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TEST BANK-INCOME TAXATION

CHAPTER 1-GENERAL PRINCIPLES AND CONCEPTS OF


TAXATION

A.MULTIPLE CHOICE:

1. THE PROCESS BY WHICH THE SOVEREIGN RAISES INCOME TO


DEFRAY THE EXPENSES OF THE GOVERNMENT IS CALLED- (RPCPA)

A. SUBSIDY
B. TARIFF
C. TAXATION
D. TRIBUTE

2. ONE OF THE CHARACTERISTICS OF INTERNAL REVENUE TAX IS THAT


THEY ARE-(RPCPA)

A) CRIMINAL IN NATURE
B) PENAL IN NATURE
C) POLITICAL IN NATURE
D) GENERALLY PROSPECTIVE IN APPLICATION

3. IN CASE OF CONFLICT BETWEEN THE TAX LAWS AND GENERALLY


ACCEPTED ACCOUNTING PRINCIPLES (GAAP)-(RPCPA)

A) BOTH TAX LAWS AND GAAP SHALL BE ENFORCED


B) GAAP SHALL PREVAIL OVER TAX LAWS
C) TAX LAWS SHALL PREVAIL OVER GAAP
D) THE ISSUE SHALL BE RESOLVED BY THE COURT

4. WHICH OF THE FOLLOWING HAS NO POWER OF TAXATION?(RPCPA)

A) PROVINCES
B) CITIES
C) BARANGAYS
D) BARRIOS

5. “SCHEDULAR SYSTEM OF INCOME TAXATION” MEANS(RPCPA)

A) ALL TYPES OF INCOME ARE ADDED TOGETHER TO ARRIVE AT


GROSS INCOME
B) SEPARATE GRADUATED RATES ARE IMPOSED ON DIFFERENT
TYPES OF INCOME
C) CAPITAL GAINS ARE EXCLUDED IN DETERMINING GROSS
INCOME
D) COMPENSATION INCOME AND BUSINESS/PROFESSIONAL
INCOME ARE ADDED TOGETHER IN ARRIVING AT GROSS
INCOME

6. ONE OF THE FOLLOWING IS A PRIMARY PURPOSE OF TAXATION

A)PROTECTION OF LOCAL INDUSTRIES AGAINST FOREIGN


COMPETITION THROUGH IMPOSITION OF HIGH CUSTOMS DUTIES ON
IMPORTED GOODS
B)REDUCTION OF INEQUALITIES IN WEALTH AND INCOME BY IMPOSING
PROGRESSIVELY HIGHER TAX RATES
C) TO SECURE REVENUE FOR THE SUPPORT OF THE GOVERNMENT
D) STRENGTHENING OF ANEMIC ENTERPRISES BY GIVING TAX
EXEMPTION

7. WHICH OF THE FOLLOWING IS NOT A SECONDARY PURPOSE OF


TAXATION?

A) TO SERVE AS KEY INSTRUMENT OF SOCIAL CONTROL


B) TO EFFECT A MORE EQUITABLE DISTRIB UTION OF WEALTH
AMONG PEOPLE
C) TO ACHIEVE SOCIAL AND ECONOMIC STABILITY
D) TO RAISE REVENUE TO DEFRAY THE NECESSARY EXPENSE OF
THE GOVERNMENT

8. WHICH IS THE BEST ANSWER? A TAX REFORM AT ANY GIVEN TIME


UNDERSCORES THE FACT THAT-(RPCPA)

A) TAXATION IS AN INHERENT POWER OF THE STATE


B) TAXATION IS ESSENTIALLY A LEGISLATIVE POWER
C) TAXATION IS A POWER THAT IS VERY BROAD
D) THE STATE CAN AND SHOULD ADOPT PROGRESSIVE TAXATION

9. THE LEGISLATIVE BODY CAN IMPOSE A TAX AT ANY


AMOUNT UNDERSCORES THE LEGAL DICTUM THAT TAXATION IS –
(RPCPA)

A) AN INHERENT POWER OF THE TAX


B) A VERY BROAD POWER OF THE STATE
C) ESSENTIALLY A LEGISLATIVE POWER
D) FOR PUBLIC PURPOSE

10. ALL OF THE FOLLOWING, EXCEPT ONE, ARE BASIC


PRINCIPLES OF THE SOUND TAX SYSTEM
A) FISCAL ADEQUACY
B) THEORETICAL JUSTICE
C) ADMINISTRATIVE FEASIBILITY
D) INHERENT IN SOVEREIGNTY

11. UNDER THIS BASIC PRINCIPLE OF SOUND TAX SYSTEM, THE


GOVERNMENT SHOULD NOT INCUR A DEFICIT-(RPCPA)

A) THEORETICAL JUSTICE
B) ADMINISTRATIVE FEASIBILITY
C) FISCAL ADEQUACY
D) NONE OF THE ABOVE

12. THE FOLLOWING, EXCEPT ONE, ARE BASIC PRINCIPLES OF A SOUND


TAX SYSTEM

A) IT SHOULD BE CAPABLE OF BEING EFFECTIVELY ENFORCED


B) IT MUST BE PROGRESSIVE
C) SOURCES OF REVENUE MUST BE SUFFICIENT TO MEET
GOVERNMENT EXPENDITURES AND OTHER PUBLIC NEEDS
D) IT SHOULD BE EXERCISED TO PROMOTE PUBLIC WELFARE

13. WHICH OF THE FOLLOWING IS NOT ONE OF THE CANONS OF A


SOUND TAX SYSTEM?

A) QUANTIFIABILITY
B) EQUALITY
C) CERTAINTY
D) CONVENIENCE

14. THE POWER OF TAXATION CAN ONLY BE EXERCISED BY THE


LAWMAKING BODY

A) SUBJECT TO CONSTITUTIONAL AND INHERENT LIMITATIONS


B) EQUALITY OR THEORETICAL JUSTICE
C) LEGISLATIVE IN CHARACTER
D) INHERENT IN SOVEREIGNTY

15. THE PRESIDENT OF THE PHILIPPINES AND THE PRIME MINISTER OF


JAPAN ENTERED INTO AN EXECUTIVE AGREEMENTIN RESPECT OF A
LOAN FACILITY TO THE PHILIPPINES FROM JAPAN WHEREBY IT WAS
STIPULATED THAT INTEREST ON LOANS GRANTED BY PRIVATE
JAPANESE FINANCIAL INSTITUTIONS IN THE PHILIPPINES SHALL NOT
BE SUBJECT TO PHILIPPINE INCOME TAXES. WHAT BASIC
CHARACTERISTIC OF TAXATION HAS BEEN VIOLATED BY THIS
AGREEMENT?

A) INHERENT LIMITATION
B) THEORETICAL JUSTICE
C) LEGISLATIVE IN CHARACTER
D) ADMINISTRATIVE FEASIBILITY

16. WHICH STATEMENT GIVES THE CORRECT ANSWER? THAT A


FEASIBILITY STUDY NEEDS OR NEED TO LOOK INTO THE TAXES OF
DIFFERENT POLITICAL SUBDIVISIONS OF GOVERNMENT WHICH MAY
BE ALTERNATIVE SITES OF BUSINESS BECAUSE-(RPCPA)

A) PROVINCES, CITIES AND MUNICIPALITIES MUST HAVE UNIFORM


TAXES BETWEEN AND AMONG THEMSELVES
B) THE LOCAL TAXES OF A POLITICAL SUBDIVISION NEED NOT BE
UNIFORM WITH THE LOCAL TAXES OF ANOTHER POLITICAL
SUBDIVISION
C) BUSINESSES THAT ARE SUBJECT TO NATIONAL TAXES ARE
EXEMPTED FROM LOCAL BUSINESS TAXES
D) LOCAL BUSINESS TAXES MAY BE CREDITED AGAINST NATIONAL
BUSINESS TAXES

17. STATE,MENT 1:THE POWER OF TAXATION IS INHERENT IN


SOVEREIGNTY BEING ESSENTIAL TO THE EXISTENCE OF EVERY
GOVERNMENT. HENCE, EVEN IF NOT MENTIONED IN THE
CONSTITUTION, THE STATE CAN STILL EXERCISE THE POWER.

STATEMENT 2:IT IS ESSENTIALLY A LEGISLATIVE FUNCTION. EVEN IN


THE ABSENCE OF ANY CONSTITUTIONAL PROVISION, TAXATION
POWER FALLS TO CONGRESS AS PART OF THE GENERAL POWER OF
LAWMAKING.-(RPCPA)

A) FALSE, FALSE
B) FALSE, TRUE
C) TRUE, TRUE
D) TRUE, FALSE

18. THOSE RESTRICTIONS ON THE EXERCISE OF THE POWER OF


TAXATION THAT AREW FOUND IN THE CONSTITUTION OR IMPLIED
FROM ITS PROVISIONS

A) THEORETICAL JUSTICE
B) LEGISLATIVE IN CHARACTER
C) INHERENT LIMITATIONS
D) CONSTITUTIONAL LIMITATIONS
19. WHICH OF THE FOLLOWING STATEMENTS IS NOT CORRECT?-(RPCPA)

A) TAXES MAY BE IMPOSED TO RAISE REVENUE OR TO PROVIDE


DISINCENTIVES TO CERTAIN ACTIVITIES WITHIN THE STATE
B) THE STATE CAN HAVE THE POWER OF TAXATION EVEN IF THE
CONSTITUTION DOES NOT NECESSARILY GIVE IT THE POWER TO TAX
C) FOR THE EXERCISE OF THE POWER OF TAXATION, THE STATE CANJ
TAX ANYTHING AT ANY TIME
D) THE POWER OF TAXATION IN THE PHILIPPINE CONSTITUTION ARE
GRANTS OF POWER AND NOT LIMITATIONS ON TAXING POWERS

20. ONE OF THE FOLLOWING IS NOT AN INHERENT LIMITATION ON THE


EXERCISE OF THE POWER OF TAXATION-

A) INTERNATIONAL COMITY
B) DOUBLE TAXATION
C) NON-DELEGATION OF THE LEGISLATIVE POWER TO TAX
D) TERRITORIALITY

21. THE CITY COUNCIL PASSED AN ORDINANCE IMPOSING AN


OCCUPATION TAX ON AN AIRCONDITIONING TECHNICIAN. CONDE IS
THE ONLY PERSON WITH SUCH OCCUPATION IN THE CITY. HE
CHALLENGED THE VALIDITY OF THE ORDINANCE AS BEING
DISCRIMINATORY SINCE HE IS THE ONLY ONE ADVERSELY
AFFECTED.

A) THE CONTENTION OF CONDE IS TENABLE


B) THE ORDINANCE IS UNCONSTITUTIONAL BECAUSE CONDE IS
DENIED OF HIS RIGHT TO EQUAL PROTECTION OF LAW
C) THE CONTENTION OF CONDE IS NOT JUSTIFIED BECAUSE THE
RULE ON UNIFORMITY IS NOT VIOLATED CONSIDERING THAT
THE ORDINANCE WOULD ALSO IMPOSE ON ALL
AIRCONDITIONING TECHNICIAN WHO MAY COME WITHIN THE
JURISDICTION OF THE CITY
D) THE ISSUE ON VALIDITY OR INVALIDITY OF THE ORDINANCE
SHOULD BE SET ASIDE

22. TREATING PERSONS WHO ARE SIMILARLY SITUATED IN THE SAME


MANNER-

A) UNIFORMITY OF TAXATION
B) EQUALITY OF TAXATION
C) DUE PROCESS OF LAW
D) NON-DELEGATION OF LEGISLATIVE POWER

23. WHICH OF THE FOLLOWING IS VIOLATIVE OF THE UNIFORMITY RULE


IN TAXATION?

A) DIFFERENT TAX RATES ON BOARDING STABLES FOR


RACEHORSES AND BOARDING HORSES THAT ARE NOT FOR
RACING
B) WHOLESALE DEALERS IN OIL ARE SUBJECT TO OCCUPATION
TAX WHILE WHOLESALE DEALERS IN OTHER ARTICLES SCU AS
SUGAR, BACON, COAL, IRON AND OTHER THINGS ARE NOT SO
SUBJECT
C) A ROAD USERS’ TAX IMPOSED ON ALL MOTOR VEHICLES
REGISTERED AND OPERATING IN THE CITY OF MANILA BUT
DOES NOT SUBJECT VEHICLES NOT REGISTERED THEREIN BUT
ALSO OPERATING TEMPORARILY IN SAID CITY
D) A TAX OF P2 PER SQM OR FRACTION THEREOF IS IMPSED ON
EVERY BILLBOARD OR SIGN ANYWHERE IN THE COUNTRY

24. THE LUNG CENTER OF THE PHILIPPINES, A CHARITABLE


INSTITUTION, IS ERECTED IN THE MIDDLE OF A 12-HECTARE LOT:

I. A BIG SPACE AT ITS GROUND FLOOR IS BEING LEASED TO


PRIVATE PARTIES, FOR CANTEEN AND SMALL STORE SPACES,
AND TO MEDICAL OR PROFESSIONAL PRACTITIONERS WHO
USE THE SAME AS THEIR PRIVATE CLINICS FOR THEIR
PATIENTS WHOM THEY CHARGE FOR THEIR PROFESSIONAL
FEES.
II. THE REST OF THE PORTIONS OF THE BUILDING ARE USED FOR
ITS PATIENTS, WHETHER PAYING OR NON-PAYING
III. ALMOST ½ OF THE ENTIRE AREA OF THE LOT ON THE LEFT
SIDE OF THE BUILDING IS VACANT AND IDLE
IV. A BIG PORTION ON THE RIGHT SIDE IS BEING LEASED FOR
COMMERCIAL PURPOSES TO A PRIVATE ENTERPRISE KNOWN
AS THE ELLIPTICAL ORCHIDS & GARDEN CENTER

WHICH PORTION IS SUBJECT TO REAL PROPERTY TAX?

A) I ONLY
B) I AND II
C) III AND IV
D) I, III AND IV
25. STATEMENT 1:THE CONSTITUTIONAL EXEMPTION ON INCOME
TAXES, PROPERTY TAXES AND CUSTOMS DUTIES IS ALLOWED ON
NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS ONLY.

STATEMENT 2: A BUILDING BEING LEASED BY ITS OWNER TO A PRIVATE


EDUCATIONAL INSTITUTION FOR USE AS CLASSROOMS IS EXEMPT FROM
PROPERTY YAX

STATEMENT 3: INCOME OF A NON-STOCK, NON-PROFIT EDUCATIONAL


INSTITUTION RUN BY THE ARCHDIOCESE IS EXMEPT FROM TAX PROVIDED
THAT INCOMES ARE ACTUALLY, DIRECTLY AND EXCLUSIVELY USED FOR
EDUCATIONAL PURPOSES

WHICH OF THE STATEMENTS ARE CORRECT?

A) STATEMENT 1 ONLY
B) STATEMENTS 1 AND 2
C) STATEMENT 2 ONLY
D) ALL OF THEM

26. WHICH OF THE FOLLOWING STATEMENTS IS NOT CORRECT?-(RPCPA)

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 A
RELIGIOUS ORDER IS EXEMPT FROM PROPERTY TAX, BUT ITS
INCOME IS SUBJECT TO INCOME TAX
C) THE PROHIBITION OF DELEGATION BY THE STATE OF THE POWER OF
TAXATION WILL STILL ALLOW THE BIR 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

27. ST. BARNABAS COLLEGE (SBC) IS A NON-STOCK, NON-PROFIT


EDUCATIONAL INSTITUTION. IT OWNS A 5-HECTARE LOT ½ OF WHICH
IS BEING USED AS ITS SCHOOL CAMPUS WHILE THE OTHER HALF IS
VACANT. TO COPE WITH THE INCREASING OPERATING COSTS AND TO
UPGRADE ITS FACILITIES, SBC PLANS TO DO THE FOLLOWING
EFFECTIVE JANUARY 1, 2006; 1). RENT OUT TO A MARKETING FIRM
THE VACANT PORTION OF THE LAND; 2) INJCREASE TUITION FEES BY
10% IN ACCORDANCE WITH GOVERNMENT REGULATIONS;.3)IMPORT
20 SETS OF COMPUTERS FOR USE IN ITS COMPUTER COURSES.

WHICH OF THE FOLLOWING QUESTIONS IS ANSWERABLE BY “YES.”?


A) IS SBC SUBJECT TO REAL ESTATE TAX ON THE ½ PORTION TO BE
RENTED OUT TO A BUSINESS ESTABLISHMENT?
B) WILL IT BE EXEMPT FROM INCOME TAX ON ITS RENTAL TO THE
MARKETING FIRM?
C) WILL THE INCREASE IN TUITION FEES BE SUBJECT TO INCOME
TAX IF IT RESULTS TO NET INCOME FROM SCHOOL
OPERATIONS?
D) WILL IT BE SUBJECT TO CUSTOMS DUTIES ON THE
IMPORTATION OF THE COMPUTERS?

28. THE QUEZON SCHOOL OF BUSINESS AND ARTS, A PROPRIETARY


EDUCATIONAL INSTITUTION WHICH IS OFFERING PRIMARY,
SECONDARY AND TERTIARY EDUCATIONB, IS REGISTERED AND
ACCREDITED BY DEPED AND CHED.
WHICH OF THE FOLLOWING IS EXEMPT FROM TAX? WHAT KIND OF
TAX?

A) THE IMPORTATION OF LABORATORY EQUIPMENTS-FROM


CUSTOMS DUTIES
B) THE SCHOOL BEING RENTED BY THE SCHOOL-FROM REAL
PROPERTY TAX
C) A PORTION OF THE SCHOOL BUILDING BEING LEASED TO A
FASTFOOD CHAIN-FROM REAL PROPERTY TAX
D) THE INCOME FROM OPERATION-FROM INCOME TAX

29. IN RELATION TO NO. 28 ABOVE, ASSUMING THAT THE


SCHOOL IS A NON-STOCK, NON-PROFIT EDUCATIONAL
INSTITUTION, WHICH OF THE FOLLOWING IS SUBJECT
TO TAX ? WHAT KIND OF TAX?

A) THE SCHOOL BUILDING OWNED BY THE SCHOOL-FROM


REAL ESTATE TAX
B) THE SCHOOL BUILDING BEING RENTED BY THE SCHOOL-
FROM REAL ESTATE TAX
C) A PORTION OF THE SCHOOL BUILDING BEING LEASED TO A
FASTFOOD CHAIN-FROM REAL PROPERTY TAX
D) THE INCOME FROM OPERATION-FROM INCOME TAX

30. THE MUNICIPALITY OF SAN FRANCISCO HAS A 10-


HECTARE CEMETERY OF 4 DIFFRRENT CEMETERIES WHICH
ARE OWNED BY DIFFERENT ENTITIES. WHICH OF THE
FOLLOWING IS SUBJECT TO REAL ESTATE TAX?
A) CEMENTERIO MUNICIPAL DEL SAN FRANCISCO-A GOV’T
CEMETERY OWNED BY THE MUNICIPALITY WHICH WAS
ESTABLISHED FOR THE PURPOSE OF USING IT AS BURIAL
GROUND OF THE PAUPERS OF SAN FRANCISCO
B) SAN FRANCISCO CATHOLIC CEMETERY-OWNED BY THE
CATHOLIC CHURCH; PAYMENTS ARE REMITTED TO THE
CATHOLIC CHURCH AND FOR THE IMPROVEMENT OF THE
CEMETERY
C) LAST TRIP MEMORIAL PARK-OWNED BY A CORPOR5ATION
WHERE DIVIDENDS ARE DISTRIBUTED TO THE SHAREHOLDERS
AT THE END OF THE YEAR
D) QUITA-QUITA MEMORIAL PARK-OWNED BY AN ASSOCIATION
CONSISTING OF 100 DIFFERENT FAMILIES; EACH FAMILY OWNS
SEVERAL SQUARE METERS OF LOT; NOT A SINGLE PORTION IS
HELD FOR SALE TO EITHER MEMBER OR NON-MEMBERS OF
THE ASSOCIATION

31.ALL APPROPRIATIONS, REVENUE OR TARIFF BILLS, BILLS


AUTHORIZING INCREASE OF PUBLIC DEBT, BILLS OF LOCAL
APPLICATION, AND BILLS SHALL ORIGINATE EXCLUSIVELY IN THE-
(RPCPA)

A) OFFICE OF THE PRESIDENT


B) HOUSE OF REPRESENTATIVES
C) SENATE
D) SUPREME COURT

32 WHICH STATEMENT IS WRONG? TAX LAWS-(RPCPA)

A) MUST ORIGINATE FROM THE HOUSE OF REPRESENTATIVES AND ON


WHICH SAME BILL THE SENATE MAY PROPOSE AMENDMENTS
B) MAY ORIGINATE FROM THE SENATE AND ON WHICH SAME BILL THE
HOUSE OF REPRESENTATIVES MAY PROPOSE AMENDMENTS
C) MAY HAVE A HOUSE VERSION AND SENATE VERSION APPROVED
SEPARATELY
D) MAY BE RECOMMENDED BY THE PRESIDENT TO CONGFRESS

33.CONGRESSMAN ERIN TANADA OF QUEZON AND SENATOR JUAN


PONCE ENRILE SPONSORED A BILL IN THE HOUSE OF REPRESENTATIVES
AND THE SENATE, RESPECTIVELY, INCREASING THE PERSONAL
EXEMPTIONS OF INDIVIDUAL TAXPAYERS AS WELL AS GRANTING TAX
EXEMPTION TO MINIMUM WAGE EARNERS. WHICH OF THE FOLLOWING
IS CORRECT?

A) THE SENATE BILL SHOULD BE DISCUSSED AHEAD OF THE HOUSE


BILL
B) THE SENATE AND HOUSE BILLS MAY BE DISCUSSED AT THE SAME
TIME IN BOTH HOUSES
C) THE HOUSE BILL SHOULD BE DISCUSSED AHEAD NOF THE SENATE
BILL
D) NO PRIORITY; EACH BILL CAN BE DISCUSSED AHEAD OF THE OTHER

34.NO LAW GRANTING ANY TAX EXEMPTION SHALL BE PASSED WITHOUT


THE CONCURRENCE OF-(RPCPA)

A) MAJORITY OF ALL MEMBERS OF THE CONGRESS


B) 2/3 VOTE OF ALL MEMBERS OF THE CONGRESS
C) ¾ VOTE OF ALL MEMBERS OF THE CONGRESS
D) UNANIMOUS VOTE OF ALL MEMBERS OF THE CONGRESS

35.WHICH OF THE FOLLOWING STATEMENTS IS INCORRECT?

A) NO PERSON SHALL BE IMPRISONED FOR NON-PAYMENT OF DEBT OR


NON-PAYMENT OF TAXES
B) THE PASSAGE OF LAWS GRANTING TAX EXEMPTIONS REQUIRES THE
CONCURRENCE BY A MAJORITY OF ALL THE MEMBERS OF
CONGRESS
C) THE SUPREME COURT’S JURISDICTION OVER TAX CASES CAN NOT
BE IMPAIRED
D) THE REVENUES AND ASSETS OF NON-STOCK, NON-PROFIT
EDUCATIONAL INSTITUTIONS AND DONATIONS FFOR EDUCATIONAL
PURPOSES ARE EXEMPTED FROM TAXES AND DUTIES

36.THEY RESTRICT THE EXERCISE OF THE POWER OF TAXATION ALTHOUGH


THEY ARE NOT EMBODIED IN THE CONSTITUTION

A) THEORETICAL JUSTICE
B) LEGISLATIVE IN CHARACTER
C) INHERENT LIMITATIONS
D) CONSTUTIONAL LIMITATIONS

37. A TAX MUST BE IMPOSED FOR PUBLIC PURPOSE. WHICH OF THE


FOLLOWING IS NOT A PUBLIC PURPOSE?-(RPCPA)

A) NATIONAL DEFENSE
B) PUBLIC EDUCATION
C) IMPROVEMENT OF SUGAR INDUSTRY
D) NONE OF THE ABOVE

38. A FUNDAMENTAL RULE IN TAXATION IS THAT “THE PROPERTY OF


ONE COUNTRY MAY NOT BE TAXED BY ANOTHER COUNTRY”. THIS IS
KNOWN AS-(RPCPA)
A) INTERNATIONAL LAW
B) INTERNATIONAL COMITY
C) RECIPROCITY
D) INTERNATIONAL INHIBITION

39.QUESTION 1: CAN THE STATE TAX THE ARMED FORCES OF THE


PHILIPPINES?

QUESTION 2: ARE GOVERNMENT-OWNED AND CONTROLLED


CORPORATIONS SUBJECT TO TAX?

A)YES, NO
B)YES, YES
C)NO, YES
D)NO, NO

40 DIPLOMATIC OFFICIALS SUCH AS HEADS OF STATES AND


AMBASSADORS ARE EXEMPT FROM TAXES AND DUTIES BECAUSE OF

A) INTERNATIONAL COMITY
B) RECIPROCITY PROVISIONS
C) PRINCIPLE OF TERRITORIALITY
D) EXEMPTION IN THE TAX CODE

41. DEALS WITH THE PROVISION OF THE LAW WHICH DETERMINES THE
PERSON OR PROPERTY TO BE TAXED, THE SUM OR SUMS TO BE RAISED,
THE RATE THEREOF, AND THE TIME AND MANNER OF LEVYINGM
RECEIVING AND COLLECTING OF TAXES

A) COLLECTION
B) PAYMENT
C) ENFORCED CONTRIBUTION
D) LEVY

42. CONSTITUTED OF THE PROVISIONS OF LAW WHICH PRESCRIBE THE


MANNER OF ENFORCING THE OBLIGATION ON THE PART OF THOSE TAXED
TO PAY THE DEMAND THUS CREATED

A) COLLECTION
B) PROPORTIONATE IN CHARACTER
C) ENFORCED CONTRIBUTION
D) LEVY
43.THE AMOUNT REQUIRED IS DICTATED BY THE NEEDS OF THE
GOVERNMENT-(RPCPA)
A) LICENSE FEE
B) TAX
C) TOLL
D) TARIFF

44. ONE OF THE CHARACTERISTICS OF A TAX IS

A) A TAX IS A PECUNIARY BURDEN AND THE LAW MAY NOT ALLOW


PAYMENT IN KIND
B) IT IS DEPENDENT UPON THE WILL OR CONTRACTUAL ASSENT,
EXPRESS OR IMPLIED, OF THE PERSON TAXED
C) IT IS LEVIED BY THE STATE BY VIRTUE OF ITS SOVEREIGNTY
D) IT IS COLLECTED FOR PUBLIC AND PRIV ATE PURPOSE

45. ONE OF THE CHARACTERISTICS OF A TAX IS THAT-(RPCPA)

A) IT IS GENERALLY BASED ON CONTRACT


B) IT IS GENERALLY PAYABLE IN MONEY
C) IT IS GENERALLY ASSIGNABLE
D) OPTIONAL

46. WHICH IS NOT AN ESSENTIAL CHARACTERISTIC OF TAX?-(RPCPA)

A) UNLIMITED AS TO AMOUNT
B) PAYABLE IN MONEY
C) PROPORTIONATE IN CHARACTER
D) REGULAR IN PAYMENT

47. NO PERSON SHALL BE IMPRISONED FOR NON-PAYMENT OF-(RPCPA)

A) PROPERTY TAX
B) EXCISE TAX
C) POLL TAX
D) INCOME TAX

48. AN EXAMPLE OF A PROPERTY TAX IS

A) ADDITIONAL COMMUNITY TAX ON INCOME OF REAL PROPERTIES


B) REAL ESTATE TAX ON REAL PROPERTIES
C) ESTATE TAX ON INHERITED PERSONAL AS WELL AS REAL
PROPERTIES
D) DONOR’S TAX ON DONATION OF PROPERTY

49. WHICH OF THE FOLLOWING IS NOT AN EXAMPLE OF EXCISE TAX?

A) TRANSFER TAX
B) SALES TAX
C) REAL PROPERTY TAX
D) INCOME TAX

50. SHARON, A CPA HAS JUST OBTAINED HER CPA LICENSE. BEFORE SHE
CAN LAWFULLY PURSUE HER OCCUPATION, SHE SHOULD PAY-
(RPCPA)

A) PRIVILEGE TAX(PTR)
B) PERCENTAGE TAX
C) CPA’S INCOME TAX
D) VALUE-ADDED TAX

51. A TAX THAT IS IMPOSED UPON A PERSON WHO IS DIRECTLY BOUND


TO PAY IT-

A) DIRECT TAX
B) INDIRECT TAX
C) EXCISE TAX
D) POLL TAX

52. ONE IS NOT A DIRECT TAX-(RPCPA)

A) IMMIGRATION TAX
B) TRANSFER TAX
C) INCOME TAX
D) CONTRACTOR’S TAX

53.THE BASIC COMMUNITY TAX OF P5.00 OF AN INDIVIDUAL IS A(AN)-


\
A) PROPERTY TAX
B) DIRECT TAX
C) NATIONAL TAX
D) AD VALOREM TAX

54. STATEMENT 1: THE VALUE-ADDED TAX IS A PROPERTRY TAX

STATEMENT 2: THE ESTATE TAX IS A DIRECT TAX-(RPCPA)

A) THE 2 STATEMENTS ARE CORRECT


B) THE 2 STATEMENTS ARE WRONG
C) STATEMENT 1 IS CORRECT; STATEMENT 2 IS WRONG
D) STATEMENT 1 IS WRONG; STATEMENT 2 IS CORRECT
55.FORMS PART OF THE PURCHASE PRICE OF THE COMMODITY OR SERVICE
AND PASSED ON TO CUSTOMERS
A) DIRECT TAX
B) INDIRECT TAX
C) PROPERTY TAX
D) NONE OF THE ABOVE

56. A TAX ON BUSINESS IS-(RPCPA)

A) DIRECT TAX
B) INDIRECT TAX
C) PROPERTY TAX
D) NONE OF THE ABOVE

57. FELIX IS A MINING OPERATOR. HIS MINERAL LANDS ARE NOT COVERED
BY ANY LEASE CONTRACT. THE TAX FELIX HAS TO PAY BASED ON THE
ACTUAL VALUE OF THE GROSS OUTPUT OR MINERAL PRODUCTS
EXTRACTED IS-(RPCPA)

A) MINING TAX
B) ROYALTIES
C) RENTAL
D) AD VALOREM TAX

58.TAX THAT IS IMPOSED SOLELY TO RAISE REVENUE FOR GOV’T


EXPENDITURES

A) REVENUE TAX
B) REGULATORY TAX
C) SPECIFIC TAX
D) AD VALOREM TAX

59.TAX LEVIED FOR PARTICULAR OR SPECIFIC PURPOSE IRRESPECTIVE


OF WHETHER REVENUE IS ACTUALLY RAISED OR NOT

A) REVENUE TAX
B) REGULATORY TAX
C) SPECIFIC TAX
D) AD VALOREM TAX

60..TAX IMPOSED BY THE NATIONAL GOVERNMENT AND IS EFFECTIVE


WITHIN THE ENTIRE JURISDICTION THEREOF

A) NATIONAL TAX
B) LOCAL TAX
C) PROPORTIONAL TAX
D) GENERAL TAX
61. TAXES IMPOSED BY A POLITICAL SUBDIVISION OF THE STATE AND IS
EFFECTIVE ONLY WITHIN THE TERRITORIAL BOUNDARIES THEREOF

A) NATIONAL TAX
B) LOCAL TAX
C) PROGRESSIVE TAX
D) REGRESSIVE TAX

62.THE FOLLOWING ARE KINDS OF TAXES AS TO GRDUATION. WHICH ONE


IS NOT?-(RPCPA)

A) DIGRESSIVE
B) UNIFORM
C) REGRESSIVE
D) PROGRESSIVE

63.THE POWER OF THE STATE OR THOSE TO WHOM THE POWER HAS BEEN
DELEGATED TO TAKE PRIVATE PROPERTY FOR PUBLIC USE UPON PAYING
TO THE OWNER A JUST COMPENSATION

A) POWER OF EMINENT DOMAIN


B) POLICE POWER
C) POWER OF TAXATION
D) PEOPLE POWER

64.THERE CAN BE CLASSIFICATION OF THE SUBJECT MATTER BEING


REQUIRED TO SHOULDER THE BURDEN. WHICH IS THE EXCEPTION?-
(RPCPA)

A) TAX
B) LICENSE FEE
C) TOLL
D) EMINENT DOMAIN

65.THE POWER OF THE STATE TO ENACT SUCH LAWS IN RELATION TO


PERSONS AND PROPERTY AS MAY PROMOTE PUBLIC HEALTH, PUBLIC
MORALS, PUBLIC SAFETY, AND THE GENERAL WELFARE OF THE PEOPLE\

A) POWER OF EMINENT DOMAIN


B) POLICE POWER
C) POWER OF TAXATION
D) PEOPLE POWER
66. THE FOLLOWING ARE SIMILARITIES OF THE INHERENT POWER OF
TAXATION, EMINENT DOMAIN AND POLICE POWER EXCEPT ONE-(RPCPA)

A) ARE NECESSARY ATTRIBUTES OF SOVEREIGNTY


B) INTERFERES WITH PRIVATE RIGHTS AND PROPERTY
C) AFFECTS ALL PERSONS OR THE PUBLIC
D) ARE LEGISLATIVE IN THEIR IMPLEMENTATION

67. WHICH STATEMENT REFERS TO POLICE POWER AS DISTINGUISHED


FROM TAXATION?-(RPCPA)

A) IT CAN ONLY BE IMPOSED ON SPECIFIC PROPERTY OR PROPERTIES


B) THE AMOUNT IMPOSED DEPENDS ON WHETHER THE ACTIVITY IS
USEFUL OR NOT
C) IT INVOLVES THE TAKING OF PROPERTY BY THE GOVERNMENT
D) THE AMOUNT IMPOSED HAS NO LIMIT

68.POLICE POWER AS DISTINGUISHED FROM TAXATION

A) JUST COMPENSATION IS RECEIVED BY THE OWNER OF THE


PROPERTY
B) MAYBE EXERCISED BY PRIVATE INDIVIDUALS
C) SUPERIOR TO THE NON-IMPAIRMENT CLAUSE OF THE CONSTITUTION
D) PROPERTY IS TAKEN BY THE GOV’T FOR PUBLIC PURPOSE

69 AFTER HAVING BEEN INFORMED THAT SOME MASSAGE PARLORS ARE


BEING USED AS FRONTS FOR PROSTITUTION, THE SANGGUNIANG
PANLUNGSOD OF MANILA PASSED A TAX ORDINANCE SUBJECTING
MASSAGE PARLORS WITHIN ITS JURISDICTION TO SUCH ONEROUS TAXES
THAT LEAVE THEM NO OTHER ALTERNATIVE BUT TO STOP OPERATING. THE
PASSAGE OF THE ORDINANCE IS A VALID EXERCISE OF-

A) TAXATION
B) EMINENT DOMAIN
C) POLICE POWER
D) POLICE POWER AND POWER OF TAXATION

70. STATEMENT 1: THE CONGRESS CAN ENACT TAX LAWS EVEN IN THE
ABSENCE OF A CONSTITUTIONAL PROVISION GRANTING SAID BODY THE
POWER TO TAX.

STATEMENT 2: A TAX MAY BE VALIDLY IMPOSED IN THE EXERCISE OF


POLICE POWER AND NOT THE POWER TO TAX.

A) FALSE, FALSE
B) FALSE, TRUE
C) TRUE, TRUE
D) TRUE, FALSE
71. WHICH OF THE FOLLOWING MAY NOT RAISE MONEY FOR THE
GOVERNMENT-(RPCPA)

A) POWER OF TAXATION
B) POLICE POWER
C) POWER OF EMINENT DOMAIN
D) PRIVATIZATION OF GOVERNMENT’S CAPITAL ASSETS

72. IN THIS POWER OF THE STATE, THE PERSON WHO IS PARTING WITH HIS
MONEY OR PROPERTY IS PRESUMED TO RECEIVE A BENEFIT-(RPCPA)

A) TAXATION
B) POLICE POWER
C) EMINENT DOMAIN
D) FORFEITURE POWER

73. WHICH OF THE INHERENT POWERS OF THE GOVERNMENT IS INFERIOR


TO THE NON-IMPAIRMENT CLAUSE OF THE CONSTITUTION?

A) TAXATION
B) POLICE POWER
C) EMINENT DOMAIN
D) NONE

74. TAX IS DISTINGUISHED FROM LICENSE FEE-(RPCPA)

A) NON-PAYMENT DOES NOT NECESSARILY RENDER THE BUSINESS


ILLEGAL
B) A REGULATORY MEASURE
C) IMPOSED IN THE EXERCISE OF POLICE POWER
D) LIMITED TO COVER COST OF OBLIGATION

75. THE DISTINCTION OF A TAX FROM PERMIT OR LICENSE FEE IS THAT A


TAX IS-(RPCPA)

A) IMPOSED FOR REGULATION


B) ONE WHICH INVOLVES EXERCISE OF POLICE POWER
C) ONE IN WHICH THERE IS GENERALLY NO LIMIT ON THE AMOUNT
THAT MAY BE IMPOSED
D) ANSWER IS NOT GIVEN

76. WHICH OF THE FOLLOWING TERMS DESCRIBES THIS STATEMENT “THAT


THE STATE HAS COMPLETE DISCRETION ON THE AMOUNT TO BE IMPOSED
AFTER DISTINGUISHING BETWEEN A USEFUL AND NON-USEFUL
ACTIVITY?”-(RPCPA)
A) TAX
B) LICENSE FEE
C) TOLL
D) CUSTOMS DUTY

77. WHICH OF THE FOLLOWING IS NOT A DISTINCTION OR SIMILARITY OF


LICENSE FEE FROM TAX?-(RPCPA)

A) IMPOSED NFOR REGULATION


B) INVOLVES EXERCISE OF POLICE POWER
C) NON-PAYMENT MAKES THE BUSINESS ILLEGAL
D) LEGAL COMPENSATION OR REWARD OF AN OFFICER FOR SERVICES

78. ALL OF THE FOLLOWING, EXCEPT ONE, ARE CHARACTERISTICS OF A


TOLL

A) DEMAND OF PROPRIETORSHIP
B) COMPENSATION FOR THE USE OF ANOTHER’S PROPERTY
C) MAY BE IMPOSED BY PRIVATE INDIVIDUALS
D) LEVIED FOR THE SUPPORT OF THE GOVERNMENT

79. THIS IS A DEMAND OF OWNERSHIP-(RPCPA)

A) LICENSE FEE
B) TAX
C) TOLL
D) FRANCHISE

80. ONE OF THE FOLLOWING IS NOT A CHARACTERISTIC OF A SPECIAL


ASSESSMENT

A) IT HAS SPECIAL APPLICATION ONLY TO A PARTICULAR TIME AND


PLACE
B) IT IS LEVIED ONLY ON LAND
C) MAY BE LEVIED ON BUSINESS
D) BASED WHOLLY ON BENEFITS

81. WHICH STATEMENT IS WRONG?-(RPCPA)

A) A TAX IS A DEMAND OF SOVEREIGNTY


B) A TOLL IS A DEMAND OF OWNERSHIP
C) A SPECIAL ASSESSMENT IS A TAX
D) CUSTOMS DUTY IS A TAX

82.WHICH OF THE FOLLOWING IS NOT A CHARACTERISTIC OF DEBT?


A) GENERALLY ARISES FROM CONTRACT
B) PAYABLE ONLY IN MONEY
C) ASSIGNABLE
D) IMPRISONMENT IS NOT A SANCTION FOR NON-PAYMENT

83. ALL FUNDS OR INCOME DERIVED BY THE GOVERNMENT FROM ANY


OTHER SOURC E

A) TAX
B) CUSTOMS DUTY
C) REVENUE
D) ORDINARY INCOME

84. IT COMPRISES ALL KINDS OF FUNDS INCLUDING TAXES-(RPCPA)

A) LICENSE FEE
B) INCOME
C) CUSTOMS DUTY
D) REVENUE

85.WHICH OF THE FOLLOWING CONSTITUTE OBJECTIONABLE DOUBLE


TAXATION?-(RPCPA)

A) A LICENSE FEE AND A TAX IMPOSED ON THE SAME BUSINESS OR


OCCUPATION FOR SELLING THE SAME ARTICLES
B) A TAX IMPOSED BOTH ON THE OCCUPATION OF FISHING AND ON
FISHPOND OPERATION
C) PERSONS ENGAGED IN LEASING OR SELLING REAL PROPERTY ARE
SUBJECT TO REAL ESTATE DEALERS TAX AND THEIR SALES ARE
ALSO SUBJECT TO 12% VAT
D) A TAX OF 1% IS IMPOSED FOR BANK RESERVE DEFICIENCY WHILE A
PENALTY OF 1/10 OF 1% IS ALSO IMPOSED AS A CONSEQUENCE OF
SUCH RESERVE DEFICIENCY

86. WHICH OF THE FOLLOWING IS NOT AN ELEMENT OF DIRECT DUPLICATE


TAXATION WHICH IS VIOLATIVE OF THE EQUAL PROTECTIONAND
UNIFORMITY CLAUSES IN THE CONSTITUTION?

A) SAME PROPERTY IS TAXED TWICE


B) SAME TAXING AUTHORITY
C) SAME AMOUNT
D) SAME PURPOSE

87. THE FOLLOWING CONSTITUTE DOUBLE TAXATION EXCEPT ONE-(RPCPA)

A) BOTH TAXES ARE IMPOSED IN THE SAME AMOUNT


B) BOTH TAXES ARE LEVIED FOR THE SAME PURPOSE
C) BOTH TAXES ARE IMPOSED BY THE SAME TAXING AUTHORITY
D) BOTH TAXES ARE IMPOSED UPON THE SAME PERSON

88. STATEMENT 1: OUR CONSTITUTION DOES NOT PROHIBIT DOUBLE


TAXATION

STATEMENT 2: IF DOUBLE TAXATION OCCURS, THE TAXPAYER MAY SEEK


RELIEF UNDER THE UNIFORMITY CLAUSE OR THE EQUAL PROTECTION
GUARANTEE-(RPCPA)

A) CORRECT, WRONG
B) WRONG, CORRECT
C) WRONG, WRONG
D) CORRECT, CORRECT

89. YOUR CLIENT OWNS A ROW OF APARTMENTS. HE COMPLAINS TO YOU


THAT HE IS BEING REQUIRED TO PAY FOUR (4) KINDS OF TAXES ON THIS
LINE OF BUSINESS ALONE. FROM THE LIST GIVEN BY YOUR CLIENT, WHICH
OF THE FOLLOWING TAXES HAS BEEN WRONGLY IMPOSED ON HIM?

A) REAL ESTATE TAX ON THE LAND AND BUILDING


B) VALUE-ADDED TAX ON THE GROSS RECEIPTS FROM RENT
C) COMMUNITY TAX BASED ON THE ASSESSED VALUE OF THE
APARTMENT HOUSE
D) INCOME TAX ON INCOME FROM RENT

90. ONE OF THE FOLLOWING IS A FALSE STATEMENT ABOUT DOUBLE


TAXATION. WHICH IS IT?

A) THERE IS NO CONSTITUTIONAL PROHIBITION ON DOUBLE TAXATION


B) DIRECT DUPLICATE TAXATION IS A VALID DEFENSE AGAINST A TAX
MEASURE IF IT IS VIOLATIVE OF THE EQUAL PROTECTION CLAUSE
C) ABSENCE OF ANY OF THE ELEMENTS OF DIRECT DOUBLE TAXATION
MAKES IT INDIRECT DUPLICATE TAXATION
D) A 20% FINAL WITHHOLDING TAX ON INTEREST INCOME ON BANK
DEPOSITS AND A 5% GROSS RECEIPTS TAX ON BANKS IS A DIRECT
DUPLICATE TAXATION
91. TRANSFER OF THE TAX BURDEN BY ONE ON WHOM THE TAX IS
ASSESSED TO ANOTHER

A) SHIFTING
B) CAPITALIZATION
C) TRANSFORMATION
D) TAX EXEMPTION
92. WHICH OF THE FOLLOWING IS NOT A SCHEME OF SHIFTING THE
INCIDENCE OF TAX BURDEN?-(RPCPA)

A) THE MANUFACTURER TRANSFERS THE TAX TO THE CONSUMER BY


ADDING THE TAX TO THE SELLING PRICE OF THE GOODS SOLD
B) THE PURCHASER ASKS FOR A DISCOUNT OR REFUSE TO BUY AT
REGULAR PRICE UNLESS IT IS REDUCED BY AN AMOUNT EQUAL TO
THE TAX HE WILL PAY
C) CHANGING THE TERMS OF THE SALE LIKE FOB SHIPPING POINT IN
THE PHILIPPINES TO FOB DESTINATION ABROAD, SO THAT THE TITLE
PASSES ABROAD INSTEAD OF IN THE PHILIPPINES
D) THE MANUFACTURER TRANSFERS THE SALES TAX TO THE
DISTRIBUTOR, THEN IN TURN TO THE WHOLESALER, TO THE
RETAILER AND FINALLY TO THE CONSUMER

93. THE REDUCTION IN THE SELLING PRICE OF INCOME-PRODUCING


PROPERTY BY AN AMOUNT EQUAL TO THE CAPITALIZED VALUE OF FUTURE
TAXES THAT MAY BE PAID BY THE PURCHASER

A) SHIFTING
B) CAPITALIZATION
C) TRANSFORMATION
D) TAX EXEMPTION

94. THE METHOD BY WHICH THE MANUFACTURER OR PRODUCER UPON


WHOM THE TAX IS IMPOSED PAYS THE TAX AND STRIVES TO RECOVER
SUCH EXPENSE THROUGH LOWER PRODUCTION COST WITHOUT
SACRIFICING THE QUALITY OF HIS PRODUCT

A) SHIFTING
B) CAPITALIZATION
C) TRANSFORMATION
D) TAX EXEMPTION

95. THE GRANT OF IMMUNITY TO PARTICULAR PERSONS OR CORPORATION


OR TO PERSONS OR CORPORATIONS OF A PARTICULAR CLASS FROM A TAX
WHICH PERSONS AND CORPORATIONS GENERALLY WITHIN THE SAME
TAXING DISTRICT ARE OBLIGED TO PAY
A) TAX EXEMPTION
B) TAX EVASION
C) TAX AVOIDANCE
D) TAX AMNESTY

96. STATEMENT 1: A BIR RULING ISSUED BY A COMMISSIONER OF INTERNAL


REVENUE WHICH GRANTS TAX EXEMPTION WOULD CREATEA PERPETUAL
EXEMPTION IN FAVOR OF THE TAXPAYER
STATEMENT 2: A TAX EXEMPTION MAY BE WITHDRAWN ANYTIME AT THE
PLEASURE OF THE TAXING AUTHORITY

WHICH OF THE ABOVE STATEMENTS IS TRUE?

A) STATEMENT 1 ONLY
B) STATEMENTS 1 AND 2
C) STATEMENT 2 ONLY
D) NEITHER OF THEM

97. IT IS ALSO KNOWN AS TAX DODGING

A) TAX EXEMPTION
B) TAX EVASION
C) TAX AVOIDANCE
D) TRANSFORMATION

98. IT IS ALSO KNOWN AS TAX MINIMIZATION

A) TAX EXEMPTION
B) TAX EVASION
C) TAX AVOIDANCE
D) TRANSFORMATION

99. WHICH OF THE FOLLOWING STATEMENTS CONSTITUTE TAX


AVOIDANCE?

A) DELIBERATE FAILURE OF A TAXPAYER TO PAY THE TAXES DUE TO


THE GOVERNMENT
B) CONNOTES FRAUD THROUGH THE USE OF PRETENSES AND
FORBIDDEN DEVICES TO LESSEN OR DEFEAT TAXES
C) PUNISHABLE BY LAW
D) MAYBE CONTRARY TO THE INTENT OF THE LEGISLATURE BUT
NEVERTHELESS DO NOT VIOLATE THE LAW

100. WHICH OF THE FOLLOWING FACTS PERTAIN/S TO TAX AVOIDANCE?

I.AFTER STUDYING HIS TAX PROBLEMS, MATALINO DECIDED TO


WITHDRAW HIS BANK DEPOSITS AND TO BUY TAX-EXEMPT SECURITIES
II.TUSO WHO WISHES TO AVOID THE PAYMENT OF TAXES ASSESSABLE
ON THE TRANSACTION MADE IT APPEAR ON THE DEED OF SALE THAT
THE SELLING PRICE WAS ONLY P200,000 ALTHOUGH IT WAS ACTUALLY
P300,000
III.REFRAINING FROM ENGAGING IN ACTIVITES SUBJECT TO TAX
IV.ABUSADO INSURANCE CORPORATION SOLD ITS OFFICE BUILDING TO
ADAN FOR P100 MILLION, WHO IN TURN, SOLD THE SAME PROPERTY TO
DUGONG-BUGHAW, INC. FOR P200 MILLION. THESE 2 TRANSACTIONS
WERE EVIDENCED BTY DEEDS OF ABSOLUTE SALE NOTARIZED ON THE
SAME DAY BY THE SAME NOTARY PUBLIC.

A) I ONLY
B) I AND III ONLY
C) I AND IV
D) I, III AND IV

101. IN CASE OF AMBIGUITY, TAX LAWS SHALL BE INTERPRETED

A) STRICTLY AGAINST THE TAXPAYER


B) LIBERALLY AGAINST THE POWER
C) LIBERALLY IN FAVOR OF THE TAXPAYER
D) LIBERALLY IN FAVOR OF THE GOVERNMENT

102. IN CASES OF DEDUCTIONS AND EXEMPTIONS ON INCOME TAX


RETURNS, DOUBTS SHALL BE RESOLVED-(RPCPA)

A) STRICTLY AGAINST THE TAXPAYER


B) STRICTLY AGAINST THE GOVERNMENT
C) LIBERALLY IN FAVOR OF THE TAXPAYER
D) LIBERALLY AGAINST THE GOVERNMENT

103. THE FOLLOWING, EXCEPT ONE, ARE EXCEPTIONS TO THE RULE THAT
TAX EXEMPTIONS MUST BE STRICTLY CONSTRUED AGAINST THE
TAXPAYER

A) WHERE THE STATUTE GRANTING THE EXEMPTION PROVIDES FOR


LIBERAL INTERPRETATION THEREOF
B) IF THE TAXPAYER DOES NOT FALL WITHIN THE PURVIEW OF THE
EXCEPTION BY CLEAR LEGISLATIVE INTENT
C) IN CASE OF SPECIAL TAXES RELATING TO SPECIAL CASES AND
AFFECTING ONLY SPECIAL CLASSES OF PERSONS
D) IF EXMPTIONS REFER TO PUBLIC PROPERTY
104. A FRANCHISE CAN BE AMENDED BY-(RPCPA)

A) AN AMENDMENT OF SPECIAL LAW, WHICH GRANTED THE


FRANCHISE
B) AN AMENDMENT OF A LAW OF GENERAL APPLICATION
C) AN AMENDMENT OF A REVENUE REGULATION
D) AN AMENDMENT OF TAX LAWS
105. SOME FRANCHISE HOLDERS WHO ARE PAYING THE FRANCHISE TAX
ARE BEING REQUIRED BY AN AMENDATORY LAW TO PAY THE VALUE-
ADDED TAX, WHILE OTHERS REMAIN SUBJECT TO FRANCHISE TAX. WHICH
OF THE FOLLOWING CONSTITUTIONAL PROVISION MAKES THE LAW
UNCONSTITUTIONAL?-(RPCPA)

A) NO LAW SHALL BE PASSED IMPAIRING THE OBLIGATION OF


CONTRACT
B) THE RULE OF TAXATION SHALL BE UNIFORM
C) NO PERSON SHALL BE DEPRIVED OF PROPERTY WITHOUT DUE
PROCESS OF LAW
D) NONE OF THE ABOVE

106. STATEMENT 1: THE POINT ON WHICH A TAX IS ORIGINALLY IMPOSED IS


IMPACT OF TAXATION

STATEMENT 2: AS A RULE, TAXES ARE SUBJECT TO SET-OFF OR


COMPENSATION

A) TRUE, TRUE
B) FALSE, TRUE
C) FALSE, FALSE
D) TRUE, FALSE

107. WHICH OF THE FOLLOWING IS NOT CONSIDERED AS A STEP IN


MAKING A REVENUE REGULATION EFFECTIVE?

A) RECOMMENDATION BY THE COMMISSIONER OF INTERNAL REVENUE


TO THE SECRETARY OF FINANCE
B) APPROVAL BY THE SECRETARY OF FINANCE
C) LEGISLATION BY CONGRESS
D) PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION

108. STATEMENT 1: IN CASE OF CONFLICT BETWEEN A REVENUE


REGULATION AND THE PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, THE LATTER SHALL PREVAIL

STATEMENT 2: THE REVOCATION OF A REVENUE REGULATION CAN NOT BE


MADE RETROACTIVE EVEN IF THE REASON FOR ITS REVOCATION IS THAT
IT IS ERRONEOUS OR CONTRARY TO LAW

A) CORRECT, WRONG
B) CORRECT, CORRECT
C) WRONG, CORRECT
D) WRONG, WRONG
109. ALL OF THE FOLLOWING, EXCEPT ONE, ARE SOURCES OF TAX LAWS-

A) LEGISLATIONS, TAX TREATIES AND TAX ORDINANCES


B) JUDICIAL DECISIONS
C) OPINIONS OF AUTHORS
D) ADMINISTRATIVE RULES AND REGULATIONS

110. THE LEAST SOURCE OF TAX LAW IS-

A) STATUTES
B) COURT DECISIONS
C) CONSTITUTION
D) BIR RULINGS

111. WHEN THE REFUND OF A TAX SUPPOSEDLY DUE TO THE TAXPAYER


HAS ALREADY BEEN BARRED BY PRESCRIPTION, AND THE SAID TAXPAYER
IS ASSESSED WITH A TAX AT PRESENT, THE TWO CASES MAY BE SET-OFF
WITH EACH OTHER. THIS DOCTRINE IS CALLED

A) SET-OFF DOCTRINE
B) DOCTRINE OF RECIPROCITY
C) TAX SPARING DOCTRINE
D) EQUITAB LE RECOUPMENT

112. STATEMENT 1: THE DOCTRINE OF EQUITABLE IS APPLICABLE IN THE


PHILIPPINES

STATEMENT 2: WHERE TAXES AND THE CLAIM OF THE TAXPAYER ARE


FULLY LIQUIDATED, DUE AND DEMANDABLE, SET-OFF OR LEGAL
COMPENSATION MAY TAKE PLACE BY OPERATION OF LAW

A) CORRECT, WRONG
B) CORRECT, CORRECT
C) WRONG, CORRECT
D) WRONG, WRONG

113. THE PLACE OR AUTHORITY THAT HAS THE RIGHT TO IMPOSE AND
COLLECT TAXES-

A) TERRITORIALITY
B) INTERNATIONAL COMITY
C) SITUS OF TAXATION
D) TRANSFORMATION

114. 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

115. WHICH OF THE FOLLOWING IS NOT CORRECT WITH RESPECT TO A


TAXPAYER’S SUIT?

A) IT MUST PERTAIN TO ILLEGAL DISBURSEMENT OF PUBLIC FUNDS


B) IT PERTAINS TO THE PASSAGE OF A SEEMINGLY UNCONSTITUTIONAL
MEASURE
C) THE FUNDS SOUGHT TO BE DISBURSED MUSTB HAVE BEEN RAISED
THROUGH TAXATION
D) IT MUST NOT REFER TO AN ENACTMENT OF A TAX LAW

B. TRUE OR FALSE

1. NO PERSON SHALL BE IMPRISONED FOR DEBT OR NON-PAYMENT OF


POLL TAX

2. CONGRESS MAY AUTHORIZE THE PRESIDENT TO FIX WITHIN


SPECIFIED LIMITS TARIFF RATES, IMPORT AND EXPORT DUTIES,
TONNAGE AND WHARFAGE DUES, AND OTHER DUTIES OR IMPOSTS
WITHIN THE FRAMEWORK OF THE NATIONAL DEVELOPMENT
PROGRAM OF THE GOVERNMENT.

3. A LAW GRANTING TAX EXEMPTION SHOULD BE CONCURRED IN BY A


MAJORITY OF ALL MEMBERS OF THE CONGRESS PRESENT.

4. THE PRESIDENT CAN VETO ANY PARTICULAR ITEM IN A REVENUE OR


TARIFF BILL, BUT THE VETO SHALL NOT AFFECT THE ITEMS OR ITEMS
TO WHICH HE DOES NOT OBJECT

5. THE POWER TO TAX CAN BE DELEGATED TO LOCAL GOVERNMENT


UNITS, SUBJECT TO LIMITATIONS THAT MAY BE SET BY LAW.
6. THE POWER OF TAXATION CAN BE DELEGATED TO THE PRESIDENT OF
THE PHILIPPINES.

7. THE PRESIDENT OF THE PHILIPPINES IS EMPOWERED TO GRANT TAX


EXEMPTION ON CERTAIN CLASS OF TAXPAYERS.

8. NON-PAYMENT OF TAX AND DEBT IS GROUND FOR IMPRISONMENT.

9. THE POWER TO TAX MAY INCLUDE THE POWER TO DESTROY.


10. PROVISIONS IN THE PHILIPPINE CONSTITUTION ARE GRANTS OF
POWER.

11. LANDS AND BUILDINGS BEING USED ACTUALLY, DIRECTLY AND


EXCLUSIVELY FOR RELIGIOUS AND CHARITABLE PURPOSES BY
CHURCHES AND CHARITABLE INSTITUTIONS ARE EXEMPT FROM
INCOME AND PROPERTY TAXES.

12. A PORTION OF A SCHOOL BUILDING WHICH IS BEING LEASED TO A


MARKETING FIRM FOR COMMERCIAL PURPOSES IS EXEMPT FROM
PROPERTY TAX.

13. A NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTION IS EXEMPT


FROM INCOME TAX ON ITS REVENUES AND FROM REAL PROPERTY
TAX ON ASSETS USED ACTUALLY, DIRECTLY AND EXCLUSIVELY FOR
EDUCATIONAL PURPOSES.

14. TAX LAWS CAN NEVER HAVE A RETROACTIVE EFFECT.

15. THE GOVERNMENT CAN NOT TAX ITS AGENCIES AND


INSTRUMENTALITIES.

16. A TAXPAYER’S SUIT CAN BE FILED BY ANY TAXPAYER IN ANY


INSTANCE AGAINST THE GOVERNMENT.

17. IN THE PHILIPPINES, THERE MAY BE DOUBLE TAXATION.

18. A TAX IS GENERALLY UNLIMITED BECAUSE IT IS BASED ON THE


NEEDS OF THE STATE.

19. AS A RULE, TAXES ARE SUBJECT TO SET-OFF OR COMPENSATION.

20. RECIPROCITY RULE APPLIES TO CITIZENS OF THE PHILIPPINES AND


RESIDENT ALIEN ONLY.

21. THE INHERENT POWERS ARE EXERCISED PRIMARILY BY THE


LEGISLATURE.

22. THE RULE OF TAXATION SHALL BE UNIFORM AND EQUITABLE.

23. TAXATION MAY BE USED TO IMPLEMENT THE POLICE POWER OF THE


STATE.

24. POLICE POWER IS SUPERIOR TO THE NON-IMPAIRMENT CLAUSE OF


THE CONSTITUTION.
25. THE THREE INHERENT POWERS ARE METHODS BY WHICH THE STATE
INTERFERES WITH PRIVATE RIGHT.

26. THE SALARY OF THE PRESIDENT OF THE PHILIPPINES AND OF THE


JUSTICES OF THE SUPREME COURT IS EXEMPT FROM INCOME TAX.

27. OPINIONS OF LEGAL LUMINARIES ARE SOURCES OF TAX LAWS.

28. THE CONSTITUTION GRANTS EXEMPTION FROM ALL KINDS OF TAXES


TO RELIGIOUS AND CHARITABLE ORGANIZATIONS.

29. BECAUSE THE POWER TO TAX IS UNLIMITED, COMPREHENSIVE,


PLENARY AND SUPREME, THE POWER TO TAX CAN REACH OVER INTO
ANY JURISDICTION TO SEIZE UPON PERSON OR PROPERTY.

30. A PERSON CAN OBJECT OR RESIST THE PAYMENT OF TAXES SOLELY


BECAUSE NO PERSONAL BENEFIT TO HIM CAN BE POINTED AS
ARISING FROM THE TAX.

31. THE “BENEFIT-PROTECTION THEORY” IS THE SOURCE OF THE


“DOCTRINE OF SYMBIOTIC RELATIONSHIP”.

32. A TAXPAYER COMMITS TAX AVOIDANCE WHEN HE DELIBERATELY


OMITS TO DECLARE ALL HIS TAXABLE INCOME.

33. THE THEORY OF TAXATION IS BASED ON THE LIFEBLOOD DOCTRINE.

34. A DIRECT TAX CAN BE SHIFTED DIRECTLY TO THE CONSUMERS.

35. A TAX IS A VOLUNTARY PAYMENT OR DONATION TO THE


GOVERNMENT.

36. TAXES ARE CONTRACTUAL DEBTS, HENCE A TAXPAYER CANNOT BE


IMPRISONED FOR NON-PAYMENT THEREOF.

37. AS A POWER, TAXATION REFERS TO THE INHERENT POWER OF THE


STATE TO DEMAND ENFORCED CONTRIBUTION FOR PUBLIC PURPOSE
OR PURPOSES.

38. THE GOVERNMENT CANNOT SURVIVE WITHOUT TAXATION.

39. INCOME TAX IS A PROGRESSIVE TAX.


40. TAX LAW CANNOT BE IMPOSED FOR A SPECIAL PURPOSE FOR IT
SHOULD ALWAYS BE AIMED AT REVENUE COLLECTION.

41. THE POWER OF THE STATE TO TAX EXISTS BY VIRTUE OF AN EXPRESS


PROVISION OF THE CONSTITUTION.

42. AN EXEMPTION FROM TAXATION IS TRANSFERABLE.

43. ADMINISTRATIVE FEASIBILITY MEANS ALSO THAT THE TAX MUST NOT
BE DISCOURAGING TO BUSINESS ACTIVITY.

44. FISCAL ADEQUACY MEANS THAT REVENUE SHOULD ALWAYS MEET


THE DEMANDS OF PUBLIC EXPENDITURE EVEN DURING ADVERSE
ECONOMIC CONDITION.

45. STATUTORY TAX EXEMPTIONS MAY BE REVOKED BY THE CONGRESS.

46. TAX EVASION IN ONE YEAR CAN BE OFFSET BY PAYING MORE TAXES
THE FOLLOWING YEAR.

47. NON-PAYMENT OF ADDITIONAL COMMUNITY TAX IS A GROUND FOR


IMPRISONMENT.

48. IN CASE OF CONFLICT BETWEEN A TAX LAW AND A REVENUE


REGULATION, THE LATTER SHALL PREVAIL.

49. A REVENUE REGULATION CAN EXPAND THE PROVISION OF LAW BY


IMPOSING A PENALTY EVEN IF THE LAW THAT IT IMPLEMENTS DOES
NOT IMPOSE A PENALTY.

50. REVENUE BILLS SHALL ORIGINATE EXCLUSIVELY FROM THE SENATE.

CHAPTER 11-INCOME TAX OF INDIVIDUALS

1.WHO AMONG THE FOLLOWING IS A NON-RESIDENT ALIEN?-(RPCPA)

A) AN ALIEN WHO COMES TO THE PHILIPPINES FOR A DEFINITE


PURPOSE WHICH IN ITS NATURE MAY BE PROMPTLY ACCOMPLISHED
B) AN ALIEN WHO COMES TO THE PHILIPPINES FOR A DEFINITE
PURPOSE WHICH IN ITS NATURE WOULD REQUIRE AN EXTENDED
STAY
C) AN ALIEN WHO HAS ACQUIRED RESIDENCE IN THE PHILIPPINES
D) AN ALIEN WHO LIVES IN THE PHILIPPINES WITH NO DEFINITE
INTENTION AS TO HIS STAY

2. ARCHIE, A STAFF AUDITOR OF SGV & CO., TOOK AND PASSED THE
EXAMINATION FOR CERTIFIED INTERNAL AUDITOR (CIA). THE FOLLOWING
YEAR, HE RESIGNED FROM HIS JOB AND LEFT THE PHILIPPINES ON APRIL
10, 2006 TO WORK AS AN INTERNAL AUDITOR IN A BIG ESTABLISHMENT IN
MELBOURNE, AUSTRALIA. FOR INCOME TAX PURPOSES, WHICH OF THE
FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO ARCHIE’S
CLASSIFICATION?

A) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE


WHOLE YEAR OF 2006
B) HIS CLASSIFICATION AS A NON-RESIDENT CITIZEN WILL START IN
2007
C) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE YEAR
2006 WITH RESPECT TO HIS INCOME DERIVED FROM SOURCES
WITHOUT FROM APRIL 10, 2006
D) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE YEAR
2006 WITH RESPECT TO HIS INCOME DERIVED FROM SOURCES
WITHOUT FROM APRIL 11,2006

3. WHO AMONG THE FOLLOWING INDIVIDUAL TAXPAYERS IS TAXABLE ON


INCOME WITHIN AND WITHOUT THE PHILIPPINES?

A) ALEX, A NATIVE OF GENERAL SANTOS CITY, WORKING AS OVERSEAS


CONTRACT WORKER IN IRAQ
B) PHILANDER RODOLFO, NATURALIZED FILIPINO CITIZEN AND
MARRIED TO A FILIPINA. HE HAD BEEN LIVING IN OLONGAPO CITY
SINCE 1970
C) ALDREDO DE LA HOYA, SPANISH CITIZEN, A RESIDENT OF MADRID,
SPAIN, SPENT A ONE WEEK VACATION TRIP IN BORACAY
D) MING HONG, TAIWANESE SINGER, HELD A 3-DAY CONCERT IN
MANILA

4. WHICH OF THE FOLLOWING TAXPAYERS WHOSE PERSONAL EXEMPTION


IS SUBJECT TO THE LAW ON RECIPROCITY UNDER THE TAX CODE?-(RPCPA)

A) NON-RESIDENT CITIZEN WITH RESPECT TO HIS INCOME DERIVED


FROM OUTSIDE THE PHILIPPINES
B) NON-RESIDENT ALIEN WHO SHALL COME TO THE PHILIPPINES AND
STAY HEREIN FOR AN AGGREGATE PERIOD OF MORE THAN 180 DAYS
DURING ANY CALENDAR YEAR
C) RESIDENT ALIEN DERIVING INCOME FROM A FOREIGN COUNTRY
D) NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS IN THE
PHILIPINES WHOSE COUNTRY ALLOWS PERSONAL EXEMPTION TO
FILIPINOS WHO ARE NOT RESIDING BUT ARE DERIVING INCOME
FROM SAID COUNTRY

5. THE PERSONAL EXEMPTION OF THE NON-RESIDENT ALIEN ENGAGED IN


TRADE OR BUSINESS IN THE PHILIPPINES IS EQUAL TO THAT ALLOWED BY-
(RPCPA)

A) THE INCOME TAX LAW OF HIS COUNTRY TO A RESIDENT CITIZEN OF


THE PHILIPPINES NOT RESIDING THERE
B) THE INCOME TAX LAW OF HIS COUNTRY TO A CITIZEN OF THE
PHILIPPINES NOT RESIDING THERE OR THE AMOUNT PROVIDED BY
THE NIRC TO A CITIZEN OR RESIDENT, WHICHEVER IS LOWER
C) THE NATIONAL INTERNAL REVENUE CODE TO A CITIZEN OR
RESIDENT
D) THE INCOME TAX LAW OF HIS COUNTRY ALLOWS TO A CITIZEN OF
THE PHILIPPINES NOT RESIDING THERE OR THE AMOUNT PROVIDED
BY THE NIRC TO A CITIZEN OR RESIDENT ALIEN, WHICHEVER IS
HIGHER

6. THE TAXPAYER IS A MARRIED NON-RESIDENT ALIEN ENGAGED IN


BUSINESS IN THE PHILIPPINES WITH TWO QUALIFIED DEPENDENT
CHILDREN. HIS COUNTRY GIVES A NON-RESIDENT FILIPINO WITH INCOME
FROM THEREFROM A BASIC PERSONAL EXEMPTION (IF MARRIED) OF
P20,000 AND ADDITIONAL EXEMPTION OF P4,000. HE IS ENTITLED TO A
PERSONAL EXEMPTION OF-(RPCPA)

A) P28,000
B) P26,000
C) P24,000
D) P20,000

7. THE FOLLOWING, EXCEPT ONE, MAY CLAIM PERSONAL EXEMPTIONS-


(RPCPA)

A) NONRESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS IN


THE PHILIPPINES
B) NONRESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS IN THE
PHILIPPINES
C) RESIDENT ALIEN
D) CITIZEN
8. AN EXEMPTION PROVIDED BY LAW TO TAKE CARE OF PERSONAL, LIVING
AND FAMILY EXPENSES OF THE TAXPAYER AND THE AMOUNT OF WHICH IS
DETERMINED ACCORDING TO THE STATUS OF THE TAXPAYERS ARE:-
(RPCPA)

A) OPTIONAL STANDARD DEDUCTION


B) PERSONAL EXEMPTION
C) ADDITIONAL EXEMPTION
D) SPECIAL ADDITIONAL EXEMPTION

9. AN EXEMPTION ALLOWED TO A TAXPAYER WHO HAS QUALIFIED


LEGITIMATE, ILLEGITIMATE, OR LEGALLY ADOPTED CHILDFREN-(RPCPA)

A) ADDITIONAL EXEMPTION
B) SPECIAL ADDITIONAL PERSONAL EXEMPTION
C) OPTIONAL STANDARD DEDUCTION
D) PERSONAL EXEMPTION

10.A MAN HAS THREE WIVES UNDER HIS TRIBAL CUSTOMS AND PRACTICE.
HE IS ENTITLED TO PERSONAL EXEMPTION APPERTAINING TO-(RPCPA)

A) A SINGLE INDIVIDUAL
B) A MARRIED INDIVIDUAL
C) A MARRIED INDIVIDUAL PLUS ADDITIONAL EXEMPTION FOR
DEPENDENTS PERTAINING TO EACH OF THE 2 EXTRA WIVES
D) A HEAD OF THE FAMILY PLUS ADDITIONAL EXEMPTION FOR
DEPENDENTS PERTAINING TO EACH OF HIS THREE WIVES

11. AS A RULE, WHO OF THE SPOUSES IS THE PROPER CLAIMANT OF THE


ADDITIONAL EXEMPTION WITH RESPECT TO ANY OF THE DEPENDENT
CHILDREN?

A) THE HUSBAND IF HIS INCOME IS HIGHER THAN THE INCOME OF THE


WIFE
B) THE SPOUSE WHO HAS A HIGHER INCOME
C) THE HUSBAND
D) THE WIFE

12. THE WIFE CAN CLAIM ADDITIONAL EXEMPTION IF-(RPCPA)

A) THE HUSBAND’S INCOME IS LOWER THAN HER INCOME


B) THE HUSBAND IS A NONRESIDENT CITIZEN WITH INCOME FROM
WITHIN AND WITHOUT THE PHILIPPINES
C) THE HUSBAND IS A PURE BUSINESS INCOME EARNER
D) THE HUSBAND HAS NO INCOME OF HIS OWN
13. THE HUSBAND CAN WAIVE HIS RIGHT TO CLAIM THE ADDITIONAL
EXEMPTION IN FAVOR OF HIS WIFE IF-

A) HE IS A NONRESIDENT CITIZEN WHOSE INCOME IS PURELY WITHOUT


THE PHILIPPINES
B) HE HAS NO INCOME OF HIS OWN
C) HE IS A COMPENSATION INCOME EARNER IN THE PHILIPPINES
D) HIS INCOME IS PURELY SUBJECT TO FINAL WITHHOLDING TAX

14. WHO AMONG THE FOLLOWING QUALIFIES AS A DEPENDENT FOR


PURPOSES OF ADDITIONAL EXEMPTION?

A) SISTER-IN-LAW
B) STEPMOTHER
C) GRANDFATHER
D) ILLEGITIMATE DAUGHTER

15. NENA, AGED 70 YEARS OLD, WHO LIVES WITH HER UNMARRIED SON
MARIO, RECEIVED P60,000 WHICH WAS USED FOR HER SUPPORT DURING
THE YEAR. THE SOURCES OF HER SUPPORT WERE AS FOLLOWS:

SOCIAL SECURITY BENEFITS P24,000


MARIO 20,000
CAROLINE, UNRELATED FRIEND 4,000
DOUGLAS, SON OF NENA 5,000
LALAINE, NENA’S SISTER 7,000
TOTAL 60,000

WHO CAN CLAIM HEAD OF FAMILY STATUS BASED ON NENA’S


DEPENDENCY EXEMPTION?

A) MARIO
B) DOUGLAS
C) LALAINE
D) NONE

16. WHO OF THE FOLLOWING IS NOT A QUALIFIED DEPENDENT FOR


PURPOSES OF CLAIMING ADDITIONAL EXEMPTION?

A) ILLEGITIMATE CHILD
B) LEGALLY ADOPTED CHILD
C) LEGITIMATE CHILD
D) CHILD BY NATURAL ADOPTION

17. MR. MAASIKASO, SINGLE, HAS THE FOLLOWING DEPENDENTS WHO ARE
LIVING WITH AND ENTIRELY DEPENDENT UPON HIM FOR CHIEF SUPPORT:
ANDREA, CHILD WITH HIS EX-GIRLFRIEND
BARBARA, LEGITIMATE CHILD OF HIS SISTER, LEGALLY ADOPTED BY MR.
MAASIKASO
CARIDAD, MOTHER, 85 YEARS OLD, WIDOW, BEDRIDDEN
DONATA, GODMOTHER, 80 YEARS OLD

MR. MAASIKASO CAN CLAIM ADDITIONAL PERSONAL EXEMPTION ON-

A) ANDREA ONLY
B) ANDREA AND BARBARA
C) ANDREA, BARBARA AND CARIDAD
D) ANDREA, BARBARA, CARIDAD AND DONATA

18. A NATIVE OF LUCENA CITY, SUPPORTING HIS BROTHER, 18 YEARS OLD,


UNMARRIED, NOT GAINFULLY EMPLOYED, STUDYING BS ACCOUNTANCY
AT ASIA PACIFIC COLLEGE AT MAKATI CITY, IS ENTITLED TO BASIC
PERSONAL EXEMPTION OF-

A) P20,000
B) 25,000
C) 50,000
D) 75,000

19. THE ADDITIONAL PERSONAL EXEMPTION ON EVERY QUALIFIED


DEPENDENT CHILD IS-

A) P8,000
B) 32,000
C) 25,000
D) 50,000

20. REMY MARTIN, SINGLE, SUPPORTING THE FOLLOWING:

JOHNNY WALKER, ILLEGITIMATE SON, 16 YEARS OLD, STUDYING IN THE


UNIVERSIDAD DE JEREZ, CADIZ, SPAIN, LIVING WITH REMY MARTIN’S
DIPLOMATIC BROTHER IN ANDALUCIA, SPAIN.

TORRES, FATHER, LIVING WITH HIM. REMY MARTIN IS GIVING 60% OF THE
ENTIRE SUPPORT NEEDED, THE OTHER 40% IS BEING FURNISHED BY HIS
SISTER, CHEVAS REGAL.

REMY MARTIN CAN CLAIM A TOTAL EXEMPTION OF-


A) P20,000
B) 75,000
C) 33,000
D) 41,000

21. TAXPAYERS ARE HUSBAND AND WIFE. THE GROSS COMPENSATION OF


THE WIFE IS P260,000 WHILE THE GROSS BUSINESS INCOME OF THE
HUSBAND IS P200,000. THEY HAVE SIX QUALIFIED DEPENDENT CHILDREN
BUT WITHIN THE YEAR ONE CHILD DIED. THEIR TOTAL EXEMPTIONS IS-
(RPCPA)

A) P200,000
B) 96,000
C) 64,000
D) NONE

22. LIZA’S HUSBAND DIED IN APRIL 2009 HAVING SEVEN(7) UNMARRIED


CHILDREN LIVING WITH AND WHOLLY DEPENDENT ON LIZA FOR SUPPORT.
THE AGES OF THE CHILDREN ARE AS FOLLOWS:

CHILDREN AGES STATUS


A 24 JOBLESS
B 22 MENTALLY RETARDED
C 19 STUDYING IN MANILA
D 10 STUDYING IN THEIR HOMETOWN
E 8 STUDYING IN THEIR HOMETOWN
F 6 STUDYING IN THEIR HOMETOWN
G 3 TAKEN BY THE GRANDPARENTS
AFTER THE DEATH OF THE FATHER

FOR PURPOSES OF TAXABLE YEAR 2009, HOW MUCH EXEMPTION WOULD


LIZA BE ENTITLED TO?-(RPCPA)

A) P150,000
B) 57,000
C) 64,000
D) 73,000

NUMBERS 23 AND 24 ARE BASED ON THE FOLLOWING INFORMATION:

23. IN 2009, PIDOL’S WIFE DIED OF A CAR ACCIDENT. HIS DEPENDENTS ARE
AS FOLLOWS:
CHILDREN STATUS
A 22 Y/O, EMPLOYED ON JULY 12, 2009
B 21 Y/O ON JANUARY 2, 2009
C 18 Y/O, MARRIED ON JANUARY 31, 2009
D 17 Y/O, GAINFULLY EMPLOYED ON OCTOBER 1, 2009
E 15 Y/O, AFFLICTED WITH SORE EYES ON MAY 6, 2009
F 13 DIED OF AN ACCIDENT IN 2009
G BROTHER, 28 Y/O PARALYTIC

FOR TAXABLE YEAR 2009, PIDOL CAN CLAIM ADDITIONAL EXEMPTIONS


OF-

A) P75,000
B) 125,000
C) 100,000
D) 32,000

24. FOR THE YEAR 2010, PIDOL CAN CLAIM ADDITIONAL EXEMPTIONS OF-

A) P8,000
B) 16,000
C) 25,000
D) 100,000

25. ANGIE, WIDOW, EARNING AN ANNUAL GROSS COMPENSATION INCOME


OF P300,000 HAS THE FOLLOWING DEPENDENT CHILDREN IN 2009:

AUBREY- BABY, BORN ON JANUARY 31;


BARBARA- CELEBRATED HER 21ST BIRTHDAY LAST JUNE 12;
CRISTETA- MARRIED ON JANUARY 1;
DIANA- GAINFULLY EMPLOYED EFFECTIVE JULY 1;
ELIZA- DIED OF DENGUE FEVER ON SEPTEMBER 30;

ASSUMING ANGIE HAS TWO EMPLOYERS, HER TAXABLE INCOME IN 2009


IS-

A) P32,000
B) 63,000
C) 150,000
D) 100,000

26. THE TAXABLE INCOME OF ANGIE IN 2010 IS-

A) P120,000
B) 225,000
C) 95,000
D) 87,000

27. WHICH OF THE FOLLOWING INCOME DERIVED FROM WITHIN THE


PHILIPPINES BY A RESIDENT ALIEN IS NOT SUBJECT TO THE RATES IN
SECTION 24(A) OF THE NIRC?-(RPCPA)

A) SALARY RECEIVED BY A MANAGING PARTNER OF A GENERAL


PROFESSIONAL PARTNERSHIP
B) A PASSIVE INCOME IN THE FORM OF A PRIZE WON IN A RAFFLE
AMOUNTING TO P4,000
C) A GAIN FROM SALE OF A MOTOR VEHICLE AS ANOTHER INCOME OF
A TAXPAYER WHO IS A COMPENSATION INCOME EARNER
D) A GAIN ON SALE OF A REAL PROPERTY FOR PRIVATE USE OF THE
FAMILY OF THE TAXPAYER

28. WHICH OF THE FOLLOWING INCOME IS SUBJECT TO FINAL TAX IF


RECEIVED BY AN INDIVIDUAL TAXPAYER?

I. SHARE OF A PARTNER IN THE NET INCOME OF A BUSINESS


PARTNERSHIP
II. CASH DIVIDEND RECEIVED BY A STOCKBROKER FROM A
DOMESTIC CORPORATION
III. WINNINGS IN LOTTO
IV. RAFFLE PRIZES AMOUNTING TO P6,000

A) I AND II
B) III AND IV
C) I, II AND IV
D) I, II, III AND IV

29. WHICH OF THE FOLLOWING IS NOT A REQUISITE FOR DEDUCTIBILITY


OF HEALTH INSURANCE?

A) THE TOTAL FAMILY INCOME IS NOT MORE THAN P250,000


B) THE MAXIMUM AMOUNT OF PREMIUM DEDUCTIBLE DURING THE
YEAR IS P2,400 PER FAMILY OR P200 A MONTH
C) IN THE CASE OF MARRIED INDIVIDUAL, THE SPOUSE CLAIMING THE
ADDITIONAL EXEMPTION SHALL BE ENTITLED TO CLAIM THE
INSURANCE PREMIUMS PAID
D) THE TAXPAYER MUST BE A HEAD OF FAMILY

30.STATEMENT 1: HEALTH AND/OR HOSPITALIZATION INSURANCE


PREMIUMS PAID BY AN INDIVIDUAL IS DEDUCTIBLE ONLY IF THE
TAXPAYER IS A PURE COMPENSATION INCOME EARNER
STATEMENT 2: A TAXPAYER WHO HAS PAID A MONTHLY HEALTH
INSURANCE OF P400 FOR SIX MONTHS IN A YEAR CAN CLAIM TOTAL
DEDUCTIBLE AMOUNT OF P2,400

A) TRUE, FALSE
B) TRUE, TRUE
C) FALSE, TRUE
D) FALSE, FALSE

31. MAX, SINGLE, SUPPORTING HIS 58-YEAR OLD MOTHER, IS A


COMPENSATION INCOME EARNER. DURING THE YEAR, HIS NET
INCOME WAS P150,000. HE ALSO PAID A TOTAL PREMIUM OF P3,000 TO
AN INSURANCE COMPANY FOR HIS HEALTH INSURANCE. HOW MUCH
IS HIS TAXABLE INCOME?

A) P97,600
B) 97,000
C) 122,000
D) 122,600

32. ALL OF THE FOLLOWING, EXCEPT ONE, ARE TAXABLE ON INCOME


WITHIN ONLY:

A) RESIDENT ONLY
B) NON-RESIDENT CITIZEN
C) RESIDENT CITIZEN
D) NON-RESIDENT ALIEN

33. IN 2009, RUSTOM, FILIPINO, LEGALLY SEPARATED FROM HIS WIFE,


MINA, LEFT FOR THE UNITED STATES WITH HIS DAUGHTER, ROBINA,
TO PERMANENTLY RESIDE THEREIN. IN 2009, HE EARNED P2
MILLION AS INCOME FROM HIS BEAUTY APRLON IN THAT COUNTRY.

WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?

A) FOR PHILIPPINE INCOME TAX PURPOSES, RUSTOM MAY


DEDUCT FROM HIS GROSS INCOME HIS PERSONAL EXEMPTION
OF P50,000 OR THE AMOUNT ALLOWED IN THAT COUNTRY,
WHICHEVER IS LOWER
B) FOR PHILIPPINE INCOME TAX PURPOSES, RUSTOM’S GROSS
INCOME IS SUBJECT TO A CREDITABLE WITHHOLDING TAX OF
10%
C) RUSTOM’S GROSS INCOME OF P2 MILLION IS NOT TAXABLE IN
THE PHILIPPINES
D) FOR PHILIPPINE INCOME TAX PURPOSES, HE IS NO LONGER
ENTITLED TO CLAIM ADDITIONAL EXEMPTION ON ROBINA
BECAUSE HE IS ALREADY CLASSIFIED AS A NON-RESIDENT
ALIEN ENGAGED IN BUSINESS IN FOREIGN COUNTRY

34. CASE 1: PEPE, A CPA, HAD SIGNED A LEGALLY ENFORCEABLE


AGREEMENT WITH HIS WIFE, PILAR, THAT THE EARNINGS FROM THE
EXERCISE OF HIS PROFESSION WOULD BE SHARED EQUALLY
BETWEEN THEM FOR PURPOSES OF COMPUTING THE INCOME TO BE
REPORTED IN THEIR RESPECTIVE INDIVIDUAL INCOME TAX RETURN.
IS THE AGREEMENT VALID?

CASE 2: LORENZO ADVISED HIS DAUGHTER, LORENA THAT THE RENT


INCOME ON THE DORMITORY OWNED BY LORENZO WILL ACCRUE TO THE
LATTER. LORENA COLLECTED THE INCOME AND REPORTED IT ON HER
OWN RETURN. WERE THE ACTIONS TAKEN BY LORENZO AND LORENA
VALID?

A) YES, NO
B) YES, YES
C) NO, YES
D) NO, NO

ITEMS 35 TO 37 ARE BASED ON THE FOLLOWING INFORMATION:

BUSINESS INCOME, PHILIPPINES P300,000


BUSINESS INCOME, UNITED STATES 250,000
EXPENSES, PHILIPPINES 200,000
EXPENSES, UNITED STATES 125,000
INTEREST ON DEPOSIT WITH METROBANK 3,000
INTEREST ON DEPOSIT IN U.S.($1=P40) $500
CASH PRIZE WON IN A LOCAL CONTEST P6,000
CASH PRIZE WON IN A CONTEST IN U.S. 10,000
WINNINGS IN LOTTO 20,000
WINNINGS IN LOTTO IN U.S. 50,000
DIVIDENDS FROM SMC, A DOMESTIC COMPANY 25,000

35. THE TAXABLE INCOME IF SHARON IS A RESIDENT CITIZEN, SINGLE


IS-

A) P261,000
B) 334,000
C) 291,000
D) 306,000
36.THE TAXABLE INCOME IF SHARON IS A NON-RESIDENT ALIEN ETB,
MARRIED WITH FIVE(5) DEPENDENT CHILDREN-

A) P243,000
B) 56,000
C) 74,000
D) NONE

37. THE INCOME TAX DUE ON SHARON ASSUMING SHE IS A NON-


RESIDENT ALIEN NETB, SINGLE, IS-

A) P83,500
B) 63,500
C) 18,500
D) 334,000

NUMBERS 38 TO 40 ARE BASED ON THE FOLLOWING INFORMATION:

ELVIS AND MADONNA, HUSBAND AND WIFE, HAVE THE FOLLOWING DATA
IN 2009:

ELVIS MADONNA
COMPENSATION INCOME P125,000 P60,000
RENT INCOME(NET OF 5% WHT) 76,000
ROYALTIES ON BOOKS 70,000
DEPENDENT CHILDREN 6
WHT ON COMPENSATION 10,000

DURING THE YEAR, THE SPOUSES HAD AN INCOME OF P120,000 AND


EXPENSES OF P65,000, WHICH CANNOT BE IDENTIFIED AS SOLELY ESRNED
BY THE WIFE OR THE HUSBAND.

38. THE INCOME TAX PAYABLE/OVERPAYMENT OF ELVIS IS-

A) P3,000
B) 10,200
C) (P5,500)
D) 8,700

39. THE TAXABLE INCOME OF MADONNA IS-


A) P27,500
B) 37,500
C) 11,600
D) NONE
40. THE FINAL TAX ON THE PASSIVE INCOME IS-

A) P14,000
B) 7,000
C) NONE
D) NO ANSWER

41. THE OPTIONAL STANDARD DEDUCTION ON INDIVIDUAL IS-

A) 40% OF TAXABLE INCOME


B) 40% OF BUSINESS AND/OR PROFESSIONAL INCLUDING
COMPENSATION INCOME
C) 40% OF BUSINESS AND/OR PROFESSIONAL INCOME
D) 10% OF BUSINESS AND/OR PROFESSIONAL EXCLUDING
COMPENSATION INCOME

42.OPTIONAL STANDARD DEDUCTION IS ALLOWED TO

A) RESIDENT ALIEN
B) NON-RESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS
C) NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS
D) NON-RESIDENT FOREIGN CORPORATION

NUMBERS 43 AND 44 ARE BASED ON THE FOLLOWING INFORMATION:

ROD, MARRIED, WITH TWO DEPENDENT CHILDREN, HAD THE FOLLOWING


INCOME AND EXPENSES IN 2009:

SALARY, NET OF WHT OF P5,000 P55,000


13TH MONTH PAY 5,000
GROSS RECEIPTS FROM PROFESSION, NET OF WHT OF P7,000 83,000
RENT INCOME, NET OF 5% WHT 57,000
GROSS RECEIPTS FROM BUSINESS 125,000
PROFESSIONAL AND BUSINESS EXPENSES 56,500
PREMIUMS ON HEALTH INSURANCE 6,000

43. THE INCOME TAX PAYABLE BY ROD IF HE AVAILED OF THE ITEMIZED


DEDUCTIONS-

A) P28,125
B) 17,125
C) 44,500
D) 41,360
44. THE INCOME TAX PAYABLE BY ROD IF HE AVAILED OF THE OPTIONAL
STANDARD DEDUCTIONS-

A) P4,500
B) 50,225
C) 51,050
D) 51,650

NUMBERS 45 TO 46 ARE BASED ON THE FOLLOWING INFORMATION:

SPOUSES CARLOS AND IRENE, GOVERNMENT EMPLOYEES, HAD THE


FOLLOWING DATA IN 2009:
CARLOS IRENE
TH
13 MONTH PAY AND OTHER BENEFITS 18,949.00 8,605.00
SSS, PHIC AND PAG-IBIG 14,549.76 4,559.75
BASIC SALARY 210,438.24 68,465.25
REPRESENTATION AND TRAVEL ALLOWANCE 96,000.00 -
PERSONNEL ECONOMIC RELIEF ALLOWANCE - 6,000.00
OVERTIME PAY 2,450.35 4,457.04
HOLIDAY PAY - 1,783.25
HAZARD PAY - 6,000.00
ADDITIONAL EXEMPTIONS 50,000.00 -
TOTAL AMOUNT OF TAXES WITHHELD 17,046.40 -

45. THE INCOME TAX PAYABLE BY CARLOS IS-

A) P31.32
B) 18,277.72
C) 363.16
D) 8,687.85

46. THE INCOME TAX PAYABLE ON IRENE IS-

A) P448.29
B) 1,431.45
C) (P983.19)
D) NONE

47. MRS. EVAN OWNS A PARCEL OF LAND WORTH P500,000 WHICH SHE
INHERITED FROM HER FATHER IN 2006 WHEN IT WAS WORTH P300,000. HER
FATHER PURCHASED IT IN 1986 FOR P100,000. IF MRS. EVAN TRANSFERS
THIS PARCEL OF LAND FOR HER WHOLLY OWNED CORPORATION IN
EXCHANGE FOR SHARES OF STOCKS OF SAID CORPORATION WORTH
P450,000. MRS. EVAN’S TAXABLE GAIN IS-(RPCPA)
A) ZERO
B) P50,000
C) 150,000
D) 350,000

48. MR. JOHNNY DELA CRUZ TRANSFERRED HIS COMMERCIAL LAND WITH
A COST OF P500,000 BUT WITH A FAIR MARKET VALUE OF P750,000 TO JDC
CORPORATION IN EXCHANGE OF THE STOCKS OF THE CORPORATION WITH
PAR VALUE OF P1,000,000. AS A RESULT OF THE TRANSFER, HE BECAME THE
MAJOR STOCKHOLDER OF THE CORPORATION.-(RPCPA)

AS A RESULT OF THE TRANSFER:

A) THE RECOGNIZED GAIN IS THE DIFFERENCE BETWEEN THE FAIR


MARKET VALUE OF THE SHARES OF STOCKS AND THE COST OF THE
LAND
B) THE RECOGNIZED GAIN IS THE DIFFERENCE BETWEEN THE PAR
VALUE OF THE STOCKS AND THE FAIR MARKET VALUE OF THE LAND
C) NO RECOGNIZED GAIN BECAUSE THE LAND WAS IN EXCHANGE OF
PURELY STOCKS AND MR. JOHNNY DELA CRUZ BECAME THE
MAJORITY STOCKHOLDER
D) NO RECOGNIZED GAIN BECAUSE THE LAND WAS IN EXCHANGE OF
STOCKS OF THE CORPORATION.

49. MR. SANTOS PURCHASED A LIFE ANNUITY FOR P100,000 WHICH WILL
PAY HIM P10,000 A YEAR. THE LIFE EXPECTANCY OF MR. SANTOS IS 12
YEARS. WHICH OF THE FOLLOWING WILL MR. SANTOS BE ABLE TO
EXCLUDE FROM HIS GROSS INCOME?-(RPCPA)

A) P100,000
B) 10,000
C) 20,000
D) 120,000

50.IF AN INDIVIDUAL PERFORMS SERVICES FOR A CREDITOR WHO IN


CONSIDERATION THEREOF CANCELS THE DEBT, THE CANCELLATION OF
INDEBTEDNESS MAY AMOUNT-(RPCPA)

A) TO A GIFT
B) TO A CAPITAL CONTRIBUTION
C) TO A DONATION INTER VIVOS
D) TO A PAYMENT OF INCOME

51. MR. AGUILA, AN EMPLOYEE OF FUERTE CORPORATION IS RECEIVING A


MONTHLY SALARY (NET OF 10% WHT) OF P18,000. DUE TO AN
OUTSTANDING ACCOMPLISHMENT IN JULY 2008, THE CORPORATION
GAVE HIM 200 SHARES OF STOCK OF THE CORPORATION WITH A PAR
VALUE OF P100 PER SHARE AND A FAIR MARKET VALUE OF P150. THE
FAIR VALUE AT THE TIME OF RECEIPT IS P152 PER SHARE.

HOW MUCH IS THE INCOME OF MR. AGUILA IN 2008?

A) P50,000
B) 270,400
C) 270,000
D) 240,000

52. CARANCHO IS INDEBTED TO DACUYCUY. DUE TO HIS INABILITY TO


PAY THE DEBT, HE WAS ASKED TO CLEAN THE PIGGERY OF THE
LATTER FOR THREE MONTHS. THEREAFTER, DACUYCUY GAVE HIM
P5,000 AND CONDONED THE DEBT AMOUNTING TO P10,000.

HOW MUCH INCOME SHOULD BE DECLARED BY CARANCHO?

A) P5,000
B) 10,000
C) 15,000
D) NONE

53. REWARDS GIVEN TO PERSONS INSTRUMENTAL IN THE DISCOVERY OF


VIOLATION OF THE NATIONAL INTERNAL REVENUE CODE ARE
SUBJECT TO-

A) FINAL TAX OF 10% ON REWARDS COLLECTED


B) FINAL TAX OF 10% OF P1,000,000
C) FINAL TAX OF 10% OF REWARDS COLLECTED OR P1,000,000,
WHICHEVER IS HIGHER
D) FINAL TAX OF 10% OF REWARDS COLLECTED OR P1,000,000,
WHICHEVER IS LOWER

54. IN 2008, ALMONTE RECEIVED FROM HIS EMPLOYER A PROMISSORY


NOTE WITH A FACE VALUE OF P50,000 FOR SERVICES RENDERED. THE
NOTE WILL MATURE IN 2009. HOWEVER, IT CAN BE SOLD TO A BANK
AT A DISCOUNT OF 25%. THE EMPLOYER PAID THE PROMISSORY NOTE
IN 2009. HOW MUCH TAXABLE INCOME IS TO BE DECLARED BY
ALMONTE ON THE PROMISSORY NOTE IN 2008 AND 2009,
RESPECTIVELY?

A) P50,000, 50,000
B) 12,500, 37,500
C) 37,500, 12,500
D) NONE, 50,000
55. USING THE SAME DATA IN NUMBER 54 ABOVE, EXCEPT THAT 50% OF
THE FACE VALUE OF THE NOTE IS PAYABLE IN 2009 WHILE THE
REMAINING 50% IS PAYABLE IN 2010?

HOW MUCH INCOME IS TAXABLE TO ALMONTE IN 2008, 2009 AND IN


2010, RESPECTIVELY?

A) P50,000, NONE, NONE


B) 37,500, 6,250, 6,250
C) 12,500, 18,750, 18,750
D) 0, 25,000, 25,000

56.

2008 CASE1 CASE2 CASE3 CASE4


NET INCOME BEFORE
WRITE-OFF OF
BAD DEBT 70,000 70,000 70,000 70,000
LESS: BAD DEBT
WRITTEN OFF 40,000 80,000 55,000 85,000
NET INCOME AFTER
BAD DEBT 40,000 (10,000) 15,000 (15,000)

2009
AMOUNT RECOVERED 40,000 30,000 40,000 85,000

THE TAXABLE AMOUNT ON THE RECOVERY OF BAD DEBT PREVIOUSLY


DEDUCTED, RESPECTIVELY, IS –

A) 40,000, 30,000, 40,000, 85,000


B) 40,000, 20,000, 40,000, 70,000
C) 30,000, 30,000, 55,000, 85,000
D) 30,000, 60,000, 25,000, 70,000

57.WHICH OF THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO


A LEASEHOLD CONTRACT?

STATEMENT I: SECURITY DEPOSITS ARE REPORTABLE AS INCOME OF THE


LESSOR IN THE YEAR OF RECEIPT

STATEMENT II: THE DEPRECIATION ON THE IMPROVEMENT IS TO BE


COMPUTED BY DIVIDING THE COST BY THE LIFE OF THE ASSET OR THE
REMAINING TERM OF THE LEASE, WHICHEVER IS LONGER
STATEMENT III: PREPAYMENT OF RENTALS BY THE LESSEE ARE TO BE
RECORDED BY THE LESSOR USING CASH METHOD EVEN IF IT IS
ORDINARILY USING ACCRUAL METHOD OF ACCOUNTING

A) I ONLY
B) I AND II
C) II AND III
D) III ONLY

NUMBERS 58 TO 62 ARE BASED ON THE FOLLOWING INFORMATION:

BRYAN LEASED A LAND TO JOSE FOR A PERIOD OF 11 YEARS STARTING


JANUARY 1, 2006 AT AN ANNUAL RENTAL OF P12,000. OBSERVING THE
PROVISIONS OF THE CONTRACT, JOSE CONSTRUCTED A BUILDING WHICH
SHALL BECOME THE PROPERTY OF BRYAN AT THE EXPIRATION OF THE
LEASE. THE CONSTRUCTION WAS COMPLETED ON JANUARY 1, 2009 AT A
COST OF P1,000,000 WITH AN ESTIMATED USEFUL LIFE OF 20 YEARS.

IT IS ALSO STIPULATED IN THE CONTRACT THAT THE LESSEE WILL PAY THE
P1,500 ANNUAL REAL PROPERTY TAX ON THE LAND.

58. ASSUMING THAT ON JANUARY 1, 2006, JOSE PAID P24,000 TO BRYAN


COVERING THE LEASE CONTRACT FOR 2 YEARS, HOW MUCH INCOME IS TO
BE REPORTED BY BRYAN IN 2006?

A) P12,000
B) 13,500
C) 24,000
D) 25,500

59. HOW MUCH INCOME IS TO BE REPORTED BY BRYAN IN 2009 UNDER THE


OUTRIGHT METHOD?

A) P13,500
B) 1,500
C) 1,013,500
D) 1,000,000

60. HOW MUCH INCOME IS TO BE REPORTED BY BRYAN IN 2009 UNDER THE


SPREAD-OUT METHOD?

A) P13,500
B) 1,500
C) 1,013,500
D) 88,500
61. HOW MUCH IS THE DEDUCTIBLE EXPENSE OF THE LESSEE IN 2009?

A) P138,500
B) 63,500
C) 125,000
D) 13,500

62. ASSUMING THAT DUE TO THE FAULT OF THE LESSEE, THE LEASE
CONTRACT WAS TERMINATED ON JANUARY 1, 2011, HOW MUCH
INCOME IS TO BE REPORTED BY THE LESSOR IN 2011?

A) P763,500
B) 750,000
C) 88,500
D) 1,013,500

NUMBERS 63 TO 69 ARE BASED ON THE FOLLOWING INFORMATION:

ARTURO LEASED A 216-SQUARE METER OF IDLE LAND TO LEIZZIE


COLLEGE OF BUSINESS (LCB), A PROPRIETARY EDUCATIONAL INSTITUTION,
FOR A PERIOD OF 20 YEARS EFFECTIVE JANUARY 1, 2006. THE LEASE
CONTRACT PROVIDES THAT LCB WILL ERECT A BUILDING THEREON TO BE
USED AS A CLASSROOM , WHICH IT DID ON THE LOT OF ARTURO. THE
AGREEMENT PROVIDES ALSO THAT THE BUILDING SHALL BECOME THE
PROPERTY OF THE LESSOR AT THE END OF THE LEASE. THE BUILDING WAS
COMPLETED ON JUNE 30, 2008 AT A COST OF P1,800,000. THE ESTIMATED
LIFE OF THE LEASEHOLD IMPROVEMENT IS 30 YEARS.

IT WAS FURTHER AGREED THAT LCB WILL PAY THE REAL ESTATE TAX ON
THE LAND ASSESSED AT P3,000 ANNUALLY. ON JANUARY 2, 2006, LCB PAID
ARTURO P120,000 CONSISTING OF RENTAL COVERING THE 2 YEARS
PERIOD(24 MONTHS) FROM 2006 TO 2007.

63. THE RENT INCOME TO BE REPORTED BY ARTURO IN 2006-

A) P60,000
B) 123,000
C) 120,000
D) 63,000

64. THE RENT INCOME TO BE REPORTED BY ARTURO IN 2008 UNDER


OUTRIGHT METHOD-
A) P60,000
B) 63,000
C) 1,860,000
D) 1,863,000

65. THE INCOME TO BE REPORTED BY ARTURO UNDER SPREAD-OUT


METHOD-

A) P84,429
B) 105,857
C) 81,429
D) 21,429

66. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?

A) EFFECTIVE JANUARY 1, 2006, THE LAND SHALL BE EXEMPT FROM


REAL ESTATE TAX
B) EFFECTIVE JUNE 30, 2008, THE LAND SHALL BE EXEMPT FROM REAL
ESTATE TAX
C) EFFECTIVE JANUARY 1, 2009, THE LAND AND THE BUILDING SHALL
BE EXEMPT FROM REAL ESTATE TAX
D) EFFECTIVE JUNE 30, 2008 THE LAND AND THE BUILDING SHALL BE
EXEMPT FROM REAL ESTATE TAX

67. THE DEDUCTIBLE EXPENSE OF LCB IN 2009-

A) P165,857
B) 162,857
C) 114, 429
D) 84,429

68. THE INCOME TO BE REPORTED BY ARTURO IN 2009 UNDER SPREAD-


OUT METHOD IS-

A) P105,857
B) 102,857
C) 114,429
D) 84,429

69. SUPPOSE THE LEASE CONTRACT WAS TERMINATED ON APRIL 1, 2012


DUE TO THE FAULT OF THE LESSEE, THE INCOME TO BE REPORTED
BY ARTURO UNDER SPREAD-OUT METHOD ON 2012 IS-

A) P1,443,000
B) 1,485,857
C) 1,440,000
D) 1,482,857
70. ON JANUARY 1, 2006, ATO LEASED A LOT TO BENGBENG WITH A
BUILDING ERECTED THEREON FOR A PERIOD OF 10 YEARS. THE
LEASE CONTRACT PROVIDED THAT BENGBENG WILL PAY THE
FOLLOWING:

I. MONTHLY RENTAL OF P10,000


II. FIRE INSURANCE PREMIUM OF P15,000 PER YEAR
III. REAL PROPERTY TAX OF P5,000 PER YEAR

THE LESSEE WILL CONSTRUCT A CONCRETE FENCE SURROUNDING THE


LOT AT A COST OF P1,200,000 WITH A USEFUL LIFE OF 20 YEARS WHICH
SHALL BELONG TO THE LESSOR AT THE EXPIRATION OF THE LEASE. THE
FENCING WAS FINISHED ON JUNE 30, 2008.

IN 2008, ATO SHALL REPORT AS INCOME FROM LEASE (SPREAD-OUT


METHOD) AN AMOUNT OF-

A) P75,000
B) 740,000
C) 140,000
D) 190,000

71. IN NUMBER 70 ABOVE, THE LESSEE CAN CLAIM A DEDUCTIBLE


EXPENSE IN 2008 OF-

A) P215,000
B) 220,000
C) 225,000
D) 190,000

72. PROCEEDS OF INSURANCE TAKEN BY A CORPORATION ON THE LIFE


OF AN EXECUTIVE TO INDEMNIFY IT AGAINST LOSS IN CASE OF HIS
DEATH IS-(RPCPA)

A) EXEMPT FROM INCOME TAX


B) PART OF TAXABLE INCOME
C) SUBJECT TO FINAL TAX
D) PARTLY EXEMPT, PARTLY TAXABLE

73. CORCOR CORPORATION TOOK TWO LIFE INSURANCE POLICIES ON


THE LIFE OF ITS EVP, MRS. LOPEZ. IN ONE POLICY, THE BENEFICIARY
IS THE CORPORATION AND THE OTHER, DESIGNATES HER HUSBAND
AS THE REVOCABLE BENEFICIARY. THE INSURANCE PREMIUM PAID
BY CORCOR CORPORATION IS-(RPCPA)
A) TAX DEDUCTIBLE INSOFAR AS THE FIRST POLICY IS CONCERNED
B) TAX DEDUCTIBLE FOR BOTH POLICIES
C) NOT DEDUCTIBLE FOR BOTH POLICIES
D) FIRST POLICY IS NOT DEDUCTIBLE; SECOND POLICY IS DEDUCTIBLE

74. MRS. LUCAS WAS INSURED UNDER AN ENDOWMENT POLICY WITH A


VALUE OF P500,000. TOTAL PREMIUMS PAID BY HER DURING THE
TERM OF PREMIUM PAYMENTS ON THE POLICY WAS P490,000 FROM
THERE WAS A RETURN OF PREMIUMS OF P40,000.AT THE MATURITY
OF THE POLICY, MRS. LUCAS RECEIVED P500,000. THE INCOME OF
MRS. LUCAS UNDER THE POLICY IS-(RPCPA)

A) ZERO
B) P500,000
C) 10,000
D) 50,000

NUMBERS 75 AND 76 ARE BASED ON THE FOLLOWING INFORMATION:

SOFIA TOOK A LIFE INSURANCE FROM SUNSTAR INSURANCE COMPANY,


WITH HER HUSBAND NOLI AS THE BENEFICIARY. UNDER THE POLICY,
SUNSTAR WILL PAY SOFIA THE AMOUNT OF P500,000 WHEN THE POLICY
MATURES, OR TO HER BENEFICIARY HUSBAND IN CASE SHE DIES BEFORE
THE MATURITY. SOFIA WILL PAY P10,000 ANNUALLY FOR 20 YEARS.

75. ASSUMING THAT THE POLICY MATURED WHEN SOFIA REACHED 50


YEARS OLD AND SHE RECEIVED THE ENTIRE P500,000 FROM THE
INSURER, HOW MUCH INCOME SHOULD SHE REPORT?

A) P500,000
B) 200,000
C) 300,000
D) NONE

76. ASSUME THAT SOFIA DIED AFTER 10 YEARS OF PAYING PREMIUM.


HOW MUCH INCOME SHOULD BE REPORTED TO THE BIR?

A) P500,000
B) 100,000
C) 400,000
D) NONE

NUMBERS 77 TO 79 ARE BASED ON THE FOLLOWING INFORMATION:


PAUL INSURED HIS LIFE WITH AN INSURANCE COMPANY . UNDER THE
CONTRACT, HE WILL PAY A MONTHLY PREMIUM OF P2,000 FOR 10 YEARS. IN
CASE OF DEATH BEFORE THE 10TH YEAR, HIS BENEFICIARY WILL RECEIVE
AN INDEMNIFICATION IN THE AMOUNT OF P150,000. IF HE IS STILL LIVING
ON THE 10TH YEAR, HE WILL RECEIVE THE FACE VALUE OF P500,000.

77. IF PAUL DIES ON THE 5TH YEAR, HIS BENEFICIARY WILL REPORT AN
INCOME OF-

A) P500,000
B) 150,000
C) 260,000
D) EXEMPT

78. SUPPOSE PAUL DIES ON THE 5TH YEAR AND HIS BENEFICIARY WAS
OFFERED TO RECEIVE P150,000 IN LUMP SUM OR TO RECEIVE IT AT
P20,000 A MONTH FOR TEN(10) MONTHS AND THE BENEFICIARY
CHOSE THE 2ND OPTION, HE WILL REPORT AN INCOME OF-

A) P500,000
B) 150,000
C) 50,000
D) EXEMPT

79. SUPPOSE PAUL SURVIVED THE POLICY AND WAS ABLE TO RECEIVE
P500,000, HE WILL REPORT AN INCOME OF-

A) P500,000
B) 260,000
C) 150,000
D) NONE

80. ANDRES IS THE OWNER AND BENEFICIARY OF A P500,000 POLICY ON


THE LIFE OF HIS FATHER. ANDRES SELLS THE POLICY TO HIS
BROTHER ROLLY FOR P150,000. ROLLY SUBSEQUENTLY PAYS
PREMIUMS OF P50,000. UPON HIS FATHER’S DEATH, ROLLY MUST

A) INCLUDE P500,000 IN HIS GROSS INCOME


B) EXCLUDE THE ENTIRE PROCEEDS IN HIS GROSS INCOME
C) INCLUDE P300,000 IN HIS GROSS INCOME
D) INCLUDE P350,000 IN HIS GROSS INCOME

81. MR. BASIL INSURED HIS LIFE WITH HIS ESTATE AS BENEFICIARY.IN
2008, AFTER MR. BASIL HAD PAID P65,000 IN PREMIUM, HE ASSIGNED
THE POLICY TO MR. JOSE LLAMADO FOR P60,000, AND MR. LLAMADO
CONTINUED PAYING THE PREMIUMS. MR. BASIL DIED AND MR.
LLAMADO COLLECTED THE TOTAL PROCEEDS OF P200,000. MR.
LLAMADO, AFTER THE ASSIGNMENT AND BEFORE MR. BASIL’S
DEATH, PAID TOTAL PREMIUMS OF P80,000. AS A RESULT OF THE
ABOBE TRANSACTION, MR. LLAMADO-(RPCPA)

A) MAY CONSIDER THE PROCEEDS OF P200,000 AS EXEMPT FROM TAX


B) DERIVED A TAXABLE INCOME OF P55,000
C) DERIVED A TAXABLE INCOME OF P60,000
D) ANSWER NOT GIVEN

82. BINATA REYES WON THE INTERNATIONAL BILLIARD CHAMPIONSHIP


HELD IN MADRID, SPAIN. THE TOURNAMENT WAS SANCTIONED BY A
NATIONAL SPORTS ASSOCIATION WHICH IS RECOGNIZED BY THE
PHILIPPINE OLYMPIC COMMITTEE. HE WAS AWARDED U.S.$60,000 BY
THE SPONSOR OF THE TOURNAMENT. HE WAS ALSO GIVEN P250,000
CASH BY SAN MIGUEL CORPORATION AS PRIZE OR AWARD.

IN THE SAME YEAR, HE ENTERED INTO A CONTRACT WITH THE SAME


COMPANY TO ADVERTISE THEIR PRODUCT FOR P1,500,000.

IF THE EXCHANGE RATE OF EVERY U.S. $1 IS P45, BINATA REYES SHOULD


REPORT AN INCOME OF –

A) P4,750,000
B) 1,500,000
C) 1,750,000
D) 3,250,000

83. WHILE CROSSING ALONG THE INTERSECTION OF LEGARDA AND


RECTO AVENUE, MISS MINA MALAS WAS BUMPED BY A PASSENGER
JEEPNEY. AS A CONSEQUENCE OF THE ACCIDENT, SHE WAS
HOSPITALIZED FOR 20 DAYS. THE DRIVER AND THE OPERATOR OF
THE PASSENGER JEEPNEY PAID HER A TOTAL AMOUNT OF P135,000
FOR THE FOLLOWING EXPENSES THAT SHE INCURRED:

HOSPITAL BILLS P60,000


COST OF MEDICINES 15,000
MORAL DAMAGES FOR MENTAL
ANGUISH AND OTHERS 60,000

SHE ALSO RECEIVED P20,000 AS SETTLEMENT OF A LIBEL CASE THAT SHE


FILED AGAINST A TV STATION WHICH ANNOUNCED THAT SHE WAS
PREGNANT AT THE TIME OF THE ACCIDENT AND THAT THE FETUS WAS
ABORTED.
THE INCOME TO BE REPORTED BY MINA IS-

A) ZERO
B) P20,000
C) 60,000
D) 155,000

84. MR. MONTES WAS INJURED IN A VEHICULAR ACCIDENT IN 2008. HE


INCURRED AND PAID MEDICAL EXPENSES OF P20,000 AND LEGAL
FEES OF P10,000 DURING THE YEAR. IN 2009, 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 OF MR. MONTES IN 2008 IS-(RPCPA)

A) ZERO
B) P40,000
C) 70,000
D) 50,000

85. AN ACCIDENT ATTRIBUTED TO THE NEGLIGENCE OF THE DRIVER OF


SUPERMAN LINES RESULTED IN THE DEATH OF RICHARD’S WIFE,
PHYSICAL INJURIES TO RICHARD THAT PREVENTED HIM FROM
WORKING FOR TWO(2) MONTHS AND THE TOTAL WRECK OF HIS
BRAND NEW CAR WHICH HE HAD BOUGHT FOR P450,000.

IN AN ACTION FOR DAMAGES, THE COURT AWARDED TO RICHARD THE


FOLLOWING:

P40,000- INJURIES TO RICHARD CONSISTING MAINLY IN THE LOSS OF


THE LEFT LEG
40,000- TWO MONTHS SALARY OF RICHARD
80,000- FOR THE DEATH OF HIS WIFE
100,000- MORAL DAMAGES FOR THE PHYSICAL SUFFERING AND
MENTAL ANGUISH
600,000- FOR THE LOSS OF HIS CAR, THE VALUE OF WHICH HAD
INCREASED

BASED ON THE FOREGOING, RICHARD SHOULD REPORT INCOME OF-

A) P190,000
B) 680,000
C) 830,000
D) 240,000
86. LYDIA WAS HIT BY A WAYWARD BUS WHILE ON HER WAY HOME. SHE
SURVIVED BUT HAD TO PAY P150,000 FOR HER HOSPITALIZATION.
SHE WAS UNABLE TO WORK FOR SIX(6) MONTHS WHICH MEANT
THAT SHE DID NOT RECEIVE HER USUAL SALARY OF P10,000 A
MONTH OR A TOTAL OF P60,000. SHE SUED THE BUS COMPANY AND
WAS ABLE TO OBTAIN A FINAL JUDGMENT AWARDING HER P150,000
AS REIMBURSEMENT FOR HER HOSPITALIZATION, P60,000 FOR THE
SALARIES SHE FAILED TO RECEIVE WHILE HOSPITALIZED, AND
P250,000 AS MORAL DAMAGES FOR HER PAIN AND SUFFERING. SHE
WAS ABLE TO COLLECT IN FULL FROM THE JUDGMENT.

HOW MUCH INCOME DID SHE REALIZE WHEN SHE COLLECTED FROM THE
JUDGMENT?

A) P460,000
B) 250,000
C) 60,000
D) 400,000

87. SAMSONA WAS INJURED IN A VEHICULAR ACCIDENT IN 2007. SHE


INCURRED AND PAID HOSPITAL EXPENSES OF P30,000 AND LEGAL
FEES OF P15,000 DURING THAT YEAR. IN 2008, SHE RECEIVED P40,000
AS SETTLEMENT FROM THE INSURANCE COMPANY WHICH INSURED
THE CAR OWNED BY DIMAR, THE OTHER PARTY INVOLVED IN THE
ACCIDENT. FROM THE ABOVE PAYMENTS AND TRANSACTIONS, THE
AMOUNT OF INCOME TAXABLE TO SAMSONA IS-

A) P40,000 IN 2008
B) 5,000 IN 2008
C) 5,000 IN 2007
D) NONE

88. WHICH OF THE FOLLOWING IS A TAXABLE INCOME?-(RPCPA)

A) INCOME FROM QUALIFIED PENSION PLAN


B) COM;PENSATION FOR PERSONAL INJURIES
C) MORAL DAMAGES
D) INTEREST ON MORAL DAMAGES

89. MISS TUAZON HAD RECENTLY JOINED MMC AS SALES EXECUTIVE.


SHE WAS ADVISED TO BE RETRENCHED BECAUSE THE COMPANY
WAS LOSING HEAVILY, BUT THAT SHE WOULD BE GIVEN A
SUBSTANTIAL SEPARATION PAY. THE GENERAL MANAGER,
HOWEVER, SUGGESTED TO MISS TUAZON TO FILE A LETTER OF
RESIGNATION FROM THE COMPANY, INSTEAD OF HAVING BEEN
INVOLUNTARILY SEPARATED AS THE LATTER WOULD HAVE
IMPLICATIONS OF INEFFICIENCY ON HER PART. MISS TUAZON CHOSE
TO RESIGN FROM THE COMPANY AND RECEIVED THE SUM OF
P100,000 AS SEPARATION PAY. THE ABOVE AMOUNT IS-(RPCPA)

A) EXEMPT FROM INCOME TAX


B) TAXABLE IN FULL
C) NON-DEDUCTIBLE EXPENSE ON THE PART OF THE COMPANY
D) PARTIALLY TAXABLE

90. LETTY, AN OFFICIAL OF SAMPAGUITA CORPORATION ASKED FOR AN


EARLIER RETIREMENT BECAUSE SHE WAS EMIGRATING TO CANADA.
SHE WAS PAID P1 MILLION AS A SEPARATION PAY IN RECOGNITION
OF HER VALUABLE SERVICES TO THE CORPORATION.

SHANE, ANOTHER OFFICIAL OF THE SAME COMPANY WAS SEPARATED FOR


OCCUPYING A REDUNDANT POSITION. SHE WAS GIVEN P500,000 AS
SEPARATION PAY.

SHEILA WAS SEPARATED DUE TO HER FAILING EYESIGHT. SHE WAS GIVEN
P250,000 AS SEPARATION PAY.

ALL OF THE THREE(3) WERE NOT QUALIFIED TO RETIRE UNDER THE BIR-
APPROVED PENSION PLAN OF THE CORPORATION.

Q1: IS THE SEPARATION PAY GIVEN TO LETTY SUBJECT TO INCOME TAX?

Q2: HOW ABOUT THE SEPARATION PAY RECEIVED BY SHANE?

Q3: HOW ABOUT THE SEPARATION PAY RECEIVED BY SHEILA?

A) YES TO ALL QUESTIONS


B) YES TO 2ND QUESTION
C) NO TO ALL QUESTIONS
D) NO TO 2ND AND 3RD QUESTIONS

91. DURING THE YEAR, BEN RECEIVED A COCONUT LAND FROM HIS
MOTHER BY WAY OF AN INTER-VIVOS DONATION. THE LAND HAD A
MARKET VALUE OF P700,000 AND EARNING AN AVERAGE ANNUAL
INCOME OF P50,000.

IN THE SAME YEAR, HIS MOTHER DIED. HE INHERITED A PASSENGER BUS


VALUED AT P400,000 AND A RESIDENTIAL HOUSE WORTH P2,000,000. THE
BUS EARNED A TOTAL INCOME OF P30,000 IN THE HANDS OF BEN.
AS A CONSEQUENCE OF HIS MOTHER’S DEATH, HE RECEIVED P400,000
FROM AN INSURANCE COMPANY AS PROCEEDS OF AN INSURANCE POLICY
TAKEN BY HIS MOTHER WHO APPOINTED HIM AS THE BENEFICIARY. THE
TOTAL PREMIUMS PAID WAS P150,000.

THE INCOME SUBJECT TO TAX IS-

A) P3,500,000
B) 3,350,000
C) 330,000
D) 80,000

92. AFTER WORKING FOR 30 YEARS AT STO. DOMINGO CORPORATION,


MISS TAPIA RETIRED FROM EMPLOYMENT AT THE AGE OF 60. SHE
RECEIVED P600,000 AS RETIREMENT PAY FROM THE PRIVATE
RETIREMENT PLAN MAINTAINED BY THE EMPLOYER.

OTHER THAN HER RETIREMENT BENEFITS, SHE ALSO RECEIVED HER


ENDOWMENT INSURANCE POLICY IN THE AMOUNT OF P400,000 WHICH SHE
WAS PAYING FOR 20 YEARS AT AN ANNUAL PREMIUM OF P5,000.

HOW MUCH INCOME MUST BE REPORTED BY MISS TAPIA?

A) P300,000
B) 400,000
C) 600,000
D) NONE

93. ANTONY WAS HIRED AS STAFF AUDITOR OF RGF AND COMPANY IN


1991. IN DECEMBER 1998 HE TRANSFERRED TO BAYAN AND
ASSOCIATES. IN 2000, HE RETURNED BACK TO RGF AND COMPANY
UNTIL HIS RETIREMENT IN 2006 AT THE AGE OF 55.

QUESTION 1: ARE THE RETIREMENT BENEFITS TAXAB LE TO ANTONY?


QUESTION 2: SUPPOSE HE WAS TERMINATED FROM EMPLOYMENT DUE TO
DISHONESTY. IS THE SEPARATION PAY TAXABLE TO ANTONY?
QUESTION 3: SUPPOSE HE WAS TERMINATED FROM EMPLOYMENT DUE TO
THE MERGER OF THE TWO AUDIT FIRMS. WILL THE
SEPARATION PAY TAXABLE TO ANTONY?

A) NO, YES, NO
B) NO, YES, YES
C) YES, NO, NO
D) YES, NO, YES
94. ON OCTOBER 1, 2009, GILDA INHERITED PROPERTIES WORTH
P3,000,000 FROM HER MOTHER. THE PROPERTIES ARE EARNING
INCOME OF P90,000 A MONTH.

HOW MUCH INCOME IS TO BE REPORTED BY GILDA IN 2009?

A) P3,090,000
B) 3,000,000
C) 3,270,000
D) 270,000

95. VILLAMOR, AN EMPLOYEE OF A COOPERATIVE WAS REGULARLY


RECEIVING A MONTHLY SALARY AND ALLOWANCE OF P3,500 AND
P1,000, RESPECTIVELY. ON JUNE 1, 2008, HE WAS RETRENCHED BY
THE COOPERATIVE PAYING HIM A SEPARATION PAY OF P125,000. HE
DECIDED TO USE THIS MONEY IN BUYING TRIMOBILE. FOR SIX(6)
MONTHS, HE EARNED A NET INCOME OF P24,000.

HOW MUCH INCOME SHOULD VILLAMOR DECLARE IN 2008 FOR INCOME


TAX PURPOSES?

A) P48,750
B) 46,500
C) 173,750
D) 171,000

96. RAMONA MONTERO WAS RETIRED BY HER EMPLOYER-


CORPORATION IN 2008 AND PAID P2,000,000 AS A RETIREMENT
GRATUITY WITHOUT ANY DEDUCTION OF WITHHOLDING TAX. THE
CORPORATION BECAME BANKRUPT IN 2007. CAN THE BIR SUBJECT
THE P2,000,000 RETIREMENT GRATUITY TO INCOME TAX?-(RPCPA)

1ST ANSWER: NO, IF THE RETIREMENT GRATUITY WAS PAID BASED ON A


REASONABLE PENSION PLAN WHERE MONTERO WAS 60 YEARS OLD
AND HAS SERVED THE CORPORATION FOR 9 YEARS.

2ND ANSWER: YES, IF MONTERO WAS FORCED BY THE CORPORATION TO


RESIGN DUE TO RETRENCHMENT.

A) BOTH ANSWERS ARE WRONG


B) BOTH ANSWERS ARE CORRECT
C) FIRST ANSWER IS CORRECT, THE SECOND IS WRONG
D) FIRST ANSWER IS WRONG, THE SECOND IS CORRECT.

97. WHICH OF THE CEILINGS ON THE FOLLOWING DE MINIMIS BENEFITS


IS CORRECT?
RICE SUBSIDY UNIFORM ALLOWANCE
A) P1,000 P3,000
B) 1,000 4,000
C) 1,500 3,500
D) 1,500 4,000

98. 1ST STATEMENT:: LAUNDRY ALLOWANCE NOT EXCEEDING P300 PER


MONTH IS NOT EXEMPT DE MINIMIS BENEFIT IF
GIVEN TO RANK-AND-FILE EMPLOYEES

2ND STATEMENT: RICE SUBSIDY OF P1,500 PER MONTH IS AN EXEMPT DE


MINIMIS BENEFIT REGARDLESS OF WHETHER THE
RECIPIENT EMPLOYEE IS OCCUPYING A MANAGERIAL
POSITION OR NOT

A) BOTH STATEMENTS ARE WRONG


B) BOTH STATEMENTS ARE CORRECT
C) THE FIRST STATEMENT IS CORRECT; THE SECOND STATEMENT IS
WRONG
D) THE FIRST STATEMENT IS WRONG; SECOND STATEMENT IS CORRECT

99. AFTER WORKING FOR 3O YEARS AND DUE TO OLD AGE, RAFFY
RETIRED FROM HIS EMPLOYMENT ON DECEMBER 31, 2008 AS A
RANK-AND-FILE EMPLOYEE OF TUMAGAY CORPORATION. AS A
CONSEQUENCE OF HIS RETIREMENT, HE RECEIVED THE FOLLOWING
FROM HIS EMPLOYER:

SALARY FOR 2008 P250,000


CHRISTMAS GIFT 25,000
ANNIVERSARY BONUS 2,500
LOYALTY AWARD 10,000
RETIREMENT PAY 750,000

BASED ON THE ABOVE DATA, THE AMOUNT SUBJECT TO TAX OF RAFFY IS-

A) P250,000
B) 257,500
C) 252,500
D) 1,037,500

NUMBERS 100 AND 101 ARE BASED ON THE FOLLOWING INFORMATION:

RICKY HAD THE FOLLOWING DATA FROM HIS EMPLOYMENT IN 2008:


MONTHLY SALARY P12,000
TAXES WITHHELD 8,000
PAG-IBIG CONTRIBUTIONS 1,500
UNION DUES 2,400
PHILHEALTH CONTRIBUTIONS 720
SSS PREMIUMS 480
13TH MONTH PAY 12,000
MID-YEAR BONUS 12,000
;LOYALTY AWARD 5,000

100. THE PORTION OF COMPENSATION WHICH IS EXCLUDED FROM


THE GROSS COMPENSATION INCOME IF RICKY IS A RANK-AND-FILE
EMPLOYEE IS-

A) P5,100
B) 34,100
C) 29,000
D) NONE

101. THE GROSS COMPENSATION INCOME OF RICKY IN 2008 IS-

A) P144,000
B) 150,000
C) 109,900
D) 138,900

102. WHICH OF THE FOLLOWING COMPENSATION PAYMENTS TO A


MINIMUM WAGE EARNER IS SUBJECT TO INCOME TAX?

A) HOLIDAY PAY
B) OVERTIME PAY
C) NIGHT SHIFT DIFFERENTIAL PAY
D) NONE OF THE ABOVE

103. THREE(3) TAXPAYERS HAVE THE FOLLOWING DATA:

ALCANZO BARRIENTOS CORPORAL


2009 BASIC PAY P99,048 P101,172 P84,368
MONTHLY BASIC PAY 8,254 8,431 10,546
HOLIDAY PAY 435 - -
OVERTIME PAY 1,256 1,459 2,543
HAZARD PAY - - 1,000
NIGHT SHIFT DIFF PAY - 1,686 -
TOTAL PAY
FOR THE MONTH 9,945 11,576 14,089
WHO OF THE ABOVE TAXPAYER(S) IS/ARE EXEMPT FROM INCOME TAX?

A) ALCANZO ONLY
B) ALCANZO AND BARRIENTOS
C) ALCANZO, BARRIENTOS AND CORPORAL
D) BARRIENTOS AND CORPORAL

CHAPTER 12- INCOME TAX OF CORPORATIONS

MULTIPLE CHOICE

104. FOR PURPOSES OF INCOME TAXATION, WHICH OF THE


FOLLOWING IS NOT CONSIDERED AS A CORPORATION?

A) GENERAL PROFESSIONAL PARTNERSHIP


B) BUSINESS PARTNERSHIP
C) UNREGISTERED PARTNERSHIP
D) JOINT STOCK COMPANIES

105. WHICH OF THE FOLOWING BUSINESSES IS NOT TAXABLE AS A


CORPORATION?

A) ANDREA, BARBIE AND CRISSY CONTRIBUTED P500,000 EACH AND


OPENED UP A DEPARTMENT STORE IN THE DOWNTOWN. THEY
AGREED THAT WHATEVER NET PROFIT IS EARNED WILL BE
DISTRIBUTED EQUALLY TO THEM. THEY DID NOT BOTHER TO
REGISTER THE BUSINESS WITH THE SECURITIES AND EXCHANGE
COMMISSION
B) GIGI AND JAYJAY, TWO SENIOR STAFF AUDITORS OF A BIG
ACCOUNTING AND AUDITING FIRM, RESIGNED FROM THEIR JOB AND
ORGANIZED A NEW FIRM WHICH THEY NAMED AS GIGI, JAYJAY AND
COMPANY, CPAs.
C) LAVINIA, DORINA, ROSA MIA AND CAPICAT FORMED A BUSINESS
ORGANIZATION WITH THE FOLLOWING AGREED FEATURES: 1) THEY
ARE DEPRIVED OF THEIR GENERAL AGENCY TO ACT ON BEHALF OF
THEIR VENTURES; 2) THE POWERS OF MANAGEMENT ARE VESTED
ON THE BOARD OF TRUESTEES; 3) THE OWNERSHIP IS REPRESENTED
IN TRANSFERABLE CERTIFICATES; 4) THE BUSINESS CONTINUES FOR
A FIXED TERM NOTWITHSTANDING THE DEATH OR DISABILITY OF
ONE OF THEM AND ; 5) THE LIABILITY OF THE PARTNERS IS NOT
LIMITED TO THEIR CONTRIBUTIONS
D) A GROUP OF FIVE(5) ENTREPRENEURS HAD ORGANIZED, FILED AND
REGISTERED THE ARTICLES OF INCORPORATION OF COJANGKUHA
CORPORATION. IT HAS AN AUTHORIZED CAPITAL STOCK OF P10
MILLION DIVIDED INTO 100,000 SHARES EACH SHARE HAVING A PAR
VALUE OF P100

106. WHICH OF THE FOLLOWING IS SUBJECT TO INCOME TAX?

A) SSS AND GSIS


B) PHILIPPINE HEALTH INSURANCE CORPORATION(PHIC)
C) PROFESSIONAL REGULATION COMMISSION(PRC)
D) PHILIPPINE AMUSEMENT AND GAMING CORPORATION(PAGCOR)

107. “TAXABLE NET INCOME RECEIVED DURING EACH YEAR FROM


ALL SOURCES” IS THE TAX BASE FOR INCOME PURPOSES OF THIS
CLASS OF TAXPAYERS-(RPCPA)

A) DOMESTIC CORPORATIONS
B) RESIDENT CORPORATIONS
C) RESIDENT FOREIGN CORPORATIONS ENGAGED IN TRADE OR
BUSINESS IN THE PHILIPPINES
D) RESIDENT FOREIGN CORPORATION NOT ENGAGED IN TRADE OR
BUSINESS IN THE PHILIPPINES

108. ONE OF THE FOLLOWING IS TAXED ON GROSS INCOME-

A) DOMESTIC CORPORATION
B) RESIDENT FOREIGN CORPORATION
C) NON-PROFIT CEMETERY
D) NON-RESIDENT FOREIGN CORPORATION

109. RGF CORPORATION, A DOMESTIC CORPORATION HAS THE


FOLLOWING RECORDS OF INCOME AND EXPENSES IN 2009:

GROSS INCOME, NET OF 1% WHT P1,435,500


EXPENSES 756,000
RENT INCOME, NET OF 5% WHT 136,800
EXPENSES ON RENT 34,600
DIVIDEND FROM DOMESTIC CORPORATION 25,000
ROYALTY 80,000
INTEREST FROM BANK DEPOSIT WITH PNB, GROSS OF TAX 15,000

THE INCOME TAX PAYABLE BY RGF CORPORATION IS-

A) P241,020
B) 219,320
C) 803,400
D) 259,490
110. BASED ON THE DATA IN NUMBER 109 ABOVE, THE TOTAL
FINAL TAXES PAYABLE ON RGF CORPORATION IS-

A) P19,000
B) 21,500
C) 33,250
D) 3,000

111. LCY CORPORATION, A CORPORATION ENGAGED IN BUSINESS


IN THE PHILIPPINES AND ABROAD, HAS THE FOLLOWING DATA IN
2009:

GROSS INCOME, PHILIPPINES P975,000


EXPENSES, PHILIPPINES 750,000
GROSS INCOME, USA 770,000
EXPENSES, USA 630,000
INTEREST ON BANK DEPOSIT 25,000

THE INCOME TAX DUE IF THE CORPORATION IS-

DOMESTIC RESIDENT NON-RESIDENT


FOREIGN FOREIGN

A) P116,800 P72,000 P320,000


B) 127,750 78,750 350,000
C) 312,000 515,850 116,800
D) 109.500 67,500 300,000

112. FLT CORPORATION, A DOMESTIC CORPORATION HAS THE


FOLLOWING RECORD OF INCOME AND EXPENSES DURING THE
YEAR:

GROSS INCOME P1,540,000


EXPENSES 654,000
DIVIDEND FROM A RESIDENT FOREIGN CORPORATION 95,000
ROYALTIES, PHILIPPINES 230,000
ROYALTIES, USA 175,000
INTEREST ON TIME DEPOSIT WITH METROBANK 18,000
INTEREST ON MONEY MARKET PLACEMENT 25,000

THE TAXABLE INCOME ON FLT CORPORATION IS-

A) P886,000
B) 1,156,000
C) 641,000
D) 616,000

113. THE TOTAL FINAL WITHHOLDING TAX ON FLT CORPORATION


IS-

A) P51,475
B) 72,600
C) 103,120
D) 148,100

NUMBERS 114 TO 117 ARE BASED ON THE FOLLOWING INFORMATION:

GCF CORPORATION WHICH STARTED WITH ITS OPERATIONS IN 1990 HAS


THE FOLLOWING RECORDS IN 2009:

IST QTR 2ND QTR 3RD QTR 4TH QTR


GROSS PROFIT P500,000 P850,000 P800,000 P770,000
EXPENSES 400,000 770,000 640,000 575,000
DIVIDEND-
DOMESTIC COMPANY 15,000 15,000 20,000 20,000
INCOME TAX WITHHELD 5,000 7,000 8,000 6,750
RENT INCOME, GROSS
OF 5% WHT 36,000 36,000 48,000 48,000

THE COMPANY HAD AN EXCESS PAYMENT OF P12,500 IN 2008 FROM WHICH


IT HAD DECIDED TO CLAIM TAX CREDIT

114. THE INCOME TAX PAYABLE AT THE END OF THE FIRST


QUARTER IS-

A) P40,800
B) 36,720
C) 28,300
D) 21,500

115. THE INCOME TAX PAYABLE AT THE END OF THE SECOND


QUARTER IS-

A) P19,200
B) 28,320
C) 31,800
D) 26,000
116. THE INCOME TAX PAYABLE AT THE END OF THE THIRD
QUARTER IS-

A) P52,000
B) 62,400
C) 12,640
D) NONE

117. THE INCOME TAX PAYABLE/REFUND AT THE END OF THE YEAR


IS-

A) P25,090
B) 63,750
C) 75,900
D) 68,610

118. ABC COMPANY, A DOMESTIC CORPORATION HAS THE


FOLLOWING DATA-(RPCPA)

INCOME TAX FOR 2008 P110,000


LESS: TAX CREDITS 125,000
EXCESS TAX CREDITS 15,000

2009 1ST QTR


INCOME NET OF 1% WHT P495,000
DEDUCTIONS 460,000

FOR THE 1ST QUARTER OF 2009, THE CORPORATION WILL REPORT:

A) EXCESS TAX CREDIT OF P6,000


B) TAX PAYABLE OF P7,000
C) EXCESS TAX CREDIT OF P8,000
D) TAX PAYABLE OF P2,000

119. A DOMESTIC CORPORATION HAS THE FOLLOWING DATA:

EXCESS TAX CREDITS FROM 2008 P15,000

FOR THE YEAR 2009:


1ST QTR 2ND QTR
INCOME, NET OF 1% WHT P495,000 P792,000
DEDUCTIONS 460,000 700,000
HOW MUCH IS THE INCOME TAX STILL DUE AND PAYABLE IN THE SECOND
QUARTER?-(RPCPA)

A) P21,000
B) 14,000
C) 10,400
D) 29,440

120. IF THE GROSS INCOME FROM UNRELATED ACTIVITY EXCEEDS


50% OF THE TOTAL GROSS INCOME DERIVED BY ANY PRIVATE
EDUCATIONAL INSTITUTION, THE RATE SHALL BE 30% BASED ON
THE ENTIRE TAXABLE INCOME. THIS PRINCIPLE IS KNOWN AS

A) CONSTRUCTIVE RECEIPT
B) TAX BENEFIT RULE
C) END RESULT DOCTRINE
D) PREDOMINANCE TEST

121. IN 2009, RGF UNIVERSITY, A PROPRIETARY EDUCATIONAL


INSTITUTION REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION (SEC) AND COMMISSION ON HIGHER
EDUCATION(CHED), SPENT P15,000,000 FOR THE CONSTRUCTION OF A
NEW BUILDING. FOR INCOME TAX PURPOSES, THE AMOUNT MAYBE:

A) CLAIMED ENTIRELY AS DEDUCTION FROM ITS 2007 GROSS INCOME


B) CLASSIFIED AS AN ASSET OR EXPENSED OUTRIGHT, AT THE OPTION
OF THE GOVERNMENT
C) CLASSIFIED AS AN ASSET OR EXPENSED OUTRIGHT, AT THE OPTION
OF THE TAXPAYER
D) CLASSIFIED AS AN ASSET AND CLAIM AN ANNUAL DEPRECIATION
OVER THE LIFE OF THE BUILDING

NUMBERS 122 AND 123 ARE BASED ON THE FOLLOWING INFORMATION:

THE QUEZON SCHOOL OF BUSINESS AND ARTS (QSBA) IS A PRIVATE


EDUCATIONAL INSTITUTION RECOGNIZED BY THE GOVERNMENT. THE
FOLLOWING ARE THE FINANCIAL DATA FOR THE ITS FISCAL YEAR ENDING
JUNE 30, 2009:

TUITION FEES P12,800,000


MISCELLANEOUS FEES 1,800,000
INTEREST ON BANK DEPOSITS 12,300
RENT INCOME OF SCHOOL FACILITIES TO OUTSIDERS 350,000
SALARY AND BONUSES, ALL PERSONNEL 7,500,000
OTHER OPERATING EXPENSES 3,500,000
REPAYMENT OF LOAN 400,000
QUARTERLY (THREE QUARTERS) INCOME TAX PAID 48,000

A BUILDING WAS CONSTRUCTED ON APRIL 2, 2009 AT A COST OF P2,000,000


WITH A DEPRECIABLE LIFE OF 50 YEARS.

122. ASSUMING THE COST OF CONSTRUCTION IS TREATED AS AN


EXPENSE, THE INCOME TAX PAYABLE BY THE SCHOOL FOR THE
YEAR ENDED JUNE 30, 2009 IS-

A) P343,000
B) 147,000
C) 576,000
D) 160,000

123. THE INCOME TAX PAYABLE IF THE COST OF BUILDING


CONSTRUCTION IS CAPITALIZED:

A) P346,000
B) 147,000
C) 1,203,200
D) 345,667

124. IN 2009, PROSPEROUS CORPORATION, A DOMESTIC


CORPORATION, HAD A NET INCOME OF P2,000,000. IT PAID A
CORPORATE TAX OF 30% LEAVING A DISTRIBUTABLE INCOME OF
P1,400,000. IF A DIVIDEND IS DECLARED BY THE CORPORATION AND
RECEIVED BY THE FOLLOWING STOCKHOLDERS, WHICH OF THE
FOLLOWING STATEMENTS IS FALSE?

A) NON-RESIDENT ALIENS ENGAGED IN TRADE OR BUSINESS ARE


LIABLE TO PAY 30% DIVIDEND TAX
B) NON-RESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS ARE
LIABLE TO PAY 25% DIVIDEND TAX
C) RESIDENT CITIZENS ARE LIABLE TO PAY 10% DIVIDEND TAX
D) RESIDENT FOREIGN CORPORATIONS ARE EXEMPT FROM THE
PAYMENT OF DIVIDEND TAX

125. DIVIDENDS FROM A DOMESTIC CORPORATION AND/OR SHARE


IN THE NET INCOME OF A TAXABLE PARTNERSHIP RECEIVED BY A
CITIZEN DURING THE YEAR 2009 IS SUBJECT TO A FINAL TAX OF-
(RPCPA)
A) ZERO
B) 30%
C) 20%
D) 10%

126. THE TY CORPORATION IS AN INTERNATIONAL CARRIER DOING


BUSINESS IN THE PHILIPPINES. ITS TAXABLE BASE FOR INCOME TAX
PURPOSES IS-(RPCPA)

A) GROSS PHILIPPINE BILLINGS


B) GROSS PHILIPPINE BILLINGS MINUS DEDUCTIBLE EXPENSES
C) REGULAR RATES OF 32% OF ITS NET TAXABLE INCOME
D) ALLOCATION OF INCOME FROM SOURCES WITHIN AND WITHOUT
THE PHILIPPINES, AS WELL AS EXPENSES

127. A RESIDENT INTERNATIONAL CARRIER HAS THE FOLLOWING


DATA FOR THE CURRENT YEAR: GROSS INCOME OF P700,000 AND
EXPENSES OF P200,000 FROM THE PHILIPPINES; GROSS INCOME OF
P500,000 AND EXPENSES OF P100,000 FROM HONGKONG. HOW MUCH
IS THE TAX PAYABLE OF THE CORPORATION?-(RPCPA)

A) P288,000
B) 17,500
C) 160,000
D) 30,000

128. ONE OF THE FOLLOWING IS EXEMPT FROM INCOME TAX

A) PROPRIETARY EDUCATIONAL INSTITUTION


B) PRIVATE CEMETERIES
C) GOVERNMENT EDUCATIONAL INSTITUTIONS
D) MUTUAL SAVINGS BANK

129. ON FEBRUARY 5, 2009, ZORRO CORPORATION DECLARES 20%


STOCK DIVIDEND AND ISSUED SHARES OF STOCKS AMOUNTING TO
P100,000. ON MARCH 20, 2009, THE CORPORATION REDEEMED THE
STOCK DIVIDEND BY VIRTUE OF WHICH THE STOCKHOLDERS
SURRENDERED THEIR STOCK CERTIFICATES IN RETURN FOR THE
CASH PAID TO THEM BY ZORRO CORPORATION IN THE AMOUNT OF
P100,000.

A) THE STOCK DIVIDENDS DECLARED ARE TAXABLE BECAUSE


GENERALLY, STOCK DIVIDENDS ARE SUBJECT TO INCOME TAX
B) THE DIVIDENDS ARE TAXABLE TO THE STOCKHOLDERS BECAUSE
THEY ARE ACTUALLY PROPERTY DIVIDENDS.
C) THE REDEMPTION OF THE STOCK DIVIDEND IS ESSENTIALLY
EQUIVALENT TO THE DISTRIBUTION OF A TAXABLE DIVIDEND.
HENCE, THE AMOUNT SO DISTRIBUTED IN REDEMPTION SHALL BE
CONSIDERED AS TAXABLE INCOME
D) THE DISTRIBUTION AND THE REDEMPTION OF THE STOCKS ARE NOT
TAXABLE BECAUSE STOCK DIVIDENDS ARE EXEMPT FROM INCOME
TAX

130. IF A CORPORATION DISTRIBUTES ITS ASSETS TO ITS


STOCKHOLDERS UPON DISSOLUTION, THIS KIND OF CORPORATE
DISTRIBUTION WILL RESULT IN-(RPCPA)

A) STOCK DIVIDENDS
B) PROPERTY DIVIDENDS
C) CASH DIVIDENDS
D) LIQUIDATING DIVIDENDS

131. IF A CORPORATION TO WHICH THE STOCKHOLDER IS


INDEBTED FORGIVES THE DEBT, THE TRANSACTION HAS THE
EFFECT OF A PAYMENT OF WHAT KIND OF DIVIDEND?-(RPCPA)

A) STOCK DIVIDEND
B) CASH DIVIDEND
C) LIQUIDATING DIVIDEND
D) INDIRECT DIVIDEND

SPECIAL TOPIC-MINIMUM CORPORATE INCOME TAX

132. THE MINIMUM CORPORATE INCOME TAX (MCIT) IS IMPOSED


ON-

A) 2% OF GROSS INCOME
B) 10% OF GROSS INCOME
C) 5% OF GROSS INCOME
D) 15% OF GROSS INCOME

133. THE MINIMUM CORPORATE INCOME TAX (MCIT) IS IMPOSED


ON-

A) PROPRIETARY EDUCATIONAL CORPORATIONS TAXABLE AT 10% OF


GROSS INCOME
B) DEPOSITARY BANKS UNDER THE EXPANDED FOREIGN CURRENCY
DEPOSIT SYSTEM
C) BUSINESS PARTNERSHIPS
D) OFFSHORE BANKING UNITS SUBJECT TO FINAL TAX OF 10%

134. THE IMPOSITION OF MINIMUM CORPORATE INCOME TAX


SHALL NOT BE SUSPENDED WHENEVER THE CORPORATION SUFFERS
LOSSES DUE TO

A) PROLONGED LABOR DISPUTE


B) FORCE MAJEURE
C) LEGITIMATE BUSINESS REVERSES
D) MISMANAGEMENT

135. A CORPORATION WHICH WAS REGISTERED WITH THE BUREAU


OF INTERNAL REVENUE IN MAY, 2002 SHALL BE COVERED BY MCIT
IN

A) 2005
B) 2006
C) 2008
D) 2009

136. WATCHOUT CORPORATION WHICH COMMENCED BUSINESS


OPERATIONS IN 2000 HAS A GROSS INCOME OF P632,000 AND
ALLOWABLE DEDUCTIONS OF P610,000 IN 2009. ITS INCOME TAX
PAYABLE DURING THE YEAR IS-

A) P7,700
B) 7,040
C) 6,660
D) 12,640

137. MAEKIS CORPORATION HAS THE FOLLOWING DATA:

2009 2010
SALES 1,700,000 2,300,000
COST OF SALES 1,050,000 1,425,000
OPERATING EXPENSES 615,000 480,000

THE INCOME TAX PAYAB LE IN 2009 IS-

A) P13,000
B) 12, 250
C) 35,000
D) 10,500

138. IN NUMBER 137, THE INCOME TAX PAYABLE BY MAEKIS


CORPORATION IN 2010 IS-
A) P117,750
B) 17,500
C) 116,000
D) 137,500

139. IN NUMBER 137 ABOVE, THE JOURNAL ENTRY IN 2009 TO


RECORD EXCESS MCIT IS-

A) DEFERRED CHARGES-MCIT-(13,000-10,500) 2,500


INCOME TAX PAYABLE 2,500
B) DEFERRED CHARGES-MCIT 13,000
INCOME TAX PAYABLE 13,000
C) PROVISION FOR INCOME TAX 11,200
INCOME TAX 11,200
D) INCOME TAX PAYABLE 13,000
CASH 13,000

140. IN NUMBER 137 ABOVE, THE ACCOUNTING ENTRY IN 2010 TO


RECORD THE CARRY FORWARD OF EXCESS MCIT AGAINST NORMAL
INCOME TAX LIABILITY IN 2009 IS-

A) DEFERRED CHARGES-MCIT 1,800


INCOME TAX PAYABLE 1,800
B) PROVISION FOR INCOME TAX 124,500
INCOME TAX PAYABLE 124,500
C) INCOME TAX PAYABLE 2,500
DEFERRED CHARGES-MCIT 2,500
D) RETAINED EARNINGS 1,800
DEFERRED CHARGES-MCIT 1,800

141. STATEMENT 1:IF THE QUARTERLY INCOME TAX IS BASED ON


MCIT, THE EXCESS MCIT FROM THE PREVIOUS TAXABLE YEAR/S
SHALL NOT BE ALLOWED TO BE CREDITED

STATEMENT 2: EXPANDED WITHHOLDING TAX, QUARTERLY CORPORATE


INCOME TAX PAYMENTS UNDER THE NORMAL INCOME TAX, AND THE MCIT
PAID IN THE PREVIOUS TAXABLE QUARTERS ARE ALLOWED TO BE APPLIED
AGAINST THE QUARTERLY MCIT DUE.

A) FALSE, FALSE
B) FALSE, TRUE
C) TRUE, FALSE
D) TRUE, TRUE
142. ADY CORPORATION HAS THE FOLLOWING DATA DURING THE
YEAR:
1ST QTR 2ND QTR
NORMAL INCOME TAX P10,000 12,000
MCIT 8,000 25,000
TAXES WITHHELD DURING THE QTR 2,000 3,000
EXCESS WHT PRIOR YEAR 1,000

THE INCOME TAX PAYABLE BY ADY CORPORATION FOR THE 1 ST QUARTER


IS-

A) P7,000
B) 4,000
C) 3,000
D) 2,000

143. IN NUMBER 142, THE INCOME TAX PAYABLE FOR THE 2 ND


QUARTER IS-

A) P15,000
B) 20,000
C) 27,000
D) 23,000

144. RELLY CORPORATION HAD THE FOLLOWING ITEMS OF


INCOME AND EXPENSES DURING THE YEAR:

GROSS RECEIPTS P1,000,000


COST OF SERVICES 850,000
DIVIDENDS FROM A DOMESTIC CO. 35,000
GENERAL AND ADMINISTRATIVE EXPENSES 120,000

THE INCOME TAX DUE ON RELLY CORPORATION IS-

A) P10,500
B) 3,000
C) 9,000
D) 30,000

145. MASAGANA CORPORATION, A DOMESTIC CORPORATION


ORGANIZED IN 2004 HAS THE FOLLOWING RECORDS OF
COMPUTATION OF ITS INCOME TAX DURING THE THREE(3)
CONSECUTIVE TAXABLE YEARS:

2007 2008 2009


SALES P3,000,000 P3,600,000 P4,300,000
LESS: COST OF SALES (1,800,000) (2,450,000) (2,250,000)
ADD: NET CAPITAL GAIN 80,000 - 10,000
GROSS INCOME 1,280,000 1,150,000 2,060,000
LESS: DEDUCTIONS 800,000 925,000 1,945,000
TAXABLE INCOME 480,000 225,000 115,000
TAX RATE 35% 35% 30%
NORMAL INCOME TAX 168,000 78,750 34,500
MCIT:
2007-NONE
2008-(1,150,000 X 2%) 23,000
2009-(2,060,000 X 2%) 41,200
TAX PAYABLE 168,000 78,750 41,200

BASED ON THE ABOVE DATA, WHICH OF THE FOLLOWING STATEMENTS IS


FALSE?

A) THE MCIT SHALL NOT BE APPLIED ON MASAGANA CORPORATION


UNTIL 2007. IT SHALL BE APPLIED EFFECTIVE IN 2008.
B) THE EXCESS MCIT IN 2009 CAN BE CARRIED TO THE SUCCEEDING
YEAR EVEN IF THE CORPORATION SUFFERS A LOSS IN 2010
C) THE TERM “GROSS INCOME” INCLUDES OTHER INCOME
D) THE EXCESS MCIT OF P6,700 IN 2009 CAN BE CARRIED OVER UNTIL
2012 ONLY

NUMBERS 146 AND 147 ARE BASED ON THE FOLLLOWING


INFORMATION:

146. IZA CORPORATION, A DOMESTIC CORPORATION, HAS THE


FOLLOWING DATA:
2008 2009
GROSS INCOME P3,500,000 2,400,000
TAXABLE INCOME 125,000 500,000

THE INCOME TAX DUE ON IZA CORPORATION FOR 2008 IS:

A) P43,750
B) 70,000
C) 26,250
D) 40,000

147. THE INCOME TAX PAYABLE BY IZA CORPORATION FOR 2009 IS:

A) P150,000
B) 48,000
C) 148,750
D) 123,750

SPECIAL TOPIC-IMPROPERLY ACCUMULATED


EARNINGS TAX

148. A PENALTY AND A FORM OF DETERRENT TO THE AVOIDANCE


OF TAX UPON SHAREHOLDERS WHO ARE SUPPOSED TO PAY
DIVIDENDS TAX ON THE EARNINGS DISTRIBUTED TO THEM BY THE
STOCKHOLDERS

A) MINIMUM CORPORATE INCOME TAX


B) FRINGE BENEFIT TAX
C) IMPROPERLY ACCUMULATED EARNINGS TAX
D) GROSS INCOME TAX

149. IMPROPERLY ACCUMULATED EARNINGS TAX IS-

A) 10% OF TAXABLE INCOME


B) 10% OF NET INCOME
C) 10% OF IMPROPERLY ACCUMULATED TAXABLE INCOME
D) 10% OF GROSS INCOME

150. WHICH OF THE FOLLOWING IS SUBJECT TO IMPROPERLY


ACCUMULATED EARNINGS TAX?

A) INSURANCE COMPANIES
B) BUSINESS PARTNERSHIPS
C) BANKS
D) CLOSELY-HELD COMPANIES

151. ALL OF THE FOLLOWING, EXCEPT ONE, ARE ADDITIONS TO


TAXABLE INCOME FOR PURPOSES OF COMPUTING IMPROPERLY
ACCUMULATED TAXABLE INCOME-

A) INCOME SUBJECT TO FINAL TAXES


B) RESERVED FOR REASONABLE NEEDS OF THE BUSINESS
C) INCOME EXCLUDED FROM GROSS INCOME
D) NOLCO DEDUCTED IN COMPUTING TAXABLE INCOME

NUMBERS 152 AND 153 ARE BASED ON THE FOLLOWING INFORMATION:


LABATIBA CORPORATION, A DOMESTIC CORPORATION, HAS THE
FOLLOWING DATA IN 2009:

GROSS INCOME (GROSS OF WHT OF 1%) P1,500,000


BUSINESS EXPENSES 600,000
GAIN ON SALE OF BUSINESS ASSET 60,000
INTEREST OF DEPOSIT WITH METROBANK, NET OF TAX 5,000
SALE OF SHARES OF STOCKS, NOT LISTED AND TRADED:
SELLING PRICE P150,000
COST 115,000
DIVIDENDS FROM CASTOR OIL CORP., DOMESTIC CORP. 35,000
DIVIDENDS PAID DURING THE YEAR 120,000
RESERVED FOR BUILDING ACQUISITION 300,000

IN 2008, THE CORPORATION SUFFERED AN OPERATING LOSS OF P130,000.


THIS AMOUNT WAS CARRIED FORWARD AND CLAIMED AS DEDUCTION
FROM GROSS INCOME IN 2009.

152. THE INCOME TAX PAYABLE IN 2009 IS-

A) P234,000
B) 265,600
C) 275,500
D) 249,000

153. THE IMPROPERLY ACCUMULATED EARNINGS TAX IS-


A) P64,415
B) 34,765
C) 36,425
D) 32,275

NUMBERS 154 TO 155 ARE BASED ON THE FOLLOWING INFORMATION:

SARADO CORPORATION, A CLOSELY HELD CORPORATION, REVEALS THE


FOLLOWING DATA:

2008: GROSS INCOME P3,400,000


EXPENSES 3,800,000
2009: GROSS INCOME 3,960,000
EXPENSES 3,100,000
ROYALTY 340,000
DIVIDENDS PAYABLE 56,000
154. THE INCOME TAX PAYABLE IN 2009 IS-

A) P81,800
B) 93,000
C) 301,000
D) 70,000

155. HOW MUCH IS THE IMPROPERLY ACCUMULATED EARNINGS


TAX IN 2009?

A) P81,500
B) 93,800
C) 91,500
D) NONE

156. CORPORATIONS CAN CLAIM OPTIONAL STANDARD


DEDUCTION IN AN AMOUNT NOT EXCEEDING
A) 10% OF GROSS INCOME
B) 10% OF GROSS SALES OR GROSS RECEIPTS, AS THE CASE MAYBE
C) 40% OF GROSS INCOME
D) 40% OF THE GROSS INCOME OR GROSS RECEIPTS, AS THE CASE
MAYBE

157. ANA CORPORATION HAS THE FOLLOWING DATA DURING THE


YEAR:

GROSS SALES P1,540,000


COST OF SALES 645,000
EXPENSES 460,460

IF ANA CORPORATION AVAILED OF THE OPTIONAL STANDARD DEDUCTION,


THE TAXABLE INCOME SHALL BE-

A) P537,000
B) 434,540
C) 741,000
D) 279,000

CHAPTER 13-INCOME TAX OF PARTNERSHIPS, JOINT


VENTURE, ESTATES AND TRUSTS

158. WHEN NINA MATHAY DIED, SHE LEFT REAL PROPERTIES TO


HER HUSBAND AND THREE(3) SMALL CHILDREN. THE HUSBAND
ADMINISTERED THE PROPERTY, THE RENTAL INCOME OF WHICH HE
ACCUMULATED AND LATER USED IN BUYING A PASSENGER BUS.

ARE THE INCOME OF THE INHERITED PROPERTIES AND THE BUS SUBJECT
TO TAX?

INHERITED PROPERTIES BUS


A) YES YES
B) YES NO
C) NO YES
D) NO NO

159. MAX AND CHOOK CONTRIBUTED MONEY AND PURCHASED


FIVE(5) HECTARES OF LAND IN 2008. IN THE SAME YEAR, THEY SOLD
THE LAND AT A HIGHER PRICE. IN 2009, THEY BOUGHT A BIGGER
PARCEL AND SOLD IT AFTER THREE(3) MONTHS AT DOUBLE THE
PRICE. THEY PAID THE CORRESPONDING CAPITAL GAINS TAXES.

QUESTION 1: HAVE THEY FORMED AN UNREGISTERED PARTNERSHIP


SUBJECT TO TAX?
QUESTION 2: ARE THEIR RESPECTIVE SHARES IN THE INCOME TAXABLE TO
THEM?
Q#1 Q#2
A) YES YES
B) NO YES
C) YES NO
D) NO NO

160. WHEN THEIR PARENTS DIED, CHERRY AND GERRY INHERITED


FIVE(5) HECTARES OF LAND IN ANTIPOLO CITY. THEY DECIDED TO
INVEST CAPITAL AND DEVELOPED THE LAND INTO A SUBDIVISION
WHICH THEY NAMED AS CHERRY-GIL SUBDIVISION., WITH SMALL
LOTS BEING SOLD EITHER ON INSTALLMENT OR IN CASH BASIS.

QUESTION 1: IS A PARTNERSHIP CREATED BY CHERRY AND GERRY?


QUESTION 2: ARE THEY SUBJECT TO FINAL TAX ON THEIR RESPECTIVE
SHARE IN THE INCOME?
Q#1 Q#2
A) YES NO
B) NO YES
C) YES YES
D) NO NO

161. Q#1: IS A CO-PARTNERSHIP TAXABLE? NO, BECAUSE THE


ACTIVITIES OF THE CO-OWNERS ARE LIMITED TO THE
PRESERVATION OF THE PROPERTY AND THE COLLECTION OF INCOME
THEREFROM.

Q#2: IS THE SHARE OF A CO-OWNER IN THE NET INCOME OF A CO-


OWNERSHIP TAXABLE? YES, BECAUSE EACH CO-OWNER IS TAXED
INDIVIDUALLY ON HIS DISTRIBUTIVE SHARE IN THE INCOME OF THE CO-
OWNERSHIP.

A) ANSWERS TO BOTH QUESTIONS ARE CORRECT


B) ANSWER TO Q#1 IS WRONG, ANSWER TO Q#2 IS CORRECT
C) ANSWER TO Q31 IS CORRECT, ANSWER TO Q#2 IS WRONG
D) ANSWER TO BOTH QUESTIONS ARE WRONG

162. THE MEMBERS OF THIS FORM OF BUSINESS ORGANIZATION


SHALL BE LIABLE FOR INCOME TAX ONLY ON THEIR INDIVIDUAL
CAPACITY, AND THEIR SHARE IN THE PROFITS, WHETHER
DISTRIBUTED OR OTHERWISE, SHALL BE RETURNED FOR TAXATION.
THIS APPLIES TO-(RPCPA)

A) DULY REGISTERED GENERAL CO-PARTNERSHIP


B) UNREGISTERED GENERAL CO-PARTNERSHIP
C) GENERAL PROFESSIONAL PARTNERSHIP
D) JOINT-STOCK COMPANIES

163. THE SHARE OF A PARTNER IN THE PROFITS OF A GENERAL


PROFESSIONAL PARTNERSHIP IS REGARDED AS RECEIVED BY HIM
AND THUS TAXABLE ALTHOUGH NOT YET DISTRIBUTED. THIS
PRINCIPLE IS KNOWN AS-

A) ADVANCE REPORTING OF INCOME


B) ACTUAL RECEIPT OF INCOME
C) ACCRUAL METHOD OF ACCOUNTING
D) CONSTRUCTIVE RECEIPT OF INCOME

164. UNDER THE NIRC, INCOME IS RECEIVED NOT ONLY WHEN IT IS


AC TUALLY OR PHYSICALLY TRANSFERRED TO A PERSON BUT EVEN
WHEN IT IS CONSTRUCTIVELY RECEIVED BY HIM. AN EXAMPLE OF
INCOME CONSTRUCTIVELY RECEIVED IS-(RPCPA)

A) RENTAL PAYMENTS REFUSED BY THE LESSOR, WHEN THE LESSEE


TENDERED PAYMENT AND THE LATTER MADE A JUDICIAL DEPOSIT
OF THE RENTAL DUE
B) INTEREST COUPONS NOT YET DUE AND PAYABLE
C) INTEREST ON SAVINGS DEPOSIT NOT YET CREDITED TO THE
ACCOUNT OF THE DEPOSITOR
D) ADVANCE DEPOSIT MADE BY THE LESSEE
165.WHICH OF THE FOLLOWING IS CONSIDERED OR CONSTRUED AS AN
EXAMPLE OF CONSTRUCTIVE RECEIPT?-(RPCPA)

A) RETIREMENT BENEFITS, PENSIONS, GRATUITIES


B) FEES PAID TO A PUBLIC OFFICIAL
C) INTEREST COUPONS THAT HAVE MATURED AND ARE PAYABLE BUT
HAVE NOT BEEN CASHED
D) DEPOSITS FOR RENTALS TO ANSWER FOR DAMAGES, RESTRICTED AS
TO USE

NUMBERS 166 AND 167 ARE BASED ON THE FOLLOWING INFORMATION:

BINGBONG AND COMPANY , A BUSINESS PARTNERSHIP, HAD THE


FOLLOWING DATA OF INCOME AND EXPENSES:

GROSS INCOME P750,000


EXPENSES 200,000
DIVIDEND FROM A DOMERTIC CORP. 75,000
INTEREST ON BANK DEPOSIT(GROSS OF TAX) 10,000

PARTNERS BING AND BONG SHARE PROFITS AND LOSSES IN THE RATIO OF
55% AND 45%, RESPECTIVELY.

166.THE INCOME TAX PAYABLE BY BINGBONG AND COMPANY –

A) P218,750
B) 187,500
C) 165,000
D) 192,500

167. THE FINAL TAXES ON THE RESPECTIVE SHARE OF BING AND BONG IN
THE PARTNERSHIP INCOME-

BING BONG
A) P25,740.00 21,060.00
B) 31,157.50 25,492.50
C) 24,227.50 19,822.50
D) 30,250.00 55.045.00

NUMBERS 168 AND 169 ARE BASED ON THE FOLLOWING INFORMATION:


PING, PONG AND COMPANY, A PARTNERSHIP OF CPAs, HAD A GROSS
INCOME OF P220,000 AND EXPENSES OF P85,000 DURING THE YEAR:

PING PONG
SHARE IN PROFIT AND LOSS RATIO 75% 25%
INCOME FROM OTHER BUSINESSES P125,000 P325,000
EXPENSES 80,000 190,000
AMOUNT WITHDRAWN
FROM PARTNERSHIP 30,000 12,500
FILING STATUS MARRIED UNMARRIED
DEPENDENT CHILDREN NONE 2

168. THE INCOME TAX PAYABLE BY THE PARTNERSHIP IS-

A) P72,600
B) NONE
C) 44,550
D) 45,900

169. THE TAXABLE INCOME OF PING AND PONG IS-

A) P69,250 AND P0, RESPECTIVELY


B) 114,250 AND 127,750, RESPECTIVELY
C) 101,250 AND 33,750, RESPECTIVELY
D) 96,250 AND 68,750, RESPECTIVELY

NUMBERS 170 AND 171 ARE BASED ON THE FOLLOWING INFORMATION:

PANDAY, SINGLE, AND PANDAK, MARRIED WITH TWO DEPENDENT


CHILDREN, ARE PARTNERS IN THE FOLLOWING PARTNERSHIPS:

PANDAY HOLDS A 60% INTEREST WHILE 40% INTEREST BELONGS TO


PANDAK.

THE PARTNERSHIP’S INCOME AND EXPENSES ARE GIVEN BELOW:

GROSS W/DRAWAL, W/DRAWAL,


PARTNERSHIP INCOME EXPENSES PANDAY PANDAK

PROF. PART. A P400,000 250,000 60,000 40,000


PROF. PART. B 300,000 500,000 - -
BUS.PART. C 500,000 200,000 40,000 20,000
BUS. PART. D200,000 300,000 - -
THE PARTNERSHIPS REMITTED TO THE BIR THE CORRESPPONDING
WITHHOLDING TAXES ON THE WITHDRAWALS OF PANDAY AND PANDAK.

THE PARTNERS’ PERSONAL INCOME AND EXPENSES ARE SHOWN BELOW:


PANDAY PANDAK
GROSS INCOME FROM
SOLE PROPRIETORSHIP P400,000 600,000
BUSINESS EXPENSES 250,000 370,000
OTHER INCOME:
RENT , NET OF 5% WHT 57,000 -
ROYALTY - 50,000
DIVIDEND FROM DOMESTIC CO. 30,000 50,000

170. THE INCOME TAX PAYABLE BY PANDAY IS-

A) P20,500
B) 18,500
C) 11,500
D) 59,000

171. THE INCOME TAX PAYAB LE B Y PANDAK IS-

A) P12,500
B) 48,000
C) 16,500
D) 24,000

172. THE TOTAL FINAL TAXES DUE ON PANDAY IS-

A) P3,000
B) 4,000
C) 7,000
D) 22,000

173. THE TOTAL FINAL TAXES DUE ON PANDAK IS-

A) P17,000
B) 14,600
C) 22,200
D) 15,200

174. THE PROPERTY, RIGHTS AND OBLIGATIONS OF A PERSON WHICH ARE


NOT EXTINGUISHED BY HIS DEATH AND ALSO THOSE WHICH HAVE
ACCRUED THERETO SINCE THE OPENING OF THE SUCCESSION-
A) ESTATE
B) LEGACY
C) TRUST
D) WILL

175. AN HEIR WHO INHERITS PERSONAL PROPERTY BY WILL IS CALLED-

A) LEGATEE
B) DEVISEE
C) TRUSTOR
D) BENEFICIARY

176. AN HEIR WHO INHERITS REAL PROPERTY BY WILL IS CALLED-

A) LEGATEE
B) DEVISEE
C) TRUSTOR
D) BENEFICIARY

177. TONYING DIED ON JANUARY 1, 2007. HE LEFT A GROSS ESTATE WITH A


COST OF P4,000,000 BUT VALUED AT P3,500,000 UNDER AN ADMINISTRATOR.
DURING THE YEAR, THE GROSS INCOME DERIVED FROM THE BUSINESS OF
THE ESTATE WAS P400,000 WHILE THE RELATED EXPENSES AMOUNTED TO
P150,000. BENEFICIARIES FELIPE AND KHADAFI WERE GIVEN P100,000
EACH.

THE INCOME TAX DUE ON THE ESTATE OF TONYING IS-

A) P30,000
B) 2,500
C) 5,500
D) 50,000

178. AN ARRANGEMENT UNDER WHICH TITLE TO PROPERTY IS PASSED TO


ANOTHER FOR INVESTMENT, WITH THE INCOME AND ULTIMATELY THE
PRINCIPAL TO BE DISTRIBUTED IN ACCORDANCE WITH THE DIRECTION OF
THE CREATOR IS-

A) A WILL
B) A TRUST
C) AN INHERITANCE
D) PACTO DE RETRO

179. WHICH OF THE FOLLOWING IS NOT SUBJECT TO TAX?

A) ESTATES UNDER JUDICIAL SETTLEMENT


B) IRREVOCABLE TRUST
C) UNREGISTERED PARTNERSHIPS
D) REVOCABLE TRUST

NUMBERS 180 AND 181 ARE BASED ON THE FOLLOWING INFORMATION:

DURING THE YEAR, LUCAS CREATED TWO SEPARATE FUNDS FOR HIS SON
BARABAS, AND APPOINTED CAIPAS AND JUDAS AS TRUSTEES, THE
BUSINESS INCOME OF THE TRUSTS ARE AS FOLLOWS:

TRUSTEE CAIPAS TRUSTEE JUDAS

NET INCOME P120,000 200,000


INCOME FROM TRUSTS
DISTRIBUTED DURING THE
YEAR 50,000 75,000

180. THE CONSOLIDATED TAXABLE INCOME OF TRUSTS IS-

A) P143,000
B) 23,250
C) 175,000
D) 300,000

181. THE INCOME TAXES PAYABLE BY TRUSTEE CAIPAS AND TRUSTEE


JUDAS ARE-

CAIPAS JUDAS
A) 24,375 24,375
B) 24,375 40,625
C) 26,000 39,000
D) 65,000 23,250

CHAPTER 7-DEALINGS IN PROPERTY

182. THE TERM “CAPITAL ASSETS” INCLUDES-(RPCPA)

E) STOCK IN TRADE OR OTHER PROPERTY INCLUDED IN THE


TAXPAYER’S INVENTORY
F) REAL PROPERTY NOT USED IN THE TRADE OR BUSINESS OF
TAXPAYER
G) PROPERTY PRIMARILY FOR SALE TO CUSTOMERS IN THE
ORDINARY COURSE OF TRADE OR BUSINESS
H) PROPERTY USED IN THE TRADE OR BUSINESS OF THE
TAXPAYER AND SUBJECT TO DEPRECIATION

183. WHICH OF THE FOLLOWING REAL PROPERTIES IS CLASSIFIED AS A


CAPITAL ASSET?

A) REAL PROPERTY INITIALLY ACQUIRED BY A TAXPAYER ENGAGED IN


REAL ESTATE BUSINESS BUT SUBSEQUENTLY ABANDONED OR
BECOME IDLE
B) REAL PROPERTY TRANSFERRED THROUGH SUCCESSION OR
DONATION TO THE HEIR OR DONEE WHO IS NOT ENGAGED IN THE
REAL ESTATE BUSINESS WITH RESPECT TO THE REAL PROPERTY
INHERITED OR DONATED, AND WHO DOES NOT SUBSEQUENTLY USE
SUCH PROPERTY IN TRADE OR BUSINESS
C) REAL PROPERTIES OF THE REAL ESTATE LESSOR, WHETHER LAND
AND/OR IMPROVEMENTS, WHICH ARE FOR LEASE OR BEING
OFFERED FOR LEASE, OR OTHERWISE FOR USE OR BEING USED IN
THE TRADE OR BUSINESS
D) REAL PROPERTIES ACQUIRED IN THE COURSE OF TRADE OR
BUSINESS BY A TAXPAYER HABITUALLY ENGAGED IN THE SALE OF
REAL ESTATE

184. UNDER SECTION 39(B) OF THE TAX CODE, HOW MUCH SHALL BE
TAKEN INTO ACCOUNT IN COMPUTING NET INCOME, IF A GAIN IS
REALIZED BY AN INDIVIDUAL TAXPAYER FROM THE SALE OR EXCHANGE
OF CAPITAL ASSETS( OTHER THAN REAL PROPERTIES AND SHARES OF
STOCKS) HELD FOR MORE THAN 12 MONTHS?-(RPCPA)

A) 50% OF NET CAPITAL GAIN


B) 5% OF THE CAPITAL ASSETS SOLD
C) P50,000
D) 5,000

185. LOTS BEING RENTED WHEN SUBSEQUENTLY SOLD ARE CLASSIFIED AS-
(RPCPA)

A) CAPITAL ASSETS
B) LIQUID ASSETS
C) ORDINARY ASSETS
D) FIXED ASSETS

186. A FEATURE OF ORDINARY GAINS AS DISTINGUISHED FROM CAPITAL


GAINS-(RPCPA)
A) GAIN FROM SALE OF ASSETS NOT STOCK IN TRADE
B) MAY OR MAY NOT BE TAXABLE IN FULL
C) SOURCES ARE CAPITAL ASSETS
D) NO HOLDING PERIOD

187. WHICH OF THE FOLLOWING TAXPAYERS IS ALLOWED TO OBSERVE “NO


HOLDING PERIOD AND NO CARRY OVER OF NET CAPITAL LOSS”

A) INDIVIDUAL
B) ESTATES
C) CORPORATION
D) TRUSTS

188. RULES ON CAPITAL GAINS AND LOSSES OF CORPORATIONS, EXCEPT:-


(RPCPA)

A) CAPITAL GAINS AND LOSSES ARE RECOGNIZED TO THE EXTENT OF


100% REGARDLESS OF THE HOLDING PERIOD
B) THE NET CAPITAL LOSS CARRY OVER IS NOT APPLICABLE
C) CAPITAL LOSSES ARE DEDUCTIBLE ONLY TO THE EXTENT OF
CAPITAL GAINS
D) THERE IS A FINAL TAX OF 5% ON REAL PROPERTY SOLD

189. 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 THE FIRST STATEMENT IS CORRECT


B) ONLY THE SECOND STATEMENT IS CORRECT
C) BOTH STATEMENTS ARE CORRECT
D) BOTH STATEMENTS ARE INCORRECT

190. JOAHNA CORPORATION REALIZED AN ORDINARY GAIN OF P400,000. ITS


CAPITAL ASSET TRANSACTIONS DURING THE YEAR ARE AS FOLLOWS:

HOLDING PERIOD AMOUNT


CAPITAL GAIN 6 MONTHS P50,000
CAPITAL GAIN 2 YEARS 45,000
CAPITAL LOSS 12 MONTHS 23,000
CAPITAL LOSS 10 YEARS 28,000

WHAT IS JOAHNA CORPORATION’S TAXABLE INCOME?

A) P484,000
B) 444,000
C) 435,500
D) 447,000

191. JOSE SIO, SINGLE, HAD THE FOLLOWING DATA ON INCOME AND
LOSSES:
2008 2009
ORDINARY BUSINESS INCOME P56,700 P60,800
INTEREST ON TIME DEPOSIT WITH PNB 2,000 3,000
SHORT-TERM CAPITAL GAIN 5,000 8,500
LONG-TERM CAPITAL GAIN 3,600 5,200
SHORT-TERM CAPITAL LOSS 8,000 2,900
LONG-TERM CAPITAL LOSS 4,400 -

IN 2008, THE TAXABLE INCOME BEFORE PERSONAL EXEMPTION OF JOSE


SIO-

A) P58,700
B) 53,300
C) 36,700
D) 56,700

192. IN 2009, THE TAXABLE INCOME OF JOSE SIO IS-

A) P15,600
B) 69,000
C) 36,000
D) 45,600

193. SANTINO QUALIFIED AS HEAD OF A HOUSEHOLD FOR 2008 TAX


PURPOSES. SANTOS’ 2009 TAXABLE INCOME WAS P200,000 EXCLUSIVE OF
CAPITAL GAINS AND LOSSES. SANTINO HAD A NET LONG-TERM LOSS OF
P8,000 IN 2009. WHAT AMOUNT OF THIS CAPITAL LOSS CAN SANTINO
OFFSET AGAINST 2009 ORDINARY INCOME?-(RPCPA)

A) ZERO
B) 3,000
C) 4,000
D) 8,000

NUMBERS 194 AND 195 ARE BASED ON THE FOLLOWING INFORMATION:

194. ROSE, SINGLE, HAD THE FOLLOWING DATA ON INCOME AND LOSSES:

2008 2009
NET INCOME P25,000 P95,000
CAPITAL GAINS 8,000 40,000
CAPITAL LOSSES 40,000 5,000

THE TAXABLE INCOME IN 2008 IS-

A) P5,000
B) ZERO
C) P(25,000)
D) (57,000)

195. THE TAXABLE INCOME IN 2009 IS-

A) P78,000
B) 55,000
C) 115,000
D) 10,000

196. ALL OF THE FOLLOWING, EXCEPT ONE, RESULTS TO A CAPITAL GAIN


OR LOSS

A) GAIN ON SHORT SALES


B) OPTION LOSS
C) WORTHLESS SECURITIES
D) ORDINARY GAINS

197. A TRANSACTION IN WHICH THE SPECULATOR SELLS SECURITIES


WHICH HE DOES NOT OWN (HE MERELY BORROWS THE STOCK
CERTIFICATES THROUGH OR FROM HIS STOCK BROKER) IN ANTICIPATION
OF A DECLINE IN ITS PRICE, AND WITHIN A REASONABLY SHORT PERIOD OF
TIME BUYS OR COVERS THE STOCK TO COMPLETE THE TRANSACTION

A) WASH SALE
B) SHORT SALE
C) AUCTION SALE
D) RESCISSIBLE SALE

198. ABC BOUGHT FROM XYZ CORPORATION TEN SHARES OF STOCK. SIXTY
DAYS THEREAFTER, THE CORPORATION WAS ADJUDGED BANKRUPT AND
ITS STOCK AS WORTHLESS. THE LOSS OF ABC TO BE REPORTED FOR
INCOME TAX PURPOSES IS CLASSIFIED AS:-(RPCPA)

A) A WAGERING LOSS
B) NON-DEDUCTIBLE LOSS FOR INCOME TAX PURPOSES
C) SHORT-TERM CAPITAL LOSS
D) CASUALTY LOSS
199. ON CAPITAL GAINS TAX ON REAL PROPERTY, WHICH OF THE
FOLLOWING STATEMENTS IS NOT CORRECT?-(RPCPA)

A) THE TAX SHOULD BE PAID, IF IN ONE LUMP SUM, WITHIN 30 DAYS


FROM THE DATE OF SALE
B) THE TERM “INITIAL PAYMENT” IS SYNONYMOUS TO
“DOWNPAYMENT”
C) THE INSTALLMENT PAYMENT OF THE TAX SHOULD BE MADE WITHIN
30 DAYS FROM RECEIPT OF EACH INSTALLMENT PAYMENT ON THE
SELLING PRICE
D) THE TAX MAY BE PAID IN INSTALLMENT IF THE INITIAL PAYMENTS
DO NOT EXCEED 25% OF THE SELLING PRICE

200. VIOLETA SOLD HER PRINCIPAL RESIDENCE FOR P5,000,000 WHEN ITS
FAIR MARKET VALUE WAS P6,000,000. THE HOUSE WAS PURCHASED FIVE(5)
YEARS AGO FOR P3,000,000. OUT OF THE PROCEEDS OF P5,000,000, VIOLETA
UTILIZED THE P4,000,000 FOR THE PURCHASE OF A NEW RESIDENTIAL
HOUSE.

THE CAPITAL GAINS TAX ON THE SALE IS-

A) P360,000
B) 300,000
C) 72,000
D) 60,000

201. BASED ON THE PROBLEM IN NUMBER 200 ABOVE, WHAT IS THE COST
BASIS OF THE NEW RESIDENCE?

A) P3,000,000
B) 2,400,000
C) 4,000,000
D) 5,000,000

NUMBERS 202 AND 203 ARE BASED ON THE FOLLOWING INFORMATION:

202. MARIA HAS THE FOLLOWING DATA IN 2008:

SALE OF PROPERTY HOLDING PERIOD GAIN/LOSS

APARTMENT HOUSE 10 YEARS P35,000


RESIDENTIAL HOUSE 6 YEARS 120,000
VACANT LOT 12 YEARS 72,500
JEWELRY FOR PERSONAL USE 6 MONTHS 4,200
JEWELRY IN A JEWELRY STORE 2 MONTHS 8,000
CAR FOR PERSONAL USE 4 YEARS (20,000)
TRANSPORTATION EQUIPMENT 12 MONTHS (10,000)

DURING THE YEAR, MARIA HAD A NET INCOME FROM BUSINESS (OTHER
THAN THE SALE OF THE PROPERTIES ABOVE) IN THE AMOUNT OF P5,000.

THE TAXABLE INCOME BEFORE PERSONAL EXEMPTION OF MARIA IN 2008


IS-

A) P32,000
B) 38,000
C) 22,200
D) 42,200

203. ASSUMING THAT THE NET INCOME OF MARIA IN 2009 WAS P130,000
WHICH INCLUDES A CAPITAL GAIN OF P6,000. THE TAXABLE INCOME
BEFORE PERSONAL EXEMPTION IN 2009 IS-

A) P125,000
B) 130,000
C) 124,200
D) 120,000

NUMBERS 204 TO 205 ARE BASED ON THE FOLLOWING INFORMATION:

ON AUGUST 15, 2009, MR. CRUZ SOLD A 500 SQUARE METER RESIDENTIAL
HOUSE FOR P3,000,000. THE HOUSE WAS ACQUIRED IN 2000 FOR P2,000,000.
ON THE DATE OF SALE, THE FAIR MARKET VALUE OF THE HOUSE AS
SHOWN IN THE REAL PROPERTY DECLARATION WAS P2,500,000 AND THE
ASSESSED VALUE AMOUNTED TO P2,200,000. THE ZONAL VALUE WAS P7,000
PER SQUARE METER.

204. THE CAPITAL GAINS TAX IS-

A) P180,000
B) 120,000
C) 150,000
D) 210,000

205. THE CAPITAL GAINS TAX OF MR. CRUZ IF THE PROCEEDS OF SALE WAS
UTILIZED IN ACQUIRING A NEW RESIDENCE-

A) P210,000
B) 150,000
C) 180,000
D) ZERO

206. THE AMOUNT TO BE DEPOSITED IN ESCROW IF THE PROCEEDS OF THE


SALE SHALL BE UTILIZED IN ACQUIRING A NEW RESIDENCE-

A) P210,000
B) 150,000
C) 180,000
D) ZERO

207. THE CAPITAL GAINS TAX PAYABLE ASSUMING THAT MR. CRUZ WILL
UTILIZE ONLY P1,500,000 OF THE PROCEEDS IN ACQUIRING A NEW
RESIDENCE?

A) P90,000
B) 210,000
C) ZERO
D) 105,000

208. MR. LEX CANLAS IS NOT ENGAGED IN REAL ESTATE BUSINESS. HE


SOLD A 1,000 SQUARE METER RESIDENTIAL LAND FOR P300,000 ON MARCH
15, 2009. THE LAND WAS ACQUIRED BY PURCHASE ON MARCH 5, 2006 FOR
P120,000. AFTER ACQUISITION, THE LAND WAS FENCED AT A COST OF
P30,000. A COMMISSION OF 5% OF THE SALES PRICE WAS PAID TO THE
SALES AGENT.-(RPCPA)

HOW MUCH IS THE CAPITAL GAINS TAX DUE?

A) P18,000
B) 18,900
C) 7,200
D) 9,000

209. LITO HAS THE FOLLOWING RECORDS OF TRANSACTIONS:


CAPITAL GAINS(SHORT TERM) ON SALE OF-
DOMESTIC SHARES LISTED AND TRADED\
IN THE STOCK EXCHANGE P22,400
VACANT LOT, THRU A BROKER, LOCATED IN
MANILA(MARKET VALUE-P700,000) 150,000
RESIDENTIAL HOUSE IN NEW YORK CITY 100,000
CAPITAL LOSS(LONG-TERM) ON SALE OF-
LAND IN VANCOUVER, CANADA 125,000
FAMILY CAR 50,000
THE NET CAPITAL GAIN/(LOSS) OF LITO IS-

A) P12,500
B) (75,000)
C) 148,500
D) (25,000)

210. ATTY. MOISES PADILLA SOLD TO JESS ABALUYAN NOT TRADED


SHARES OF STOCKS FOR A CONSIDERATION OF P200,000. AT THE TIME OF
SALE, ITS FAIR MARKET VALUE IS P500,000. ATTY. PADILLA SHOULD PAY-

A) CAPITAL GAINS TAX


B) DONOR’S TAX
C) DOCUMENTARY STAMP TAX
D) ALL OF THE ABOVE

211. IN THE PRECEDING PROBLEM, IF LATER ON JESS ABALUYAN SELLS THE


SAME SHARES OF STOCKS TO ED DEL ROSARIO FOR P400,000, THE GAIN
SUBJECT TO TAX SHALL BE DETERMINED BY DEDUCTING THE-

A) P200,000 FROM THE P500,000


B) 200,000 FROM THE 400,000
C) 400,000 FROM THE 500,000
D) 400,000 FROM THE 200,000

212. ROCKY SOLD 1,500 SHARES OF STOCKS OF ACHIEVERS CORPORATION.


THE PAR VALUE PER SHARE WAS P85 BUT WERE ACQUIRED BY HIM AT P90.
ON THE DATE OF SALE, THE SHARES HAD A SELLING PRICE OF P120 PER
SHARE.
THE CAPITAL GAINS TAX ON THE SALE IF THE SHARES ARE NOT LISTED
AND TRADED IN THE PHILIPPINES STOCK EXCHANGE IS-

A) P2,250
B) 2,625
C) 14,000
D) 11,375

213. ROLLY SOLD 1,000 NOT LISTED AND TRADED SHARES OF STOCKS. THE
DATA OF WHICH ARE AS FOLLOWS:

SELLING PRICE P600,000


FAIR MARKET VALUE 620,000
EXPENSES ON THE SALE 10,000
PURCHASE PRICE 440,000
EXPENSES UPON ACQUISITION 3,000
THE CAPITAL GAINS TAX DUE IS-

A) P13,000
B) 14,000
C) 9,700
D) 12,850

214. NARDA SOLD THE FOLLOWING SHARES OF STOCKS DURING THE YEAR:

LISTED & NOT LISTED LISTED &


TRADED & TRADED & TRADED
SELLING PRICE P1,500,000 630,000 210,000
COST 1,230,000 570,000 170,000
DATE SOLD 01-02-02 03-16-02 11-14-02

THE CAPITAL GAINS TAX PAYABLE IS-

A) P3,000
B) 32,000
C) 11,550
D) 3,150

NUMBERS 215 THRU 218 ARE BASED ON THE FOLLOWING


INFORMATION:

DATE OF SALE DATE OF ACQUISITION COST SELLING PRICE

FEB 13, 2009 JAN 18, 2007 P80,000 P135,000


APRIL 5, 2009 NOV 30, 2008 256,000 360,000
JULY 20, 2009 SEPT 3, 2007 175,000 115,000
OCT 13, 2009 AUG 7, 2009 144,500 150,000

215. THE CAPITAL GAINS TAX ON THE FEB. 13, 2009 SALE IS-

A) P2,750
B) 1,375
C) 675
D) 55,000

216. THE CAPITAL GAINS TAX ON THE APRIL 5, 2009 SALE IS-

A) P10,400
B) 5,400
C) 5,200
D) ZERO

217. THE CAPITAL GAINS TAX/REFUND ON THE JULY 20, 2009 SALE IS-

A) P3,000
B) (3,000)
C) 1,500
D) ZERO

218.THE FINAL CAPITAL GAINS TAX/REFUND IN THE 2009 TRANSACTIONS


IS-

A) TAX PAYABLE OF P1,350


B) TAX REFUND OF P1,350
C) TAX PAYABLE OF P2,725
D) TAX REFUND OF P2,725

219. ON DECEMBER 1, 2007, MAT OBESE WHOSE TAXABLE YEAR IS THE


CALENDAR YEAR, PURCHASED 100 SHARES OF COMMON STOCK OF
MICHELLE COMPANY FOR P10,000. ON DECEMBER 16, 2007, HE PURCHASED
100 ADDITIONAL SHARES FOR P9,000. ON JANUARY 3, 2008, HE SOLD THE 100
SHARES PURCHASED ON DECEMBER 1, 2007 FOR P9,000.

WHICH OF THE FOLLOWING STATEMENTS IS CORRECT ON MAT OBESE?

A) HE CAN CLAIM A DEDUCTIBLE LOSS OF P1,000 IN 2008


B) HE MUST REPORT A TAXABLE CAPITAL GAIN OF P1,000 IN 2008
C) HE MUST REPORT A TAXABLE CAPITAL GAIN OF P9,000 IN 2008
D) HE IS NOT ALLOWED TO CLAIM A DEDUCTIBLE LOSS ON THE LOSS
ON SALE IN 2008

220. MISS BEAUTY, WHOSE TAXABLE YEAR IS THE CALENDAR YEAR, HAD
THE FOLLOWING STOCK TRANSACTIONS:

 ON SEPTEMBER 20, 2008 PURCHASED 100 SHARES OF THE COMMON


STOCK OF UGLY COMPANY FOR P5,000 OR AT P50 PER SHARE
 ON DECEMBER 11, 2008, SHE PURCHASED 50 SHARES OF
SUBSTANTIALLY IDENTICAL STOCK FOR P2,750 OR AT P55 PER SHARE
 ON DECEMBER 26,2008, SHE PURCHASED 25 ADDITIONAL SHARES OF
SUCH STOCK FOR P1,125 OR AT P45 PER SHARE
 ON JANUARY 2, 2009, SHE SOLD FOR P4,000 THE SHARES PURCHASED
ON SEPTEMBER 20 OR AT P40 PER SHARE

HOW MUCH IS THE DEDUCTIBLE LOSS AND NON-DEDUCTIBLE LOSS ON


JANUARY 2, 2009 SALES?
DEDUCTIBLE NON-DEDUCTIBLE
A) P1,000 P0
B) 0 1,000
C) 125 0
D) 250 750

NUMBERS 221 AND 222 ARE BASED ON THE FOLLOWING INFORMATION:

MAUI HAS THE FOLLOWING DATA IN 2009:

CAPITAL LOSS
ON 2 WEEKS OPTION CONTRACT______ P5,000
CAPITAL GAIN
ON SALE OF BONDS(HOLDING PERIOD: 6 MOS.)_____ 6,000
LOSS ON SALE OF DELIVERY TRUCK HELD
FOR 3 ½ YEARS____ 40,000
GAIN ON SALE OF PERSONAL CAR HELD
FOR 5 YEARS______ 16,000
CAPITAL GAIN ON DIRECT SALE TO BUYERS
OF SHARES OF STOCKS___ 4,000
SALE OF 2-YEAR OLD RESIDENTIAL HOUSE
(COST:P540,000)____ 550,000

IN 2008, MAUI HAD A NET INCOME OF P5,000 AND A CAPITAL LOSS OF P7,500

221. THE NET CAPITAL GAIN/CAPITAL LOSS (BEFORE CARRY-OVER) IN 2009


IS-

A) P17,000
B) 9,000
C) 2,000
D) (7,000)

222. THE NET CAPITAL LOSS CARRY-OVER FROM 2008 IS-

A) P7,500
B) ZERO
C) 9,000
D) 5,000

223. IN COMPUTING GAIN OR LOSS FROM THE SALE OR OTHER DISPOSITION


OF PROPERTY ACQUIRED AS GIFT OR DONATION, THE BASIS OF COST
SHALL BE-(RPCPA)

A) THE FAIR MARKET VALUE AS OF THE DATE OF ACQUISITION


B) THE PURCHASE PRICE PLUS EXPENSES OF ACQUISITION
C) THE LATEST INVENTORY VALUE
D) THE SAME AS IT WOULD BE IN THE HANDS OF THE DONOR

224. PAULO RECEIVED A RESIDENTIAL HOUSE VALUED AT P2,500,000 FROM


HIS PARENTS AS A GIFT. AFTER A MONTH, HE SOLD IT TO RUDY FOR
P2,000,000 ONLY. HOW MUCH IS THE TAX LIABILITY ON THE SALE?

A) P150,000
B) 120,000
C) 100,000
D) ZERO

225. IT IS IMPORTANT TO KNOW THE SOURCE OF INCOME FOR TAX


PURPOSES (I.E. FROM WITHIN OR WITHOUT THE PHILIPPINES) BECAUSE-
(RPCPA)

A) SOME INDIVIDUALS AND CORPORATE TAXPAYERS ARE TAXED ON


THEIR WORLDWIDE INCOME WHILE OTHERS ARE TAXABLE ONLY
UPON INCOME FROM SOURCES WITHIN THE PHILIPPINES
B) THE PHILIPPINES IMPOSES INCOME TAX ONLY ON INCOME FROM
SOURCES WITHIN
C) SOME INDIVIDUAL TAXPAYERS ARE CITIZENS WHILE OTHERS ARE
ALIENS
D) EXPORT SALES ARE NOT SUBJECT TO INCOME TAX

226. MR. SHOLI, A NON-RESIDENT ALIEN STOCKHOLDER, RECEIVED A


DIVIDEND INCOME OF P300,000 IN 2009 FROM A FOREIGN CORPORATION
DOING BUSINESS IN THE PHILIPPINES. THE GROSS INCOME OF THE
FOREIGN CORPORATION FROM WITHIN AND WITHOUT THE PHILIPPINES
FOR THREE YEARS PRECEDING 2009 ARE AS FOLLOWS(RPCPA)
\

SOURCES OF INCOME 2006 2007 2008

FROM W/IN THE PHIL. 16,000,000 12,000,000 14,000,000


FROM W/OUT THE PHIL. 8,000,000 14,000,000 16,000,000

HOW MUCH OF THE DIVIDEND INCOME RECEIVED BY MR. SHOLI IS


CONSIDERED INCOME FROM SOURCES WITHIN THE PHIL.?

A) ZERO
B) P157,500
C) 150,000
D) 300,000
227. THE WIDOW OF YOUR BEST FRIEND HAS JUST BEEN PAID P1,000,000 ON
ACCOUNT OF THE LIFE INSURANCE POLICY OF THE DECEASED HUSBAND.
SHE ASKS YOU WHETHER SHE SHOULD DECLARE THE AMOUNT FOR
INCOME TAX PURPOSES OR FOR ESTATE TAX PURPOSES-(RPCPA)

1ST ADVICE: THE PROCEEDS OF LIFE INSURANCE PAID TO THE


BENEFICIARY UPON THE DEATH OF THE INSURED ARE EXEMPT
FROM INCOME TAX AND NEED NOT BE DECLARED FOR
INCOME TAX PURPOSES

2ND ADVICE: THE PROCEEDS OF LIFE INSURANCE WOULD HAVE TO BE


DECLARED FOR ESTATE TAX PURPOSES IF THE DESIGNATION
OF THE BENEFICIARY WAS IRREVOCABLE, OTHERWISE IT
NEED NOT BE DECLARED

A) BOTH ADVICE ARE CORRECT


B) 1ST ADVICE IS CORRECT, 2ND ADVICE IS WRONG
C) BOTH ADVICE ARE WRONG
D) 1ST IS WRONG, 2ND ADVICE IS CORRECT

CHAPTER 8-DEDUCTIONS FROM GROSS INCOME


228. AN ORDINARY AND NECESSARY EXPENSE WHICH IS FULLY
DOCUMENTED AND SUPPORTED BY RECEIPTS MAY BE FULLY DEDUCTED
FOR INCOME TAX PURPOSES OVER AND ABOVE THE LIMIT SET BY LAW-
(RPCPA)

A)MEDICAL EXPENSES
B)CONTRIBUTION
C)REPRESENTATION
D)HIGH SCHOOL FEE

229. LANGHAP CORPORATION INCURRED THE FOLLOWING EXPENSES.


WHICH OF THESE EXPENSES IS NON-DEDUCTIBLE?

A) INSURANCE PREMIUMS ON THE BUILDING


B) SALARIES OF THE OFFICIALS AND EMPLOYEES
C) ENTERTAINING PROSPECTIVE CUSTOMERS
D) GIFTS GIVEN TO PUBLIC OFFICIALS WHO FAVORED LANGHAP
CORPORATION’S CONTRACT WITH THE GOVERNMENT

230. WHICH OF THE FOLLOWING IS A DEDUCTIBLE EXPENSE FOR INCOME


TAX PURPOSES?-(RPCPA)
A) SALARIES OF DOMESTIC SERVANTS
B) ORDINARY REPAIR OF THE PERSONAL CAR
C) PROVISION FOR DOUBTFUL ACCOUNTS
D) NONE OF THE ABOVE

231. ONE OF THE FOLLOWING EXPENSES IS DEDUCTIBLE FROM GROSS


INCOME

A) PERSONAL, LIVING AND FAMILY EXPENSES


B) AMOUNT PAID OUT FOR NEW BUILDING OR FOR PERMANENT
IMPROVEMENT OR BETTERMENT, MADE TO INCREASE THE VALUE
OF ANY PROPERTY OR ESTATE
C) PREMIUMS PAID ON A LIFE INSURANCE POLICY COVERING THE LIFE
OF THE EMPLOYEE WHEN THE MEMBERS OF THE FAMILY OF THE
EMPLOYEE ARE THE DIRECT BENEFICIARY UNDER SUCH POLICY
D) ANY AMOUNT EXPENDED IN RESTORING PROPERTY OR IN MAKING
GOOD EXHAUSTION THEREOF FOR WHICH AN ALLOWANCE IS OR
HAS BEEN MADE

232. ALL OF THE FOLLOWING, EXCEPT ONE, ARE NOT DEDUCTIBLE FROM
GROSS INCOME

A) TUITION FEES AND OTHER EXPENSES OF THE TAXPAYER’S CHILDREN


B) REPLACEMENT OF THE ROOF OF THE OFFICE BUILDING
C) PREMIUMS PAID IN INSURING THE LIFE OF THE CORPORATE
PRESIDENT, APPOINTING THE CORPORATION AS THE BENEFICIARY
OF THE POLICY
D) PREMIUMS PAID ON A LIFE INSURANCE OF A RANK-AND-FILE
EMPLOYEE WITH THE LATTER’S CHILDREN AS THE APPOINTED
BENEFICIARY

233. IN 2009, AZKAL CORPORATION PAID THE FOLLOWING PREMIUMS TO AN


INSURANCE COMPANY IN INSURING THE LIFE OF ITS OFFICIALS AND
EMPLOYEES:

OFFICIAL/EMPLOYEE BENEFICIARY PREMIUMS PAID

RANK-AND-FILE CHILDREN P5,000


PERSONNEL MANAGER PARENTS 10,000
TREASURER CORPORATION 15,000
GENERAL MANAGER CORPORATION 15,000
BOARD CHAIRMAN CORPORATION 15,000

THE DEDUCTIBLE EXPENSE ON THE INSIURANCE PREMIUMS PAID BY THE


CORPORATION IS-
A) P60,000
B) 45,000
C) 5,000
D) 15,000

234. THE FOLLOWING ARE EXAMPLES OF CORPORATE EXPENSES


DEDUCTIBLE FROM GROSS INCOME, EXCEPT ONE(-RPCPA)

A)REPRESENTATION EXPENSES DESIGNED TO PROMOTE BUSINESS


B) CONTRIBUTIONS TO DRUM UP BUSINESS LIKE CONTRIBUTION OF SOFT
DRINKS TO BARRIO FIESTAS
C) EXPENSES PAID TO AN ADVERTISING FIRM IN ORDER TO CREATE A
FAVORABLE IMAGE FOR THE CORPORATION
D) PREMIUMS ON LIFE INSURANCE COVERING THE LIFE OF AN EMPLOYEE
IF THE BENEFICIARY IS HIS HEIRS

235. FLOR CORPORATION TOOK TWO KEYMEN INSURANCE ON THE LIFE OF


ITS PRESIDENT, MR. CHAN. IN ONE POLICY, THE BENEFICIARY IS THE
CORPORATION TO COMPENSATE IT FOR ITS EXPECTED LOSS IN CASE OF
DEATH OF ITS PRESIDENT. THE OTHER POLICY DESIGNATES MR. CHAN’S
WIFE AS ITS IRREVOCABLE BENEFICIARY.-(RPCPA)

Q#1: ARE THE INSURANCE PREMIUMS PAID BY FLOR CORPORATION IN


BOTH POLICIES DEDUCTIBLE?

Q#2: WILL THE INSURANCE PROCEEDS BE TREATED AS INCOME SUBJECT


TO TAX BY THE CORPORATION AND BY THE WIFE?

A) YES TO Q#1 AND NO TO Q#2


B) YES TO BOTH QUESTIONS
C) NO TO Q#1 AND YES TO Q#2
D) NO TO BOTH QUESTIONS

NUMBERS 236 THRU 238 ARE BASED ON THE FOLLOWING


INFORMATION:

IN 2009, LEXUS CORPORATION MADE SOME REPAIRS ON A BUILDING BEING


LEASED TO LESLIE, TO WIT:

MINOR REPAIRS(EXPENSED) P30,000


MAJOR REPAIRS 60,000

THE MAJOR OR EXTRAORDINARY REPAIR DID NOT ADD VALUE TO THE


PROPERTY BUT APPRECIABLY PROLONGED ITS USEFUL LIFE BY FIVE(5)
YEARS.
236. THE ENTRY IN THE BOOKS OF LEXUS TO RECORD THE EXPENSES
INCURRED FOR MINOR REPAIRS IS-

A) BUILDING P30,000
CASH P30,000
B) LEASE EXPENSE-LESLIE 30,000
CASH 30,000
C) REPAIRS EXPENSE 30,000
CASH 30,000
D) NO ENTRY

237. THE ENTRY IN THE BOOKS OF LEXUS TO RECORD THE EXPENSES


INCURRED FOR MAJOR REPAIR IS-

A) BUILDING P60,000
CASH P60,000
B) REPAIRS EXPENSES 60,000
CASH 60,000
C) ALLOWANCE FOR DEP’N 60,000
CASH 60,000
D) NO ENTRY

238. SUPPOSE THE MAJOR REPAIR INCREASED THE VALUE NBY P40,000 AND
IT ALSO PROLONGED THE LIFE OF THE ASSET, THE ACCOUNTING ENTRY TO
RECORD THE REPAIR IN THE BOOKS OF LEXUS CORPORATION IS-

A) ALLOWANCE FOR DEPRECIATION P60,000


CASH P60,000
B) BUILDING 40,000
CASH 40,000

C) BUILDING 40,000
ALLOWANCE FOR DEPRECIATION 20,000
CASH 60,000
D) NONE OF THE ABOVE

239. CHOOSE THE BEST ANSWER: RGF COLLEGE, INC. A PROPRIETARY


EDUCATIONAL INSTITUTION, SPENT P10 MILLION FOR THE CONSTRUCTION
OF A NEW SCHOOL BUILDING. THE AMOUNT SPENT FOR THE
CONSTRUCTION-

A) MUST BE CLAIMED AS EXPENSE IN THE YEAR OF COMPLETION


B) CAPITALIZED AND CLAIM ANNUAL DEPRECIATION OVER THE LIFE
OF THE BUILDING
C) CAPITALIZED OR EXPENSE OUTRIGHT AT THE OPTION OF THE
SCHOOL
D) CAPITALIZED OR EXPENSE OUTRIGHT AT THE OPTION OF THE BIR

240. RELAX CORPORATION IS ENGAGED IN SALE OF GOODS AND SERVICES


WITH NET SALES/NET REVENUE OF P400,000 AND P200,000, RESPECTIVELY.
THE ACTUAL ENTERTAINMENT, AMUSEMENT AND RECREATION EXPENSE
FOR THE TAXABLE QUARTER AMOUNTED TO P6,000.

RELAX CORPORATION CAN CLAIM AN ENTERTAINMENT, AMUSEMENT AND


RECREATION EXPENSE ON THE SALE OF GOODS AND SERVICES,
RESPECTIVELY OF-

A) P4,000 AND P4,000


B) 4,000 AND 2,000
C) 2,000 AND 4,000
D) 2,000 AND 2,000

INTEREST EXPENSE PROBLEMS:

241. WHICH OF THE FOLLOWING ITEM IS CORRECT?

A) INTEREST INCURRED ON LOAN FROM A BROTHER IS DEDUCTIBLE


B) INTEREST EXPENSE INCURRED ON UNPAID VALUE-ADDED TAX IS
REDUCED BY 42% OF INTEREST INCOME SUBJECTED TO FINAL TAX
C) INTEREST PAYABLE WHICH HAD ALREADY PRESCRIBED IS
DEDUCTIBLE IF PAID VOLUNTARILY BY THE TAXPAYER
D) INTEREST INCURRED TO ACQUIRE A BUSINESS ASSET MAY BE ADDED
TO THE COST OF THE PROPERTY

242. INTEREST ON BUSINESS IS DEDUCTIBLE FOR INCOME TAX PURPOSES.


HOWEVER, ONE OF THE FOLLOWING IS NOT DEDUCTIBLE-(RPCPA)

A) INTEREST ON DELINQUENCY TAX


B) INTEREST ON INDEBTEDNESS INCURRED TO PURCHASE DELIVERY
EQUIPMENT
C) INTEREST ON INDEBTEDNESS SECURED TO PURCHASE A TAX-
EXEMPT SECURITY
D) NONE OF THE ABOVE

243. WHICH INTEREST IS DEDUCTIBLE?

A) INTEREST INCURRED ON UNPAID VALUE-ADDED TAX


B) INTEREST ON LOAN BY AN INDIVIDUAL FROM A CORPORATION IF
60% OF THE OUTSTANDING STOCK OF THE LATTER IS OWNED
INDIRECTLY BY SUCH INDIVIDUAL
C) INTEREST ON LOAN BETWEEN MEMBERS OF A FAMILY
D) INTEREST ONN LOAN BY A FIDUCIARY OF A TRUST AND A
BENEFICIARY OF SUCH TRUST

244. A DEDUCTIBLE INTEREST EXPENSE-

A) INTEREST ON LOAN BETWEEN MEMBERS OF A FAMILY


B) INTEREST ON LOAN THAT WAS USED TO FINANCE THE
CONSTRUCTION OF THE TAXPAYER’S RESIDENTIAL HOUSE
C) INTEREST ON TAX DELINQUENCY
D) INTEREST ON INDEBTEDNESS TO FINANCE PETROLEUM OPERATIONS

245. ON JANUARY 2, 2009, MANG OTANG CONTRACTED A 1-YEAR P100,000


LOAN FROM METROBANK FOR THE PURCHASE OF COMPUTERS. THE
EQUIPMENTS WHICH HAD A DEPRECIABLE LIFE OF EIGHT(8) YEARS WERE
ACQUIRED ON APRIL 1, 2009. THE INTEREST EXPENSE FOR ONE(1) YEAR
AMOUNTED TO P15,000.

IN THE SAME YEAR, HIS BANK DEPOSIT WITH PNB EARNED AN INTEREST
INCOME OF P2,000. DURING THE YEAR, HE INCURRED AN INTEREST
EXPENSE ON UNPAID BUSINESS TAX OF P600.
THE DEDUCTIBLE INTEREST EXPENSE OF MANG OTANG IN 2009 IS-

A) P14,240
B) 14,760
C) 13,600
D) 14,940

246. IN NUMBER 245, THE DEDUCTION OF MANG OTANG IN 2008 ASSUMING


THAT THE INTEREST ON LOAN WAS CAPITALIZED-

A) P14,375
B) 15,000
C) 10,781.25
D) NONE

247. IN DECEMBER 2006, A TAXPAYER DONATED TO HIS SON 3,000 SHARES


OF STOCK OF SAN MIGUEL CORPORATION. FOR FAILURE TO FILE A
DONOR’S TAX RETURN ON THE DONATION WITHIN THE STATUTORY
PERIOD, THE TAXPAYER WAS ASSESSED THE SUM OF P100,000, AS DONOR’S
TAX PLUS 25% SURCHARGE OR P25,000 AND 20% INTEREST OR P20,000
WHICH HE PAID JANUARY 2009.

ON JUNE 20, 2009, HE FILED HIS INCOME TAX RETURN FOR 2008 CLAIMING,
AMONG OTHERS, A DEDUCTION FOR INTEREST AMOUNTING TO P1,500.
ON JUNE 5, 2009, THE TAXPAYER FILED AN AMENDED INCOME TAX RETURN
FOR THE SAME CALENDAR YEAR 2008, CLAIMING THEREIN AN
ADDITIONAL DEDUCTION IN THE AMOUNT OF P20,000 REPRESENTING
INTEREST PAID ON THE DONOR’S TAX.

A CLAIM FOR REFUND OF ALLEGED OVERPAID INCOME TAX FOR TAXABLE


YEAR 2008 WAS FILED WITH THE CIR WHICH WAS SUBSEQUENTLY DENIED.

THE CIR POINTED OUT THAT A TAX IS NOT INDEBTEDNESS AND THAT
THERE IS A FUNDAMENTAL DISTINCTION BETWEEN A “TAX” AND A “DEBT”.
ACCORDING TO THE CIR, THE DEDUCTIBILITY OF INTEREST ON
INDEBTEDNESS FROM A PERSON’S INCOME TAX CANNOT EXTEND TO
INTEREST ON TAXES.

Q#1: IS THE INTEREST ON THE DONOR’S TAX DEDUCTIBLE?


Q#2: IS THE INTEREST ON THE INCOME TAX DEDUCTIBLE?

A) YES, YES
B) NO, YES
C) YES, NO
D) NO,NO

248. IF A STOCKHOLDER RECEIVES A TAXABLE STOCK DIVIDEND, WHAT IS


THE MEASURE OF INCOME APPLICABLE TO HIM?-(RPCPA)

A) PAR VALUE OF THE SHARES ON THE DATE HE RECEIVES THEM


B) FAIR MARKET VALUE OF THE SHARES ON THE DATE OF
DECLARATION
C) THE ADJUSTED COST OF THE OLD SHARES AND THE NEW SHARES OF
THE CORPORATION
D) THE BOOK VALUE OF THE SHARES OF THE PRECEDING CALENDAR
YEAR

249. GENERALLY, SALES OF REAL PROPERTY ARE SUBJECT TO TAX. WHICH


OF THE FOLLOWING SALES OF LAND IS NOT ALLOWED BY THE LAW TO BE
SUBJECTED TO TAX?-(RPCPA)

A) LAND SOLD BY THE CHURCH


B) LAND FORECLOSED BY THE BANK
C) LAND SOLD TO GOVERNMENT CORPORATIONS
D) NONE OF THE ABOVE

TAX EXPENSE/TAX CREDIT PROBLEMS:

250. ONE IS NOT A DEDUCTIBLE TAX-(RPCPA)


A) BUSINESS TAX
B) VALUE-ADDED TAX
C) PRIVILEGE TAX
D) OCCUPATION TAX

251. ONE IS A DEDUCTIBLE TAX-(RPCPA)

A) ESTATE TAX
B) FRANCHISE TAX
C) DONOR’S TAX
D) SPECIAL ASSESSMENT

252. ONE IS ENTITLED TO TAX CREDIT FOR TAXES PAID TO FOREIGN


COUNTRY-(RPCPA)
A) RESIDENT ALIENS
B) DOMESTIC CORPORATION
C) NON-RESIDENT ALIENS WITH RECIPROCITY
D) NON-RESIDENT CITIZENS

253. ONE IS ENTITLED TO TAX CREDIT FOR TAXES PAID TO FOREIGN


COUNTRY-(RPCPA)

A) NON-RESIDENT ALIENS
B) FOREIGN CORPORATIONS
C) RESIDENT ALIENS WITH INCOME DERIVED SOLELY FROM SOURCES
WITHIN THE PHILIPPINES
D) BENEFICIARIES OF THE ESTATES AND TRUSTS

254.THE FOLLOWING TAXPAYERS CAN CLAIM TAX CREDIT EXCEPT ONE-


(RPCPA)

A) DOMESTIC CORPORATIONS
B) MEMBERS OR BENEFICIARIES OF PARTNERSHIP OR TRUST
C) RESIDENT FILIPINO CITIZENS
D) NON-RESIDENT ALIENS

255. IN 2009, VICTOR CO., A DOMESTIC CORPORATION HAS NET INCOME


FROM WITHIN THE PHILIPPINES, P200,000 AND FROM THE U.S.A., P300,000.
INCOME TAX PAID ON INCOME FROM THE U.S.A. IS P95,000. THE TAX CREDIT
ON INCOME TAX PAID TO U.S. GOVERNMENT IS-(RPCPA)

A) P105,000
B) 60,000
C) 90,000
D) 110,000
256. GLOBAL CORPORATION, A DOMESTIC CORPORATION , HAS THE
FOLLOWING DATA FOR THE CALENDAR YEAR. THE CORPORATION
SIGNIFIED ITS INTENTION TO CLAIM TAX CREDITS ON INCOME TAXES PAID
TO THE FOREIGN COUNTRIES:

GROSS ALLOWABLE
COUNTRY INCOME DEDUCTIONS TAX PAID

PHIL. 1,000,000 800,000 P-


U.S.A. 400,000 200,000 80,000
JAPAN 300,000 200,000 25,000

THE INCOME TAX PAYABLE BY GLOBAL CORPORATION IS:

A) P75,000
B) 65,000
C) 60,000
D) 72,000

257. PENNY GARCIA , SINGLE HAS THE FOLLOWING DATA DURING THE
YEAR:

GROSS INCOME, PHIL. P120,000


GROSS INCOME, USA 200,000
EXPENSES, PHIL. 80,000
EXPENSES, USA 160,000
TAX PAID IN THE STATE OF CALIFORNIA 40,000
FEDERAL INCOME TAX PAID 8,500

IF THE FOREIGN TAX PAID IS CLAIMED AS DEDUCTION, THE INCOME TAX


DUE IS-

A) P51,500
B) 5,725
C) 12,800
D) 1,650

258. IN NUMBER 257, IF YOU ARE THE TAXPAYER, WILL YOU OPT TO CLAIM
THE FOREIGN TAX PAID AS TAX CREDIT OR AS A DEDUCTION?

A) TAX CREDIT BECAUSE THE TAX LIABILITY WOULD BE P1,250 ONLY


B) TAX CREDIT BECAUSE THE TAX LIABILITY WOULD BE P2,500 ONLY
C) DEDUCTION BECAUSE THE TAX LIABILITY WOULD BE P2,150 ONLY
D) DEDUCTION BECAUSE THE TAX LIABILITY WOULD BE P7,000 ONLY
CHAPTER 9-LOSSES

259. ONE IS NOT A DEDUCTIBLE LOSS-(RPCPA)

A) LOSS DUE TO REMOVAL OR DEMOLITION OF OLD BUILDING, THE


SCRAPPING OF OLD MACHINERY OR EQUIPMENT INCIDENT TO
RENEWAL OR REPLACEMENT
B) LOSS DUE TO REMOVAL OF BUILDING OR REAL ESTATE PURCHASED
WHEN THE PURCHASE WAS FOR THE ACQUISITION OF THE LAND
AND WITHOUT INTENDING TO USE THE BUILDING
C) LOSS IN VALUE OF SECURITIES OF SUCH EXTENT THAT THE
SECURITIES HAVE BECOME WORTHLESS AND ARE WRITTEN OFF
D) LOSS IN USEFULNESS IN BUSINESS OF AN ASSET SO THAT THE
BUSINESS IS DISCONTINUED OR THE ASSET IS DISCARDED

260.MAX AND JESS ARE BUSINESS COMPETITORS. MAX PURCHASED A


LAND BESIDE THE BUSINESS PREMISES OF JESS WITH THE INTENTION OF
ERECTING A NEW 4-STOREY BUILDING. THE LAND WHICH WAS VALUED AT
P1,000,000 HAD AN ALMOST DILAPIDATED BUILDING THEREON ASSESSED
AT P150,000. HE SPENT P40,000 FOR ITS DEMOLITION AND SOLD ITS SCRAP
FOR P25,000. THE CONSTRUCTION OF THE NEW BUILDING COST HIM
P10,000,000.

WHEN JESS KNEW THE INTENTION OF MAX, HE DECIDED ALSO TO


DEMOLISH HIS 20-YEAR OLD BUILDING AND TO PUT UP A NEW ONE. THE
DEMOLITION COST HIM P80,000 BUT RAISED P35,000 FROM THE SCRAP, AND
THE CONSTRUCTION COST OF THE NEW 6-STOREY BUILDING WAS
P15,000,000.
AS BETWEEN MAX AND JESS, WHO IS ENTITLED TO CLAIM LOSS AS
DEDUCTION FROM GROSS INCOME?

A) MAX ONLY
B) JESS ONLY
C) BOTH OF THEM
D) NEITHER OF THEM

261. DELTA COMPANY PURCHASED A PIECE OF LAND WITH A BUILDING


THEREON FOR P1,500,000 ALLOCATED UNDER A CONTEACT OF SALE AT
P1,000,000 FOR THE LAND AND P500,000 FOR THE BUILDING. IT HAD NO USE
FOR THE BUILDING AT THE TIME OF PURCHASE AND IT WAS ITS INTENTION
TO REMOVE THE BUILDING IN ORDER TO BUILD ITS FACTORY. IT
INCURRED DEMOLITION COST OF P50,000. IT SOLD ITS SCRAP FOR P15,000.
THE CONSTRUCTION OF THE NEW BUILDING COST THE COMPANY
P2,500,000.
THE TOTAL VALUE OF THE LAND IS-

A) P1,000,000
B) 2,615,000
C) 1,615,000
D) 1,535,000

262. DINA COMPANY HAD AN OLD WAREHOUSE WHICH HAD A COST OF


P1,200,000. THE COMPANY DEMOLISHED THE WAREHOUSE WHEN IT HAD A
BOOK VALUE OF P200,000 IN ORDER TO CONSTRUCT A NEW AND BIGGER
WAREHOUSE. THE DEMOLITION COST AMOUNTED TO P25,000 WHILE THE
SCRAP VALUE WERE SOLD FOR P10,000. IN ITS ACCOUNTING ENTRY, DINA
COMPANY SHOULD DEBIT A LOSS ON RETIREMENT OF OLD BUILDING OF

A) NONE
B) P200,000
C) 185,000
D) 215,000

263. A BUILDING WAS PARTIALLY DESTROYED BY FIRE IN 2008. IT HAD A


BOOK VALUE OF P4,000,000. THE INSURANCE COMPANY WAS WILLING TO
PAY P3,000,000 WHICH WAS REFUSED BY THE OWNER OF THE BUILDING.
FINALLY, THE CLAIM WAS SETTLED IN 2009 FOR P3,500,000. THE P3,500,000
PROCEEDS IS-(RPCPA)

A) EXEMPT FROM INCOME TAX


B) TAXABLE IN FULL
C) SUBJECT TO FINAL TAX
D) PARTLY TAXABLE, PARTLY EXEMPT

264. REFER TO ITEM 263 DATA. THE TAXPAYER CAN CLAIM S DEDUCTIBLE
LOSS OF-(RPCPA)

A) P1,000,000 IN 2008
B) 1,000,000 IN 2009
C) 500,000 IN 2008
D) 500,000 IN 2009

265. IN 2008, POPOY’S RESIDENCE WAS TOTALLY DESTROYED BY FIRE. THE


PROPERTY HAD AN ADJUSTED BASIS AND A FAIR MARKET VALUE OF
P130,000 BEFORE THE FIRE. DURING 2008, POY RECEIVED INSURANCE
REIMBURSEMENT OF P120,000 FOR THE DESTRUCTION OF HIS HOME.
POPOY’S 2008 ADJUSTED GROSS INCOME WAS P70,000. POPOY HAD NO
CASUALTY GAINS DURING THE YEAR.. WHAT AMOUNT OF THE FIRE LOSS
WAS POPOY ENTITLED TO CLAIM AS AN ITEMIZED DEDUCTION ON HIS 2009
TAX RETURN?-(RPCPA)
A) ZERO
B) 8,500
C) 8,600
D) 10,000

266. IN 2007, VIOLETA CONSTRUCTED AN OFFICE BUILDING WORTH


P2,000,000. IN 2009 WHEN IT HAD AN ACCUMULATED DEPRECIATION OF
P72,000 THE BUILDING WAS TOTALLY DESTROYED BY FIRE. ASSUMING
THAT THE AMOUNT RECOVERABLE FROM STAN INSURANCE COMPANY IS
P500,000, THE DEDUCTIBLE LOSS OF VIOLETA IS-

A) P1,928,000
B) 2,000,000
C) ZERO
D) 1,428,000

267.BASED ON THE DATA IN NO. 266 ABOVE, THE ACCOUNTING ENTRY IN


THE BOOKS OF VIOLETA

A) FIRE LOSS 2,000,000


BUILDING 2,000,000
B) FIRE LOSS 1,428,000
ALLOWANCE FOR DEPRECIATION 72,000
BUILDING 1,500,000
C) FIRE LOSS 500,000
RECEIVABLE FROM INS. CO. 500,000

D) RECEIVABLE FROM INS. CO. 500,000


ALLOWANCE FOR DEPRECIATION 72,000
FIRE LOSS 1,428,000
BUILDING 2,000,000

268. THE FOLLOWING PROPERTIES WERE BURNED IN A FIRE WHICH BROKE


OUT IN THE COMPANY PREMISES:

PROPERTY A PROPERTY B
TYPE OF LOSS TOTAL PARTIAL
COST 800,000 1,200,000
ACCUM. DEP’N 550,000 600,000
INSURANC RECOVERY 200,000 150,000
REPLACEMENT COST OF
DAMAGED PORTION - 500,000

THE DEDUCTIBLE LOSS ON PROPERTY A IS-


A) P250,000
B) 800,000
C) 50,000
D) 600,000

269. BASED ON THE DATA IN NUMBER 268 ABOVE, THE DEDUCTIBLE LOSS
ON PROPERTY B IS-

A) P600,000
B) 350,000
C) 500,000
D) 1,200,000

270. KATRINA CONSTRUCTION CORPORATION, A DOMESTIC CORPORATION


HAD THE FOLLOWING DATA:
YEAR 2008:
GROSS INCOME FROM SERVICES P3,200,000
OPERATING EXPENSES 3,450,000
RENT INCOME OF HEAVY EQUIPMENTS 70,000
DIVIDEND RECEIVED FROM JOHNA CORP. 36,500
CAPITAL GAIN ON SALE OF SHARES OF STOCKS
(NOT LISTED) 12,250

YEAR 2009:
GROSS INCOME FROM SERVICES 3,560,000
OPERATING EXPENSES 1,250,000

IN 2009, KATRINA CORPORATION INCURRED THE FOLLOWING LOSSES:

FIRE LOSS OF A COMPANY BUILDING: TOTAL LOSS


COST P5,000,000
ACCUM. DEP’N 3,000,000
AMOUNT RECOVERED FROM INSURANCE CO. 750,000
SCRAP(TAKEN AWAY BY THE INS. CO.) 5,000

ACCIDENT LOSS OF A COMPANY DUMP TRUCK: PARTIAL LOSS


COST OF DUMP TRUCK P500,000
ACCUM. DEP’N 250,000
RESTORATION COST 150,000
AMOUNT RECOVERED FROM INS. CO. 65,000

271. HOW MUCH IS THE NET OPERATING LOSS CARRY-OVER TO 2009?

A) (P131,250)
B) (119,000)
C) (180,000)
D) (250,000)

272. HOW MUCH IS THE CASUALTY LOSS IN 2009?

A) P1,335,000
B) 2,150,000
C) 1,400,000
D) 1,435,000

273. HOW MUCH IS THE INCOME TAX DUE IN 2009?

A) P238,500
B) 278,250
C) 130,462.50
D) 97,387.50

274. JOE, A SALES AGENT ON COMMISSION BASIS OF CONTRADE


ENTERPRISES WHICH IS ENGAGED IN THE SALE OF PAPER AND PAPER
PRODUCTS, WHILE IN THE COURSE OF HIS TRAVEL TOWARDS BICOL
REGION WAS APPREHENDED BY MEMBERS OF THE NEW PEOPLE’S ARMY
(NPA) UNDER MELITO GLOR COMMAND ALONG QUEZON PROVINCE. HIS
SERVICE CAR OWNED BY CONTRADE ENTERPRISES WAS SEIZED. THE NEXT
DAY, HE LEARNED THAT THE NPAS AND THE MEMBERS OF THE PHIL. ARMY
UNDER 51ST BRIGADE HAD A CHANCE ENCOUNTER. USING HEAVY
WEAPONS, THE MILITARY FIRED AT THE NPAS THAT TRIED TO ESCAPE WITH
THE USE OF HIS CAR. ALL THE MEMBERS OF THE NPA WERE KILLED AND
THE CAR WAS A TOTAL WRECK. IS THE VALUE OF THE CAR DEDUCTIBLE AS
CASUALTY LOSS?
A) YES. IT IS DEDUCTIBLE TO JOE BEING IN POSSESSION OF THE CAR AT
THE TIME IT WAS SEIZED
B) YES. IT IS DEDUCTIBLE TO CONTRADE ENTERPRISES PROVIDED
THAT THE OTHER REQUISITES FOR DEDUCTIBILITY MUST BE
SATISFIED
C) NO. CASUALTY LOSS REFERS ONLY TO FIRE, EARTHQUAKE,
VOLCANIC ERUPTION AND OTHER NON-MAN MADE CALAMITIES
D) NO, BECAUSE IT WAS INTENTIONALLY WRECKED BY THE MEMBERS
OF THE PHIL. ARMY

275. QUENNIE COMPANY ACQUIRED MACHINERY AT A PURCHASE PRICE OF


P500,000. FREIGHT AND INSTALLATION COST AMOUNTED TO P20,000. AT A
DATE IN A TAXABLE YEAR WHEN THE ACCUMULATED DEPRECIATION WAS
P300,000, QUENNIE COMPANY RETIRED THE MACHINERY FROM THE
BUSINESS BECAUSE THE INCREASE IN THE COST OF PRODUCTION AND THE
CHANGE OF MANUFACTURE OF THE PRODUCT TO WHICH THE MACHINERY
IS EXCLUSIVELY DEVOTED MADE ITS CONTINUED PROFITABLE USE
IMPOSSIBLE. THE SCRAP VALUE OF THE MACHINERY WAS P10,000.

THE LOSS ON THE RETIREMENT OF THE MACHINERY IS-

A) P220,000
B) 280,000
C) 200,000
D) 210,000

276. FLORENCIO HAD THE FOLLOWING RECORDS OF INCOME, EXPENSES


AND LOSSES DURING THE YEAR:

WAGERING GAINS(WAGERING LOSSES, P50,000) P30,000


TEMPORARY DECLINE IN VALUE OF STOCKS OF TY CORP 12,500
SALE OF TYPEWRITERS WHICH WERE RENDERED
OBSOLETE BTY COMPUTERS(BOOK VALUE:P115,000) 80,000

HOW MUCH WAS THE LOSS IS DEDUCTIBLE BY FLORENCIO?

A) P97,500
B) 35,000
C) 55,000
D) 110,000

277. ALL OF THE FOLLOWING, EXCEPT ONE, ARE REQUISITES IN THE


CARRY-OVER OF NET OPERATING LOSS

A) THERE MUST BE NO SUBSTANTIAL CHANGE IN THE OWNERSHIP OF


THE BUSINESS
B) CARRY-OVER IS NOT ALLOWED IF THE CORPORATION IS SUBJECT TO
MCIT DURING THE TAXABLE YEAR
C) EVEN IF THE CORPORATION PAID TAX BASED ON MCIT, THE
RUNNING OF THE PRESCRIPTION PERIOD IS NOT INTERRUPTED
D) THE CARRY-OVER IS GOOD ONLY FOR ONE(1) YEAR

278. STATEMENT 1: THE TERM “NET OPERATING LOSS” SHALL MEAN THE
EXCESS OF ALLOWABLE DEDUCTION OVER GROSS INCOME OF THE
BUSINESS IN A TAXABLE YEAR.

STATEMENT 2: NON-RESIDENT FOREIGN CORPORATIONS ARE NOT


ENTITLED TO DEDUCT NOLCO FROM THEIR GROSS INCOME

STATE,MENT 3: THE NOLCO WHICH HAD NOT BEEN OFFSET AS DEDUCTION


FROM GROSS INCOME SHALL BE CARRIED OVER AS A DEDUCTION FROM
GROSS INCOME FOR THE NEXT TAXABLE YEAR IMMEDIATELY FOLLOWING
THE YEAR OF SUCH LOSS

WHICH OF THE ABOVE STATEMENTS IS/ARE FALSE?

A) STATEMENT 1 ONLY
B) STATEMENTS 1 AND 2
C) STATEMENT 3 ONLY
D) NONE

NUMBERS 279 TO 281 ARE BASED ON THE FOLLOWING INFORMATION:

THE FOLLOWING ARE THE RECORDS OF BRIDGET COMPANY:

2007 2008 2009


GROSS SALES P3,300,000 2,340,000 825,000
COST OF SALES 2,400,000 1,070,000 380,000
DIVIDEND-RESIDENT
FOREIGN CORP. 140,000 - 32,000
INTEREST INCOME ON
NOTES RECEIVABLE 28,000 16,400 -
CAPITAL GAIN - 13,000 18,500
CAPITAL LOSS 20,000 - 22,000

279. THE TAXABLE INCOME/OPERATING LOSS IN 2007 IS-

A) (P575,000)
B) (407,000)
C) (427,000)
D) 1,068,000

280. IN QUESTION 279, THE TAXABLE INCOME/OPERATING LOSS IN 2008 IS-

A) ZERO
B) 274,400
C) (132,600)
D) 254,400

281. THE NET OPERATING LOSS CARRY-OVER IN 2009 IS-

A) P18,000
B) ZERO
C) 170,600
D) 18,000
NUMBERS 282 AND 283 ARE BASED ON THE FOLLOWING INFORMATION:

THE FOLLOWING ARE THE RECORDS OF BETTY, SINGLE, RESIDENT


CITIZEN:
2008 2009
GROSS SALES P2,560,000 1,920,000
COST OF SALES 1,360,000 895,000
DIVIDEND FROM\ \
RESIDENT FOREIGN CORP. - 41,200
INTEREST INCOME ON
NOTES REC’BLE 12,500 -
INTEREST FROM DEPOSIT WITH
CHINABANK 2,350 1,680
CAPITAL GAIN 11,450 13,650
CAPITAL LOSS - 17,800
DEDUCTIONS 1,160,000 458,350
ADDITIONAL INFORMATION:

A. IN 2007, THE TAXPAYER HAD AN OPERATING LOSS OF P300,000


B. IN 2009, THE TAXPAYER AVAILED OF OPTIONAL STANDARD
DEDUCTION

282. THE TAXABLE INCOME/OPERATING LOSS IN 2008 IS-

A) P261,400
B) ZERO
C) 274,400
D) 1,286,400
283. THE TAXABLE INCOME/OPERATING LOSS IN 2009 OF BETTY IS-

A) P190,700
B) 939,580
C) 248,200
D) 232,500

284. HOLY WORD COMPANY PURCHASED SHARES OF STOCK OF NUEVA


CACERES COMPANY FOR P60,000 AND OF ATENEO COMPANY FOR P30,000. AT
THE END OF THE TAXABLE YEAR, IT ASCERTAINED THAT ITS NUEVA
CACERES COMPANY STOCK WAS WORTHLESS BECAUSE OF THE COMPLETE
INSOLVENCY OF THE CORPORATION, AND ITS ATENEO COMPANY HAD
DECLINED OIN VALUE OF P28,000. HOLY WORD COMPANY SHOULD
RECOGNIZE A LOSS ON ITS INVESTMENT IN NUEVA CACERES AND ATENEO
COMPANY SHARES OF-

A) ZERO
B) P62,000
C) 60,000
D) 90,000

285. NINI COMPANY WAS MERGED INTO OTOY COMPANY. NINI COMPANY
TRANSFERRED ALL ITS PROPERTIES WITH A BOOK VALUE OF P4,000,000 TO
OTOY COMPANY FOR WHICH IT RECEIVED SHARES OF THE LATTER WITH A
FAIR MARKET VALUE OF P3,600,000. SANKO WAS A STOCJHOLDER OF NINI
COMPANY (WHICH HE ACQUIRED AT A COST OF P500,000) WHEN THE
MERGER WAS EFFECTED AND RECEIVED SHARES OF OTOY COMPANY WITH
A FAIR MARKET VALUE OF P360,000. THE AMOUNT OF LOSS DEDUCTIBLE BY
NINI COMPANY IS-

A) P400,000
B) 4,000,000
C) 140,000
D) ZERO

286. IN NUMBER 285 ABOVE, THE AMOUNT OF LOSS DEDUCTIBLE BY OTOY


IS-

A) P400,000
B) 140,000
C) 500,000
D) ZERO

287. KIRING-KING COMPANY TRANSFERRED PROPERTY TO RAYRAY


COMPANY. AS A RESULT OF THE TRANSFER, KIRING-KING COMPANY
ACQUIRED CONTROL OVER RAYRAY COMPANY. THE PROPERTY HAD A
BOOK VALUE OF P1,000,000 TO KK COMPANY. AS A CONSIDERATION, IT
RECEIVED SHARES OF STOCK OF RR WITH A FAIR MARKET VALUE OF
P960,000. AS A CONSEQUENCE OF THE TRANSACTION, KK COMPANY SHALL
CLAIM A DEDUCTIBLE LOSS OF-

A) P1,000,000
B) 960,000
C) 40,000
D) ZERO

288. SHASHA, SINGLE, HAS THE FOLLOWING DATA IN 2008 AND 2009:

2008 CASE1 CASE2 CASE3


NET INCOME BEFORE
PERSONAL EXEMPTION
AND BAD DEBT 50,000 50,000 50,000
LESS: BAD DEBT
WRITTEN OFF 70,000 68,000 30,000
NET INCOME AFTER
BAD DEBT (20,000) (18,000) 20,000

2009
BAD DEBT
RECOVERED 70,000 60,000 30,000

IN 2009, THE TAXABLE AMOUNTS BEFOREW PERSONAL EXEMPTION ARE:


CASE1 CASE2 CASE3
A) 50,000 50,000 50,000
B) 50,000 42,000 30,000
C) 70,000 68,000 30,000
D) (20,000) (8,000) 20,000

289. THE FOLLOWING WERE TAKEN FROM THE INCOME STATEMENT OF ABC
CORPORATION FOR THE TAXABLE YEAR 2009:-((RPCPA)

GROSS PROFIT ON SALES P800,000


LESS: DEDUCTIBLE EXPENSES 440,000
PROVISION FOR BAD DEBTS 80,000 520,000
NET INCOME BEFORE INCOME TAX 280,000

ADDITIONAL INFORMATION:

A. ACCOUNTS WRITTEN OFF DURING THE YEAR AND CHARGED TO


ALLOWANCE FOR BAD DEBTS-P50,000
B. RECOVERIES ON ACCOUNTS RECEIVABLE PREVIOUSLY WRITTEN OFF
IN 2008 AND CREDITED TO ALLOWANCE FOR BAD DEBTS

ALLOWED AS DEDUCTION BY BIR=P30,000


DISALLOWED BY BIR AS DEDUCTION=P20,000

THE NET INCOME BEFORE INCOME TAX OF ABC CORPORATION IS-

A) P280,000
B) 260,000
C) 330,000
D) 340,000

290. WHICH OF THE FOLLOWING METHODS OF DEPRECIATION IS NOT


EXPRESSLY ALLOWED UNDER THE LAW?

A) OUTPUT OR PRODUCTION METHOD


B) SUM-OF-YEARS DIGITS METHOD
C) STRAIGHT LINE METHOD
D) DECLINING BALANCE METHOD

291. WHICH OF THE FOLLOWING ASSETS IS SUBJECT TO DEPRECIATION FOR


INCOME TAX PURPOSES?-(RPCPA)

A) INVENTORIES OR STOCK IN TRADE


B) GOODWILL
C) EQUIPMENT USED IN BUSINESS
D) RESIDENTIAL HOUSE

292. A STORE BUILDING WAS CONSTRUCTED ON JANUARY 2, 2004 WITH A


COST OF P570,000. ITS ESTIMATED USEFUL LIFE IS 16 YEARS WITH SCRAP
VALUE OF P70,000 AFTER 16 YEARS. IN JANUARY 2009, REPLACEMENT OF
SOME WORN-OUT PARTS OF THE BUILDING COSTING P50,000 WAS SPENT.
AFTER THE RAPAIRS, THE BUILDING WAS APPRAISED WITH A FAIR MARKET
VALUE OF P770,000. THE ALLOWABLE DEDUCTION FOR DEPRECIATION FOR
THE YEAR 2009 IS-(RPCPA)

A) P35,795.45
B) 43,750
C) 49,431.82
D) 31,250

CHARITABLE CONTRIBUTION PROBLEMS:

293.WHICH OF THE FOLLOWING IS DEDUCTIBLE FROM GROSS INCOME


EVEN IF THE PAYMENT IS NOT CONNECTED WITH BUSINESS?

A) CONTRIBUTION OF THE EMPLOYER TO THE PENSION TRUST OF THE


EMPLOYEE
B) CHARITABLE CONTRIBUTIONS
C) INCOME TAX PAID IN FOREIGN COUNTRY
D) TRAVELLING EXPENSES

294. THE AMOUNT OF CHARITABLE CONTRIBUTION OF PROPERTY OTHER


THAN MONEY SHALL BE BASED ON

A) FAIR MARKET VALUE


B) BOOK VALUE
C) LOWER OF COST OR MARKET
D) ACQUISITION COST

295. ANGELO IS A CASH BASIS, SELF-EMPLOYED AIR-CONDITIONING


REPAIRMAN WITH 2009 GROSS BUSINESS RECEIPTS OF P200,000. ANGELO’S
CASH DISBURSEMENT WERE AS FOLLOWS:-(RPCPA)
AIR CONDITIONING PARTS P25,000
YELLOW PAGES LISTING 20,000
ESTIMATED NATIONAL INCOME TAXES ON
SELF-EMPLOYMENT INCOME 10,000
BUSINESS LONG-DISTANCE TELEPHONE CALLS 4,000
CHARITABLE CONTRIBUTIONS 2,000

WHAT AMOUNT SHOULD ANGELO REPORT AS SELF-EMPLOYMENT INCOME


BEFORE PERSONAL EXEMPTION?

A) P151,000
B) 149,000
C) 141,000
D) 139,000

296. WHAT WOULD BE THE ALLOWABLE DEDUCTION FOR P10,000


CONTRIBUTION MADE BY A RESIDENT CITIZEN TO A CHARITABLE
INSTITUTION, FROM HIS P60,000 NET INCOME BEFORE CONTRIBUTION?

A) P6,000
B) 7,000
C) 3,000
D) 10,000

297.NOTRADAMUS CORPORATION HAD THE FOLLOWING DATA IN 2009:

GROSS INCOME P500,000


DEDUCTIONS(EXCEPT CONTRIBUTIONS) 400,000
DONATIONS TO CULTURAL CENTER OF THE PHIL. 3,000
DONATIONS TO REHABILITATION OF VETERANS, INC. 2,000
DONATION TO ROMAN CATHOLIC CHURCH 1,500
DONATIONS TO VICTIMS OF PAYATAS TRAGEDY 5,000
THE TAXABLE INCOME OF THE CORPORATION IS-

A) P92,000
B) 93,500
C) 88,500
D) 100,000

298. DOMINGO HAD THE FOLLOWING DATA DURING THE YEAR:

GROSS INCOME FROM BUSINESS P1,000,000


CAPITAL GAIN 50,000
CAPITAL LOSS 20,000
DEDUCTIONS 400,000
DONATION TO ACCREDITED NGO 30,000
DONATION TO CHURCH 20,000
THE TAXABLE INCOME OF DOMINGO IF HE IS AN INDIVIDUAL TAXPAYER,
SINGLE, WITH A COMPENSATION INCOME DURING THE YEAR OF P40,000-

A) P550,000
B) 600,000
C) 560,000
D) 570,000

299. IN NUMBER 299 DATA, HOW MUCH IS THE TAXABLE INCOME IF


DOMINGO IS A CORPORATION (DISREGARD COMPENSATION INCOME)-

A) P670,000
B) 640,000
C) 580,000
D) 570,000

300. SANDY MADE A CONTRIBUTION OF P15,000 TO ST. JUDE PARISH


CHURCH. HE HAD A GROSS INCOME FROM BUSINESS OF P500,000 AND
DEDUCTIONS (EXCLUDING CONTRIBUTION) OF P400,000. FROM THIS
CONTRIBUTION, HOW MUCH WILL HE BE ALLOWED AS DEDUCTION FROM
HIS GROSS INCOME?

A) P15,000
B) ZERO
C) 10,000
D) 100,000

301. AN INDIVIDUAL TAXPAYER MADE THE FOLLOWING CONTRIBUTIONS:

TO FATIMA CATHOLIC CHURCH P20,000


TO BEGGARS 500
TO POLYTEHCNIC UNIVERSITY OF THE PHIL. 25,000
TO BGY TIKAPO 10,000

THE AMOUNT OF CONTRIBUTIONS DEDUCTIBLE SUBJECT TO 10%


LIMITATION IS-

A) P20,000
B) 30,000
C) 55,000
D) 55,500

302. THE CANCER HOSPITAL OF THE PHILIPPINES IS A CHARITABLE


INSTITUTION. MR. BIGLANG-AWA VISITED THE HOSPITAL ON HIS 60 TH
BIRTHDAY. HE DONATED P500,000 TO THE HOSPITAL AND P10,000 TO A
CANCER VICTIM WHO IS ONLT TEN(10)YEARS. HE ALSO BROUGHT WITH
HIM A CHAIN RESTAURANT MASCOT THAT PLAYED WITH THE CHILDREN
PATIENTS WHILE EATING THE POPULAR PRODUCT OF THE RESTAURANT. IT
HAD COST HIM P15,000.

WHICH OF THE ABOVE CONTRIBUTIONS IS QUALIFIED AS DEDUCTION


FROM THE GROSS COMPENSATION INCOME OF BIGLANG-AWA IF HE IS A
NEWLY RETIRED GOVERNMENT OFFICIAL WHO IS NOT ENGAGED IN
BUSINESS?

A) ONLY THE P500,000


B) THE P500,000 AND THE P10,000
C) THE P500,000, P10,000 AND P15,000
D) NONE OF THEM

OPTIONAL STANDARD DEDUCTION PROBLEMS:

303. THE TAXPAYER HAD THE FOLLOWING DATA IN 2009:

GROSS RECEIPTS P1,450,000


COST OF SERVICES 565,300
DEDUCTIONS 325,800
CAPITAL GAIN 25,500
CAPITAL LOSS 6,000

IF THE TAXPAYER IS SINGLE, WITH ONE DEPENDENT CHILD, THE TAXABLE


INCOME IF HE AVAILED OF THE OPTIONAL STANDARD DEDUCTION IS-

A) P870,000
B) 814,500
C) 475,320
D) 503,400

305. IN NUMBER 304, THE TAXABLE INCOME IF THE TAXPAYER IS A


CORPORATION IS-

A) P550,320
B) 814,500
C) 542,520
D) 889,500

ACCOUNTING METHODS PROBLEMS:


306. A HYBRID METHOD OF ACCOUNTING IS-

A)THE METHOD UNDER WHICH EXPENSES IN THE PRODUCTION OF CROPS


ARE DEDUCTED IN THE YEAR IN WHICH THE GROSS INCOME FROM THE
CROP HAS BEEN REALIZED
B)A METHOD UNDER WHICH THE TAXPAYER REPORTS HIS INCOME AND
EXPENSES BY EMPLOYING THE COMBINATION OF CASH AND ACCRUAL
METHOD
C)ALSO KNOWN AS CASH RECEIPTS AND DISBURSEMENTS METHOD
D)A METHOD IN WHICH THE TAXPAYER REPORTS INCOME IN THE YEAR IT
IS EARNED

307. TAXPAYER IS REQUIRED TO REPORT INCOME FOR THE TAX YEAR IN


WHICH PAYMENTS ARE ACTUALLY OR CONSTRUCTIVELY RECEIVED WHILE
EXPENSES ARE DEDUCTED IN THE YEAR PAID

A) ACCRUAL BASIS
B) CASH BASIS OR CASH RECEIPTS AND DISBURSEMENTS METHOD
C) HYBRID METHOD
D) CROP YEAR BASIS

308. UNDER THIS METHOD OF ACCOUNTING, INCOME IS REPORTED IN THE


YEAR IT IS EARNED

A) CASH BASIS
B) CROP YEAR BASIS
C) CONSTRUCTIVE RECEIPT OF INCOME
D) ACCRUAL METHOD

309. ESTRELLA USES ACCRUAL METHOD OF ACCOUNTING. SHE OWNS A


LAND WHICH SHE LEASED TO GORDON FOR 2 YEARS AT AN ANNUAL
RENTAL OF P100,000. ON JULY 1, 2007, SHE RECEIVED P200,000 FROM
GORDON REPRESENTING THE RENTAL COVERING THE PERIOD JULY 1, 2007
TO JUNE 30, 2009.

IN 2007, ESTRELLA WILL REPORT AN INCOME SUBJECT TO TAX OF –

A) P50,000
B) 200,000
C) 100,000
D) 150,000

310. BASED ON THE DATA IN NO. 309 ABOVE, GORDON, USING CASH
METHOD CAN DEDUCT AN EXPENSE OF-

A) P50,000
B) 200,000
C) 100,000
D) 150,000

311. ALL OF THE FOLLOWING, EXCEPT ONE, ARE CONSIDERED AS


“CONSTRUCTIVE RECEIPTS” FOR INCOME TAX PURPOSES. WHICH IS THE
EXCEPTION?

A) THE SHARE OF THE PROFITS OF THE PARTNER IN A GENERAL


PROFESSIONAL PARTNERSHIP
B) INTEREST CREDITED ON BANK SAVINGS DEPOSIT
C) BOND INTEREST COUPONS WHICH HAVE MATURED BUT WHICH
HAVE NOT BEEN REDEEMED
D) PROPERTY BORROWED BY THE TAXPAYER

312. UNDER THIS METHOD OF REPORTING INCOME, THE TAXPAYER


REPORTS A PERCENTAGE OF THE GROSS INCOME FROM A LONG-TERM
CONTRACT BASED ON THE PORTION OF WORK THAT HAS BEEN
COMPLETED

A) ACCRUAL BASIS
B) CASH BASIS
C) PERCENTAGE OF COMPLETION METHOD
D) HYBRID METHOD

313. GROSSS INCOME IS REPORTEDLY PARTIALLY IN EACH TAXABLE YEAR


IN PROPORTION TO COLLECTIONS MADE IN SUCH PERIOD AS IT BEARS TO
THE TOTAL CONTRACT PRICE REFER TO-(RPCPA)

A) CROP YEAR BASIS METHOD


B) PERCENTAGE OF COMPLETION BASIS METHOD
C) ACCRUAL METHOD
D) INSTALLMENT SALES METHOD

314. ALL OF THE FOLLOWING, EXCEPT ONE, ARE NOT TAKEN INTO
ACCOUNT IN DETERMINING THE CORRECT AMOUNT OF INITIAL PAYMENTS

A) COMMISSIONS
B) OTHER SELLING EXPENSES
C) INSTALLMENT PAYMENTS IN THE YEAR OF SALE
D) GROSS PROFIT

315. UNDER INSTALLMENT METHOD OF REPORTING INCOME TAX, THE


AMOUNT OF TAX PAYABLE IN THE YEAR OF SALE OF A VACANT LOT IS
COMPUTED BY APPLYING THE FOLLOWING FORMULA:
A) (DOWNPAYMENT/CONTRACT PRICE) X FINAL TAX DUE
B) (INITIAL PAYMENT/SELLING PRICE) X FINAL TAX DUE
C) (FINAL TAX DUE/SELLING PRICE) X COLLECTION
D) (INITIAL PAYMENT/CONTRACT PRICE) X FINAL TAX DUE

NUMBERS 316 TO 318 ARE BASED ON THE FOLLOWING INFORMATION:

ALONSO OWNS A PERSONAL CAR WHICH HE SOLD IN INSTALLMENT ON


NOVEMBER 1, 2008 AS FOLLOWS:

DATE OF ACQUISITION- MARCH 20, 2006


ACQUISITION COST- P300,000
TERMS OF PAYMENT:
DOWNPAYMENT- NOVEMBER 1, 2008 - P50,000
DUE ON - DECEMBER 1, 2008- 50,000
DUE ON- JANUARY 1, 2009- 150,000
DUE ON- FEBRUARY 1, 2009- 150,000

316. THE INITIAL PAYMENT IN 2008 IS-

A) P50,000
B) 100,000
C) 300,000
D) 400,000

317. THE AMOUNT OF GAIN TO BE REPORTED IN 2008 IS-

A) P50,000
B) 25,000
C) 37,500
D) 12,500

318. THE AMOUNT OF GAIN TO BE REPORTED IN 2009 IS-

A) P50,000
B) 25,000
C) 37,500
D) 12,500

NUMBERS 319 TO 323 ARE BASED ON THE FOLLOWING INFORMATION:


MARLYN SOLD A VACANT LOT TO HER SISTER MICA. THE DETAILS OF
WHICH ARE AS FOLLOWS:

ACQUISITION COST OF LAND, MARCH 5, 2006 P450,000


CASH PAYMENTS:
DATE OF SALE, DEC. 15, 2008 P100,000
PAYMENT, JANUARY 15, 2009 100,000
MORTGAGE ASSUMED BY MICA 500,000

319. THE INITIAL PAYMENT IS-

A) P100,000
B) 250,000
C) 150,000
D) 200,000

320. THE SELLING PRICE OF THE PROPERTY IS-

A) P150,000
B) 550,000
C) 700,000
D) 250,000

321. THE CONTRACT PRICE IS-

A) P150,000
B) 550,000
C) 700,000
D) 250,000
322. THE FINAL TAX PAYABLE IN 2008 IS-

A) P42,000
B) 25,200
C) 9,000
D) NONE

323. THE FINAL TAX PAYABLE IN 2009 IS-

A) P42,000
B) 25,200
C) 16,800
D) NONE

NUMBERS 324 AND 325 ARE BASED ON THE FOLLOWING INFORMATION:


ABUNDA SOLD HIS WAREHOUSE BUILDING TO ABELINDE. THE PROPERTY
WAS ACQUIRED BY HIM IN 2001 FOR P250,000. AT THE TIME OF SALE, ITS
ACCUMULATED DEPRECIATION AMOUNT TO P50,000. THE TERMS OF THE
SALE ARE AS FOLLOWS:

CASH PAID, JUNE 1, 2008 P50,000


INSTALLMENT, SEPT 1, 2008 20,000
INSTALLMENT, DEC 1, 2008 20,000
INSTALLMENT, MARCH 1, 2009 155,000
INSTALLMENT, JUNE 1, 2009 155,000

324. THE INCOME TO BE REPORTED BY ABUNDA IN 2008 IS-

A) P45,000
B) 90,000
C) 200,000
D) NONE

325. THE INCOME TO BE REPORTED BY ABUNDA IN 2009 IS-

A) P200,000
B) 155,000
C) 45,000
D) NONE

326. JOSEPH SAN JOSE SOLD A COMMERCIAL BUILDING ON OCTOBER 15,


2008 FOR P2,000,000. THE COST OF THE PROPERTY WAS P1,200,000 WHILE THE
ACCUMULATED DEPRECIATION WAS P400,000. THE TERMS OF THE SALE
WERE:

DOWN PAYMENT P300,000


BALANCE IS PAYABLE IN MONTHLY INSTALLMENTS OF P100,000
BEGINNING NOVEMBER 15, 2008 UNTIL FULLY PAID.

THE INCOME TO BE REPORTED IN 2008 –

A) P75,000
B) 300,000
C) 45,000
D) 30,000

SPECIAL TOPIC-FRINGE BENEFIT TAX

327. THE FRINGE BENEFIT TAX IS NOT IMPOSED ON-


I) RANK AND FILE EMPLOYEE
J) SUPERVISORY EMPLOYEE
K) MANAGERIAL EMPLOYEE
L) ALL EMPLOYEES

328.FRINGE BENEFIT TAX IS IMPOSED ON-

A) RANK AND FILE EMPLOYEE


B) DE MINIMIS BENEFITS
C) SUPERVISORY AND MANAGERIAL EMPLOYEES
D) FRINGE BENEFITS GRANTED FOR THE CONVENIENCE OF THE
EMPLOYER

329. WHICH OF THE FOLLOWING IS SUBJECT TO FRINGE BENEFIT TAX?-


(RPCPA)

A) COMPENSATION OF THE RANK AND FILE EMPLOYEE


B) COMPENSATION OF THE SUPERVISORY AND MANAGERIAL
EMPLOYEE
C) FRINGE BENEFIT OF THE RANK AND FILE EMPLOYEE
D) FRINGE BENEFIT OF THE SUPERVISORY OF MANAGERIAL
EMPLOYEES

330. THE FOLLOWING EARNINGS ARE SUBJECT TO FRINGE BENEFIT TAX,


EXCEPT:-(RPCPA)

A) SALARY OF RANK AND FILE EMPLOYEE


B) HOUSING NECESSARY FOR THE TRADE AND FOR THE CONVENIENCE
OF THE EMPLOYER
C) FOOD ALLOWANCE FOR THE CONVENIENCE OF THE EMPLOYER AND
NECESSARY IN THE CONDUCT OF THE BUSINESS
D) ALL OF THE ABOVE

ITEMS 331 AND 332 ARE BASED ON THE FOLLOWING INFORMATION:

331. DITSO IS EMPLOYED BY HOLY CROSS HOSPITAL AS AN AMBULANCE


DRIVER WITH A SALARY OF P4,000 A MONTH. IN ADDITION, HE IS GIVEN
MEALS WITH A MONTHLY VALUE OF P1,500 AND LIVING QUARTERS WITHIN
THE HOSPITAL COMPOUND WITH AN EQUIVALENT VALUE OF P1,000 A
MONTH

THE MONTHLY COMPENSATION INCOME OF DITSO IS-

A) P6,500
B) 4,000
C) 5,000
D) 5,500

332. IF THE BENEFITS GIVEN TO DITSO IN NUMBER 331 ABOVE IS


FURNISHED BY HIS EMPLOYER SO THAT HIS SERVICES COULD EASILY BE
AVAILED OF WHENEVER SOME PATIENTS WILL NEED THE URGENT
SERVICES OF AN AMBULANCE, HIS MONTHLY COMOENSATION INCOME IS-

A) P6,500
B) 4,000
C) 5,000
D) 5,500

333. THE FOLLOWING STATEMENTS ARE TRUE, EXCEPT:-(RPCPA)

A) FRINGE BENEFIT TAX SHALL BE TREATED AS A FINAL INCOME TAX


ON THE EMPLOYEE WITHHELD AND PAID BY THE EMPLOYER ON A
QUATERLY BASIS
B) THE GROSSED-UP MONETARYVALUE OF THE FRINGE BENEFIT IS THE
ACTUAL AMOUNT RECEIVED BY THE EMPLOYEE
C) THE GROSSED-UP MONETARY VALUE OF THE FRINGE BENEFIT SHALL
BE DETERMINED BY DIVIDING THE MONETARY VALUE OF THE
FRINGE BENEFIT BY THE GROSS MONETARY VALUE FACTOR
D) THE PERSON LIABLE FOR FRINGE BENEFIT TAX IS THE EMPLOYER,
WHETHER HE IS INDIVIDUAL, PROFESSIONAL PARTNERSHIP OR A
CORPORATION REGARDLESS OF WHETHER THE CORPORATION IS
TAXABLE OR NOT OR THE GOVERNMENT AND ITS
INSTRUMENTALITIES

334. STATEMENT 1: A FRINGE BENEFIT THAT IS EXEMPT FROM BENEFIT TAX


IS LIKEWISE EXEMPT FROM ANY OTHER FORM OF INCOME TAX

STATEMENT 2: ANY AMOUNT GIVEN BY THE EMPLOYER AS DEMINIMIS


BENEFITS TO ITS EMPLOYEES, SHALL NOT CONSTITUTE AS DEDUCTION
UPON SUCH EMPLOYER

A) STATEMENT 2
B) STATEMENT 1
C) STATEMENTS 1 AND 2
D) NEITHER STATEMENTS

335.SARAH BUKAS, MARRIED WITH THREE(3) QUALIFIED DEPENDENT


CHILDREN, A REGULAR EMPLOYEE OF CONFEDERATE, INC., RECEIVES ON
JULY 6, 2009 P30,000 AS REGULAR MONTHLY SALARY AND HALF OF HIS 13 TH
MONTH PAY AMOUNTING TO P15,000 PLUS OTHER BENEFITS SUCH AS RICE
ALLOWANCE FOR JULY OF P2,000, INCENTIVE PAY OF P20,000, HAZARD PAY
OF P1,000, OVETRTIME PAY OF P4,000 AND NIGHT SHIFT DIFFERENTIAL OF
P2,000.

COMPUTE THE INCOME SUBJECT TO WITHHOLDING TAX IN JULY

A) P57,000
B) 30,000
C) 45,500
D) 72,500

336. MAYAMAN COMPANY OWNS A FLEET OF MOTOR VEHICLES. IN 2008,


ONE OF THE CARS WHICH WAS ACQUIRED AT A COST OF P400,000 WAS
ALLOWED AS SERVICE VEHICLE BY ONE OF ITS OFFICIALS. DURING THE
YEAR, ITS BOOK VALUE AMOUNTED TO P375,000. HOW MUCH WAS THE
FRINGE BENEFIT TAX DUE THEREON?

A) P96,969
B) 18,823
C) 17,767
D) 88,235

337. BASED ON THE DATA IN NUMBER 336 ABOVE, SUPPOSE MAYAMAN


COMPANY IS JUST LEASING THE CAR THAT IS BEING USED PARTLY FOR
PERSONAL AND FOR BUSINESS PURPOSES AND IS PAYINH AN ANNUAL
RENTAL OF P100,000. THE ANNUAL FRINGE BENEFIT TAX IS-

A) P28,229
B) 23,529
C) 73,529
D) 25,760

338. IN MAY 2008, A NON-STOCK, NON-PROFIT UNIVERSITY PROVIDED A 3-


DAY VACATION TRIP TO BORACAY ISLAND TO THE UNIVERSITY’S EVP. THE
TOTAL EXPENSES INCURRED BY THE SCHOOL WAS P20,000. THE FRINGE
BENEFIT TAX IS-

A) P6,400
B) 9,412
C) 10,303
D) NONE

ITEMS 339 AND 340 ARE BASED ON THE FOLLOWING DATA:

339. XYZ CORPORATION ASSIGNED MR. PASSO ONE OF THE EMPLOYEES IN


THE HEAD OFFICE IN MANILA TO MANAGE THEIR BRANCH OFFICE IN
DAGUPAN. THE COMPANY PROVIDED FOR THE RESIDENTIAL HOUSE OF
THE MANAGER PAYING A MONTHLY RENTAL OF P34,000.

THE MONTHLY FRINGE BENEFIT TAX THEREON IS-


A) P16,000
B) 10,880
C) 25,000
D) 8,000

340. BASED ON THE SAME DATA IN NO. 339 ABOVE, THE DEDUCTIBLE
EXPENSE FROM THE GROSS INCOME OF XYZ CORPORATION IS-

A) P8,000
B) 25,000
C) 42,000
D) 34,000

NUMBERS 341 AND 342 ARE BASED ON THE FOLLOWING INFORMATION:

341. EXTRA CORPORATION FURNISHED AND GRANTED THE USE OF ITS


CONDOMINIUM UNIT TO ITS EVP. THE FAIR MARKET VALUE OF THE
PROPERTY IS P4,800,000 WHILE THE ACQUISITION COST IS P3,000,000.

THE MONTHLY FRINGE BENEFIT TAX DUE IS-

A) P2,941.18
B) 4,705.88
C) 88,235
D) 58,823.53

342. BASED ON NUMBER 341 ABOVE, THE DEDUCTIBLE EXPENSE FROM THE
GROSS INCOME OF EXTRA COPORATION IS-

A) P14,705.88
B) 4,705.88
C) 12,132.35
D) 2,941.18

343. BRAVO COMPANY PROVIDED FRINGE BENEFIT TO ITS MANAGERIAL


EMPLOYEES IN THE AMOUNT OF P136,000 AND TO ITS RANK AND FILE
EMPLOYEES AMOUNTING TO P50,000. THE DEDUCTIBLE EXPENSE BY
BRAVO COMPANY IS-

A) P186,000
B) 136,000
C) 50,000
D) 250,000

344. THE CORPORATION GAVE A BRAND NEW CAR TO ITS SALES MANAGER.
THE FRINGE BENEFIT GIVEN IS-

A) SUBJECT TO FRINGE BENEFIT TAX BASED ON THE PROVISIONS OF


THE TAX CODE
B) SUBJECT TO FRINGE BENEFIT TAX BECAUSE IT WAS GIVEN TO A
RANK-AND-FILE EMPLOYEE
C) EXEMPT FROM THE FRINGE BENEFIT TAX BECAUSE IT IS REQUIRED
BY THE NATURE OF OR NECESSARY TO THE TRADE OR BUSINESS OF
THE EMPLOYER
D) EXEMPT FROM THE FRINGE BENEFIT TAX BECAUSE IT WAS GIVEN
FOR THE CONVENIENCE OF THE EMPLOYER

345. FRANCINE CORPORATION GAVE THE FOLLOWING FRINGE BENEFITS TO


ITS EMPLOYEES:

TO SUPERVISORY EMPLOYEES P220,000


TO MANAGERIAL EMPLOYEES 120,000
TO RANK-AND-FILE EMPLOYEES 60,000

THE ENTRY TO RECORD THE ABOVE TRANSACTION IS-

A) FRINGE BENEFITS TAX 56,471


FRINGE BENEFIT EXPENSE 400,000
CASH 400,000
FRINGE BENEFIT TAX PAYABLE 56,471
B) FRINGE BENEFIT TAX 400,000
FRINGE BENEFIT TAX PAYABLE 400,000

C) FRINGE BENEFITS TAX 560,000


FRINGE BENEFIT TAX PAYABLE 560,000
D) FRINGE BENEFIT TAX EXPENSE 160,000
FRINGE BENEFIT EXPENSE 400,000
CASH 400,000
FRINGE BENEFIT TAX PAYABLE 160,000

346. IVY CORPORATION HAS THE FOLLOWING JOURNAL ENTRY ON FRINGE


BENEFITS:

FRINGE BENEFITS EXPENSE P186,000


FRINGE BENEFIT TAX EXPENSE 64,000
CASH 186,000
FRINGE BENEFIT TAX PAYABLE 64,000
BASED ON THE ABOVE ACCOUNTING ENTRY, THE AMOUNT OF FRINGE
BENEFIT GIVEN TO RANK AND FILE EMPLOYEES-

A) P64,000
B) 50,000
C) 186,000
D) 250,000

347. ADRIAN, A SUPERVISORY EMPLOYEE OF BOGBOG CORPORATION


BORROWED P50,000 FROM THE COMPANY PAYABLE IN FOUR MONTHS THRU
SALARY DEDUCTION. IF THE CORPORATION IS CHARGING 4% INTEREST
PER ANNUM ON THE LOAN, THE FRINGE BENEFIT TAX EXPENSE IS-
A) P2,000
B) 666.67
C) 627.45
D) 313.73

CHAPTER 2-TAX ADMINISTRATION, TAX RETURNS,


FILING AND PAYMENT

348. WHICH OF THE FOLLOWING STATEMENTS IS FALSE?

A) INDIVIDUAL TAXPAYERS SHALL FILE THEIR INCOME TAX RETURNS


ON OR BEFORE APRIL 15 OF EACH YEAR
B) EXTENSION OF TIME FOR FILING INCOME TAX RETURNS MAY BE
GRANTED BY THE COMMISSIONER OF INTERNAL REVENUE(CIR)
C) SECOND INSTALLMENT IN THE PAYMENT OF INCOME TAX MUST BE
PAID ON OR BEFORE JULY 15 OF THE SAME YEAR
D) IN PLACES WHERE THERE ARE NO ACCREDITED BANKS, THE
RETURN CAN BE FILED WITH THE MUNICIPAL TREASURER WHERE
THE PLACE OF BUSINESS IS LOCATED

349. THE INCOME TAX RETURN MUST BE FILED IN-(RPCPA)

A) DUPLICATE
B) TRIPLICATE
C) QUADRUPLICATE
D) QUINTUPLICATE

350. ONE OF THE FOLLOWING IS NOT AN ATTACHMENT TO THE INCOME


TAX RETURN OF A COMPANY WHOSE GROSS QUARTERLY SALES IS
P1,500,000.
A) CERTIFIED BALANCE SHEETS
B) PROFIT AND LOSS STATEMENTS
C) SCHEDULE OF INCOME PRODUCING PROPERTIES
D) SUMMARY OF TAXES PAID DURING THE TAXABLE YEAR

351. THE INCOME SUBJECT TO THIS WITHHOLDING TAX IS NOT INCLUDIBLE


IN THE COMPUTATION OF TAXABLE INCOME-

A) WITHHOLDING TAX ON COMPENSATIONN INCOME


B) CREDITABLE WITHHOLDING TAX
C) FINAL WTHHOLDING TAX
D) ALL OF THE ABOVE

352. WHICH OF THE FOLLOWING INDIVIDUAL TAXPAYERS IS NOT


REQUIRED TO FILE AN INCOME TAX RETURN?

A) A CITIZEN RECEIVING COMPENSATION AND BUSINESS INCOME


B) AN EMPLOYEE WHOSE SALARY GRADE IN THE GOVERNMENT IS 2
C) AN EMPLOYEE RECEIVING PURELY COMPENSATION INCOME FROM
TWO EMPLOYERS
D) AN INDIVIDUAL RECEIVING PURELY COMPENSATION INCOME FROM
ONE EMPLOYER, THE INCOME TAX OF WHICH HAS BEEN WITHHELD
CORRECTLY, BUT WHOSE SPOUSE IS REQUIRED TO FILE AN INCOME
TAX RETURN

353. ONE OF THE FOLLOWING INDIVIDUALS IS NOT SUBJECT TO


WITHHOLDING TAX ON COMPENSATION

A) AN INDIVIDUAL WHO DERIVES COMPENSATION FROM TWO OR


MORE EMPLOYERS AT ANY TIME DURING THE TAXABLE YEAR
B) AN INDIVIDUAL WHO HAS COMPENSATION AND BUSINESS INCOME
C) AN INDIVIDUAL WHOSE GROSS INCOME IN A YEAR IS MORE THAN
P220,000
D) AN INDIVIDUAL WHOSE MONTHLY GROSS COMPENSATION INCOME
IS P8,000

354. THE SIGNATURE OF THE FOLLOWING PERSONS MUST APPEAR IN THE


INCOME TAX RETURN OF A CORPORATION, EXCEPT:-(RPCPA)

A) PRESIDENT
B) GENERAL MANAGER
C) TREASURER
D) INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

355. THE BOOKS OF ACCOUNTS OR RECORDS OF THE TAXPAYER MUST NOT


BE KEPT IN THE FOLLOWING LANGUAGE-
A) FILIPINO
B) CHINESE
C) ENGLISH
D) SPANISH

356. ONE OF THE FOLLOWING IS REQUIRED TO ISSUE RECEIPTS

A) THOSE WHOSE SALES ARE VALUED AT P25 OR MORE


B) MARKET VENDORS SELLING ECLIUSIVELY VEGETABLES, DOMESTIC
MEAT, FRUITS AND OTHER FOOD PRODUCTS
C) WHEN THE VALUE OF THE MERCHANDISE SOLD IS P5
D) VENDORS GIVEN EXEMPTION BY THE COMMISSIONER OF INTERNAL
REVENUE

357. STATEMENT 1: WHERE DONOR’ S TAX HAS BEEN PAID ON PROPERTY


RECEIVED BY A MINOR FROM A LIVING PARENT, INCOME ON SUCH
PROPERTY SHALL BE INCLUDED IN THE INCOME TAX RETURN OF THE
PARENT

STATEMENT 2: THE INCOME TAX RETURN OF A DISABLE PERSON MAY BE


MADE BY A PERSON CHARGED WITH THE CARE OF HIS PROPERTY

STATEMENT 1 STATEMENT 2
A) TRUE TRUE
B) FALSE FALSE
C) FALSE TRUE
D) TRUE FALSE

358. HOW LONG MUST THE BOOKS OF ACCOUNT BE KEPT?

A) UNTIL THE DEADLINE FOR FILING INCOME TAX RETURN


B) FROM THE CURRENT TO THE LAST DAY OF THE NEXT TAXABLE
YEAR
C) FOR A PERIOD BEGINNING FROM THE LAST ENTRY IN EACH BOOK
UNTIL THREE YEARS
D) FOR A PERIOD BEGINNING FROM THE LAST ENTRY IN EACH BOOK
UNTIL THE LAST DAY PRESCRIBED WITHIN WHICH THE
COMMISSIONER IS AUTHORIZED TO MAKE AN ASSESSMENT

359. BEAUTY CORPORATION HAD A NET INCOME PER BOOKS ON


DECEMBER 31, 2008 OF P220,000. INCLUDED IN THE NET INCOME ARE THE
FOLLOWING ITEMS:
-DIVIDEND INCOME FROM A DOMESTIC CORPORATION, P50,000
-INTEREST ON BANK DEPOSIT (NET OF TAX), P5,000 AND
-PROVISION FOR BAD DEBTS, P35,000
THE TAXABLE INCOME OF THE CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 2008-

A) P130,000
B) 200,000
C) 220,000
D) 165,000

360. THE FOLLLOWING 2009 DATA PERTAINS TO ANALYN COMPANY, A


DOMESTIC CORPORATION:

NET SALES P1,850,000


COST OF GOODS SOLD 1,025,000
GROSS PROFIT 825,000
SUNDRY INCOME 70,250
GROSS INCOME 895,250
OPERATING EXPENSES AND OTHER CHARGES 260,000
NET INCOME PER BOOKS 635,250

ADDITIONAL INFORMATION:

1.INCLUDED IN THE SUNDRY INCOME ARE THE FOLLOWING:


-DIVIDENDS FROM DOMESTIC CORPORATION P42,500
-DIVIDENDS RECEIVED FROM RESIDENT FOREIGN CORP 15,000
-PROCEEDS FROM SALE OF COMPANY ASSETS 4,750

2.INCLUDED UNDER OPERATING AND OTHER CHARGES:


-DONATION TO TYPHOOIN VICTIMS P12,000
-PROVISION FOR DOUBTFUL ACCOUNTS 17,500
-LOCAL TAXES AND LICENSES 8,620
-PREMIUMS PAID ON INSURANCE OF BUILDINGS 4,500

3.THE COMPANY WROTE OFF IN 2008 AGAINST ALLOWANCE FOR BAD


DEBTS UNCOLLECTIBLE RECEIVABLES AMOUNTING TO P15,000 WHICH WAS
ALLOWED AS DEDUCTION FROM GROSS INCOME. THIS AMOUNT WAS
RECOVERED IN 2009.

4. IN OCTOBER 2008, ONE OF THE COMNPANY’S BUILDINGS WAS TOTALLLY


DESTROYED BY FIRE WHEN THE BOOK.VALUE WAS P260,000. THE LIABILITY
OF THE INSURANCE COMPANY WAS SETTLED IN 2009 AND ANALYZE
COMPANY WAS PAID P150,000.

THE INCOME TAX PAYABLE IN 2009 BY ANALYN CORPORATION IS-

A) P158,320
B) 184,537.50
C) 35,763.50
D) 158,175

361. THE INCOME TAX RETURN(ITR) OF JANET, SINGLE, FOR TAXABLE YEAR
2009, REPORTED A TAXABLE INCOME OF P520,240. A CAREFUL SCRUTINY
REVEALED THAT SOME ITEMS INCLUDED AS INCOME AND EXPENSES ARE
THE FOLLOWING:

INCOME:

COMPENSATION INCOME P180,000


CASH DIVIDEND 122,800
STOCK DIVIDENDS 73,500
PROPERTY DIVIDENDS 27,000
GAMBLING WINNINGS 23,100
DONATION RECEIVED 16,000
GAIN ON SALE OF CAPITAL ASSETS-15 MONTHS 8,000
GAIN ON SALE OF HIS VACANT LOT 120,000
INCOME ON RICE LAND 60,000
TOTAL 630,400

EXPENSES:

REAL ESTATE TAX P3,500


COMMUNITY TAX 945
SURCHARGE FOR LATE FILING OF 2008 ITR 12,000
INTEREST ON PERSONAL LOAN 24,000
GAMBLING LOSSES 32,000
PERSONAL AND LIVING EXPENSES 50,000
LOSS ON SALE OF CAPITAL ASSETS-8.5 MONTHS 5,000
LOSS ON CROPS DUE TO FLOOD 27,250
TOTAL 154,695

THE CORRECT AMOUNT OF JANET’S TAXABLE INCOME IS-

A) P246,940
B) 236,840
C) 66,040
D) 256,840

TRUE OR FALSE QUESTIONS

1.THE BASIC PERSONAL EXEMPTION IS P50,000 REGARDLESS OF WHETHER


THE INDIVIDUAL TAXPAYER IS SINGLE, MARRIED OR HEAD OF THE FAMILY.
2.A BENEFACTOR OF A SENIOR CITIZEN CAN CLAIM A BASIC PERSONAL
EXEMPTION OF P25,000.

3.CORPORATIONS ARE ALLOWED TO CLAIM OPTIONAL STANDARD


DEDUCTION.

4.THE OPTIONAL STANDARD DEDUCTION ON INDIVIDUAL IS 40% OF GROSS


INCOME.

5. THE MINIMUM CORPORATE INCOME TAX (MCIT) IS 2% OF GROSS INCOME


ON SALES.

6. A SALE OF SHARES WHICH ARE LISTED AND TRADED THROUGH THE


LOCAL STOCK EXCHANGE IS SUBJECT TO INCOME TAX.

7. IN COMPUTING THE CAPITAL GAINS OR LOSSES ON A SALE OF SHARES


OF STOCK WHICH WERE ACQUIRED THROUGH PURCHASE, THE COST BASIS
SHALL BE THE ACTUAL PURCHASE PRICE PLUS ALL COSTS OF ACQUISITION
SUCH AS COMMISSIONS, DOCUMENTARY STAMP TAXES, TRANSFER TAXES,
ETC.

8. THE WASH SALE PROHIBITION DOES NOT APPLY IN THE CASE OF A


DEALER IN STOCK IF THE SALE OR OTHER DISPOSITION OF STOCK IS MADE
IN THE ORDINARY COURSE OF THE BUSINESS OF SUCH DEALER.

9. PERSONS DERIVING CAPITAL GAINS FROM THE SALE OR EXCHANGE OF


LISTED SHARES OF STOCK NOT TRADED THROUGH THE LOCAL STOCK
EXCHANGE SHALL FILE A RETURN WITHIN 30 DAYS AFTER EACH
TRANSACTION

10. THE CEILING OF DE MINIMIS BENEFITS ON RICE ALLOWANCE IS ONE


SACK OF 50 KILOGRAMS RICE OR CASH OF P1,200 PER MONTH.

11. AN EMPLOYEE IN THE PUBLIC SECTOR RECEIVING COMPENSATION


INCOME EQUIVALENT TO SALARY GRADE 5 AND BELOW ARE EXEMPT
FROM WITHHOLDING TAX ON WAGES.

12. MINIMUM WAGE EARNERS ARE NOT REQUIRED TO FILE AN INCOME TAX
RETURN.

13. HOLIDAY PAY, OVERTIME PAY, NIGHT SHIFT DIFFERENTIAL PAY AND
HAZARD PAY RECEIVED BY AN EMPLOYEE WHO IS RECEIVING A MONTHLY
BASIC PAY OF P20,000 ARE EXEMPT FROM INCOME TAX.
14. THE COST OF CONSTRUCTION OF ADDITIONAL FACILITIES MAY BE
CAPITALIZED OR DEDUCTED AS AN EXPENSE BY A PROPRIETARY
EDUCATIONAL INSTITUTION, AT THE OPTION OF THE BIR.

15. FOR PURPOSES OF HEALTH AND/OR HOSPITALIZATION INSURANCE, THE


TERM “TOTAL FAMILY INCOME” INCLUDES PRIMARY INCOME AND OTHER
INCOME FROM SOURCES RECEIVED ALL MEMBERS OF THE NUCLEAR
FAMILY, I.E. FATHER, MOTHER, UNMARRIED CHILDREN LIVING TOGETHER
AS ONE HOUSEHOLD OR A SINGLE PARENT WITH CHILDREN. A SINGLE
PERSON LIVING ALONE IS CONSIDERED AS A NUCLEAR FAMILY.

16. OTHER BENEFITS SUCH AS 13 TH MONTH PAY AND PRODUCTIVITY


INCENTIVE PAY ARE NOT INCLUDED IN THE COMPUTATION OF MINIMUM
WAGE.

17. FRINGE BENEFITS RECEIVED BY MANAGERIAL EMPLOYEES ARE NOT


SUBJECT TO INCOME TAX BUT THEY ARE SUBJECT TO FRINGE BENEFIT
TAX.

18. THERE IS AN INCOME TAX ON A SALE OF A VACANT LOT (CAPITAL


ASSET) EVEN IF THERE IS A LOSS ON THE SALE OF THE PROPERTY.

19. AS A RULE, STOCK DIVIDENDS ARE SUBJECT TO INCOME TAX.

20. EXPENSES FOR THE ORGANIZATION OF CORPORATION SUCH AS


INCORPORATION FEES, ATTORNEY’S FEES, AND ACCOUNTANT’S FEES ARE
DEDUCTIBLE FROM GROSS INCOME.
21. COMPENSATION INCOME EARNERS ARE ALLOWED TO USE FISCAL YEAR
AS ACCOUNTING PERIOD.

22. VALUE-ADDED TAX IS DEDUCTIBLE FROM GROSS INCOME.

23. DEFERRED PAYMENT METHOD OF REPORTING INCOME IN


INSTALLMENT IS AVAILABLE TO A TAXPAYER IF THE INITIAL PAYMENTS DO
NOT EXCEED 25% OF THE SELLING PRICE.

24. PROCEEDS OF LIFE INSURANCE ARE EXEMPT FROM INCOME TAX IF THE
DESIGNATED BENEFICIARY IS IRREVOCABLE.

25. TAX SPARING CREDIT APPLIES ONLY TO RESIDENT FOREIGN


CORPORATIONS.

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