Philippine Association of Certified Tax Technicians, Inc.

4F Anelle Bldg., Biak na Bato St., Tabuco, Naga City

 054 472-9104; 0917 1276589; 0918 4644441

PRACTICE EXERCISES IN ESTATE TAX

Effective Jan. 1, 2018
Gross estate Pxx
Less: Deductions
Ordinary -
Claims against the estate Pxx
Claim against insolvent person xx
Unpaid taxes xx
Losses xx
Unpaid mortgages xx
Vanishing deduction xx
Transfer for public use xx ( x x)
Special -
Family home, maximum (10 M)
Standard deduction ( 5 M)
RA 4917 ( x x)
Net estate xx
Less: Share of surviving spouse (if married) ( x x)
Net taxable estate xx
x Tax rate 6%
Estate tax xx

1. Wilson died in a car accident. He died intestate on October 10, 2018. The following are the data:
Exclusive properties of the decedent:
Car P1,400,000
Lot in Quezon City 2,000,000
Community properties -
Cash on hand and in bank 3,000,000
Receivable as prize in a raffle contest sponsored by PICPA 50,000
Receivable from an insurance company where his son, Gino was
designated in the policy as the revocable beneficiary 150,000
House and lot in Laguna, used as family home 4,000,000
Other real properties 1,500,000
The following deductions were claimed:
Funeral expenses 195,000
Judicial expenses 15,000
Claims against the estate, not notarized 50,000
Claims against insolvent persons 30,000
Unpaid mortgage on lot in Quezon City (contracted before marriage) 200,000
Unpaid mortgage on house and lot in Laguna 350,000
Accrued income taxes 35,000
Income tax on income earned from Oct 11 to Dec 31(year of death) 7,500
Medical expenses 20,000
REQUIRED: Compute the
1. Estate tax due based on the information given.
2. Estate tax due if the bank deposit was withdrawn prior to the filing of the tax return.

PRACTICE EXERCISES IN DONOR’S TAX

1. Cabalo, widower, made the following donations:
2018:
 March 20 - P225,000 cash to Catindig, a legitimate son who got married on March 18, 2016.
May 20 - P500,000 cash to Catabac, niece who got married on April 1, 2017.
June 5 - P88,000 to Cabanatan, his housemaid on account of marriage to his driver on January
1, 2018.
2019:
August 3 - To Hospicio de San Jose, a charitable institution, P100,000
To Philippine Association of Certified Tax Technicians, Inc., a NGO, P300,000.
REQUIRED: Compute the gift tax due on each donation if the donations were made in 2018.

2. Mr. and Mrs. Amigo, citizens and residents of Zamboanga City, made the following donations of the
community properties, unless otherwise specified:
May 17, 2018
To daughter, Barat, on account of marriage on November 1, 2018, cash of P370,000.
To Barat by Mr. Amigo alone, property owned exclusively by the donor, P125,000.
June 12, 2018
To Constantino, brother of Mrs. Amigo, property owned exclusively by Mrs. Amigo, P100,000.
To Barat, on account of marriage, property subject to an 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.

REQUIREMENT: Compute the donor’s taxes due.

3. Vecio sold a property on October 31, 2018 to his bestfriend for P1,000,000 when the market value was
P1,600,000. Cost of the property to the taxpayer in 2015 was P400,000. He gave a commission of
P50,000 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.
a. How much is the donor’s tax due on the transaction?
b. How much is the capital gains tax?
Assumption B: The property is a personal car.
a. How much is the donor’s tax due?
b. How much is the income subject to tax?
4. Mabait made the following donations:
a. Residential house in Manila P 1,500,000
b. Condo unit 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, domestic 125,000
f. Shares of stock in a Canadian company, foreign 250,000

Compute the gross gift/estate if Mabait is a:

a. Resident citizen
b. Nonresident citizen
c. Resident alien
d. Nonresident alien (with reciprocity)
e. Nonresident alien (no reciprocity)

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 corporation 72,000
e. Shares of stock from Shaolin Corporation, a foreign corporation 200,000
f. Shares of stock from Pirung Corporation, an Indonesian corporation
whose 86% of the business is in the Philippines 130,000
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 the Phils 100,000
 COMPUTE the gross gift/estate assuming Elmer is a non-resident alien and he is not exempt
under the principle of reciprocity.

PRACTICE EXERCISES - VAT & OPT

1. A person had the following sales during the preceding year (assume independent situations): Indicate
whether subject to VAT, 3% Non-VAT, or Exempt from VAT/Percentage Tax in 2018:

Situation Gross receipts - PY VAT Registered Not VAT Registered

1 P 80,000
2 800,000
3 2,000,000
4 4,000,000

2. A person had the following gross receipts from rental of real property. Indicate whether
subject to VAT, 3% Non-VAT or Exempt.

Monthly Rent Aggregate Taxable 3%

Situation Type of Property VAT
per unit Annual Rental Year OPT
1 Commercial Bldg 12,000 2,300,000 2018
2 Residential 14,500 2,900,000 2018
3 Residential 16,000 2,700,000 2018
4 Residential 15,500 3,500,000 2018
5 Residential 14,500 3,500,000 2018

3. Menu Mura Corporation imported an article from Japan. The invoice value of the following article was
¥1,000,000 (¥1 = P0.50). The following costs 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 is 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 P1,064,000, VAT inclusive.

4. A VAT-registered business had the following balances in its books of accounts during the first quarter
of 2018:
Deferred input taxes, December P 10,000
Sales, January 400,000
Purchases, January 300,000
Sales, February 500,000
Purchases, February 450,000
Sales, March 430,000
Purchases, March 350,000
COMPUTE the VAT payable for January, February and March.

5. Miss Mocha Eyeliner, an actress, had the following data for the quarter ending February 2018 (amounts
are exclusive of tax):
 Receipts from talent fees P4,000,000
Gross receipts from taxicabs (4 units) 1,000,000
Purchases of wardrobes used in films 1,000,000
Purchase of spare parts of taxicabs 40,000
Public relations services for image build-up as an actress 100,000
Insurance premiums for taxicabs 20,000
Rent of office space used both for her occupation and
taxicab business, subject to VAT 400,000
Compute for the VAT payable by Miss Mocha.

6. Cea Buyo, is a businessman with transactions in the Philippines and international. His domestic and
international transactions during the period are as follows:
Overseas calls:
Outgoing -
Paid by Cea Boyo P 20,000
Paid by the call receiver 10,000
Incoming -
Paid by Cea Boyo 15,000
Paid by the caller abroad 25,000
Local calls 2,500
Monthly bill 1,100
COMPUTE the following (assume that the amounts do not include the tax):
1. VAT payable
2. Overseas communications tax

7. A businessman operates two lines of business - Sratbucks, a coffee shop (VAT) and La Bamba, a
Videoke Bar. In a taxable period, it had the following data, exclusive of tax:
Sale of services:
From operation of Sratbucks:
Cash sales P 350,000
Accounts receivable 80,000
Credit card sales 130,000
From operation of La Bamba:
Cash sales 285,000
Accounts receivable 14,000
Credit card sales 260,000
Payments for operations of Sratbucks (70% are to VAT taxpayers) is P500,000

COMPUTE for the following:

1. VAT payable
2. Percentage tax payable

8. Seal Services is engaged in transport of cargo from Manila to any point of the Philippines. It has its
own ferry boat which transport cargoes and also passengers. 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) 600,000
Ferry boat: Cargo Passenger
Matnog, Sorsogon to Allen, Samar (vice-versa) 250,000 200,000
Tabaco City to Virac, Catanduanes (vice-versa) 200,000 300,000
Payment of expenses to VAT sellers:
Services for repair of transport units 100,000
Purchase of spare parts 300,000
Insurance of transport units 150,000
Other VAT expenses (65% are from VAT sellers) 800,000
REQUIRED:
 1. COMPUTE for the VAT payable.
2. COMPUTE for the percentage tax and VAT payable if the gross receipts from trucking services
are from passenger buses.

9. A stockbroker who is not a dealer in securities sold 10,000 shares of stock of Bago Corporation for P5.50
per share. The shares are listed and traded in the stock exchange. The cost per share is P4.50 while the
par value is P6.

COMPUTE for the business tax is the sale were made in 2018.

Gross selling price (10,000 x P5.50) 55,000

Rate of tax 6/10%
Stock transaction tax 330

10. A taxpayer had the following data:

Collections during the period:
From revenues of prior periods P 50,000
From revenues of the current period 200,000
From revenues of the succeeding period 30,000
COMPUTE for the percentage tax if the taxpayer is a -
1. Bus operator
2. KTV/Videoke bar
3. Cockpit
4. Place for professional basketball games
5. Place for boxing exhibition

PRACTICE EXERCISES ON INCOME TAXATION

Effective January 1, 2018 until December 31, 2022:

Over Not over Tax Plus Of excess over

P 250,000 Exempt
P 250,000 400,000 20% - P 250,000
400,000 800,000 P 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,410,000 35%. 8,000,000

RULE 1: Individuals earning purely compensation income shall be taxed based on the graduated tax rates.

1. Mr. Empoy is a government employee. He is not engaged in business nor has any other source of
income other than his employment. For 2018, Mr. Empoy earned a total taxable compensation income
of ₱900,000. How much is the income tax due?

RULE 2:
The rate of tax of purely self-employed individuals and/or professionals whose gross sales/receipts
and other non-operating income does not exceed P3,000,000, shall have the option to avail of:
a. An eight percent (8%) tax on gross sales or receipts and other non-operating income in excess of
₱250,000 in lieu of the graduated income tax rates and the 3% Non-VAT; OR
b. The graduated rates.

2. Mr. A, an accountant, owns a small grocery. During the taxable year, he had the following gross
receipts:
Option 1 – 8% of gross sales/receipts
Option 2 – Graduated rates

TY Gross sales Gross receipts Cost of Option? Elected Income Business

- Grocery - Profession sales/services (Y/N) Option tax due tax due
 2017 P 1,000,000 P 600,000 P 450,000
2018 1,800,000 500,000 630,000
2018 2,000,000 400,000 1,300,000
2018 2,500,000 750,000 1,200,000
2018 2,600,000 1,100,000 2,450,000
2018* 1,200,000 250,000 860,000
* Failed to indicate signify intention to be taxed at 8%.
RULE 3:
If at any time during a given taxable year, a taxpayer’s gross sales or receipts exceeded ₱3,000,000,
he/she shall automatically be subjected to the graduated rates.
A VAT-registered taxpayer, regardless of the gross sales/receipts can no longer avail of the 8% option.
On the other hand, a non-VAT registered taxpayer who initially opted to avail of the 8% option but has
exceeded the VAT threshold during the taxable year, shall be subject to 3% Percentage Tax on the first
₱3,000,000 of his/her gross sales without imposition of any penalty if payment is timely made on the
following month when the threshold is breached. Then, the excess of the threshold shall be subject to VAT
prospectively, and the 8% income tax previously paid shall be credited to the Income Tax Due under the
graduated rates.

3. Ms. BB signified her intention to be taxed at 8% income tax rate on gross sales in her 1st Quarter Income
Tax Return. However, her gross sales during the taxable year has exceeded the VAT threshold.

Q1 Q2 Q3
(8% Rate) (8% Rate) (8% Rate) Q4
Total Sales ₱ 500,000 ₱ 500,000 ₱2,000,000 ₱3,500,000
Less: Cost of Sales 300,000 300,000 1,200,000 1,200,000
Gross Income 200,000 200,000 800,000 2,300,000
Less: Operating Expenses 120,000 120,000 480,000 720,000
Taxable Income 80,000 80,000 320,000 1,580,000
Income Tax due

4. Ms. CC is an accountant who is engaged in public practice. Her total gross receipts amounted to
₱4,250,000.00 for taxable year 2018. Her recorded cost of service and operating expenses were
₱2,150,000.00 and ₱1,000,000.00, respectively.
QUESTIONS:
1. HOW MUCH is the income tax due on Ms. CC?
2. What business tax is due on her?
3. How much is the tax due if she availed of the Optional Standard Deduction?

RULE 4:
Taxpayers who are subject to Other Percentage Taxes (amusement tax, franchise tax, common
carrier’s tax, etc.) except those subject to 3% non-VAT, have no option to avail of the 8% income tax rate.

5. In 2018, Mama Sang owns a videoke bar with gross receipts of ₱2,500,000. Her cost of sales and
operating expenses are ₱1,000,000 and ₱600,000, respectively, and with non-operating income of
₱100,000.
How much is the income tax due and business tax due on Mama Sang?

6. In 2018, Dean Rolly, professor of accounting in one university, earned annual compensation of
₱900,000, inclusive of 13th month and other benefits in the amount of ₱120,000 but net of mandatory
contributions to SSS, Philhealth and Pag-Ibig. Aside from employment income, he practices his
profession as a CPA, with gross receipts of ₱2,200,000. His cost of services and other operating expenses
amounted to ₱600,000 and 250,000, respectively, and with non-operating income of ₱100,000.
REQUIRED: COMPUTE for the
a. Total income tax due if he opted to be taxed at 8%.
 b. Total income tax due if he opted to be taxed at the graduated rates.
c. Business tax on the profession.

7. In 2018. Mr. Boquiren, is earning an annual compensation of ₱ 400,000, inclusive of 13th month and
other benefits in the amount of ₱120,000. Aside from employment income, he owns a fruit and vegetable
farm with gross sales of ₱3,500,000. His cost of sales and operating expenses are ₱1,000,000 and
₱600,000, respectively, and with non-operating income of ₱100,000.
REQUIRED: Compute for the income tax and business tax due.

8. A. Lien, an american employed in Faren Corporation, a Petroleum Service Contractor received

compensation income of ₱5,000,000 for 2018, inclusive of ₱400,000 13th month pay and other benefits.
COMPUTE for the income tax due on the compensation income of A. Lien.

9. In 2018, the Company gave fringe benefit to its employees. The amount of benefit received by employee
France is P32,500. The total amounts given to the rank-and file employees amounted to P40,000.
a. How much is the fringe benefit tax if France is a supervisory employee?
b. How much is the deductible expense on the company?
c. How much is the fringe benefit tax if France is a rank-and-file employee?

10. After working for 30 years. Rita retired from employment in December 2018 as an accountant of Nail
Corporation. As a consequence of her retirement due to old age, she received the following from his
employer:
Monthly salary (until December 15) P 30,000
13th month pay 30,000
Cash gift 5,000
Retirement pay 750,000
Terminal leave pay 120,000
Longevity pay 30,000
Rice allowance per month 2,500
Clothing allowance 8,000
Loyalty award 20,000

How much is the taxable compensation income of Rita in 2018?

RULE 5:
GPP is not subject to income tax. However, the partners shall be liable to pay income tax on their
separate and individual capacities for their respective distributive share in the net income of the GPP.
The GPP is not a taxable entity for income tax purposes since it is only acting as a “pass-through”
entity where its income is ultimately taxed to the partners comprising it.
“For purposes of computing the distributive share of the partners, the net income of the GPP shall
be computed in the same manner as a corporation.” As such, a GPP may claim either the itemized
deductions or in lieu thereof, it can opt to avail of the OSD allowed to corporations in claiming the
deductions in an amount not exceeding forty percent (40%) of its gross income.
In computing taxable income, the following may be allowed as deductions:
a. Optional Standard Deduction; OR
a. Itemized expenses which are ordinary and necessary, incurred or paid for the practice of profession.
The net income determined by either claiming the itemized deduction or OSD from the GPP’s gross
income is the distributable net income from which the share of each partner is to be determined. Each
partner shall report the net income as taxable income, actually or constructively received, in the net
income of the partnership. The partners comprising the GPP can no longer claim further deduction from
their distributive share in the net income of the GPP.
If the partner also derives other income from trade, business or practice of profession apart and
distinct from his share in the net income of the GPP, the deduction that he can claim from his other
income would either be OSD or itemized deductions.

10. EE operates a sari-sari store while she is engaged in tax practice. In 2018, her gross sales amounted to
₱1,800,000, in addition to her gross receipts from tax practice of ₱400,000. Her recorded cost of
goods sold and operating expenses were ₱1,325,000 and P320,000, respectively.
COMPUTE for the income tax due on EE if –
a. she availed of Optional Standard Deduction.
b. if she signifies her intention to be taxed at 8% income tax rate in her 1st Quarter return
11. Mr. FF is a partner of Certified Tax Practitioners, a general professional partnership, and owns 25%
interest. The gross receipts of Certified Tax Practitioners amounted to ₱10,000,000 for taxable year
2018. The recorded cost of service and operating expenses of Certified Tax Practitioners were
₱2,750,000 and ₱1,500,000, respectively.
COMPUTE for the following:
a. Net income of the partnership if it availed of the OSD.
b. Income tax liability on the share of FF in the net income of the partnership.
c. Net income of the partnership if it availed of the Itemized deduction.
d. Income tax liability on the share of FF in the net income of the partnership.

12. Barbaro is a minimum wage earner and operates a small barber shop. During the year, the following
are his data;
Salary P 48,000
Overtime pay 12,000
Holiday pay 3.000
Gross receipts - barbershop 280,000
Cost of services and expenses 60,000
Interest on bank deposit, gross of tax) 1,500
Winnings in lotto 200,000

QUESTIONS:
1. How much income is taxable on Barbaro?
2. How about the final taxes?

REVENUE REGULATION 21-2018

Rate of Interest
There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the
effective legal interest rate for loans or forbearance of any money in the absence of an express stipulation
as set by the Bangko Sentral ng Pilipinas (BSP) from the date prescribed for payment until the amount is
fully paid.
The rate of interest per BSP Memorandum No. 799 series of 2013 for loans or forbearance of any
money in the absence of an express stipulation is six percent (6%).
Thus, the rate of legal interest imposable under Section 249 of the Tax Code, as amended, shall be
twelve percent (12%).
Deficiency Interest
Interest imposed on any deficiency tax due, which interest shall be assessed and collected from the date
prescribed for its payment until: (a) full payment thereof, or (b) upon issuance of a notice and demand by
the commissioner or his authorized representative, whichever comes first.

Delinquency Interest
Interest imposed on the failure to pay:
(l) The amount of the tax due on any return to be filed; or
(2) The amount of the tax due for which no return is required; or
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and
demand of the Commissioner or his authorized representative until the amount is fully paid, which
interest shall form part of the tax.

No Double Imposition of Interest

Upon the effectivity of the TRAIN Law, in no case shall the deficiency and delinquency interest
prescribed herein be imposed simultaneously.
Illustration
Mr. A has been assessed deficiency income tax P1,000,000.00, exclusive of interest and surcharge for
taxable year 2018. The tax liability has remained unpaid despite the lapse of June 30, 2020, the deadline
for payment stated in the notice and demand issued by the Commissioner. Payment was made by the
taxpayer on February 10, 2021. The applicable interest shall be computed as follows:
 PRACTICE EXERCISES ON REAL PROPERTY TAX

Assessment level and assessed value

1. ASSESSMENT LEVEL- the percentage applied to the FMV to determine the assessed value of the
property.
2. ASSESSED VALUE (taxable value)-the FMV of the real property multiplied by the assessment level.
Limitations on assessment level (not exceeding)
A. On Lands and Machineries
Classification Assessment Levels
Land Machineries
Residential 20% 50%
Timberland 20% -
Agricultural 40% 40%
Commercial, industrial 50% 80%
Mineral 50% -
Special classes: cultural, hospital, scientific 15% 15%
Local water districts 10% 10%
Government owned or controlled corporations engaged in
the supply and/or generation/ transmission of electric power 10% 10%

B. On Improvements
Fair market value Commercial/
Over Not over Residential Industrial Agricultural Timberland
(+000) (+000)
P175 0% 0% 0% 0%
P175 300 10% 30% 25% 45%
300 500 20% 35% 30% 50%
500 750 25% 40% 35% 55%
750 1M 30% 50% 40% 60%
1M 2M 35% 60% 45% 70%
2M 5M 40% 70% 50% 70%
5M 10M 50% 75% 50% 70%
10M 60% 80% 50% 70%
Tax rates on the basic tax
In provinces - Not exceeding 1% of the assessed value
In cities, and municipality of Pateros - Not exceeding 2% of the assessed value

Additional levies (in addition to basic RPT)

1. Special Education Fund Tax (SEF) – 1% of AV
2. Ad valorem tax on Idle Lands – not exceeding 5% of AV
3. Special Levy or special assessment

1. A vacant commercial land located in a city measuring 2,000 square meters has a market value of P1,100
in the tax declaration and a zonal value of P800. The city has maximized the assessment level and the
tax rate to that allowed by law.
COMPUTE for the following:
a. The total real property tax payable per year.
b. The maximum amount of discount that will be allowed as deduction from his tax due if the taxpayer
paid in advance.
c. The total amount payable if the taxpayer pays his real property tax after twelve (12) months of
delinquency.

2. A tax declaration contains the following data:

Actual use of property - Residential -
Market value Assessment level
Land P 500,000 15%
Improvement 800,000 20%
COMPUTE for the following –
a. The taxable value on the land and improvement.
b. The basic real property tax on the land and improvement if the tax rate is 1%.
c. The total real property tax assessable on the properties.
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