QUESTION 4

Karima Limited acquired a 40-year leasehold property on 1 February 2015 for P850,000. On 31 July 2020, Karima Limited sold the leasehold property for P1,050,000. Take NCOLI for July 2020 as 2068.2.

On 1 September, the company acquired another leasehold property for P1,200,000 with a period of 50 years.

The company made an election for holdover relief.

Required

1. Explain the tax implications to a lessee of disposal of leasehold property. (10 marks)
2. Calculate the net allowances granted under income tax. (10 marks)
3. Calculate the chargeable gain or loss arising on the disposal of the leasehold property. (10 marks)
4. Compute the holdover or rollover relief and explain the conditions that Karima should meet to be granted the holdover relief. (10 marks)