lOMoARcPSD|31727608

Solution Manual to Tax Book

Bachelors of Science Major in Accountancy (University of San Jose - Recoletos)

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

Downloaded by Geraldine Bacol ([email protected])
 lOMoARcPSD|31727608

SOLUTIONS MANUAL
TRANSFER & BUSINESS TAXATION, 2022 Edition
By: TABAG & GARCIA

CHAPTER 1 Ð SUCCESSION & TRANSFER TAXES

TRUE OR FALSE
1. TRUE 6. TRUE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. FALSE
3. TRUE 8. FALSE 13. TRUE 18. TRUE
4. FALSE 9. TRUE 14. TRUE 19. TRUE
5. FALSE 10. FALSE 15. FALSE 20. TRUE

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. C
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 or repudiation of inheritance takes effect upon death of the decedent

CHAPTER 2 Ð GROSS ESTATE

PROBLEM SOLVING
(P2.1) (1) P19,300,000 (2) P19,300,000 (3) P11,000,000 (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
Receivables under insurance policies:
§ Life insurance with his estate as revocable beneficiary 200,000 - 200,000
§ Life insurance with his daughter as revocable beneficiary 300,000 - 300,000
§ Life insurance with his son as irrevocable beneficiary - - -
§ Life insurance (group) taken by the employer of the decedent - - -
TOTAL GROSS ESTATE P19,300,000 P11,000,000 P14,300,000

1| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(P2.2)
To Juan (P25,000 x 1,000 sqm) P25,000,000
To Pedro 18,000,000
To Maria (P15,000 x 1,000 sqm) 15,000,000
Total Gross Estate P58,000,000

(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

(P2.4) (1)P230,0000; (2)P1,100,000; insufficient consideration (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] = P1,150,000

MODIFIED IDENTIFICATION
EXERCISE A
1. Included 6. Excluded
2. Included 7. Excluded *
3. Excluded 8. Included **
4. Included 9. Excluded
5. Excluded 10. Included***

*Exclusions. The first heir is acting only as the trustee of the 2nd heir (beneficiary).
**Exclusions from the gross estate. Nonetheless, the tax code requires this item 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, since whether or not such is exempt will undergo scrutiny first by the BIR, these items shall 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. FALSE 10. TRUE 15. FALSE 20. FALSE

2| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

MULTIPLE CHOICE
1. A 16. B 31. B 46. C 61. C
2. B 17. D 32. A 47. B 62. D
3. D 18. A 33. A 48. D 63. B
4. B 19. D 34. B 49. D 64. A
5. C 20. B 35. D 50. C 65. C
6. C 21. A 36. C 51. C 66. D
7. A 22. B 37. B 52. C 67. C
8. B 23. A 38. C 53. B 68. A
9. A 24. C 39. C 54. D 69. D
10. B 25. C 40. C 55. C 70. D
11. D 26. C 41. B 56. C
12. D 27. D 42. B 57. A
13. A 28. B 43. B 58. A
14. C 29. D 44. C 59. A
15. D 30. C 45. C 60. A

Supporting Computations (Multiple Choice):

(20).
Common stock-Sunchamp [(P40+39)/2] x 2,000 shares P79,000
Common stock Ð AgriNurture (1,500 shares x P45) 67,500
Preferred stock Ð 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

(21).
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
(22).
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

3| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(24).
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

(25).
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

(31). (P12M/100,000) x 1,000 shares = P120,000

(32). P100 par value x 1,000 shares = P100,000; Par Value=P10M/100,000 = P100/share
(33). P100 x 1,000 shares = P100,000
(34). (P140 + P80/2) x 1,000 shares = P110,000

(42).
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

(45).

Insufficient consideration? Yes; the consideration is lower than the FMV of the property sold at the time of sale
(P100,000 vs. P250,000).
Included in the Gross Estate = FMV upon death Ð consideration received = P300,000 Ð P100,000 = P200,000.

4| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

CHAPTER 3 Ð DEDUCTIONS FROM THE GROSS ESTATE

PROBLEM SOLVING

(P3.1) (a) P2,500,000 computed as follows:

Loss due to shipwreck, two (2) months after the decedentÕs death. P500,000
Robbery loss P2,000,000
Allowable Deduction P2,500,000

(b) P500,000 computed as follows:

Loss due to shipwreck, two (2) months after the decedentÕs death. P500,000
Allowable Deduction P500,000

(P3.2) P5,640,000 computed as follows:

Ordinary Deductions:
Claim against insolvent person (500,000-400,000) P100,000
Unpaid taxes on the estate before death 150,000
Unpaid mortgage on the estate 200,000
Unpaid loans arising from debt instruments (notarized) 125,000
Casualty loss 65,000
Special Deductions:
Standard deduction 5,000,000
Total Allowable deduction from the gross estate P5,640,000

NOTE: Funeral, judicial and medical expenses are no longer allowed beginning January 1, 2018 under the TRAIN law.

(P3.3) (Claim Against Insolvent Persons)

Case A: P100,000

Case B: P333,333 computed as follows:

Receivable P500,000
Collectible portion (400/1,200) x 500,000 (166,667)
Deductible claim (Uncollectible portion) P333,333

Case C: P0. Debtor is not insolvent

Case D: P250,000
Total Assets P1,200,000
Taxes payable (GovÕt is a priority creditor) (800,000)
Assets after deducting unpaid taxes P400,000

Receivable (CAIP) P500,000

Collectible (400/800) x 500,000 (250,000)
Deductible Claim against Insolvent Persons P250,000

(P3.4) P200,000 computed as follows:

Uncollectible receivable from Juan P100,000
Uncollectible receivable from Manuel 100,000
Total P200,000

5| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(P3.5) P133,333 computed as follows:

DebtorÕs (Pedro) Assets P400,000

Taxes payable by Pedro to the BIR (govÕt is a priority creditor) (200,000)
Assets of Pedro after deducting unpaid taxes P200,000

Receivable from Pedro (CAIP) P200,000

Collectible amount from Pedro (allocated): (200/600) x 200,000 (66,667)
Deductible Claim (uncollectible) against Insolvent Person P133,333

(P3.6) P2,625,000 computed as follows:

Value to take (lower amount) P9,375,000

1st Deduction: Mortgage paid (1,875,000)
Initial basis P7,500,000
2nd Deduction: Proportional deduction
(7,500/45,000) x 5,625,000 (937,500)
Final Basis P6,562,500
x Vanishing rate 40%
Vanishing Deduction P2,625,000

(P3.7) STANDARD DEDUCTION

CASE
A P5,000,000
B P5,000,000
C P5,000,000
D P500,000
E P500,000

(P3.8) FAMILY HOME

Case A: P0
Case B: P5,000,000
Case C: P0; exclusive property of the surviving spouse
Case D: P10,000,000
Case E: P12M/2 = P6,000,000
Case F: [ 5M + (5,000,000/2)] = P7,500,000

6| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(P3.9)
Question 1: P7,308,013; (Decedent: Resident Citizen)
Question 2: P7,308,013; (Decedent: Resident Alien) (same computation with Q#1).

Domestic shares of 2,000 shares inherited 6 years ago P8,000,000

House and lot, family home, located in Davao, 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 5,000,000
Interest from bank deposit (earned after death) -
Transfer for Public Use (donation to the govÕt provided in his will) 250,000
GROSS ESTATE P15,850,000
ORDINARY DEDUCTIONS:
Claims against the estate 120,000
Transfer for Public Use 250,000
Vanishing deductions (house and lot) 1,171,987** (1,541,987)
SPECIAL DEDUCTIONS
Standard Deduction 5,000,000
Family Home 2,000,000 (7,000,000)
NET TAXABLE ESTATE P7,308,013

Value to take P1,500,000

1st Deduction: Mortgage paid -
Initial basis P1,500,000
2nd Deduction: Proportionate deduction
(1,500/15,850) x P370,000 (35,016)
Final Basis P1,464,984
x Vanishing rate 80%
Vanishing Deduction P1,171,987**

(P3.10)
Question No. 1
TFPU P300,000
House and Lot in Makati (Family Home) 1,500,000
Farm Lot 825,000
Other real properties 15,000,000
Claim against insolvent person 225,000
Transfer in contemplation of death 1,250,000
Total Gross Estate P19,100,000
Allowable Deductions
TFPU (correct amount) (300,000)* *
Claim against insolvent person (225,0000)**
Unpaid mortgage on farm lot (75,000)**
Standard deduction (5,000,000)
Family Home (1,500,000)
TAXABLE NET ESTATE P12,000,000

7| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Question No. 2
Value to take P575,000
Mortgage paid (P150,000-P75,000) (75,000)
Initial Basis 500,000
Proportional deduction
(500/19,100) x 600,000** (15,707)
Final Basis 484,293
Vanishing deduction rate 20%
Vanishing Deduction*** P96,859

NET ESTATE without VD (from Q#1) P12,000,000

Vanishing Deduction*** (96,859)
TAXABLE NET ESTATE P11,903,141

(P3.11)
Question No. 1
VALUE TO TAKE (LAND) P1,250,000
MORTGAGE PAID (50,000)
INITIAL BASIS 1,200,000
Proportionate Deduction:
(1,200/12,800 x P700,000**) (65,625)
FINAL BASIS P1,134,375
VANISHING DEDUCTION RATE 40%
VANISHING DEDUCTION P453,750
Correct ELIT + TFPU:
=300k+50k+50k +300k TFPU=P700,000***

Question No. 2
Gross Estate P12,800,000
Correct Losses, Indebtedness, Taxes (LIT) (400,000)
TFPU (300,000)
Vanishing deduction (453,750)
Standard deduction (5,000,000)
Family Home (2,000,000)
Death benefits under RA4917 (200,000)
Net taxable estate P4,446,250

8| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE
2. TRUE 7. TRUE 12. TRUE
3. FALSE 8. TRUE 13. TRUE
4. FALSE 9. TRUE 14. TRUE
5. TRUE 10. TRUE 15. TRUE

MULTIPLE CHOICE
1. C 11. D 21. D 31. D
2. D 12. D 22. C 32. A
3. C 13. A 23. C 33. A
4. D 14. A 24. A 34. C
5. A 15. B 25. C 35. D
6. A 16. B 26. B 36. A
7. A 17. B 27. B 37. A
8. D 18. C 28. D 38. A
9. D 19. A 29. A 39. D
10. C 20. C 30. B 40. A

Supporting Computation (Multiple Choice):

(6.) A
Real property tax for the year 2020 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 2020 200,000
Allowable deductions P420,000

(12). D
Income tax from practice of profession , 2019 P300,000
Income tax from practice of profession for Jan.-June, 2020 100,000
Real property taxes for 2018 and 2019 150,000
Business taxes for 2019 100,000
Deductible taxes P650,000

(29). A

ERRATUM: FMV at the time of inheritance = P10M

Value to take/Initial Basis P9,000,000

Mortgage paid (500,000)
Initial basis 8,500,000
2nd Deduction:
(8,500/10,000 x P1,000,000**) (850,000)
Final Basis P7,650,000
x Vanishing rate 40%
VANISHING DEDUCTION P3,060,000
** Mortgage P1,500,000 Ð 500,000

9| Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(39). Answer Ð P52,300,000

Gross Estate P60,000,000
(Tangible property Phils.; with reciprocity)
Prorated LIT (12,000,000 x 60M /100M) (7,200,000)
Standard deduction (500,000)
Taxable Estate P52,300,000

(40). Answer-P930,000
Shares, domestic corporation P5,000,000
Tangible personal property 15,000,000
Gross Estate 20,000,000
Prorated LIT (5,000,000 x 20M/25M) (4,000,000)
Standard deduction (500,000)
Taxable Estate P15,500,000
TAX DUE
Estate Tax Due (P15.5M x 6%) P930,000

CHAPTER 4 Ð PROPERTY RELATIONS

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 C
10. C C
11. C C
12. E E
13. C E
14. E C (All fruits or incomes are common property under CPG. Thus, the
property purchased shall be classified as common property.
15. E E

10 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P4.2
Absolute Community of Property (ACoP)
a) P12,400,000
b) P19,500,000
c) P9,750,000
d) P17,150,000
Exclusive Common Total
Land inherited during marriage P24,000,000
Other personal property owned before marriage P16,000,000
Other personal property acquired during marriage 5,000,000
Total P24,000,000 P21,000,000 P45,000,000
Deductions:
Casualty loss (500,000)
Unpaid Taxes (400,000)
Claims against the estate (600,000)
Vanishing deduction** (11,600,000) (13,100,000)
Net estate before special deduction and share of the P12,400,000 P19,500,000 P31,900,000
surviving spouse
Standard deduction (5,000,000)
Share of the Surviving Spouse (19,500,000/2) (9,750,000)
NET TAXABLE ESTATE P17,150,000

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

Conjugal Partnership of Gains (CPG)

e) P28,400,000
f) P3,500,000
g) P1,750,000
h) P25,150,000

Exclusive Common Total

Land inherited during marriage P24,000,000
Other personal property owned before marriage 16,000,000
Other personal property acquired during marriage 5,000,000
Total P40,000,000 P5,000,000 P45,000,000
Deductions:
Unpaid Taxes (400,000)
Claims against the estate (600,000)
Casualty Loss (500,000)
Vanishing deduction (same computation) (11,600,000) (13,100,000)
Net estate before special deduction and share of the P28,400,000 P3,500,000 P31,900,000
surviving spouse
Standard deduction (5,000,000)
Share of the Surviving Spouse (3,500,000/2) (1,750,000)
NET TAXABLE ESTATE P25,150,000

11 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P4.3 Decedent: Non-resident alien

a) P1,621,396
b) P4,451,136
c) P3,346,964
d) P200,818
Exclusive Common Total
Exclusive properties, Phils. P2,000,000
Conjugal properties, Phils.* P5,000,000 P7,000,000
LIT** (548,864)
Vanishing Deductions *** (178,604)
Transfer for Public Use **** (200,000)
Net Estate P1,621,396 P4,451,136 P6,072,532
Share of the Surviving Spouse (4,451,136/2) (2,225,568)
Standard deduction (500,000)
Net Taxable Estate P3,346,964
x Estate Tax Rate 6%
Estate Tax Due P200,818
* The gross estate should include tangible and intangible properties within the Philippines since the problem is silent as to whether reciprocity is
applicable. As a general rule, reciprocity is not assumed.

**LIT:
Actual ELIT P1,725,000
x Allocation 7,000/22,000
ALLOWABLE LIT P548,864

NOTE: Funeral, judicial, and medical expenses are no longer allowed as deduction from the gross estate beginning January 1, 2018 or
upon the effectivity of the TRAIN law.

***VANISHING DEDUCTIONS:
Value to take P500,000
1st Deduction: Mortgage paid -
Initial basis P500,000
2nd Deduction: Proportionate deduction
(500/7,000) x (548,864 + 200,000) (53,490)
Final Basis P446,510
x Vanishing rate 40%
Vanishing Deduction P178,604

**** Since the properties in the problem were already classified as exclusive and common, it should be assumed that both amounts are
already all-inclusive. Thus, unless provided otherwise, the exclusive properties should already include the transfer for public use.

12 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

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 stocks, Philippines 8,000,000
Investment in stocks, USA 10,000 000
Investment in bonds, USA 7,000,000
Cash in bank, Philippines 3,000,000
Cash on hand, Philippines 500,000
Claim against insolvent person (fully uncollectible) 2,000.000
Car, Philippines 8,000,000
Receivable under RA 4917 500,000
Devise to Quezon City for childrenÕs playground** 700,000
Total Gross Estate P59,700,000
Ordinary Deductions:
Unpaid Philippine income tax for income in 2020 1,200,000
Loss on December 31, 2021 due to theft 800,000
Devise to Quezon City for childrenÕs playground 700,000
Claim against insolvent person (fully uncollectible) *** 2,000,000 (4,700,000)

Special Deductions:
Standard deduction (5,000,000)
RA 4917 500,000
Net Taxable Estate P49,500,000
Estate Tax Due (P49,500,000 x 6%) P2,970,000
* *Family home is not allowed as a deduction for single decedent
**To be deductible, the legacy/devise should be included first in the decedentÕs gross estate
***Assume the debtor is an insolvent person.

P4.5
a) Vanishing deduction = P18,009,756
b) Net Taxable estate = P28,140,244
c) Estate tax due = P1,688,415
Exclusive Conjugal Total
Land P30,000,000
House and Lot (Family Home) P50,000,000
Other tangible personal properties 22,000,000
Claims against insolvent persons 500,000 P102,500,000
Ordinary deductions:
Other claims against conjugal properties (5,000,000)
Unpaid Taxes (1,200,000)
Claims against insolvent persons (500,000)
Unpaid mortgage** (3,500,000)
VANISHING DEDUCTION* (18,009,756) (28,443,902)
Net exclusive/conjugal P11,990,244 P62,300,000 P74,290,244
Special deductions:
Standard deduction (5,000,000)
Family Home (10,000,000)
Share of the surviving spouse (31,150,000)
TAXABLE ESTATE P28,140,244
Estate Tax Due (P28,140,244 x 6%) P1,688,415

13 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Value to take/Initial Basis*** P25,000,000

2nd Deduction: 25,000/102,500 x 10,200,000 (2,487,805)
Final Basis P22,512,195
x VD rate 80%
Vanishing Deduction* P18,009,756*

** P7,000,000 Ð 3,500,000 = P3,500,000

***The value to take shall be lower amount between the valuation at the time of death and the valuation upon inheritance (P30M vs P25M). Likewise,
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 considered in computing the VD, the mortgage should have been assumed on the property at the time of
inheritance or donation.

TRUE OR FALSE
1. FALSE 6. FALSE 11. TRUE
2. TRUE 7. TRUE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. FALSE 9. FALSE 14. FALSE
5. FALSE 10. FALSE 15. TRUE

NOTE :
#1: The statement is applicable to CPG
#4: Under CPG, property brought into marriage is classified as exclusive property
#5: Shall be ½ of the net conjugal property
#6: The properties described in the problem shall be classified as exclusive properties.

#7: If the problem is silent or unless the type of property relationship is specifically provided in the problem, the term
ÒcommunityÓ property is generally used in case of Absolute Community Property regime. Thus, the statement in #7 is correct.
On the other hand, unless provided otherwise, the term ÒconjugalÓ property is generally used in case of Conjugal Partnership
of Gains regime.

#9: Shall be before marriage

#10; May be deductible from either exclusive or community properties
#14; Applicable to ACoP

MULTIPLE CHOICE
1. A 6. D 11. B 16. D 21. B 26. D
2. B 7. D 12. D 17. C 22. C 27. D
3. A 8. B 13. C 18. C 23. D 28. A
4. C 9. D 14. D 19. A 24. A 29. B
5. D 10. C 15. C 20. D 25. A 30. D

14 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Supporting Computations (Multiple Choice)

(No. 19 & 20)
Gross Estate (CPG): Exclusive Conjugal
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 spouse 200,000
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. 21 & 22)

Gross Estate (ACoP): Exclusive Common
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. 23)
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 before special deductions P10,000,000
Divide 2
Share of the Surviving Spouse P5,000,000

** Unless provided otherwise, deductions are assumed to be conjugal or community in nature.

(No. 24)
Real property, Philippines P7,000,000
Real property, USA 5,000,000
Claim against insolvent persons 50,000
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Balance P11,950,000
Standard Deductions (5,000,000)
Family Home (P1,500,000/2) (750,000)
Share of the surviving spouse (P11,900,000/2) (5,975,000)
Net Taxable Estate P225,000

15 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(No. 25)
Exclusive Common Total
Conjugal real properties P7,000,000
Conjugal family home 5,000,000
Paraphernal properties -
(excluded; exclusive of the surviving spouse)
Exclusive properties P2,500,000
Total P2,500,000 P12,000,000 P14,500,000
Ordinary Deductions:
Unpaid taxes -
Casualty losses (from excl.property) (100,000)
Other losses (P1M x 75%) (750,000) (850,000)
Net Estate before Special Deductions P2,400,000 P11,250,000 P13,650,000
Special Deductions:
Standard Deductions (5,000,000)
Medical expenses -
Family Home (5,000,000/2) (2.500,000)
Share of the surviving spouse (P11,250,000/2) (5,625,000)
Net Taxable Estate P525,000

(No. 26 and 27) ABSOLUTE COMMUNITY OF PROPERTY

Exclusive Common
Properties-Land P24,000,000
Other personal property owned before marriage 16,000,000
Other personal property acquired during marriage 5,000,000
Gross Estate P24,000,000 P21,000,000
Vanishing deduction (11,200,000)
Claim against the estate (2,000,000)
Losses (1,000,000)
Net conjugal before special deductions P18,000,000
Share of surviving spouse (P1,800,000/2) P9,000,000

(No. 28) CONJUGAL PARTNERSHIP OF GAINS

Exclusive Common Total

Properties-Land P24,000,000
Other personal property owned before marriage 16,000,000
Other personal property acquired during marriage**** P5,000,000
Gross Estate P40,000,000 P5,000,000 P45,000,000
Ordinary Deductions
Claim against the estate (2,000,000)
Losses (1,000,000)
Vanishing Deductions***** (11,200,000)
Net Estate Before Special Deductions P28,800,000 2,000,000
Share of the surviving spouse (P200,000/2) (1,000,000)
****If silent or unless the problem clearly illustrate that it is exclusive, assume the property is a common property.

16 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Value to take P15,000,000

1st Deduction: Mortgage paid -
Initial basis P15,000,000
2nd Deduction: Proportionate deduction
(1,500/4,500) x 300,000 (1,000,000)
Final Basis P14,000,000
x Vanishing rate 80%
Vanishing Deduction P11,200,000 *****

(No. 29 and 30) ACOP

Exclusive Common Total
GROSS ESTATE:
Real properties inherited during marriage from his father 5,000,000
Real property abroad given as gift by his uncle during marriage 15,000,000
Land received as donation during the marriage 5,000,000
House built on the donated land using communal fund 9,000,000
Income from the real property received as gift 1,000,000
Real property received by the surviving spouse before the marriage 18,000,000
Real property acquired by the spouses during the marriage 15,000,000
Personal properties acquired during the marriage 10,000,000
Claims against an insolvent person 500,000
Donation mortis causa to the City of Manila (TFPU) 1,500,00
TOTAL P27,500,000 P52,500,000 P80,000,000
ORDINARY DEDUCTIONS:
Obligations incurred that benefited the community properties (2,500,000)
Claims against an insolvent debtor (500,000)
Unpaid mortgage on inherited land (650,000)
Loss of vehicle due to theft on December 31, 2021 (3,000,000)
Unpaid realty tax on real property received as gift from his uncle (300,000)
Transfer for Public Use (Donation mortis causa to City of Manila) (1,500,000)
Vanishing Deduction*** (858,600) (9,308,600)
Net Estate Before Special Deductions and Share of the Surviving P24,191,400 P46,500,000 P70,691,400
Spouse
SPECIAL DEDUCTIONS:
Standard Deduction (5,000,000)
Family Home [(P5M) + (P9M/2)] (9,500,000)
Share of the Surviving Spouse (P46.5M/2) (23,250,000)
NET TAXABLE ESTATE P32,941,400
Multiply: Estate Tax Rate 6%
ESTATE TAX DUE P1,976,484

Vanishing Deduction Ð Real property inherited:

Value to take P3,000,000
1st Deduction: Mortgage paid (1,400,000)
Initial basis P1,600,000
2nd Deduction: Proportionate deduction
(P1,600/P80,000) x P8,450,000 (169,000)
Final Basis P1,431,000
x Vanishing rate 60%
Vanishing Deduction P858,600 *****
NOTE:
§ The real property abroad received as gift 4 ½ years before death is not subject to vanishing deduction.
§ The donated land received 6 years before death is not subject to vanishing deduction.

17 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

CHAPTER 5 Ð ESTATE TAX CREDIT AND DISTRIBUTABLE ESTATE

PROBLEM SOLVING

P5.1 One foreign country only:

a) Decedent is a resident citizen

Total Net Estate before special deductions P15,000,000
Less: Standard deduction (5,000,000)
Net Taxable estate P10,000,000
x Estate tax rate 6%
Estate tax due P600,000
Less: Estate tax credit
Estate tax paid abroad P200,000
vs. Limit (P3/10 x P600,000) 180,000
Allowed (lower) (180,000)
Estate tax payable P420,000

b) Decedent is a nonresident alien

Total Net Estate before special deductions (Phils. only) P12,000,000
Less: Standard deduction (500,000)
Net Taxable estate P11,500,000
x Estate tax rate 6%
Estate tax payable (tax credit is not allowed to NRA decedents) P690,000

P5.2 More than one foreign countries:

Net Taxable Estate, world P20,000,000

Estate Tax Due (P20M x 6%) P1,200,000

Estate tax credit ** (570,000)**
Estate tax payable P630,000

Limit 1 (Per foreign country): Limit Actual Allowed

Canada: 8,000/20,000 x P1.2M P480,00 P520,000 P480,000
USA: 2,000/20,000 x P1.2M 120,000 90,000 90,000
P570,000
Limit 2 (all foreign countries):
10,000/20,000 x P1.2M P600,000 P610,000 600,000
ALLOWED TAX CREDIT
(Lower between L1 and L2) P570,000**

P5.3
Net Taxable Estate P20,000,000
Estate Tax Due (P20M x 6%) P1,200,000
Estate tax credit** (300,000)**
Estate tax payable after tax credit P900,000

18 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Limit 1 (Per foreign country with tax payments only): Limit Actual Allowed
Singapore: 5,000/20,000 x P1,200,000 P300,000 P200,000 P200,000
China: NOT included in the determination of Limit 1 since - - -
there was no estate tax paid in China
Japan: 2,000/20,000 x P1,200,000 120,000 100,000 100,000
P300,000
Limit 2 (all foreign countries including China):
10,000/20,000 x P1,200,000 P600,000 300,000 300,000
ALLOWED TAX CREDIT P300,000

P5.4
a) Net Taxable estate = P7,474,000
b) Estate tax due = P448,440
c) Net Distributable Estate = P11,731,560

House and lot (Family Home), USA P8,000,000

Cash in bank, USA 650,000
Car, USA 2,000,000
Accounts receivable from an insolvent person in Quezon City** 200,000
Investment in stock, Philippines 800,000
Parcel of land in Quezon City inherited from his father 2 ½ years ago 1,000 000
Investment in bonds, foreign corporation*** 700,000
Cash in bank, Philippines 450,000
Car, Philippines 800,000
Devise to Quezon City for childrenÕs playground or TFPU**** 1,400,000
Total Gross Estate P16,000,000

Ordinary Deductions:
LITe:
Claim against the estate (Philippines) P940,000
Unpaid Philippine income tax for 2016 and 2017 320,000
Loss on December 31, 2018 due to theft 180,000
Claim against insolvent person *** 200,000 (1,640,000)

TFPU (1,400,000)
Vanishing Deduction (486,000)
Special Deductions:
Standard deduction (5,000,000)
Family Home in USA; (not allowed) -
NET TAXABLE ESTATE P7,474,000
Estate Tax Due (P7,474,000 x 6%) P448,440

**To be deductible, the legacy/devise should be included first in the decedentÕs gross estate;
*** Considered as Estate ÒwithinÓ

Value to take/Initial basis P1,000,000

2nd Deduction: Proportionate deduction
(1,000/16,000) x P1,640,000 + P1.4M**** (190,000)
Final Basis P810,000
x Vanishing rate 60%
Vanishing Deduction P486,000

19 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Total Gross Estate P16,000,000

Deductions:
Actual funeral expenses P480,000
Judicial expenses 300,000
Claim against the estate (Philippines) 940,000
Unpaid Philippine income tax for 2016 and 2017 320,000
Loss on December 31, 2018 due to theft 180,000
Claim against insolvent person 200,000
TFPU 1,400,000
Vanishing Deduction No allowed
Standard deduction Not allowed
Estate tax due 448,440 (4,268,440)
NET DISTRIBUTABLE ESTATE P11,731,560

MULTIPLE CHOICE
1. C 5. B
2. C 6. C
3. D 7. B
4. C

Supporting Computations:

No.5 B
Net taxable estate P4,000,000
x Estate tax rate 6%
Estate tax due P240,000
Less: Estate tax credit
Limit = P1/4 x P240,0000 = P60,000 (60,000)
Actual tax paid abroad = P80,000
Estate tax payable P180,000

No. 6 C (decedent: resident alien)

Total net taxable estate P10,000,000
x Estate tax rate 6%
Estate tax P600,000
Less: estate tax credit NA
Estate tax payable P600,000

No. 7 B
Gross Estate P20,000,000
Ordinary deductions - Philippines (3,000,000)
(since the amount provided is P3M only, it shall be assumed that such
amount is exclusive of Standard Deduction and Family Home)
Deductions - France (2,000,000)
Net estate before special deductions P15,000,000
Less:
Standard Deduction (5,000,000)
Share of the surviving spouse
(P15M x 60% / 2) (4,500,000)
Family home (P8M / 2) (4,000,000)

20 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Net taxable estate P1,500,000

x Estate tax rate 6%
Estate tax due P90,000
Less: Tax credit (30,000)
Limit: 4/1.5 x P90,000 = P240,000
Actual: P30,000
Estate tax payable P60,000

CHAPTER 6 Ð DONORÕS TAX

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

*The question is Ògross giftsÓ, hence, disregard the mortgage.

**Sale of Land #1 is a transfer for insufficient consideration. However, unlike in Estate Taxation, Transfer for insufficient
consideration for donorÕs tax purposes is not taxable if the property donated is a real property classified as capital asset
subject to capital gains tax.
*** Sale of Land # 2 is considered bona fide or valid sale.
****Sale of Land #3 is a transfer for insufficient consideration. Nonetheless, the sale is subject to donorÕs tax because the
property is not subjected to capital gains tax. Capital gains tax on real properties are applicable only on sale of real
properties classified as capital assets located in the Philippines.

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

21 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P6.3
(a) None; subject to CGT, not donorÕs tax
(b) CGT = P2.5M x 6% = P150,000
(c) DonorÕs tax = [(P2.5M Ð P1.5M) Ð 250,000] x 6% = P45,000 TRAIN Law
(d) CGT = P0

P6.4
(a) DonorÕs Tax = [(P850,000 Ð 400,000) Ð 250,000] x 6% = P12,000
(b) DonorÕs Tax = P0; exempt from donorÕs tax under the TRAIN Law

P6.5
a) March 1 = Exempt
b) May 30 = P21,000
c) June 30 = P18,000
d) July 31 = P0; exempt
e) September 30 = P144,000

Solution:

Gross Gifts Ð March 1 P200,000

Less: Tax exempt gift (250,000)
Net taxable gift P-
DonorÕs Tax Due/ Payable Ð March 1 Exempt

Gross gift Ð May 30 P500,000

Less: Mortgage assumed by the donee (100,000)
Add: Prior net gift 200,000
Total net gifts as of May 30 P600,000
Less: Tax Exempt gift (250,000)
Taxable gift Ð May 30 P350,000
x 6%
DonorÕs Tax Due P21,000
Less: Tax paid -
DonorÕs tax payable-May 30 P21,000

Gross gift Ð June 30 P300,000 Apply cumulative rule regardless of the

relationship between the donor and the donee
Add: Prior net gift 600,000
Total net gifts as of June 30 900,000
Less: Tax Exempt gift (250,000)
Taxable gift Ð June 30 P650,000
x 6%
DonorÕs Tax Due P39,000
Less: Tax paid as of May 30 (21,000)
DonorÕs tax payable-June 30 P18,000

22 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

Gross gift Ð September 30 P3,000,000

Less: Mortgage assumed by the donees (600,000)
Add: Prior net gift 900,000
Total net gifts as of June 30 P3,300,000
Less: Tax Exempt gift (250,000)
Taxable gift Ð Sept. 30 P3,050,000
x 6%
DonorÕs Tax Due P183,000
Less: Tax paid as of June 30 (39,000)
DonorÕs tax payable-Sept. 30 P144,000

P6.6
1) March 30, 2021 = P45,000
2) May 1, 2021 = P120,000

Solution
March 30, 2021
Gross gift P1,000,000
Less: Tax exempt gift (250,000)
Net taxable gift P750,000
x DonorÕs Tax Rate 6%
DonorÕs Tax Due P45,000

May 1, 2021
Gross gift P2,000,000
Add: Prior net gift 1,000,000
Less: Tax exempt gift (250,000)
Taxable gift P2,750,000
x DonorÕs Tax Rate 6%
DonorÕs Tax Due P165,000
Less: DonorÕs Tax Paid (45,000)
DonorÕs Tax Payable P120,000

P6.7
1) June 6, 2021= P342,000
2) October 8, 2021 = P36,000
3) November 4, 2021 = P24,000
June 6, 2021
Husband Wife Total
Gross Gift (P4.6M + 2M)/2 P3,300,000 P3,300,000
Mortgage assumed (200,000) (200,000)
Net gift P3,100,000 P3,100,000
Less: Tax exempt gift (250,000) (250,000)
Net Taxable gifts Ð June 6 P2,850,000 P2,850,000
DonorÕs Tax Payable @ 6% P171,000 P171,000 P342,000

23 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

October 8, 2021
Husband Wife Total
Gross Gift P300,000 P300,000
Prior Net Gift 3,100,000 3,100,000
Total net gifts P3,400,000 P3,400,000
Less: Tax exempt gift (250,000) (250,000)
P3,150,000 P3,150,000
x6% x6%
DonorÕs Tax Due P189,000 P189,000
Tax Paid-June 6 (171,000) (171,000)
DonorÕs Tax Payable P18,000 P18,000 P36,000

November 4, 2021
Husband Wife Total
Gross Gifts (charitable org.; exempt) P500,000 P500,000
To a family friend 200,000 200,000
Allowable deductions (charitable org.) (500,000) (500,000)
Net gift, November P200,000 P200,000
Add: Prior net gifts 3,400,000 3,400,000
Less: Tax exempt gift (250,000) (250,000)
Net Taxable gift P3,350,000 P3,350,000
@6% @6%
DonorÕs Tax Due P201,000 P201,000
Less: DonorÕs tax paid Ð June & Oct. (189,000) (189,000)
DonorÕs Tax Payable P12,000 P12,000 P24,000

P6.8 (a)P120,000 (b)P60,000 (c)P420,000 (d)P45,000

Feb. 15, 2021

Mr.Palabigay Mrs.Palabigay Total
Gross Gifts P2,000,000 P2,000,000
Mortgage assumed [(P2M x 50%) /2] (500,000) (500,000)
Net Gift P1,500,000 P1,500,000
Less: Exempt gift (250,000) (250,000)
Net Taxable gift P1,250,000 P1,250,000
DonorÕs Tax Due @ 6% P75,000 P75,000 P150,000

March 30, 2021

Mr. Palabigay Mrs. Palabigay Total
Gross Gifts P2,000,000 P-
Prior net gift 1,500,000
Net gift P3,500,000
Less: Tax exempt gift (250,000)
Net Taxable Gift P3,250,000
DonorÕs Tax Due @ 6% P195,000
DonorÕs tax paid (75,000)
DonorÕs Tax Payable P120,000 P120,000

24 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

June 1, 2021
Mr. Palabigay Mrs. Palabigay Total
Gross Gifts P- P1,000,000
Prior net gift 1,500,000
Net gift 2,500,000
Less: tax exempt gift (250,000)
Net Taxable gift P2,250,000
DonorÕs Tax Due @ 6% P135,000
DonorÕs tax paid (75,000)
DonorÕs Tax Due P60,000 P60,000

October 12, 2021

Mr. Palabigay Mrs. Palabigay Total
Gross Gifts (P4,000k+P4,000k)/2 P4,000,000 P4,000,000
Less: Mortgage assumed (P1M/2) (500,000) (500,000)
Prior net gift 3,500,000 2,500,000
Net gift P7,000,000 P6,000,000
Less: tax exempt gift (250,000) (250,000)
Net Taxable Gift P6,750,000 P5,750,000
x 6% 6%
DonorÕs Tax Due P405,000 P345,000
Less: DonorÕs Tax Paid (195,000) (135,000)
DonorÕs Tax Payable P210,000 P210,000 P420,000

October 12, 2021 - CLIFFORD

Gross gift P1,000,000
Less: Tax exempt gift (250,000)
Net Taxable gift P750,000
Tax Due @ 6% P45,000

TRUE OR FALSE
1. TRUE 7. FALSE 13. FALSE 19. FALSE 25. FALSE
2. TRUE 8. TRUE 14. FALSE 20. TRUE
3. FALSE 9. FALSE 15. FALSE 21. TRUE
4. TRUE 10. FALSE 16. TRUE 22. TRUE
5. TRUE 11. TRUE 17. FALSE 23. FALSE
6. TRUE 12. FALSE 18. FALSE 24. TRUE

25 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

MULTIPLE CHOICE
1. A 13. C 25. D 37. D
2. A 14. D 26. A 38. A
3. C 15. B 27. D 39. B
4. C 16. D 28. B 40. A
5. B 17. A 29. A
6. D 18. B 30. A
7. D 19. C 31. B
8. D 20. B 32. A
9. D 21. C 33. B
10. C 22. A 34. B
11. D 23. D 35. B
12. A 24. C 36. C

Supporting computation:
No. 26.
Gross Gifts (5M/2) P2,500,000
Less: Mortgage (P1M/2) (500,000)
Less: Tax Exempt Gift (250,000)
Net taxable gift P2,250,000

No. 28.
Gross gift-April 1 P1,000,000
Mortgage assumed by the donee (500,000)
Net gift P500,000
Less: tax exempt gift (250,000)
Taxable Net Gift P250,000
DonorÕs Tax Rate (TRAIN Law) 6%
DonorÕs tax due/payable P15,000

No. 29.
Net gifts, May 31 P5,000,000
Add: Prior net gift, April 1 500,000
Cumulative net gift P5,500,000
Less: Tax exempt gift (250,000)
Cumulative taxable net gift P5,250,000
x 6%
DonorÕs tax due P315,000
Less: DonorÕs tax paid, April 1 (15,000)
DonorÕs Tax Payable, MAY 31 P300,000

No. 30. TRAIN LAW

Net gifts of the spouses, March 1 P500,000
Divide by 2
Net gift, Mr. Mapagbihay, March 1 P250,000
Tax exempt gift (250,000)
Taxable net gift, Mr. Mapagbigay P0
DonorÕs Tax Due, Mr. Mapagbigay P0

26 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

No. 31.
Net gifts of the spouses, May 1 P400,000
Add: Prior net gift, March 1 500,000
Cumulative net gift P900,000
Divide by 2
Cumulative Net gift, Mrs Mapagbigay P450,000
Less: Tax exempt gift (250,000)
Cumulative taxable net gift P200,000
x 6%
DonorÕs tax due P12,000
Less: DonorÕs tax paid, March 1 -
DonorÕs Tax Payable P12,000

No. 32.
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%
DonorÕs tax due per spouse P18,000 P18,000
Total donorÕs tax due of the spouses P36,000

No. 33.
Gross gift-Jan. 24 P2,000,000
Mortgage assumed by the donee (500,000)
Net gift P1,500,000
Less: tax exempt gift (250,000)
Taxable Net Gift P1,250,000
DonorÕs Tax Rate (TRAIN Law) 6%
DonorÕs tax due/payable P75,000

No. 34.
Net gift-Nov. 30 P4,500,000
Net gift-Jan. 24 1,500,000
Cumulative Net gift P6,000,000
Less: tax exempt gift (250,000)
Taxable Net Gift P5,750,000
DonorÕs Tax Rate (TRAIN Law) 6%
Total donorÕs tax due P345,000
Less: DonorÕs tax paid-Jan. 24 (75,000)
Allowable DonorÕs tax credit: (258,750)
Limit = 4.5/6 x P345,000 = P258,750
Vs. Actual = 400,0000
DonorÕs tax due/payable P11,250

27 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

CHAPTER 7 Ð BUSINESS TAXES

MULTIPLE CHOICE
1. A 6. B 11. C 16. C
2. D 7. C 12. B 17. D
3. D 8. D 13. C 18. D
4. D 9.. C 14. A 19. A
5. B 10. D 15. D 20. D

CHAPTER 8 Ð VALUE ADDED TAX

PROBLEM SOLVING
P8.1
Residential Units:
Case A Exempt
Case B OPT
Case C OPT
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 (assume domestic carrier)

P8.3
A. V E. E
B. V F. V
C. V G. V
D. E H. E

P8.4
a) nil
b) Vat Payable = P134,400 x 3/28 = P14,400
c) Vat Payable = OV P201,600 x 3/28 Ð Input Vat P14,400 = P7,200
d) nil

28 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P8.5
Cash Sales P660,800
Sales on account 246,400
Transactions deemed sale (22,400+16,800+19,040+8,960) 67,200
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

P8.6
OUTPUT:
Sales (P8M Ð 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. 132,000** (214,080)
VAT PAYABLE P767,520

**The rule on amortizing the input vat on capital goods shall only be allowed until December 31, 2021. Consequently,
amortization of input vat on capital goods purchased/imported beginning January 1, 2022 shall no longer be allowed.

P8.7
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**

29 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P8.8
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)
Total Input Vat (P374,000 + 69,848 + 154,000 + 55,000) x 3/28 = P69,948
(b)
Output vat (P330,000 + P274,996) x 3/28 P64,821
Less: Input vat (P374,000 + 69,848 + 154,000) x 3/28 (69,984)
Vat Payable (P5,163)
Note:
§ Sale to export oriented enterprise is considered is subject to 12% vat under the TRAIN Law.
§ The input vat on purchase of goods intended for export may be refunded, deducted from output vat or converted to
a tax credit certificate.

P8.10
(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 (P5,000 x 12%) (600)
Vat Payable P12,600

P8.11
(a)
1st Quarter, Output Vat (P3M x 12%) P360,000
2021
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 2020 (125,000)
Vat Payable P66,000

30 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

(b)
2nd Quarter, Output Vat (4.8M x 12%) P576,000
2021
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)

(c)
1st Quarter, Output Vat (P3M x 12%) P360,000
2022
INPUT VAT:
Purchases (P1.2M x 12%) (144,000)
Purchase of machinery (P2.5M x 12%) (300,000)
Unused input vat as of end of 2021 (125,000)
Excess Input vat (P209,000)

NOTE: Amortization of input vat on capital goods is no longer allowed on capital goods purchased
beginning January 1, 2022.

(b)
2nd Quarter, Output Vat (4.8M x 12%) P576,000
2022
Input Vat
Purchases (P3M x 12%) (360,000)
Vat payable P216,000

P8.12
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. Inventory vs. P10,000 (10,000)
Vat Payable P18,320

P8.13
(a) P3,400
(b) P80,000

Output vat (P800,000 x 12%) P96,000

Less: Input Vat
Presumptive I.V (P85,000 x 4%) (3,400)
Purchased of olive oil (P67,200 x 3/28) (7,200)
Purchased of can containers (P25,000 x 12%)) (3,000)
Payments for paper labels (P12,000 x 12%) (1,440)
Purchased of cardboard for boxes (P8,960 x 3/28) (960)
Payments for hauling services nil
Vat Payable P80,000

31 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P8.14
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

P8.15
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

Subject to Percentage Tax (Amusement Tax)

Disco:
Sale of food and refreshments (P1.6M x 18%) 288,000
Sale of wine, beer and liquor (P1.2M x 18%) 216,000
TOTAL BUSINESS TAXES P1,182,000

P8.16
OUTPUT VAT based on collections
(15M + 10M + 5M) P3,600,000
INPUT VAT on purchases from:
Alpha (P12M Ð 1.2M) x 12% (1,296,000)
Bravo (non-vat reg.) -
Charlie (P4M Ð 1M) x 12% (360,000)
Delta (P2M x 12%) (240,000)
Vat Payable P1,704,000

P8.17
Output vat ((P4M Ð 2.5M) x 12% P180,000
Less: input vat (P800,000 x 12%) (96,000)
Vat Payable P84,000

NOTE: Output vat on dealer of securities is based on gross income.

32 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P8.18
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. 2021 Dec. 2021
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

P8.19
a) Output vat September 2021 = P3M x 12% = P360,000
The sale is a Deferred sale. Ratio of initial payments over SP is 30%.
b) Output vat January 2022 = P0

P8.20
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
2. F 7. F 12. F
3. F 8. F 13. T
4. T 9. F 14. F
5. T 10. T 15. F

SET B
1. T 6. T 11. T
2. T 7. F 12. T
3. F 8. F 13. F
4. F 9. F 14. T
5. F 10. T 15. T

33 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

MULTIPLE CHOICE
1. D 21. C 41. B 61. C 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. C
5. D 25. A 45. B 65. A 85. C
6. D 26. B 46. D 66. C 86. C
7. D 27. B 47. D 67. B 87. D
8. D 28. C 48. C 68. D
9. A 29. A 49. C 69. B
10. C 30. B 50. D 70. D
11. C 31. C 51. B 71. D
12. A 32. A 52. C 72. A
13. A 33. B 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. A 58. A 78. D
19. D 39. D 59. C 79. C
20. D 40. A 60. A 80. B

Supporting Computations/explanations:
No. 12 ÒIIIÓ 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 Ð previous quarter (6,000)
Vat Payable (Carry-over) (P2,400)

No. 23
Statement ÒbÓ should be:

ÒSale of services, including provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, to a
Registered Export Enterprise (REE), to be used directly and exclusively in its registered project or activity, shall be considered
export sale subject to 0% vat.Ó

34 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

No. 36
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. 37
Output vat (P5.5M x 12%) P660,000
Input vat on materials (180,000)
Vat Payable September P480,000

No. 38
Output vat (P10M x 12%) P1,200,000
Input vat on materials (P4M x 12%) (480,000)
Input vat on capital goods (360,000)
(P3M x12%)
Vat Payable June 30 P360,000
NOTE: Amortization of input vat on capital goods is no longer allowed beginning 2022

No. 39
Acquisition - October 2021
Input Vat (P2M x 12%) P240,000
Less: Amortization, Oct. 2021 to March 2022
(P216,000 / 60 mos. x 6) (24,000)
Unamortized Input vat as of April 1, 2022 P216,000

Acquisition - April 2022, P1.5M x 12% 180,000

Creditable input vat on April 2022 P396,000

NOTE: Amortization of input vat on capital goods purchased prior to 2022 is allowed to be amortized until fully utilized.

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

35 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

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 2021 = P3M x 12 = P360,000
v Ratio of Initial Payment 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 2022 = P0; The entire output vat was paid in 2021

No. 74
Down payment 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 2021 (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%
(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

36 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

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

37 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

CHAPTER 9 – OTHER PERCENTAGE TAXES

PROBLEM SOLVING
P9.1
1. V 11. V 21. V 31. PT
2. E 12. V 22. V 32. V
3. E 13. V 23. V 33. V
4. V 14. V 24. PT 34. V
5. V 15. V 25. PT 35. V
6. V 16. E 26. PT 36. E
7. PT 17. PT 27. E 37. V
8. PT 18. PT 28. E 38. E
9. PT 19. V 29. V 39. V
10. V 20. PT 30. PT 40. V

P9.2
1) 1% OPT (CREATE LAW) on vat exempt sales (GR<3,000,000 & non-vat registered) =P1,275,000 x 1% = P12,750
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 and CREATE Law.

P9.3
1) Gross sales/receipts and other non-operating income = P1.8M + (570,000/95%) = P2.4M
Business Tax = P2.4M x 1% under Sec. 116 = P24,000

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 and CREATE 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 1% under Sec. 116 = P12,750
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 and CREATE 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.

38 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

P9.6
1)Taxpayer is non-vat registered
Gross receipts P2,400,000
Add: AR, beginning 500,000
Less: AR, end (600,000)
Collections 2,300,000
x 1%
Business Taxes under P23,000
Sec. 116
& The basis of business tax in this particular problem shall be collections because the taxpayer is engaged in sale of
services.
& The taxpayer is non-vat registered and the total gross receipts ≤ P3,000,000, hence, subject to 1% OPT under
Section 116 of the Tax Code, as amended by CREATE law.

2)Taxpayer is vat registered

Gross receipts P2,400,000
Add: AR, beginning 500,000
Less: AR, end (600,000)
Collections 2,300,000
x 12%
Business Taxes Due (vat) P276,000
& The basis of business tax in this particular problem shall be collections because the taxpayer is engaged in sale of
services.
& Although the total gross receipts ≤ P3,000,000, the taxpayer is vat registered, hence, subject to 12% vat.

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

39 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

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 = P7,500

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

3. Subject to P6,000 value added tax

[(5,000 sh. X P50) – P200,000 = P50,000 capital gain x 12% = P6,000
A dealer in securities is subject to 12% value added tax based on gross income

4. Subject to OPT (stock transaction tax) of P720 computed as follows:

P120,000 x .006 (TRAIN Law) = P720

5. OPT = 5,000 shares x P18 x .006 = P540

P9.10
1. P1,053,000 OPT (amusement tax). P5,850,000 x 18% = P1,053,000
2. P720,000 OPT. P4M x 18% = P720,000
3. P18,500 OPT. P1,850,000 x 1% = P55,500
4. P198,000 VAT. (P1,850,000 x 12%) – (P224,000 x 3/28)] = P198,000

P9.11
1. P501,250 computed as follows:
1st Quarter % Business Tax
Interest and commission income from lending activities with P4,000,000 5% P200,000
maturity of 3 years
Interest and commission income from lending activities with 3,500,000 5% 175,000
maturity of 5 years
Interest and commission income from lending activities with 6,000,000 1% 60,000
maturity of 7 years
Other income from rentals of facilities and other assets 775,000 7% 54,250
Income from financial leasing (remaining maturity is more than 1,200,000 1% 12,000
5 yrs)
Dividends and equity shares in net income of subsidiaries 500,000 0% -
Net trading gain (loss) (150,000) NA -
Total Gross Receipts Tax P501,250

40 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

2. P446,000
2nd Quarter % Business Tax
Interest and commission income from lending activities with P2,800,000 5% P140,000
maturity of 3 years
Interest and commission income from lending activities with 3,300,000 5% 165,000
maturity of 5 years
Interest and commission income from lending activities with 7,200,000 1% 72,000
maturity of 7 years
Other income from rentals of facilities and other assets 825,000 7% 57,750
Income from financial leasing (remaining maturity is more than 950,000 1% 9,500
5 yrs.)
Dividends and equity shares in net income of subsidiaries 400,000 0% -
Net trading gain net of loss (P325,000-150,000) 175,000 7% 1,750
Total Gross Receipts Tax P446,000

TRUE OR FALSE
1. FALSE 11. TRUE 21. TRUE
2. TRUE 12. FALSE 22. TRUE
3. TRUE 13. FALSE 23. TRUE
4. FALSE 14. TRUE 24. TRUE
5. FALSE 15. TRUE 25. FALSE
6. FALSE 16. TRUE
7. FALSE 17. FALSE
8. TRUE 18. FALSE
9. TRUE 19. TRUE
10. FALSE 20. FALSE

#4. False. Shall be either 0%vat or vat exempt only

#5. False. Shall be exempt from local tax
#6. False. Shall be whichever is higher. However, the application of minimum quarterly receipts has been suspended.
#7. False, CCT is based only on GR from cargo operations.
#9. True. For business tax purposes only; sources within for income tax purposes
#13. False. Shall be from the government
#14. True. i.e., Radio/television broadcasting companies whose GR exceeds the vat threshold of P10M preceding
year.

41 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

MULTIPLE CHOICE
1. A* 21. D 41. A 61. A 81. D
2. D 22. A 42. A 62. C 82. D
3. D 23. A 43. A 63. C 83. A
4. C 24. A 44. D 64. A 84. D
5. D** 25. B 45. C 65. A 85. C
6. C 26. A 46. A 66. D 86. D
7. A 27. B 47. D 67. D 87. D
8. A 28. D 48. B 68. A 88. D
9. D 29. B 49. A 69. B 89. C
10. A 30. C 50. B 70. B 90. C
11. A 31. A 51. B 71. C 91. B
12. A 32. C*** 52. C 72. A
13. C 33. D 53. C 73. B
14. D 34. B 54. C 74. C
15. A 35. D 55. B 75. B
16. B 36. D 56. B 76. B
17. C 37. D 57. A 77. A
18. D 38. D 58. C 78. C
19. B 39. A 59. C 79. B
20. B 40. C 60. D 80. A

**”A” should be:

a. I and III only

**Items I and II are not subject to business taxes while item III is subject to Sec. 117 instead of Sec. 116
***For International Carriers, passenger operation is exempt from business tax.

Supporting Computations:
No. 6 OPT on sale of refined sugar and cooking oil = (P500,000 + 500,000) x 1% = P10,000
No. 7 (P280,000 + P220,000) x 1% = P5,000
No. 8 Collections = P50,000 + 100,000 – 75,000 = P75,000
OPT = P75,000 x 1% = P750
No. 9
Gross receipts (refer to #8) P75,000
x vat rate 12%
Output vat P9,000
Input vat (P11,200 x 3/28) (1,200)
Vat Payable P7,800

No. 10 VAT Payable = (P1,350,000 + 625,000 – 1,200,000) x 12% = P93,000

No. 19 P6.5M x 12% vat = P780,000
No. 20 CCT = P660,00 x 3% = P19,800
No. 21 Output Vat = (P400,000 + P100,000) x 12% = P60,000; shall be based on collections
No. 22 CCT = (P800,000 + 400,000) x 3% = P36,000
No. 23 CCT = [(100,00-18,000) + (165,000-13,500) + 90,000 + 35,500] x 3% = P10,770
No. 26 P10M x 2.5% = P250,000
No. 27 P10M x 1.5% = P150,000

42 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

No. 28 exempt
No. 29 B
No. 30 (P10M x 40%) 3% = P120,000

No. 37
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. 38
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. 39 2020 = P9M x 3% = P270,000; 2021 = P12M x 3% = P360,000

No. 45 P3M x 10% = P300,000

No. 46
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 Statement 2 is False. The rate shall be 4% (twice the rate of Section 123 NIRC)

No. 54
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

43 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])

 lOMoARcPSD|31727608

No. 55
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. 56
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. 57
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. 58
Interest withheld and paid (P100,000 x 5 years x 1%) (P5,000)
Adjusted amount of tax due to pre-termination (P100,000 x 5 years x 5%) 25,000
Tax Payable P20,000
No. 60 OPT under Sec. 124 = P2M x 4% = P80,000
No. 61 [(P500,000 x 12%)-(300,000x12%)] = P24,000
No. 62 P2M x 2% = P40,000
No. 67 P5,425,000 x 18% = P976,500
No. 69 P425,000 x 1% = P12,750
No. 72 Amusement tax = exempt
No. 73 Amusement tax = (P5M + 3M) x 10% = P800,000
No. 75 Double = P200 bet/P20 per ticket = 10 tickets; 10 tickets x P180 net winnings per ticket x 4% = P72
Ordinary (winner take all) = P500 bet/P50 per ticket = 10 tickets;
= 10 tickets x P950 net winnings per ticket x 1% = P950

Forecast = Bet P1,000/20 per ticket = 50 tickets

= 50 tickets x P80 net winnings per ticket x 4% = P160
TOTAL = P1,182

No. 80 OPT = P350,000 x .006 = P2,100

No. 81 CGT= Capital gain=P0; CGT = P0
No. 82 Vat = (P1.5M – P1M) x 12% = P60,000

44 | Transfer & Business Taxation (2022 Edition) by Tabag and Garcia

Downloaded by Geraldine Bacol ([email protected])