TAXATION 1

ESTATES & TRUST, FRINGE BENEFIT

PROBLEM 1 – Multiple Choice – Write the letter as well as the entire answer
1. Property, rights and obligation of a person which are not extinguished by his death and also
those which have accrued thereto since the opening of the succession.
2. a. estate b. trust c. fiduciary d. beneficiary

3. The person who establishes a trust

a. trustor b. grantor c. fiduciary d. beneficiary

4. When an individual dies, future income on his property will be taxed to

a. those who inherit the property after they receive the property
b. the estate itself after the heirs have received the property
c. the individual himself d. none of the above

5. When an individual dies, who is taxed on income from his property between the time of his
death until his estate is finally settled?
a. those who inherit the property after they receive the property
b. the estate itself after the heirs have received the property
c. the individual himself d. none of the above

6. The general term which applies to all persons or corporations that occupy positions of
peculiar confidence towards others, such as trustees, executors, guardians, or administrators,
receivers, or conservators.
a. trustor b. grantor c. fiduciary d. beneficiary

7. Legal entity that exists for the purpose of managing and distributing the deceased person’s
property to the heirs
a. Estate b. Estate tax c. Estate taxation d. None of the above

8. Cost of life or health insurance and other non-life insurance premiums borne by the
employer for his employee shall be treated as taxable fringe benefit, except
a. contriburtions of the employer for the benefit of the employee pursuant to provision
of existing laws such as under SSS and GSIS
b. cost of premiums borne by the employer for the group insurance of his employees
c. both of the above
d. none of the above
9. Fringe benefits not subject to fringe benefits tax include which of the following?
a. Fringe benefits which are authorized and exempted from income tax under the Code
or under any special law
b. Contribution of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefit plans
c. Benefits given to the rank and file, whether granted under a collective bargaining
agreement or not
d. All of the above e. None of the above

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 10. Which statement is not true? The amount on which the fringe benefit tax rate is applied is
a. the monetary value of the fringe benefit
b. the grossed-up monetary value of the fringe benefit
c. the amount deductible by the employer from his gross income
d. reflected in the books in the two accounts of fringe benefit and tax

PROBLEM 2 – Identify or fill in the blank

1. This is the amount given to an employee to supplement his wage or salary and given in the
form of food, service, or other benefit furnished or granted in cash or in kind.
2. An employee who is holding neither a managerial or supervisory position as defined in the
Labor Code of the Philippines.
3. The party that pays the fringe benefit tax.
4. If the fringe benefit is given to a managerial employee and is subject to fringe benefit tax,
how much is the deduction for the employer from fringe benefit payments?
5. The whole amount of income realized by the employee which includes the net amount of
money or net monetary value of property which has been received plus the amount of fringe
benefit tax due thereon.
6. Enumerate fringe benefits not subject to fringe benefits tax (5)

PROBLEM 3 – For each of the following cases, compute the fringe benefit tax:
1. An education grant of 340,000 was given in 1998 to an alien employed as general manager
of an offshore banking unit of a foreign bank.
2. In 1999, a non-resident alien not engaged in business in the Philippines was provided with a
driver by the employer who paid the driver’s salary of 96,000.
3. The employer purchased a car in 2000 for 520,000 in the name of its accounting manager.
4. The employer bought a car in 2001 for 960,000 with the employee as owner. The amount is
payable in 3 years. The cash price of the car is 600,000.
5. The employer paid the hospitalization cost of its controller who met in accident in 2002,
10,000.
6. In 2003, the employer lent 500,000 to its vice president at an interest rate of 4%.
7. In 2004, the employer paid the following to one of its division chiefs:
Salary of the household help of the employee 60,000
Membership fee in Laguna Golf and Country Club 36,000
Expenses for foreign travel, as follows:
Business class airplane ticket $750
Foods and accommodation (8 days) $400/day
(Exchange rate – P50: $1)
Clothing allowance for the year 3,000

8. Rental payment in 1999 for the residential unit where the manager resides, 1,300,000

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PROBLEM 3
The following data pertain to two trusts with a common grantor and a common beneficiary:

Trust 1 Turst 2
Gross income 1,800,000 1,200,000
Expenses 640,000 480,000
Income distribution to beneficiary 300,000 200,000

Compute the tax due of each trust.

PROBLEM 4