Illustration 1

Mr. A, a resident rank-and-file private employee has three (3) qualified dependent children at the
beginning of the year. He also supports his mother-in-law who is a senior citizen. The following data
are made available for the year 2019:

Salary, net of P117,500 withholding tax, P6975 SSS contributions, P5,250 Philhealth P482,500
contributions and P1,500 union dues
13th month pay 50,000
14th month pay 50,000
Rice subsidy (P1,500/month) 18,000
Uniform and clothing allowance 5,000
Monetized unused vacations leaves (12 days) 6,000
Actual medical benefits 15,000
Christmas gifts 10,000
Laundry allowance (P400 x 12) 4,800
Employee achievement award (amount of cash given) 10,000
Benefits received by virtue of collective bargaining agreement (CBA) and productivity 14,000
incentive schemes

Compute for the following:

Case 1 – Mr. A is a resident rank-and-file private employee

a. Tax exempt de minimis benefits

b. De minimis benefits to be included in other benefits
c. Taxable compensation income

DMB-Exempt Excess Other benefits Taxable

Salary 600,000
13th 50000
14th 50000
Rice allowance 18000
uniform 5000
VL 5000 1000
Medical benefits 10000 5000
Christmas gifts 5000 5000
Laundry 3600 1200
allowance
Employee 10000
achievement
CBA 14000
Total 46,600 22200
(22200) 22200
Total other 136200
benefits
Limit (90000)
Total taxable 46200
(46200) 46200
646200
 Case 2 – Mr. A is a resident rank-and-file government employee

a. Tax exempt de minimis benefits

b. De minimis benefits to be included in other benefits
c. Taxable compensation income

DMB-Exempt Excess Other benefits Taxable

Salary 600,000
13th 50000
14th 50000
Rice allowance 18000
Uniform 5000
VL 6000
Medical benefits 10000 5000
Christmas gifts 10000
Laundry 3600 1200
allowance
Employee 10000
achievement
CBA 14000
Total 42,600 16200
(16200) 16200
Total other 140200
benefits
Limit (90000)
Total taxable 50200
(50200) 50200
650200

Illustration 2

Mr. B received the following benefits aside from his basic pay for 2019:

Monetized unused VL (14 days) P11,200

Monetized unused SL (8 days) 6,400
Medical Assistance 16,000
Medical cash allowance to his dependents (per annum) 5,000
Rice subsidy 30,000
Uniform and clothing allowance 20,000
Laundry allowance 4,800
Employee achievement award (amount of watch given) 10,000
Employee achievement award (amount of cash given) 5,000
Christmas gift 5,000
Anniversary gifts 10,000
Daily meal allowance for OT work (10 days) 3,200
Benefits received by virtue of collective bargaining agreement (CBA) and productivity 12,000
incentive schemes
Profit sharing 50,000
Transportation and hazard pay 10,000
Representation and Transportation Allowance or RATA 40,000
Compute for the following:

Case 1 – Mr. A is a resident rank-and-file private employee

a. Tax exempt de minimis benefits

b. De minimis benefits to be included in other benefits
c. Taxable compensation income
d. Total non-taxable compensation

DMB-Exempt Excess Other benefits Taxable Non

taxable
VL 11200
SL 6400
Medical 10000 6000
assistance
Medical 4500 500
Rice subsidy 24000 6000
Uniform 6000 14000
Laundry 3600 1200
Watch 10000
EAA – cash 5000
Christmas gifts 5000
Anniversary gifts 5000 5000
Daily meal 2000 1200
CBA 12000
Profit sharing 50,000
Transportation 10000
RATA 40000
Total 82700 33900 82700
(33900) 33900
Total 55900 55900
Limit (90000)
Total 60,000

Case 2 – Mr. A is a resident rank-and-file government employee

a. Tax exempt de minimis benefits

b. De minimis benefits to be included in other benefits
c. Taxable compensation income
d. Total non-taxable compensation

DMB-Exempt Excess Other benefits Taxable

VL 8000 3200
SL 6400
Medical 10000 6000
assistance
Medical 4500 500
Rice subsidy 24000 6000
Uniform 6000 14000
Laundry 3600 1200
Watch 10000
 EAA – cash 5000
Christmas gifts 5000
Anniversary gifts 10000
Daily meal 2000 1200
CBA 12000
Profit sharing 50,000
Transportation 10000
RATA 40000
Total 73100 42100
(42100) 42100
Total 65600
Limit (90000)
Total 100,000

Case 3 – Mr. A is a resident managerial or supervisory employee

a. Tax exempt de minimis benefits

b. De minimis benefits to be included in other benefits
c. Taxable compensation income
d. Total non-taxable compensation
e. Fringe benefit
f. Fringe benefit tax

DMB-Exempt Excess Other benefits Taxable -FBT Taxable -

BIT
VL 8000 3200
SL 6400
Medical 10000 6000
assistance
Medical 4500 500
Rice subsidy 24000 6000
Uniform 6000 14000
Laundry 3600 1200
Watch 10000
EAA – cash 5000
Christmas gifts 5000
Anniversary gifts 10000
Daily meal 2000 1200
Profit sharing 50,000
Transportation 10000
RATA 40000
Total 73100

Total
Limit
Total

ABC Company provided the following housing benefits to its employees:

 Mr. A, rank-and-file employee received a house and lot amounting to P3M. – not under FBT
 ABC Company leases a residential house and lot for the use of his business manager, Mr. B for
P30,000/month – rental paid = P30,000; MV=30000*50%=15000

GUMV=15000/65%=23076.92

FBT=23076.92*35%=8076.92

 ABC Company allowed one of its unused realty investment costing P4,500,000, with zonal value
of P4,000,000 and assessed value of P3,000,000 to be used by its vice president, Mr. C.

ZV 4000000/20=200000

MV=200000*50%=100000

GUMV=100K/65%=153846.15

FBT=153846.15*35%=53,856.15

 ABC Company purchased a residential property for the use of its manager, Mr. D. The property is
payable over 12 annual installments of P200,000 including interests but have a cash price of
P2,000,000.

2000000*.05=100K

MV=100K*50%=50K
GUMV=50/65%=76923.07

FBT=76923.07*.35=26923

 ABC Company bought a residential dwelling for P5,000,000 and transferred ownership to its
president, Mr. E. The property has P3,000,000 zonal value.

5M

GUMV=7692307.69

FBT=2692307.69

 ABC Company owns a residential property and transferred it to his managerial employee, Mr. F
for P3,000,000. The property has fair value per tax declaration of P3,400,000 and zonal value of
P6,000,000.

6000000-3000000=3000000 Value of benefit

3000000/.65=4615384.62 GUMV

4615384.62*35%=1615384.62

 ABC Company provided a residential unit to Mr. G, supervisory employee for his temporary
home. Said property is located 50 meters within the business premise. – not subject to FBT

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

DEF Corporation paid for the following expenses which were liquidated by its managerial employee,
Mr. H:

Water and electricity bill at manager’s home P25,000

Meals and groceries at manager’s home 30,000

Bills on business telephone 15,000

Bills on personal phone 5,000

Transportation from office to and from clients 22,000

Transportation from office to and from home 15,000

Foods and beverages for visiting business clients 5,000

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

MV: 25000+30000+5000+15000=75000

GUMV:115384.62

FBT: 40384.62

A Inc. paid for the following expenses for its employees:

 Purchased a motor vehicle for P500,000 and transferred ownership to manager, Mr. B for its
personal use.

MV: 500000

GUMV: 500000/.65=769230.77

FBT: 769230.77*.35=269230.77

 Purchased a car for P1,000,000 payable in four installments plus 10% interest on the outstanding
unpaid balance of the car.

MV: 1000000/5 or *20%=200000

GUMV: 200000/65%=307692.31

FBT: 307692.31*.35=107692.31

 Cash benefit to Mr. D amounting to P600,000 for the purchase of a brand-new car to be partly
used in business.

MV: 600000

GUMV: 600000/65%=923076.92

FBT: 923076.92*35%=323076.92
 Mr. E, manager purchased a brand-new car amounting to P800,000 of which P300,000 was
contributed by the company.
 MV: 800000
 GUMV: 800000/65%=1230769.23
 FBT: 1230769.92*35%=430769.23

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

B Corporation maintains a fleet of motor vehicles for business use and employee use. The following
relates to the calendar quarter just ended:

Cost of four vehicles used exclusively for sales, freights P4,500,000

And delivery service

Cost of a motor vehicle for employees’ business use and 600,000

And employee use

MV: 600000/5=120000*50%=60000

GUMV: 60000/65%=92307.69

FBT: 92307.69*35%=32307.69

Rental payments for additional motor vehicle for employees 50,000

Personal use

MV: 50000*50%=25000

GUMV: 25000/65%=38461.54

FBT: 38461.54*35%=13461.54

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

C Corporation acquired the following for the use of its executive officers:

Bell 206 helicopter P25,000,000

-not subject to FBT

Elling E3 Executive (seagoing motor yacht) 18,000,000

MV: 18000000/20 or *.05=900000

GUMV: 900000/65%=1384615.38

FBT: 1384615.38*35%=484615.38
Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

D Corporation granted the following benefits to a Mr. A, managerial employee.

Salary of household personnel P15,000/month

Salary of personal driver 10,000/ month

Home owner’s association dues 6,000/year

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

FBT for the month

MV:15000+10000+500=25500

GUMV: 25500/65%=39230.77

FBT: 39230.77*35%=13730.77

E Cooperative lent its chief executive officer, Mr. A P1,000,000 at a minimal 4% annual interest rate.
Also, he pays for the membership dues in golf course of Mr. A amounting to P20,000.

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

MV: 12%-4%=8%*1000000=80000

GUMV: 80000/65%=123076.92

FBT: 123076.92*35%=43076.92

Mr. B, the Vice President for Finance of Z Corporation incurred the following expenses in attending a
three-day foreign business convention:

Plane tickets (USA travel)

First Class $5000

30% is subject to FBT

Economy 500

-not subject to FBT

Hotel accommodation 3000

2100 is subject to FBT

 Inland travel 1000

-not subject to FBT

Determine the following (1) Monetary value of each cases, (2) Gross up Monetary Value, and (3)
Fringe benefit tax, assuming that the business convention was:

a. With documentary evidence – 30%first class ticket and 2100 Hotel accommodation
b. Without documentary evidence – all are subject to FBT

E Marketing, a distributor of cosmetic products provides educational assistance to the following

employees under an employment bond:

Position Field of study Amount

VP for Management Doctor in Business Administration P150,000
VP for Marketing Master’s in marketing management 100,000
Operations Manager BS Cosmetology 80,000
Accounting Supervisor BS Criminology 50,000
Accounting Staff BS Accountancy 40,000
Educational assistance to the dependents of its supervisory employees P100,000

Through a competitive scheme under a scholarship program of the

company

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

Accounting Supervisor only since it’s not related to his job function

50000/65%*35%

F Company made the following insurance premium payments:

 P50,000 premium for the life insurance of the Chief Executive Officer (CEO) with F Company as
the beneficiary of the policy -not subj to FBT
 P40,000 premium for the life insurance of the Company Chief Operating Officer (COO) with his
wife as the beneficiary – subj FBT
 P20,000 insurance premium of the personal car of the company manager-subj FBT
 P60,000 premium for group insurance of employees-not subj to FBT
 P120,000 premium share in SSS, Philhealth, and Pag-ibig dues of employees-not subj FBT
 P50,000 fire insurance premium for the company building-not subj to FBT

Compute for the following:

1. Monetary value of each cases

2. Gross up Monetary Value
3. Fringe benefit tax

A and B are co-owners by virtue of a property given to them by their father. The co-ownership had a
gross rental income of P500,000 (gross of 5% tax) and expenses related to rental activity of P300,000
but 10% is not deductible for the year 2019. A and B share in the profits at 75% and 25%,
respectively. A withdrew P100,000 from the co-ownership net income for the year; B did not
withdraw any amount. A and B are both single. Compute for the following:

a. Income tax liability of the co-ownership

500-(300*90%)=230,000 - not taxable

usually limited to the preservation of the co-ownership property and the collection of the income
therefrom Share in net income of the co-ownership of A and B
b. Mr. A230000*.75=172500

MR. B 57500

Co-ownership

Suppose A and B did not divide but instead invested the entire profit in another business venture
where they earned a net income after deductions of P450,000. Compute for the tax due of the co-
ownership.

450000 x 30%=135000

Estates and Trusts

Mr. A died on January 2, 2019 leaving a net estate of P4,000,000. The estate is in the hands of an
executor. Ms. B, a nephew of Mr. A, married, is one of the heirs of Mr. A.

In 2020, the estate had a gross income of P800,000 and expenses of P500,000 on the properties in
the estate. B, has his own gross sales of P600,000, cost of sale of P400,000, and business expenses of
P120,000. The executor distributed to Ms. B the following:

From the properties in the estate P250,000

From the current year’s income, net of 15% CWT 85,000 (85000/85%)

For 2020, both the estate of A and B do not avail of the 8% income tax rate option.

Determine:

a. The taxable income of the estate in 2020

800000-500000-100000=200000

b. The taxable income of B in 2020

600000-400000-120000+100000=180000

c. Income tax payable/refund of B in 2020 = 0

Mr. A designated in irrevocable trust a property in favor of Mr. B and appointed Mr. C as trustee. The
property earned P720,000 income before expenses of P200,000 and trust fees of P50,000. In
accordance with the trust agreement, Mr. C distributed P100,000 to Mr. B.

Determine:

a. The taxable income of the trust=720000-200000-50000-100000=370000

b. The taxable income of M. B=100000
c. The taxable income of Mr. C=50000
A created two trusts, Trust 1 and Trust 2 with different trustees but with a common beneficiary. The
following data pertain to the trusts and beneficiary’s own account:

Trust 1 Trust 2 Beneficiary

Gross income P450,000 P1,090,000 P250,000

Allowable deductions 75,000 125,000 100,000

Income distributed to beneficiary 150,000 175,000

(gross of CWT)

Determine the taxable income of:

a. Trust 1 450000-75000-150000=225000
b. Trust 2 1090000-125000-175000=790000
c. Consolidated Trusts

Income (1090000+450000) =1540000

Total expense =(200000)

Income distributed to beneficiary (325000)

Taxable P1015000

d. Beneficiary 250000-100000=150000+150000+175000=475000