The summary provides an overview of the key details in the document, which requests tax advice and services for Dindong, Marian, and Fraser Pharmaceutical Corporation (FPC) for tax year 2012. It lists the types of income received by Dindong and Marian, identifies which incomes are taxable and non-taxable, calculates personal exemptions and deductions, determines taxable income and tax liability for each individual, and analyzes the tax implications of donations made and the final assessment notice received by FPC for tax year 2011.
The summary provides an overview of the key details in the document, which requests tax advice and services for Dindong, Marian, and Fraser Pharmaceutical Corporation (FPC) for tax year 2012. It lists the types of income received by Dindong and Marian, identifies which incomes are taxable and non-taxable, calculates personal exemptions and deductions, determines taxable income and tax liability for each individual, and analyzes the tax implications of donations made and the final assessment notice received by FPC for tax year 2011.
The summary provides an overview of the key details in the document, which requests tax advice and services for Dindong, Marian, and Fraser Pharmaceutical Corporation (FPC) for tax year 2012. It lists the types of income received by Dindong and Marian, identifies which incomes are taxable and non-taxable, calculates personal exemptions and deductions, determines taxable income and tax liability for each individual, and analyzes the tax implications of donations made and the final assessment notice received by FPC for tax year 2011.
Taxation Law Review Final Examinations Far Eastern University Institute of Law Atty. Edwin Abella October 8, 2013
Dindong and Marian are husband and wife, both i!i"inos and residents of #ue$on %it& who are both em"!o&ed b& 'raser Pharmaceutica! %or"oration ('P%), a domestic cor"oration* Dindong is the +ice President for the Lega! De"artment and is receiving the fo!!owing from his em"!o&ment and other sources for the ca!endar &ear 2012, 1* -a!ar& of P3.0,000 a month* 2* /e"resentation a!!owance of P20,000 "er month which he is re0uired to !i0uidate not !ater than 1 da&s after the end of the month* 2n& un!i0uidated amount wi!! be deducted from his 34ed month!& trans"ortation a!!owance of P1.,000, but a!! these re"resentation a!!owances has been actua!!& s"ent* 3* ree tuition fee to 3nish a Mastera! Degree at 2sian 5nstitute of Management amounting to P136,000 for the &ear* 6* One bag of .0 7i!ogram 8asmine rice ever& month worth P6,900* .* One bag of .0 7i!ogram washed sugar ever& month worth P1,.00* 6* 2nua! dues with 5:P amounting to P2,060 and annua! dues with the 2merican :ar 2ssociation for P3,600* 1* Director;s fee of P10,000 "er meeting which is re0uired to be conducted ever& 1st Monda& of the month* 9* Pri$e from a tennis tournament s"onsored b& /D% amounting to P20,000* <* 5nterest on :an7 De"osit with Metroban7 amounting to P.00,000* 10* 5nterest on a !oan to a friend amounting to P200,000* 11* =ain from sa!e of shares of stoc7s of PLD> which are not traded in the stoc7 e4change in the amount of P1.0,000* 12* =ain from dis"osition of shares of stoc7s of a foreign cor"oration ac0uired in 200< amounting to P200,000* 13* >he withho!ding ta4 certi3cate re?ects P1,319,6<9 as ta4es remitted on com"ensation income for the &ear* Marian is the +ice President for Mar7eting and is entit!ed to the fo!!owing, 1* -a!ar& of P620,000 a month* 2* i4ed re"resentation a!!owances P20,000 a month* 3* 2 new @onda %/+ worth 1*36 Mi!!ion* 6* 2nnua! dues with Phi!i""ine Medica! 2ssociation amounting to P2,120* .* %ost of foreign trave! to attend a seminar for mar7eting e4ecutives he!d in Aashington amounting to P120,000* 6* 2n interestBfree !oan amounting to P2 Mi!!ion re!eased to her in 8anuar& 2012 "a&ab!e in 3 &ears* 1* 2nnua! "remium of P20,000for an insurance ta7en b& 'P% amounting to P2 Mi!!ion naming a who!!& ownded subsidiar&, 2b!e %or"oration, as the bene3ciar&* 9* Pri$e from a commercia! raCe amounting to P10,000* <* /o&a!ties "aid b& /e4 :oo7store on her authorshi" of a bestse!!er Mar7eting :oo7 "ub!ished in 2012, amounting to P120,000*00 10* >ota! ta4es withhe!d and remitted on Marian;s com"ensation for the &ear is P1,.11,301* >he s"ouses have three (3) !egitimate chi!dren and one (1) !ega!!& ado"ted chi!d who are a!! !iving with them and de"endent u"on them for chief su""ort* >he o!dest !egitimate chi!d ce!ebrated his 21st birthda& on 8anuar& 1, 2012 and the ado"ted chi!d became gainfu!!& em"!o&ed on December 1., 2012 u"on turning 21 &ears o!d* On 2"ri! 21, 2012, the s"ouses donated a residentia! !ot with a fair mar7et va!ue of P2 Mi!!ion in favor of their ado"ted chi!d and 3ancee who are to be married in the succeeding &ear* >he 6 chi!dren are a!! covered b& hea!th and hos"ita!i$ation insurance for which the husband was "a&ing a "remium of P3,000 "er chi!d "er annum* >he husband waived his right to c!aim for additiona! "ersona! e4em"tion in favor of his wife* >he s"ouses a!so o"erate a car re"air sho", DDM Motors which is du!& registered for +2> "ur"oses and earned service sa!esE revenues of P6*2 mi!!ion during 2012* >he& started the &ear with $ero receivab!es from customers but as of December 31, 2012, P200,000 remains unco!!ected on the services rendered that &ear* >he e4"enses for the o"erations of the business are com"rised of, 1* -a!aries of the two mechanics and the cashier at the rate of the statutor& minimum wage in Metro Mani!a of P6.6 "er da&* >he tota! sa!aries "aid is P6<,320* '0uiva!ent to P166,660 "er em"!o&ee (P6.6 4 36. da&s)* 2* @a$ard "a& of P20,000 each was "aid to the 2 mechanics, over the "a& and night shift diFerentia! "a& amounted to P30,000 each for the 3 em"!o&ees* 3* >he mechanics area!so given commission of .G of their res"ective bi!!ings as fo!!ows, Mechanic Pano&, P <0,000, Mechanic 2bno& 120,000* 1* 2!! of the above "a&ments were not subHected to withho!ding ta4 due to the honest be!ief of the s"ouses that the minimum wage earners are e4em"t from income ta4* 2* /enta! e4"enses (net of the 12G +2> "assedBon b& !essor) amounted to P260,000 for the &ear for which the .G '4"anded Aithho!ding >a4 was "ro"er!& deducted and remitted to the government* 3* Purchase of e0ui"ment at the start of the &ear (Hanuar&) amounted to P1,200,000 (e4c!usive of 12G +2>) and e4"ected to be used for . &ears* 6* -"are "arts and other su""!ies "urchased from +2>Bsu""!iers amounted to P1.0,000 (net of the 12G +2>) .* 2!! "urchases from +2>Bsu""!iers are covered either b& +2> invoice or +2> oIcia! recei"t* >here are no in"ut ta4es at the start of the &ear* 'P%, is a +2>Bregistered trader of "harmaceutica! "roducts* 5ts sa!es for 2012 amounted to P.00 Mi!!ion* >he &ear started with an inventor& of P. Mi!!ion* >he "urchases for the &ear amounted to P600 Mi!!ion but P.0 Mi!!ion worth of merchandise remained unso!d as of December 31* >hese were a!! "urchased from +2>Bregistered su""!iers* 2!! the in"ut ta4es in the "revious &ear were fu!!& uti!i$ed in "a&ment of its out"ut ta4es for that &ear* 'P% received cash dividends amounting to P2 Mi!!ion, from :arac7 %or"oration, a J*-* %or"oration deriving 60G of its gross income from Phi!i""ine sources through its branch in Pasig %it&* >he tota! administrative and se!!ing e4"enses incurred b& 'P% for 2012 amounted to P100 Mi!!ion inc!usive of a!! the "a&ments made for the bene3t of the s"ouses, Dindong and Marian* On -e"tember 30, 2013, 'P%, through its cor"orate oIces, received a ina! 2ssessment Kotice from the %ommissioner of 5nterna! /evenue re?ecting de3cienc& 5ncome >a4 and +a!ueB2dded >a4 for ta4ab!e &ear 2011* >he "rocedures re0uired for the issuance of a va!id assessement were re!igious!& fo!!owed b& the %5/* Your services are now engaged by the spouses Dindong and Marian to address the following concerns: 1. Determine the types of income that each should declare in their Income Tax eturn for the year !"1!. #repare a list with the corresonding amount of all returnable income of the spouses. !. $ow much is the gross income of Dindong and Marian to be declared in their income tax return% &. $ow should these incomes be re'ected in the income tax return% (xplain the procedures by citing provisions of the income tax law to support your position. ). Identify the incomes that are not re*uired to be declared in the income tax return and give the reasons for each. +lso indicate the amount of such income you have identi,ed- the amount of tax thereon if sub.ect to tax- or indicate if the income if exempt from income tax. /ite the legal basis for each item. 0. $ow much is the amount of personal exemption 1basic and additional2 that Dindong and Marian may claim in their income tax return% 3. 4hat are the deductions that can be claimed by Dindong and Marian% Indicate the amount and the reason for their deductibility and cite your legal bases. 5. 4hat are the items not deductible% 6ive reasons and cite your legal bases. 7. $ow much is the taxable compensation income of Dindong and Marian% 6ive reasons for your computation and cite your legal bases. 8. $ow much is the taxable business income of Dindong and Marian% 6ive reasons for your computation and give legal bases. 1". $ow much is the respective total taxable income 1tax base2 of the spouses% 11. $ow much is the income tax liablity per income tax return of Dindong and Marian% 1!. 4hat are the donor9s tax implications of the donation made by the spouses in !"1!% Determine the amount of donor9s tax due from each donation made. 1&. /alculate the :+T exposure of Dindong and Marian for !"1! 1aanuali;ed determination2 and explain how you arrived at that amount. 1). $ow much is the taxable income of (#/ in its income tax return for the taxable year !"1!% <upport your answer with explanation and legal bases of what should be included or excluded in your computations 1both on income and deductions2 10. /alculate the :+T exposure of (#/ for !"1! and explain your position. 13. (xplain the legal remedies available to (#/ on the =inal +ssessment >otice for taxable year !"11.