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SUGGESTEDANSWERS
Chapt
er6:
Fri
ngeBenef
it
sTax

CHAPTER6
FRI
NGEBENEFI
TSTAX
Pr
oblem 6–1TRUEORFALSE
1. Fal se–FBTi saf i
naltaxoft heempl oyee.Howev er
,thisistheli
abi l
it
yoftheemploy ertowit
hhold
thefinaltaxof32%
2. Tr ue
3. Tr ue
4. Tr ue
5. Tr ue
6. Tr ue
7. Tr ue
8. Tr ue
9. Fal se–Somehousi ngfringebenef i
tisnotsubjecttoincomet ax.Ex.Tempor ar
yhousi ngfort
hree
mont hsorhousi ngbenef itundertheempl oyer
’sbenefitr
ule.
10.Tr ue,alsoFBi salsoaf orm ofincentiv
est orank-
in-
fil
eempl oyees.
11.Fal se–Thesear ebenef it
sot herthansalari
esandalsogi ventor ank-i
n-f
il
eemploy ees.
12.Fal se–Wageandsal ariesar enotsubjecttoreduct
iononcegi venr egardl
essofthef i
nanci
al
conditi
onoft heempl oyer.
13.Tr ue
14.Tr ue
15.Fal se–Thecor porateincomet axrat
eis30%asof2012, whil
et hef r
ingebenef
ittaxremainsat
fi
naltaxr at
eof32%.
16.Tr ue,unlessthesear eamongt hedemi ni
mis

Pr
oblem 6–2TRUEORFALSE
1. Fal se–Demi ni
mi sarealsof ri
ngebenef i
tsinsmal lamountbutnotsubj ecttoFBT.
2. Fal se–Fr ingebenef i
tsgivent orank-i
n-fi
le,exceptthosewhi chareamongt hedemini
misand
thosegi v
enf orempl oyer’
sconv enience,arenotsubj ectt
oFBTbutsubj ecttocompensat
ion
i
ncomet ax.
3. Tr ue
4. Tr ue
5. Fal se–P750/ semest eristheceili
ngf orexemptmedi calal
lowance
6. Fal se-theexemptmeal all
owancemustber elatedintherenderingofov ert
imeworktobe
consi dereddemi nimis.
7. Tr ue
8. Tr ue
9. Tr ue
10.Fal se–At ravelr
equi r
edbyt hecompanyt oitsoff
icerisnotsubjecttoFBTbecausebyi t
snatur
ea
trav el
li
ngexpense.
11.t rue
12.Fal se–Schol ar
shipgr antstoempl oyeesnotr elat
edt obusinessistaxable.
13.Fal se–Thesear eamongt hoseexempt edf rom fr
ingebenef i
ttax.

Pr
obl
em 6-
3 Pr
obl
em 6-
4
CashI
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Chapt
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Fri
ngeBenef
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sTax

1. C 1.A–Yes,
alsoifr
eceivedbysuper
visor
2. B 2.C
3. C 3.A
4. C 4.D
5. D 5.D
6. A 6.A
7. B 7.B
8. D 8.B
9. A 9.A–onl
yP5,000istaxabl
etheexcessofP10,
000.
10.B 10.D
11.B 11.D
12.D 12.D

Problem 6–5 Notinthechoices=P51,

000
Netincome( P300,000/30%) P1,
000,
000
Add: FBchar gedtomi scel
laneousexpense 170,
000
Taxabl enetincome P1,
170,
000
Mul t
ipliedbycorporatetaxrate 30%
Incomet axdue P 351,
000
Less: Incomet axalr
eadypaid 300,
000
Additionaltaxtobepai d P 51,000

Thef r
ingebenef
it
sofrank-i
n-f
il
eemployeearesubjecttoregul
arwithhol
dingtaxonwages,[Sec.24( A)
,
NIRC].Ther
eisnogrossed-
upmonet ar
yv al
uei
nvol
ved.IftheBIRuncovertheconceal
mentresult
ingtothe
nonpaymentofwi t
hhol
dingtax,thefr
ingebenef
it
sshal lbedisal
l
owedasdeduct i
bleexpense.[Sec.34
(A)(
1ai),
NIRC]

Probl
em 6–6 C
Fri
ngebenef i
ttax(P102,000/68%)x32% P48,
000
I
ncomet ax:
Netincomebef oretax(P1,
750,
000/70%) P2,
500,
000
Add:Fr i
ngebenef i
tschargetomiscel
laneousexpense 102,
000
Total P2,
602,
000
Multi
pliedbycor porat
eincometaxrate 30%
Corporateincomet ax P 780,
600
Less:Incomet axalreadypaid(
P2,500,000–P1,750,
000) 750,
000 30,
600
Taxrecoveredbyt hegov er
nment P78,
600

Note:
Thefri
ngebenef
itt
axexpenseisnotdeducti
blebecausether
elat
edwi
thhol
dingt
axwas
notwit
hhel
dandpaidunt
ilt
hetaxevasi
onwasdi scover
edbyt heBI
R.

Problem 6–7
Correct
ion:
Shoul
dbe-Thecarowner
shi
pwast
ransf
err
edt
oMr
.Al
egr
e.

1. Let
terB
CashI
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SUGGESTEDANSWERS
Chapt
er6:
Fri
ngeBenef
it
sTax

Cash P 34,
000
Houseandlot–FMV, higher(
ownershi
ptr
ansf
err
ed) 544,
000
Car–ownershipt
ransferr
ed(P680,
000x9/10) 612,
000
Monetar
yvalueoffr
ingebenefi
ts P1,
190,
,
000

2. Lett
erC
Grossed-
upmonet
aryv
alue(
P1,
190,
000/
68%) P1,
750,
000

Pr
obl
em 6–8
1.Let
terC
Monetar
yval
ueofFB(
P80,
000/
32%)x68% P170,
000

2.Lett
erB
Grossed-
upmonet
aryv
alue(
P80,
000/
32%) P250,
000

3.Let
terD
Afr
ingebenef
itt
axi
snotani
ncomet
axofempl
oyer
. P -0 -

Probl
em 6–9 C
Mealbenefi
ts(P10,200x6months) P 61,
200
Educat
ionalassi
stance(
P13,
600x6mont
hs) 81,
600
Fri
ngebenefit
ssubjectt
oFBT P142,
800

Sal
ari
esar
esubj
ectt
onormaltax.Thef
ri
ngebenef
it
ssubj
ectt
oFBTshal
lonl
ystartf
rom t
het i
meMr.Roj
as
waspromot
edtomanager
ial
level
.Hisf
ri
ngebenef
it
spri
ort
ohispr
omoti
onshouldbesubjectt
onor
mal t
ax.

Probl
em 6–10 B
Deducti
blef
rom busi
nessi
ncome(
P136,
000/
68%) P200,
000

Probl
em 6–11 A
None,becausef r
ingebenef
itt
axi
safinalt
axandnodeducti
onisal
lowedfr
om grosscompensat
ioni
ncome
exceptpersonalexempti
onsandheal
thorhospi
tal
i
zat
ioninsur
anceactual
l
ypaidifthef
amilyi
ncomedoes
notexceedP250,000.

Pr
obl
em 6–12 D
Zer
o.NoFri
ngebenef
itt
axi
stobeimposedonfri
ngebenefi
tofrank-i
n-f
il
eemploy
ee.Mr.
Est
radai
sacompanymessenger
.Hi
sfri
ngebenefi
tissubj
ectt
owi thhol
dingt
axonwages.

Pr
obl
em 6–13
1. Lett
erA
Grossed-
upmonetaryval
ue(
P6,
000,
000x5%x50%)
/68% P220,
588
Multi
pli
edbyFBTr at
e 32%
Fri
ngebenefi
ttax P 70,
588

2. Let
terB
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Chapt
er6:
Fri
ngeBenef
it
sTax

Downpay ment P2,

000,
000
Presentv
alueof4i
nst
all
ment
s(P1,
000,
000x3.
037) 3,
037,
000
Total P5,
037,
000

GMV( P5,037,
000x5%x50%)
/68% P185,
183
Multi
pli
edbyFBTr at
e 32%
Fr
ingebenefitt
ax P 59,
258

Pr
oblem 6–14 D
FBExpensei
sequal
toGMV(
P2,
000,
000x5%x50%)
/68% P73,
529

Probl
em 6–15 B
Acqui
sit
ioncost=f
airmar
ketv
alue(
highert
hanzonal
val
ue) P2,
040,
000

Mont
hlyf
ri
ngebenef
it[
(P2,
040,
000x5%x50%)
/12]
/68% P6,
250

Pr
obl
em 6–16 A
Zer
o.Jean’
susedofthecondominium i
snotforherbenefi
tbutf
ort
hebenef
itofBCor
por
ati
on
asthef
ormerconduct
sinvest
igat
ionfori
nventor
yfraud.

Problem 6–17 A
Discountedpri
ceofthecars(P1,
000,
000x95%x50) P47,
500,
000
Add: Tr
ansportat
ion,
insur
anceandtest
ingcost 500,
000
Totalacquisi
ti
oncost P48,
000,
000

Acquisi
ti
oncostassignedt
oof
fi
cer
s
[(
P48,000,
000/50)x10] P9,
600,
000

Monetaryv
alueof10cars[ (
P9,
600, 000/5)x50%] P 960,
000
Di
vi
dedbynumberofof f
icerst
or eceivedthecars 10
Monetaryv
alueoffri
ngebenefi
tofeachof fi
cer P 96,000
[
Sec.2.33(B)
,Rev.Regs.No.3-98]

Pr
obl
em 6–18
1. Lett
erA
Grossed-
upmonetaryval
ue[
(P1,
000,
000/
5)x50%]/
68% P147,
059
Multi
pli
edbyFBTr at
e 32%
Fri
ngebenefi
ttax P 47,
059

2. Lett
erC
Grossed-
upmonetaryval
ue(
P1,
000,
000/
5)/
68% P294,
117
Multi
pli
edbyFBTr at
e 32%
Fri
ngebenefi
ttax P 94,
117

Probl
em 6–19 D
Leasepriceperv
ehicl
e[P6,000,
000/
(20+14+6)] P150,
000
Multi
pli
edbynumberofv ehicl
eassi
gnedt
ooff
icer
s 6
Totalf
ri
ngebenefit
stooffi
cers P900,
000

Annual
val
ueoffr
ingebenef
it
sofeachof
fi
cer
[(
P900,
000/
6)x50%] P 75,
000

Probl
em 6–20 C
Annualdepr
eci
ati
onal
l
owed(
P17,
000,
000/
20) P 850,
000
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Chapt
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Fri
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it
sTax

Di
v i
dedbyGMVf act
or 68%
Grossed-
upmonet ar
yv al
ue P1,
250,
000
Multi
pli
edbyFBTr at
e 32%
Annualfr
ingebenefi
ttax P 400,
000
Di
v i
dedbynumberoft hemember softheBOD 5
Annualfr
ingebenefi
ttaxforeachdi
rect
or P 80,000

Theuseofai r
craf
t(i
ncl
udi
nghelicopt
ers)ownedandmaint
ainedbyt
heempl
oyershal
lbet
reat
edas
busi
nessuseandnotbesubj
ectt
ot hefr
ingebenef
itt
ax.

Theuseofyachtwhet
herownedandmai nt
ainedorleasedbytheempl
oyershal
lbetreatedast
axablef
ri
nge
benefi
t.Theval
ueoft hef
ri
ngebenef i
tshallbemeasur edbasedont hedepreci
ationofay achtatan
esti
matedusef
ull
if
eof20years.[
Sec.2.
33(B),Rev.Regs.No.3-
98]

Probl
em 6–21 B
Li
ghtandpowerofhi sr
esidenti
alhouse P 5,
440
Grocer
yitems 6,
800
Reimbursabl
eexpensesubjectt
oFBT P12,
440

Onl
ytheper
sonal
expenser
eimbur
se.

Probl
em 6–22 D
Groceryi
tems P17,
000
PantsandT-shi
rt 3,
400
Totalmonetar
yvalueofFB P20,
400

Fr
ingebenef
itt
ax(
P20,
400/
68%)x32% P 9,
600

Pr
oblem 6–23 B
FBexpense(
P476,
000x75%)/
68% P525,
000

Pr
oblem 6–24 D
Fr
ingebenef
itt
ax(
P16,
320/
68%)x32% P7,
680

Pr
oblem 6–25 C
Fr
ingebenef
itt
ax(
P57,
800/
68%)x32% P27,
200

Pr
obl
em 6–26
1. Lett
erD
Therei
snoFBTf
orr
ank-
in-
fi
leempl
oyee.

2. Lett
erB
Benchmar ki
nterest(P88,
400x12%) P10,
608
Less:Actual
interestchar
ge(P88,
400x3%) 2,
652
Dif
ference P 7,
956

FBT(
P7,
956/
68%)x32% P 3,
744

Pr
oblem 6–27 D
Pr
ofessi
onal
TaxRecei
pts P 5,
440
CashI
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Fri
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sTax

PICPALifet
imemember shi
p 13,
600
Gomagol fclub 68,
000
Bagui
oCount r
yClub 340,
000
Total
taxablefri
ngebenef
it
s P427,
040

FBT(
P427,
040/
68%)x32% P200,
960

Allmembershi
pfeespai
dbyt
hecompanyi
nbehal
foft
hecompt
rol
l
erar
econsi
der
edf
ri
ngebenef
it
s;hence,
subjectt
oFBT.

Problem 6–28 A
Hotel accommodat ion[(
$1,
600-($300x4)
]xP50/
$1 P 20,
000
Personal expenses($280xP50/ $1) 14,
000
Totalamountoff r
ingebenef
its P 34,
000

Fr
ingebenef
itexpense(
P34,
000/
68%) P 50,
000

Pr
oblem 6–29 C
Fr
ingebenef
itt
ax[
(P54,
400x30%)/68%]x32% P 7,
680

Pr
oblem 6–30 B
Fr
ingebenef
itexpense(
P408,
000/
68%) P600,
000

Pr
obl
em 6–31 A
Zer
o.Theschol
arshi
pwasobt
ainedt
hroughcompet
it
iveexami
nat
ion.

Pr
oblem 6–32
1. Lett
erD
None.Exemptbecauset
heeducat
ional
benef
iti
srel
atedt
owor
k.(
Empl
oyer
’sbenef
itr
ule)

2. Let
terB
P65,
280–Onl
ythemonet
aryv
aluei
sdeduct
ibl
ebecauset
hebenef
iti
stax-
exempt
.

Pr
oblem 6–33 D
Gr
ossed-upmonetaryval
ue(P170,
000/
85%) P200,
000
Multi
pli
edbyappli
cabl
eFBTrate 15%
Fr
ingebenefi
ttax P 30,
000

Pr
obl
em 6–34 B
Fri
ngebenefittax:
Chan(P30, 000/
75%)x25% P10,
000
Lapid(P51,000/68%)x32% 24,
000
Total
fri
ngebenef i
ttaxwit
hhel
d P34,
000

Probl
em 6–35 C
Annuall
ifei
nsurancepremium P100,
000
Amountofloan P1,
000,
000
Less:Pr
esentvalueat12%( P1,
000,
000x0.893) 893,
000 107,
000
Monetaryval
ueoff r
ingebenefi
tsubj
ectt
oFBT P207,
000

Pr
obl
em 6–36 C
CashI
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Fri
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I
nsurancepr
emi um -VPforOper
ati
on(
50%xP4,
080) P2,
040
Di
v i
dedbyGMVf act
or 68%
Grossed-
upmonet ar
yv al
ue P3,
000
Multi
pli
edbyFBTr ate 32%
Fr
ingebenefi
ttax P 960

Pr
obl
em 6–37
1. Ricesubsi
dy P12,
000
Nontaxabl
euniform andclot
hingal
l
owance 4,
000
Employeesachievementaward 10,
000
Nontaxabl
emedi calall
owancetodependent
s(P125x12) 1,
500
Laundryal
lowance 3,
600
Actualmedical
benef i
ts 10,
000
Totalnont
axablefri
ngebenefi
ts P41,
100

2. Car P214,
000
Di
v i
dedbygrossed-uprat
e 68%
Grossed-
upmonet aryval
ue P314,
705
Multi
pli
edbyFBTr ate 32%
Fr
ingebenefi
ttax P100,
705

Note: ThenewBI Rinterpretat

ioni
sthattheexcessoft
heactualfri
ngebenefi
tgi
venshal
lbe
taxableafterdeducti
ngt hede–mi nimisthr
esholdamount.Theexcessamountoffri
ngebenefi
t
shallbesubj ectt
owi t
hhol di
ngtaxonwageswhet hert
hereci
pientemployeei
sarank-
in-
fi
leor
manager ialemployee.

Pr
obl
em 6–38
1. Housingbenef
it(P12,240x110%) P13,
464
LionsClubmember shipfee 20,
400
Total P33,
864
Divi
dedbygrossed-upr at
e 68%
TaxableamountofFB P49,
800

2. Fr
ingebenef
itt
ax(
P49,
800x32%) P15,
936

3. Vi
olet
aVi
cent
ecannotdeductt
heFBTf
rom hergr
ossi
ncome.

SanMi guelCor
porat
ion,however
,candeducttheenti
reamount
ofgrossed-
upmonet ar
yv al
ueamountingt
oP49, 800fr
om the
grossincomeofthecorporati
onasfr
ingebenefi
texpense.

Pr
obl
em 6–39
A. 1. Monetar
yval
ue P68,
000

2. FBT(
P68,
000/
68%)x32% P32,
000

B. 1. Downpay ment P200,

000
Add:Presentval
ueofP180,000i
nst
all
mentat18%pery
ear
:
Yr.1:(P180,
000x0.8475) 152,
550
Yr.2:(P180,
000x0.
7182) 129,
276
Yr.3:(P180,
000x0.
6086) 109,
548
Yr.4:(P180,
000x0.
5158) 92,
844
CashI
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Yr.5: (
P180,
000x0.
4371) 78,
678 562,
896
Acquisit
ioncost P762,
896
Di
videdby 5
Monet ar
yv al
ue P152,
579

2. FBT(
P152,
579/
68%)x32% P 71,
802

C. 1. Monet
aryv
alue(
P816,
000x150%) P1,
224,
000
2. FBT(
P1,
224,
000/
68%)x32% P 576,
000

D. 1. Annual
monet
aryv
alue=annual
depr
eci
ati
on(
P1,
020,
000/
25) P 40,
800
2. FBT(
P40,
800/
68%)x32% P 19,
200

E. 1. Monet
aryv
alue(
P244,
000x50%) P 122,
000
2. FBT(
P122,
000/
68%)x32% P 57,
412

F. 1. Monet
aryv
alue(
P1,
360,
000x5%x50%) P 34,
000
2. FBT(
P34,
000/
68%)x32% P 16,
000

Pr
obl
em 6–40

1. FBT–condomi nium [(
P6,000,
000x5%x50%) /
68%]x32% P 70,
588
FBT–car :
Downpay ment P 300,
000
Presentv al
ueofP240, 000year
lyi
nst
all
mentat12%
(P240,000x3. 605) 865,
200
Acquisit
ioncost P1,
165,
200
Divi
dedby 5
Monet ar
yv alue P 233,
040
FBT–car( P233,040/68%)x32% P 109,
666

2. Jour
nalent
ri
es:
FBexpense 70,
588
Cash/FBTpayabl
e 70,
588

FBexpense 342,
706
Car 233,
040
Cash/FBTpay
abl
e 109,
666

Pr
obl
em 6–41
1. Monetar
yval
ue–assi
gnmentofcondomi
nium (
P5,
000,
000x5%x50%) P125,
000

2. Gr
ossed-
upmonet
aryv
alueofcondomi
nium (
P125,
000/
68%) P183,
823

3. Fr
ingebenef
itt
axont
heuseofcondomi
nium (
P183,
823x32%) P 58,
823

4. Gr
ossed-
upmonet
aryv
alueoft
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