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Transfer Bus Tax 2018 Answer Key
Transfer Bus Tax 2018 Answer Key
MANUAL
TRANSFER & BUSINESS TAXATION, 2018 Edition
By: TABAG & GARCIA
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) P11,800,000 (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 is 500,000 500,000
in the Philippines, deposited in a bank safety deposit box in Malaysia
Receivable from a friend who has no property whatsoever 300,000 300,000 300,000
Receivables under insurance policies:
§ Life insurance with his estate as revocable beneficiary 200,000 200,000 200,000
§ Life insurance with his daughter as revocable beneficiary 300,000 300,000 300,000
§ Life insurance with his son as irrevocable beneficiary - - -
§ Life insurance (group) taken by the employer of the decedent - - -
§ Property insurance for loss of property 50,000 50,000 50,000
§ Accident insurance, for injury sustained 50,000 50,000 50,000
TOTAL GROSS ESTATE P19,300,000 P11,800,000 P14,300,000
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, the tax code still require these items to 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. A 64. C
5. C 20. A 35. B 50. C 65. D
6. C 21. D 36. B 51. D 66. B
(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
(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
PROBLEM SOLVING
(P3.1) (Funeral Expenses)
Case A: P150,000; Case B: P200,000; Case C: P150,000; Case D: P150,000
(P3.3) P0
Mourning clothing (donated by the decedent’s employer) P-
Expenses paid by relatives -
Telecommunication charges paid by the friends -
Cost of burial plot, coffin, interment fees and other funeral charges paid by -
an insurance company
DEDUCTIBLE FUNERAL EXPENSE -nil-
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
& NOTE: Maximum deductible Family Home for decedent who died:
o Prior to 2018 – P1,000,000
o On or after Jan. 1, 2018 – P10,000,000
(P3.16)
CASE A – Decedent died before 2018:
Question 1: P2,430,000 (Decedent: Resident Citizen)
Question 2: P2,430,000 (Decedent: Resident Alien) (same computation with Q#1).
Domestic shares of 2,000 shares inherited 6 years ago P800,000
House and lot, family home, located in Europe, 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 500,000
Transfer for Public Use (donation to the gov’t provided in his will) 250,000
GROSS ESTATE P4,150,000
ORDINARY DEDUCTIONS:
Funeral expenses, Philippines (max.) 200,000
Judicial expenses, abroad 100,000
Judicial expenses, Philippines 50,000
Claims against the estate 120,000
Transfer for Public Use 250,000 (720,000)
Vanishing deductions (NONE; The shares were inherited 6 years ago - -
and the House and Lot is located abroad)
Question No. 1
TFPU P300,000
House and Lot in Makati (Family Home) 1,500,000
Personal properties 1,500,000
Farm Lot 825,000
Claim against insolvent person 225,000
Transfer in contemplation of death 1,500,000
Question No. 2
Value to take P575,000
Mortgage paid (P150,000-P75,000) (75,000)
Initial Basis 500,000
Proportional deduction
(500/5,850) x 867,500 (74,145)
Final Basis 425,855
Vanishing deduction rate 20%
Vanishing Deduction*** P85,171
Question No. 1
TFPU P300,000
House and Lot in Makati (Family Home) 1,500,000
Personal properties 1,500,000
Farm Lot 825,000
Claim against insolvent person 225,000
Transfer in contemplation of death 1,500,000
Question No. 2
Value to take P575,000
Mortgage paid (P150,000-P75,000) (75,000)
Initial Basis 500,000
Proportional deduction
(500/5,850) x 600,000 (51,282)
Final Basis 448,718
Vanishing deduction rate 20%
Vanishing Deduction*** P89,744
Question No. 1
VALUE TO TAKE (LAND) P1,250,000
MORTGAGE PAID (50,000)
INITIAL BASIS 1,200,000
Proportionate Deduction:
(1,200/7,800 x P900,000**) (138,462)
FINAL BASIS P1,061,538
Question No. 2
Gross Estate P7,800,000
ELIT (600,000)
TFPU (300,000)
Vanishing deduction (212,308)
Standard deduction (1,000,000)
Family Home (1,000,000)
Question No. 1
VALUE TO TAKE (LAND) P1,250,000
MORTGAGE PAID (50,000)
INITIAL BASIS 1,200,000
Proportionate Deduction:
(1,200/7,800 x P700,000**) (107,692)
FINAL BASIS P1,092,307
VANISHING DEDUCTION % 20%
VANISHING DEDUCTION P218,462
Correct ELIT + TFPU:
=1,200k+100k-300k-600k+300k TFPU=P700,000***
Question No. 1
Cash in bank P1,200,000
Residential House and lot in Q.C. (200sq.m. x P12,000) 2,400,000
Agricultural land in Canada 1,500,000
Devised to Quezon City government (TFPU) 1,100,000
Common stocks of Digong Corporation (5,000 sh. X P100) 500,000
Common stocks of Mar Corporation (15,000 sh. X P50) 750,000
Preferred stocks of Gracy Inc. (3,000 sh. X P50) 150,000
Shares of stock in a foreign corporation 170,000
Car 500,000
Receivables from Miriam 80,000
RA 4917 250,000
Total Gross Estate P8,600,000
(16.) A
Real property tax for the year 2013 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
(22). D
Income tax from practice of profession - 2013 P300,000
Income tax from practice of profession for Jan.-June ‘14 100,000
Real property taxes for 2013 150,000
Business taxes for 2013 100,000
Deductible taxes P650,000
(55).
Shares, domestic corporation P500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
LIT (500,000 x 2,000/2,500) (400,000)
Taxable Estate P1,600,000
TAX DUE
Estate Tax Due (P1.6M x 6%) P96,000
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 E
10. C C
11. C C
12. E E
13. C E
14. E E
15. E E
VANISHING DEDUCTION**
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
x Vanishing Deduction % 80%
Vanishing Deduction P11,600,000
**VANISHING DEDUCTIONS:
Value to take P500,000
1st Deduction: Mortgage paid -
Initial basis P500,000
2nd Deduction: Proportionate deduction
(500/7,000) x (867,045 + 200,000) (76,218)
Final Basis P423,782
x Vanishing rate 40%
Vanishing Deduction P169,513
**** 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
Accounts receivable (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
Accounts receivable (fully uncollectible) *** 2,000,000 (4,700,000)
TRUE OR FALSE
1. TRUE 6. FALSE 11. TRUE
2. TRUE 7. TRUE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. FALSE 9. TRUE 14. FALSE
5. FALSE 10. FALSE 15. TRUE
MULTIPLE CHOICE
1. A 8. B 15. D 22. B 29. D
2. B 9. D 16. C 23. C 30. A
3. A 10. C 17. D 24. D 31. C
4. C 11. B 18. C 25. C 32. B
5. D 12. D 19. C 26. B 33. D – P205,032
6. D 13. C 20. A 27. A 34. A
7. D 14. D 21. D 28. D 35. A
36. D
(No. 24)
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. 25)
Real property, Philippines P4,000,000
Real property, USA 5,000,000
Funeral expenses (200,000)
Judicial expenses (200,000 – 50,000) (150,000
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Balance P8,550,000
Standard Deductions (1,000,000)
Medical expenses (max.allowed) (500,000)
Family Home (P1,500,000/2) (750,000)
Share of the surviving spouse (P8,550,000/2) (4,275,000)
Net Taxable Estate P2,025,000
(No. 26)
Real property, Philippines P40,000,000
Real property, USA 50,000,000
Funeral expenses -
Judicial expenses -
Claim against insolvent persons (5,000,000)
Unpaid taxes (5,000,000)
Balance P80,000,000
Share of the surviving spouse (P80,000,000/2) (40,000,000)
Standard Deduction (5,000,000)
Medical expenses -
Family Home (P15,000,000/2) (7,500,000)
Net Taxable Estate P27,500,000
(No. 30)
Real property given as gift by his uncle during the marriage 4 ½ years before 1,500,000
the present decedent's death
Land inherited during the marriage from an aunt who died 6 years before the 500,000
present decedent's death
Cash income from the real property received as gift 100,000
Total exclusive property P2,100,000
(No. 30 to 36)
Real properties inherited before the marriage from his father who died 3 years P500,000
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 P5,700,000
(No. 34)
Value to take/initial basis P300,000
2nd deduction: 300/7,850 x P980,000 (37,452)
Final Basis P262,548
VD rate 60%
Vanishing deduction P157,529**
P5.2
Net Taxable Estate P2,000,000
Estate Tax Due P135,000
Estate tax credit (67,500)
Estate tax payable after tax credit P67,500
P5.4
(a) Net Taxable estate = P3,570,000; (b)Estate tax due after tax credit = P142,770
(c ) Net Distributable Estate = P4,427,230
House and lot, USA * P2,000,000
Investment in stock, Philippines 800,000
Investment in stock, USA 1,000 000
Investment in bonds, USA*** 700,000
Cash in bank, Philippines 300,000
Cash on hand, Philippines 50,000
Accounts receivable 200.000
Car, Philippines 800,000
Legacy in favor of Philippine National Red Cross** 50,000
Devise to Quezon City for children’s playground** 70,000
Total Gross Estate P5,970,000
Ordinary Deductions:
Funeral expenses P150,000
Judicial expenses 300,000
Unpaid Philippine income tax for income in 2011 120,000
Loss on December 31, 2012 due to theft 10,000
Legacy in favor of Philippine National Red Cross 50,000
Devise to Quezon City for children’s playground 70,000
Accounts receivable (fully uncollectible) 200,000 (900,000)
Special Deductions:
Standard deduction (1,000,000)
Medical expenses (500,000)
NET TAXABLE ESTATE P3,570,000
Estate Tax Due P307,700
Estate Tax Credit (164,930)
Limit: [(3,200/5,970) x 307,700 = P164,930
Actual: P250,000
ESTATE TAX DUE AFTER ESTATE TAX CREDIT P142,770
NOTE:*Family home is not allowed as a deduction for single decedent
**To be deductible, the legacy/devise should be included first in the decedent’s gross estate; *** Considered as Estate “within”
MULTIPLE CHOICE
1. B 5. C 9. D
2. C 6. C 10. A
3. D 7. C
4. C 8. A
Supporting Computations:
No.5
Estate tax due (for P4M) P355,000
Estate tax credit (3/4 x P355,000) vs P80,000 (80,000)
Estate tax payable P275,000
No. 6
Estate tax due for P1,000,000; [P15,000 + (P500,000 x 8%)] P55,000
Less: Estate tax credit (20,500)
Estate tax payable P34,500
No. 7 Assume the decedent died before effectivity of the TRAIN Law
Gross Estate P10,000,000
Deductions (assume inclusive of Standard deduction) (5,000,000)
Share of the surviving spouse (5,000,000 x 60% x 50%) (1,500,000)
Net taxable estate P3,500,000
Tax Due (Tax Table); [P135,000 + (P1.5M x 11%) P300,000
Estate tax credit (2.8/3.5 x P300,000) vs P124,500 (124,500)
Estate tax payable P175,500
Net estate France = [(6M -2M) x 0.6 x 1/2] + (6M-2M) x 0.4 = P2,800,000
Net estate R.P. = [(4M-3M) x 0.6 x 1/2] + (4M-3M) x 0.4 = P700,000
No. 9 and 10
Net Taxable Net Distributable
Property inherited P1,400,000 P1,400,000
Property acquired through own labor 3,600,000 3,600,000
Funeral expenses (200,000) (240,000)
Judicial expenses (200,000) (200,000)
Claims against the estate
Notarized (40,000) (40,000)
Not notarized - (20,000)
Standard deduction (1,000,000) -
Net Taxable/Distributable estate P3,560,000 P4,500,000
CHAPTER 6 – DONOR’S TAX
ERRATUM:
Cumulative Basis of Computing the Net Taxable Estate
PRIOR to 2018 2018 Onwards
DISREGARD THIS STATEMENT:
Cumulative rule is applicable regardless of the relationship of the donor and the donee but
only is far as gifts made within the same calendar year.
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) x 6% = P60,000 TRAIN Law
(d) CGT = P0
P6.5
Relatives Strangers
Cash to his son on account of marriage P50,000
Cash to PPCRV for 2013 election - -
Jewelry to his auntie 46,000
Shoes and bags to his girlfriend 30,000
Books to the City of Makati 20,000
Second hand car to his first cousin 500,000
Brand new SUV to his second cousin (subject to revocation) - -
Shares of stocks of a domestic corp. to his best friend 150,000
Car to his daughter (a donation mortis causa) - -
Forgiven a loan due from his brother(50,000-25,000) 25,000
Sports equipment to his brother in law 75,000
Parcel of land to the Philippine government for public use 1,000,000
Gross Gifts P621,000 P1,275,000
NOTE:
§ Cash to PPCRV. Not considered as donation under the tax code. It is subject to the rules and regulations of the COMELEC under the
election code of the Philippines.
§ Books for the City of Makati AND Land for Public Use. Although the donations are exempt, should be considered in the determination of
“gross gifts”
§ Gift subject to revocation is not a gift.
§ Donation mortis causa is a donation subject to estate tax, not donor’s tax.
Solution:
Gross Gifts P200,000
Dowry - > 1 year after celebration
Net taxable gift P200,000
Donor’s Tax Due/ Payable (Tax Table) – March 1 P2,000
September 30
Relative Stranger Total
Gross Gift P1,500,000 P1,500,000
Dowry (10,000) -
Mortgage assumed (300,000) (300,000)
Prior net gift 600,000
Taxable gift P1,790,000 P1,200,000
@30%
Tax Due P107,200 P360,000
Less: Tax Payments (20,000)
Tax Payable P87,200 360,000 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
P6.8 – Donations were made before and after effectivity of TRAIN Law
1) January 15, 2017 = P32,000
2) April 1, 2017 = P6,000
3) December 25, 2017 = P0
4) March 30, 2018 = P0
5) May 25, 2018 = P0, exempt
Solution
Gross Gifts-Jan. 1, 2017 P1,000,000
Less: Encumbrance (200,000)
Taxable gift P800,000
Donor’s tax due/payable-Jan. 1, 2017 (Tax Table) P32,000
P6.9
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
Dowry - -
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
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%
Donor’s Tax Due P1,200 P1,200
Less: Donor’s tax paid (1,080) (1,080)
Donor’s Tax Payable P120 P120 P240
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
Supporting computation:
No. 27. None of the choices
Gross Gifts (5M/2) P2,500,000
Less: Tax Exempt Gift (250,000)
Net taxable gift P2,250,000
No. 37.
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. 39.
Mr. :
D. Tax Payable= P75,000/2 x 30% = P11,250
Mrs. :
Gross gifts, June 9 (P75,000/2) P37,500
Dowry (10,000)
Prior net gift – Feb. 240,000
Total taxable gift, June 9 P267,500
Donor’s tax due P4,700
Donor’s tax paid, Feb. (3,600)
Donor’s Tax Payable-June 9 P1,100
No. 40.
Mr. :
Gross gifts, Dec. 25 (P750,000 x 60%) /2 P225,000
Prior net gift – Feb. 240,000
Total taxable gift, June 9 P465,000
No. 41.
Gross gifts, Dec. 25 (P750,000 x 40%) P300,000
Donor’s tax rate 30%
Donor’s tax payable, Dec. 25 P90,000
PROBLEM SOLVING
P8.1 – ERRATUM: Determine the applicable business tax correct of the following:
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
P8.2
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
P8.5
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
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
P8.9
(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
x 12% (28,800)
§ Input vat on Freight from customs to warehouse (600)
Vat Payable P12,600
P8.10
(a)
1st 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)
2nd 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)
P8.12
(a) P3,400
(b) P80,000
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
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. 2015 Dec. 2015
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
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
*Sale of Gold to BSP Prior to 2018 = 0% vat; Beg. Jan. 1, 2018 = Vat exempt
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
Output Vat, 3rd quarter (P150,000 x 12%) P18,000
Input vat, 3rd quarter (P120,000 x 12%) (14,400)
Deferred input vat – previous quarter (6,000)
Vat Payable (Carry-over) (P2,400)
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. 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)
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
v Ratio of Initial Pay’t over Gross S.P. = P900,000/P3,000,000 = 30%
v 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 2015 = P0; The entire output vat was paid in 2014
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
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
PROBLEM SOLVING
P9.1
1. A 11. A 21. A 31. A 41. A
2. F 12. A 22. C 32. C 42. E
3. F 13. A 23. A 33. C 43. A
4. A 14. A 24. A 34. A 44. F
5. A 15. A 25. A 35. A 45. A
6. F 16. C 26. C 36. A
7. C 17. C 27. A 37. B
8. C* 18. C 28. C 38. F
9. C 19. A 29. F 39. A
10. A 20. C** 30. F 40. F
*#8: Assume the taxpayer is a domestic common carrier transporting passengers by land
#7-9: Assume the taxpayer is a domestic common carrier by land
**Franchise tax of 5% under PD1869; related SC decision
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 Erratum: Change the OPEX to P425,000
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
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.
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.
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.
P9.7
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
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
No. 48 Statement 2 is False. The rate shall be 4% (twice the rate of Section 123 NIRC)