Business Transfer Taxes Litonjua

Philippine Transfer and Business Taxes, edition 2013-2014, by Virgilio G. Litonjua / Lilian M. Litonjua

Answers to Multiple Choice Questions in Chapter 1: GPOT, BIROPF, TR, CHAPTER I. CPA BOARD QUESTIONS, OK Q01. D Q11. NONE Q21. Q02 B Q12. D Q22. Q03. C Q13. B Q23. Q04. C Q14. C Q24. Q05. D Q15. D Q25. Q06. D Q16. C Q26. Q07. B Q17. C Q27. Q08. C Q18. D Q28. Q09. A Q19. D Q29. Q10. A Q20. D Q30.

C D C/G B C C A D B D

Q31. Q32. Q33. Q34. Q35. Q36. Q37. Q38. Q39. Q40.

C D B C C D D D C D

Q41. Q42. Q43. Q44. Q45. Q46. Q47. Q48.

C A A D A

B

No Multiple Choice Questions in Donor’s Tax Chapter 2.

Answers/Solutions to Problems in Donor’s Tax Chapter 3: TNG, GTD, Problem 1. Various Donors donees are relatives Donors TNG DTD 01. BIM 375,000 9,000 02. BAM 76,900 0 DTD TNG 03 BOM 287,000 3,830,000 04 GIGI 192,000 2,850,000 05 GAGA 45,000 1,012,500

NGADT 384,000 76,900 NGADT

4,117,000 3,042,000 1,057,500

donees are strangers DTD NGADT 112,500 487,500 23,070 99.970 TNG NGADT 956,667 1,243,667 640,000 832,000 150,000 195,000

C1. 2,000 + (175,000 X 4%) = 7,000 = 9,000 DTD R, C2. EXEMPT SINCE TNG IS NOT OVER P100,000, C3. (204,500 = 3,000,000) + (83,000 / 10% = 830,000) = 3,830,000 TNG C4. (44,000 = 1,000,000) + (148,000 / 8% = 1,850,000) = 2,850,000 TNG C5. (44,000 = 1,000,000) + (1,000 / 8% = 12,500) = 1,012,500 TNG C6. 375,000 X 30% = 112,500 DTD, C7. 76,900 X 30% = 23,070 DTD, C8. 287,000 / 30% = 956,667 TNG, C9. 192,000 / 30% = 640,000TNG, C10. 45,000 / 30% = 150,000 TNG Problem 2. Mr. Oyo Boy Taxable net Gift Gift Tax due C1. C3. C5.

Relative 382,600 9,304 (0-15%)

Stranger 53,000 15,900 30%

Total 435,600 25,204

295,000 + 60,000 + 27,600 = 382,600 GG R 382,600 + 53,000 = 435, 600 182,600 x 0.04 = 7,304 + 2,000 = 9,304 DTD R

1

C2. 38,000 + 15,000 = 53,000 GG S C4. 53,000 x 30% = 15,900 DTD S

Problem 3. Ms. Angel L (RCD) 653,000 280,000 933,000 96,500 75,400 171,900 761,100 228,330 (30%)

Donations Phil. Donations Abroad Gross Gift Less: Allowed Deduction Phil. Allowed Deduction Abroad Total Allowed deduction Taxable Net Gift Gift Tax due C1. 761,100 X 30% = 228.330 DTD S,

(NRAD) 653,000 0 653,000 96,500 0 96,500 556.500 17,3 80 (0 - 15%) C2. 14,000 + (56,000 X 6%) 3,390 = 1,390 DTD R

Problem 4. Miss Rica P. Relative Gross Gift Allowed Deduction Taxable Net Gift Gift Tax due

633,750 79,500

554,250 17,255 (0-15%)

Stranger 341,250 185,500 155,750 46,725 (30%)

Total 975,000 265,000 710,000 63,590

C1. 975,000 X 65% = 633,750 GG R C2. 975,000 X 35% = 341,250 GG S, C3. 265,000 X 70% = 185,500 AD S C4. 265,000 X 30% = 79,500 AD R C5. 14,000 + (54,250 X 6%) = 3,255 = 17,255 DTD R C6. 155,750 X 30% = 46,725 DTD S

Problem 5. Mr. Marvin A. Gross Gift Allowed Deduction Taxable Net Gift Gift Tax due Gift Tax Paid Gift Tax Still Due / Payable

FEB. 2013 535,500 140,000 395,500 9,820 0 9,820

JUNE 2014 130,000 15,000 115,000 300 0 300

C1. 500,000 + 35,500 = 535,000 GG, C3. 95,000 + 35,000 = 130,000 GG Gross Gift – C Allowed Deduction- C Net Gift - C Add: prior Net Gift Taxable Net Gift Gift Tax Due Gift Tax Paid Gift Tax Still Due / Payable

C2. 2,000 + (195,500 X 4%) 7,820 = 9,820 DTD C4. 15,000 X 2% = 300 DTD

Nov. 2014 111,500 24,000 87,500 115,000 202,500 2,100 300 1,800

C1. 65,000 + 1,500 + 45,000 = 111,500 GG C3. (2,500 X 4%) = 100 + 2,000 = 2,100 DTD

C2. 14,000 + 10,000 = 24,000 AD

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Problem 6. Miss Jennelyn M. Gross Gift Allowed deduction Taxable Net Gift Gift Tax due

RAD 725,000 192,200 532,800 159,840 (30%)

NRAD 475,000 120,700 354,300 8,172 (0-15%)

C1. 385,000 + 160,000 + 90,000 + 90,000 = 725,000 GGW C2. (86,500 – 15,000) + 71,500 + 120,700 = 192,200 ADW C3. 385,000 + 90,000 = 475,000 GGP C4. 532,800 X 30% = 159,840 DTD S C5. (154,300 X 4%) 6,172 + 2,000 = 8,172 DTD R

Problem 7. Mr. & Mrs. Richard G. Husband Gross Gift 462,500 Allowed Deduction 116,000 Taxable Net Gift 346,500 Gift Tax Due 7,860 (0-15%)

Wife 315,000 110,000 205,000 2,200 (0-15%)

Friend 62,500 15,000 47,500 14,250 30%

C1. 80,000 + (250,000 x 75%+ (390,000 x 50%) = 462,500 C2. 120,000 + (390,000 x 50%) = 315,000 C3. 250,000 x 25% = 62,500 C6. 60,000 x 25% = 15,000 C4. 26,000 + (90,000 x 50%) + (60,000 x 75%) = 116,000 C7. (5,000 X .04) 200 + 2,000 = 2,200 DTD S C5. 65,000 + 45,000 = 110,000 C8. (146,500 X .04 ) 5,860 + 2,000 = 7,860 DTD R C9. 47,500 X 30% = 14,250 TD S

Problem 8. Mr. Francis M. Gross Gift Allowed Deduction Taxable Net Gift Gift Tax Due (0 – 15%)

Gross Gift Allowed Deduction Net Gift Add: Prior Net Gift Taxable Net Gift Gift Tax Due (0 – 15%) Prior Gift Tax Paid Gift Tax Still Due / Payable

Aug. 28, 2013 225.700 13,400 212,300 2,492 Nov. 24, 2013 92,100 18,200 73,900 212,300 286,200 5,448 2,492 2,956 (0-15%)

C1. 190,000 + 35,700 = 225,700 GG C3. 12,300 x .04= 492 + 2,000 = 2, 492 DTD C5. 86,200 x .04= 3, 448 + 2,000 = 5, 448 DTD

C2. 5,000 + 8,400 = 13,400 AD C4. 79,600 + 12,500 = 92,100 GG C

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Problem 9. Mr. Dennis T.

Gross Gift Less; Allowed deduction Taxable Net Gift Gift Tax Due C1. C3. C5. C7. C8

1 RCD 1,430,000 305,000 1,125,000 337,500 30%

2 NRAD 980,000 175,000 805,000 32,300 (0-15%)

980,000 + 450,000 = 1,430,000 1,125,000 x .30 = 337,500 1,430,000 x .70 = 1,001,000 305,000 x .50 = 152,500 348,500 x 6% = 20,910 + 14,000 = 34,910

C2. C4. C6.

3.NRCD Stranger 429,000 152,500 276,500 82,950 (30%)

Relative 1,001,000 152,500 848,500 34,910 (0-15%)

Total 1,430,000 305,000 1,125,000 117,860

175,000 + 130,000 = 305,000 305,000 x .06 =18,300+14,000 = 32,300 1,430, 000 x .30 = 429,000

Answers/ Solutions to Problems in Donor’s Tax Chapter 4: Tax. Credit. Problem 01. Resident donor, Foreigner RAD 540,000 140,000 400,000 10,000 4,650 5,350

Gross Gift Allowed Deduction Taxable Net Gift Gift Tax due Tax Credit Gift Tax still Due / payable C1. C3. C5 C6 C7

NRAD 350,000 80,000 270,000 4,800 1,400 3,400

350,000 + 190,000 = 540,000 C2. 2,000 + (200,000 x .04) = 10,000 C4. 70,000 x .02 = 1,400 130,000 / 400,000 x 10,000 = 3,250 Formula 3,250 + 1,400 = 4,650

80,000 + 60,000 = 140,000 2,000 + (70,000 x .04) = 4,800 Actual 24,500

Lower 3,250

Problem 02. Boyet De Leon Taxable Net Gift Tax due Tax Credit Gift Tax Still Due / Payable

NRCD 1,000,000 300,000 106,000 194,000

C1. 600,000 + 250,000 + 150,000 = 1,000,000 C3. 600,000 x 30% = 180,000 C4. Limit A Japan – 250,000 / 1,000,000 x 300,000 = USA – 150,000 / 1,000,000 x 300,000 =

NRAD 600,000 180,000 0 180,000 C2. 1,000,000 x 30% = 300,000 Formula 75,000 45,000

Actual 68,500 37,500

Lower 68,500 37,500 106,000

Formula 120,000

Actual 106,000

Lower 106,000

C5. Limit B Abroad – 400,000 / 1,000,000 x 300,000

4

Problem.03. Aga Mulach -NRCD Gross Gift Allowed Deduction Net Gift Add: Prior Net Gift Taxable Net Gift Gift Tax Due Prior Gift Tax Due Gift Tax Still Due / Payable

Feb. 2013 ? ? 250,000 0 250,0004,000 0 4,000

C1 50,000 x .04 = 2,000 + 2,000 = 4,000 C3 62,500 x .06 = 3,750 + 14,00 = 17,750 C4. 9,861.11 + 4,000 = 13,861.11

July 2013 475,000 162,500 312,500 250,000 562,500 17,750.00 13,861.11 3,888.89 C2. 175,000 – 12,500 = 162,500

Formula 9,861.11

Abroad – 312,500 / 562,500 x 17,750

Actual 12,500

Lower 9,861.11

Problem 04. Mr. Bong Revilla Amended Donor’s Tax Return filed in May 2013 RAD NRAD Gross Gift 370,000 180,000 Allowed Deduction 120,000 50,000 Taxable Net Gift 250,000 130,000 Gift Tax due 4,000 600 Tax Credit 2,120 0 Gift Tax still Due / payable 1880 600 C1. 120,000 + 180,000 + 70,000 = 370,000 C3. Limit A GB- 90,000/ 250,000 x 4,000 = Israel- 30,000/250,000 x 4,000 = Total C4. Limit B

C2. 30,000 + 50,000 + 40,000 = 120,000 Formula 1,440 480 1,920 Formula 1,920

Abroad- 120,000/ 250,000 x 4,000 C5.

2000 + (50,000 x .04) = 4,000

C6. 30,000 x 0.02 = 600

Original Donor’s Tax Return filed in March 2013 RAD Gross Gift 275,000 Allowed Deduction 165,000 Taxable Net Gift 110,000 Gift Tax Due / Paid 200 C1. 85,000 + 250,000 + 40,000 = 275,000

Actual 8,600 3,500 12,100

Lower 1,440 480 1920

Actual 12,100 C7.

1,920 + 200 = 2,120

NRAD 150,000 90,000 60,000 0 C2, 53,000 + 90,000 + 25,000 = 165,000

5

Lower 1,920

Problem 5. Kris Aquino July , 2013 350,000 120,000 230,000 0 230,000 69,000 0 69,000

Gross Gift Allowed Deduction Net Gift Add: Prior Net Gift Taxable Net Gift Gift Tax Due Prior Gift Tax Paid Gift Tax Still Due / Payable C1. 230,000 x 30% = 69,000 C3. 400,000 + 140,000 = 540,000 C5 Tax Credit Abroad – 100,000 / 680,000 x 204,000

Oct. 2013 540,000 90,000 450,000 230,000 680,000 204,000 99,000 105,000 C2. C4.

69,000 + 30,000 = 99,000 50,000 + 40,000 = 90,000

Formula 30,000

Actual 35,000

Lower 30,000

****************************************************************************** Answers/ Solutions to Problems on Donor’s Tax Chapter 5: Gross Gift Problem 01. Mr. Pepsi Cola Non R a. 0 b. 0 c. 260,000 d. 50,000 e. Excluded f. 0 g. 0 h. 12,600 i. 14,00 j. 0 k. Excluded l. 25,000 Gross Gift 361,600

Problem 02. Miss Pop Cola Relative a. 0 b. 37,500 c. 0 d. 130,000 e. 15,000 f. 0 g. Excluded h. 0 i. 0 j. Excluded Gross Gift 182,500

Resident S 200,000 180,000 0 0 Excluded 35,000 15,000 0 0 36,700 Excluded 0 466,700

Strangers 160,000 37,500 15,000 0 0 45,000 Excluded 15,000 35,000 Excluded 307,500

Citizen donor NonTotal R 200,000 0 180,000 0 260,000 0 50,000 50,000 0 Excluded 35,000 0 15,000 0 12,600 12,600 14,000 14,000 36,700 0 0 0 25,000 0 828,300 76,600

Total 160,000 75,000 15,000 130,000 15,000 45,000 0 15,000 35,000 0 490,000

6

Resident S 200,000 0 0 0 Excluded 35,000 15,000 0 0 36,700 0 0 286,700

Alien donor Total 200,000 0 0 50,000 0 35,000 15,000 12,600 14,000 36,700 0 0 363,300

Problem. 03. Mr. Zesto Relative a. 950,000 b. 350,000 c. 75,000 d. Excluded e. 25,700 f. 0 g. 42,500 h. 50,000 i. 0 Gross Gift 1,493,200 Problem 04. Mr. Sarsi 1 a. TG b. TG c. TG d. TG e. TG f. TG g. TG C1

350 shares x P62 = 21,700

Problem 05. Mr. Coca Cola Relative a. 54,000 b. 41,000 c. 0 d. 0 e. Excluded f. 0 g. Excluded h. 18,000 i. 0 j. 0 k. Excluded l. 0 m. 70,000 Gross Gift 183,000

Strangers

Total 950,000 350,000 75,000 0 25,700 15,900 42,500 50,000 14,800 1,523,900

0 0 0 Excluded 0 15,900 0 0 14,800 30,700

2 85,000 300,000 75,000 250,000 400,000 21,700 75,600 C2

Strangers 0 0 30,000 15,000 Excluded 21,000 Excluded 0 32,000 250,000 Excluded 75,000 0 423,000

1 TG TG Exclusion TG Exclusion Exempt (3) Gross Gift

h. I. j. k. l. m.

540 shares x P140 = 75,600

Total 54,000 41,000 30,000 15,000 Excluded 21,000 Excluded 18,000 32,000 250,000 Excluded 75,000 70,000 606,000

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2 3,000,000 120,000 0 460,000 0 35,000 4,822,300

Answers/ Solutions to Problems on Donor’s Tax Chapter 6: Allowed Deduction Problem 01. Mr. Seven-up, a. b. c. d. e. f. g.

Exemption on Account of Marriage

February, 2013 7,000 9,000 0 10,000 0 0 0

November 2013 3,000 1,000 0 0 0 0 0

Problem 02. Mr. Rootbeer, exemption on account of marriage in 2013 a. b. c. d. e. f. Gross Gift a. c. e. g. Allowed Ded. Taxable Net Gift

Relative 60,000 0 75,000 4,500 0 0 139,500 10,000 20,000 0 0 30,000 109,500

Stranger

Total 60,000 27,000 75,000 4,500 85,000 0 251,500 10,000 20,000 85,000 12,000 127,000 124,500

0 27,000 0 0 85,000 0 112,000 0 0 85,000 12,000 97,000 15,000

Problem 03. Ms. Del Monte in 2013 a. b. c. d. e.

Cash to sister, a graduation gift Shoes, clothes to a brother, a birthday gift Jewelry to a legitimate daughter, a dowry Lot in QC a wedding gift to her recognized natural son & wife An art painting, donation inter-vivos to her uncle Gross Gift Less: Deduction on account of marriage (e) Taxable Net Gift Donor’s Tax Due

Relative 15,000 20,600 165,000 225,000 150,000 575,600 20,000 555,600 17,336

Stranger

225,000 225,000 225,000 67,500

C1. 17,336 + 67,500 = 84,836

Problem 04. Mr. & Mrs. Mountain Dew

a. b. c.

Husband 10,000 3,500 0

Exemptions on account of marriage October 2013 December 2013 Wife Husband Wife 10,000 0 0 3,500 5,250 5,250 10,000 0 0

8

Total 15,000 20,600 165,000 450,000 150,000 800,600 20,000 780,600 84,836

d. e. f.

3,000 0 0

3,000 0 0

Problem. 05. Mrs. Mirinda in 2013 Relative Gross Gift 148,000 Allowed Deduction 25,000 Taxable Net Gift 123,000 Gift Tax Due C1 C2 C3

Stranger 642,200 623,600 18,600

6,000 0 0

6,000 0 0

Total 790,200 648,600 141,600

48,000 + 15,000 + 85,000 = 148,000 16,800 + 30,000 + 6,800 + 542, 700 + 45,900 = 642,200 10,000 + 15,000 = 25,000 C4 5,000 + 30,000 + 542,700 + 45,900 = 623, 6

Problem 06. Miss Sprite, in 2013 Resident Relative 25,000 60,000 190,000 0 5,400 9,800 0 15,000 0 0 29,000 8,000 0 342,200 60,000 0 9,800 0 10,000 200 0 80,000 262,200

a. b. d. f. g. h. i. j. k. n. o. p. q. Gross Gift -World b. f. h. i. j. p. q. Allowed Ded -World TNG - World Excluded are Letters

a. b. f. g. h. i. n.

c,

Citizen Stranger 0 0 0 17,000 0 9,800 80,000 0 25,000 6,000 0 0 37,00 174,800 0 17,000 0 80,000 0 0 37,000 134,000 40,800

Donor Total 25,000 60,000 190,000 17,000 5,400 19,600 80,000 15,000 25,000 6,000 29,000 8,000 37,000 517,000 60,000 17,000 9,800 80,000 10,000 200 37,000 214,000 303,000

Non-Resident Alien Relative Stranger 25,000 0 60,000 0 0 17,000 5,400 0 9,800 9,800 0 80,000 0 6,000

Donor Total 25,000 60,000 17,000 5,400 19,600 80,000 6,000

e. l,

9

o. p. q. Gross Gift – Phil. f. h i. p q. Allowed Ded. Phil Taxable Net Gift-Phil

29,000 8,000 0 137,200 0 0 0 0 0 0 137,200

0 0 37,000 149,800 17,000 0 80,000 0 37,000 134,000 15,800

29,000 8,000 37,000 287,000 17,000 0 80,000 0 37,000 134,000 153,000

****************************************************************************** Problem 7. Mr. Tommy Gilna Sept., 2013 Dec., 2013 Gross Gifts 431,500 85,000 Allowed Deduction 60,000 50,000 Taxable Net Gift/ Net Gift 371,500 35,000 Prior Net Gift 0 371,500 Taxable Net Gift 371,500 406,500 Gift Tax due 8,860 10,260 Prior Gift Tax Paid 0 8,860 Gift Tax Still Due / Payable 8,860 1,400 C1. 28,000 + 8,500 + 15,000 + 380,000 = 431,500 C3. (171,500 x 0.04) + 2,000 = 8,860 C4. 50,000 + 16,000 + 5,000 + 14,000 = 85,000

C2. 10,00 + 50,000 = 60,000 C5. (206,500 x 0.04) + 2,000 = 10,260

CPA MCQ In DONOR’S TAX

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

C B B D A A A B B A

11. 12. 13. 14. 15. 16. 17. 18. 19. 20

SET A, THEORIES B B B B B A D A B C

1. 2. 3. 4. 5. 6. 7. 8. 9.

A C C B D 6,000 D, 1,200 A B A

11. 12. 13. 14. 15. 16. 17. 18. 19.

SET B, PROBLEMS B C C A A B A C P0 D P0

10

21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

A A D A C D D A A C

10.

A

20

B

11