,000)* *
Claim against insolvent person (225,0000)**
Unpaid mortgage on farm lot (75,000)**
Standard deduction (5,000,000)
Medical expenses -
Family Home (1,500,000)
TAXABLE NET ESTATE P12,000,000
(P3.11)
Question No. 1
VALUE TO TAKE (LAND) P1,250,000
MORTGAGE PAID (50,000)
INITIAL BASIS 1,200,000
Proportionate Deduction:
(1,200/12,800 x P700,000**) (65,625)
FINAL BASIS P1,134,375
VANISHING DEDUCTION % 40%
VANISHING DEDUCTION P453,750
Correct ELIT + TFPU:
=1,200k+100k-300k-600k+300k TFPU=P700,000***
Question No. 2
Gross Estate P12,800,00
0
Correct Losses, Indebtedness, Taxes (LIT) (400,000)
TFPU (300,000)
Vanishing deduction (453,750)
Standard deduction (5,000,000)
Family Home (2,000,000)
Medical expenses (repealed under TRAIN -
Law)
Death benefits under RA4917 (200,000)
Net taxable estate P4,446,250
TRUE OR FALSE
MULTIPLE CHOICE
1. C 11. D 21. D 31. D
2. D 12. D 22. C 32. A
3. C 13. A 23. C 33. A
4. D 14. A 24. A 34. C
5. A 15. B 25. C 35. D
6. A 16. B 26. B 36. A
7. A 17. B 27. B 37. A
8. D 18. C 28. D 38. A
9. D 19. A 29. A 39. C
10. C 20. C 30. B 40. B
(6.) A
Real property tax for the year 2017 P100,000
Notarized interest bearing promissory note 100,000
Accrued interest on the promissory note at the time of death 20,000
Income tax due for 2013 200,000
Allowable deductions P420,000
(12). D
Income tax from practice of profession , 2017 P300,000
Income tax from practice of profession for Jan.-June, 2018 100,000
Real property taxes for 2016 and 2017 150,000
Business taxes for 2017 100,000
Deductible taxes P650,000
(29). A
Value to take/Initial Basis P900,000
Mortgage paid (50,000)
Initial basis 850,000
(39). C
Gross Estate P6,000,000
(Tangible property Phils.; with reciprocity)
Prorated LIT (1,200,000 x 6,000/10,000,000) (720,000)
Standard deduction (500,000)
Taxable Estate P4,780,000
(40). B
Shares, domestic corporation P500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
Prorated LIT (500,000 x 2,000/2,500) (400,000)
Standard deduction (500,000)
Taxable Estate P1,100,000
TAX DUE
Estate Tax Due (P1.1M x 6%) P66,000
PROBLEM SOLVING
P4.1
ACP CPG
1. C
E
2. C
C
3. C
C
4. C
C
5. C
E
6. C
C
7. E
E
8. E
C
9. C
C
10. C
C
11. C
C
12. E
E
13. C
E
14. E
C (All fruits or income e are common property under CPG. Hence,
the property purchased shall be classified as common.
15. E E
P4.2
Absolute Community of Property (ACoP)
a) P12,400,000
b) P19,500,000
VANISHING DEDUCTION**
**VANISHING DEDUCTIONS:
Value to take P500,000
st
1 Deduction: Mortgage paid -
Initial basis P500,000
nd
2 Deduction: Proportionate deduction
****
Since the properties were already classified as exclusive and common, it should be assumed that the exclusive
properties were already inclusive of transfer for public use.
P4.4 (Decedent: Resident Alien; Single) (a) Net Taxable estate = P49,500,000; (b)Estate tax due = P2,970,000
House and lot, USA * P20,000,000
Investment in stock, Philippines 8,000,000
Investment in stock, USA 10,000 000
Investment in bonds, USA 7,000,000
Cash in bank, Philippines 3,000,000
Cash on hand, Philippines 500,000
Claim against insolvent person (fully uncollectible) 2,000.000
Car, Philippines 8,000,000
Receivable under RA 4917 500,000
Devise to Quezon City for children’s playground** 700,000
Total Gross Estate P59,700,000
Ordinary Deductions:
Funeral expenses P-
Judicial expenses -
Unpaid Philippine income tax for income in 2017 1,200,000
Loss on December 31, 2018 due to theft 800,000
Devise to Quezon City for children’s playground 700,000
Claim against insolvent person (fully uncollectible) *** 2,000,000 (4,700,000)
Special Deductions:
Standard deduction (5,000,000)
RA 4917 500,000
Medical expenses -
Net Taxable Estate P49,500,000
Estate Tax Due (P49,500,000 x 6%) P2,970,000
TRUE OR FALSE
1. TRUE 6. FALSE 11. TRUE
2. TRUE 7. TRUE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. TRUE 9. TRUE 14. FALSE
5. FALSE 10. FALSE 15. TRUE
MULTIPLE CHOICE
1. A 8. B 15. C 22. C 29. A
2. B 9. D 16. D 23. D 30. C
3. A 10. C 17. C 24. A
4. C 11. B 18. C 25. B
5. D 12. D 19. A 26. A
6. D 13. C 20. D 27. C
7. D 14. D 21. B 28. A
(No. 23)
Conjugal properties P20,000,000
Conjugal Deductions:
Funeral and judicial expenses (no longer allowed) -
Casualty losses (3,500,000)
Unpaid taxes (2,000,000)
Claim against the estate (4,500,000)
Net Conjugal properties P10,000,000
Divide 2
Share of the Surviving Spouse P5,000,000
(No. 24)
Real property, Philippines P7,000,000
Real property, USA 5,000,000
Funeral expenses -
Judicial expenses -
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Balance P11,900,000
Standard Deductions (5,000,000)
Medical expenses -
Family Home (P1,500,000/2) (750,000)
Share of the surviving spouse (P11,900,000/2) (5,950,000)
Net Taxable Estate P200,000
(No. 25)
Real property, Philippines P40,000,000
Real property, USA 50,000,000
Funeral expenses -
Judicial expenses -
(No. 26)
Exclusive Common Total
Conjugal real properties P7,000,000
Conjugal family home 5,000,000
Paraphernal properties -
(excluded; exclusive of the surviving spouse)
Exclusive properties P2,500,000
Total P2,500,000 P12,000,000 P14,500,000
Ordinary Deductions:
Funeral expenses -
Unpaid taxes -
Casualty losses (from excl.property) (100,000)
Other losses (P1M x 75%) (750,000) (850,000)
Net Estate before Special Deductions P2,400,000 P11,250,000 P13,650,000
Special Deductions:
Standard Deductions (5,000,000)
Medical expenses -
Family Home (5,000,000/2) (2.500,000)
Share of the surviving spouse (P11,250,000/2) (5,625,000)
Net Taxable Estate P525,000
(No. 29)
Real property given as gift by his uncle 1,500,000
Land received as donation during marriage 500,000
Cash income from the real property received as gift 100,000
Total exclusive property P2,100,000
(No. 30)
Real properties inherited before the marriage from his father who died 3 P500,000
years before the present decedent's death
House built on the inherited land using communal fund 900,000
Real properties received by the surviving spouse before the marriage 1,800,000
Real properties acquired by the spouses during the marriage 1,500,000
Claim against insolvent person 50,000
Personal properties acquired during the marriage 1,000,000
Total Community property P5,750,000
PROBLEM SOLVING
P5.1 One foreign country only:
P5.3
Net Taxable Estate P20,000,000
Limit 1 (Per foreign country with tax payments only): Limit Actual Allowed
Singapore: 5,000/20,000 x P1,200,000 P300,000 P200,000 P200,000
China: not included in the determination of Limit 1 - - -
since there was no estate tax paid in China
Japan: 2,000/20,000 x P1,200,000 120,000 100,000 100,000
P300,000
Limit 2 (all foreign countries including China):
10,000/20,000 x P1,200,000 P600,000 300,000 300,000
ALLOWED TAX CREDIT P300,000
P5.4
a) Net Taxable estate = P7,474,000
b) Estate tax due = P448,440
c) Net Distributable Estate = P11,731,560
Ordinary Deductions:
LITe:
Claim against the estate (Philippines) P940,000
Unpaid Philippine income tax for 2016 and 2017 320,000
Loss on December 31, 2018 due to theft 180,000
Claim against insolvent person 200,000 (1,640,000)
TFPU (1,400,000)
Vanishing Deduction (486,000)
Special Deductions:
Standard deduction (5,000,000)
Family Home in USA; (not allowed) -
NET TAXABLE ESTATE P7,474,000
Estate Tax Due (P7,474,000 x 6%) P448,440
MULTIPLE CHOICE
1. C 5. A
2. C 6. C
3. D 7. B
4. C
Supporting Computations:
No.5 A
Net taxable estate P4,000,000
x Estate tax rate 6%
Estate tax due P240,000
Less: Estate tax credit
Limit = P1/4 x P240,0000 = P60,000 (60,000)
Actual tax paid abroad = P80,000
Estate tax payable P180,000
No. 6 C
Total net taxable estate P1,000,000
x Estate tax rate 6%
Estate tax P60,000
Less: estate tax credit NA
Estate tax payable P60,000
No. 7 B
Gross Estate P20,000,000
Ordinary deductions - Philippines (3,000,000)
(since the amount provided is P3M only, it shall be assumed that
such amount is exclusive of Standard Deduction and Family
Home)
Deductions - France (2,000,000)
Net estate before special deductions P15,000,000
Less:
Share of the surviving spouse
PROBLEM SOLVING
P6.1
QUESTION
TO A B C D E
Abel P800,000 P800,000 P800,000 P800,000 P800,000
Jen 3,000,000 3,000,000 3,000,000
Gore 250,000 250,000 250,000 250,000
Alexa 100,000 100,000 100,000 - 100,000
Earl 5,000,000 5,000,000 5,000,000
Hananiah 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
Chen 100,000 100,000 100,000 - 100,000
Kristine 100,000 100,000 100,000 - -
Gavrie 500,000 500,000 500,000 500,000 500,000
Land 1** - - - - -
Land 2*** - - - - -
Land 3**** 5,000,000 5,000,000 5,000,000 - -
Car 200,000 200,000 200,000 200,000 200,000
GROSS GIFT P16,550,000 P16,550,000 P16,550,000 P3,000,000 P3,450,000
P6.2
ITEM Q#A Q#B
A P4,500,00 P4,500,00
B 1,000,000 -
C 1,500,000 -
D 2,000,000 -
E 3,000,000 3,000,000
F 500,000 -
Car, Alabang 200,000 200,000
Car, Malaysia 200,000 -
Land Cebu - -
GROSS GIFT P12,900,000 P7,700,000
P6.3
(a) None; subject to CGT, not donor’s tax
(b) CGT = P2.5M x 6% = P150,000
(c) Donor’s tax = [(P2.5M – P1.5M) – 250,000] x 6% = P45,000 TRAIN Law
(d) CGT = P0
Solution:
Gross Gifts – March 1 P200,000
Less: Tax exempt gift (250,000)
Net taxable gift P-
Donor’s Tax Due/ Payable – March 1 Exempt
Solution
March 30, 2018
Gross gift P100,000
Less: Tax exempt gift (250,000)
Taxable net gift P-
P6.7
1) June 6, 2018 = P0; exempt
2) October 8, 2018 = P2,160
3) November 4, 2018 = P240
June 6, 2018
Husband Wife Total
Gross Gift (P460k + 20K)/2 P240,000 P240,000
Mortgage assumed (2,000) (2,000)
Net gift P238,000 P238,000
Less: Tax exempt gift (250,000) (250,000)
Net Taxable gifts – June 6 (P12,000) (P12,000)
Donor’s Tax Payable P0 P0 P0
October 8, 2018
Husband Wife Total
Gross Gift P30,000 P30,000
Dowry -
Prior Net Gift 238,000 238,000
Total net gifts P268,000 P268,000
Less: Tax exempt gift (250,000) (250,000)
P18,000 P18,000
x6% x6%
Donor’s Tax Due P1,080 P1,080
Tax Paid-June 6 - -
Donor’s Tax Payable P1,080 P1,080 P2,160
November 4, 2018
June 1, 2018
Mr.Macariola Mrs.Macariola Total
Gross Gifts P- P100,000
Prior net gift 150,000
Net gift 250,000
Less: tax exempt gift (250,000)
Net Taxable gift P0
Donor’s Tax Due P0 P0
TRUE OR FALSE
1. TRUE 7. FALSE 13. FALSE 19. TRUE 25. TRUE
2. TRUE 8. TRUE 14. FALSE 20. FALSE 26. TRUE
3. FALSE 9. FALSE 15. FALSE 21. FALSE 27. FALSE
4. TRUE 10. FALSE 16. FALSE 22. FALSE 28. TRUE
5. TRUE 11. TRUE 17. FALSE 23. FALSE 29. FALSE
6. TRUE 12. FALSE 18. FALSE 24. TRUE 30. FALS E
MULTIPLE CHOICE
1. A 13. C 25. D 37. B
2. A 14. D 26. D 38. C
3. C 15. B 27. B 39. D
4. C 16. D 28. D 40. A
5. B 17. A 29. D 41. B
6. D 18. B 30. B 42. C
7. D 19. C 31. A
8. D 20. B 32. A
9. D 21. C 33. B
10. C 22. A 34. A
11. D 23. D 35. B
12. A 24. C 36. B
Supporting computation:
No. 27.
Gross Gifts (5M/2) P2,500,000
Less: Tax Exempt Gift (250,000)
Net taxable gift P2,250,000
No. 33.
Net gifts of the spouses, May 1 P400,000
Add: Prior net gift, March 1 500,000
Cumulative net gift P900,000
Divide by 2
Cumulative Net gift, Mrs Mapagbigay P450,000
Less: Tax exempt gift (250,000)
Cumulative taxable net gift P200,000
x 6%
Donor’s tax due P12,000
Less: Donor’s tax paid, March 1 -
Donor’s Tax Payable P12,000
No. 34.
Mr. Mrs.
Total gifts of the spouses (P1.1M/2) P550,000 P550,000
Less: Exempt gifts (250,000) (250,000)
Net Taxable gift P300,000 P300,000
x 6% 6%
Donor’s tax due per spouse P18,000 P18,000
Total donor’s tax due of the spouses P36,000
PROBLEM SOLVING
P8.1
Residential Units:
Case A OPT
Case B Exempt
Case C Exempt
Case D Vat
Commercial Units:
Case E Vat
Case F OPT
Case G OPT
Case H Vat
P8.3
a) nil
b) Vat Payable = P134,400 x 3/28 = P14,400
c) Vat Payable = OV P201,600 x 3/28 – Input Vat P14,400 = P7,200
d) nil
P8.4
Cash Sales P660,800
Sales on account 246,400
Transactions deemed sale (22,400+16,800+19,040+8,960) 67,200
Total sales subject to vat P974,400
x 3/28
Output Vat P104,400
Less: Input vat (P291,200 x 3/28) (31,200)
Vat Payable P73,200
P8.5
OUTPUT:
Sales (P8M – 400,000) x 12% P912,000
Sales from consignment (March and Feb.) 36,000
(20+10) x P10,000 x 12%
Transactions deemed sales
January 8 consignment (20 x P10,000) x 12% 24,000
Goods withdrawn 6,000
Goods taken as payment to creditors 3,600 P981,600
INPUT VAT
Purchase of goods, supplies, freight/insurance) 82,080
Capital goods (P1,100,000 x 12%) / 48 mos. 2,750 (84,830)
VAT PAYABLE P896,770
P8.6
Sale of school supplies P1,680,000
Sale of gift items 1,008,000
Sales subject to output vat P2,688,000
x 3/28
Output Vat P288,000
Less:
P8.7
Output Vat (P896,000 x 3/28) P96,000 Note:
Less: Input vat The input vat on capital goods is not amortized because the
acquisition cost is not more than P1M.
▪ P224,000 x 3/28 (24,000)
▪ P112,000 x 3/28 x 80% (9,600) The ratio of vatable sales to total sales = 80%
P8.8
(a)
Total Input Vat (P374,000 + 69,848 + 154,000 + 55,000) x 3/28 = P69,948
(b)
Output vat (P330,000 + P274,996) x 3/28 P64,821
Less: Input vat (P374,000 + 69,848 + 154,000) x 3/28 (69,984)
Vat Payable (P5,163)
Note:
▪ Sale to export oriented enterprise is considered is subject to 12% vat under the TRAIN Law.
▪ The input vat on purchase of goods intended for export may be refunded, deducted from output vat or
converted to a tax credit certificate.
P8.9
(a) P28,800
(b) P12,600
Output Vat (P350,000 x 12%) P42,000
Less:
P8.10
(a)
st
1 Quarter Output Vat (P3M x 12%) P360,000
INPUT VAT:
Purchases (P1.2M x 12%) (144,000)
Purchase of machinery (P2.5M x 12%) / 36 x 3mos. (25,000)
Unused input vat as of end of 2017 (125,000)
Vat Payable P66,000
(b)
nd
2 Quarter Output Vat (4.8M x 12%) P576,000
Input Vat
Purchases (P3M x 12%) (360,000)
Unused input vat on capital goods (P2.5M x 12%-25,000) (275,000)
Excess Input vat (P59,000)
P8.11
Output vat (P336,000 x 12%) P40,320
Input vat:
On purchases (P112,000 x 3/28) (12,000)
Transitional input vat:
Higher between 2% of beg. Invty vs. P10,000 (10,000)
Vat Payable P18,320
P8.12
(a) P3,400
(b) P80,000
P8.14
Subject to Value Added Tax
Hotel rooms (P1.8M x 12%) P216,000
Dining Hall:
Sale of food and refreshments (P2.2M x 12%) 264,000
Sale of wine, beer and liquor (P950,000 x 12%) 114,000
Other revenues (P700,000 x 12%) 84,000
P8.15
OUTPUT VAT based on collections
(15M + 10M + 5M) P3,600,000
INPUT VAT on purchases from:
Alpha (P12M – 1.2M) x 12% (1,296,000)
Bravo (non-vat reg.) -
Charlie (P4M – 1M) x 12% (360,000)
Delta (P2M x 12%) (240,000)
Vat Payable P1,704,000
P8.16
Output vat ((P4M – 2.5M) x 12% P180,000
Less: input vat (P800,000 x 12%) (96,000)
Vat Payable P84,000
P8.17
Ratio of Initial Payment over Selling Price:
Lot A = 50/250 = 20% ; Installment Sale
Lot B = 70/200 = 35%; Deferred Sale; Treated as Cash Sale
Lot C = 60/300 = 20%; Installment Sale
Nov. 2018 Dec. 2018
Lot A: P25,000 x 12%; P25,000 x 12% P3,000 P3,000
Lot B: P200,000 x 12% 24,000 -
Lot C: P40,000 x 12%; P20,000 x 12% 4,800 2,400
P8.18
a) Output vat September 2018 = P3M x 12% = P360,000
The sale is a Deferred sale. Ratio of initial payments over SP is 30%.
b) Output vat January 2019 = P0
P8.19
Room charges P1,000,000
Laundry services 25,000
Food and beverages 1,500,000
Corkage 15,000
Handling charges for providing telephone, 4,500
telex, cable or fax services
Cake shop sales 80,000
Total P2,624,500
Vat rate 12%
Output Vat for the month P314,940
TRUE OR FALSE
SET A
1. T 6. F 11. F 16. T 21. F
2. F 7. F 12. F 17. F 22. F
3. F 8. F 13. F 18. F 23. T
4. T 9. T 14. F 19. T* 24. F
5. T 10. T 15. F 20. T 25 T
SET B
1. T 6. F 11. F 16. T 21. T
2. T 7. F 12. F 17. T 22. T
3. T 8. F 13. T 18. T 23. T
4. F 9. T 14. F 19. F 24. T
5. F 10. F 15. T 20. F 25 F
MULTIPLE CHOICE
1. D 21. C 41. B 61. C 81. D
2. C 22. A 42. C 62. B 82. A
3. A 23. C 43. D 63. C 83. B
4. D 24. D* 44. D 64. D 84. C
5. D 25. C 45. B 65. A 85. C
6. D 26. C** 46. D 66. C 86. C
7. D 27. B*** 47. D 67. B 87. D
8. D 28. B 48. C 68. D
9. A 29. C 49. C 69. A
10. C 30. B 50. D 70. D
11. C 31. B 51. B 71. D
12. A 32. D 52. C 72. A
13. A 33. A**** 53. B 73. D
14. D 34. B 54. D 74. B
15. C 35. B 55. D 75. C
Supporting Computations/explanations:
No. 12
“III” is exempt only if contribution per member is not more than P15,000.
No. 20
Output Vat (P2,805,500 +P1,524,000) x 12% P519,540
Input vat (P1,102,200+P1,012,500) x 12% (253,746)
Vat Payable P265,780
No. 21
rd
Output Vat, 3 quarter (P150,000 x 12%) P18,000
rd
Input vat, 3 quarter (P120,000 x 12%) (14,400)
Deferred input vat – previous quarter (6,000)
Vat Payable (Carry-over) (P2,400)
No. 24 *No longer considered as export sale under the TRAIN Law.
No. 26 **Letter “C” only on the assumption that the problem is pertaining to sale prior to the effectivity of the TRAIN Law.
No. 27 ***Letter “B” is no longer considered export sale upon \the effectivity of the TRAIN Law.
No. 33 ***Change Letter A to “II and IV only”. Items II and IV are subject to VAT under the TRAIN Law.
No. 37
AR, July 1 P180,000
Billings, July-Sept. 850,000
AR, Sept. 30 (120,000)
Collections P910,000
Output vat @ 12% 109,200
Input vat on purchases @ 12% (57,600)
Vat Payable P51,600
No. 38
Output vat (P5.5M x 12%) P660,000
Input vat on materials (180,000)
Vat Payable September P480,000
No. 39
Output vat (P10M x 12%) P1,200,000
Input vat on materials (480,000)
Input vat on capital goods (36,000)
(P3Mx12%) /60 mos.
Vat Payable June 30 P684,000
No. 41
Sales, shares held as inventory P5,000,000
Cos of shares, held as inventory (2,000,000)
Gross income 3,000,000
Vat rate 12%
Output vat P360,000
Les: Input vat
Supplies expense 12,000
Rent expense 24,000 (36,000)
No. 49
Domestic sales (P600,000 x 12%) P72,000
Add: Transaction deemed sales
Jan. 4 consignment (P200,000 x 12%) 24,000
Goods consumed on Fe. 27 (P50,000 x 12%) 6,000
Property dividends (P150,000 x 12%) 18,000
Total Output Vat P120,000
No. 66 & 67
Output vat (P592,480 x 3/28) P63,480
Less: Input Vat
Purchases of goods (P100,000 x 12%) P12,000
Purchases of services (P20,000 x 12%) 2,400
Transitional input vat 4,800 (19,200)
VAT Payable P44,280
No. 72
Output Vat for October 2014 = P3M x 12 = P360,000
❖ Ratio of Initial Pay’t over Gross S.P. = P900,000/P3,000,000 = 30%
❖ If initial payment is more than 25% of Selling Price, the sale is classified as Deferred Sale which is treated as Cash
Sale. Therefore, the entire output vat is due on the month of sale.
No. 73
Output Vat for 2018 = P0; The entire output vat was paid in 2017
No. 74
Downpayment P112,000
st
1 installment payment 112,000
Total (vat inclusive) 224,000
Less: VAT (P224,000 x 3/28) (24,000)
Initial Payment (exclusive of vat) P200,000
Divide by contract Price (P1,120,000 x 3/28) 1,000,000
Ratio of Initial Payment over SP 20%
Output vat for 2017 (P200,000 x 12%) P24,000
No. 75
VAT ON CASH SALE: P72,000
(ZV is higher than SP) (P600,000 x 12%)
VAT ON DEFERRED SALE: 36,000
(Ratio of Initial payment over SP > 25%
(Deferred Sale)
(Treated as cash sale; SP is higher than FMV)
[(P336,000/1.12) x 12%]
TOTAL OUTPUT VAT P108,000
No. 78 and 79
Output vat (P336,000 x 3/28) P36,000
No. 80
OUTPUT VAT (P896,000 x 3/28) P96,000
INPUT VAT
Purchases of goods, vat business, vat included (24,000)
(P224,000 x 3/28)
MIXED Transactions:
Purchases of supplies, for vat & non vat business
[(112,000 x 3/28) x (800,000/1,000,000)] (9,792)
Purchase of depreciable asset, for use in vat and non vat business
[(P2,240 x 3/28) x (800,000/1,000,000)]
VAT PAYABLE P62,208
No. 81 and 82
OUTPUT VAT
Domestic sales (P330,000 + P274,996) x 3/28 P64,821
Export sales (zero rated) 0
INPUT VAT
Purchases of goods, supplies and services for domestic sales and for export (374,000 +
69,848 + 154,000 + 55,000) x 3/28 (69,948)
Vat Payable (P5,127)
No. 83
Raw Materials (P560,000 x 3/28) x 400,000/1M P24,000
Supplies (P448,000 x 3/28) x 400,000/1M 19,200
Equipment (P300,000 x 12% x 400,000/1M) 14,400
INPUT VAT ATTRIBUTED TO EXPORT SALES P57,600
PROBLEM SOLVING
P9.1
1. A 11. A 21. A 31. C 41. A
2. F 12. A 22. A 32. A 42. F
3. F 13. A 23. A 33. A 43. A
4. A 14. A 24. C 34. A
5. A 15. A 25. C 35. B
6. F 16. F 26. C 36. F
7. C* 17. C 27. F 37. A
8. C* 18. C 28. F 38. F
9. C* 19. A 29. A 39. A
10. A 20. C 30. C 40. E
*#7 to #9: Assume the taxpayer is domestic common carrier by land. It is subject to OPT under Section 117.
#7-9: It is subject to OPT under Section 116
#18: Subject to Section 118 as to its cargo operations only
P9.2
1) 3% OPT on vat exempt sales (GR<3,000,000 & non-vat registered) =P1,275,000 x 3% = P38,250
2) Business Tax Due = P0; The taxpayer opted to be taxed at 8% (qualified) which is in lieu of the Basic Income Tax
Due and Business Tax Due under Section 116 of the Tax Code, as amended under TRAIN Law.
P9.3
1) Gross sales/receipts and other non-operating income = P1.8M + (570,000/95%) = P2.4M
Business Tax = P2.4M x 3% under Sec. 116 = P72,000
P9.4
1) Gross sales/receipts and other non-operating income = P1,275,000
Business Tax = P1,275,000 x 3% under Sec. 116 = P38,250
The compensation income is not subject to business tax.
2) Business Tax Due = P0; The taxpayer opted to be taxed at 8% (qualified) which is in lieu of the Basic Income Tax
Due and Business Tax Due under Section 116 of the Tax Code, as amended under TRAIN Law.
P9.5
Gross receipts-passenger operations by land P240,000
(P8,000,000 x 3% CCT)
Gross receipts cargo operations 450,000
(P5M x 75% x 12%vat)
Rentals (P2M x 12%vat) 240,000
Total business taxes P930,000
The basis of business tax in this particular problem shall be collections because the taxpayer is engaged in sale of
services.
P9.6
1) Taxpayer is non-vat registered
Gross receipts P2,400,000
Add: AR, beginning 500,000
Less: AR, end (600,000)
Collections 2,300,000
x 3%
Business Taxes under Sec. P69,000
116
The basis of business tax in this particular problem shall be collections because the taxpayer is engaged in sale of
services.
The taxpayer is non-vat registered and the total gross receipts ≤ P3,000,000, hence, subject to 3% OPT under
Section 116 of the Tax Code, as amended.
P9.7
1) Income tax due = P400,000
▪ GR Passenger operations-Phils. P10,000,000
▪ GR cargo operations-Phils. 6,000,000
Total 16,000,000
GPB rate 2.5%
Income Tax Due P400,000
P9.8
1. P0. Not subject to business tax but subject to a capital gains tax of P7,500.
[(5,000 sh. X P50) – P200,000 = P50,000 capital gain x 15%CGT under TRAIN Law = P7,500 CGT
2. P0. Not subject to business tax as well as income tax (CGT). The transaction resulted to a loss amounting to
P75,000, hence, not subject to CGT.
Purchase Price = P50/share; S.P.=P35/share; Loss = P15/share
P9.9
1. P3,000 OPT. ratio=10/35=28.5%; IPO rate= 2%; Tax due on=P150,000 x 2% = P3,000
2. P120 OPT. P20,000 x .006 = P100
P9.10
1. P1,053,000 OPT (amusement tax). P5,850,000 x 18% = P1,053,000
2. P720,000 OPT. P4M x 18% = P720,000
3. P55,500 OPT. P1,850,000 x 3% = P55,500
4. P198,000 VAT. (P1850,000 x 12%) – (P224,000 x 3/28)] = P198,000
P9.11
1. P501,250 computed as follows:
st
1 Quarter % Business Tax
Interest and commission income from lending activities with P4,000,000 5% P200,000
maturity of 3 years
Interest and commission income from lending activities with 3,500,000 5% 175,000
maturity of 5 years
Interest and commission income from lending activities with 6,000,000 1% 60,000
maturity of 7 years
Other income from rentals of facilities and other assets 775,000 7% 54,250
Income from financial leasing (remaining maturity is more than 5 1,200,000 1% 12,000
yrs)
Dividends and equity shares in net income of subsidiaries 500,000 0% -
Net trading gain (loss) (150,000) NA -
Total Gross Receipts Tax P501,250
2. P446,000
nd
2 Quarter % Business Tax
Interest and commission income from lending activities with P2,800,000 5% P140,000
maturity of 3 years
Interest and commission income from lending activities with 3,300,000 5% 165,000
maturity of 5 years
Interest and commission income from lending activities with 7,200,000 1% 72,000
maturity of 7 years
Other income from rentals of facilities and other assets 825,000 7% 57,750
Income from financial leasing (remaining maturity is more than 5 950,000 1% 9,500
TRUE OR FALSE
1. FALSE 11. TRUE 21. FALSE
MULTIPLE CHOICE
1. B 21. D 41. A 61. A 81. C
2. D 22. A 42. A 62. C 82. C
3. D 23. A 43. A 63. C 83. D
4. C 24. A 44. D 64. A 84. D
5. D* 25. B 45. C 65. A 85. D
6. C 26. A 46. A 66. D 86. C
7. A 27. B 47. D 67. D 87. A
8. A 28. D 48. B 68. B 88. P1,440****
9. D 29. B 49. A 69. C
10. A 30. C 50. B 70. A
11. A 31. A 51. B 71. B
12. A 32. C** 52. C 72. C
13. C 33. D 53. C 73. A
14. D 34. B 54. C 74. B
15. A 35. D 55. B 75. A
16. B 36. D 56. B 76. B
17. C 37. D 57. A 77. B
18. D 38. D 58. C 78. A
19. B 39. A 59. C 79. C
20. B 40. C 60. P80,000*** 80. C
*Items I and II are not subject to business taxes while item III is subject to Sec. 117 instead of Sec. 116
**For Inte’l Carriers, passenger operation is exempt from business tax.
No. 6 OPT on sale of refined sugar and cooking oil = (P500,000 + 500,000) x 3% = P30,000
No. 7 (P280,000 + P220,000) x 3% = P15,000
No. 8
Collections = P50,000 + 100,000 – 75,000 = P75,000
OPT = P75,000 x 3% = P2,250
No. 9
Gross receipts (refer to #6) P75,000
x vat rate 12%
Output vat P9,000
Input vat (P11,200 x 3/28) (1,200)
Vat Payable P7,800
No. 37
AR, beg. P600,000
Revenues (P4M + P1M) 5,000,000
AR, end (960,000)
Gross receipts P4,640,000
Vat rate 12%
Business tax due P556,800
No. 38
Covered by the Franchise NOT Covered by the Franchise
AR, beg. P600,000 AR, beg. P----
Revenues 4,000,000 Revenues 1,000,000
AR, end (800,000) AR, end (160,000)
Gross receipts P3,800,000 Gross receipts P840,000
Franchise tax rate 2% Franchise tax rate 12%
Business tax due P76,000 Business tax due P100,800
Total Business Taxes P176,800
No. 48 Statement 2 is False. The rate shall be 4% (twice the rate of Section 123 NIRC)
No. 54
OPT% GRT
Interest income from lending activities from
inst1uments with remaining terms of:
Five years and less 5,000,000 5% P250,000
More than five years 3,000,000 1% 30,000
Dividends & equity shares from subsidiaries 1,000,000 0% 0
Rental income 500,000 7% 35,000
Net trading gains 300,000 7% 21,000
Total Gross Receipts Tax P336,000
No. 55
OPT% GRT
Rentals from safety deposit boxes P880,000 7% P61,600
Net foreign exchange gains 220,000 7% 15,400
Net trading gains from trading of securities 660,000 7% 46,200
Trust fees 110,000 7% 7,700
Dividends from domestic corporations 30,000 0% 0
Other service fees 220,000 7% 15,400
Interest income from lending activities from
inst1uments with remaining terms of:
Five years and less 700,000 5% 35,000
More than five years 800,000 1% 8,000
Total Gross Receipts Tax P189,300
No. 56
Interest income with maturity of less than 5 years (P500,000 x 5%) P25,000
Rentals (P500,000 x 7%) 35,000
Net trading loss = none; if net trading gain, tax is 7%
Gross receipt tax (GRT) P60,000
No. 57
Interest income with maturity of less than 5 years (P1M x 5%) P50,000
Rentals (P500,000 x 7%) 35,000
Net trading gain
[200,000 – (100,000 net trading loss previous month) x 7%] 7,000
Gross receipt tax (GRT) P92,000
No. 58
Interest withheld and paid (P100,000 x 5 years x 1%) (P5,000)
Adjusted amount of tax due to pre-termination (P100,000 x 5 years x 5%) 25,000
Tax Payable P20,000
No. 60 ***Assume agent of a nonresident foreign insurance company; OPT under Sec. 124 = P2M x 4% =
P80,000
No. 76
Double = P200 bet/P20 per ticket = 10 tickets; 10 tickets x P180 net winnings per ticket x 4% = P72
Ordinary (winner take all) = P500 bet/P50 per ticket = 10 tickets;
= 10 tickets x P950 net winnings per ticket x 1% = P950
No. 87
(2,000 x P25 x 4% = P2,000; Ratio = 2/75 = 2.67%; IPO rate = 4%
No. 88 OPT = 6,000 x P40 x .006% = P1,440 ; The the old rate of .005 was used in arriving at P1,200****.
#17. The sixty (60)-day period for the submission of all relevant supporting documents shall not apply to requests for reconsideration under
RR 18-2013.
#23. (the taxpayer has, nonetheless, the option to wait for the decision of the BIR even beyond the 180 day period nder RR 18-2013.)
If the protest is not acted upon by the Commissioner’s duly authorized representative within one hundred eighty (180) days, THE
TAXPAYER MAY EITHER:
a) Appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180)-day period; or
b) Await the final decision of the Commissioner’s duly authorized representative on the disputed assessment.