TRANSFER AND BUSINESS TAXATION
ACCOUNTING METHODS AND PERIODS
FORMATS OF COMPUTATION
1 Selling Price (SP)
Cash received xxx
FMV of the property received xxx
Receivables xxx
Unpaid mortgage assumed by the buyer xxx
Selling Price (SP) xxx
2 Contract Price (CP)
Selling Price xxx
Less: Mortgage assumed by the buyer (xxx)
Balance xxx
Add: Excess unpaid mortgage cost xxx
Contract Price (CP) xxx
3 Initial Payments
Downpayment xxx
Expected installment collections in the year of sale xxx
Excess of unpaid mortgage over cost xxx
Initial Payments xxx
4 Realized Gross Profit (RGP) (if sale is subject to basic tax)
RGP = Collections x Gross Profit Rate
Gross Profit Rate = Gross Profit/Contract Price
5 Installment Capital Gains Tax
Installment CGT = Total CGT x Collection/CP 0
EXAMPLE
Based on the previous data, how much is the gross income, assuming cash basis is used?
Sale of livestock and farm products 120,000.00
Cost of sales:
Beginning inventory 90,000.00
Purchases of livestock 100,000.00
Ending inventory -180,000.00 10,000.00
Gross income from operations 110,000.00
Add: Other income 70,000.00
Total Gross Income 180,000.00
Sale of livestock and farm products 120,000.00
Cost of sales:
Purchases of livestock -100,000.00
Gross income from operations 20,000.00
Add: Other income 70,000.00
Total Gross Income 90,000.00
Ariel
How much is the selling price?
a. P450,000 c. P180,000
b. P270,000 d. P225,000
How much is the contract price?
a. P450,000 c. P180,000
b. P270,000 d. P225,000
How much is the initial payments?
a. P67,500 c. P45,000
b. P112,500 d. P225,000
How much is the income subject to income tax in 2016, 2017, and 2018?
a. P56,250, P33,750 and P22,500, respectively
b. P112,500, P67,500 and P45,000, respectively
c. P225,000, PO and PO, respectively
d. None of the choices
ESTATE TAX
UNMARRIED DECEDENT
Gross Estate P xx
LESS:
Ordinary deductions (xx)
Special deductions (xx)
Net Taxable Estate P xx
x Estate Tax Rate 6%
Estate Tax Due P xx
Less: Estate tax credit (xx)
Estate Tax Payable P xx
MARRIED DECEDENT
Gross Estate Conj./Comm. Ex clusive Total
Real and immovable property xx xx
Tangible personal property xx xx
Intangible property * xx xx
Certain transfers ** xx xx
Total xx xx xx
Less: Ordinary Deductions
1. Losses (xx) (xx)
Indebtedness or Claims against the estate (xx) (xx)
Unpaid Taxes (xx) (xx)
etc., such as claims against insolvent persons (xx) (xx)
2. Vanishing Deduction
Property Relationship: CPG - (xx)
Property Relationship: ACoP (xx) (xx)
3. Transfer for Public Use (generally exclusive) - (xx) (xx)
Net Community/Exclusive before special deductions xx xx xx
Less: Special Deductions
1. Standard Deduction
Train Law: (xx)
Citizen/Resident citizens - P5M
NRA decedents - P500,000
2. Family Home (xx)
Train Law:
Citizen/Resident citizens - P10M
NRA decedents - not allowed
3. Amount received under RA4917 (xx)
NRA decedents - not allowed xx
Net Estate before share of the surviving spouse
Less: Share of the Surving Spouse (1/2 of the net common property before Special Deductions (xx)
Net Taxable Estate Pxx
Multiply by: Estate Tax Rate under TRAIN law 6%
ESTATE TAX DUE Pxx
* Intangible properties including rights accruing before death, claims against insolvent persons, RA 4917, and receivable as
proceeds from life insurance tak en out by the decedent.
** Refer to certain transfers made before death but will tak e effect only upon death (transfer mortis causa) as well as transfer
under general power of appointment, transfers made to qualified charitable organizations and transfer for public use/purpose.
AMOUNT DEDUCTIBLE (PROFORMA COMPUTATION)
Value to take (lower between FMV at the time death vs. FMV at the time of inheritance or donation
Less: Mortgage paid by present decedent (on mortgaged assumed)
Initial Basis
Less: Proportional Deduction
[(IB/GE) x (LITe + TPFU)]
Final basis
Rate
Vanishing Deduction
RATE OF VANISHING DEDUCTION: RATE
Interval of Acquisition (inheritance or donation) and death of present decedent
Within 1 year 100%
More than 1 year but not more that 2 years 80%
More than 2 years but not more than 3 years 60%
More than 3 years but not more than 4 years 40%
More than 4 years but not more than 5 years 20%
CHANGES ON ESTATE TAX
Sec. 84 - On the computation of Estate Tax:
1. Deduction Allowed to the Estate of a Citizen or Resident of the Philippines:
A Standard Deduction = P5,000,000
B Family Home = Fair Market Value (FMV) of the decedent's Family Home up to P10,000,000 only
C No deduction for Funeral Expense and Medical Expense
2. Deduction Allowed to the Estate of a Non-Resident:
A Standard Deduction = P500,000
