TAXATION QUIZZER 3 ANSWER KEY

1. D (should be 2% of GROSS income)

2. B (reserved for reasonable needs of the business will be DEDUCTED)
3. C (this income is subject to 15% or 30% final income tax)
4. D (the informant MUST NOT be a government employee)
5. C (even if sale of real property held as capital asset results to a loss, capital gains tax will still be
imposed)
6. D (only CAPITAL GAINS have holding period)
7. B (Statement C: Foreign corporations will only be taxable from sources ONLY WITHIN the Phils.)
8. A
9. D (III. Tax due from compensation will be computed using GRADUATED TAX RATES ONLY.)
10. C
Regular Income Tax (graduated tax rates)
Gross business income P 700,000
Less: Business expenses 300,000
Taxable Income P 400,000
Tax Due (based on graduated tax rates) P 30,000

Final Income Tax

Royalty from books (40,000 * 10%) P 4,000

Capital Gains Tax

Gain on direct sale to buyers of domestic shares
(70,000 * 15%) P 10,500
Sale of land held as capital asset
(1,200,000 * 6%) 72,000
Total Capital Gains Tax P 82,500

TOTAL INCOME TAX (add all highlighted amounts) P 116,500

11. B
Regular Income Tax (8% income tax rate)
Gross business income P 700,000
Less: Exempt income 250,000
Taxable Income P 450,000
Multiply by tax rate 8%
Tax Due P 36,000

Final Income Tax

Royalty from books (40,000 * 10%) P 4,000

Capital Gains Tax

Gain on direct sale to buyers of domestic shares
(70,000 * 15%) P 10,500
Sale of land held as capital asset
(1,200,000 * 6%) 72,000
Total Capital Gains Tax P 82,500

TOTAL INCOME TAX (add all highlighted amounts) P 122,500

12. A
13. D
ANA: She also sold her personal car and some of her jewelries resulting to a capital gain
of P100,000.
ANO: ANO’s spouse is engaged in business.
14. B
Productivity Incentive P 22,000
Less: Exempt de minimis benefit 10,000
Amount included in taxable other benefits P 12,000
 Total value of other de minimis benefits P 32,000
Less: Total of exempt other de minimis benefits 24,000
Amount included in taxable other benefits P 8,000

13 month pay P 75,000

Total taxable other benefits 20,000
Total 13th month pay and other benefits P 95,000
Less: Non-taxable 13th month pay 90,000
Taxable 13th month pay and other benefits P 5,000

Gross Taxable Compensation Income (item 23 Part IVA of BIR Form 2316)
Regular compensation income P 780,000
Overtime pay 43,000
13th month pay and other benefits 5,000
Total P 828,000
15. B (Refer to tax table in computing item 24 Part IVA – tax due from P828,000)
16. C
Gross Taxable Compensation Income (item 23 Part IVA of BIR Form 2316)
Regular compensation income P 780,000
Overtime pay 43,000
Total P 823,000

*Taxable 13th month pay and other benefits of P20,000 as computed in number 14 will
be treated as fringe benefit subject to fringe benefits tax because the employee is a
managerial or supervisory employee.
17. C (Refer to tax table in computing item 24 Part IVA – tax due from P823,000)
18. A
Other benefits of managerial and supervisory employee
(this is the monetary value of fringe benefit) P 20,000
Divided by 65%
Grossed up monetary value P 30,769
Multiply by FBT rate 35%
Fringe benefits Tax P 10,769
19. C (MWE is exempt with his basic minimum wage. De minimis are all within the ceiling and 13 th
month pay and other benefits is within the ceiling of P90,000)
20. D (MWE is exempt with basic compensation income, overtime pay, night shift differential,
hazard pay and holiday pay. Taxable 13 th month pay and other benefits is P30,000, which is the
excess of the P90,000 exempt 13th month pay. Taxable income below P250,000 is EXEMPT.)
21. A
22. C
Fringe benefits to managerial employees P 170,000
Divided by 65%
Grossed up monetary value P 261,538
Multiply by FBT rate 35%
Fringe benefits tax P 91,538
23. C
Salaries to rank and file employees P 1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file employees 54,400
De minimis benefits to managerial employees 27,200
Fringe benefits to rank and file employees 102,000
Fringe benefits to managerial employees 170,000
Fringe benefits tax 91,538
TOTAL ALLOWABLE DEDUCTION P 3,245,138
24. A
Fringe benefit tax payable P 148,750
Divided by FBT rate 35%
Grossed up monetary value P 425,000
25. B
Grossed up monetary value P 425,000
Multiply by 65%
Monetary value of fringe benefits to supervisory personnel P 276,250
Less: Recorded Fringe benefits expense 376,250
Monetary value of fringe benefits to rank and file P 100,000
26. A
27. D
28. C
29. A
30. B (Add all given since non-resident citizen is taxable on properties wherever located. NOTE: Use
the zonal value for land in Davao City since it is higher than its FMV.)
31. B
32. C
Conjugal Absolute
Car acquired before marriage by Pedro P 300,000 P 300,000
Car acquired before marriage by Susan 450,000
House and lot acquired during marriage 1,500,000 1,500,000
Jewelries of Susan 100,000
Personal properties inherited by Pedro during marriage 250,000 250,000
Land inherited by Susan during marriage
Rental income on land inherited by Susan (25% of which 150,000
was earned after Pedro’s death)
Benefits from SSS
Retirement benefits
Proceeds of group insurance taken by Juan’s employer
TOTAL GROSS ESTATE (item 34C Part IV of BIR Form 1801) 31. P 2,200,000 32. P 2,600,000

33. D
34. D
Exclusive Common Total
Gross Estate P 5,000,000 P 16,000,000 P 21,000,000
Less: Ordinary Deductions 1,200,000 800,000 2,000,000
Estate after Ordinary Deductions P 3,800,000 P 15,200,000 P 19,000,000
Less: Special Deductions
Family Home 3,000,000
Standard Deduction 5,000,000
Net Estate 11,000,000
Less: Share of Surviving Spouse 7,600,000
Net Taxable Estate (item 16 Part II) 31. 3,400,000
Tax Rate 6%
Tax Due (item 18 Part II) 32. P 204,000

NOTES:
 Exclusive Deduction – P 1,200,000 (Devise to local and national government)
 Common Deduction – P 800,000 (Claims against the estate)
 Family Home – P 3,000,000 (Since family home is a common property, only ½ will be
claimed as deduction but not to exceed P10,000,000)
 Share of Surviving Spouse – (1/2 of Common Estate after Ordinary Deductions which is
P15,200,000)
35. D
Initial value P 220,000
Less: Indebtedness paid 20,000
Initial basis P 200,000
Less: ((Initial basis/Gross Estate) * LIT + TPU) 5,000
Final basis P 195,000
Multiply by vanishing rate: (4 ½ years ago) 20%
Vanishing deduction P 39,000