ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 41  May 2021 CPA Licensure Examination  Week No. 13
TAXATION
TAX-1202: SPECIAL ALLOWABLE ITEMIZED DEDUCTIONS
A. Special Allowable Itemized Deductions – The following items of deductions from gross income are in addition to the
regular allowable itemized deductions as provided under existing regular and special laws, rules and issuances:
Special Deductions
1. Adopt-a-School Program (R.A. Actual amount of assistance/donation or limit, whichever is applicable,
8525, R.R. No. 10-2003)
2. Additional deduction
ofsalaries/wages paid to the
senior citizens (R.R. 7-2010)
3. Senior citizen discount (R.A. 9257)
4. Person with disability (PWD)
discount (R.A. No. 9442, R.R. No.
1-2009) and other privileges
5. Rooming-in and Breast Feeding
Practice (R.A. 7600)
6. Free Legal Assistance (R.A. 9999)
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A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
Deductible amount
under Section 34 (H) (Charitable and other contributions)
Additional amount equivalent to 50% of the actual contribution/donation
(special itemized deduction)
Valuation of assistance or donation:
a. Cash assistance - actual amount of cash
b. Personal property – acquisition cost or depreciated value
whichever is applicable
c. Consumable goods – acquisition cost by the donor, or the actual
cost at the time of donation, whichever is lower
d. Services – service value as agreed upon per Memorandum of
Agreement (MOA) or actual expenses incurred, whichever is
lower
e. Real property – fair market value at the time of donation or the
book value whichever is lower (recorded appraisal increase is
excluded)
Fifteen percent (15%) of the total amount paid as salaries and wages to
senior citizens.
Conditions for the allowance of deduction:
a. The employment shall have to continue for a period of at least
six (6) months
b. The annual taxable income of the senior citizen does not exceed
the poverty level
Discounts granted by the seller of qualified goods and services exclusively
for the use of the senior citizens:
a. 20% - for goods and services
b. 5% -for water and electricity consumption registered in the
name of senior citizen provided the water and electricity
consumption do not exceed 30 cubic meters and 100 kilowatt
hours, respectively
c. 50% - for electricity, water and telephone consumption if
consumed by a Senior Citizen Center administered by the
Government or domestic NGOs
Person with disability shall be entitled to claim at least 20% discount from
certain establishments relative to the sale of goods or services for their
exclusive use or enjoyment.
Establishments granting sales discount to PWD on their sales of goods
and/or service shall be entitled to deduct the said sales discounts from
their gross income subject to certain conditions.
Additional deduction, from gross income,
equivalent to twenty-five percent (25%)of
the total amount paid as salaries and
wages to disabled persons by private
entities that employ said disabled persons
PWD shall be entitled to exemption from VAT (Sec. 1, R.A. No. 10754)
PWD, who are within the fourth civil degree of consanguinity or affinity to
the taxpayer regardless of age, who are not gainfully employed and
chiefly dependent upon the taxpayer, shall be treated as dependent for
additional exemption purposes. (Sec. 2, R.A. No. 10754) (no longer
allowed under TRAIN)
Expenses incurred by a private health institution in complying with the
provisions of R.A. 7600 up to twice the actual incurred during the taxable
year
Amount that could have been collected for the actual free legal services
rendered or up to 10% of the gross income derived from the actual
performance of the legal profession, whichever is lower
Actual free legal services shall be exclusive of the minimum 60 hours
mandatory legal aid services rendered to indigent litigants as required
under the Rule of Mandatory Legal Aid Service for Practicing Lawyers.
0915-2303213  www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TAX-1202
Week No. 13: SPECIAL ALLOWABLE ITEMIZED DEDUCTIONS

B. Exercises
a. Rosales Corporation, a domestic corporation, adopted Masbate State College, a school operated by the
government and accredited by CHED. It entered into a Memorandum of Agreement (MOA) with the
provincial school and CHED. Rosales Corporation provided the following assistance:
Cash to improve school facilities P500,000
Computers (acquisition cost) 500,000

The following data were taken from the books of Rosales Corporation for the current year:
Gross income P10,000,000
Operating expenses (excluding the assistance ) 3,000,000

Question 1 - How much is the amount deductible by Rosales Corporation as far as the assistance to a
public school is concerned?
Question 2 – How much is the taxable net income of Rosales Corporation?

b. Aranas Corporation has a soft spot for senior citizens and PWDs. As such, it hires senior citizens and
PWDs to work in the company for at least six (6) months. The following data are provided by the
corporation:
Gross sales P15,000,000
Cost of sales 5,000,000
Operating expenses (including salaries of P500,000 given
to senior citizen-employees and P200,000 given to PWDs) 3,000,000

During the same period the corporation also allows 20% discount to senior citizens who buy goods from
the company. The discount is on the P800,000 sales(part of the gross sales above) summarized as
follows:
Selling price (VAT-exempt) P800,000
Less: 20% discount 160,000
Amount payable by the Senior Citizen P640,000

Question 1 – How much is the special itemized deductions allowed in connection with the salary of the
senior citizen-employee and PWDs and the discount given to senior citizens?
Question 2- How much is the taxable net income of the corporation?
Question 3 – How much is the taxable net income of the corporation availing of OSD?

c. A VAT-registered enterprise sold goods to a person with disability. The amount of sale was P1,000,
without VAT.

Question 1 - How much is the sales discount that can be deducted from the gross income of the seller?
Question 2 – How much is the total amount to be paid by the person with disability?

d. Health Care Services, a private health institution, complies with Rooming-in and Breast-Feeding Practices
as provided under R.A. 7600. It holds a seminar on the advantage of breastfeeding. The following duly
receipted expenses are incurred in connection with the seminar:
Materials on breast-feeding P300,000
Transportation expense 100,000
Free snacks 50,000
TotalP450,000

How much is the total deductible amount including the special itemized deduction?

e. Tamayo Lim Caiga Manuel and Associates, a partnership of lawyers, renders 500 hours of pro bono legal
assistance to indigent litigants. The 500 hours do not include the 60 hours mandatory legal aid required
by Supreme Court. The partnership charges P10,000 per hour to paying clients. The partnership’s gross
income during the year amounts to P80,000,000.

How much is the allowable special itemized deduction that the firm can deduct from its gross professional
fees?

END

THOT: “Never ever quit on your dreams. Fight until your dreams come true.” - Tamthewise

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