The D'Asenso Corp. issued 5,000 shares of common stock at 100.00 per share. Of 

this, Eugene owns 500 shares which he acquiredat100 per share. In December,

2013 the corporation declared and paid 25% stock dividend payable in preferred

stock. Eugene sold all his stock dividend shares at 120 per share on February 10,

2014.

Required:

a. Compute the gain or loss on sale of stock dividend shares, assuming that at the

time of payment of the stock dividend, the fair market value of the shares of stock

are:

Common: 110 per share

Preferred: 110 per share

b. Compute the capital gains tax due on said sale.

2. On January 5, 2008, A entered into a 10-year lease contract with B over a 1,000 Sq.

M. lot at a minimal rental of 1,000 a month, on condition that B will construct a

building thereon, which will become the property of A upon termination of the

lease. The building was completed on December 31, 2008 at a total cost of

P5,000,000.00, with an estimated useful life of 20 years. Assuming that in early

2013 the building was destroyed by an earthquake.

How much income or loss should A report to the BIR on this building for 2013, if he

is using the spread-out method, assuming that there was no insurance coverage

on said building?

3. Bernardo, a Filipino businessman and practicing lawyer, had the following expenses

and losses for 2008:

Real property taxes paid on his beach resort including

100 as interest 2,500

Value added tax 10,000

Losses from fire but recovered 100,000

from Insurance Company 150,000

Interest paid on his loan to his mother 1,500

Membership dues paid to Integrated Bar of the Phil. 500

Bad debts written off 20,000

Yearly depreciation on car 5,000

Office furniture bought on July 1, 2008, with an

estimated life of 5 years 30,000

Loss on sale of residential lot held for 2 years 25,000

Entertaining sales supervisor and sales manager 4,000

Salaries to office and business personnel 160,000

Bernardo received a cashgift from his Uncle amounting to 25,000 but was stolen.

The bad debts in No. 6 above refer to an uncollectible account of a debtor who died

without leaving any properties.

Required:

Compute Bernardo's allowable deductions for his 2008 income tax return and

explain the items not allowed to be deducted.

Answer rating: 100% (QA)

a To compute the gain or loss on the sale of stock dividend shares we first need to determine the cost basis of the shares Eugene sold Since the stock ... View the full answer