Transfer & Business Taxation, 2015 Edition: Chapter 1 - Succession & Transfer Taxes
Transfer & Business Taxation, 2015 Edition: Chapter 1 - Succession & Transfer Taxes
Transfer & Business Taxation, 2015 Edition: Chapter 1 - Succession & Transfer Taxes
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 domestic corporation deposited in a bank 2,000,000 2,000,000
safety deposit box in Malaysia
Shares of stock of a foreign corporation the entire business of 500,000 500,000
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 own 200,000 200,000 200,000
life, with his estate as revocable beneficiary
▪ Life insurance policy, taken by the decedent, with his 300,000 300,000 300,000
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
(P2.2)
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
(P2.3)
Shares of stock (Frozen Co.)
[(P8M+3M)/800,000sh x 100,000 shares P1,375,000
Shares of stock (Divergent Co..)
100,000 shares x P15** 1,500,000
Shares of stock (Lenovo Co..)
100,000 shares x P12 1,200,000
Total Gross Estate P4,075,000
***Mean value shall be used only if the quotation price at the date of death is not determinable
(RR 2-2003)
(P2.4) (1)P230,0000; (2)P1,100,000; (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] =
P1,150,000
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. D 61. A
2. B 17. C 32. B 47. C 62. A
3. D 18. B 33. A 48. C 63. C
4. B 19. D 34. B 49. D 64. D
5. C 20. A 35. B 50. D 65. B
6. C 21. D 36. D 51. D 66. A
7. A 22. A 37. C 52. C 67. C
8. B 23. B 38. B 53. C 68. C
9. A 24. A 39. C 54. C 69. D
10. A 25. C 40. C 55. B 70. D
11. A 26. C 41. C 56. D 71. D
12. B 27. C 42. B 57. C 72. A
13. D 28. D 43. C 58. C 73. D
14. A 29. B 44. B 59. A 74. D
15. C 30. D 45. C 60. A 75. B
PROBLEM SOLVING
(P3.1) (Funeral Expenses)
Case A: P150,000
Case B: P200,000
Case C: P150,000
Case D: P150,000
(P3.2) P0
Mourning clothing (donated by the decedent’s employer) P-
Expenses paid by relatives -
Telecommunication charges paid by the friends -
(P3.7)
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 and payment of P100,000
debts
Attorney’s fees (1/2 were incurred after six months) P40,000 x 1/2 20,000
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 estate 12,000
Brokerage fees for selling property of the estate 10,000
Total allowable judicial expenses P217,500
(P3.15)
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 2,000,000
ago
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 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
TRUE OR FALSE
1. TRUE 7. TRUE 13. FALSE 19. TRUE 25. TRUE
2. TRUE 8. TRUE 14. FALSE 20. TRUE 26. TRUE
3. TRUE 9. TRUE 15. TRUE 21. TRUE 27. FALSE
4. TRUE 10. FALSE 16. FALSE 22. FALSE 28. TRUE
5. TRUE 11. FALSE 17. TRUE 23. TRUE 29. FALSE
6. FALSE 12. FALSE 18. TRUE 24. TRUE 30. TRUE
MULTIPLE CHOICE
1. C 11. C 21. A 31. C 41. C
2. D 12. B 22. A 32. A 42. A
3. D 13. A 23. B 33. C 43. A
4. C 14. A 24. B 34. B 44. C
5. B 15. A 25. B 35. B 45. D
6. B 16. D 26. C 36. D 46. A
7. D 17. D 27. A 37. A 47. A
8. C 18. C 28. C 38. D 48. A
9. A 19. D 29. D 39. D 49. B
10. B 20. P650,000 30. C 40. D 50. D
(14.)
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
(20).
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
(37).
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 40%
VANISHING DEDUCTION P306,000
** Mortgage P150,000 – 50,000
(49).
Shares, domestic corporation P500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
ELIT (500,000 x 2,000/2,500) (400,000)
Taxable Estate P1,600,000
TAX DUE
1st P500,000 P15,000
In excess of P500,000 = (1,100,00 x 8%) 88,000
Estate Tax Due P103,000
(50).
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
P4.1
P4.2
Exclusive Common Total
Land inherited during marriage P2,400,000
Other personal property owned before marriage P1,600,000
Other personal property acquired during 500,000
marriage
Total P2,400,000 P2,100,000 P4,500,000
Deductions:
Funeral expenses (200,000)
Judicial expenses (100,000)
Vanishing deduction** (1,120,000)
Net estate before special deduction and share of P1,280,000 P1,800,000 P3,080,000
the surviving spouse
Standard deduction (1,000,000)
Medical expenses (500,000)
Share of the Surviving Spouse (1,800,000/2) (900,000)
NET TAXABLE ESTATE P680,000
VANISHING DEDUCTION**
Value to Take/Initial Basis P1,500,000
Proportional Deduction (1,500/4,500 x (100,000)
P300,000)
Final Basis P1,400,000
x Vanishing Deduction % 80%
Vanishing Deduction P1,120,000
✉ Since the problem is silent as to the type of the marriage settlement but one of the
requirements is to compute for “community property”, ACP should be used. The term
“community” property is applicable to ACP.
P4.3
(a)P1,624,773 (b)P4,132,955 (c)P3,691,250 (d)P321,038
Exclusive Common Total
Exclusive properties P2,000,000
Conjugal properties* P5,000,000 P7,000,000
ELIT** (867,045)
Vanishing Deductions *** (175,227)
Transfer for Public Use **** (200,000)
Net Estate P1,624,773 P4,132,955 P5,757,728
Share of the Surviving Spouse (4,132,955/2) (2,066,478)
Net Taxable Estate P3,691,250
st
1 P2,000,000 P135,000
In excess of P2,000,000 @ 11% 186,038
ESTATE TAX DUE P321,038
**ELIT:
Funeral expenses P200,000
Judicial expenses 800,000
Claim against the estate 1,725,000
TOTAL ELIT P2,725,000
X 7,000/22,000
ALLOWABLE ELIT P867,045
**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.
P4.4
(Decedent: Resident Citizen)
a) Vanishing deduction = P1,676,200
b) Net exclusive property of the decedent = P7,200,000
c) Net community property = P19,300,000
d) Net Taxable estate = P14,850,000
e) Estate tax due = P2,185,000
P4.5
(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 (fully uncollectible) 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:
TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE
2. TRUE 7. FALSE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. FALSE 9. TRUE 14. FALSE
5. FALSE 10. FALSE 15. TRUE
MULTIPLE CHOICE
1. 7. 13. 19. 25.
2. 8. 14. 20. 26.
(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)
Judicial expenses (200,000 – 50,000) (150,000
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Balance P8,550,000
(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 (from excl.property) (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
PROBLEM SOLVING
P5.1
(1)P200,000 (2)P0; not allowed
Net Taxable Estate P10,000,000
P5.2
Net Taxable Estate P2,000,000
P5.3
✉ ASSUME: ESTATE TAX PAID U.S.A. = P250,000
(a) Net Taxable estate = P3,570,000; (b)Estate tax due after tax credit = P142,770
(c ) Net Distributable Estate = P4,427,230
P5.4
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
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 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)
Net taxable estate P3,500,000
Tax Due 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. 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
PROBLEM SOLVING
P6.1
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 - -
I 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#1 Q#2
A P4,500,00 P4,500,00
P6.3
1.P0 2.P5,000 3.P10,000 43,000
P6.4
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.
P6.5
Relative Stranger
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.
P6.6
a) March 1 = P2,000
b) May 30 = P18,000
c) June 30 = P90,000
d) July 31 = P0
e) September 30 = P447,200
Solution
Gross Gifts P200,000
Dowry - > 1 year after celebration
Net taxable gift P200,000
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
P6.7
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
March 30, 2015 The rule that gift of not more than P100,000
P100,000 x 30% P30,000 is exempt is applicable only to donations
made to relatives.
May 25, 2015
Gross gift P200,000
Deductions (200,000)
Taxable gift P0
Tax Due P0
P6.8
1) October 8, 2015 = P9,800
2) November 4, 2015 = P1,200
June 6, 2015
Husband Wife Total
Gross Gift P240,000 P240,000
Dowry (10,000) (10,000)
Mortgage assumed (2,000) (2,000)
Taxable gift P228,000 P228,000
October 8, 2015
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, 2015
Husband Wife Total
Gross Gifts (strangers) P7,000 P7,000
Exempt (5,000) (5,000)
Prior Net Gift - -
Taxable gift P2,000 P2,000
June 1, 2015
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
Supporting computation:
No. 18. If the sale is considered fictitious, the entire value at the date of sale is subject to donor’s tax.
No. 21.
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. 24.
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. 27.
DONEE
Son D. in Law
Gross Gifts (5M/2) P2,500,000 -
Less Dowry (10,000) -
Net taxable gift P2,490,000 -
No. 31-33.
Husband Wife
NG (3/1) 125,000 125,000
Tax Due (P25,000 x 2%) P500 P500
No. 38.
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
ERRATUM:
❖ Page 257, Question#2 of Illustration 18 Case B. Change the following
Question2:
❖ Answer: P108,000 change to P372,000.
INPUT VAT Transfer costs (300,000)
(From BOC to the importer’s warehouse in Isabela)(P6,000,000 x (36,000)
5%) x 12%
PROBLEM SOLVING
P8.1
Case A E
P8.2
Case A X Case E V Case I V
Case B X Case F X Case J X
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
P8.4
Cash Sales P660,800
Sales on account 246,400
Transactions deemed sale 67,200
(22,400+16,800+19,040+8,960)
Total sales subject to vat P974,400
x 3/28
Output Vat P104,400
Less: Input vat (P291,200 x 3/28) (31,200)
Vat Payable P73,200
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
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 -
Marine cargo insurance 2,550
Total P240,000
x 12% (2
8,800)
▪ Input vat on Freight from customs to warehouse (600)
Vat Payable
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 (24,500)
3mos.
Unused input vat as of end of 2014 (125,000)
Vat Payable P66,500
(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 (275,500)
12%-24,500)
Excess Input vat (P59,500)
P8.11
Output vat (P336,000 x 12%) P40,320
Input vat:
On purchases (P112,000 x 3/28) (12,000)
Transitional input vat:
Higher between 2% of beg. Invty vs. P10,000 (10,000)
Vat Payable P18,320
P8.12
(a) P3,400
(b) P80,000
P8.13
Output vat (672,000 x 3/28) P72,000
Less: Input Vat
Pres. Input vat on purchased of fruits from farmers @ (8,000)
4%
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)
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 114,000
12%)
Other revenues (P700,000 x 12%) 84,000
P8.15
OUTPUT VAT based on
collections P3,600,000
(15M + 10M + 5M)
INPUT VAT on purchases from:
Alpha (P12M – 1.2M) x 12% (1,296,000)
Bravo (non-vat reg.) -
Charlie (P4M – 1M) x 12% (360,000)
Delta (P2M x 12%) (240,000)
Vat Payable P1,704,000
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
P8.18
a) Output vat September 2015 = P3M x 12% = P360,000
The sale is a Deferred sale. Ratio of initial payments over SP is 30%.
b) Output vat January 2016 = 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 F
SET B
1. T 6. F 11. F 16. T 21. T
2. T 7. F 12. F 17. T 22. T
3. T 8. F 13. T 18. T 23. T
4. F 9. T 14. F 19. F 24. T
5. F 10. F 15. T 20. F 25 F
MULTIPLE CHOICE
1. D 21. C 41. B 61. B 81. D
2. C 22. A 42. C 62. B 82. A
3. A 23. C 43. D 63. C 83. B
4. D 24. C 44. D 64. D 84. D
5. D 25. D 45. B 65. A 85. D
6. D 26. C 46. D 66. C 86. B
7. D 27. D 47. D 67. B 87. C
8. D 28. B 48. C 68. D 88. D
9. A 29. C 49. C 69. A 89. C
10. C 30. B 50. D 70. D 90. D
11. C 31. A 51. B 71. D
12. A 32. D 52. C 72. A
13. A 33. A 53. B 73. D
14. D 34. B 54. D 74. B
15. C 35. B 55. D 75. C
16. C 36. B 56. C 76. D
17. A 37. B 57. A 77. C
18. D 38. B 58. B 78. D
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 P519,540
12%
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. 38
Output vat (P5.5M x 12%) P660,000
Input vat on materials (180,000)
Vat Payable September 2014 P480,000
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, 2014 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
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
❖ Ratio of Initial Pay’t over Gross S.P. = P900,000/P3,000,000 = 30%
❖ 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. 74
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 20%
Output vat for 2014 (P200,000 x 12%) P24,000
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%
(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. 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
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
Supporting Computations:
No. 22 P10M x 1.5% = P150,000
No. 26 (P10M x 40%) 3% = P120,000
No. 27 (P10M – P6M) X 30% = P1,800,000
No. 30 Subject to vat, not franchise tax
No. 34
AR, beg. P600,000
Revenues (P4M + P1M) 5,000,000
AR, end (960,000)
Gross receipts P4,640,000
Vat rate 12%
Business tax due P556,800
No. 35
Covered by the Franchise NOT Covered by the Franchise
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:
Five years and less 5,000,000 5% P250,000
More than five years 3,000,000 1% 30,000
Dividends & equity shares from subsidiaries 1,000,000 0% 0
Rental income 500,000 7% 35,000
Net trading gains 300,000 7% 21,000
Total Gross Receipts Tax P336,000
No. 49
OPT% GRT
Rentals from safety deposit boxes P880,000 7% P61,600
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 7%
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
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 2.5% 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 7% = P579,250
(P6M + 1.2M) x 1% = P72,000
2. P578,500
[(P2.8M + 3.3M + 825,000) + (325,000 – 150,000)] x 7% = P497,000
(P7.2M + 950,000) x 1% = P81,500