TAX.
0033 - VAT
Ms. Naserah Toctoc, a VAT registered
realty and car dealer, made the
following sales of goods and
properties during a quarter:
Selling price of goods:
- a brand new car with P1M fair value for
P1.2M
- used car with with P1M fair value for
P800K
- slightly used car with P1.5M fair value
for P1M
Sales of properties:
- residential lot with P2M fair value for
P1.9M
- house and lot with P4M fair value for
P3.5M
- house and lot with P3M fair value for
P2.8M
- commercial lot with P1M fair value for
P2M
Compute the total output VAT.
SOLUTION
1.2M+ 800K +1.5M x 12% = 420,000 ;
4M + ( 2M/1.12) 12% = 694,286.
P 1,114,286
Clue: if goods are sold for inadequate
consideration, the basis shall be the FV.
Note the exempt sales of real properties as
they are not subject to VAT. Note also that
VAT on property is based on GSP. GSP is
interpreted to be higher of FV and SP. If FV
is the GSP, it is VAT exclusive. If SP is the
GSP, it is VAT inclusive.
TAX.0032 - Branch profit remittance
The branch of Megalyst Corp., a
corporation organized according to
the laws of the Philippines - the most
powerful country earth, made the
following remittances to Megalyst
Corp. head office:
P15,000,000 from operating
profits,net of tax
P 2,000,000, capital gains, net of capital
gains tax
P800,000, interest income net of final
tax
P 20,000,000 return of capital assigned
by the head office
Compute the branch profit remittance
tax.
ANSWER: 0
The answer is Zero. Branch profit
remittance tax pertains only to remittance
of resident foreign corporation branch in
the Philippines to their overseas head
offices.
TAX.0031 - Deduction
HT Company borrowed P1,000,000
from a bank at 8% annual interest.
The bank also requires a P50,000
maintaining balance in a savings
deposit account but will earn an
interest of 2% per annum.
Compute the total allowable
deductions for taxation purposes.
SOLUTION
P79,670 = [1M*.08-((50k*.02)*.33)]
TAX.0030 - Final tax
Miss Experto, an unmarried beautiful
and sexy lady with six boyfriends,
won the P10,000 "First Prize" in the
customer's raffle draw of Bag Teeth
Department Store.
Compute the final tax to be withheld
by Bag Teeth Department Store.

SOLUTION
10,000 x 20% =2,000
The answer is P2,000. This is winnings,
hence, the P10,000 threshold between RIT
or FIT do not apply. Note that winnings
comes from transactions dependent upon
chance while prizes comes from effort. The
"prize" on raffle draw is winnings.
TAX.0029 - Deductions
Mr. Maling Acala, with two dependent
children, reported a net income of
P300,000 from business after the
following business contributions:
Contributions to non-accredited
institutions - P50,000
Contributions to accredited
institutions - P70,000
Contributions to beggars on the streets -
P80,000
Contributions to foreign non-profit
institutions - P20,000
Compute the deductible contribution
expense.
SOLUTION
300+50+70+80+20=520x10%=52 vs 50 so
50 + 70= 120,000
The answer here is P120,000. DO NOT deduct
personal exemptions in the base of the 10%
limit on contributions with limit. Basis? See Tax
Form 1701. Only donations to domestic
organizations are deductible. Donations to
foreign are non-deductible, except when made
in pursuant to treaties. Deductions to
accredited institutions are deductible (the 30%
admin expense threshold is deemed satisfied
otherwise it would not have been accredited
din the first place.)
TAX.0028 - Deductions
Salaries to persons with disability -
P40,000
Salaries to senior citizens - P30,000
Salaries to other employees -
P210,000
Fringe benefits to:
-persons with disability - P 12,000
-senior citizens - P8,000
-other rank and file employees - P32,000
-managerial or supervisory employee -
P42,500
Compute the total allowable deductions.
SOLUTION
40 x 1.25=50
To seniorc 30 x 1.15=34.5
Other employee =210
Fb-ms 42.568%=62.5
Other fb(8+12+32)=52
Total P409,000
Note Do not forget fringe benefits tax and
special additional deductions on PWD
(25%) and SCs (15%).
TAX.0027 - Value Added Tax
On August 1, 2016, Mr. Yu, a realty
dealer, disposed a residential lot for
P2,184,000 payable by the buyer in
24 monthly installments every month
end starting August. The lot has a
zonal value of P1,930,000 at the date
of sale.
Compute the output VAT for the third
calendar quarter.
SOLUTION
19,500.00 = (2,184,000 which is higher than
zonal value x .12/1.12)/24 installments x 2
months applicable for the 3rd calendar
quarter.
It is presumed VAT dealer. That lone sale is
already in excess the VAT threshold. You do
not even need to be VAT registered to be
subjected to VAT.
For real property, the basis of the VAT is
GSP. GSP means contract price or FMV w/e
is higher. If GSP is based on contract price,
it is presumed inclusive of VAT (hence VAT
is computed as 12/112) if GSP is based on
FMV, it is exclusive (to be computed as FMV
x 12%).
TAX.0026 - IAET
Power Corp. was assessed
improperly accumulated earnings
tax.
Common stocks - P2,000,000
Additional paid in capital - P 500,000
Retained earnings - P3,000,000
Revaluation surplus - P800,000
Treasury stocks - P200,000
Compute the IAET.
SOLUTION
3M-2M(OS)-200K(TS)=800000*10%=
P80,000.
TAX.0025 - Corporate MCIT
Real Corporation had the following
during the first quarter of year:
Excess MCIT - prior year P 5,000
MCIT - P 20,000
Allowable deductions - P900,000
CWT withheld by clients - P 11,000
Compute the income tax still due for the
first quarter.
SOLUTION
The regular income tax is higher,
[(20k.02)- 900k] x 30% = 30,000.
Thus, P14,000 (30-5-11) is the tax still due
TAX.0024 - Deductions
Mr. Oha has a building used in
business:
Building cost P 500,000
Accumulated depreciation 135,000
Residual value 50,000
Current fair value 275,000
Original useful life 9 years
Compute the annual deductible
depreciation expense.
SOLUTION
The answer is P50,000. Expense in taxation
must be actual meaning based on cost.
Hence, (P500,000 - P50,000)/9 years.
TAX.0023
Mr. Daddy Yo, a working man and a
father of two 4 years old and 2
years old, earns the following income
during a taxable year:
Gross salary (11,000 per month)
SSS, PhilHealth, Pag-ibig, Union dues
(1,000 per month) not yet
deducted from gross salary above
Thirteenth month pay (10,000)
Performance bonus (1,000)
How much is the taxable compensation
income of Mr. Daddy?
SOLUTION
The answer is P21,000. Gross taxable CI is
(P11,000 x 12 regular CI, plus P1,000
supplemental CI) less P1,000 x 12 non-
taxable CI (SSS, HDMF, etc.) LESS P100K
personal exemptions. NOTE: 13th month &
other benefits do not include performance
bonus. Note also that it does not exceed
P82,000.
TAX.0022
Mr. A owns 1,000 shares of ABC Co.,
a domestic corporation. If ABC Co.
pays 20 cash dividends per share,
how much cash, net of tax, will Mr. A
receive? (Note: Mr. A is a natural
born, full-blooded Filipino and he is
my neighbor) - P.S. he never went
abroad because he is afraid to ride
on an airplane, ship, bus, jeep, taxi,
horse, etc.)
SOLUTION
The answer is 18,000 P20x1,000 x 90% (net
of 10% final tax).
TAX.0021
Mr. A sells his house and lot, located
in the Philippines, to a buyer for
1,050,000. Mr. A pays the real
estate broker 50,000 commission.
Mr. A acquired the property before at
200,000 and paid commission to
broker of 10,000. The property is a
capital asset. Compute for the tax
liability of Mr. A.
SOLUTION
The answer is P 78,750 [7.5% x P1,050,000
(6% for CGT + 1.5% for DST)]
TAX.0020
Mr. A won a one way ticket to the
moon. Mr. A sells his house and lot,
located in the Philippines, to a buyer
for 1,000,000. Mr. A acquired the
property two years ago for
20,000,000. The property is
considered a capital asset. Compute
for the tax liability of Mr. A.
SOLUTION
Answer: 60K (1M x 6%)
TAX.0019
Mr. A acquires shares of stock of a
domestic corporation for 100,000.
Mr. A pays 2,000 commission to
broker. The shares are considered
capital asset of Mr. A. A year later,
Mr. A sells the shares for their fair
value of 206,000. Mr. A pays 4,000
commission to broker. Compute for
the tax liability of Mr. A.
SOLUTION
Answer: 5,000; (206K 4K) (100K + 2K) =
100K x 5%
TAX.0018
Mr. A sells shares of stocks of ABC
Co., a domestic corporation, directly
to a buyer for 100,000. Mr. A
acquired the shares earlier at
120,000. At the date of sale, the
shares have fair value of 240,000.
Compute for the tax liability of Mr. A.
SOLUTION
Answer: 7,000; Capital gain based on fair
value = 120,000 (240K FV 120 Cost) =
120,000; tax on capital gain = (100,000 x
5%) + (20,000 x 10%)
TAX.0018
Mr. A sells shares of stocks of ABC
Co., a domestic corporation, directly
to a buyer for 100,000. Mr. A
acquired the shares earlier at
120,000. Compute for the tax
liability of Mr. A.
SOLUTION
Answer: 0 (no tax because no capital gain)
TAX.0017
ABC Co., a domestic corporation,
sells land with carrying amount of
800,000 for 1,000,000, equal to fair
value. The land is considered a
capital asset. Compute for the tax
liability of ABC Co.
SOLUTION
Answer: 60,000 (1M x 6%)
(TAX.0016)
ABC Co., a domestic corporation,
sells shares of stocks of another
domestic corporation that it holds as
capital asset directly to a buyer at a
gain of 120,000. Compute for the
tax liability of ABC Co.
SOLUTION
7,000 (100K x 5%) + (20K x 10%)
(TAX.0015)
Kang Kong Co. the employer of Ms.
Pechay pays Ms. Pechays income tax
for the period amounting to 100. This
is because Kang Kong believes that
there is joy in giving with open heart.
Assuming the compensation of Ms.
Pechay, on which the tax was
computed, is 500, how much is the
adjusted taxable compensation
income of Ms. Pechay?
Answer is 600
Income tax paid by employer in favor of an
employee is taxable on the part of the
employee. The tax paid is considered
additional compensation of the employee.
TAX.0014
King Kong Co. obtains insurance for
its employee, Mr. Darrell Whitey, for a
premium of 100. The beneficiary is
Mr. Darrells wife. How much is the
taxable compensation income of Mr.
Whitey?
Answer: 100
If employer pays insurance premium for
employee and the beneficiary is the
emplyee's dependents, the premium paid is
considered taxable on the part of the
employee. (Sec. 40, Rev. Reg. No. 2)
However, if the beneficiary is the employer,
the premium paid is nondeductible and
excluded from the employee's taxable
income.

TAX.0013
Rhad Tangkad is an employee of Mam
Erl Co. Rhad was unable to pay his
loan from Mam Erl in the amount of
20 so Mam Erl deducted the 20 loan
from Rhads salary of 100 for the
month of April 2017. Rhad was furious
but had no choice but to receive his
pay of 80 with teary eyes. How much
is the taxable compensation income
of Rhad Tangkad for the month of
April?
Answer: 100
If taxpayer renders service in exchange for
cancellation of debt, the debtor realizes
income to the extent of debt cancelled.
(See basis in TAX.0012 below)
TAX.0012)
Rex Toothpick is a shareholder in
Andrix Seeding Co. Rex has an
outstanding loan from Andrix
amounting to 100. During the period,
Andrix forgave the repayment of
Rexs loan out of kindness,
generosity and love. How much is the
income of Rex subject to taxation?
Answer is 100
If a corporation cancels a shareholder's
debt, the effect is payment of dividend
(TAX.0011)
Darrell Tisoy is an employee of
Mundas Beauty Care. Mr. Tisoy earns
monthly compensation of 100. During
the period, Darrell Tisoy agreed to
avail of Mundas bleaching and facial
care in exchange for his salary for
that month. The fair value of the
bleaching and facial care service is
120. How much is the taxable income
of Mr. Tisoy during the month?
Answer is 120.
Services received in lieu of compensation -
tax basis is fair value of service received.
TAX.0010
During the year, Mark Expensive, an
employee of Nangina Corporation,
received 10 shares of stocks of
Nangina as part of the companys
employee stock ownership plan. The
shares have a par value per share of
1. At the time of receipt, the shares
are quoted at 2 per share. How much
is the taxable income of Mr.
Expensive?
Answer is 20
Compensation received in the form of stock
- basis for taxation is fair value of shares at
the time the service is rendered.
See basis in (TAX.0009) below.
TAX.0009
A taxpayer received from its
employer the following in exchange
for services rendered during the
period:
Monthly salary of 10 for the first half
of the year.
Monthly salary of 20 for the last half
of the year.
One carabao with carrying amount of
100 in the employers accounting
books and fair value of 200. The
carabaos costs to sell is 10.
How much is the gross taxable income
of the taxpayer?
Answer is 380.
(20*6)+(10*6)+200 = 380
Compensation received in the form of
property, the basis for taxation is fair value of
property received.
TAX.0008
A taxpayer earned the following
income during the period:
Salary for the year 100
Honorarium as a guest speaker 50
Commissions 30
Fees as a director 20
Monetized unused sick leave 10
Cost of living allowances 5
Interest income from bank deposit 3
Royalty income from musical
composition 2
How much is the gross taxable income
of the tax payer?
Answer is 215....all except int. and royalty.
TAX.0007)
Which of the following is incorrect?
a. A person or a business subject to
any internal revenue tax shall
register with the BIR only once.
b. A person subject to any internal
revenue tax may be required to file
and pay taxes more than once in a
given tax period.
c. A taxpayer engaged in more than
one business or is employed in more
than one employment or otherwise
earns income from more than one
source shall obtain separate TINs for
each source of income.
d. In case the taxpayer dies, his or
her estate shall be issued a new TIN.
Answer is C. One TIN only for each taxpayer.
TAX.0006
Which of the following is not one of
the powers or authorities of the BIR
Commissioner?
a. Power to decide tax cases
b. Authority to cancel tax liability
c. Authority to compromise
d. Power to enact tax laws
Answer D
TAX.0005
One characteristic of tax is that it is
a. generally paid in cash
b. generally assignable
c. generally based on contract
d. generally avoidable for a citizen
who works abroad
Answer A
TAX.0004
Which is not an income taxpayer?
a. General professional partnerships
b. Government-owned and controlled
corporations
c. Special aliens
d. Irrevocable trusts
Answer A
TAX.0003

Who is not a stranger in donors

taxation?
a. Girlfriend
b. Second cousin
c. God son
d. Grandson of the donors daughter

Answer D

TAX.0002

Darrell Jose sold stocks of a

domestic corporation directly to
buyer for P500,000. The stocks were
acquired for P200,000 and have a fair
value of P600,000 at the date of sale.
Compute the capital gains tax.

a. P 0 c. P25,000
b. P 15,000 d. P35,000

Answer C

TAX.0001

The Constitutional tax exemption of

non-stock non-profit educational
institution refers to
a. Real property tax.
b. Property tax and income tax.
c. Income tax.
d. Business tax.

Answer B