SELF CHECK
In order to know whether you have understood the concepts we have just
finished, try to answer the following and follow the directions as placed below.
Direction: Open the file Self Check Number 5 in your LMS or Flash Email Account. It is an
encrypted file. Password will be given to you after the discussion of the previous topics. Place
your answer in a short bond paper (either handwritten or encoded may do), those who are using
LMS, must submit the output while those who are using the ILG (offline), must compile their
output in the Learning Portfolio to be submitted before giving the next module. The output must
include your complete name in the higher left side while the date must be placed higher on the
right side.
FRINGE BENEFITS
1.Northern Company reimbursed the
P102,000 vacation expenses of its
president, Mr. Calica.
2.Northwestern company granted a
P4,000,000 7% loan to its VP for
Marketing, Christiana Dave
3.Cecil,a sole proprietor, paid the P150,000
monthly salary and P68,000 monthly rental
of the condo unit of his branch manager
4.CD Realty Corporation sold a property to
its VP for Operations for P1,980,000. The
residential house and lot was purchased for
P2,300,000 and had a fair market value per
BIR for P2,500,000 and per assessors office
of P2,600,000.
5.Courrier Company transferred its
ownership on the house and lot to its
president, Alfredodo JhunJhun. The
following information relates to the
property
Monetary
Value
FB
Expense
Fringe
Benefit
Tax
Deductible
Amount
Cost= P5,000,000; Zonal Value=
P4,500,000; Assessed value= P 3,000,000
6.KKK, a business partnership, purchased
an automobile for the use of its manager,
Mr. Ali. The vehicle which is intended to be
used partly for business purposes costs
P400,000 and was registered in the name
of Mr. Ali
7.Reynaldo, is a doctor on call. He was
granted by his employer a car with a
second hand value of P300,000 to ensure
immediate availability during emergency
situations, the car has a book value of
P250,000.
8.Ms. Cora is a cute accounting staff at
MBA Audit Services of Mr. Gardoce. The
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managing partner was so impressed by Ms.
Cora that he allowed the company to
shoulder Ms. Cora’s P10,000 residential
rental
9.HTM Corporation granted the use of its
residential unit it acquired in 2000 for
P5,000,000 to a non-resident alien director.
The property has a zonal value of
P6,000,000 and assessed value of
P5,500,000.
10.Jomar, a resident citizen, was hired s
the VP for Risk Management for the
offshore banking unit (OBU) of
Superpangkalawakan Bank in the
Philippines. As such, Joe was given car
benefit of P1,200,000. 30% of this will be
deducted from Jomar’s future monthly
salary.
1. Which of the following is subject to fringe benefits tax?
a. Fringe benefit given to rank and file employees
b. Fringe benefit given to managerial or supervisory employees
c. Compensation income of the rank and file employees
d. Compensation income of the managerial or supervisory employees
2. The following concepts denote exemption from fringe benefits tax, except:
a. Convenience of the employer
c. Welfare and benefit of the
b. Necessity to the business or
employee
trade
d. De minimis benefits
3. As a rule, fringe benefits furnished or granted in cash or in kind by the employer to an
individual employee may be subject to fringe benefits tax, if given to:
A. Rank and File Employees B. Managerial Employees C. Those holding supervisory
positions
a. Only A and B
b. Only A and C
4. The fringe benefits tax is
A. Imposed on the employer B. Withheld at source
a. Only A and B
b. Only A and C
c. Only B and C
d. A, B and C
C. Deductible by the employer
c. Only B and C
d. A, B and C
5. With regard to the amount on which the fringe benefit tax rate is applied, which statement
is wrong? The benefits rate is applied on
a. The monetary value of the fringe benefit
b. The gross-up monetary value of the fringe benefit
c. The amount deductible by the employer from gross income
d. Both accounts of fringe benefit and the fringe benefit tax
6. The following fringe benefits are not subject to fringe benefit tax, except
a. If required by the nature of, or necessary to the trade, business or profession of
the employer
b. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans;
c. Benefits given to rank and file employees
d. Benefits given for the convenience or advantage of the employee
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7. Basic rules on fringe benefits tax, except
a. Fringe benefits given to rank and file employees is not subject to fringe benefits
tax
b. Fringe benefits given to a supervisory or managerial employee is subject to fringe
benefit tax
c. De minimis benefits whether given to rank and file employee or to supervisory or
managerial employee is not subject to fringe benefits tax
d. The fringe benefits tax is a tax paid by the managerial or supervisory employee
8. Facilities or privileges furnished or offered by an employer to his employees that are
relatively small value and are offered or furnished by the employer as a means of
promoting the health, goodwill, contentment, or efficiency of his employees.
a. Fringe benefits
c. De minimis benefits
b. Fringe benefits tax
d. Gross-up monetary value
9. Which
a.
b.
c.
d.
statement is wrong? The fringe benefits tax is
Imposed on the employer
Withheld at source
Imposed on the managerial or supervisory employee
Deductible by the employer
10. Which of the following is considered fringe benefits?
a. Housing benefits provided to military officials of the Armed Forces of the
Philippines consisting of officials of the Philippine Army, Navy and Air Force
b. Housing unit which is within or adjacent to the premise of a business or factory
which is within 50 meters of the perimeter of the business premise of the employer
c. Temporary housing for an employee who stays in a housing unit for three months
or less
d. Housing benefits given by the government to its public managerial employees.
11. The gross-up monetary value of fringe benefit subject to fringe benefit tax received by a
non-resident alien individual not engaged in trade or business in the Philippines is
computed by dividing the monetary value of the fringe benefit by
a. 75%
c. 85%
b. 25%
d. 15%
12. The following fringe benefits are not subject to fringe benefits tax, except:
a. Fringe benefits given to rank and file employees, whether given on a Collective
Bargaining Agreement or not
b. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans;
c.
De minimis benefits promulgated by the Bureau of Internal Revenue
d. Fringe benefits furnished or granted by the employer to its managerial and
supervisory employees
13. The 2018 books of accounts of DBest Company showed the following:
Fringe benefits expenses
P 1,500,000.00
Fringe benefits tax expense
363,125.00
Compute the gross up monetary value of fringe benefit given to managers and supervisors.
14. Compute the value of the fringe benefit given to rank and file employee.
15. Compute the monetary value of the fringe benefit given to managers and supervisors.
16. Compute the total deductible amount against gross income of DBest Company.
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17. Mr. A is a mining engineer employed by B Co., a mining firm. The company’s mine site is in
the forest of Mt. Manok. Mr. A was provided by the company with quarters at the mine site.
The fair rental value of the living quarters is P15,000 a month.
Determine the quarterly fringe benefits tax due.
18. In 2018, ABC Corp hired Ms. C.A. Centista as sales manager for cosmetics. In accordance
with her conditions for employment, she was given the following compensation and fringe
benefit
Salary
P200,000.00/month
Three handsome houseboy maids
P8,000.00 per maid/month
A macho personal driver
P10,000/month
Homeowner’s association dues
P1,200.00 per year
The fringe benefits tax due is
19. In 2019, A Corporation allowed its sales manager to incur expenses subject to
reimbursement as follows:
Electricity Bill (paid and receipted under A Corporation’s name)
P 20,000.00
Water bill (paid and receipted under the manager’s name but was reimbursed by A
Corporation)
P 2,000.00
Grocery purchases (Mariton Grocery)
P 10,000.00
Gasoline of company car
P 12,000.00
Representation and transportation-business trip
P 4,000.00
The amount subject to fringe benefits tax is
20. As a means of promoting health, goodwill and efficiency of employees, employer A gave
rank and file employee B the following fringe benefits in 2019.
Monetized unused vacation leave of 15 days
P 9,000
Rice Subsidy
24,000
Uniform and clothing allowance
8,000
Achievement award for length of service in the form of tangible personal
75,000
Gifts given during Christmas and Major Anniversary celebrations
10,000
13th month pay
38,000
The amount of taxable fringe benefit is
21. The employer’s deductions for the benefits given
QUERY: Assuming that the employee is a managerial or supervisory employee, compute
the following:
1. Taxable amount of Fringe Benefits_______________________
2. Total employer’s deduction_____________________________
22. ABC Corporation paid for the following benefits of employees in the first quarter of 2019.
Types of benefits
4 managers and
30 rank and file
supervisors
Rice subsidy
P 36,000
P 270,000
SSS employer’s share*
12,000
67,500
SSS employee share
12,000
67,500
(withheld)
Life insurance of officers
15,000
with their spouses as
beneficiary
Life insurance of officers
15,000
with the corporation as
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beneficiary
*Mandatory amounts were P9,000 and P62,000 for officers and rank and files ,
respectively.
Compute the fringe benefits tax.
23. The following data belong to Nasty Corporation for the year 2018.
a. Educational assistance to supervisors and their children
b. Employer’s contribution for the benefit of the employees
to retirement, insurance and hospitalization benefit plans
P 75,000
P 70,000
c. Year’s rental for an apartment paid by the Nasty for the use of its controller
P 60,000
Compute the total amount of deductible fringe benefit tax expense
24. ABC,Inc. established in the Philippines provided its employees cash and non-cash fringe
benefits in 2017 as follow:
Total amount of fringe benefits
P 1,000,000
60% of the said amount was given to rank and file employees
40% was given to corporate officers as follows:
a. To resident citizens
45%
b. To non-resident aliens not engaged in business in Philippines 35%
c. To special aliens and Filipino Employees
20%
25. Compute the total deductible fringe benefits tax expense.
26. A Company made the following payments in the 3rd quarter of 2018
Fringe benefits:
To the supermarket in payment of the groceries for the company’s manager and
family-P16,500
To a university in payment of the tuition fee of the manager- P24,750
Salary of the manager, net of P50,000 withholding tax- P350,000
Determine the fringe benefit tax expense
27. Celebes, Inc. owns a residential property it acquired for P2,000,000. It transferred
ownership thereto to its managerial employee for P1,200,000 when its fair value was
P3,000,000. What is the monetary value of the benefit?
28. Kalibo Corporation designated two condominium units for the use of its supervisory
employee with the fair value and terms of residence as follows:
Unit 1
Unit 2
Agreed Residence Time
1 year
3 months
Property value
P4,000,000
3,000,000
Compute the quarterly monetary values for the above.
29. Ozamis Corporation granted ownership of several housing units to the following
employees on its foundation day:
Name
Mr. Magdiwang
Mrs. Calatrava
Mr. Romblon
Position
Accounting manager
Marketing supervisor
Machine operator
Property value
P 3,000,000
P 2,000,000
P 1,500,000
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Mrs. Sta. Fe
Electrical Staff
P 1,000,000
Compute the total monetary value of all fringe benefits
30. Compute the total monetary value of housing benefits that are subject to fringe benefits
tax.
31. Tapas Corporation has a production facility 10 kilometers away from town. To promote
the goodwill of its employees, it decided to construct housing units within the compound
of the facility. It also agreed to pay half of the household rentals of employees, who did
not want to transfer their families to the housing unit. The following data relates to the
quarter of grant:
Value of housing unit
Rental payments
COMPANY OFFICERS
P 1,000,000
500,000
RANK AND FILE
P 3,000,000
800,000
Compute the monetary value of benefits subject to fringe benefits tax
32. As part of its employee benefits, Zarraga Realty Corporation acquired a piece of residential
lot worth P2,000,000 for its Director and constructed upon it a house at a cost of P
4,000,000. Ownership of the house and lot was turned over to the director upon
completion of the construction. 40% of the value of the house and lot will be deducted
from the director’s salary over a period of 5 years.
What is the monetary value of the fringe benefit?
33. In July 2018, Naga purchased a P1,200,000 car for the use of its managerial employee.
Compute the monetary value to be reported respectively for the calendar quarter ending
September and December 2018.
34. Compute the fringe benefit if the employee I a resident citizen.
35. Maasin Carbon Plant acquired a P1,000,000- motor vehicle of its field engineer, a plant
supervisor, assigned to a very remote facility from town. Compute the monetary value of
the benefits subject to tax.
36. Bilar acquired a car for P 1,200,000 and transferred ownership to its supervisory employee
for P400,000. The car shall be used partly in the employer’s business. Compute the
monetary value.
37. During the last calendar quarter of 2016, Naval Company granted a Filipino supervisory
employee the following benefits:
Salaries
P 120,000
Performance bonus
20,000
13th month pay
40,000
Excess de minimis benefits
12,000
Cash price of car given to supervisory employee 300,000
Compute the fringe benefit tax
38. Catbalogan paid the P27,200 monthly rental of the residence of its managerial employee
from January to May of 2018. Compute the fringe benefits tax for the first quarter and
second quarter of 2018.
39. On July 1, 2016, Calbayog designated the use of its residential unit for its managerial
employee. The residential unit was acquired P 4,500,000 and has a zonal value of
P2,000,000. The land has assessed value of P1,000,000 while the improvement has
assessed fair value of P2,000,000.
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Compute the fringe benefits tax for the third and fourth quarters of 2016.
40. Borongan Company granted the following fringe benefits in 2017.
- January 15- paid P68,000 for the birthday celebration expenses of its vice
president for operations
- February 14- distributed iPhones costing P47,600 each to four supervisory
employees as incentives
- April 2- granted the use of a residential unit to the vice president for finance
with fair value of P3,000,000
- August 4- transferred ownership to a residential dwelling with zonal value of
P4,000,000 and assessed value of P3,000,000 to the company president
- December 15- distributed P896,000 in 13th month pay to all employees (20%
of this relates to managerial or supervisory employees)
Compute the quarterly fringe benefits tax to be remitted by Borongan Company in the first
quarter and in the second quarter.
41. What is the fringe benefits tax respectively in the third and fourth quarter?
REGULAR INCOME TAXATION:
1. All of
A.
B.
C.
D.
the following statements are correct, except one. Which is the exception?
The source of interest income is the country where the debtor resides
The source of dividend income is the country where the corporation was incorporated
Rents are considered derived from the country where the property is located
Income from personal services is considered derived from the country where the
services were rendered.
2. – A gain from sale of shares of a domestic corporation shall be considered derived from the
Philippines regardless of where the shares were sold.
- A gain from sale of shares of a foreign corporation shall be considered derived from the
country where the corporation was created or organized.
A.
B.
True; True
True; False
C.
D.
False; True
False; False
3. Which is not a creditable withholding income tax?
A.
Expanded withholding income tax
B.
Withholding income tax on passive income
C.
Withholding income tax at source
D.
Withholding income tax on compensation income
4. As a rule, this is not part of taxable income
A.
Profit sharing
B.
Hazard pay
5. This is taxable income
A.
Retrenchment pay
B.
SSS/GSIS benefits
C.
D.
C.
D.
Overtime pay
13th month pay
Separation pay due to resignation
Refund of Philippine Income tax
6. Which of the following is taxable income?
A.
Prizes and awards as an awardee of Ramon Magsaysay Award Foundation
B.
Damages awarded as a consequence of a libel and slander suits
Page 118 of 201
C.
D.
Interest on Philippine lotto winnings
Amounts received as returns of premiums
7. One of the following is taxable income
A.
Gifts, bequests and devices
B.
Amounts received as rewards for giving information instrumental in the discovery of
violation of the Tax Code and seizure of smuggled goods
C.
Proceeds from life insurance
D.
Separation pay received by an employee due to a cause beyond his control
8. As a rule, the following are taxable income, except
A.
Cash dividend
C.
B.
Property dividend
D.
Scrip dividend
Stock dividend
9. The following items are exclusions from gross income, except
A.
Labor union dues
C.
IOU’s
B.
SSS/GSIS premiums contributions
D.
Pag-ibig premiums contributions
10. Which of the following is part of gross income?
A.
PCSO & Phil Lotto winnings
B.
Bank interest on long-term deposit
C.
Proceeds of life insurance
D.
Raffle prize not exceeding P10,000
11. If refunded, this is taxable
A.
Estate tax
B.
Donor’s tax
C.
D.
Special assessment
Fringe benefit tax
12. Income tax payments to a foreign country, in the case of a resident citizen may be claimed as
A.
Tax credit and deduction from gross income
B.
Tax credit only
C.
Tax credit or deduction from gross income
D.
Deduction from gross income only
13. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except
A.
if received by a resident citizen
B.
if received by a resident alien
C.
if received by a non-resident corporation
D.
if received by another domestic corporation
14. Which of the following statements regarding dividends is wrong?
A.
Exempt from income tax if received by a domestic corporation from another domestic
corporation
B.
Exempt from income tax if received by a resident corporation from a domestic
corporation
C.
Taxable subject to year-end tax if received by a resident citizen from a non-resident
corporation
D.
Taxable subject to final tax if received by a non-resident citizen from a non-resident
corporation
15. X works as a secretary in an advertising firm in Manila. During the year, she received
P10,000 a month as salary or a total of P120,000. In addition she also received 13th month
pay, Christmas bonus, productivity bonus, mid year bonus and 14th month pay amounting to
P40,000. The total deductions for her SSS premiums, Medicare, Pag-ibig, and Union dues
Page 119 of 201
contributions amounted to P5,000. X’s taxable income,
16. Which of the following statements is correct?
A.
The power of taxation reaches even the citizens abroad and his income earned from
sources outside the Philippines
B.
Priests and religious institutions are exempt from income and property taxes.
C.
Separation benefits received by terminated employees resulting from a deadlock in their
collective bargaining agreement are exempt from income tax.
D.
The value of a property received as a gift, or under a will or testament or through legal
succession is exempt from taxation.
17. Which of the following statements is not correct?
A.
Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are
excluded from gross income regardless of whether the proceeds are received as a single
sum or in installments.
B.
In case of transfer for a valuable consideration by assignment or otherwise of a life
insurance, endowment or annuity contract or any interest therein, only the actual value
of such consideration and the amount of the premium and the sums subsequently paid
by the transferee are exempt from income tax.
C.
Marriage fees, baptismal offerings, sums paid for saying masses for the dead and
other contributions received by a clergyman, evangelist or religious worker for services
rendered is taxable income.
D.
Monetization of leave credits of employees who were unable to go on leave due to
exigencies of the service constitute taxable income.
18. – PCSO and Phil lotto winnings are excluded from gross income because they are subject to
final tax.
- Prizes, awards and winnings are excluded from gross income because they are subject to
final tax.
A.
Both are true
C.
True; False
B.
Both are False
D.
False; True
19. Which statements is correct?
A.
Incomes from illegal activities are taxable.
B.
Tax refunds constitute taxable income to the taxpayer.
C.
Recovery of bad debts previously written off is part of taxable income
D.
As a rule, contest awards and prizes are subject to 20% final tax if they amount to
P10,00 or more, otherwise they will be exempt from income tax.
20. One of the following is taxable income
A.
Compensation for damages
B.
The share of a partner in the undistributed net income of a general professional
partnership
C.
Living quarters and meals furnished and given to an employee for the convenience of the
employer
D.
Facilities or privilege of relatively small value offered by the employer as a means of
promoting the health, goodwill, contentment, or efficiency of the employee.
21.Which of the following is taxable?
A.
P100,000 interest on long-term deposit or investment
B.
P200,000 gain on sale of 10-year bonds
C.
P12,000 prize in a supermarket raffle
D.
P1 M winnings from Phil. lotto
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22. Gain realized from the sale or exchange or retirement of bonds, debentures or other
certificate of indebtedness is excluded from gross income if with a maturity of
A.
5 years or more
C.
More than 8 years
B.
More than 7 years
D.
More than 10 years
23. Gross benefits received by officials and employees of public and private entities as 13th
month pay and other benefits such as productivity bonus, service incentive pay and
Christmas bonus shall be excluded from taxable income up to
24. Exclusions from gross income, except:
A.
Interest on the price of the land covered by the Presidential Decree on land reform.
B.
Interest payments on proceeds of life insurance held by the insurer
C.
GSIS/SSS, Philhealth and Pag-ibig contributions and Union dues of individuals
D.
Gains realized by an investor upon redemption of shares of stock in a mutual fund
company.
25. Advance rental in the nature of prepaid rental, received by the lessor under a claim or right
and without restriction as to use is
A. Taxable income of the lessor in the year received if he is on the cash method of accounting
B.
Taxable income of the lessor in the year received whether he is on the cash or accrual
method of accounting
C.
Taxable income of the lessor in the year received whether he is on the cash or accrual
method of accounting
D.
Taxable income of the lessor up to the amount earned in the year the rental is received
26. Which payments made by the lessee under such terms of the lease contract should be
considered as additional rent income of the lessor?
1.
If a lessee paid directly to the government a real tax on the property of the lessor
2.
If the amount received by the lessor is in the nature of a security deposit for the faithful
compliance by the lessee of the terms of the contracts
3.
If the amount received by the lessor is in the nature of a loan extended by the lessee to
the lessor.
A.
B.
Only 1
Only 1 and 3
C.
D.
Only 2 and3
1, 2 and3
27. One of the following represents taxable income:
A.
Refund of overpaid rental expense in prior year
B.
Refund of donor’s tax paid in prior year
C.
Refund of income tax in prior year
D.
Refund of special assessment paid in prior year
28. If an individual performs services for a creditor who in consideration thereof cancels the
debt, the cancellation of indebtedness may amount to
A.
A gift
C.
A capital contribution
B.
A donation inter-vivos
D.
A payment of income
29. This is not part of gross compensation income
A.
Salary of P 20,000 a month
B.
Fringe benefits of P10,000 of an employee
C.
Salary of P10,000 a month of a partner in a general professional partnership
D.
Honorarium and allowances of P10,000 of a member of the board of directors of a
Corporation
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30. Mr Z, a farmer, had the following data for the year:
Sales of livestock and farm products raised
Sales of livestock and farm products purchased
Cost of raising livestock and farm products
Cost of livestock and farm products purchased and sold
Rental income of farm equipment
Inventory of livestock and farm products, January 1
Inventory of livestock and farm products, December 31
P270,000
160,000
190,000
140,000
105,000
110,000
113,000
Using the cash method of accounting, the income is:
31. Using the same information above, but the accrual method of accounting is used, the income
32. RDE was retired by his employer corporation in 2003 and paid P1,000,000 as a retirement
gratuity without any deduction for withholding tax. The corporation became bankrupt in 2004.
Can the BIR subject the P1,000,000 retirement gratuity to income tax?
1st answer: Yes, if the retirement gratuity was paid based on a reasonable pension plan
were RDE was 50 years old and has served the corporation.
2nd answer: No, if the RDE was forced by the corporation to retire.
a.
b.
c.
d.
Both answers are wrong.
Both answers are correct.
1st answer is correct, 2nd answer is wrong.
1st answer is wrong, 2nd answer is correct.
33. The widow of your best friend has just been paid P1,000,000 on account of life insurance
policy of the decease husband. She asks you whether she should declare the amount for
income taxes purposes or for estate tax purposes.
1st advice: The proceeds of life insurance paid to the beneficiary upon the death of the
insured are exempt from income tax and need not be declared for income tax purposes.
2nd advise: The proceeds of life insurance would have to be declared for the estate tax
purposes if the designation of the beneficiary was irrevocable, otherwise it need not be
declared.
a.
b.
c.
d.
Both advises are correct.
1st advice correct, 2nd advice are wrong.
Both advises are wrong.
1st advice wrong, 2nd advice correct.
34. Mr. Juan dela Cruz transferred his commercial land with a cost of P500,000 but with a fair
market value of P 750,000 to JDC Corporation in exchange of the stocks of the
corporations with par value of P1,000,000. As a result of the transfer he became the major
stockholder of the corporation.
As a result of the transfer,
a. The recognized gain is the difference between the fair market value of the shares of
stocks and the cost of the land.
b. The recognized gain is the difference between the par value of the stock and the fair
market value of the land.
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c. No recognized gain because the land was in exchange or purely stocks and Mr. dela
Cruz became the majority stockholders.
d. No recognized gain because the land was in exchange of stocks of the corporation.
35. Gross income is reported partially in each taxable year in proportion to collections made in
such period as it bears to the total contract price refers to:
a.
b.
c.
d.
Crop year basis method.
Percentage of completion basis method.
Accrual method.
Installment sales method.
36. “Schedular system of income taxation” means:
a.
b.
c.
d.
All types of income are added together to arrive at gross income.
Separate graduated rates are imposed on different types of income.
Capital gains are excluded in determining gross income.
Compensation income and business professional income are added together in
arriving at gross income.
37. It is important to know the source of income for tax purposes (i.e., from within or without
the Philippines) because:
a. Some individual and corporate taxpayers are taxed on their worldwide income while
others are taxable only upon income from sources within the Philippines.
b. The Philippines imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
STRAIGHT PROBLEMS
1. (Phil. CPA) Mr. C. Conte bought a 2,000 square meter land at a cost of p500,000. He leased
the land to Mr. D. Damian at an annual rental of p40,000. The term of the contract of lease was
15 years. The contract of lease provided that Mr. Damian will construct a building on the land,
which will belong to the lessor at the end of the term of the lease or at the termination of the
lease. The building was constructed for a total cost of p400,000 and has an estimated useful life
of 20 years which was the basis of a straight-line method of depreciation. The remaining term of
the lease when the building was completed was 14 years.
Compute the following:
A. Income from lease contract in the year the improvement was completed assuming Mr. Conte
will report his income from leasehold improvement using outright or lump sum method.
B. Yearly income assuming Mr. Conte will spread his income from leasehold improvement over the
term of the contract of lease.
C. Income of Mr. Conte in the 11th year assuming the contract of lease was terminated after the
10th year or at the beginning of the 11th year due to the fault of the lessee.
D. Deductible loss of the lessor assuming the leasehold improvement was destroyed at the
beginning of the 9th year of the lease contract.
2. An individual income taxpayer, unmarried with 1 dependent, derived the following income:
Compensation income
Rent income
Philippines
P200,000
150,000
Abroad
P400,000
180,000
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Gain on sale of domestic bonds directly to buyers (held 14 mos.)
Gain on sale of foreign bonds directly to buyer (held 18 mos.)
Loss on sale of foreign shares directly to buyer (12 months)
Gain on sale of domestic stock directly to buyer
Interest from FCDU dollar deposit, gross
Prizes from dancing competition
Interest income from notes
5,000
45,000
12,000
7,500
12,000
2,000
38,000
27,000
40,000
24,000
12,000
23,000
Required: Complete the following table:
1.
2.
3.
Taxpayer
Resident Citizen
Resident Alien
NRA-NETB
Taxable Income
Final Tax
Capital Gains Tax
3.
The following are the revenue items in the income statement of a domestic corporation for the
year 2018:
Sales
P 1,000,000
Cost of sales
500,000
Gain from sale of an office equipment
20,0000
Gain from sale of land not used in business (selling price P300,000)
100,000
Gain from sale of shares of stock directly to the buyer
50,000
Gain from sale of shares of stock through the stock exchange (selling price, P200,000)
10,000
Interest income from bank deposit, Philippines
40,000
Yield from deposit substitute, Philippines
80,000
Interest income received from depository bank under EFCDS, Philippines
60,000
Interest income from bank deposit, USA
400,000
Interest on trade notes receivable, Philippines
30,000
Advance rent for two (2) years, Philippines
600,000
Royalties, Philippines
70,000
Royalties, USA
300,000
Property dividend received from domestic corporation
150,000
Stock dividend received from a domestic corporation
100,000
Cash dividend received from a foreign corporation
350,000
Prizes and winnings, Philippines
400,000
Refund of Philippine value-added tax
100,000
Bad debt recovery
50,000
Question 1 – how much was total exempted/excluded income?
2 – how much was the total final withholding taxes on passive income?
3 – how much was the total capital gains tax?
4 – how much was the total gross income subject to the 30% corporate income tax?
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