Business Administration and Accountancy Integrated CPA Review and Refresher Program TAXATION. Exam.

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The University of Manila College of Business Administration and Accountancy Integrated CPA Review and Refresher Program TAXATION

1. Your two classmates are engaged in a discussion as to what are included in the inherent limitations on the power of taxation. They decided to make you their referee in order to enlighten them on which of the following is generally not included among the inherent limitations. What should you choose from among the following? a. Double Taxation b. Recognition of Comity c. No improper delegation of the legislative authority to tax. d. The taxing power should only be exercised within the territorial boundaries of the taxing authority.

2. Armando, a resident citizen, is employed as a manager of an offshore banking unit in the Philippines. He is married but estranged from his wife. He has, living with him and fully dependent for support, his five (5) minor children, who were all unmarried and not gainfully employed. What amount could Armando claim as his basic personal and additional exemptions? a. none b. P250,000.00 c. P300,000.00 d. P 50,000.00 3. A taxpayer is suspected no to have declared his correct gross income in his return for 2012. The Examiner requested the Commissioner to authorize him to inquire into the bank deposits of the taxpayer so that he could proceed with the net worth method of investigation to establish fraud.

I. The examiner may be allowed to look into the taxpayer’s bank deposits because of the deliberate intent to deprive the government to collect taxes.

II. The examiner may inquire into the taxpayer’s bank deposits if he filed an application for compromise of his liability. a. Only I is correct b. Only II is correct c. Both I and II are correct d. Neither I nor II is correct 4. For income tax purposes, the source of the service income is important for the taxpayer, who is a; a. Filipino citizen residing in Makati City b. Non-resident Filipino citizen working and residing in London, United Kingdom. c. Japanese citizen who is married to a Filipina citizen and residing in their family home in Fort Bonifacio, Taguig City d. Domestic Corporation.

5. Wendy shows the following input VAT during a quarter: Deferred input VAT Allocation of current input VAT: Regular sales Zero-rated sales Sales to the government Exempt sales Compute the creditable input VAT. a. P800,000 b. P700,000

c. P650,000

P150,000 P200,000 300,000 100,000 50,000

d. P350,000

6. ABCD Corporation, a corporation created and organized in the Philippines and under its law is composed wholly of the resident aliens. It shall not be subject to Philippine income taxation on a. royalties received from a French corporation for the use of ABCD’s patented processes in France. b. interest on its dollar deposits under the expanded foreign currency deposit system. c. dividends received from a domestics corporation wholly owned by Filipino citizens. d. gains derived from the sale in the New York stock exchange of shares of stocks of an Argentinian corporation.

7. On December 2018, WTF Drugstore purchased drugs prescribed for diabetes, high-cholesterol, and hypertension in the amount of P300,000 which were sold on January 2019 with a 30% mark-up. As of December 31,2018, the taxpayer’s excess input taxes amounted to P150,000. A summary of the taxpayer’s inventory as of December 31, 2018 shows the following:

Amount

Input VAT

Imported medicines: For diabetes, high-cholesterol,& hypertension P300,000 P36,000 Other imported medicines 700,000 84,000 Local Purchases: For diabetes, high-cholesterol,& hypertension Other Medicines 250,000 30,000 TOTAL itable input taxes available to WTD Drugstore beginning January 1, 2019?

P150,000 P1,250,000 P150,000 a) What is the total available excess cred b) P36,000 c) P114,000 d) None of the above.

8. In 2012 Gloria donated to the National Museum a Manansala painting which she acquired for P1.5 million.

Her total income from her business for the year amounted to P6 million. Gloria’s allowable itemized deductions before deducting the charitable contribution amounts to P5 million. How much may Gloria deduct as charitable contributions from her 2012 income? a. P1.5 million b. P0 c. P75,000 d. P150,000 9. On August 17, 2012, Mr. Cruz sold a 500 square meter residential land for P3,000,000.00. The land was acquired in 2010 fro P2,000,000. On the date of sale, the fair value as shown in the real property tax declaration is P2,500,000.00 and the assessed value amounts to P750,000.00. The zonal value is P7,000.00 per square meter.

The capital gains tax is: a. P210,000.00 c. P180,000.00 b. P150,000.00 d. P 60,000.00 10. Dyango is a professional with gross receipt of P2,000,000 and deductible expenses of P1,200,000 for the calendar taxable year 2018. How much will be the income tax to be paid for 2018 by taking into account your best recommendation as Tax Adviser on the most economical option to avail of in taxing his self-employment income? a.P110,000 b. P130,000 c. P140,000 d. P160,000 For Questions Nos. 11– 13 : The record of a taxpayer shows the following in 2015: Gross income Cost of sale of goods Salaries of employees (net of payroll deductions)

Php 8,000,000 4,000,000 2,000,000

Fringe benefits given to: Rank and File employees 520,000 Managerial employees 680,000 Representation and entertainment expenses (business connected) 100,000 Rent expenses 200,000 Depreciation expenses 40,000 Bad debts expenses 20,000 Payroll deductions: Creditable withholding tax of employees 100,000 SSS premiums contributions 20,000 Philhealth premiums contributions 10,000 Pag-Ibig premiums contributions 8,000 Union dues 2,000 Other income: Cash dividend received from: 1. Domestic corporations: a. 70% of its income came from Philippine source 90,000 b. 30% of its income came from Philippine source 90,000 2. Resident foreign corporation: a. 70% of its income came from Philippine source 90,000 b. 30% of its income came from Philippine source 90,000 3. Non-resident foreign corporation 20,000 11.

If the taxpayer is a domestic corporation, its taxable income is a. Php 4,100,000 b. Php 4,240,000 c. Php 4,420,000

d. Php 4,140,000

12.

If the taxpayer is a resident alien, the taxable income before personal exemption is a. Php 4,000,000 b. Php 4,140,000 c. Php 4,348,000 d. Php 4,068,000

13.

If the taxpayer is a resident citizen, the final withholding tax is a. Php 18,000 b. Php 9,000 c. Php 20,000

d. Php 20,800

FOR QUESTIONS NO. 14-16: A vacant commercial land located in a city measuring 2,000 square meters has a market value of P1,100 per square meter in the tax declaration and a zonal value of P800 per square meter. The city has maximized the assessment level and the tax rate to that allowed by law. Special Education Fund allowed under the LGC was also imposed by the city.

CLASS ASSESSMENT LEVELS Residential 20% Agricultural 40% Commercial 50% Industrial 50% Mineral 50% Timberland 20% 14. How much is the total real property tax payable? a. P35,200 b. P22,000

c. P33,000 d. P40,920

15. How much is the total amount payable if the taxpayer pays his real property tax after twelve (12) months delinquency? a. P35,200 b. P22,000

c. P33,000 d. P40,920

16. How much is the total real estate tax payable if the lot is an idle agricultural land and it is subject to an idle land of tax 1%? a. b. c. d.

P35,200 P26,400 P3,000 P40,920

Mr. and Mrs. Genaro Robles got married on August 3, 1988. They had a pre-nuptial agreement under conjugal partnership of gains. Mr. Robles died in 2014. The following properties with their fair market values, among others, were left behind: Properties inherited by the decedent before the marriage P5,000,000 Properties received as donation by the surviving wife before marriage 3,000,000 Properties inherited by the decedent during the marriage 1,000,000 Income received during the marriage from the properties inherited by the decedent before the marriage 100,000 Income from properties inherited by the decedent during the marriage 200,000 Properties acquired before the marriage by the decedent who had legitimate descendants by a former marriage 500,000 Properties acquired during the marriage 2,000,000 You were engaged to assist the administrator in computing the gross estate of the decedent.

17. How much were the total exclusive properties of the decedent? a. P6,700,000 b. P6,500,00 c. P6,200,000 d. None of the choices

18. Rudolfo, a citizen of the Philippines and resident of Bacolod City, died testate on May 10, 2015. Among his gross estate are properties inherited from his deceased father who died on April 4, 2012. What percentage of deduction will be used in computing the amount of vanishing deduction? a.

80% of the value taken as basis for vanishing deduction b.

100% of the value taken as basis for vanishing deduction c.

60% of the value taken as basis for vanishing deduction d.

40% of the value taken as basis for vanishing deduction

19. Mr. B died on June 30, 2018, leaving, among others, the following changes and obligations: Real property tax for the calendar year 2018 - P20,000, On an interest bearing promissory note (notarized): face value of the note – P10,000; accrued interest on the note at the time of death – P600; and interest to accrue on the note from the date of death to the date of maturity – P400. The deduction from the gross estate is a. P20,6000 c. P31,000 b. P30,600 d. P21,000

20. What body has jurisdiction over the appeal of the owner or person having legal interest in the real property who is not satisfied with the action of the Board of Assessment Appeals of the province or city? a. Regional Trial Court. b. Central Board of Assessment and Appeals. c. Court of Tax Appeals in Division. d. Court of Tax Appeals, en banc.

21. Mrs. Vicente owns a parcel of land worth P500,000 which she inherited from her father in 2000 when it was worth P300,000. Her father purchased it in 1997 for P100,000. If Mrs. Vicente transfers this parcel of land to her wholly owned corporation in exchange for shares of stock of said corporation worth P450,000, Mrs. Vicente’s taxable gain is a. Zero b. P50,000 c. P150,000 d. P350,000

22.

Marshall said that the power to tax involves the power to destroy while Holmes maintains that the power to tax is not the power to destroy. Which among the following statements does not reconcile the two seemingly inconsistent opinions? a. The imposition of a valid tax could not be judicially restrained merely because it would prejudice taxpayer’s property. b. The power to tax could not be the subject of compensation and set-off. c. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayer’s property.

d. Marshall’s view refers to a valid ta while the Holme’s view refers to an invalid tax.

23. Pedro, single, died leaving properties he inherited 4 ½ years ago which had fair market value of P800,000 at the time of his death (P650,000 at the time of inheritance. Pedro mortgaged the property for P50,000 when he already owned it. He paid the mortgage indebtedness before he died.

Other properties in his gross estate had fair market value of P1,000,000. The total expenses, losses, indebtedness, taxes, and transfer for public purpose amounted to P300,000. How much was the vanishing deduction? a. P108,333 b. P208,333 c. P225,000 d. P508,333

Question 24-25 are based on the following information.

My mother-in-law underwent an invasive cosmetic procedure which was done by a certain Dr. Miraculo, a VAT-registered self-employed doctor who practices his profession inside Beautiful Face Hospital in Makati City. The hospital billed my mother-in-law the following: the professional fee of Dr. Miraculo in the amount of P50,000, inclusive of the 12% VAT but exclusive of the excise tax, and other fees for the use of hospital facilities and supplies in the amount of P20,000, exclusive of the excise tax.

24. (a) How much will the hospital collect from my mother-in-law? a) P73,500 b) P55,300 c) P56,250 d) None of the above.

25. (b) If Dr. Miraculo is subject to the 10% CWT on professional income, how much will the hospital pay him?

(The excise tax is also withheld by the hospital.) a) P45,804 b) P85,300 c) P75,600 d) None of the above.

26. The taxpayer received an assessment notice on April 15,2013 and filed its request for reinvestigation against the assessment on April 30,2013. Additional documentary evidence in support of its protest was submitted by it on June 30,2013. If no denial of the protest was received by the taxpayer, when is the last day for the filing of its appeal to the CTA? a. November 30, 2013 b. December 30, 2013 c. January 30,2014 d. February 28, 2014

27. In 2012, Helga, married, and a non-resident Swede while a tourist in Boracay, sold her SAAB car in the Philippines to Roberto for P3.5 million. She previously bought the car for P2.5 million. Aside from the sales proceeds she did not derive any other income from the Philippines. She has three (3) minor children, single, and not gainfully employed, all of whom are living with her and dependent upon her for their chief support.

How much basic personal and additional exemptions is Helga entitled to on the sales proceeds of her car if Sweden allows non-resident Filipinos who earn income in Sweden, a basic personal exemption of the equivalent of P100,000.00 for each married individual, and P75,000.00 for each minor dependent child, and Helga, is willing to file a true and accurate return of the P3.5 million sales proceeds? a. P325,000.00 b. P none

c. P200,000.00 d. P50,000.00

28. In 2008, the Commissioner of Internal Revenue assessed against a manufacturing corporation the amount of P1,000,000 as deficiency income tax. The deficiency was brought about by the disallowance of items claimed by the corporation as deductible business expenses for the taxable year. These were a) expenses paid to an advertising firm in order to create a favourable image for the corporation to promote sales of its shares of stock; and b) litigation expenses incurred in defense of a title to corporate property. Of course, the corporation contended otherwise.

In the light of the above which of the following statements is correct?

I. The advertising expenses are not deductible ordinary necessary expenses.

II. The litigation expenses are deductible ordinary and necessary expenses. a. Only I b. Only II c. Both I and II d. Neither I nor II 29. A sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is a bona fide, at arm’s length, and free from any donative intent), will be considered as made for an adequate and full consideration in money or money’s worth and therefore: a. subject to donor’s tax b. not subject to donor’s tax c. subject to estate tax d. choice not given

30. Liceo, a widower, 54 years of age, maintains a home in Cebu City for his three children. His wife died in January, 2012. During the taxable year 2012, his eldest child, Laura, who is 20 years of age, was away most of the time at the University of the Philippines in Diliman, Quezon City. The other two children, Florante and Menandro, ages 14 and 12, respectively, were away in the United States on vacation with their grandparents for eight months during 2012. Liceo is the sole supporter of his children who do not have any income of their own, What are the total exemptions for the taxable year 2009 which can be availed of by Menandro? a. P 50,000.00 b. P100,000.00 c. P 75,000.00 d. P125,000.00

31. One of the statements that follow is correct. Which is it? A deed of donation was executed by a Donor residing in Makati, in favor of a Donee residing in Manila. The Donee executed a deed of acceptance in the city of manila. The donor’s tax return shall be filed with the Bureau of Internal Revenue Office: a. At the residence of the Donor b. At the residence of the Donee c. At the residence of the Donor or the Donee, whichever the Donor chooses d. Neither at the residence of the Donor nor at the residence of the Donee

32. A filed his income tax return for calendar year 2010 on March 20, 2011. When is the last day for the BIR to collect, assuming A did not pay the tax due on upon filing? a. March 20, 2014 b. April 15, 2014 c. April 15, 2016 d. March 20, 2016

33. Analysis of the balances in selected accounts of a taxpayer, with VAT and non-VAT business is shown below.

There were no inventories at the beginning and end of the taxable period. All amounts shown are VAT exclusive.

Purchases, all from VAT suppliers P1,600,000 Export sales, VAT business 1,000,000

Export sales, non-VAT business Domestic sales, VAT business Domestic sales, non-VAT business

600,000 2,000,000 400,000

The net value-added tax payable (refundable) for the taxable period is: a. (48,000) b. 48,000 c. (96,000) d. 96,000

34. Geris, who worked as an export clerk for STC Export, Inc., lent STC P150,000.00 in 2010. Geris did not own any stock in STC Export, Inc., and the loan was not a precondition of Geris maintaining his employment with STC Export, Inc. In 2012, STC Export, Inc. declared bankruptcy and Geris’ note receivable from STC became worthless. What loss can Geris claim on his 2008 income tax return? a. P150,000 bad debts expense b. P 0 c. P150,000 short-term capital loss d. P75,000 long term capital loss 35. Mr. L made a donation during a political campaign period for campaign materials Statements 1.If the donation is given to a particular candidate, donation is exempt from the donor’s tax Statement 2. If the donation is given to the political party of the candidate, the donation is subject to the donor’s tax a. True, true c. True, false b. False, false d. False, true 36. The following among other are amendments to the NIRC of 1997 as amended by R.A. 10963 or the Train Law. Which one is Not? a. Removal of personal and additional exemptions allowed to individual income taxpayers, whether the source of income is purely derived from employment or self-employment or even as mixed income earner. b. Raising the limit of 13th month pay and other benefits received by officials and employees of public and private entities of up to P90,000 exclusion from gross income. c. employee’s share in the GSIS, SSS, Philhealth and PAG-IBIG contributions, as well as the union dues are no longer allowed as mandatory deductions from gross compensation of employees in arriving at the taxable compensation income. d. individuals earning purely self-employment and/or practice of profession income whose gross sales and/or gross receipts and other non-operation income do not exceed the new VAT threshold of P3,000,000 shall have the option now to avail of being taxed under the new graduated rates of from 0% to 35% or at 8% income tax rate based on gross sales and/or gross sales and/or gross receipts and other non-operating income in excess of P250,000 in lieu of the graduated income tax rates under Section 24(A)(2)(a) and the percentage tax of 3% under section 116, all under the tax Code, as amended.

37. Boying a resident Filipino citizen, sold his principal residence (house and lot) which had cost him P11 million for P11 million at a time when its fair market value (zonal value) was P13 million. If the proceeds of the sale were not invested in the new principal residence but instead, new funds of P15 million were used to construct it, the capital gains tax is a. P0 b. P720,000 c. P660,000 d. P780,000

38. ABC Corporation (vat reg.) has a following data for the month of March: Gross Sales ( vat exclusive) Sales Returns

P8,000,000 400,000

Goods shipped on consignment (net)

Units

Unit Price

March 25 40 P10,000 February 14 30 10,000 January 8 20 10,000 Goods withdrawn for use by the company P50,000 Goods taken as payment to creditor 30,000 Purchases for the month of (net of vat) Goods P600,000 Supplies 75,000 Capital goods (life : 4 yrs) 1,100,000 Freight and insurance 8,500 Salaries of employees 385,000 Additional Information: • Received cash representing payment for ten (10) units delivered on February 14. The amount received was net of ten percent (10%) commission • A consignee reported and remitted P200,000 (gross of 10% commission) representing 20 units sold from goods consigned in March.

The vat payable for the month of March shall be: a. P60,000 b. P84,830 c. P896,770 d. P981,600

39. The religious sect, Tres Personas Solo Dios, is organized as a corporation sole. A 5,000 sq. m. lot registered in the name of the head priest as the corporation sole was rented out for the use as a school site of an educational institution organized for profit. The sect used the rentals for the support and upkeep of its priest.

Choose which among the following is the most appropriate ruling with regard to real property tax exemptions?

The 5,000 sq. m. lot is, a. is not exempt from the payment of real property taxes because the user is organized for profit hence subject to taxation. b. is exempt from the payment of the real property taxes because it is actually, directly and exclusively used for educational purposes. c. is exempt from the payment of the real property taxes because it is actually, directly and exclusively used for religious purposes. d. is not exempted from the payment of the real property taxes because it is the proceeds, not the land, that is actually, directly and exclusively used for religious purposes.

40. Which statement on prescriptive periods is true? a. The prescriptive periods to asses taxes in the National Internal Revenue Code are the same: b. Local taxes shall be assessed within five (5) years from the date they became due; c. Action for the collection of the local taxes may be instituted after the expiration of the period to asses and to collect the tax. d. Local taxes may be assessed within ten (10) years from discovery of the underpayment of the tax which does not constitute fraud. (BAR 2012) 41. Although the power of taxation is basically legislative in character, it is NOT the function of the Congress to a. fix with certainty the amount of taxes. b. collect the tax levied under the law. c. identify who should collect the tax d. determine who should be subject to the tax.

In November 2018, while the couple were talking about having another child, P. Nagpala suffered a cardiac arrest and died 3 days after, without any last will and testament. By year0end, the estate tax was paid and the estate was distributed to his legal heirs. Makiri went back to the practice of her profession and continued operating the commercial building.

42. If an income tax return is to filed for the 2018 income of P. Nagpala, how much personal and additional exemptions maybe claimed?

a. Php 20,000

b. Php 125,000

c. Php 75,000

d. Php 100,000

43. CValix Corporation declared property dividends in the form of common shares of its wholly-owned subsidiary, RValix Corporation. The BIR assessed a donor’s tax on the difference between the FMV of the shares and the book value of such shares. Should a donor’s tax be imposed on this transaction? a) Yes. A property dividend in the form of shares of stock may be classified as “other disposition” of shares of stock held as capital assets. Such disposition may result in a selling price lower than the FMV of such shares, and the difference between the 2 amounts shall be deemed a gift subject to the donor’s tax. b) No. No gain or loss is recognized by the payor of the dividends. There can be no inadequacy of consideration which can lead to a donor’s tax. c) All of the above d) None of the above

44. On April 15, 2015, Mr. Lacson filed his income tax return for his 2014 income and paid the tax due thereon.

In 2016, when Mr. Lacson hired a new CPA to prepare his income tax return, he was informed that he made an over-payment in his income tax return filed in 2015. Convinced that he erroneously collected with the BIR Commissioner on December 15, 2016. On April 10, 2017, without receiving a reply or decision in his claim for refund, Mr. Lacson’s lawyer filed in the Court of Tax Appeals a petition for review on his claim for refund of tax erroneously collected. Did the Court of Tax of Tax Appeals acquire jurisdiction over the petition for review of Mr. Lacson?

1st Answer: No, because the appeal is premature, there being no decision yet on said claim for refund. The Court of Tax Appeals did not acquire jurisdiction over the appeal because its jurisdiction is to review by appeal decisions of the BIR Commissioner 2nd Answer: Yes, because while the BIR Commissioner has not yet rendered a decision on said claim for refund, the peremptory period of two years within which a claim for refund of taxes erroneously collected may be filed is about to expire on April 15, 2017 and the failure of the Commissioner to act on the claim for refund is tantamount to denial of the taxpayer’s claim, hence appealable to the Court of Tax Appeals a.

First answer is wrong, second answer is correct b.

First answer is correct, second answer is wrong c.

Both answers are correct d. Both answer are wrong

45. Mr. Monte was injured in a vehicular accident in 2018. He incurred and paid medical expenses of P20,000 and legal fees of P10,000 during the year. In 2019, he received P70,000 as settlement from the insurance company which insured the car owned by the other party involved in the accident. From the above payments and transactions, the amount of taxable income to Mr. Monte in 2019. a. Zero c. P70,000 b. P40,000 d. P50,000

46. Danilo, a non-resident citizen, was divorced from his wife. He is the source of chief support for his 18-year old illegitimate son, who is single and gainfully employed, as well as of his sister who is 34 years old, but who is incapable of self-support because of mental defect. The sister is confined in a sanatorium. How much could Danilo claim for his basic personal and additional exemptions when he files his income tax return for income derived from sources within the Philippines? a. P25,000.00 b. P33,000.00 c. P50,000.00 d. P41,000.00 47. Liezel purchased a life annuity for P500,000.00 which will pay her P120,000.00 a year. The life expectancy of Liezel is 12 years. Under Section 32 of the National Internal Revenue Code of 1997, which of the following will Liezel be able to exclude from her gross income: a. P940,000.00 c. P500,000.00

b. P1,440,000.00

d. P0

48. Mr. Geronimo worked as chief accountant of a hospital for forty-five years. When he retired at 65, he received a retirement pay equivalent to two month salary for every year of service as provided in the hospital’s BIR approved retirement plan.

The board of directors of the hospital felt that the hospital should be give Mr. Geronimo more than what was provided for in the hospital’s retirement plan in view of his loyalty and invaluable services for forty-five years; hence, it resolved to pay him a gratuity of P1 million over and above his retirement pay.

Which among the following is a correct statement? a. The P1 million is part of Mr. Geronimo’s gross compensation income. b. The P1 million is retirement pay excluded from gross income. c. The P1 million is a gift excluded from gross income. d. The P1 million is neither a gift, retirement pay nor part of Mr. Geronimo’s gross compensation income.

49. The best Corporation, A domestic corporation had the following data for 2018: Cash sales Sales on account Cost of sales Expenses Dividend from a DC Interest income Land Building

P3,954,245 1,689,341 3,453,957 1,142,190 43,096 950 Zonal value Assessed value P1,234,590 P945,687 2,985,043 2,545,890

The total community tax to be paid by the corporation in 2018 is: a. P2,994 b. P3,495 c. P4,170 d. P3,033

50. Should there be general failure of crops or substantial decrease in the price of agricultural or agribased products, or calamity in any province, city, or municipality, when will the condonation or reduction of real property taxes and interest take effect? a. Within 6 months of such incident b. Within 3 months of such incident c. For the succeeding year or years d. No condonation or reduction allowed

51. Statement 1. The power of the Commissioner of Internal Revenue to recommend the promulgation of rules and regulations by the Secretary of Finance may not be delegated Statement 2. The power of the Commissioner of Internal Revenue to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau of Internal Revenue may not be delegated a. True, true c.True,false b. False, false d. False, true 52. Rolando, was employed and resided in Cagayan de Oro City. On September 5, 2008, Rolando was permanently transferred to Kabacan, Cotabato his employer. As a result of the transfer from Cagayan de Oro City to Kabacan, Cotabato, Rolando incurred the following unreimbursed relocation expenses Travelling expenses P2,500 Cost of shipping his personal and household effects 10,500

Temporary lodging for his family while looking for a place to rent 5,000 What amount is deductible when Rolando files his income tax return for his 2009 income? a. P18,000 b. P13,000 c. P0 d. P15,000 53. What is the correct tax treatment of sales made by a vat-registered supplier from customs territory to a PEZA registered enterprise?

TRANSACTION Sale of Goods a. Vat exempt b. 0% vat c. 0% vat d. Vat exempt

Sale of Services Vat exempt Vat exempt 0% vat 0% vat

54. After the province has constructed a barangay road, the sangguniang Panlalawigan may impose a special levy upon the lands specifically benefitted by the road up to an amount not to exceed. a.60% of the actual cost of the road without giving any portion to the barangay b.100% of the actual project cost without giving any portion to any barangay c.100% of the actual project cost, keeping 60% for the province and giving 40% to the barangay d.60% of the actual cost, dividing the same between the province and the barangay Question 55-63 are based on the following information.

A domestic corporation (on calendar year basis), which started operations in 2010, has the following data in 2018: Sales, net of sales discounts of P550,000 P25,000,000 Cost of Sales 13,000,000 Gross income 12,000,000 Cost of sale of goods 4,000,000 Salaries of employees (net of payroll deductions) 5,000,000 Fringe benefits given to: Rank and file employees 520,000 Managerial employees 650,000 Representation and entertainment expenses (business connected) 145,000 Rent expenses 200,000 Depreciation expenses 400,000 Bad debt expenses (1/2 charge off during year) 50,000 Payroll deductions: CWT on compensation 600,000 SSS premiums 40,000 Philhealth contributions 60,000 Pag-ibig contributions 12,000 Union dues 5,000 Lactation station expenses 100,000 Other Income: Cash dividend received from: 1) Domestic Corporations a) 70% of its income came from the Philippine sources 90,000 b) 30% of its income came from the Philippine sources 90,000 2) Resident foreign corporations a) 70% of its income came from the Philippine sources 40,000 b) 30% of its income came from the Philippine sources 40,000 3) Non-resident foreign corporation 20,000 Tax withheld by customers/ clients during first 3 quarters (BIR Form 2307) 90,000 th Tax withheld by customers/ clients in 4 Quarter (BIR Form 2307) 30,000

Taxes paid in first 3 quarters: 1st Quarter (RCIT less credits) P210,000 nd 2 Quarter (MCIT less credits) 330,000 3rd Quarter (RCIT less credits) 444,900 55. What annual return should it have filed before April 15, 2019? a. BIR Form No. 1702-RT – for Corporations, Partnerships and Other Non-Individual Taxpayers Subject Only to Regular Income Tax Rate b. BIR Form No. 1702-EX – for Corporations, Partnerships and Other Non-Individual Taxpayers EXEMPT under the Tax Code (Sec. 30 and those exempted in Sec. 27 (c)) and Other Special Laws, with NO Other Taxable Income c. BIR Form No. 1702-MX – for Corporations, Partnerships and Other Non-Individual Taxpayers with MIXED Income Subject to Multiple Income Tax Rates or with Income Subject to Special/ Preferential Rates d. None of the above 56. How much is the corporation’s total gross sales and where will it be indicated in the annual ITR? a. P25,550,000; Part IV, Item 27 b. P12,100,000; Part IV, Item 33 c. P8,187,000; Part IV, Item 37 d. P242,000; Part IV, Item 42 57. How much is the corporation’s total gross taxable income and where it will be indicated in the annual ITR? a. P25,550,000; Part IV, Item 27 b. P12,100,000; Part IV, Item 33 c. P8,187,000; Part IV, Item 37 d. P242,000; Part IV, Item 42 58. How much is the corporation’s total allowable deductions and where it will be indicated in the annual ITR? a. P25,550,000; Part IV, Item 27 b. P12,100,000; Part IV, Item 33 c. P8,187,000; Part IV, Item 37 d. P242,000; Part IV, Item 42 59. How much is the corporation’s net taxable income and where it will be indicated in the annual ITR? a. P3,913,000; Part IV, Item 39 b. P1,173,900; Part IV, Item 41 and 43; Part II, Item 14 c. P1,104,900; Part IV, Item 55; Part II, Item 15 d. P69,000; Part IV, Item 56; Part II, Item 16 60. How much is the corporation’s RCIT and where will it be indicated in the annual ITR? a. P3,913,000; Part IV, Item 39 b. P1,173,900; Part IV, Item 41 and 43; Part II, Item 14 c. P1,104,900; Part IV, Item 55; Part II, Item 15 d. P69,000; Part IV, Item 56; Part II, Item 16 61. How much is the corporation’s MCIT and where will it be indicated in the annual ITR? a. P25,550,000; Part IV, Item 27 b. P12,100,000; Part IV, Item 33 c. P8,187,000; Part IV, Item 37 d. P242,000; Part IV, Item 42 62. How much is the corporation’s total available credits and where will it be indicated in the annual ITR? a. P3,913,000; Part IV, Item 39 b. P1,173,900; Part IV, Item 41 and 43; Part II, Item 14

c. P1,104,900; Part IV, Item 55; Part II, Item 15 d. P69,000; Part IV, Item 56; Part II, Item 16 63. How much is the corporation’s income tax payable and where will it be indicated in the annual ITR? a. P3,913,000; Part IV, Item 39 b. P1,173,900; Part IV, Item 41 and 43; Part II, Item 14 c. P1,104,900; Part IV, Item 55; Part II, Item 15 d. P69,000; Part IV, Item 56; Part II, Item 16

64. Public money or property may be appropriated: a. for the use, benefit or support of any sect, church, denomination, sectarian institution, or system of religion. b. for the use, benefit or support of any priest, preacher, minister or other religious teachers, or dignitary as such. c. for the use, benefit or support of any priest, preacher, minister or dignitary assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium. d. none of the choices.

65. Mr. A was preparing his income tax return and had some doubt on whether a commission he earned should be declared for the current year or for the succeeding year. He sought the opinion of his lawyer who advised him to report the commission in the succeeding year. He headed his lawyer’s advice and reported the commission in the succeeding year. The lawyer’s advice turned out to be wrong; in Mr. A’s petition against the BIR assessment, the court ruled against Mr. A. Is Mr. A guilty of fraud? a. Mr. A is not guilty of fraud as he simply followed the advice of his lawyer b. Mr. A is guilty of fraud; he deliberately did not report the commission in the current year when he should have done so c. Mr. A’s lawyer should pay the tax for giving wrong advice d. Mr. A is guilty for failing to consult his accountant

66. Advance Learning Institute, an educational institution provided the following data for current taxable year: Income from tuition fees School miscellaneous fees Dividend income: Domestic corporation Foreign corporation Rent income (net of 5% withholding tax) Operating expenses

P3,500,000 1,500,000 2,000,000 2,000,000 1,900,000 4,000,000

The income tax payable of the school is :

a. b. c. d.

P1,750,000 P1,650,000 P500,000 P400,000

67. Benito, the 65-year old widowed father of Carmen is earning only P5,000.00 a month. As his income is barely enough just for medicines alone, Benito lived with and was dependent for his chief support upon Carmen, his daughter, who was single. How much basic personal and additional exemption could Carmen claim when she files he income tax return? a. None b. P25,000.00 c. P75,000.00

d. P50,000.00

68. In case of full or partial denial of the written claim for refund or excess input tax directly attributable to zerorated sales, or the failure on the part of the Commissioner to act on the application within 120 days from the date of submissions of complete documents, an appeal must be filed with the CTA: a. Within thirty (30) days after filing the administrative claim with the BIR. b. Within sixty (60) days after filing the administrative claim with the BIR. c. Within one hundred twenty (120) days after filing the administrative claim with the BIR; d. Within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the 120-days period

69. Eugene worked for Mateo, Inc. from 1980 to 2012. Beginning 2013 Eugene’s employment was terminated as he could no longer perform his duties. Eugene was informed by Mateo, Inc. that he will get a pension of P40,000 a month for the rest of his life. Mateo, Inc. has neither a standardized pension plan nor a qualified pension plan. Eugene’s pension was paid from Mateo, Inc.’s operating revenues and Mateo, Inc. deducted the payments as necessary and ordinary business expense.

I. Eugene’s pension is subject to income taxes because there is no standardized pension plan nor a qualified pension fund which provides the pension payments.

II. Eugene’s pension is excluded from gross income because it was deducted as ordinary and business expenses by the Mateo, Inc. a. b. c. d.

Only I is true Only II is true Both I and II are true Neither I nor II is true

70. The appraisal, assessment, levy and collection of real property tax shal;l be guided by the following principles. Which statement does NOT belong here? a. Real property shall be appraised at its current and fair market value; b. Real property shall be classified for assessment purposes on the basis of its actual use; c. Real property shall be assessed on the basis of a uniform classification within each local political subdivision; d. The appraisal and assessment of real property shall be based on audited financial staements of the owner.

71. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as a. assessment b. levy c. payment d. collection 72. C, vat-registered person, imported machines to be used in the Philippines as follows: Machines Purchase Price Purpose 1 P100,000 Personal use 2 200,000 Business use 3 300,000 For sale

The importations were subjected to 50% excise tax based on purchase price. Machine 3 was sold for P1,000,000 (net of vat). How much is the vat paid on importation? a. P108,000 b. P90,000 c. P54,000 d. P36,000 73. Cheche Corporation’s operating income for the year ended December 31, 2012, amounted to P2 million. Included in Cheche’s 2012 operating expenses is a P100,000 insurance premium on a policy insuring the life of Cheche’s president Timothy. Cheche is the beneficiary of this policy. In Cheche Corporation’s 2012 income tax return, what percentage should be deducted for the P100,000 life insurance premium? a. 100% b 40% c. 60% d. 0 74. Rico promised to pay, in instalments, P1 million which he owed Atty. Puno as a result of legal services rendered by the latter. In the absence of a collateral, Rico, with the consent of his irrevocable beneficiary, assigned his life insurance policy with a face value of P1 million to Atty.

Puno. In the meantime Rico dies and Atty. Puno is able to collect P1 million.

You are consulted by Atty. Puno with regard to the taxation of the P1 million insurance proceeds. What advice shall you give him? a. The P1 million being life insurance proceeds should be excluded from his gross income. b. The P1 million should be reported as part of his gross income in his income tax return. c. The P1 million is subject to final tax and therefore not to be reported in his income tax return. d. The P1 million is considered as a gift from Rico hence excluded from gross income but subject to donor’s tax.

75. Mr. A was a travelling salesman on a salary basis. In the course of his travel, his own car that he used in travelling was taken by force by bandits. The bandits had an encounter with the military, and the battle resulted in the death of the bandits and a total loss of a car. was no insurance coverage on the car.

Statement 1. The loss can be There deducted because it was not compensated by insurance or otherwise Statement 2. The loss cannot be deducted because the gross income is gross compensation income (salary) only a. True, true b. False, false c. True, false

d. False, true

76. X is the proprietor of Watchwell, which is a security and detective agency. X was able to get the contract to provide the security services of a government agency. He signed the Security Agreement woth the director of the government agency calling for the deployment of 100 security guards on a 24 hours basis. The contract was revocable at the will of the director. To please the director, X gives him at the end of the month P100.00 per guard hired. The amount paid to the director is I. Deductible from gross income.

II. Not deductible from gross income.

III. Deductible only if it complies with the substantiation rule. a. I only b. II only c. III only d. Neither I, II or III

Question 77-82 are based on the following information.

For each month of taxable year 2018, Chris Masaya, single, Filipino with 1 dependent child, received the following as professional fees as a CPA and consultant: Monthly Fees

Plus VAT

Less 5% CWT

= Net Monthly Fees Received

P250,000

P30,000

P12,500

P267,500

He was VAT-registered, and chose the 40% OSD instead of itemizing deductions in his first quarterly ITR. Aside from his CPA/consultancy business, he was also a faculty member of Belt University from which he received the following employment income for the same year:

Belt University

Gross Pay

Less CWT

P900,000

P75,000

Less SSS premiums and unions dues P5,600

Net Pay

P819,400

The amount he received from Belt University was inclusive of 13 th Month Pay and Other Benefits of P65,000.

During the year he also received P3,000 interest income from his BPI deposit, and P250,000 in royalties from the publication of his book entitled “The Hungry Eyes”.

He had excess tax credits from the prior year of P15,500. During the year he paid the following quarterly income taxes: In the 1st Quarterly ITR P0 nd In the 2 Quarterly 69,500 rd In the 3 Quarter ITR 97,500 Total P167,000 77. What annual return should be file before April 15, 2019? a. BIR Form No. 1701 – Individual (Including Mixed Income Earners, Estates, and Trusts) b. BIR Form No. 1701A – Individuals Earning Income Purely from Business/ Profession (Those under the graduated income tax rates with OSD as mode of deduction OR those who opted to avail of the 8% flat income tax rate) c. BIR Form No. 1700 – Individuals Earning Purely Compensation Income d. None of the above 78. How much is Masaya’s taxable compensation income and where will he indicate it in his annual ITR? a. P900,000; Part V, Schedule 2, Item 4 b. P829,400; Part V, Schedule 2, Item 6 c. P3,000,000; Part V, Schedule 3A, Item 8 d. P1,800,000; Part V, Schedule 3A, Item 23

79. How much is Masaya’s taxable income from business, trade or practice of profession and where will he indicate it in his annual ITR? a. P900,000; Part V, Schedule 2, Item 4 b. P829,400; Part V, Schedule 2, Item 6 c. P3,000,000; Part V, Schedule 3A, Item 8 d. P1,800,000; Part V, Schedule 3A, Items 18 and 23

80. How much is Masaya’s income tax due for 2018 and where will he indicate it in his annual ITR? a. P691,408; Part V, Schedule 3A, Item 25; Part VI, Items 1 and 5; Part II, Item 22. b. P407,500; Part VII, Item 10; Part II, Item 23 c. P283,908; Part II, Items 31 and 32. d. None of the above

81. How much is Masaya’s total income tax credits for 2018, and where will he indicate it in his annual ITR? a. P691,408; Part V, Schedule 3A, Item 25; Part VI, Items 1 and 5; Part II, Item 22. b. P407,500; Part VII, Item 10; Part II, Item 23 c. P283,908; Part II, Items 31 and 32. d. None of the above

82. How much is Masaya’s income tax payable and where will he indicate it in his annual ITR? a. P691,408; Part V, Schedule 3A, Item 25; Part VI, Items 1 and 5; Part II, Item 22. b. P407,500; Part VII, Item 10; Part II, Item 23 c. P283,908; Part II, Items 31 and 32. d. None of the above

83. Which is not a zero-rated sale of goods or service? a.

Transmission of messages message originating from the Philippines to abroad other than news services, embassies and diplomatic calls. b.

Sale of gold to the Bangko Sentral ngPilipinas c.

Sale of electricity from hydropower and solar power plants d.

Transport of passengers by air or sea from Philippines to abroad

A VAT-registered service contractor has the following data for the month of January 2015: Cash received for buildings completed on January 2015 with a contract price of P5,000,000 P 3,800,000 Cash advances received for building to be construed on February, 2015 300,000 Cash received from VAT- registered supplier on materials returned charged to the supplier 100,000 Cash received from owners of building for materials charged with the services 1,000,000 Cash received from owners of building to be used to pay building permit fees.

200,000 Cash received from VAT-registered sub-contractors for overpayments 300,000 84. How much is the output tax for the month? a. P684,000 b. P672,000 c. P612,000

d. None of the choices

85. Mr. Aegis Trangia, your client, asks you to file a tentative income tax return for his behalf because he is going abroad. However, Mr. Trangia stay outside the Philippines is indefinite, so Mr. Trangia asks you when is his last day to make amendments to finalize his Income Tax Return? a. b. c. d.

3 years from the date of filing.

3 years from the date required by law.

Anytime until the BIR has not yet commenced its investigation over said return.

Before Mr. Trangia receives a Letter of Authority from the BIR and before its prescription.

86. A PAN shall not be required in the following, except a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return filled by the taxpayer b. When the excise tax due on excisable article has been paid c. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent d. When a tax payer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarters of the succeeding taxable year 87. Lorna, a PWD and a minimum wage earner, works for Masigasig Corporation. She earned the following income for 2018 taxable year: Compensation income-P168,000

Overtime pay-P80,000 Night shift deferential-P30,000 Hazard pay-P15,000 Holiday pay-P15,000 She also contributed to the SSS, Philhealth, and HDMF amounting to P5,000 and has received a 13th month pay and other benefits of P120,000. Lorna’s income tax due for the taxable year should be: a. P6,000 c. P7,200 b. P3,600 d. P0

88. Mr. A, a resident citizen, died on the United States leaving the following properties: Real properties in the United States Family home in the Philippines Office condominium in the Philippines Shares of stock of a domestic corporation Cash in bank; and Personal belongings without any obligation Statement 1.His gross estate shall include all the properties Statement 2. His gross estate shall include only the properties in the Philippines a. True, true

c. True, false d. False, true

b. False, false

89. Tong Siok, a Chinese billionaire and Canadian resident, died and left assets in China valued at P80 billion and in the Philippines assets valued at P20 billion. For Philippine estate tax purposes the allowable deductions for expenses, losses, indebtedness, and taxes, property previously taxed, transfers for public use, and the share of his surviving spouse in their conjugal partnership amounted to P15 billion. Tong’s gross estate for Philippine estate tax purposes is a. P20 billion

b. P5 billion

c. P100 billion

d. P85 billion

A VAT-registered corporation has the following data taken from the books of accounts for the first calendar quarter of 2015: Sales returns and allowances P100,000

Office equipment purchased January 1, 2015 1,100,000 Operating expenses (40% with passed on VAT) 300,000 Cost of Sales 1,500,000 Vehicle for land transport imported January 1, 2015 2,500,000 Purchase of goods for sale, (included in the cost of sales above) 300,000 Gross sales 5,000,000 Office supplies purchased (wholly used) 90,000 VAT payment for January and February 40,000 Sales discount 400,000 90. How much is the creditable input tax? a. P379,050 b. P79,050 c. P4,800 d. None of the choices

91. Hagrid ,63 years old grandmother , was treated by her grandchildren Conrado , Crispin and Pedro to Max's restaurant during grandparents day and their total bills P 2,240.00 How much is the VAT ? a. P 240.00 b. P 160.00 c. P 100.00 d. P 400.00

92. Tax of a fixed proportion of the value of the property with respect to which the taxes assessed and requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined is known as: a. Specific b. Ad valorem c. Special or regulatory d. Answer not given

SysRq a Resident Corporation provided you the following information for the year 2017: Sales net of withholding tax in the Philippines Sales without the Philippines Capital Gains Direct Cost Dividend paid to stockholders 93. Determine the Taxable Income a. P6,200,000 b. P6,700,000 c. P4,500,000 d. P2,790,000

P4,455,000 5,500,000 500,000 3,800,000 650,000

94. The distinction between actual distraint and constructive distraint is that: a.

Actual distraint may be made on the properly of any taxpayer whether delinquent or not while constructive distraint is made on the property only of a delinquent taxpayer b.

In actual distraint, there is a taking of possession, while in constructive distraint, the taxpayer is merely prohibited from disposing of the property c. Actual distraint is effected by requiring the taxpayer to sign a receipt of the property or by the revenue officer preparing and leaving a list of the distraint property or by service of a warrant of distraint or garnishment d. Answer not given 95. John transfers his car to his brother Samuel for P400,000. The sold car costs P500,000. At the time of the transfer, the car has a fair market value of P300,000. John inquires from you whether or not he is required to file donor’s tax return and pay donor’s tax. What will you tell him? a He has to file a donor’s tax return because the transfer will be considered a transfer for insufficient consideration because the selling price is less than the cost. b He does not have to file a return because it is a transfer for sufficient consideration, hence, no donor’s tax is due. c. He has to file a donor’s tax return and pay donor’s tax because transfers to relatives are generally subject to donor’s tax. d. He does not have to file a return because the BIR will not be in a position to know the transfer as it is done between brothers.

Mr& Mrs. Mapagbigay made the following donations: February 14,2016: Donation of property to son and daughter-in-law on account of marriage (same year), fair market value of P500,000 at date of donation, P550,000 at date of marriage, with P50,000 mortgage assumed by donees. March 15, 2016: Donation to Daughter P800,000.

July 18, 2016: Donation to sister of Mrs. P300,000 August 23, 2016: Real property sold to 1st cousin for P200,000, with fair market value of P400,000.

96. How much is the donor’s tax due to Mr. on (date of first donation)? a. P33,8000 c. P37,500 b. P33,750 d. P38,000 97. How much is the donor’s tax due of Mr. on (2nd donation)? a. P38,750 c. P14,750 b. P38,500 d. P14,500

98. How much is the donor’s tax due of Mr. on (3rd donation)? a. P90,000 c. P23,750 b. P45,000 d.P9,000 99. How much is the donor’s tax due of Mr. on (4th donation)? a. P20,750 c. P6,000 b. P14,750 d. P 0

100. Among the nature of taxation is that it is an inherent power that is an attribute of sovereignty. Which among the following is not among its manifestation as such an inherent power? a. Courts cannot issue an injunction to enjoin the collection of taxes. b. There should be no improper delegation or the power to tax. c. Taxes may be imposed even without a constitutional grant. d. The state has the right to select the subjects and objects of taxation.