BALIUAG UNIVERSITY JPIA

IN PARTNERSHIP WITH P&A GRANT THORNTON

TAXATION SUGGESTED SOLUTIONS

3. Capital gains taxes are only applicable for capital assets located within the Philippines. Otherwise,
gains are subjected to regular income taxes as ordinary gains applicable within the Philippines.
Thus, a.) Family home (higher of FMV and SP) P6M + Residential land in PH (higher of FMV
and SP) P7M = P13M x 6% = P780,000

4. Gross income from Non-school related = P4M/P8M= 50% of school related.

Such an instance exceeds the threshold of the predominance test. Thus, non-school related is subject to
Regular Corporate Income Tax (RCIT).
P1M x 30% = P300,000

5. P1,000,000 x 10% = 100,000

6. 2014:
MCIT = 20M x 2% = 400,000
RCIT = nil

2015:
MCIT = 33M x 2% = 660,000
RCIT = Net income: 8,000,000
NOLCO carryover (1,000,000)*
Taxable NI 7,000,000
RCIT 30%
RCIT 2,100,000
Less: MCIT (400,000)
Tax still due P 1,700,000

*NOLCO carryover does not include incentives allowed by special laws. It is only allowed to be
deducted on the year it was granted. Further, it is not considered to be part of an operating loss.
Hence, it cannot be carry over to the succeeding year.

7. Gross income P 5,000,000

Deductions:
Salaries, gross 950,000
Fringe benefits to rank and file 300,000
Fringe benefits to managers 136,000
FBT also deductible - 32% 64,000
Entertainment & representation:
Actual - 100,000
Limit of 1% of gross sales
P8,000,000x1%x.05 40,000
 Allowed 40,000
Rent expense 120,000
Net income before charitable contributions 3,390,000
Charitable contributions
Actual 500,000
Limit 10% x 3,390,000 339,000
Allowed 339,000
Net income before exemptions P 3,051,000

15. P8,040,000 x 12% = P964, 800

16. Moira died not Thea. It must have been Thea who died to be able to claim vanishing deduction
to the property.

17. Value to take P 500,000

Less: Mortgage paid (80,000-30,000) (50,000)
Initial basis 450,000
Less: proportional deduction
(450,000/5,600,000 x 650,000*) (52,232)
Final basis 397,768
Rate 60%
Vanishing deduction P 238,661

*Deductions for vanishing deduction

Funeral expense P 150,000
Judicial expense 100,000
Claims against the estate 250,000
Taxes 20,000
Claims against insolvent 100,000
Unpaid mortgage 30,000
Total P 650,000

Real properties P 4,800,000

Other tangible personal properties 200,000
Bank deposit, PNB Manila under R.A No. 4917 500,000
Claims against insolvent persons 100,000
Gross estate P 5,600,000

Deductions:
Deductions before vanishing deductions 650,000
Vanishing deduction 238,661
Amount under R.A 4917 500,000
Family home 1,000,000
Standard deduction 1,000,000
Medical expenses 500,000
Taxable net estate P 1,711,339
18. Gross receipts P 2,500,000
Less: Cost of Service 500,000
Gross income 2,000,000
Less: operating expense (250,000)
Basic personal exemption (50,000)
Additional exemption (25,000)
Taxable net income P 1,675,000

19. Gross receipts 2,500,000

Less: optional standard deduction (40% x 2,500,000) (1,000,000)
Basic personal exemption (50,000)
Additional exemption (25,000)
Taxable net income P 1,425,000

20. Regular itemized deduction P 2,000,000

Special itemized deduction:
Senior citizen discount 250,000
P 2,250,000

21. Remodeling of a space for lactation station P 100,000

Tables and chairs 60,000
Manual and electric breast pumps 12,000
Supplies 10,000
Refrigerator 20,000
Total P 202,000
Special itemized deduction (202,000 x 100%) 202,000
Total deductions 404,000