Professional Documents
Culture Documents
SOLUTIONS MANUAL
TRANSFER & BUSINESS TAXATION, 3rd Edition
By: TABAG & GARCIA
Supportitjg Computatiotjs:
23.
Bank deposit itj the foreigtj bratjch of a domestic bank P500,000
Bank deposit itj Makati bratjch 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
23.
House and lot, family home in Quezon City P1,500,000
Bank deposit itj Makati bratjch 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
25.
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
26.
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. 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.
PROBLEM SOLVING:
PROPLEM 1
(1) P19,300,000 (2) P19,300,000 (3) P11,800,000 (4) P14,300,000
Citizen/ NRA with R NRA w/o R
Resident
(# 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 domestic corporation deposited in a 2,000,000 2,000,000
bank safety deposit box in Malaysia
Shares of stock of a foreign corporation the entire business 500,000 500,000
of which is in the Philippines, deposited in a bank safety
deposit box in Malaysia
Receivable from a friend who has no property whatsoever 300,000 300,000 300,000
Receivables under insurance policies:
Life insurance policy, taken by the decedent on his 200,000 200,000 200,000
own life, with his estate as revocable beneficiary
Life insurance policy, taken by the decedent, with 300,000 300,000 300,000
his daughter as revocable beneficiary
Life insurance policy, taken by the decedent on his - - -
own life, with his son as irrevocable beneficiary
Life insurance (group) taken by the employer of - - -
the decedent, with the estate as revocable
beneficiary
Property insurance, for a 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
PROBLEM 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
PROPLEM 3
1. P230,0000
2. P1,100,000
3. P0
4. P5,000,000
5. P1,000,000 + [1M x (1M x 10% x 1.5)] = P1,150,000
MODIFIED IDENTIFICATION
EXERCISE A
1. Included 11. Included***
2. Included 12. Excluded**
3. Excluded 13. Excluded**
4. Included 14. Included
5. Excluded 15. Included
6. Excluded 16. Included
7. Included * 17. Excluded
8. Excluded 18. Excluded**
9. Excluded** 19. Excluded
10. Excluded 20. Included
*Included in the gross estate if the beneficiary is the estate, administrator or executor. In case of doubt,
the item should be taxable.
**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.
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
23.
Income tax from practice of profession - 2013 P300,000
Income tax from practice of profession for Jan.-June ‘13 100,000
Real property taxes for 2013 150,000
Deductible taxes P550,000
35.
ERRATUM: Pedro died leaving a car acquired by purchase from Pedro JUAN
41.
Value to take/Initial Basis P900,000
Mortgage paid (50,000)
Initial basis 850,000
2nd Deduction:
(850/1,000 x P100,000**) (85,000)
Final Basis P765,000
X Vanishing rate 40X
VANISHING DEDUCTION P306,000
54.
Shares, domestic corporation P500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
5| Transfer & Business Taxation(3 r d
Edition) by Tabag and Garcia
55.
Gross Estate (Tangible property Phils.) P6,000,000
ELIT (1,200,000 x 6,000/10,000,000) (720,000)
Taxable Estate P5,280,000
PROBLEM SOLVING
Problem 1
Case A: P150,000
Case B: P200,000
Case C: P150,000
Case D: P150,000
Case E: P0
Problem 2
ASSUME GROSS ESTATE OF P2,000,000
Embalming charges P15,000
Burial apparel of the decedent 3,500
Cost of coffin 125,000
Mourning apparel of the surviving spouse during the burial 5,000
Mourning apparel of the minor child 2,000
Snacks and drinks during the wake 12,500
Honoraria of priest for daily masses before burial 2,000
Telecommunication charges to inform relatives 1,000
Charges for death notice published in a newspaper 8,000
Cost of video footage of the burial and interment 12,000
Funeral car service during interment 4,000
Honorarium of priest who celebrated the mass during interment 2,000
Cost of tombstone 30,000
ACTUAL FUNERAL EXPENSE P232,000
Vs. Limit (P5X of P2M) 100,000
ALLOWABLE FUNERAL EXPENSE P100,000
NOTE: Hospital bills for two months of confinement before decedent’s death should be charged to
“medical expenses”
Problem 3
Case A: P100,000
Case B: P333,333 computed as follows:
Receivable P500,000
Collectible portion (400/1,200) x (166,667)
500,000
Uncollectible portion of the claim P333,33
3
Case C: P0. Debtor is not insolvent
Problem 4
DUE FROM PEDRO P200,000
Assets of Pedro P400,000
Less: Due to the BIR for utjpaid taxes (200,000)
Balatjce 200,000
Collectible by Juatj X 200/600 (66,667)
UNCOLLECTIBLE PORTION
(Deductible from Juan’s Gross Estate) P133,333
Problem 5
Question 1: P550,000 computed as follows:
Unpaid taxes on the estate before death P150,000
Unpaid mortgage on the estate 200,000
Unpaid loans arising from debt instruments 125,000
(notarized)
Unpaid loans arising from debt instruments (not 75,000
notarized). The debt instrument was issued by
a financial institution not requiring notarizations
for debt instruments issued
Total Deductible Claim Against the Estate P550,00
0
Problem 6
Question 1: P217,500
Question 2: P217,500
Same answer with question #1. Whether or not the estate was
settled judicially is irrelevant in the determination of allowable
deduction for judicial expenses.
Solution:
Expenditures incurred for the collection of assets P100,000
and payment of debts
Attorneys fees (1/2 were incurred after six 20,000
months)
P40,000 x 1/2
Accountant’s fees 25,000
Executor’s commission 15,000
Appraiser’s fees 2,500
Court fees 18,000
Cost of preserving and distributing the estate 15,000
Cost of storing or maintaining the property of the 12,000
estate
Brokerage fees for selling property of the estate 10,000
Total allowable judicial expenses P217,50
0
Problem 7
Loss due to shipwreck, two (2) months after the decedent’s death. P500,000
Robbery loss, seven (7) months after the decedent’s death. The 2,000,000
decedent’s executor was allowed by the Bureau of Internal Revenue
to extend the filing (within the period allowed by the Tax Code) of
estate tax return due to a meritorious reason
Allowable Deduction P2,500,000
Problem 8
Value to take P937,500
1st Deduction: Mortgage paid (187,500)
Initial basis P750,000
2nd Deduction: Proportionate deduction
(750/4,500) x 562,500 (93,750)
Final Basis P656,250
x Vanishing rate 40%
Vanishing Deduction P262,500
Problem 9
Value to take P1,500,000
1st Deduction: Mortgage paid ------
Initial basis P1,500,000
2nd Deduction: Proportionate deduction
(1,500/1,980) x 170,000 (128,788)
Final Basis P1,371,212
x Vanishing rate 80%
Vanishing Deduction P1,096,970
Problem 10
Case A: P1,000,000
Case B: P1,000,000
Case C: P1,000,000
Case D: P0
Case E: P0
Problem 11
Case A: P500,000
Case B: P500,000
Case C: P150,000
Case D: P500,000
Case E: P0
Problem 12
Case A: P1,000,000
Case B: P500,000
Case C: P0
Case D: P500,000
Case E: P600,000
Case F: P750,000; [ (1M/2) + (500,000/2)]
Problem 13
Gross Estate P3,000,000
Funeral expenses (150,000)
Actual P300,000 – 120,000 = P180,000
Limit = P3M x 5% = P150,000
Standard deduction (1,000,000)
Medical expenses (400,000)
Taxable Estate P1,450,000
Supportitjg Computatiotjs
No. 22 and 23
Gross Estate: Exclusive Cotjjugal
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 200,000
spouse
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. 24 and 25
Gross Estate: Exclusive Commotj
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. 26
Conjugal properties P200,000
Conjugal Deductions:
Funeral expenses (35,000)
Actual = P45,000
Limit = (P500,000 + 200,000) x 5% = 35,000
Judicial expenses (20,000)
Claim against the estate (45,000)
Net Conjugal properties P100,000
Divide 2
Share of the Surviving Spouse P50,000
No. 27
Real property, Philippines P4,000,000
Real property, USA 5,000,000
Funeral expenses (200,000)
No. 28
Exclusive Common Total
Conjugal real properties P5,000,000
Conjugal family home 1,500,000
Exclusive properties P2,500,000
Total P2,500,000 P6,500,000 P9,000,000
Ordinary Deductions:
Funeral expenses (75,000)
Actual P300,000 x 25% = P75,000
Limit = 5% x P9M = P450,000
Casualty losses*** (100,000)
Miscellaneous deductions (P1M x 75%) (750,000) (825,000)
Net P2,400,000 P5,675,000 P8,075,000
Special Deductions:
Standard Deductions (1,000,000)
Medical expenses (P500,000 x 50%) (250,00)
Family Home (1,500,000/2) (750,000)
Share of the surviving spouse (5,675,000/2) (2,837,500)
Net Taxable Estate P3,275,000
ERRATUM: DISREGARD ….Exclusive Properties are NET of Casualty Losses***
****If silent and unless the problem clearly illustrate that it is exclusive, assume the property is common.
PROBLEM SOLVING
PROPLEM 1:
(a)P1,624,773 (b)P4,132,955 (c)P3,691,250 (d)P321,038
*The problem is silent as to reciprocity, hence, the gross estate should include tangible and intangible
properties within the Philippines.
**ELIT:
**VANISHING DEDUCTIONS:
Value to take P500,0 00
1st Deduction: Mortgage paid -
Initial basis P500,000
2nd Deduction: Proportionate deduction
(500/7,000) x 867,045 (61,932)
Final Basis P438,068
x Vanishing rate 40%
Vanishing Deduction P175,227
**** 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.
PROPLEM 2:
(Decedent: Resident Citizen)
a) Vanishing deduction = P1,676,200
b) Net exclusive property of the decedent = P7,923,800
c) Net community property = P17,800,000
d) Net Taxable estate = P15,323,800
e) Estate tax due = P2,279,760
Exclusive Conjugal Total
Exclusive properties P10,000,000
Ordinary Deductions:
Conjugal properties 20,000,000 P30,000,000
Funeral expenses (200,000) (200,000)
Judicial expenses (300,000) (300,000)
Claims against conjugal properties (200,000) (200,000)
Claims against exclusive properties* (400,000) (400,000)
Legacy against exclusive properties ** - - -
VANISHING DEDUCTION*** (1,676,200) (1,676,200)
Amount received under RA4917 (1,500,000) (1,500,000)
Net exclusive/conjugal P7,923,800 P17,800,000 P25,723,800
Special Deductions:
Standard deduction (1,000,000)
Medical expenses (500,000)
Share of the survivitjg spouse (8,900,000)
NET TAXABLE ESTATE P15,323,800
ESTATE TAX DUE P2,279,760
*From the information provided in the problem, the amount of P400,000 as “claim against exclusive
property” should pertain to the unpaid mortgage on the land inherited. Therefore, the present decedent
paid P100,000 on the original amount of the mortgage (P500,000). This should be taken into
consideration in computing the vanishing deduction.
** LEGACY AGAINST EXCLUSIVE PROPERTIES
Legacy means bequest or inheritance of personal properties. The deductible legacy/devised (bequests)
under the tax code are:
Transfer for “public use” (Rule: Include both in the “Gross Estate” as well as in the “Deductions
from the Gross Estate) ; and
Bequests to charitable institutions wherein not more than 30% of the bequest was used for
administrative purposes (Rule: Same as transfer for public use)
From the information provided above, the problem was silent as to the type of the legacy. In case of
doubt, the two types of transfers enumerated above should not be assumed. Therefore, the item should
be treated as a simple “legacy” or “transfer in contemplation of death” which is added only in the gross
estate.
PROPLEM 3:
(Decedent: Resident Alien) (a) Net Taxable estate = P3,570,000; (b)Estate tax due = P307,700
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
NOTE (Problem 3)
*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
***Assume the debtor is an insolvent person.
***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 deductible,
the mortgage should have been assumed on the property at the time of inheritance.
PROPLEM 5
Conjugal Absolute
Partnership Community
1. Real Property inherited by the decedent duritjg the E E
marriage.
2. Income earned duritjg marriage from the property in the C E
preceding number.
3. Property acquired by the decedent with cash owned before E C
15 | Transfer & Business Taxation(3 r d
Edition) by Tabag and Garcia
the marriage
4. Personal belongings used exclusively by the decedent E E
5. Jewelry for the exclusive use of one of the spouses C C
6. Property unidentified when and by whom acquired C C
7. Lot acquired before the marriage by the surviving spouse E E
(surviving spouse had a previous marriage and legitimate
children in that previous marriage)
8. Income from the lot above E E
9. Cash – income during marriage C C
10. Exclusive property was sold, and was repurchased using C C
conjugal property
Supportitjg Computatiotjs:
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 P500,000) P55,000
Less: Estate tax credit (20,500)
Estate tax payable P34,500
No. 7
Gross Estate P10,000,000
Deductions (5,000,000)
Share of the surviving spouse (5,000,000 x 60% x 50%) (1,500,000)
No. 8
Estate tax due (for P500,000) P71,000
Less: Estate tax credit (41,417)
Estate tax payable P29,583
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
No. 28
Letter “a” ……….The Bureau of Internal Revenue can ask payment from the heirs to whom the estate has
been disturbed …….. change to Distributed
PROBLEM SOLVING
Problem I:
(1)P200,000 (2)P0; not allowed
Net Taxable Estate P10,000,000
Problem II:
Net Taxable Estate P2,000,000
Problem III:
(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
Problem IV:
Real property, Philippines P4,000,000
Claim Against Insolvent Persons 50,000
Real property, USA 3,000,000
Real property, Japan 2,000,000
Net estate, Malaysia (1,000,000)
Total Gross Estate (common) P8,050,000
Funeral expenses (maximum) (200,000)
Judicial expenses (P200,000-100,000) (100,000)
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Net estate before special deductions P7,650,000
X (Share of the surviving spouse) 1/2
Net estate of the decedent in the conjugal properties P3,825,000
Standard Deduction (1,000,000)
Family Home (1,000,000)
Medical Expenses (500,000)
NET TAXABLE ESTATE P1,325,000
TAX DUE:
1ST P500,000 P15,000
In excess of P500,000 @ 8% 66,000
ESTATE TAX DUE P81,000
Estate Tax Credit (None; No Estate Tax Payments abroad) ----
ESTATE TAX PAYABLE P81,000
Supportitjg computatiotj:
No. 17.
ERRATUM: Letter “C”: A gift to the International Rice Research Institute…… is exempt from gift *
No. 19. If the sale is considered fictitious, the entire value at the date of sale is subject to donor’s tax.
No. 22.
Letter “a” – onerous transfer
Letter “b” - To be considered valid donation, the renunciation should be specifically and categorically done in favor
of identified heir(s) to the exclusion or disadvantage of the other co-heir(s) in the hereditary estate.
Letter “c” – gratuitous transfer, subject to donor’s tax
No. 25.
Donation to Pedro Clara
Gross Gifts (2M/2) /2 P500,000 P500,000
Less Dowry (10,000) -
Net taxable gift P490,000 P500,000
No. 28.
DONEE
Son D. in Law
Gross Gifts (5M/2) P2,500,000 -
Less Dowry (10,000) -
Net taxable gift P2,490,000 -
No. 32-34.
Husband Wife
NG (3/1) 125,000 125,000
Tax Due (P25,000 x 2X) P500 P500
No. 39.
Taxable gift P300,000
Tax Due P6,000
Tax Credit P4,500 vs. (200/300 x P6,000=P4,000) (4,000)
D.T.Pyable P2,000** **Change Choice “d” from P2,200 to P2,000
PROBLEM SOLVING
Problem I:
ITEM Q#1 Q#2 Q#3 Q#4 Q#5
A P800,000 P800,000 P800,000 P800,000 P800,000
B 3,000,000 3,000,000 3,000,000
C 250,000 250,000 250,000 250,000
D 100,000 100,000 100,000 - 100,000
E* 5,000,000 5,000,000 5,000,000
F 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
G 100,000 100,000 100,000 - 100,000
H 100,000 100,000 100,000 - -
21 | Transfer & Business Taxation(3 r d
Edition) by Tabag and Garcia
Problem II:
ITEM Q#1 Q#2
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
Problem III:
1.P0 2.P5,000 3.P10,000 43,000
Problem IV:
Donation-Red Cross (exempt under a special law)* P100,000
Donation to Manila City Hall * 300,000
Mortgage on the land (400,000 x ¼) 100,000
Total deductions from the gross gifts P500,000
*Exempt donations which partake the nature of deductions and are, therefore , deductible from
the gross gifts to arrive at taxable net gifts.
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.
City of Makati AND Latjd for Public Use. Although the donation is exempt, it shall be considered
in the determination of “gross gifts”
Gift subject to revocatiotj is not a gift.
Dotjatiotj mortis causa is a donation subject to estate tax, not donor’s tax.
Problem VI
Tax payable on:
1) March 1 = P2,000
2) May 30 = P18,000
3) June 30 = P90,000
4) July 31 = P0
5) September 30 = P447,200
Solution
Gross Gifts P200,000
Dowry - 1 year after celebration
Net taxable gift P200,000
Donor’s Tax Due/ Payable – 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
Problem VII
1) January 15, 2012 = P32,000
2) April 1, 2012 = P6,000
3) December 25, 2012 = P0
4) March 30, 2013 = P30,000
5) May 25, 2013 = P0
Solution
Gross Gifts-Jan. 1, 2012 P1,000,000
Less: Encumbrance (200,000)
Taxable gift P800,000
Donor’s tax due/payable-Jan. 1, 2012 P32,000
March 30, 2013 The rule that gift of not more than
P100,000 x 30% P30,000 P100,000 is exempt is applicable only to
donations made to relatives.
May 25, 2013
Gross gift P200,000
Deductions (200,000)
Taxable gift P0
Tax Due P0
Problem VIII
1) October 8, 2014 = P9,800
2) November 4, 2014 = P1,200
June 6, 2014
October 8, 2014
Husband Wife Total
Gross Gift P30,000 P30,000
Dowry --- (10,000)
Prior Net Gift 228,000
Taxable gift P228,000 P248,000
@30
Donor’s Tax (Tax Table) P3,920
Tax Paid-June 6 (3,120)
Donor’s Tax Payable P9,0000 P800 P9,800
November 4, 2014
Husband Wife Total
Gross Gifts (strangers) P7,000 P7,000
Exempt (5,000) (5,000)
Prior Net Gift - -
Taxable gift P2,000 P2,000
@30 @30
Donor’s Tax Payable P600 P600 P1,200
Problem IX
1) October 10, 2013 = P3,140
2) April 4, 2014 = P13,500
June 6, 2013
Mr.Ramos Mrs.Ramos Total
Gross Gifts (strangers) P115,000 P115,000
Exempt (90,000) (90,000)
Taxable gift P25,000 P25,000
@30 @30
Donor’s Tax Payable P7,500 P7,500 P15,000
April 4, 2014
Mr.Ramos Mrs.Ramos Total
Gross Gifts P45,000 P45,000
Dowry - (10,000)
Prior net gifts - -
(none; different year)
Taxable gift P45,000 P35,000
@30
Donor’s Tax Payable P13,500 Exempt P13,500
Problem X
(1)P7,000 (2)P2,600 (3)P69,800 (4)P30,000
Feb. 15, 2014
Mr.Macariola Mrs.Macariola Total
Gross Gifts P200,000 P200,000
Dowry (beyond 1 year) - -
Mortgage assumed (50,000) (50,000)
Taxable gift P150,000 P150,000
Donor’s Tax Payable P1,000 P1,000 P2,000
June 1, 2014
Mr.Macariola Mrs.Macariola Total
Gross Gifts P- P100,000
Dowry - (10,000)
Prior net gift 150,000
Taxable gift 240,000
Donor’s Tax P3,600
Donor’s tax paid (1,000)
Donor’s Tax Payable 2,600 P2,600
@30%
* The end-use (person using the communication facility is the one liable for OCT, not the communication company.
**3% CCT is applicable only to domestic carriers transporting passengers by land, not by air or sea.
ERRATUM:
Illustration #6 …. Medical fees (included in the hospital bills)
Supportitjg Computatiotjs:
No. 14 To be exempt, the contributions from each member in item “III” should not exceed P15,000.
No. 21 Item “a” is composed of selling price and the applicable output vat
No. 23
Output Vat (P280,550 +P152,400) x 12% P51,954
Input vat (P110,220+P101,250) x 12% (25,374.6)
Vat Payable P26,578
No. 24
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. 40
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. 42
Output vat (P10M x 12%) P1,200,000
Input vat on materials (480,000)
Input vat on capital goods (36,000)
No. 52
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. 63
Output tax (1,500,00 x 12%) P180,000
Less: Input taxes
Purchases (800,000 x 12%) 96,000
Machinery (240,000/60 x 3mos.) 12,000
Carry-over 97,000 205,000
Excess input vat (P25,000)
No. 64
Output tax on sale (2,000,000x 12%) P240,000
Output tax on sale of machinery (2,000,000x 12%) 240,000
Less: Input taxes
Purchases 1,000,000x 12%) 120,000
Unamortized input tax on machinery 25,000
(240,000- 12,000)
Carry-over 228,000 (373,000)
VAT Payable P107,000
No. 71 & 72
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. 77
Change the year from 2010 to 2012
Output Vat for October 2012 = P3M x 12 = P360,000
No. 80
Downpayment P112,000
1st 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 20X
Output vat for 2012 (P200,000 x 12X) P24,000
No. 80
VAT ON CASH SALE: P72,000
(FMV is higher than SP) (P600,000 x 12%)
VAT ON DEFERRED SALE: 36,000
(Ratio of Initial payment over SP 25X
(Not qualifying under installment method)
(Treated as cash sale; SP is higher than FMV)
[(P336,000/1.12) x 12%]
TOTAL OUTPUT VAT P108,000
No. 83 and 84
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. 85
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. 86 and 87
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. 88
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
Problem 1:
a) P0
b) P134,400 x 3/28 = P14,400
c) PP201,600 x 3/28 = P201,600 (regardless of whether or not Abi is a vat registered exporter)
Not zero rated. To be zero rated, the problem should provide that Abi exported more than 70%
of its annual production
d) Vat exempt
Problem 2:
Cash sales (P660,800 x 3/28) P70,800
Sales on account (P246,400 x 3/28) 26,400
Transaction deemed sales:
(P22,400 + 16,800 + 19,040 + 8,960) x 3/28 7,200
Total output vat P104,400
Input vat (P291,200 x 3/28) (31,200)
Vat Payable P73,200
Problem 3:
OUTPUT:
Sales (P8M – 400,000) x 12% P912,000
Sales from consignment (March and Feb.) 36,000
(20+10) x P10,000 x 12%
Tratjsactiotjs 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 (ASSUME USEFUL LIFE OF 4 YEARS) 2,750 (84,830)
(P1,100,000 x 12%) / 48 mos.
VAT PAYABLE P896,770
Problem 4:
Business tax VAT OPT
Problem 5:
Output vat on gross receipts (collections) from
construction contracts with:
Bobads, City Condo & Urban Dev’t.
(P30M x 12%) P3,600,000
Less: Input vat on payments/advances made to:
Alpha (P12M x 90% x 12%) (1,296,000)
Charlie (P4M-P1M) x 12% (360,000)
Delta (P2M x 12%) (240,000)
VAT PAYABLE, 1st Quarter 2014 P1,704,000
Problem 6:
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
Problem 7:
Output vat: school supplies and gift items (P560,000 + 336,000) x 3/28 P96,000
Input vat:
Directly attributable to vatable sales (P406,000 x 3/28) (43,500)
Not directly attributable to vatable sales (P21,112 x 3/28 x 800*/1,000**) (1,809.60)
VAT PAYABLE P50,690.40
Supporting Computations:
No. 5 (P280,000 + P220,000) x 3% = P15,000
No. 6 (P50,000 + 100,000 – 75,000) x 3% = P2,250
No. 7
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. 35
Covered by the Fratjchise NOT Covered by the Fratjchise
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. 34
Output vat (P5M x 12%) P600,000
Input Vat
P300,000 x 12% (36,000)
P800,000 x 12% x 5/8 (60,000)
Vat Payable P504,000
No. 48
OPT% GRT
Interest income from lending activities from
inst1uments with remaining terms of:
No. 49
OPT% GRT
Rentals from safety deposit boxes P880,000 7% P61,600
Net foreign exchange gains 220,000 7% 15,400
Net trading gains from trading of securities 660,000 7% 46,200
Trust fees 110,000 7% 7,700
Dividends from domestic corporations 30,000 0% 0
Other service fees 220,000 7% 15,400
Interest income from lending activities from
inst1uments with remaining terms of:
Five years and less 700,000 5% 35,000
More than five years 800,000 1% 8,000
Total Gross Receipts Tax P189,300
No. 50
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 7X
Gross receipt tax (GRT) P60,000
No. 51
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. 52
Interest withheld and paid (P100,000 x 5 years x 1%) P5,000
Adjusted amount of tax due to pretermination (P100,000 x 5 years x 5%) 25,000
Tax Payable P20,000
“a” - not subject to percentage tax or any business tax…… Overseas communication into the Philippines.
“b” and “d” - subject to vat
“c” – not world or oriental championship. Subject to 10% OPT
PROBLEM SOLVING
Problem I:
Gross receipts-passenger operations 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
Problem II:
1) 3% OPT on vat exempt sales (GR<1,919,500 & non-vat registered) =P1.4M x 3% = P42,000
2) VAT = P1,400,000 x 12% = P168,000
Problem III:
1) Income tax due = P625,000
Subject to 2.5% GPB:
GR Passenger operations-Phils. P10,000,000
GR cargo operations-Phils. 6,000,000
Total 16,000,000
GPB rate 2.5X P400,000
Subject o NCIT (RR 15-2013):
Demurrage, detention and Other fees 1,000,000
Expenses on demurrage fees (250,000)
Income subject to NCIT 750,000
NCIT rate 30% 225,000
Total income tax due P625,000
EXCLUDED FROM GPB: RR15-2003 provides that demurrage fees, detention fees, and other
charges relating to inbound and outbound cargoes are considered as income derived from
sources “within” the Philippines subject to regular tax rates.
Problem IV:
1. P0. Not subject to business tax but subject to a capital gains tax of P2,500.
[(5,000 sh. X P50) – P200,000 = P50,000 capital gain x 5%CGT = P2,500 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
Problem V:
1. P3,000 OPT. ratio=10/35=28.5%; IPO rate= 2%; Tax due on=P150,000 x 2% = P3,000
2. P100 OPT. P20,000 x .005
Problem VI:
1. P1,053,000 OPT (amusement tax). P5,850,000 x 18%
2. P1,053,000 OPT. Subject only to a business tax due of 18% OPT.
3. P720,000 OPT P4,000,000 x 18%
4. P55,500 OPT. P1,850,000 x 3%
5. P108,000 Vat. (P1850,000 x 12%) – [P750,000 x 12% + (P224,000 x 3/28)]
Problem VII:
1. P651,250
(P4M + 3.5M + 775,000) x 7X = P579,250
(P6M + 1.2M) x 1X = P72,000
2. P578,500
[(P2.8M + 3.3M + 825,000) + (325,000 – 150,000)] x 7X = P497,000
(P7.2M + 950,000) x 1X = P81,500