1.

Ivar Corporation, revealed the following data:

Salaries and wages (net of SSS and philhealth
contributions amounting to 25,000 and
withholding tax of 150,000) 785,000
Allowance, not subject to liquidation 60,000 (FINAL TAX)
Gasoline allowance, subject to liquidation 19,500 (NOT AN INCOME)
13th month pay 80,000

Based on the above problem, the fringe benefit tax due is –

a. P19,500 c. P31,500
b. P30,000 d. P32,307

Salaries & Wages, net 785,000

w/holding tax 150,000
Taxable Compensation 935,000

FBT due = (60,000/65%)*35%= 32,307

2. In the year 2023, Bank of Philippine Archipelago Inc. paid for the quarterly rental of a residential
house of its branch manager, Mr. Tolentino, amounting to P90,000.
How much is the fringe benefit expense?
a. P15,750 c. P90,000
b. P45,000 d. P105,750

FBT due = (Rent*50%/65%)*35%

FBT due = (90,000*50%/65%)*35%= 24,230

Journal Entry- Employer:
FB Exp. (rent) 90,000
FBT Exp 24,230
Cash 114,230

3. In the year 2023, Bank of Philippine Archipelago Inc. paid for the quarterly rental of a residential
house of its branch manager, Mr. Tolentino, amounting to P90,000.
How much is the fringe benefit tax?
a. P24,230 c. P90,000
b. P45,000 d. P105,750
FBT due = (Rent*50%/65%)*35%

FBT due = (90,000*50%/65%)*35%= 24,230

Journal Entry- Employer:
FB Exp. (rent) 90,000
FBT Exp 24,230
Cash 114,230
 4. Ironside Inc. owns a condominium unit. During the year 2023, it allowed its CEO to use the said
property as his residence. The zonal value of the property is P10,000,000 while its fair market
value as shown in its current Real Property Tax Declaration amounts to P8,000,000.
How much is the fringe benefit expense?
a. P500,000 c. P200,000
b. P250,000 d. nil

FBT due = (10,000,000*50%*5%/65%)*35%= 134,615

FBT -Quarterly= 134,615/4 = 33,654

Journal Entry- Employer(per quarter):

FB Exp. -
FBT Exp 33,654
Cash 33,654

There is no more Fringe Benefit expense since it is already recorded as Depreciation Expense
by the employer.

5. Lindesfarne Inc. owns a condominium unit. During the year 2023, it allowed its CEO to use the
said property as his residence. The zonal value of the property is P10,000,000 while its fair
market value as shown in its current Real Property Tax Declaration amounts to P8,000,000.
How much is the quarterly fringe benefit tax expense?
a. P50,000 c. P33,654
b. P23,529 d. nil

FBT due = (10,000,000*50%*5%/65%)*35%= 134,615

FBT -Quarterly= 134,615/4 = 33,654

Journal Entry- Employer(per quarter):

FB Exp. -
FBT Exp 33,654
Cash 33,654

6. Wessex Kingdom Inc. owns a condominium unit. During the year 2023, it allowed its CEO to use
the said property as his residence. The zonal value of the property is P10,000,000 while its fair
market value as shown in its current Real Property Tax Declaration amounts to P8,000,000.
The acquisition cost of the residential property is P7,000,000 and the remaining useful life is 15
years.
How much is the fringe benefit expense?
a. P500,000 c. P200,000
b. P250,000 d. nil
Dep’n = P10M-P7M / 15 years P200,000

Journal Entry-Employer
FB Expense (dep’n) 200,000
FB Tax Expense 134,615
Income (per RR) 200,000
Cash 134,615

7. In 2025, RAGNAR Corporation purchased a residential house and lot for P2,300,000. The
property was later sold to its General Manager for P1,980,000. The fair market value per
Assessor’s Office is P2,200,000 while the zonal value is P2,100,000.
How much is the fringe benefit tax?
a. P103,529 c. P150,588
b. P118,462 d. nil

FBT = FMV P2,200,000

SP (1,980,000)
Savings 220,000

FBT = (220,000/ 65%) x 35% = P118,461

Higher of FV per tax declaration or ZV xx

Less: cost to the employee (xx)
Monetary value xx

8. In 2025, RAGNAR Corporation purchased a residential house and lot for P2,300,000. The
property was later sold to its General Manager for P1,980,000. The fair market value per
Assessor’s Office is P2,200,000 while the zonal value is P2,100,000.
Assuming the selling price is P2,400,000, how much is the fringe benefit tax?
a. P103,529 c. P150,588
b. P118,462 d. nil

FBT = FMV P2,200,000

SP (2,400,000)
Addt’l Cost-Employee (200,000)
No FBT

9. Mikaela Flower Shop Inc. purchased a motor vehicle in 2018 for the use of its manager, Mike. It
was registered under Mike’s name. The cost of the vehicle was P400,000. The vehicle will be
partly used for the benefit of the Company. How much is the fringe benefit tax?
a. P188,235 c. P37,647
b. P215,385 d. nil
FBT due = (400,000/65%)*35%= 215,384
➔ Transfer of Ownership
 10. How much is the allowable deduction from business income of a domestic corporation which
granted and paid P97,500 fringe benefits to its key officers in 2018?
a. P150,000 c. P97,500
b. P100,000 d. P65,000

Grossed Up MV = 97,500/65% =150,000

11. Mr. Santiago purchased a life annuity for P100,000 which will pay him P10,000 a year. The life
expectancy of Mr. Santiago is 12 years. Which of the following will Mr. Santiago be able to
exclude from his gross income?
a. P100,000 c. P20,000
b. P10,000 d. P120,000

Cost of Life Annuity= 100,000

12. JJ, a member of the Philippine boxing team received the following during the taxable year:
Prize for winning gold in the Asian games P500,000 (exempt)
Athlete of the year award 100,000 (exempt)
Winnings from Philippine lotto 400,00 (final tax)
Prize – Mc Donald raffle promo 10,000 (Normal Income Tax)
Cash gift from SM Foundation 100,000 (Donor’s Tax- Not income Tax)

The amount not subject to income tax is

a. P600,000 c. P1,000,000
b. P700,000 d. P1,100,000

13. An operator of an illegal horse betting business, single, has the following data:
Receipt from illegal bets P600,000
Rent of space where bets are received,
gross of 5% withholding tax 120,000
Salaries of assistants, gross of creditable 100,000
withholding tax
Bribe money to obtain protection
from arrest and prosecution 50,000 (illegal payment- not deductible)
How much is the taxable income
a. P380,000 c. P180,000
b. P330,000 d. P150,000

Receipts from illegal bets P600,000

Rental expense (120,000)
Salaries of assistants (100,000)
Bribe nondeductible
Taxable Income P380,000
 14. Pedro, single received the following during the taxable year:
Proceeds of his life insurance paid at an annual
premium of P15,000 within 25 years P2,000,000
Proceeds of his mother’s life insurance
paid at an annual premium of P10,000 within 20 years 1,000,0000
House and lot inherited from his mother 4,000,000 (Gross Estate)
Rent income from inherited properties 200,000

For income tax purposes, how much of the above items must be included in his gross income?
a. P7,200,000 c. P200,000
b. P1,200,000 d. P1,825,000

Proceeds of his life insurance P2,000,000

Payment of Life Insurance(15,000*25yrs) (375,000)
Rent income from inherited properties (Fruits) 200,000
Returnable Income P1,825,000

15. Corazon insured her life with Malayan Insurance company. Under the contract, she will pay a
monthly premium of P2,000 for 10 years. In case of death before the 10th year, her beneficiary
will receive an indemnification in the amount of P150,000. If she is still living on the 10th year,
she will receive P500,000. If Corazon dies on the 5th year, her beneficiary will report an income
of:
a. P500,000 c. P260,000
b. P150,000 d. nil
 16. A, during the year 2020, received the following benefits:
Medical benefits P 55,000 per year
Monetized leave credits:

Vacation (13 days) 13,000

Sick Leave (15 days) 15,000

Rice Subsidy, Sinandomeng 5,300 per month (5,300*12 = 63,600)
Laundry Allowance 270 per month (270*12 = 3,240)
Christmas cash gift 22,000
Performance-Based Bonus 20,000
Employee Achievement Awards, cash 12,000
Uniform Allowance 6,000
13th Month Pay 50,000

How much is the exempt De Minimis Benefits?

De Minimis Benefits Annual Exempt Excess

Medical benefits 55,000 3,000 52,000
Vacation (13 days) 13,000 10,000 3,000
Sick Leave (15 days) 15,000 10,000 5,000
Rice Subsidy 63,600 24,000 39,600
Laundry Allowance 3,240 3,240 -
Christmas cash gift 22,000 5,000 17,000
Perform. -Based Bonus 20,000 10,000 10,000
Achiev’t Awards, cash 12, 000 - 12,000
Uniform Allowance 6,000 6,000 -
13th Month Pay 50,000 -
TOTAL 71,240 138,600

Excess De Minimis Benefits 138,600

13th Month Pay 50,000
13th Month Pay & Other Benefits 188,600
Limit (90,000)
Other Taxable Income 98,600
Other Taxable Income 98,600
Tax Due -0-

Other Taxable Income 98,600

Compensation Income 300,000
Total Taxable Income 398,600

Total Taxable Income 398,600

Less 250,000
148,600
X 20% 29,720 → Tax Due