Frontliners Reviewer

Sept 2013

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III. Business Law and Taxation
Business Law
1. Demand is not necessary to incur delay when:
a. Creditor refuses the performance without just case
b. The debtor is guilty of non-performance
c. Time is the controlling motived
d. If the obligation bears interest

2. Gene had entered into an agreement of purchase and sale to buy Harold’s cottage. A week before the sale is to close, Gene calls
Harold and tells him that he has had a change of heart and does not want to close the deal. Harold protests vehemently, to no avail.
Harold tells his lawyer, who advises Harold to show up at the place arranged for closing with the deed and other documentation he was
required to deliver at closing at the appointed closing time. Why would Harold’s lawyer give him this advice?
a. If Harold does not show up at closing, Gene could sue him for breach of contract.
b. If Harold does not show up at closing, the contract is frustrated.
c. By tendering performance, Harold is then entitled to immediately sue Gene for breach of contract.
d. It is still possible Gene might change his mind.
e. He wants to earn additional money for the preparation of the documents.

3. Tina agrees to pay Ron P 1000 if Ron will mow her front and back lawns and trim the trees in her yard. Tina pays Ron the money and
then decides to do the work herself. Because Tina knows that Ron is saving for university, Tina gives Ron a waiver stating he doesn’t
have to do the work or return the money. Can Tina demand her money back in three days time if she changes her mind again?
a. Yes because there was no consideration for the waiver.
b. No because the P1000 payment amounted to consideration for the waiver.
c. No because a waiver is a method of discharging a contract.
d. No because Tina doing the yard work amounted to consideration for the waiver.
e. Yes because the P1000 was just a gratuitous promise, not part of a contract

4. Which of the following does (do) NOT discharge parties from liability under a contract?
I. An oral condition precedent.
II. A sharp and unexpected rise in commodity prices above a set contract price.
III. Performance of one’s obligations.
a. I only.
b. II only.
c. Both I and II.
d. I, II and III.

5. Alberta and Bob make a contract. Bob breaches, so Alberta puts an end to the contract. Alberta’s action will constitute a
a. Termination.
b. Cancellation.
c. Both of the above.
d. None of the above.

1. Which of the ff is not correct?
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A. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation.
B. The property of an educational institution operated by religious order is exempt from property tax but its income is subject to
income tax.
C. The prohibition on delegation by the state of power of taxation will still allow the Bureau of Internal revenue to modify the rules on
time for filing of returns and payment of taxes.
D. The power of taxation is shared by the legislative and executive departments of government.

2. Domicile or residence of the owner is not the situs of taxation in
A. Income tax
B. Community tax
C. Estate tax
D. Business tax

3. When a refund of a tax supposedly due to taxpayer has already been barred by prescription and the said taxpayer is assessed with
a tax at present, the two taxes may be set off.
A. Set off doctrine
B. Doctrine of reciprocity
C. Tax sparing rule
D. Equitable recoupment

4. Which is not an excise tax?
A. Transfer tax
B. Sales tax
C. Real property tax
D. Income tax

5. Which is correct about NRA?
A. Taxable income within and without
B. May be entitled to claim basic personal exemption
C. May be entitled to claim additional exemption
D. Shall be taxable on all income derived from sources within the Phils

6. Which is incorrect?
A. Lotto winning in the US of a Filipino residing in the Phils is taxable in the Phils
B. Lotto winning sponsored by the PCSO are not taxable to a resident citizen
C. Winnings of a brand new car in a raffle draw sponsored by shopping mall is taxable
D. Winnings in a raffle draw sponsored by a cigarette company is taxable based on the schedule of rates in tax table if the amount is
less than 10,000.

7. Statement 1: Capital losses are deductible only from ordinary gains
Statement 2: Corporations are not allowed to observe the holding period and to carry over net capital loss
A. Only Statement 1 is correct
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B. Only statement 2 is correct
C. Both are correct
D. Both incorrect

8. An example of funeral expense not deductible is
A. Cost of coffin assumed by family friend
B. Funeral expenses paid out of decedent’s estate
C. Mourning clothing of surviving spouse
D. Cost of tombstone

9. Which is false? Gross gift of NRA
A. Includes all intangible personal properties regardless of location
B. Includes all intangible personal properties in the Phils
C. With reciprocity will not include all intangible personal properties regardless of location
D. Without reciprocity will not include all intangible personal properties situated outside the Phils.

10. Which is not Vat exempt?
A. Sales of meds to in-patients of a hospital
B. Services rendered by persons subject to percentage tax
C. Receipts from leasing of real properties
D. Export sales of persons NO VAT registered

11. A corporation registered in BIR in May 2007 shall be covered by MCIT in
A. 2010
B. 2011
C. 2013
D. 2014

12. What is the taxable income if A is a resident citizen,single?
Business Income, Phils 300000
Business Income, US 250000
Expenses, Phils 200000
Expenses, US 125000
Interest on deposit in Metrobank, and US 3000 and 500
Cash prize won in local and US contest 6000 and 10,000
Winnings lotto phil, US 20000 and 50000
Dividends from domestic corp 25000
A. 261000
B. 334000
C. 291000
D. 306000

13. If A is NRA, ETB, married, 5 children, taxable income is
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A. 243000
B. 56000
C. 74000
D. None

14. If A is NRA, NETB income tax due is
A. 83500
B. 63500
C. 18500
D. 334000

15. A died. The amount of funeral expenses is covered by a memorial plan up to 120000. Other actual funeral expenses amounted to
75000. The amount of his tangible properties upon death was 3700000.
Gross Estate Funeral Expenses
A. 3700,000 70000
B. 3700000 195000
C. 3820000 191000
D. 3820000 195000

16. A,single has the ff data in 2010 and 2011:
2010 Case 1 Case 2 Case 3
Net income before personal expemtion and
bad debt
50000 50000 50000
Less: Bad debt written off 70000 68000 30000
Net income (20000) (18000) 20000
Bad debt recovered 70000 60000 30000
In 2011, the taxable amounts before personal exemption are:
Case1 Case 2 Case 3
A. 50000 50000 50000
B. 50000 42000 30000
C. 70000 68000 30000
D. (20000) (8000) 20000
17. When A was informed that he is about to die, he sold his properties:
MV-date of sale Selling price MV-date of death
Land 2500,000 1500,000 2700,000
Jewelries 500,000 300,000 300,000
Shares of stocks 200,000 220,000 250,000
Transfer under limited
power of appointment
1000,000 600,000 800,000
How much shall be included in the gross estate?
A. 1200,000
B. 1230,000
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C. 1430,000
D. 1400,000

18. Magulang gave gifts to the following persons on his 75
 A second hand car worth 350,000 to K, his driver. The donation was made orally. Since then, the driver had taken possession of the
 To M, a lot with a bungalow in it. The value of the property is 1200,000. The donation provides that it may be revoked anytime at
htepleasure of Magulang.
 His flower shop worth 700,000 to H. The donation is in Magulang’s will.
 Cash of 50000 each to the 3 maids.
How much donor’s tax is due?
A. 720,000
B. 100,000
C. 45,000
D. 1,000

19. A is the owner of a small grocery store with gross sales in one year that do not exceed 1919,500. She is not Vat registered. Data are:
Ending inventory, Dec 31, 2007……………..123,450
Gross Sales……………………………………………..67,800
Purchases from VAT registered suppliers..156,980
The percentage tax due is:
A. 34,823
B. 6780
C. 2034
D. 9876

20. The franchise tax on grantees of radio and television broadcasting companies whose annual gross receipts in any year do not
exceed 10million shall be
A. 1% of gross receipts
B. 2% of gross receipts
C. 3% of gross receipts
D. 4% of gross receipts