Mr. Leody, a resident citizen, is working for a large real estate development company in the country and in 2020, he was promoted to Vice-President of the company. With more responsibilities comes higher pay. In 2021, he decided to buy a new car worth P2 Million and he traded-in his old car with a market value of P800,000.00 and paid the difference of P1.2 Million to the car company. The old car, which was bought three (3) years ago by the father of Mr. Leody at a price of P700,000.00 was donated by him and registered in the name of his son. The corresponding donor's tax thereon was duly paid by the father. How much is the tax basis of the old car?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Mr. Leody, a resident citizen, is
working for a large real estate
development company in the
country and in 2020, he was
promoted to Vice-President of
the company. With more
responsibilities comes higher
pay. In 2021, he decided to buy
a new car worth P2 Million and
he traded-in his old car with a
market value of P800,000.00
and paid the difference of P1.2
Million to the car company.
The old car, which was bought
three (3) years ago by the
father of Mr. Leody at a price
of P700,000.00 was donated
by him and registered in the
name of his son. The
corresponding donor's tax
thereon was duly paid by the
father. How much is the tax
basis of the old car? *
Transcribed Image Text:Mr. Leody, a resident citizen, is working for a large real estate development company in the country and in 2020, he was promoted to Vice-President of the company. With more responsibilities comes higher pay. In 2021, he decided to buy a new car worth P2 Million and he traded-in his old car with a market value of P800,000.00 and paid the difference of P1.2 Million to the car company. The old car, which was bought three (3) years ago by the father of Mr. Leody at a price of P700,000.00 was donated by him and registered in the name of his son. The corresponding donor's tax thereon was duly paid by the father. How much is the tax basis of the old car? *
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