SCRIPT
To apply our learning from the discussion we have heed, lets answer the following illustration.
Mr. Saryaya, a practicing accountant, had the following income and donations during the year:
Professional fees P 1,100,000
Donations to government priority activities 100,000
Donations pursuant to treaties 30,000
Donations to accredited charitable institutions 50,000
Donations to the government for public purpose 80,000
Donations to non-accredited charitable institutions 60,000
Donations to a foreign charitable institution 40,000
Donations to street beggars 50,000
Other deductible business expenses 600,000
Distinguishing the Fully deductible contributions we have:
To government priority activities P 100,000
To accredited charitable institutions 50,000
To treaty-covered entities 30,000 which totalled to P 180,000
And When it comes to Partially deductible contributions we have:
To government non-priority activities P 80,000
To non-accredited charitable institutions 60,000
Which totalled to 140 000, for what we have learned, partially deductible contributions are
subject to limit, So to compute for the deduction limit for partially deductible contributions then lets
have:
Professional fees P 1,100,000
Less: Other deductions before contribution expense 600,000
Net income before contributions P 500,000
Since we are computing for individual purposes then lets use the 10% deduction. Then 500, 000
multiplied by 10% is 50,000 pesos. Therefore is our deduction limit for partially deductible
contributions. Next is we will add the total of the full and partially deductible contributions. So 180,00
plus 50,000 that will result to 230,000pesos for our total deductible contribution expense.
Notice that the donations to a foreign charitable institution is not deductible for the fact that it is not in
accordance with treaties. The donations to beggars is also not deductible since it is not made to a
domestic organization. And lastly know that contributions to non-qualified donee institutions are not
deductible against gross income and are subject to donor’s tax.
NOTE:
1.The donation to a foreign institution is not deductible unless in accordance with treaties.
2. The donation to beggars is not made to a domestic organization; hence, it is not deductible.
3. Contributions to non-qualified donee institutions are not deductible against gross income and are
subject to donor’s tax.
CONTENT
Illustration 1
Mr. Saryaya, a practicing accountant, had the following income and donations during the year:
Professional fees P 1,100,000
Donations to government priority activities 100,000
Donations pursuant to treaties 30,000
Donations to accredited charitable institutions 50,000
Donations to the government for public purpose 80,000
Donations to non-accredited charitable institutions 60,000
Donations to a foreign charitable institution 40,000
Donations to street beggars 50,000
Other deductible business expenses 600,000
Deductible contribution expense shall be computed as follows:
Fully deductible contributions:
To government priority activities P 100,000
To accredited charitable institutions 50,000
To treaty-covered entities 30,000 P 180,000
Partially deductible contributions:
To government non-priority activities P 80,000
To non-accredited charitable institutions 60,000
Total contributions subject to limit P 140,000
Deduction limit P 50,000
Deductible contributions with limit (LOWER) 50,000
Total deductible contribution expense P 230,000
Deduction limit for partially deductible contributions is computed as follows:
Professional fees P 1,100,000
Less: Other deductions before contribution expense 600,000
Net income before contributions P 500,000
Multiply by: Individual limit percentage 10%
Deduction limit P 50,000
NOTE:
1.The donation to a foreign institution is not deductible unless in accordance with treaties.
2. The donation to beggars is not made to a domestic organization; hence, it is not deductible.
3. Contributions to non-qualified donee institutions are not deductible against gross income and are
subject to donor’s tax.
