Chapter 1 - Succession & Transfer Taxes: Solutions Manual Transfer & Business Taxation, 2019 Edition By: Tabag & Garcia

SOLUTIONS MANUAL
TRANSFER & BUSINESS TAXATION, 2019 Edition

By: TABAG & GARCIA
CHAPTER 1 – SUCCESSION & TRANSFER TAXES

TRUE OR FALSE
1. TRUE 6. TRUE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. FALSE
3. TRUE 8. FALSE 13. TRUE 18. TRUE
4. FALSE 9. TRUE 14. TRUE 19. TRUE
5. FALSE 10. FALSE 15. FALSE 20. TRUE
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
CHAPTER 2 – GROSS ESTATE
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
https://cdn.fbsbx.com/v/t59.2708-21/80047660_2273266482…=18669a49270fd784ac24af5921788750&oe=5E3FD6FE&dl=1 07/02/2020, 10H56 AM

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(P2.2)
To Juan P25,000,000
To Pedro 18,000,000
To Maria 15,000,000
To Sisa 20,000,000
Total Gross Estate P78,000,000
(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
***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
4. P4,000,000 4. P10M
5. P6,000,000 5. P0
TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE 16. 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

Page 2 of 42
5. C 20. A 35. B 50. B 65. D
6. C 21. D 36. B 51. D 66. B
7. A 22. A 37. D 52. D 67. A
8. B 23. A 38. B 53. C 68. C
9. A 24. B 39. B 54. C 69. C
10. A 25. C 40. C 55. C 70. D
11. A 26. C 41. C 56. B 71. C
12. B 27. C 42. C 57. D 72. A
13. D 28. C 43. B 58. C 73. D
14. A 29. D 44. B 59. C 74. D
15. C 30. B 45. B 60. A
Supporting Computations (Multiple Choice):
(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
(33). (P12M/100,000) x 1,000 shares = P120,000

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(34). P100 x 1,000 shares = P100,000; Par Value=P10M/100,000 = P100/share
(35). P110 x 1,000 shares = P110,000

(36). (P140 + P80/2) x 1,000 shares = P110,000
(44).
Consideration FMV upon transfer FMV upon death Gross Estate
received
Land P1,500,000 P1,500,000 P2,000,000 None. Valid sale
Shares of stock 100,000 50,000 150,000 None. Valid sale
Vintage car 50,000 80,000 100,000 P50,000
Painting 250,000 400,000 500,000 250,000
INCLUSION IN THE GROSS ESTATE P300,000
(48). Includible in the Gross Estate = FMV @ time of “+” less Consideration received = P300k-P100k =
P200,000
CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE
PROBLEM SOLVING
(P3.1) (a) P2,500,000 computed as follows:

Loss due to shipwreck, two (2) months after the decedent’s death. P500,000
Robbery loss P2,000,000
Allowable Deduction P2,500,000
(b) P500,000 computed as follows:

Loss due to shipwreck, two (2) months after the decedent’s death. P500,000
Allowable Deduction P500,000
(P3.2) P5,715,000 computed as follows:

Ordinary Deductions:
Claim against insolvent person (500,000-400,000) P100,000
Unpaid taxes on the estate before death 150,000
Unpaid mortgage on the estate 200,000
Funeral expenses (no longer allowed under TRAIN Law) -
Judicial expenses (no longer allowed under TRAIN Law) -
Unpaid loans arising from debt instruments (notarized) 125,000
Unpaid loans arising from debt instruments (not notarized). The debt 75,000
instrument was issued by a financial institution not requiring
notarizations for debt instruments issued
Casualty loss 65,000
Special Deductions:
Standard deduction 5,000,000
Medical expenses (no longer allowed under TRAIN Law) -
Total Allowable deduction from the gross estate P5,715,000
(P3.3) (Claim Against Insolvent Persons)

Case A: P100,000
Case B: P333,333 computed as follows:

Receivable P500,000
Collectible portion (400/1,200) x 500,000 (166,667)
Deductible claim (Uncollectible portion) P333,333

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Case C: P0. Debtor is not insolvent
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
Receivable (CAIP) P500,000

Collectible (400/800) x 500,000 (250,000)
Deductible Claim against Insolvent Persons P250,000
(P3.4) P200,000 computed as follows:

Uncollectible receivable from Juan P100,000
Uncollectible receivable from Manuel 100,000
Total P200,000

Debtor’s Assets P400,000
Taxes payable (Gov’t is a priority creditor) (200,000)
Assets after deducting unpaid taxes P200,000
Receivable (CAIP) P200,000

Collectible (200/600) x 200,000 (66,667)
Deductible Claim against Insolvent Persons P133,333

Value to take P937,500
st
1 Deduction: Mortgage paid (187,500)
Initial basis P750,000
nd
2 Deduction: Proportionate deduction
(750/4,500) x 562,500 (93,750)
Final Basis P656,250
x Vanishing rate 40%
Vanishing Deduction P262,500
(P3.7) STANDARD DEDUCTION

CASE
A P5,000,000
B P5,000,000
C P5,000,000
D P500,000
E P500,000
(P3.8) FAMILY HOME

Case A: P0
Case B: P5,000,000
Case C: P0; exclusive property of the surviving spouse
Case D: P10,000,000
Case E: P12M/2 = P6,000,000
Case F: [ 5M + (5,000,000/2)] = P7,500,000
(P3.9)
Question 1: P7,308,013; (Decedent: Resident Citizen)
Question 2: P7,308,013; (Decedent: Resident Alien) (same computation with Q#1).

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Domestic shares of 2,000 shares inherited 6 years ago P8,000,000
House and lot, family home, located in Davao, inherited 2 years ago 2,000,000
Jewelry items, in the Philippines at the time of death 400,000
Jewelry items kept in a vault abroad 200,000
Bank deposit in a Philippine branch of a U.S. bank 5,000,000
Interest from bank deposit (after death) -
Transfer for Public Use (donation to the gov’t provided in his will) 250,000
GROSS ESTATE P15,850,000
ORDINARY DEDUCTIONS:
Funeral expenses, Philippines -
Judicial expenses, abroad -
Judicial expenses, Philippines -
Claims against the estate 120,000
Transfer for Public Use 250,000
Vanishing deductions
(Shares of stocks = None; House and Lot = Allowed) 1,171,987** (1,541,987)
SPECIAL DEDUCTIONS
Standard Deduction (TRAIN Law) 5,000,000
Family Home 2,000,000
Medical Expenses -
RA 4917 - (7,000,000)
NET TAXABLE ESTATE P7,308,013
Value to take P1,500,000

st
1 Deduction: Mortgage paid -
Initial basis P1,500,000
nd
(1,500/15,850) x P370,000 (35,016)
Final Basis P1,464,984
Vanishing Deduction P1,171,987**
(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
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

Page 6 of 42
Question No. 2
Mortgage paid (P150,000-P75,000) (75,000)
Initial Basis 500,000
Proportional deduction
(500/19,100) x 600,000** (15,707)
Final Basis 484,293
Vanishing deduction rate 20%
Vanishing Deduction*** P96,859
NET ESTATE without VD (from Q#1) P12,000,000

Vanishing Deduction*** (96,859)
TAXABLE NET ESTATE P11,903,141
(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
0
Correct Losses, Indebtedness, Taxes (LIT) (400,000)
TFPU (300,000)
Vanishing deduction (453,750)
Medical expenses (repealed under TRAIN -
Law)
Death benefits under RA4917 (200,000)
Net taxable estate P4,446,250
TRUE OR FALSE

Page 7 of 42
5. FALSE 10. TRUE 15. TRUE 20. 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
Supporting Computation (Multiple Choice):
(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

Page 8 of 42
nd
2 Deduction:
(850/1,000 x P100,000**)
(85,000)
VANISHING DEDUCTION P306,000
** Mortgage P150,000 – 50,000
(39). C
(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)
Taxable Estate P1,100,000
TAX DUE
Estate Tax Due (P1.1M x 6%) P66,000
CHAPTER 4 – PROPERTY RELATIONS
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

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c) P9,750,000
d) P17,150,000
Exclusive Common Total

Land inherited during marriage P24,000,000
Other personal property owned before marriage P16,000,000
Other personal property acquired during marriage 5,000,000
Total P24,000,000 P21,000,000 P45,000,000
Deductions:
Casualty loss (500,000)
Funeral expenses (no longer allowed under TRAIN Law) -
Judicial expenses (no longer allowed under TRAIN Law) -
Unpaid Taxes (400,000)
Claims against the estate (600,000)
Vanishing deduction** (11,600,000) (13,100,000)
Net estate before special deduction and share of the P12,400,000 P19,500,000 P31,900,000
surviving spouse
Medical expenses (no longer allowed under TRAIN Law) -
Share of the Surviving Spouse (19,500,000/2) (9,750,000)
VANISHING DEDUCTION**
Value to Take/Initial Basis P15,000,000
Proportional Deduction (15,000/45,000 x P1,500,000) (500,000)

x Vanishing Deduction % 80%
Vanishing Deduction P11,600,000
Conjugal Partnership of Gains (CPG)

e) P28,400,000
f) P3,500,000
g) P1,750,000
h) P25,150,000

Land inherited during marriage P24,000,000
Other personal property owned before marriage 16,000,000
Other personal property acquired during marriage 5,000,000
Total P40,000,000 P5,000,000 P45,000,000
Deductions:
Unpaid Taxes (400,000)
Claims against the estate (600,000)
Casualty Loss (500,000)
Funeral expenses -
Judicial expenses -
Vanishing deduction (same computation) (11,600,000) (13,100,000)
Net estate before special deduction and share of the P28,400,000 P3,500,000 P31,900,000
surviving spouse
Medical expenses -

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P4.3 Decedent: Non-resident alien
a) P1,621,396
b) P4,451,136
c) P3,346,964
d) P200,818
Exclusive properties, Phils. P2,000,000
Conjugal properties, Phils.* P5,000,000 P7,000,000
LIT** (548,864)
Vanishing Deductions *** (178,604)
Transfer for Public Use **** (200,000)
Net Estate P1,621,396 P4,451,136 P6,072,532
Net Taxable Estate P3,346,964
x Estate Tax Rate 6%
Estate Tax Due P200,818
*The problem is silent as to reciprocity, hence, the gross estate should include tangible and intangible properties within the
Philippines.
**LIT:
Funeral expenses P-
Judicial expenses -
Claim against the estate 1,725,000
TOTAL ELIT P1,725,000
X 7,000/22,000
ALLOWABLE ELIT P548,864
**VANISHING DEDUCTIONS:
st
Initial basis P500,000
nd

Page 11 of 42
(500/7,000) x (548,864 + 200,000) (53,490)
****
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
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:
RA 4917 500,000
Medical expenses -
Estate Tax Due (P49,500,000 x 6%) P2,970,000
*Family home is not allowed as a deduction for single decedent

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**To be deductible, the legacy/devise should be included first in the decedent’s gross estate
***Assume the debtor is an insolvent person.
P4.5 (Decedent: Resident Alien)

a) Vanishing deduction = P4,560,976
b) Net Taxable estate = P44,689,024
c) Estate tax due = P2,681,341
Exclusive Conjugal Total
Land P30,000,000
House and Lot (Family Home) P50,000,000
Other tangible personal properties 22,000,000
Claims against insolvent persons 500,000 P102,500,000
Ordinary deductions:
Other claims against conjugal properties (5,000,000)
Claims against insolvent persons (500,000)
Unpaid mortgage** (3,500,000)
VANISHING DEDUCTION* (4,560,976) (13,560,976)
Net exclusive/conjugal P25,439,024 P68,500,000 P93,939,024
Special deductions:
Medical expenses -
Share of the surviving spouse (34,250,000)
TAXABLE ESTATE P44,689,024
Estate Tax Due (P44,689,024 X 6%) P2,681,341
Value to take/Initial Basis*** P25,000,000

2nd Deduction: 25,000/102,500 x 9,000,000 (2,195,122)
x rate 20%
Vanishing Deduction* P4,560,976
** P7,000,000 – 3,500,000 = P3,500,000

***The amount paid on the mortgage should not be considered in computing the vanishing deduction because the amount pertains to a
mortgage entered into by Pedro during his lifetime. To be considered in computing the VD, the mortgage should have been assumed
on the property at the time of inheritance or donation.
TRUE OR FALSE
1. TRUE 6. FALSE 11. TRUE
2. TRUE 7. TRUE 12. 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
Supporting Computations (Multiple Choice)

Page 13 of 42
(No. 19 & 20)
Gross Estate (CPG): Exclusive Conjugal
Rest House in Batangas P2,500,000
Car 1,000,000
Commercial land 5,000,000
Income from the commercial land 500,000
Income from exclusive property of the spouse 200,000
Jewelry owned before the marriage 300,000
Other properties at the time of her death 1,000,000
Gross Estate P8,800,000 P1,700,000
(No. 21 & 22)

Gross Estate (ACoP): Exclusive Common
Rest House in Batangas P2,500,000
Car 1,000,000
Commercial land 5,000,000
Income from the commercial land 500,000
Jewelry owned before the marriage 300,000
Other properties at the time of her death 1,000,000
Gross Estate P2,500,000 P7,800,000
(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 -

Page 14 of 42
Claim against insolvent persons (5,000,000)
Unpaid taxes (5,000,000)
Balance P80,000,000
Standard Deduction (5,000,000)
Medical expenses -
Family Home (P15,000,000/2) (7,500,000)
(No. 26)
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
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)
Net Taxable Estate P525,000
(No. 27) ABSOLUTE COMMUNITY OF PROPERTY

Exclusive Common
Properties-Land P2,400,000

Page 15 of 42
Other personal property acquired during marriage 500,000
Gross Estate P2,400,000 P2,100,000
Vanishing deduction (1,120,000)
Claim against the estate (200,000)
Losses (100,000)
Net conjugal before special deductions P1,800,000
Share of surviving spouse (P1,800,000/2) P900,000
(No. 28) CONJUGAL PARTNERSHIP OF GAINS

Properties-Land P2,400,000
Other personal property acquired during marriage**** P500,000
Gross Estate P4,000,000 P500,000 P4,500,000
Ordinary Deductions
Claim against the estate (200,000)
Losses (100,000)
Vanishing Deductions***** (1,120,000)
Net Estate Before Special Deductions P2,880,000 200,000
Share of the surviving spouse (P200,000/2) (100,000)
****If silent and unless the problem clearly illustrate that it is exclusive, assume the property is common.
Value to take P1,500,0 00

st
Initial basis P1,500,000

nd
(1,500/4,500) x 300,000 (100,000)
Vanishing Deduction P1,120,000 *****
(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
Personal properties acquired during the marriage 1,000,000
Total Community property P5,750,000

Page 16 of 42
CHAPTER 5 – ESTATE TAX CREDIT AND DISTRIBUTABLE ESTATE
PROBLEM SOLVING
P5.1 One foreign country only:
a) Decedent is a resident citizen

Total Net Estate before special deductions P10,000,000

Page 17 of 42
Less: Standard deduction (5,000,000)
Net Taxable estate P5,000,000
x Estate tax rate 6%
Estate tax due P300,000
Less: Estate tax credit
Estate tax paid abroad P200,000
vs. Limit (P4/10 x P300,000) 120,000
Allowed (lower) (120,000)
Estate tax payable P180,000
b) Decedent is a nonresident alien

Total Net Estate before special deductions (Phils. Only) P6,000,000
Less: Standard deduction (500,000)
Net Taxable estate P5,500,000
Estate tax payable (tax credit is not allowed to NRA P330,000
decedents
P5.2 More than one foreign countries:
Net Taxable Estate, world P20,000,000
Estate Tax Due (P20M x 6%) P1,200,000

Estate tax credit ** (570,000)**
Limit 1 (Per foreign country): Limit Actual Allowed

Canada: 8,000/20,000 x P1.2M P480,00 P520,000 P480,000
USA: 2,000/20,000 x P1.2M 120,000 90,000 90,000
P570,000
Limit 2 (all foreign countries):
10,000/20,000 x P1.2M P600,000 P610,000 600,000
ALLOWED TAX CREDIT
(w/ever is lower between L1 and L2) P570,000**
P5.3

Page 18 of 42
Estate Tax Due (P20M x 6%) P1,200,000
Estate tax credit** (300,000)**
Estate tax payable after tax credit P900,000
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
House and lot (Family Home), USA P8,000,000

Cash in bank, USA 650,000
Car, USA 2,000,000
Accounts receivable from an insolvent person in Quezon City 200,000
Investment in stock, Philippines 800,000
Parcel of land in Quezon City inherited from his father 2 ½ 1,000 000
years ago
Investment in bonds, foreign corporation** 700,000
Cash in bank, Philippines 450,000
Car, Philippines 800,000
Devise to Quezon City for children’s playground or TFPU*** 1,400,000
LITe:
Claim against the estate (Philippines) P940,000
Unpaid Philippine income tax for 2016 and 2017 320,000
Claim against insolvent person 200,000 (1,640,000)
TFPU (1,400,000)
Vanishing Deduction (486,000)
Special Deductions:
Family Home in USA; (not allowed) -
Estate Tax Due (P7,474,000 x 6%) P448,440
** Considered as Estate “within”

***To be deductible, the legacy/devise should be included first in the decedent’s gross estate;
Value to take/Initial basis P1,000,000

nd
(1,000/16,000) x P1,640,000 + P1.4M (190,000)

Page 19 of 42
Deductions:
Actual funeral expenses P480,000
Judicial expenses 300,000
Claim against the estate (Philippines) 940,000
Unpaid Philippine income tax for 2016 and 2017 320,000
TFPU 1,400,000
Vanishing Deduction No allowed
Standard deduction Not allowed
Estate tax due 448,440 (4,268,440)
NET DISTRIBUTABLE ESTATE P11,731,560
MULTIPLE CHOICE
1. C 5. A
2. C 6. C
3. D 7. B
4. C
Supporting Computations:
No.5 A
Less: Estate tax credit
Limit = P1/4 x P240,0000 = P60,000 (60,000)
Actual tax paid abroad = P80,000
No. 6 C
Total net taxable estate P1,000,000
Estate tax P60,000
Less: estate tax credit NA
No. 7 B
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

Page 20 of 42
(P15M x 60% / 2) (4,500,000)
Family home (P8M / 2) (4,000,000)
Less: Tax credit (125,000)
Limit: 4/6.5 x P390,000 = P240,000
Actual: P125,000
CHAPTER 6 – DONOR’S TAX
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
*The question is “gross gifts”, hence, disregard the mortgage.

**Sale of Land #1 is a transfer with insufficient consideration. However, unlike in Estate Taxation, Transfer
with insufficient consideration for donor’s tax purposes is not taxable if the property donated is a real property
classified as capital asset subject to capital gains tax.
*** Sale of Land # 2 is considered bona fide or valid sale.
****Sale of Land #3 is a transfer with insufficient consideration. Nonetheless, the sale is subject to donor’s tax
because the property was not subjected to capital gains tax. Capital gains tax on real properties are applicable
only on sale of real properties classified as capital assets located in the Philippines.
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

Page 21 of 42
P6.4
(a) Donor’s Tax = [(P850,000 – 400,000) – 250,000] x 6% = P12,000
(b) CGT = P0; the shares were sold at a loss.
(c) Donor’s Tax = P0; exempt from donor’s tax under the TRAIN Law
(d) CGT = P0; the shares were sold at a loss.
P6.5 – Donations were made after the effectivity of TRAIN Law

a) March 1 = Exempt
b) May 30 = P21,000
c) June 30 = P90,000
d) July 31 = P0; exempt
e) September 30 = P447,200
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
Gross gift – May 30 P500,000

Less: Mortgage assumed by the donee (100,000)
Add: Prior net gift 200,000
Total Gifts as of May 30 P600,000
Less: Tax Exempt gift (250,000)
Taxable gift – May 30 P350,000
x 6%
Donor’s Tax Due P21,000
Less: Tax paid -
Donor’s tax payable-May 30 P21,000
Gross gift – June 30 P300,000 Apply cumulative rule regardless of the

relationship between the donor and the donee
Total gifts as of June 30 900,000
Taxable gift – June 30 P650,000
x 6%
Less: Tax paid as of May 30 (21,000)
Donor’s tax payable-June 30 P18,000
Gross gift – September 30 P3,000,000

Less: Mortgage assumed by the donees (600,000)
Total gifts as of June 30 P3,300,000
Taxable gift – Sept. 30 P3,050,000
x 6%
Less: Tax paid as of June 30 (39,000)
Donor’s tax payable-Sept. 30 P144,000

Page 22 of 42
P6.6 – Donations were made before and after effectivity of TRAIN Law
1) March 30, 2018 = P0
2) May 25, 2018 = P0, exempt
Solution
March 30, 2018
Gross gift P100,000
Taxable net gift P-
May 25, 2018

Gross gift - church P200,000
Deductions (200,000)
Taxable gift P0
Tax Due P0; exempt
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

Page 23 of 42
Husband Wife Total
Gross Gifts (charitable org.; exempt) P- P-
To a family friend 2,000 2,000
Prior net gifts 268,000 268,000
Tax exempt gift (250,000) (250,000)
Taxable gift P20,000 P20,000
@6% @6%
Less: Donor’s tax paid (1,080) (1,080)
Donor’s Tax Payable P120 P120 P240
P6.8 (1)P6,000 (2)P0 (3)P36,000 (4)P30,000
Feb. 15, 2018

Mr.Macariola Mrs.Macariola Total
Gross Gifts P200,000 P200,000
Mortgage assumed (50,000) (50,000)
Net Gift P150,000 P150,000
Less: Exempt gift (250,000) (250,000)
Net Taxable gift P- P-
Donor’s Tax Due P0; exempt P0; exempt P-
March 30, 2018

Gross Gifts P200,000 P-
Prior net gift 150,000
Net gift P350,000
Net Taxable Gift P100,000
Donor’s Tax Due @ 6% 6,000
Donor’s tax paid -
Donor’s Tax Payable P6,000 P6,000
June 1, 2018
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

Page 24 of 42
October 12, 2018
Gross Gifts (P400k+P400k)/2 P400,000 P400,000
Less: Mortgage assumed (50,000) (50,000)
Prior net gift 350,000 250,000
Net gift P700,000 P600,000
Less: tax exempt gift (250,000) (250,000)
Net Taxable Gift P450,000 P350,000
x 6% 6%
Less: Donor’s Tax Paid (6,000) (6,000)
Donor’s Tax Payable P21,000 P15,000 P36,000
October 12, 2018 - CLIFFORD

Gross gift P100,000
Net Taxable gift P0
Tax Due P0; exempt
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. 30 and 31. TRAIN Law

Net gift – Feb. 29 P500,000

Page 25 of 42
Less: Donation to the government (P500,000)
Net taxable gift – Feb. 29 P-; exempt
Gross gift April 1 P1,000,000

Mortgage assumed by the donee (500,000)
Net Gift P500,000
Net Taxable Gift P250,000
Donor’s Tax Due @ 6% (#30) P15,000,
Net gifts, May 31 P5,000,000

PNG-April 1 500,000
Cumulative Net gift, May 31 P5,500,000
Net taxable gift P5,250,000
x 6%
Total P315,000
Less: Donor’s tax paid April 1 (15,000)
Donor’s tax payable, May 31 (#31) P300,000
No. 32. TRAIN LAW

Net gifts of the spouses, March 1 P500,000
Divide by 2
Net gift, Mr. Mapagbihay, March 1 P250,000
Tax exempt gift (250,000)
Taxable net gift, Mr. Mapagbigay P0
Donor’s Tax Due, Mr. Mapagbigay P0
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
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
No. 35. TRAIN LAW

Gross gift-Jan. 24 P2,000,000
Mortgage assumed by the donee (500,000)
Net gift P1,500,000
Taxable Net Gift P1,250,000

Page 26 of 42
Donor’s Tax Rate (TRAIN Law) 6%
Donor’s tax due/payable P75,000
No. 36. TRAIN LAW

Net gift-Nov. 30 P4,500,000
Net gift-Jan. 24 1,500,000
Cumulative Net gift P6,000,000
Taxable Net Gift P5,750,000
Donor’s Tax Rate (TRAIN Law) 6%
Total donor’s tax due P345,000
Less: Donor’s tax paid-Jan. 24 (75,000)
Allowable Donor’s tax credit: (258,750)
Limit = 4.5/6 x P345,000 = P258,750
Vs. Actual = 400,0000
Donor’s tax due/payable P11,250
CHAPTER 7 – BUSINESS TAXES

MULTIPLE CHOICE
1. A 6. B 11. C 16. C
2. D 7. C 12. B 17. D
3. D 8. D 13. C 18. D
4. D 9.. C 14. A 19. A
5. D 10. D 15. D 20. D
CHAPTER 8 – VALUE ADDED TAX
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

Page 27 of 42
P8.2
Case A X Case E V Case I V
Case B X Case F X Case J X (OPT)
Case C V Case G V (0%)
Case D V Case H V
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:
▪ Input vat on purchases directly attributable to vatable sales

(Purchase of school supplies and gift items)
P1,344,000 x 3/28
P144,000
▪ Input vat on purchases attributable to vatable and nonvatable
sales (Purchase of computers)
P448,000 x 3/28 x (2,400/3,600)**
P32,000
▪ Purchase of office supplies used in vatable and non-vatable
transactions from non-vat registered suppliers nil (176,000)
Vat Payable P112,000
**Total Vatable Sales net of vat = P2,400,000
Non-vatable sales = P1,200,000

Page 28 of 42
Total Sales, net (vatable and non-vatable) = P3,600,000
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%
▪ P2,240 x 3/28 x 80% (192)

Vat Payable P62,208
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:
▪ Input vat on importation:

CIF (cost, insurance, freight) value P229,195
Charges/expenses incurred in claiming the goods:
Wharfage 1,540
Arrastre 2,295
Customs duty 4,090
Brokerage fee and documentary stamps 330
Facilitation expense = bribe; illegal payment; not included -
in the computation
Marine cargo insurance 2,550
Total P240,000

Page 29 of 42
x 12% (28
,800)
▪ Input vat on Freight from customs to warehouse (600)
Vat Payable P12,600
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
Output vat (P800,000 x 12%) P96,000

Less: Input Vat
Presumptive I.V (P85,000 x 4%) (3,400)
Purchased of olive oil (P67,200 x 3/28) (7,200)
Purchased of can containers (P25,000 x 12%)) (3,000)
Payments for paper labels (P12,000 x 12%) (1,440)
Purchased of cardboard for boxes (P8,960 x 3/28) (960)
Payments for hauling services nil
Vat Payable P80,000

Page 30 of 42
P8.13
Output vat (672,000 x 3/28) P72,000
Less: Input Vat
Purchased of bottles (P22,400 x 3/28) (2,400)
Purchased of can containers (P50,000 x 12%) (6,000)
Payments for paper labels (P5,600 x 3/28) (600)
Purchased of cardboard for boxes (P3,360 x 3/28) (360)
Payments for hauling services (P60,000 x 12%) (7,200)
Vat Payable P55,440
The taxpayer (processor of fruits) is not entitled to presumptive vat
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
Subject to Percentage Tax (Amusement Tax)

Disco:
Sale of food and refreshments (P1.6M x 18%) 288,000
Sale of wine, beer and liquor (P1.2M x 18%) 216,000
TOTAL BUSINESS TAXES P1,182,000
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

Page 31 of 42
Vat Payable P31,800 P5,400
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

Page 32 of 42
16. C 36. B 56. C 76. D
17. A 37. B 57. A 77. C
18. D 38. B 58. A 78. D
19. D 39. C 59. C 79. C
20. D 40. A 60. A 80. B
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)
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)

Page 33 of 42
Vat payable P324,000
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

Page 34 of 42
Input vat (56,000 + 11,200) x 3/28 x 300/500 (4,320)
Vat Payable P31,680
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
CHAPTER 9 – OTHER PERCENTAGE TAXES
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

Page 35 of 42
3) VAT = P2.4M x 12% = P288,000
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.
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
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.
2) Taxpayer is vat registered

Add: AR, beginning 500,000
Less: AR, end (600,000)
Collections 2,300,000
x 12%
Business Taxes under Sec. P276,000
116
services.
Although the total gross receipts ≤ P3,000,000, the taxpayer is vat registered. Hence, subject to 12% vat
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

Page 36 of 42
2) Income tax due using preferential tax rate of 2% per treaty = P320,000
▪ GR Passenger operations-Phils. P10,000,000
▪ GR cargo operations-Phils. 6,000,000
Total 16,000,000
GPB rate 2%
Income Tax Due P320,000
3) Business tax due = 3% CCT on cargo operations originating in the Philippines

= 3% x P6M = P180,000
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
3. Subject to P6,000 value added tax

[(5,000 sh. X P50) – P200,000 = P50,000 capital gain x 12% = P6,000
A dealer in securities is subject to 12% value added tax based on gross income
4. Subject to OPT (stock transaction tax) of P720 computed as follows:
P120,000 x .006 (TRAIN Law) = P720
5. OPT = 5,000 shares x P18 x .006 = P540
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
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
maturity of 5 years
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

Page 37 of 42
yrs)
Dividends and equity shares in net income of subsidiaries 400,000 0% -
Net trading gain net of loss (P325,000-150,000) 175,000 7% 1,750
TRUE OR FALSE
1. FALSE 11. TRUE 21. FALSE

6. FALSE 16. TRUE 26. TRUE
7. FALSE 17. FALSE 27. TRUE
10. FALSE 20. FALSE 30. FALSE
#4. False. Shall be either 0%vat or vat exempt only

#6. False. Shall be whichever is higher. However, the application of minimum quarterly receipts has been suspended.
#7.False, CCT is based only on GR from cargo operations.
#9. True. For business tax purposes only; sources within for income tax purposes
#13. False. Shall be from the government
#14. True. i.e., Radio/television broadcasting companies whose GR exceeds the vat threshold of P10M preceding year.
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.

Page 38 of 42
Supporting Computations:
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. 10 VAT Payable = (P1,350,000 + 625,000 – 1,200,000) x 12% = P93,000

No. 19 P6.5M x 12% vat = P780,000
No. 20 P660,00 x 3% = P19,800
No. 21 (P400,000 + P100,000) x 12% = P60,000; shall be based on collections
No. 22 CCT = (P800,000 + 400,000) x 3% = P36,000
No. 23 CCT = [(100,00-18,000) + (165,000-13,500) + 90,000 + 35,500] x 3% = P10,770
No. 26 P10M x 2.5% = P250,000
No. 27 P10M x 1.5% = P150,000
No. 28 exempt
No. 29 B
No. 30 (P10M x 40%) 3% = P120,000
No. 37
AR, beg. P600,000
Revenues (P4M + P1M) 5,000,000
AR, end (960,000)
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. 39 2017 = P9M x 3% = P270,000; 2018 = P12M x 3% = P360,000
No. 45 P3M x 10% = P300,000

No. 46
Output vat (P5M x 12%) P600,000

Page 39 of 42
Input Vat
▪ P300,000 x 12% (36,000)
▪ P800,000 x 12% x 5/8 (60,000)
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
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
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. 61 [(P500,000 x 12%)-(300,000x12%)] = P24,000

No. 62 P2M x 2% = P40,000
No. 68 P7.5M x 18% = P1,350,000
No. 69 P5M x 18% = P900,000

Page 40 of 42
No. 70
P2.5M x 3% = P75,000; although the sales for the quarter alone is already P2.5M, it was clear in the preceding
number that the total sales never exceeded the vat threshold. Consequently, JC shall still be subject to OPT under Sec. 116.
No. 73 Amusement tax = exempt

No. 74 Amusement tax = (P5M + 3M) x 10% = P800,000
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
Forecast = Bet P1,000/20 per ticket = 50 tickets

= 50 tickets x P80 net winnings per ticket x 4% = P160
TOTAL = P1,182
No. 82 OPT = P350,000 x .005 = P1,750

No. 83 none; subject to CGT
No. 84 Vat = (P1.5M – P1M) x 12% = P60,000
No. 86 (120,000 – 30,000) x ½ x P30 x 1% = P13,500; Ratio = 45/75 = 60%; IPO rate = 1%
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****.
CHAPTER 10 – TAX REMEDIES

MULTIPLE CHOICE
1. D 16. A 31. D* 46. D 61. A
2. B 17. D 32. D 47. A 62. D
3. C 18. C 33. B 48. A 63. D
4. A 19. B 34. B 49. A 64. C
5. D 20. C 35. B 50. D 65. B
6. D 21. C 36. B 51. D 66. B
7. C 22. D 37. C 52. D 67. B
8. D 23. B 38. A 53. B 68. B
9. D 24. B 39. C 54. D 69. A
10. D 25. C 40. D 55. A 70. A
11. D 26. B 41. D 56. B 71. D
12. D 27. C 42. D 57. B 72. A
13. C 28. C 43. A 58. A 73. D
14. B 29. B 44. D 59. D 74. D
15. D 30. C 45. A 60. C 75. C
#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.
*#31. BASED ON #30
30 | Transfer & Business Taxation(2019 Edition) by Tabag and Garcia

Page 41 of 42
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Chapter 1 - Succession & Transfer Taxes: Solutions Manual Transfer & Business Taxation, 2019 Edition By: Tabag & Garcia

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Chapter 1 - Succession & Transfer Taxes: Solutions Manual Transfer & Business Taxation, 2019 Edition By: Tabag & Garcia

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SOLUTIONS MANUAL

TRANSFER & BUSINESS TAXATION, 2019 Edition

CHAPTER 1 – SUCCESSION & TRANSFER TAXES

CHAPTER 2 – GROSS ESTATE

https://cdn.fbsbx.com/v/t59.2708-21/80047660_2273266482…=18669a49270fd784ac24af5921788750&oe=5E3FD6FE&dl=1 07/02/2020, 10H56 AM

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Supporting Computations (Multiple Choice):

(33). ​(P12M/100,000) x 1,000 shares = P120,000

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(35). ​P110 x 1,000 shares = P110,000

CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE

(P3.1) (a) P2,500,000 computed as follows:

(b) P500,000 computed as follows:

(P3.2) P5,715,000 computed as follows:

(P3.3) (Claim Against Insolvent Persons)

Case B: P333,333 computed as follows:

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Receivable (CAIP) P500,000

(P3.4) P200,000 computed as follows:

(P3.5) P133,333 computed as follows:

Receivable (CAIP) P200,000

(P3.6) P262,500 computed as follows:

(P3.7) STANDARD DEDUCTION

(P3.8) FAMILY HOME

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Value to take P1,500,000

https://cdn.fbsbx.com/v/t59.2708-21/80047660_2273266482…=18669a49270fd784ac24af5921788750&oe=5E3FD6FE&dl=1 07/02/2020, 10H56 AM

NET ESTATE without VD (from Q#1) P12,000,000

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Supporting Computation (Multiple Choice):

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CHAPTER 4 – PROPERTY RELATIONS

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Exclusive Common Total

Value to Take/Initial Basis P15,000,000

Proportional Deduction (15,000/45,000 x P1,500,000) (500,000)

Final Basis P14,500,000

Vanishing Deduction P11,600,000

Conjugal Partnership of Gains (CPG)

Exclusive Common Total

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*Family home is not allowed as a deduction for single decedent

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P4.5 ​(Decedent: Resident Alien)

Value to take/Initial Basis*** P25,000,000

** P7,000,000 – 3,500,000 = P3,500,000

Supporting Computations (Multiple Choice)

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(No. 21 & 22)

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(No. 27) ​ABSOLUTE COMMUNITY OF PROPERTY

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(No. 28) ​CONJUGAL PARTNERSHIP OF GAINS

Value to take P1,500,0 00

Initial basis P1,500,000

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a) Decedent is a resident citizen

https://cdn.fbsbx.com/v/t59.2708-21/80047660_2273266482…=18669a49270fd784ac24af5921788750&oe=5E3FD6FE&dl=1 07/02/2020, 10H56 AM

b) Decedent is a nonresident alien

P5.2 More than one foreign countries:

Net Taxable Estate, world P20,000,000

Estate Tax Due (P20M x 6%) P1,200,000

(33). (P12M/100,000) x 1,000 shares = P120,000

(35). P110 x 1,000 shares = P110,000

P4.5 (Decedent: Resident Alien)

(No. 27) ABSOLUTE COMMUNITY OF PROPERTY

(No. 28) CONJUGAL PARTNERSHIP OF GAINS

No. 10 VAT Payable = (P1,350,000 + 625,000 – 1,200,000) x 12% = P93,000

No. 39 2017 = P9M x 3% = P270,000; 2018 = P12M x 3% = P360,000

No. 45 P3M x 10% = P300,000

No. 61 [(P500,000 x 12%)-(300,000x12%)] = P24,000

No. 73 Amusement tax = exempt

No. 82 OPT = P350,000 x .005 = P1,750