Quizzer TAX- Fringe- Benefit-TAX PDF

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PCBA CPA REVIEWConcordia Sur, Nueva Valencia, GuimarasTAXATION - PROBLEMS IN FRINGE BENEFIT TAX(1-3) Buday was hired by Budoy to be the latter’s Secretary and Personal Assistant. To enable her to perform her duties well, Budoy provided a condo unit (which is adjacent to his unit) which Buday could u...

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PCBA CPA REVIEW Concordia Sur, Nueva Valencia, Guimaras

TAXATION - PROBLEMS IN FRINGE BENEFIT TAX (1-3) Buday was hired by Budoy to be the latter’s Secretary and Personal Assistant. To enable her to perform her duties well, Budoy provided a condo unit (which is adjacent to his unit) which Buday could use as her temporary residence. 1. (YES/NO) Is the fair market of the use of the condo by Buday a Fringe Benefit that is subject to FRINGE BENEFIT TAX? 2. (YES/NO) Is the Fair Market Value of the use of the condo unit by Buday will form part of her taxable compensation income that is subject to basic tax under Section 24-A of the Tax Code and consequently to Creditable Withholding Tax on Compensation Income? 3. Assuming Buday is an employee holding a managerial post and not merely a secretary and personal assistant to Budoy, is the Fair Market Value of the use of the condo by Buday a Fringe Benefit subject to FBT? (YES/NO) 4. On the Field Allowance (covers meals and business trip-related expenses) are granted to the managerial and supervisory employees of the Philippine Gaming Management Corporation (PGMC) who will be away from the office site for at least 8 hours to visit Lotto Franchise holders for repairs and/or inspection of equipment leased by PGMC from Philippines Charity sweepstakes Office (PCSO). Should the aforementioned allowance be subject to FRINGE BENEFIT TAX? (YES/NO) (5-7)Arthur Henderson and Marie Henderson filed their annual income tax with the BIR. Mr. Arthur is the president of American International Underwriters for the Philippines, Inc., which is domestic corporation engaged in the business of general non-life insurance, and represent a group of American insurance companies engaged in the business of general non-life insurance. The BIR demanded payment for alleged deficiency taxes. In their computation, the BIR included as a part of taxable income.  Arthur’s allowances for rental, residential expenses, subsistence, water, electricity and telephone expenses.  Entrance fee to the Marikina Gun and Country Club which was paid by his employer for his account, and  Travelling allowance of his wife. The taxpayer’s justification are as follows: Allowances for Rental and Utilities

Entrance fee to the Marikina Gun and Country Club

Travelling Allowance of his wife.

Arthur did not receive money for the allowances. The apartment is furnished and paid for by his employer-corporation, for the employer corporation’s purposes. The spouses had no choice but to live in expensive apartment, since the company used it to entertain guests, to accommodate officials, and to entertain customers. Arthur is firm that such amount should not be considered income since it is an expense sustaining the business of his employer. He has to talk to one of the key client of the company for future investments. Mrs. Henderson merely accompanied Arthur to New York on a business trip as his secretary, and at the employer-corporation’s request that she should look at details of the plans of a building that the employer intended to construct. Mrs. Henderson knows the place very well because she stayed in New York for 15 years before she moved in the Philippines.

5. The taxpayer’s justification on Allowances for Rental and Utilities is correct. The rental expenses and subsistence allowance are to be considered not subject to income tax. The taxpayer’s high executive position and social standing, demanded and compelled the couple to live in a more spacious and expensive quarters. These expenses are company expenses, not income by the employee that is subject to tax . (TRUE/FALSE) 6. The taxpayer’s justification on Entrance fee to the Marikina Gun and Country Club is correct. These expenses are company expenses, not income by the employee that is subject to tax . (TRUE/FALSE)

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6. The taxpayer’s justification on Travelling Allowance of his wife is correct. The employer-corporation is the one who requested for the service of Mrs. Henderson to look at details of the plans of a building that the employer intended to construct. The travel is related to the pursuit of business plan’s success and not for just leisure and priviledge. These expenses are company expenses, not income by the employee that is subject to tax . (TRUE/FALSE) (8-16) Determine the Grossed Up Monetary Value and the Fringe Benefit Tax (FBT) of the following for taxable year 2019. TAXPAYER’S CLASSIFICATION

Resident Citizen (Sales Manager) Resident Alien (Executive President)

Resident Citizen (Finance Manager)

Resident Citizen (Branch Accountant) Special Alien Employee (Operations Manager)

NATURE OF THE FRINGE BENEFIT RECEIVED Grocery allowance for personal consumption Expenses of the employee which are borne by the employer for household personnel. Expenses incurred due to attending business meeting or convention. Grocery allowance for the personal consumption Expenses of the employee which are borne by the employer for driver and house helper.

AMOUNT OF FRINGE BENEFIT RECEIVED

GROSSED-UP MONETARY VALUE

FRINGE BENEFIT TAX

P25,000.00

(8)

(9)

P200,000

(10)

(11)

P40,000

P40,000

(12)

(13)

(14)

(15)

(16)

P10,000

P100,000

(17-18) Assume an employer furnished cash fringe benefit subject to fringe benefit tax amounting to P975,000. 17. What should be the appropriate journal entry in the books of the employer? A.

FRINGE BENEFIT EXPENSE FRINGE BENEFIT TAX EXPENSE

975,000 525,000 CASH

B.

FRINGE BENEFIT TAX EXPENSE FRINGE BENEFIT EXPENSE

1,500,000 975,000 525,000

CASH C. FRINGE BENEFIT EXPENSE FRINGE BENEFIT TAX EXPENSE

1,500,000 975,000 458,824

CASH D. CASH

1,433,824 1,500,000

FRINGE BENEFIT EXPENSE FRINGE BENEFIT TAX EXPENSE

975,000 525,000

18. Assume that the cash fringe benefit is not subject to fringe benefit tax what should be the appropriate journal entry of the employer. A.

FRINGE BENEFIT EXPENSE FRINGE BENEFIT TAX EXPENSE

975,000 525,000 CASH

1,500,000

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B.

FRINGE BENEFIT EXPENSE

975,000 CASH

C. FRINGE BENEFIT TAX EXPENSE

975,000 975,000

CASH D. CASH

975,00 1,500,000

FRINGE BENEFIT TAX EXPENSE FRINGE BENEFIT EXPENSE

975,000 525,000

(19-22) In 2019, a domestic corporation paid for the monthly rental of a residential house of its branch manager, Mr. Juan De la Cruz, amounting to P156,000. Assume that there is no tansfer of ownership. 19. How much is the monetary value of the fringe benefit? 20. How much is the grossed-up monetary value of the fringe benefit? 21. How much is the Fringe Benefit Tax? 22. How much is the deductible expense by the employer from its gross income? (23-27) ABC Corporation, a domestic corporation, owns a condiminium unit. In 2019, the said corporation furnished and granted the said property for the residential use of its Vice President. The Fair Market Value of the property per BIR assessment amounts to P12,000,000 while its Fair Market Value as shown in its Current Real Property amounts to P10,000,000. 23. What is the monthly monetary value of the Fringe Benefit? 24. What is the monthly grossed up monetary value of the benefit? 25. Monthly Fringe Benefit Expense 26. Monthly Fringe Benefit Tax Expense 27. Total amount deductible as fringe benefits by the employer for the month 28. Which statement is wrong? The fringe benefit tax is: a. Imposed on the employer. b.Imposed on the employee. c.Withheld at source. d.Deductible by the employer. 29. Which statement is wrong? The amount on which the fringe benefit tax rate is applied is: a.The monetary value of the fringe benefit. b.The grossed-up monetary value of the fringe benefit. c.The amount deductible by the employer from his/its gross income. d.Reflected in the books of accounts in the two account of fringe benefits expense and fringe benefit tax expense. 30. Which of the following fringe benefit is not subject to the fringe benefits tax? a. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans. b.Housing. c.Expense account. d.Vehicle of any kind. 31. Statement 1. A fringe benefit which is subject to the fringe benefit tax is taxable income of the employee. Statement 2. A fringe benefit which is not subject to the fringe benefit tax is taxable income of the employee. a.First statement is true while second statement is false. b.First statement is false while second statement is true. c.Both statements are true. d.Both statements are false. 32. Statement 1. The fringe benefit tax is deductible from the gross income of the employer. Statement 2. The fringe benefit tax is withheld by the employer. a. The first statement is true while second statement is false. b.The first statement is false while second statement is true. c.Both statements are true. d.Both statements are false.

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33. Statement 1: A corporation cannot deduct a loss arising from a sale between the corporation and the controlling individual stockholders. Statement 2: A corporation cannot deduct a loss arising from a sale between the corporation and the controlling parent corporation. a. First statement is correct, but the second statement is wrong. b.First statement is wrong, but the second statement is correct. c.Both statements are correct. d.Both statements are wrong. 34. The family of an individual shall include his brothers and sisters, whether by whole or half blood, spouse, ancestors and lineal descendants. In which of the following does the concept not apply? a.Non-deductible loss from sales or exchange of property between members of the family. b.Non-deductible bad debts on transaction between members of the family. c.Non-deductible interest expense between members of the family. d.Deductible premiums on hospitalization and health insurance of the family.

35. If a friend inquires whether or not the cost of education to the assistance to the employee and/or his dependents which are borne by the employer be taxable. What will your answer be? First Answer – A scholarship grant to the employee by the employer shall not be treated as taxable fringe benefit if the education or study involved is directly connected with the employer’s trade, business or profession and there is a written contract between them that the employee is under obligation to remain in the employ of the employer for a period of time that they have mutually agreed upon. Second Answer – The cost of education assistance extended by an employer to the dependents of an employee shall be treated as taxable fringe benefits of the employee unless the assistance was provided through a competitive scheme under the scholarship program of the company. a. True, True b. True, False c. False, True d. False, False 36. 1st Statement – Monetized unused vacation leave credits not exceeding 10 days is an exempt de minimis benefit. 2nd Statement – Daily meal allowance for overtime work not exceeding twenty-five (25%) percent of the basic minimum wage is exempt fringe benefit. a. True, true b. False, true c. True, false d. False, false 37. The Fringe benefit tax is i. Imposed on the employer ii. Withheld at source iii. Deductible expense by the employee a. Only A and B b. Only A and C c. Only B and C d. A,B, and C 38. The following are not taxable, except a. Refund of fringe benefit tax b. Refund of Philippine income tax c. Refund of estate or donor’s tax d. Refund of special assessment 39. Which is wrong? The tax benefit rate is applied on a. The monetary value of the fringe benefit b. The gross up monetary value of the benefit c. The amount deductible by the employer from gross income d. Both the amounts of fringe benefit and fringe benefit tax 40. The determination of the fringe benefit tax would entail the following, except a. Valuation of the fringe benefit. b. Determination of the percentage of the benefit subject to the fringe benefit tax. c. Determination of the manner by which the fringe benefit has been utilized by the employee. d. Determination of the grossed-up monetary value of the fringe benefit.

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