Donors TAX Problems. Toaz tax reviewer. Reviewer in Taxation PDF

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PROBLEMS: Andaya made it appear that he sold his properties to his son at the following prices: Residential house p 100, Personal properties 50, The correct fair market value on the date of sale was p 1,000,000 for the house, and p 50,000 for the personal properties. Assuming, you know the facts as ...

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PROBLEMS: 1. Andaya made it appear that he sold his properties to his son at the following prices: Residential house p 100,000 Personal properties 50,000 The correct fair market value on the date of sale was p 1,000,000 for the house, and p 50,000 for the personal properties. Assuming, you know the facts as a BIR officer, the correct tax payable on the transaction is? A. P 12,000 c. None B. 72,000 d. P 38,000 Answer: B Computation Fair market value (personal properties) Less: selling price Deemed gift tax on p 200,000 2,000 250,000 x 4% + 10,000 donor’s tax due Fair market value (residential house) Rate of tax Capital gains tax Total tax due

p 500,000 (50,000) 450,000

p 12,000 1,000,000 x 6% + 60,000 p 72,000

The rule on transfer for insufficient consideration does not apply on transfers of real properties which are capital assets. However, the sale is subject to 6% capital gains tax. A residential house is a real property, capital asset. 2. Mark sold his car to his friend, Mike for P100,000 when its value was P250,000. The property was acquired by Mark for P450,000 in 2017. Six (6) months after the sale, Mark died. On that date, the property was valued at P190,000. The donor’s tax due is – a P 1,000 b P 1,200 c P 45,000 d None 3. The following gifts were made during the year by a resident alien:  Php 500,000 to the Philippine government  Php 200,000 to the son as wedding gift on the wedding held during the year  Php 50,000 as a birthday gift to a friend  Php 20,000 as a wedding gift to his friend’s son What is the total donor’s tax for the year? A. Php 22,800 B. Php 21,000 C. Php 1,800 D. Php 22,880 ANSWER: A SOLUTION:

Resident Alien: Gifts

RELATIVE 2. Php 200,000

Gross Gift Allowable Deduction Net Taxable Gift On: Php 100,000 --------Php 0 90,000 x 2% -------1,800 Php 1,800

STRANGER 1. Php 500,000 3. 50,000 4. 20,000 Php 570,000 (500,000) Php 70,000

Php 200,000 (10,000) Php 190,000

TOTAL

Php 770,000 (510,000) Php 260,000

Donor’s Tax Due: Php 70,000 X 30% Php 21,000

Php 22,800

4. NJ, single, donated the following properties on September 17, 2017: a b

Cash to his brother; Jacob, on account of marriage Jewelries to Kate, girlfriend residing in Japan

c d e f

House and lot to parents, a silver wedding anniversary gift Cash to PICPA Lot to Diamond Village, for use as site of barangay hall Car to Jonen, brother, donation is revocable

g

Cash to International Rice Research Institute

h

Cash to John, father of the father of his mother

i

Motorcycle to Ezra, nephew, donation is embodied in the will

The donor’s tax due on the donation to stranger is: a b c d

103,500 724,500 157,200 66,000

Answer: D. 66,000 b. d. e. g. Gross Gift Less: Exemptions e. g. Total Exemptions Taxable Net Gift Tax Rate

Stranger P 200,000 20,000 75,000 50,000 345,000 75,000 50,000 (125,000) 220,000 x 30%

P 100,000 200,00 0 1,500,000 20,000 75,000 300,00 0 50,000 100,00 0 70,000

5. In November 2017, Mr. Reyes made certain transfers of property deemed as donations fairly valued as follows: j k

Cash to his recognized natural child on account of marriage Personal computer, a graduation present to a friend

l Car, a birthday present to his father. The said property was subject to a chattel mortgage amounting to P50,000 which was assumed by the donee

P 165,000 40,00 0 350,000

m Colored TV transferred to his neighbor. The said TV had a book value of P8,000 but with a fair value of P15,000 on date of transfer n Study tables gifted to Polytechnic University of the Philippines o

Jewelry given to his sister

p

Shares of stocks on domestic corporation to his best friend

q

Washing machine to his second cousin (a revocable donation)

5,000 80,00 0 30,00 0 21,00 0 20,00 0

How much is the donor’s tax due? a P 28,400 b P 71,300 c P 38,300 d P 21,300

ANSWER: C. P 38,300 SOLUTION: a. b. c. d. e. f. g. h. Gross Gift Less: Exemptions a. c. e. Total Exemptions

Relative P 165,000

Stranger P 40,000

350,000 10,000 80,000 30,000 21,000 20,000 565,000

151,000

(10,000) (50,000) (60,000)

Total P 165,000 40,000 350,000 10,000 80,000 30,000 21,000 20,000 716,000 (10,000) (50,000)

(80,000) (80,000)

(140,000)

Taxable Net Gift

505,000

71,000

71,000 X 30%

500,000 14,000 5,000 x 6% = 3,000 Donor’s Tax Due

576,000

17,000

21,300

38,300

6. Donations on one date by Smouldy, father, of property and cash as follows: to Fluffy, a legitimate daughter on account of marriage, land with fair market value of 500,000 but subject to a mortgage of 100,000 which is assumed by Fluffy; to George, a legitimate son, on account of marriage, cash of 200,000. Required: Compute the amount of Net Gifts. a. 580,000 b. 700,000 c. 800,000 d. 570,000 Answer: A 7. Ken donated his 150 hectares land valued at the date of donation at 2,000,000 as follows: National Government Bicol Local Government Maria, girlfriend

1,000,000 400,000 600,000

How much is the net gift? a 2,000,000 b 1,000,000 c 600,000 d 400,000 Answer: C Gross gift 2,000,000 Less: Deductions (1M+400k) 1,400,000 Net gift 600,000 8. Don Fernando gave his favorite grandson, Froilan, a farm in Ilocos Norte. The property is subject to a mortgage of P500,000. Of this amount there remains an unpaid mortgage of P150,000. The farm was acquired in 2013 for P350,000. At the tine of donation, it has a fair value of P750,000. Froilan assumed the mortgage.

The donor's tax on Don Fernando's net gift is a. P29,000 b. P20,000 c. P12,000 d. P6,000 Answer: B

Gross Gift

P750,000

Less: Exemption

(P150,000)

Net Gift

P600,000

Donor’s Tax, Total Net Gift

On P500,000

P14,000

100,000

6,000

P600,000

P20,000

9. Celia donated P110, 000.00 to her friend Victoria who was getting married. Celia gave no other gift during the calendar year. What is the donor's tax implication on Celia’s donation? (A) The P100, 000.00 portion of the donation is exempt since given in consideration of marriage. (B) A P10, 000.00 portion of the donation is exempt being a donation in consideration of marriage. (C) Celia shall pay a 30% donor's tax on the P110, 000.00 donation. (D) The P100, 000.00 portion of the donation is exempt under the rate schedule for donor's tax. Ans: C

10. Annie donated the following properties: Land in Los Angeles, California, USA Land and building in Jolo, Sulu Car registered in the State of California, USA Jewelries in the Philippines Shares of stock in a corporation based in USA Accounts recievable, debtor is in the Philippines -

P250,000 175,000 225,000 45,000 60,000 25,000

The gross gift of Annie if she is a non-resident alien without reciprocity is A P 780,000 B P 295,000 C P 245,000

D P 220,000 Answer: C Solution: Land and building, Sulu Jewelries, Philippines Accounts Receivable, Philippines Gross Gift

175,000 45,000 25,000 245,000

11. A resident alien donor donated to a Philippine domestic corporation a property located abroad valued at ₱500,000. The foreign donor’s tax on the donation was ₱100,000. A donation earlier within the same calendar year, was donated to a legitimate daughter, a property valued at ₱300,000. How much was the tax payable? a b

56,250 52,500

c. 58,500 d. None of the choices

Answer: B Solution: Stranger Net gifts Add: Prior net gifts

₱500,000 -

Relative ₱ 300,000

Taxable net gifts

500,000

300,000

Tax due

150,000

6,000

Total tax due

156,000

Less: Tax payments/ credits Payments for prior gifts

6,000

Foreign donor’s tax

97.500

Total tax due

103,500 52,500

Donor’s tax credit Actual foreign donor’s tax

100,000

Limit [(500,000/800,000) X 156,000]

97500

Allowed (lower)

97500

12. Ara gave the following properties to various donees on December 25, 2012: House and lot in London

P3,500,000

Apartment house in Naga City

8,000,000

Car in Iriga City

520,000

Car in London

900,000

Savings deposit with BPI

50,000

Time deposit in a New York Bank

120,000

Accounts receivable, debtor residing in the Philippines

140,000

Accounts receivable, debtor residing in Hongkong

35,000

Franchise exercised in New York

225,000

Franchise exercised in Philippines

120,000

Investment in Good Time Co., partnership established in Hongkong

160,000

Investment in Lovers Company, partnership established in the Phil’s.

125,000

The gross gift if Ara is a resident and citizen of united states (without reciprocity). a.13,895,000

c. 8,520,000

b. 8,955,000

d. None

Solution: Apartment house in Naga City

8,000,000

Car in Iriga City

520,000

Savings deposit with BPI

50,000

Accounts receivable, debtor residing in the Philippines

140,000

Franchise exercised in Philippines Investment in Lovers Company, partnership established in the Phil’s. Total

13. A donor made the following donations: a) P 165,000 cash, a wedding gift to his recognised natural child

120,000 125,000 8,955,000

b) Personal computer worth P40,000, a graduation present to a friend c) Car valued at P350,000, a birthday present to his father. Said property was subject to a chattel mortgage amounting to P50,000 which was assumed by the done. d) Study tables gifted to Auq Na University, P80,000 e) Jewelry given to his favourite sister, P30,000. How much is the gross gift given to strangers? A. P 545,000 B. P 120,000 C. P 485,000 D. P 50,000

ANSWER:B SOLUTION: a) b) P 40,000 c) d) P 80,000 Total P 120,000 14. On January 15, 2015, Mr. Jose de Leon executed a Deed of Donation covering a piece of land which is part of the common property owned by him and his wife with the latter’s consent. The donation was made to niece, Erika. Erika accepted the donation on February 14, 2015. The land had an assessed value of P1,000,000 and zonal value of P800,000 at the time of donation. It was also encumbered with an unpaid mortgage of P300,000 which was assumed by the done. In addition, the done agreed to pay the applicable donor’s tax of P210,000. How much is the donor’s tax due? a. P3,000 b. P12,000 c. P15,000 d. P8,000 Solution: Gross gift Less: Deduction Net gift Tax due 200,000 150,000 x 4%

P 500,000 150,000 350,000 2,000 6,000

P

8,000

15. The spouses Helena and Federico wanted to donate a parcel of land to their son Dondon who is getting married in December, 2011. The parcel of land has a zonal valuation of P420,000.00. What is the most efficient mode of donating the property? a The spouses should first donate in 2011 a portion of the property valued at P20,000.00 then spread the P400,000.00 equally for 2012, 2013, 2014 and 2015. b Spread the donation over a period of 5 years by the spouses donating P100,000.00 each year from 2011 to 2015.

c d

The spouses should each donate a P110,000.00 portion of the value of the property in 2011 then each should donate P100,000.00 in 2012. The spouses should each donate a P100,000.00 portion of the value of the property in 2011, and another P100,000.00 each in 2012. Then, in 2013, Helena should donate the remaining P20,000.00.

16. On January 15, 2011, Daisy gave a piece of land to her brother-inlaw who is getting married on February 14, 2011. The assessed value and zonal value of the land were P750,000 and P1,000,000 respectively. The land had an unpaid mortgage of P200,000, which was not assumed by the donee and an unpaid realty tax of P10,000 which was assumed by the donee. How much was the donor's tax due? a. P 297,000

c. p 43,400

b. p 237,000

d. p 31,400

Gross gift

1,000,000

Less: Unpaid realty tax assumed by donee

(10,000)

Taxable net gift

990,000

Tax due and payable (30% X P990,000)

297,000

17. Jose German, filipino resident of Germany, donated a real propery worth ₱800,000 to his brother, Felipe Española. Jose paid a transfer tax of ₱20,000 in germany. How much donor’s tax should be paid by Jose German in the Philippines? C. 12,000 D. Zero

A 32,000 B 20,000

Solution: Tax on 500,000

14,000

300,000 x 6%

18,000

Tax due

32,000

Less: Tax paid in Germany

20,000

Limit (800/800 x 32000) 32,000 Credit allowed (lower) Tax Payable

(20,000) 12,000

18. The following were donations made by Mr Fab, a Filipino, to his relative for the taxable year 2014: Donation of Property which are located in: Foreign Country A

300,000

Foreign Country B

200,000

Philippines

500,000

Total Donations

1,000,000

Foreign Donor’s Tax Foreign Country A

10,600

Foreign Country B

10,000

How much is the Tax Credit and the Donor’s Tax Due? A B C D

19,400 22,000 13,200 10,600

Answer: A 19. A sold his car to B. A car cost P300,000 and has a fair market value of P400,000 at the time of sale. The car was sold for P200,000. For donor’s tax purposes, which of the following statements is correct? a There is a taxable gift of P100,000 b There is a taxable gift of P200,000 c The transfer is for insufficient consideration hence, not subject to gift tax d The transfer involves a personal property hence, not subject to gift tax Answer: B 20. The gross estate of a non-resident alien P2,000,000, 75% of which is from abroad. The actual funeral expenses totalled to P80,000, 1/4 of which was paid by his employer. The deductible funeral expense is: a. 60,000 b. 15,000 c. 5,000 d. 6,250 Answer B Solution: PH gross estate: 2000000 x 25%= 500,000 500000/2000000 x 60000= 15000

Limit: 200000 Actual expenses: 60000 Lowest amount: 15000

21. Tiffany, Filipina, had the following data: Net Gift, Philippines Net Gift, United States Gift tax paid in the United States

P 150 000 450 000 7 500

The donor's tax payable on Carina is A P 20 000 B P 1 000

C. P 12 500 D. P 15 000

Answer: C Solution: Net Gift, Philippines Net Gift, United States Total net gifts Tax on 500 000 100 000 x 6% Donor's tax due Less: Tax credit Tax paid, U.S Limit (45/60 x 20 000) Allowed (lower) Donor's tax payable

150 000 450 000 600 000 14 000 6 000 20 000 7 500 15000 7 500 12 500

22. Problem Don Ardiente wanted the painting hanging on the wall of his living room replaced with a new one. He was able to sell it to his friend, Don Antonio, at a very low price of P500,000. It's fair market value is P800,000. Three years ago, he bought the painting at an exhibit held in Paris for P350,000. What is the gain from sale? a. P450,000 b. P300,000 c. P150,000 d. P0 Answer: C

23. During the year, MR. and Mrs. Dela Cruz donated P100,000 in cash from their conjugal assets to each of their children. For purposes of paying donor’s tax, they should file: a A joint return of the total donation in 2001 of P300,000

b c d

Three joint returns for P100,000 donation to each child Two separate returns for P100,000 by each spouse Two separate returns for a donation of P150,000 by each spouses...