PRACTICE EXERCISES

ON
DONOR’S TAX
Question No. 1
Cabalo, widower, made the following donations in 2018:
P325,000 cash to Catindig, a legitimate son who got married on March
January 20
18, 2014.
Feb 20 P500,000 cash to Catabac, niece who got married on April 1, 2015.
P88,000 to Cabanatan, his housemaid on account of marriage to his
March 5
driver on January 1, 2018.
April 9 P25,000 cash as birthday gift to Cabo, his bodyguard.

REQUIRED: Compute the gift tax due on each donation.

Solutions No. 1 Jan 20, 2018
Net gift 325,000

Less: exempt gift (250,000)

Taxable gift 75,000
Donors Tax rate 6%
Donors Tax due 4,500
Feb 20, 2018
Net gift 500,000
Add: Net gift, January 20 325,000
Total 825,000
Less; Exempt Gift (250,000)
Taxable Gift 575,000
Tax rate 6%
Tax due 34,500

Less: Tax paid, January 20 4,500

Tax payable 30,000

Continued…
Solutions No. 1 March 05, 2018
Net gift 88,000
Add: Prior gifts 825,000
Less: exempt gift (250,000)
Taxable gift 663,000
Donors Tax rate 6%
Donors Tax due 39,780
Less Taxes paid 34,500
Tax Payable 5,280

April 9, 2018
Net gift 25,000
Add: Prior Gifts 913,000
Total 938,000
Less; Exempt Gift (250,000)
Taxable Gift 688,000
Tax rate 6%
Tax due 41,280
Less: Taxes paid 39,780
Tax payable 1,500
THANK YOU
Question No. 2
Mr. and Mrs. Amigo, citizens and residents of Zamboanga City, made
the following donations of the community properties, unless
otherwise specified:
May 17, 2014
To daughter, Barat, on account of marriage on November 1, 2014, cash of
P370,000.
To Barat by Mr. Amigo alone, property owned exclusively by the donor, P125,000.
June 12, 2014
To Constantino, brother of Mrs. Amigo, property owned exclusively by Mrs.
Amigo P100,000.
To Barat, on account of marriage, property subject to and unpaid mortgage of P
40,000 and an unpaid tax of P 8,000, all to be assumed by Barat. That property has
a fair market value of P600,000.

REQUIRED: Compute the donor’s taxes due.

Solution No. 2
Mr. Amigo Mrs. Amigo
To Barat (370,000 x 1/2) 185,000 P 185,000
Barat 125,000
Gross gift 310,000
Less: Exemptions 10,000 10,000
Net gift 300,000 175,000
Tax on P200,000 P 2,000
100,000 x 4% 4,000
Tax payable 6,000
Tax on P100,000 Exempt
75,000 x 2% P 1,500

Continued…
Solution No. 2
Donation – June 12, 2014 Mr. Amigo Mrs. Amigo
To Constantino 100,000
Barat (600,000/2) 300,000 300,000
Gross gift 300,000 400,000
Less: Deduction - Unpaid mortgage (40,000/2) 20,000 20,000
Net gift 280,000 380,000
Add: Net gift, May 17 300,000 175,000
Total 580,000 555,000
Tax on P 500,000 14,000
80,000 x 6% 4,800
Tax due 18,800
Less: Tax paid, May 17 6,000
Tax payable 12,800
Tax paid on P500,000 14,000
55,000 x 6% 3,300
Tax due 17,300
Less: Tax paid, May 17 1,500
Tax payable 15,800
Question No. 3
Vecio sold a property on October 31, 2015 to his
bestfriend for P 1,000,000 when the market value was
P1,600,000. Cost of the property to the taxpayer in
2012 was P400,000. He gave a commission of P
50,000 to the broker and spent for documentary stamp
taxes and other fees in the amount of P25,000.
Assumption A: The property is a residential house.
How much is the donor’s tax due on the transaction?
How much is the capital gains tax?
Assumption B: The property is a personal car.
How much is the donor’s tax due?
How much is the income subject to tax?
Solution No. 3
Assumption A:
The rule on transfer for insufficient consideration applies only
when the following requisites are present:
The market value is higher than the selling price; and
The property is not a real property-capital asset.
Thus, even if the sale was made for an insufficient consideration
no donor’s tax is due because the property subject of sale is a
real property-capital asset.

b. Market value (higher than selling price) 1,600,000

Capital gains tax rate 6%
Capital gains tax 96,000

Continued..
Solution No. 3
Assumption B:
a. Fair market value 1,600,000
Less: Selling price 1,000,000
Deemed gift 600,000
Rate of tax (stranger) 30%
Tax payable 180,000
b. Selling price 1,000,000
Less: Cost 400,000
Acquisition cost 50,000
Commission 25,000
Taxes and other fees 475,000
Capital gain on sale (long-term) 525,000
Income subject to tax (525,000 x 50%) 262,500
PERCENTAGE TAKEN INTO ACCOUNT
(Holding Period)

In the case of a taxpayer, other than a corporation,

only the following percentages of the gain or loss
recognized upon the sale or exchange of a capital asset
shall be taken into account in computing net capital
gain, net capital loss, and net income:

1. One hundred percent (100%) if the capital asset has

been held for not more than twelve (12) months; and
2. Fifty percent (50%) if the capital asset has been held
for more than twelve (12) months.
Question No. 4
Mabait made the following donations:
a. Residential house in Manila P1,500,000
b. One-half hectare of land in Vancouver, Canada 800,000
c. Car in the Philippines 350,000
d. Jewelries in Canada 80,000
e. Shares of stock in San Miguel Corporation, 125,000
domestic
f. Shares of stock in a Canadian company 250,000

Compute the gross gift if Mabait is a:

 Resident citizen
 Nonresident citizen
 Resident alien
 Nonresident alien (with reciprocity)
 Nonresident alien (no reciprocity)
Solution No.4
Resident NRA (with NRA (no
or citizen* reciprocity) reciprocity)
House, Manila P1,500,000 P1,500,000 P1,500,000
Land, Canada 800,000 - -
Car, Philippines 350,000 350,000 350,000
Jewelries, Canada 80,000 -
Domestic shares 125,000 - 125,000
Foreign shares 250,000 - . .
Gross gift P3,105,000 P1,850,000 P1,975,000
Question No.5
Elmer gave the following intangible properties to Liza:
A. Bank deposit in Manila 50,000
B. Bank deposit in New York, USA 80,000
C. Franchise exercised in the Phils. 20,000
D. Shares of stock issued by Goodbooks Corp., domestic 72,000
corporation
E. Shares of stock from Shaolin Corporation, a foreign 200,000
corporation
F. Shares of stock from Pirung Corporation, an Indonesian
corporation whose 86% of the business is in the 130,000
Philippines
G. Shares of stock from Murung Corporation, a foreign
corporation with business situs in the Philippines 50,000
H. Interest in Sinang Company, a partnership established in 100,000
the Phils

COMPUTE the gross gift assuming Elmer is a non-resident alien

and he is not exempt under the principle of reciprocity.
Solution No. 5
Bank deposit, Manila 50,000

Franchise exercised in Philippines 20,000

Stocks, domestic corporation 72,000

Stocks, Indonesian Corp., 86% business in the Phils. 130,000

Stocks, foreign corporation, with business situs in the Phils 50,000

Interest, partnership established in Philippines 100,000

Gross gift 422,000

END
PRACTICE EXERCISES
ON
VAT & OPT
Question No. 1
Menu Mura Corporation imported an article from Japan. The invoice value of
the following article was ¥1,000,000 (¥1 = P0.50). The following were
incurred in connection with the importation:
Insurance P 15,000
Freight 10,000
Postage 5,000
Wharfage dues 7,000
Arrastre charges 8,000
Brokerage fee 25,000
Facilitation fee 3,000

The imported article was subject to P50,000 customs duty and P30,000 excise
tax. Menu Mura Corporation spent P5,600 for trucking from customs
warehouse to its warehouse in Quezon City.

COMPUTE the following:

A. VAT on importation.
B. VAT payable if the imported article was sold for P950,000, VAT exclusive.
Solution No.1
A. Invoice value (Y1,000,000 x P0.50) 500,000
Insurance 15,000
Freight 10,000
Postage 5,000
Wharfage dues 7,000
Arrastre charges 8,000
Brokerage fee 25,000
Customs duty 50,000
Excise tax 30,000
Base 650,000
Rate of tax 12%
VAT payable 78,000

B. Output tax (950,000 x 12%) 114,000

Less: Input taxes
On importation 78,000
Freight (5,600 x 3/28) 600 78,600
VAT payable 35,400
Question No.2
A VAT-registered business had the balances in its books of
accounts during the second quarter of 2016:
Deferred input taxes, March P 10,000
Sales, April 400,000
Purchases, April 300,000
Sales, May 500,000
Purchases, May 450,000
Sales, June 430,000
Purchases, June 350,000
COMPUTE the VAT payable for April, May and June.
Solution No. 2
April May June
Output taxes
A (400,000 x 12%) 48,000
M (500,000 x 12%) 60,000
June (400 + 500 + 430) x 12% 159,600
- Input taxes
A (300,000 x 12%) ( 36,000)
M (450,000 x 12%) ( 54,000)
J (300 + 450 + 350) x 12% (132,000)
Deferred taxes, March ( 10,000) ( 10,000)
Tax paid, April ( 2,000)
Tax paid, May ______ ______ ( 6,000)
VAT payable 2,000 6,000 9,600
Question No. 3
A taxpayer is engaged in a VAT and non-VAT business. The
amounts of VAT transactions do not include the tax.
Sales:
VAT business P 800,000
Non-VAT business 200,000
Purchases from VAT suppliers:
Of goods for sale in VAT business 200,000
Of goods for sale in non-VAT business 100,000
Of supplies for use of both in VAT and non-VAT business 40,000
Other operating expenses:
Paid to a VAT business 250,000
Paid to a Non-VAT business 40,000
COMPUTE the VAT payable.
Solution No. 3
Output tax (800,000 x 12%) 96,000
Less: Input tax
Goods (200,000 x 12%) 24,000
Supplies (40,000 x 12%) x 8/10 3,840
Expenses (250,000 x 12%) x 8/10 24,000 51,840
VAT payable 44,160

VAT business 800,000

Non-VAT business 200,000
Total 1,000,000
Question No. 4
A VAT taxpayer has the following records in in its books:
Gross sales P 600,000
Sales returns and allowances 20,000
Sales discounts 13,600
Purchases 280,000
Purchase returns and allowances 15,000
Purchase discounts 20,000

COMPUTE for the VAT payable.

Solution No. 4
Output tax
GS 600,000
Less: SRA 20,000
SD 13,600 33,600
Net sales 566,400
Rate 12% 67,968
Less: Input tax
P 280,000
Less: PRA 15,000
PD 20,000 35,000
Net purchases 245,000
Rate 12% 29,400
VP 38,568
Question No. 5
A real estate dealer sold a parcel of land in February 2015.
The data are as follows:
Price in the deed of sale P 5,000,000
Market value per tax declaration 4,200,000
Zonal value 4,000,000
Cost to the seller 3,500,000
Gross receipts on the consideration:
Mortgage assumed by the buyer P 2,000,000
February 2015 600,000
August 2015 600,000
February 2016 1,800,000
COMPUTE output tax for
February 2015
August 2015
February 2016
Solution No. 5
Selling price (highest) 5,000,000
VAT rate 12%
VAT 600,000

Payment, 2/15 600,000

8/15 600,000
Initial payment 1,200,000

IP rate (1,200/5,000) 24%

Output tax on:

February 2015 (600,000/5,000,000) x 2,600,000 312,000
August 2015 (600,000/5,000,000) x 600,000 72,000
2016 (600,000/5,000,000) x 1,800,000 216,000
Total 600,000
Question No. 6
Cheng Company has an annual sales ranging from
P1,400,000 to P1,800,000. In January 2016, it had the
following data (exclusive of tax):
Domestic sales P150,000
Export sales 100,000
Purchases (exports) 80,000
Purchases (domestic) 55,000
All purchases are from VAT registered sellers.
COMPUTE the following:
Percentage tax if Cheng Company is non-VAT registered.
VAT Payable if Cheng Company is VAT registered.
Solutions No. 6
1. Sales (150,000 + 100,000) 250,000
Rate 3%
Percentage tax 7,500

2. Output tax (150,000 x 12%) 18,000

Less: Input tax
Domestic (55,000 x 12%) 6,600
Export (80,000 x 12%) 9,600 16,200
VAT payable 1,800
Question No. 7
Cea Boyo,isa businessman with transactions in the Philippines and
international. His domestic and international transactions during
the period are as follows:
Sale of services:
From operation of Sratbucks, a coffee shop:
Cash sales P 350,000
Accounts receivable 80,000
Credit card sales 130,000
From operation of videoke bar:
Cash sales 285,000
Accounts receivable 14,000
Credit card sales 260,000

Payments for operations (70% are to VAT taxpayers) is 60% of

gross receipts.
COMPUTE for the following:
VAT payable
Percentage tax payable
Solutions No. 7
1. Local calls 2,500
Monthly bill 900
Gross receipts 3,400
Rate 12%
VAT payable 408

2. Outgoing call 20,000

Rate of tax 10%
Overseas communication tax 2,000
Question No. 8
Ret Caba operates a coffee shop and a Videoke Bar. In a taxable
period, it had the following data, exclusive of tax:
Sale of services:
From operation of Sratbucks, a coffee shop:
Cash sales P 350,000
Accounts receivable 80,000
Credit card sales 130,000
From operation of videoke bar:
Cash sales 285,000
Accounts receivable 14,000
Credit card sales 260,000
Payments for operations (70% are to VAT taxpayers) is 60%
of gross receipts.

COMPUTE for the following:

1. VAT payable
2. Percentage tax payable
Solution No. 8
Sratbox Videoke bar
Cash sales 350,000 285,000
Credit card sales 130,000 260,000
Gross receipts 480,000 545,000
Rate 12% 18%
Output tax 57,600
Less: Input tax
(480,000 x 60%) x 70% x 24,192
12%
Tax payable 33,408 98,100
Question No. 9
Seal Services is engaged in transport of passengers and cargo
from Manila to any point of the Philippines. During the
month, it had the following gross receipts(tax not included):
Trucking services:
Manila to Ilocos (vice-versa) P 700,000
Manila to Bicol (vice-versa) 680,000
Carrier by sea:
Cargo -
Matnog, Sorsogon to Allen, Samar (vice-versa) 250,000
Tabaco City to Virac, Catanduanes (vice-versa) 180,000
Passenger 485,000
Purchases/expenses (65% are from VAT sellers) 1,800,000
COMPUTE for the following:
VAT payable
Common carriers tax
Solution No. 9
Trucking (700,000 + 680,000) 1,380,000
Cargo (250,000 + 180,000) 430,000
Passenger 485,000
Gross receipts 2,295,000
Rate 12% 12%
Output tax 275,400
- Input tax (1,800,000 x 65%) x 12% 140,400
VAT payable 135,000
END