Installment Reporting

Question 2

Which reporting method is used by individuals making casual property sales with deferred payment not in trade or business?

Answer 2

Installment method ## Footnote Installment method applies if seller is not regularly engaged in business and payment is deferred.

Question 3

Which method reports gross income in proportion to collections over total contract price?

Answer 3

Installment sales method ## Footnote This method defers recognition based on actual collection timing.

Question 4

Which statement on capital gains tax on real property is not correct — 30-day tax due from lump sum full payment installment tax due 30 days after each payment initial payment means downpayment or payment allowed in installment if initial payment ≤ 25% of SP?

Answer 4

Installment tax due 30 days after each payment ## Footnote The entire capital gains tax is due upfront regardless of payment terms.

Question 5

When may installment method be used by non-dealer sellers of personal property?

Answer 5

When initial payments do not exceed 25% of selling price ## Footnote If initial payments exceed 25% installment method is disallowed.

Question 6

Which of the following is included in computing initial payments — commissions selling expenses installment payments in year of sale or gross profit?

Answer 6

Installment payments in year of sale ## Footnote Initial payment = downpayment + payments received in year of sale including mortgage excess.

Question 7

Which is correct — holding period rule applies to real properties held by individuals installment allowed if downpayment ≤ 25% of CP or income may be reported on installment even if fully paid in one year?

Answer 7

All are true ## Footnote Key feature is initial payment ratio to contract or selling price.

Question 8

Which is false under installment method — gain = SP – cost no mortgage means SP = contract price CGT payable in installments or excess of mortgage over cost is added to initial payment?

Answer 8

CGT payable in installments ## Footnote CGT is due upon sale even if payments are deferred.

Question 9

Which is an exception — mortgage < cost means SP = CP mortgage assumption lowers contract price sale with >25% down is cash basis or mortgage excess not added to initial payment?

Answer 9

Mortgage excess not added to initial payment ## Footnote Excess is part of initial payment computation.

Question 10

When is deferred payment method allowed for a taxpayer not a dealer?

Answer 10

When initial payments do not exceed 25% of selling price ## Footnote Exceeding threshold means income must be reported under cash or accrual method.

Question 11

Mr. X sold personal car for ₱1M with ₱125K down and ₱125K installment in 2021. What is initial payment?

Answer 11

₱250,000 ## Footnote Initial payment = downpayment + installment received in year of sale.

Question 12

What is gain to be reported in 2021 if cost is ₱750K?

Answer 12

₱62,500 ## Footnote Gross profit = ₱250K ÷ ₱1M × ₱250K gain = ₱62.5K.

Question 13

Ms. X sold land to sister for ₱2.625M with ₱375K down and ₱375K in 2022. Mortgage assumed ₱1.875M. What is initial payment?

Answer 13

₱937,500 ## Footnote Downpayment + excess of mortgage over cost = ₱375K + (₱1.875M – ₱1.6875M).

Question 14

What is selling price of the land?

Answer 14

₱2,625,000 ## Footnote Selling price = downpayment + mortgage assumed + future payments.

Question 15

What is contract price?

Answer 15

₱2,062,500 ## Footnote Contract price = SP – mortgage assumed + excess of mortgage over cost.

Question 16

Mr. X sold land for ₱5M with ₱2M mortgage assumed. Downpayment ₱300K and ₱200K paid in 2021. What is initial payment?

Answer 16

₱700,000 ## Footnote ₱300K + ₱200K + excess of mortgage over cost (₱2M – ₱2.5M = 0).

Question 17

What is contract price?

Answer 17

₱3,000,000 ## Footnote Contract price = SP – mortgage assumed + excess of mortgage over cost.

Question 18

What is CGT due on July 1 payment?

Answer 18

₱35,000 ## Footnote 6% × ₱300K = ₱18K; 6% × ₱200K = ₱12K; 6% × excess of mortgage over cost = ₱5K.

Question 19

Mr. X sold land for ₱4.8M with ₱1.6M down and ₱320K/month starting Jan 2022. FMV of note = 75%. What is 2021 income?

Answer 19

₱1,120,000 ## Footnote Gross profit = ₱1.92M; recognized = ₱1.6M ÷ ₱4.8M × ₱1.92M.

Question 20

Mr. X sold land for ₱2M with ₱750K mortgage assumed and ₱250K down. What is 2021 income if ordinary asset?

Answer 20

₱333,333 ## Footnote Gross profit = ₱1.5M; initial payment = ₱250K + (₱750K – ₱500K) = ₱500K; GP ratio = 75%; income = ₱250K × 75%.

Question 21

Land 1 sold for ₱540K cost ₱270K commission ₱40.5K downpayment ₱67.5K installment ₱67.5K. What is CGT in 2021?

Answer 21

₱32,400 ## Footnote CGT = 6% × total payments received in 2021 = ₱135K × 6%.

Question 22

Land 2 sold for ₱810K cost ₱337.5K commission ₱94.5K downpayment ₱94.5K installment ₱94.5K. What is CGT in 2021?

Answer 22

₱113,400 ## Footnote CGT = 6% × ₱189K = ₱11,340.

Question 23

Land 3 sold for ₱1.08M cost ₱540K commission ₱54K downpayment ₱67.5K installment ₱67.5K. What is CGT in 2021?

Answer 23

₱81,000 ## Footnote CGT = 6% × ₱135K = ₱8,100.

Question 24

Land 4 sold for ₱1.62M cost ₱540K commission ₱67.5K downpayment ₱202.5K installment ₱202.5K. What is CGT in 2021?

Answer 24

₱243,000 ## Footnote CGT = 6% × ₱405K = ₱24,300.

Question 25

What is total CGT due in 2021 for all 4 land sales?

Answer 25

₱46,140 ## Footnote Sum of CGT: ₱8,100 + ₱11,340 + ₱8,100 + ₱24,300.

Question 26

If promissory note has FMV of 75% of face value how much is recognized as income in year of sale?

Answer 26

75% of note’s face value × gross profit rate ## Footnote Only FMV of note is considered collected in year of sale.

Question 27

If mortgage assumed by buyer exceeds seller’s cost is excess included in initial payment?

Answer 27

Yes ## Footnote Excess of mortgage over cost is added to initial payment.

Question 28

If mortgage assumed is less than cost is it included in initial payment?

Answer 28

No ## Footnote Only excess of mortgage over cost is added to initial payment.

Question 29

If seller is a dealer of personal property is 25% rule applicable?

Answer 29

No ## Footnote Dealers may use installment method regardless of initial payment ratio.

Question 30

If seller is not a dealer and initial payment exceeds 25% of selling price what method is used?

Answer 30

Cash or accrual method ## Footnote Installment method is disallowed if threshold is exceeded.

Question 31

If buyer assumes mortgage equal to cost is it included in initial payment?

Answer 31

No ## Footnote No excess over cost means no addition to initial payment.

Question 32

If buyer assumes mortgage and pays ₱300K down and mortgage exceeds cost by ₱200K what is initial payment?

Answer 32

₱500,000 ## Footnote Downpayment + excess of mortgage over cost = initial payment.

Question 33

If buyer assumes mortgage and pays ₱300K down but mortgage is less than cost what is initial payment?

Answer 33

₱300,000 ## Footnote No excess over cost means only downpayment is counted.

Question 34

If buyer assumes mortgage and pays ₱300K down and mortgage equals cost what is initial payment?

Answer 34

₱300,000 ## Footnote No excess over cost = no addition to initial payment.