Samplex: Taxation Law Review Posted on October 6, 2013 | Leave a comment
Taxation Law Review Final Examinations Far Eastern University Institute of Law Atty.. Edwin Abella Atty October 8, 2013
Dindong and Marian are husband and wife, both i!i"inos and residents of #ue$on %it& who are both em"!o&ed b& 'raser Pharmaceutica! Pharmaceutica! %or"oration ('P%), a domesti domestic c cor"oration* Dindong is the +ice President for the Lega! De"artment and is receiving the fo!!owing from his em"!o&ment and other sources for the ca!endar &ear 2012
1*
-a!a -a !ar& r& of P3 P3.0 .0,0 ,000 00 a mon month th**
2*
/e"re /e "resent sentati ation on a!!owance a!!owance of of P20,000 P20,000 "er "er month month which he is is reuir reuired ed to !iuid !iuidate ate not !ater than da&s after the end of the month* n& un!iuidated amount amount wi!! be deducted from his 4ed month!& trans"ortation a!!owance of P1.,000, but a!! these re"resentation a!!owances has been actua!!& s"ent*
3*
ree tuiti tuition on fee to to nish nish a Mastera Mastera!! Degree Degree at at sian sian 5nstitu 5nstitute te of Managem Management ent amounting to P136,000 for the &ear*
*
One bag bag of of .0 7i!og 7i!ogram ram 8asm 8asmine ine rice rice ever ever& & month month worth worth P,9 P,900 00**
.*
One bag bag of .0 7i!o 7i!ogram gram was washed hed suga sugarr ever& ever& mont month h worth worth P1,. P1,.00* 00*
6*
nua! dues with 5:P amount amounting ing to to P2,00 P2,00 and annua! annua! dues with the meri merican can :ar :ar ssociation for P3,00*
*
Directo Dir ector;s r;s fee of P10,000 P10,000 "er meeti meeting ng which which is reuir reuired ed to be conduct conducted ed ever& ever& 1st Monda& of the month*
9*
Pri$e Pri $e from from a tennis tennis tour tourname nament nt s"onso s"onsored red b& /D% /D% amounti amounting ng to P20, P20,000* 000*
<*
5nterest 5nter est on :an7 :an7 De"osi De"ositt with with Metr Metroban oban7 7 amounti amounting ng to to P.00,0 P.00,000* 00*
10* 5nter 5nterest est on a !oan !oan to a friend amounti amounting ng to P200,00 P200,000* 0* 11* =ain from sa!e of shares shares of of stoc7s of PLD> which which are not traded traded in the stoc7 e4change in the amount of P1.0,000* 12* =ain from dis"osit dis"osition ion of shares of stoc7s stoc7s of a foreign foreign cor"oration cor"oration acuired acuired in 200< amounting to P200,000* 13* >he withho!ding withho!ding ta4 certicat certicate e re?ects P1,319,< P1,319,<9 9 as ta4es ta4es remitte remitted d on com"ensation income for the &ear*
Marian is the +ice President for Mar7eting and is entit!ed to the fo!!owing
1*
-a!ar& of P20,000 a month*
2*
i4ed re"resentation a!!owances P20,000 a month*
3*
new @onda %/+ worth 1*36 Mi!!ion*
*
nnua! dues with Phi!i""ine Medica! ssociation amounting to P2,20*
.*
%ost of foreign trave! to attend a seminar for mar7eting e4ecutives he!d in Aashington amounting to P120,000*
6*
n interestBfree !oan amounting to P2 Mi!!ion re!eased to her in 8anuar& 2012 "a&ab!e in 3 &ears*
*
nnua! "remium of P20,000for an insurance ta7en b& 'P% amounting to P2 Mi!!ion naming a who!!& ownded subsidiar&, b!e %or"oration, as the beneciar&*
9*
Pri$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,.1,301*
>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 "ri! 2, 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 ancee who are to be married in the succeeding &ear* >he 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", DM Motors which is du!& registered for +> "ur"oses and earned service sa!esE revenues of P*2 mi!!ion during 2012* >he& started the &ear with $ero receivab!es from customers but as of December 31, 2012, P200,000 remains unco!!ected on the services rendered that &ear* >he e4"enses for the o"erations of the business are com"rised of
1*
-a!aries of the two mechanics and the cashier at the rate of the statutor& minimum wage in Metro Mani!a of P.6 "er da&* >he tota! sa!aries "aid is P<,320* 'uiva!ent to P166,0 "er em"!o&ee (P.6 4 36. da&s)*
2*
@a$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 bno& 120,000* 1* !! 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 +> "assedBon b& !essor) amounted to P20,000 for the &ear for which the .G '4"anded Aithho!ding >a4 was "ro"er!& deducted and remitted to the government* 3* Purchase of eui"ment at the start of the &ear (Hanuar&) amounted to P1,200,000 (e4c!usive of 12G +>) and e4"ected to be used for . &ears* * -"are "arts and other su""!ies "urchased from +>Bsu""!iers amounted to P.0,000 (net of the 12G +>) .* !! "urchases from +>Bsu""!iers are covered either b& +> invoice or +> oIcia! recei"t* >here are no in"ut ta4es at the start of the &ear*
'P%, is a +>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 P00 Mi!!ion but P.0 Mi!!ion worth of merchandise remained unso!d as of December 31* >hese were a!! "urchased from +>Bregistered su""!iers* !! 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, f rom :arac7 %or"oration, a J*-* %or"oration deriving 0G 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 benet of the s"ouses, Dindong and Marian*
On -e"tember 30, 2013, 'P%, through its cor"orate oIces, received a ina! ssessment Kotice from the %ommissioner of 5nterna! /evenue re?ecting decienc& 5ncome >a4 and +a!ueBdded >a4 for ta4ab!e &ear 2011* >he "rocedures reuired 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 subect 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 basic 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 tax 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! aanuali;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!% otice for taxable year !"11.