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1. Nico, Vice-President of JJ Super Fit Corporation was given a car by his employer, Mr. JJ Trinidad.

The cost of the car given to Nico was P900,000. The fringe benefits tax that Nico is required to
pay is:
a. P423,529 c. P900,000
b. P288,000 d. P0

2. One of the following is not correct for deductibility of casualty losses from gross income:
a. It must arise from fire, storm, or other casualty, robbery, theft, or embezzlement.
b. It must not be compensated by insurance or any form of indemnity.
c. A declaration of loss by casualty should be filed with the BIR.
d. It is of property owned by the taxpayer, whether used in business or not.

3. Jim, a Filipino citizen, migrated to the United States some eight (8) years ago and got a
permanent resident status or green card. He should pay his Philippine income taxes on:
a. The gains derived from the sale in California, U.S.A. of jewelry he purchased in the
Philippines.
b. The proceeds he received from a Philippine insurance company as the sole beneficiary of life
insurance taken by his father who died recently.
c. The gains derived from the sale in New York Stock Exchange of shares of stock in PLDT, a
Philippine corporation.
d. Dividends received from a two year old foreign corporation whose gross income was
derived solely from Philippine sources.

4. The following data pertain to installment sales of personal property made by Dina Bale, who
regularly sells in installment, in his retail furniture store.
Equal Collection in
Year of Sale Installment Sale Profit
2016
2013 P50,000 15,000 10,000
2014 P100,000 40,000 20,000
2015 P150,000 75,000 40,000
These sales were regularly made in installment by Dina Bale to her customers. Under installment
method, Dina should report gross profit for 2016 of
a. P31,000 c. P86,000
b. P75,000 d. P130,000

5. Hermes received a final assessment notice (FAN) from the BIR on December 20, 2015. He
submitted his protest and the supporting documents within the time prescribed by the Law.
After 180 days, the subsequent step/s available to him shall be:
I. Elevate the case on appeal to the CTA, alleging inaction of the CIR, within 30 days from the
180th day since he submitted the supporting documents on his protest.
II. Wait for the decision of the Commissioner of Internal Revenue (CIR) and if adverse, appeal
the case before the CTA within thirty (30) days.
a. I only c. I and II
b. II only d. I or II

6. In our jurisdiction, which of the following statements may be erroneous?


a. Taxes are pecuniary in nature.
b. Taxes are assessed according to a reasonable rule of appointment.
c. Taxes are levied by the executive branch of the government.
d. Taxes are imposed on persons and property within the territorial jurisdiction of a State.

7. On October 1, 2018, Pastrana Co. leased a new residential house for the use of its general
manager. The rent agreed upon was P136,000 per month. The amount of the fringe benefit tax
monthly is:
a. P68,000 c. P36,615
b. b. P100,000 d. P32,000
8. Miriam Santiago, a business woman, incurred the following losses in 2006:
1. Wagering losses at Casino Filipino P86,000
Note: Wagering winnings amounted to P14,000
2. Loss on sale of company car to Red Co. 54,000
Note: Miriam Santiago owns 60% of the stocks of Red Co.
3. Loss on sale of office computers to Miriam Sto. Domingo, 40,000
cousin of Miriam Santiago
The deductible loss of Mirriam Santiago is:
a. P190,000 c. P54,000
b. b. P104,000 d. None

9. Which is subject to final tax?


a. Share of the distribute net income of a general professional partnership
b. Winnings not exceeding P10,000
c. Prizes not exceeding P10,000
d. Interest income from foreign bank deposits

10. Mr. Quoriput signified his intention to be taxed at 8% income tax rate on gross sales in his 1"
Quarter Income Tax Retun. He has no other source of income. His total sales for the first three
(3) quarters amounted to P3,000,000.00 with 4th quarter sales of P3,500,000.00.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter


(8% Rate) (8% Rate) (8% Rate)
Total Sales 500,000 500,000 2,000,000 3,500,000
Less: Cost of Sales 300,000 300,000 1,200,000 1,200,000
Gross Income 200,000 200,000 800,000 2,300,000
Less: Operating Expenses 120,000 120,000 480,000 720,000
Taxable Income 80,000 80,000 320,000 1,580,000

Compute for the Annual Income Tax Payable


a. P 289,200.00 c. P 509,200.00
b. P 40,000.00 d. P 260,000.00

THE NEXT ITEM(S) IS/ARE BASED ON THE FOLLOWING


Bryant leased a land to Jose for a period of 11 years starting January 1, 2015 at an annual rental of P12.000.
Observing the provisions of the contract, Jose constructed a building which shall become the property of
Bryant at the expiration of the lease. The construction was completed on January 1, 2018 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 to the government the P1,500 annual real property
tax on the land starting in 2015.

11. Assuming that on January 1, 2015, Jose paid P24.000 to Bryant covering the lease contract for
two years, how much income is to be reported by Bryant in 2012?
a. 12,000
b. 13,500
c. 24,000
d. 25,500

ANS: D
Gross receipts from rental P24,000
Real property taxes assumed by lessee 1,500
Income to be reported by lessor 25,500
Taxes and other obligations of the lessor which are assumed by the lessee are income to the lessor.
Rentals are taxable in the year they are received, if prepaid, irrespective of the accounting method being
used by the taxpayer. Thus, advance payments of rental are to be reported by the lessor in the year of receipt.
REF: Ampongan 2014
NAR: Bryant

12. How much income is to be reported by Bryant in 2018 under the outright method?
a. 13,500
b. 1,500
c. 1,013,500
d. 1,000,000

ANS: C
Fair market value of improvement 1,000,000
Annual rental 12,000
Taxes assumed by lessee 1,500
Income to be reported by lessor 1,013,500
Under the Outright Method of reporting income on leasehold improvement, the lessor shall report as income
the fair market value of the improvement in the year of completion.
REF: Ampongan 2014
NAR: Bryant

13. How much income is to be reported by Bryant in 2018 under the spread-out method?
a. 13,500
b. 1,500
c. 1,013,500
d. 88,500

ANS: D
Annual rental P12,000
Taxes assumed by lessee 1,500
Income on leasehold improvement:
Cost P1,000,000
Less: Accumulated depreciation
(1,000,000/20) x 8 years 400,000
Book value, end of lease 600,000
Income in 2015 on improvements (600,000/8) 75,000
Income to be reported in 20:5 88,500
REF: Ampongan 2014
NAR: Bryant

14. How much is the deductible expense of the lessee in 2018


a. 138,500
b. 63,500
c. 125,000
d. 13,500

ANS: A
Taxes assumed by lessee 1,500
Depreciation of building (1,000,000/8) 125,000
Deductible expense 138,500
The leasehold improvement shall be depreciated over the remaining tern: of the lease or the life of the
improvement, whichever is shorter.

15. Ms. Ferrer , a Financial Comptroller of JAB Company, earned annual compensation in 2018 of
P1,500.000.00, inclusive of 13 month and other benefits in the amount of P120,000.00 but net of
mandatory contributions to SSS and Philhealth. Aside from employment income, he owns a
convenience store, with gross sales of P2,400,000. His cost of sales and operating expenses are
P1,000,000.00 and P600,000.00, respectively, and with non-operating income of 100,000.00

His tax due for 2018 shall be computed as follows if he opted to be taxed at eight percent (8%)
income tax rate on his gross sales for his income from a business.
a. P 513,000 c. P 540,000
b. P 589,200 d. P 520,000

16. His tax due for 2018 shall be computed as follows if he did not opt for the eight percent (8%)
income tax based on gross sales/receipts and other non-r operating income.
a. P 513,000 c. P 540,000
b. P 589,200 d. P 520,000

17. Donations were made on January 30, 2018 at P2,000,000; on March 30, 2018 at P1,000,000; and
August 15, 2018 at P500,000. How much is the donor’s tax due on August 15, 2018?
a. P 210,000 c. P 30,000
b. P 195,000 d. P 90,000

Date of donation Amount Donor's Tax

1. January 30, 2018 P2,000,000

January 30, 2018 donation 2,000,000


Less: Exempt Gift (250,000)

Tax Due / Payable on the January Donation = 1,750,000 P105,000

2. March 30, 2018 1,000,000

March 30, 2018 donation 1,000,000

Add: January 30, 2018 donation 2,000,000

Less: Exempt Gift (250,000)

Total = 2,750,000

Tax Due Thereon 165,000

Less: Tax due/paid on January donation 105,000

Tax Due / Payable on the March Donation 60,000

3. August 15, 2018 500,000

August 15, 2018 500,000

Add: January 2018 donation 2,000,000

Add: March 2018 donation 1,000,000

Less: Exempt Gift (250,000)

Total =3,250,000

Tax Due Thereon 195,000

Less: Tax due/paid on Jan/March donation (165,000)

Tax Due / Payable on the August Donation 30,000

18. Statement 1. A general professional partnership is exempt from income tax,


but a partner will be taxable on his share in the partnership net income, that he will
consolidate with his own income from other sources.
Statement 2. A partnership that is not a general professional partnership is
taxable as a corporation, and a partner will report his spare in the partnership net
income, as dividend income, whether actually received or not.

(a) Both statements are correct;


(b) Both statements are wrong;
(c) The first statement is correct but the second statement is wrong;
(d) The first statement is wrong but the first statement is correct.

19. Messrs, A and B inherited an income esming property. In 2018, without divi¬
ding the property, they had a net receipts (gross receipts less costs and
expenses) of P230.000 which they deposited in a Joint bank account. !n 2018, they
used the money in the bank to purchase another income-producing
property. From the net receipts of P500.000 in 2019 from the two properties,
Messrs. A and B each withdrew P100,000. Messrs. A end B are brothers.
Which of the following statements is wrong?
(a) in 2019, Mr. A and Mr. B each had a net receipts from the properties,
taxable to each as income of individual taxpayers;
(b) The income of P500.000 in 2019 is income of a partnership, taxable as
income of a corporation;
(c) in 2019, Mr, A and Mr. B each had an net receipts of P250.000, taxable as
income of an individual:
(d) In 2019, Mr. A and Mr. B each had a net receipts of P100.000, taxable as
income of an individual.

20. in 2018, Mr, X and Miss Y inherited income-producing properties from their
mother with a reported value of PI,000,000 to the court and the Bureau of
Internal Revenue, and on which the estate tax was paid. The properties
remained registered in the name of the mother, but the net receipts of P40.000
rfom the property was deposited in a joint account of Mr. X and Miss Y. in
2019, the property had a net receipts of P70.000, from which each withdrew Pi
5,000. in the same year, they sold the property for P3,000,000. Which of the
following statements is wrong?
(a)Mr. X and Miss Y in 2013 each had gross receipts (income) of P20.000
(1/2 of P40.000) from the property, as individual taxpayers;
(b) Mr. X and Miss Y became an entity taxable as a corporation beginning
2019;
(c) Mr. X and Miss Y in 2016 each had a net receipts of P35,000 from the
property, as individual taxpayers;
(d) Mr. X and Miss Y each had a capital gain tax of on a selling
price of F1,500,000.

21. A Go. is an owner of a large tract of land. B Co. is a construction company.


A Co. and B Co, entered into a consortium under which A Co. will contribute
the land, and B Co. will construct subdivision houses on it. A Co. 8 Co. will
divide the property (land and houses) between them. A Co. and B Co. will sell
their respective shares in the developed property. Which statement is wrong?
(a) A Co. and B Co. do not constitute a taxable entity on the project;
(b) A Co. and B Co. are not be taxable on their allocated shares (in land and
property) in the developed property;
(c) A Co. and B Co. is one taxable entity on the sale of all land and houses
covered by the consortium agreement;
(d) A Co, and B Co. are taxable on the sale of the land and houses allocated
to them, as separate taxpayers;
22. Assuming Senator Bobadilla filed in the Senate a substitute e-vat bill "in anticipation" of its receipt of
the bill from the House. The proposal is totally different from the version of the lower house. Which of
the following statements will justify the filing of a substitute bill by Honorable Senator Bobadilla?
I. To insist that a revenue statute not only the bill which initiated the legislative process culminating in
the enactment of the law - must substantially be the same as the House bill would be to deny the
Senate's power not only to "concur with amendments" but also to "propose amendment."
Il. lt would be to violate the coequality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.
Given the power of the Senate to propose amendments, it can propose its own version even with
respect to bills which are required by the Constitution to originate in the House.
III. Filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House is not
prohibited under the Constitution, so long as the action by the Senate as a body is withheld pending
receipt of the House bill.
a. I only c. I, II and III
b. II only d. None of the above

23. The deferred payment method of reporting income on a deferred payment sale is available to a taxpayer if, there
being a requirement of the law on the ratio of initial payments to the selling price, the initial payments:
a. Exceed 25% of the selling price;
b. Do not exceed 25% of the selling price;
c. Regardless of the ratio of initial payments to the selling price;
d. Do not exceed 25% of the contract price.

24. Mr. CA is an art dealer and investor in share of stock of domestic corporations. He had the following transactions
in a year:
(a) Sale of a painting masterpiece with a cost of P500,000 for P2,500,000;
(b) Sale directly to a buyer of shares of stock held as investment with a cost of P150,000 for P320,000;
(c) Sale of a painting with a cost of P100,000 for P200,000 and donation of the proceeds of the sale to a child.

Which of the following statements is wrong?


a. The sale of a painting masterpiece is a sale of an ordinary asset;
b. The sale of shares of stock is a sale of a capital asset;
c. The sale second painting is a sale of an ordinary asset;
d. All the gains shall be reported in the income tax return at the end of the year.

25. Mr. A is a dealer of household furniture regularly selling on installments. He made a sale of a bedroom set, with a
cost to him of P4,000, for P10,000, receiving as down payment P1,000 on the date of sale on December 2012,
and P1,500 the day after, and monthly thereafter at P2,500.

The gross income to report on the installment method in 2013 is:


a. P4,500; c. P7,500;
b. P0; d. P1,500.
26. Which gain is exempt from income tax?
a. Gain to a stockholder or security holder when in a merger or consolidation he received from the absorbing
corporation shares only.
b. Gain to the absorbed corporation in a merger of consolidation when the absorbed corporation received only
stock of the absorbing corporation;
c. Gain to a transferor in a transfer of property to a corporation for stock only of the corporation, and as a result
of the transfer the transferor gained control of the corporation;
d. In a sale of a principal residence by an individual when all or part of the proceeds of the sale are invested
by in acquiring a new principal residence

27. A Filipino citizen derived a dividend income on his shares of stock of an American corporation in the United
States. The United States federal government imposed an income tax on it. Which of the following statements
is correct?
a. There is double taxation;
b. The United States income tax payment cannot be claimed as a deduction from gross income;
c. The United States income tax payment can be claimed as tax credit without any limitation on the amount of
such tax credit;
d. The United States income tax payment can be claimed as tax credit, but subject to limitation on the amount
of such tax credit.

28. Double taxation in its general sense means taxing the same subject twice during the same taxing
period. In this sense, double taxation
a. Violates substantive due process.
b. Does not violate substantive due process.
c. Violates the right to equal protection.
d. Does not violate the right to equal protection.

29. The least source of tax laws:


a. Statutes c. Revenue regulations
b. Presidential decrees d. Tax treaties or conventions

30. In cases of deductions and exemptions on income tax returns, doubts shall be resolved:
a. Strictly against the taxpayer; c. Liberally in favor of the taxpayer;
b. Strictly against the government; d. Liberally in favor of the employer.

31. The following are the differences between the Power of Taxation and the Power of
Eminent Domain, except:
Power of Taxation Power of Eminent Domain
a. Enforced proportionate contribution Property to be taken is for public use
b. Government has no obligation to pay Gov't is a debtor of the property taken
c. It operates in a community It operates on an individual
d. Attribute of sovereignty Fundamental power

Answer: A

“D” is the similarity between the two powers described above.


32. The Congress enacted a new law, known as Expanded Value Added Tax Law. An association
of taxpayers questions the constitutionality of this law on the ground that it did not originate
exclusively in the House of Representatives as required by the Constitution, because it is in
fact the result of the consolidation of two distinct bills, one from the House of
Representatives and the other from the Senate. Is the vat law unconstitutional?
a. Yes, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt,
bills of local application, and private bills, shall originate exclusively in the House of
Representatives.
b. Yes, because the Senate has no authority to propose or concur any amendments with the
revenue or tax bill proposed by House of Representatives.
c. No, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt,
bills of local application, and private bills, shall be initiated by the Senate.
d. No, because it is not the law but the revenue bill which is required by the constitution to
originate exclusively in the House of Representatives and insisting otherwise would violate
the coequality of legislative power of the two houses of Congress and in fact would make the
House superior to the Senate.

Answer: D
Use the following data for the next two (2) questions:
Ana, a resident citizen of the Philippines, provided the following data for year current taxable year:
Gross income from business P700,000
Business Expenses 300,000
Royalty from books 40,000
Gain on direct sale to buyer of shares of stock of a domestic corporation
held as capital asset 70,000
Loss on sale of land in the Philippines held as capital asset with cost of
P1,500,000 when the zonal value is P1,200,000 500,000

27. Assuming the taxable year is 2017, how much is the total income tax expense of Ana?
a. P116,500
b. P207,500
c. P159,500
d. P156,000

Answer: C

Solution:
Basic Income Tax P80.000***
Final Tax on Passive Income (40,000 x 10%) 4,000
CGT on shares of stock (P70.000 x 5%) 3,500
CGT on real properties (P1.2M x 6%) 72,000
SP = Cost - Loss = P1.5M - .5M = P1M
ZV-P1,200,000
TOTAL Income Tax Expense P159,500

Gross income from business 9700,000


Business Expenses (300,000)
Basic personal exemption (50,000)
Taxable Net Income 9350,000
Tax Due; old graduated rate
[950,0000 + (9100,000 x 30%)] 980,000"

INCOME TAX EXPENSE = basic income tax + FWT on passive income + CGTaxes

28. Assuming the taxable year is 2018, how much is the total income tax expense of Ana?
a. P116,500
b. P207,500
c. P159,500
d. P156,000

Answer: A

Solution:
Basic Income Tax P30,000"
Final Tax on Passive Income (40,000x10%) 4,000
CGT on shares of stock (P70,000x 15%) 10,500
CGT on real properties (P1,2M x 6%) 72,000
SP = Cost - Loss = P1.5M - .5M = P1M
ZV = P1,200,000
TOTAL Income Tax Expense P116,500

Gross income from business P700,000


Business Expenses (300,000)
Basic personal exemption NA
Taxable Net Income P400,000
Tax Due (TRAIN Law) P30,000**

31. The taxpayer is a corporation


Gross income from business P15,000,000
All deductions (except contributions) 10,000,000
Contributions (deductible in full) 20,000
Taxable income?

Answer/Sokition.
Gross income from business P15,000,000
Less:
Questions and Answers, Problems and Solutions in Taxation SO

All other deductions P10,000,000


Contributions 20.000 10,020,000
Taxable income P 4,980,000QA-PS 13.

33. Mr. 2 died single,


Mr. A died married, with the following properties:
Family home P15,000,000
Other real properties 3,000,000
Personal properties 500,000
Unpaid obligations:
Funeral expenses 1,000,000
Medical expenses 3.000.000
Judicial expenses 2.000.000
How much was the net taxable estate?

Answer/Solutlon.

Family home P15,000,000


Other real properties 3,000,000
Personal properties 500,000
Gross estate P18,500,000
Deductions:
Standard deduction P5,000,000
Family home 10,000,000 15,000.000
Net taxable estate Pi 3,500,000QA-PS-2.

34. Rudolfo, a citizen of the Philippines and resident of Bacolod City, died testate on May 10, 2015. Among his
gross estate ars properties inherited from his de¬ ceased father who died on April 4, 2012. What percentage of
deduction will be used in computing the amount of vanishing deduction?
(a) 80% of the value taken as basis for vanishing deduction;
(b) 100% of the value taken as basis for vanishing deduction;
(c) 60% of the value taken as basis for vanishing deduction;
(d) 40% of the value taken as basis for vanishing deduction.
(CPA Examination question)
Answer/Solution: d

35. Gaby, a Japanese residing in the Philippines, bought garments from ABC Corp., a domestic
corporation, and exported the same to Japan. Total value of export is P100.000. VAT (output tax) due on the
transaction is:
(a) P10,000;
(b) P 5,000;
(c) None, because 0% applies;
(d) None, because the sale is exempt from VAT.

Answer/SoMon: d
Since Gaby is not a VAT-registered person (he is not in business) the
exportation is exempt from the value-added tax. Total value of export does hot mean the export selling price.
36, A VAT seller of services had the following data in a month;

37. Mrs, Evangelista owns a parcel of land worth P500,000 which was inherited
from her father in 2009 when it was worth P300.000. Her father purchased it in 2017
for P100,000. If Mrs. Evangelista transfers the parcel of land to her wholly
owned corporation in exchange for shares of stock of said corporation worth
P450.000, Mrs, Evangelista’s taxable gain is;
(a) Zero; (b) P50.000; (c) P150,000; (d) P350,000.
(CPA Examination question)
The author changed the year in the original problem.

Answer/Sotution. a

This is a simple exchange of property. Mrs. Evangelista already had control of


the corporation at the time of transfer so that the rules on “transfer to controlled
corporation” cannot apply.
1. In filing the estate tax return, a CPA Certified is required when:
a. Gross estate exceeds P2,000,000 c. Gross estate exceeds P200,000
b. Gross estate reaches P20,000 d. Gross estate reaches P2,000,000

2. Which of the following is deductible from the gross estate?


a. income tax paid on income received after death;
b. Property taxes not accrued prior to death;
c. Estate tax paid to a foreign country;
d. Donor's tax accrued prior to death.

3. Rudolfo, a citizen of the Philippines and resident of Bacolod City, died testate on May 10, 1991. Among his
gross estate are properties inherited from his deceased father who died on April 4, 1988. What percentage
of deduction will be used in computing the amount of vanishing deduction?
a. 80% of the value taken as basis for vanishing deduction;
b. 100% of the value taken as basis for vanishing deduction;
c. 60% of the value taken as basis for vanishing deduction;
d. 40% of the value taken as basis for vanishing deduction.

4. Decedent was a citizen of the Philippines who was single at the time of death, with properties and charges
thereon:
Properties:
Inherited two and one-half years ago:
Property outside the Philippines P300,000
Property in the Philippines
Fair market value when inherited 650,000
Fair market value at death 700,000
Mortgage on the property when inherited 150,000
Mortgage on the property at death 100,000
Property acquired thru own labor 2,000,000
Charges:
Ordinary deductions from the gross estate 390,000

Vanishing deduction?
a. P522,000; c. P313,200;
b. P417,600; d. P208,800.

5. Which statement is true?


a. A single person who is not a head of family may not have a deduction for family home;
b. There can be a deduction for two family homes if their aggregate value does not exceed P10,000,000;
c. Deduction may be claimed for a family home of a non-resident citizen of the Philippines located outside the
Philippines;
d. A family home is always conjugal/community property.

6. Mr. Ramon Asuncion, a citizen and resident of the Philippines, died leaving the following properties:
Real and personal properties P3,000,000
Land and building inherited from the father 1.5 years ago
(with a fair market value at that time of P1,500,000) 2,000,000
Car, purchased with cash received as gift from the mother
during the year 500,000
Cash (including P500,000 received by inheritance from the father) 1,500,000
Claims against the estate 600,000
Unpaid mortgage on the land and building inherited
(from an original of P600,000 when inherited) 100,000

The vanishing deduction is:


a. P1,530,000; c. P 450,000;
b. P1,080,000; d. P1,130,000.

7. The widow of Mrs. A received P500,000 under a life insurance of her husband. Should the proceeds of life
insurance be included in the gross estate? Which statement is wrong?
a. Yes, if the estate, executor or administrator of Mr. A was designated as revocable beneficiary;
b. Yes, if the estate was designated as irrevocable beneficiary;
c. Yes, if Mrs. A was designated as revocable beneficiary
d. Yes, if it was Mrs. A who insured Mr. A, and her designation as beneficiary was irrevocable.

8. In the last will and testament, a decedent provided that the properties he leaves should not be sold or
disposed of for ten years following his death. He had real estate in his gross estate as follows:
At the time of death - zonal value of P500,000
At the end of ten years after death:
Fair market value - P2,500,000;
Declared value in the estate tax return - P1,500,000;
Zonal value - P3,000,000.

What value shall be used for purposes of estate tax?


a. P3,000,000; c. P2,500,000;
b. P1,500,000; d. P 500,000.

9. Fair market value Consideration


At transfer At death Received
Revocable transfers:
Land P4,000,000 P5,200,000 P3,000,000
Car 1,000,000 0 600,000
Shares of stock 500,000 300,000 400,000
Bonds 200,000 200,000 250,000
Transfer under power of appointment:
Land and building, general power 2,000,000 1,800,000 1,000,000
Farm land, limited power 1,500,000 500,000 1,200,000

The gross estate?


a. P 800,000; c. P2,200,000;
b. P3,000,000; d. Some other amount.

10. iA citizen and resident of the Philippines died leaving:


Cash on hand and in banks (of which P150,000 was provi-
ded in the will to be given to a charitable institution) P1,000,000
Real property in the Philippines:
Assessed value per assessment rolls of the city 100,000
Zonal value per Bureau of Internal Revenue 500,000
Selling price of adjacent piece of land the day pre-
ceding the date of death 600,000
Real property in Malaysia, fair market value 450,000
Car in the Philippines, with a mortgage of P200,000 400,000
Receivables:
From a friend from whom there is no possibility of recovery 20,000
From a sister whose ratio of assets to liabilities is 1:3 15,000
Amounts under insurance contracts:
Receivable under life insurance, with the father as revocable
beneficiary 250,000
Receivable under life issuance, with the mother as irrevo-
cable beneficiary 200,000
Receivable under accident insurance, for accident that
happened one year ago 50,000
Receivable under property insurance, for damage caused
to his car 12,000
Revocable transfers:
To sister (fair market value at the time of transfer was
P40,000 and consideration received was P10,000 50,000
To father (fair market value at the time of transfer was
P30,000 and consideration received was P30,000) 60,000
To mother (fair market value was P40,000 and consi-
deration received was P50,000) 70,000

The gross estate is:


a. P2,737,000; c. P2,627,000;
b. P2,807,000; d. P1,350,000.

The decedent was married at the time of death.


Cash owned by the decedent before the marriage P5,000,000
Real property inherited by the decedent during the marriage 6,000,000
Personal property received by the wife as gift before the
marriage 400,000
Property acquired by the decedent with cash owned before
the marriage 600,000
Clothes of the decedent, purchased with the exclusive
money of the wife 500,000
Jewelry purchased with the exclusive cash of the decedent 1,000,000
Property unidentified when and by whom acquired 1,200,000
Cash - income during the marriage 2,000,000

11. Exclusive gross estate if the spouses were under the system of conjugal partnership of gains?
a. P11,600,000; c. P 6,600,000;
b. P10,600,000; d. P12,600,000.

12. Community gross estate if the spouses were under the system of absolute
community of property?
a. P10,200,000 c. P9,200,000:
b. P 8,200,000; d. P7,200,000.

13. The reciprocity clause applies to:


a. Real property; c. Intangible personal property;
b. Tangible personal property; d. All of the above.

14. Donations were made on March 3, 2018, as follows:


To a legitimate son, on account of marriage P200,000
To a legitimate daughter 40,000
To a close friend 10,000
Donor's tax''
a. P3,000; c. P6,200;
b. P3,200; d. 0

Husband and wife, citizens and residents of the Philippines, made the following donations:

June 2, 2018: To a daughter and future son-in-law, on account of marriage to be celebrated on June 15, 2017,
cash of P1,000,000.
July 2, 2018: To an illegitimate child of the husband, cash of P100,000.

15. Donor's tax of husband on the donations of June 2, 2013?


a. P15,000 c. P78,600;
b. P75,000; d. Some other amount.

16. Donor/s tax of the wife on the donations of July 2, 2013?


a. P3,000 c. P75.,000;
b. P15,000; d. Some other amount.

17. Gross receipts tax (GRT) is a business tax paid by a:


a. Hotel operator; c. Franchise holder;
b. Insurance company; d. Bank.

18. The account title to best reflect the value-added tax on a purchase:
a. Sales tax payable; c. Input tax;
b. Value-added tax payable; d. Output tax.

19. Charlie is an operator of parking lots. What business tax is due on his income from the business?
a. Broker's tax; c. Caterer's tax;
b. Common carrier's tax; d. Value-added tax.

20. Which of the following transactions is subject to zero-rated value-added-tax?


a. Services rendered to persons engaged in international shipping or air transport operations.
b. Services rendered by banks, non-bank financial intermediaries.
c. Generation, transmission and distribution of electricity.
d. Services rendered by professionals such as CPAs, Physicians and Lawyers.

Atin Transport Co. is a common carrier by land and sea within the Philippines. It had the following data in a month:
On land carriers:
Gross receipts from cargoes P 500.000
Gross receipts from passengers 700,000
On sea carriers:
Gross receipts from cargoes 900,000
Gross receipts from passengers 1,000,000

21. The percentage tax?


a. P21,000; c. P15,000;
b. P36,000; d. Some other amount.

22. The output value-added tax?


a. P240,000; c. P288,000;
b. P120,000; d. Some other amount.

23. Statement 1: Banks are subject to the value-added tax;


Statement 2: Banks are subject to the gross receipts tax, which is a percentage tax.
a. True, true c. True, false;
b. False, false d. False, true

24. Sale of raw materials or packing materials to export-oriented enterprise is considered export sales when
export sales of such enterprise
a. Exceed 50%> of total annual production
b. Exceed 33 1/3% of total annual production
c. Exceed 66 2/3% of total annual production
d. Exceed 70% of total annual production

25. Export sales of non-VAT registered person is


a. Exempt from VAT c. Subject to 0% VAT
b. Subject to percentage tax d. Subject to 12% VAT

26. The taxpayer is a domestic corporation (2018)


Gross income from business P5,000,000
Dividend from domestic corporation 10,000
Interest on bank deposit 15,000
Capital gain on direct sale to buyer of shares of
domestic corporation 60,000
Business expenses 3,000,000
Dividend declared and paid 500,000
Retained earnings from prior years 2,000,000
Paid-in capital at the end of the year 1,000,000

If accumulation of earnings during the year is improper, the IAET?


a. P197,900; c. P103,560;
b. P208,500; d. P197,300

27. A domestic corporation had the following selected data for 2013, the accumulated earnings for which year
the Bureau of Internal Revenue considered to be improper:

Sales P6,000,000
Cost of sales 2,000,000
Quarterly income tax paid 710,000
Business expenses 1,000,000
Interest on Philippine currency bank deposit 50,000
Capital gain on sale directly to buyer of shares
of domestic corporation 120,000
Dividend income from domestic corporation 60,000
Dividend declared and paid during the year 500,000
Maturing bonds in 2014 100,000
Retained earnings, beginning of the year 1,500,000
Paid-in capital, end of the year 2,000,000

The improperly accumulated earnings tax (IAET) is:


a. P175,300; c. P121,300
b. P156,300; d. P323,000

28. All, except one, of the following, are not subject to the improperly accumulated earnings tax. Which is the
exception?
a. Publicly-held corporations;
b. Banks and other non-bank financial intermediaries;
c. Insurance companies;
d. Service enterprises.

29. A domestic corporation had the following data in five years:

Year 4: Normal income tax P32,000


Minimum corporate income tax 65,000
Year 5: Normal fax 8,000
Minimum corporate income tax 2,000
Year 6: Normal tax 10,000
Minimum corporate income tax 30,000
Year 7: Normal tax 22,000
Minimum corporate income tax 20,000
Year 8: Normal tax 50,000
Minimum corporate income tax 20,000

The income tax for Year 8 (before credit for any quarterly income tax payments) is:
a. P50,000; c. P20,000;
b. P30,000; d. P28,000.

30. One of the following statements is correct.


a. A joint venture for construction projects is taxable as a corporation;
b. A joint venture for engaging in petroleum, coal, geothermal and other energy operations pursuant to an
operating or consortium agreement under a service contract with the Government is taxable as a
corporation;
c. A general professional partnership is not taxable as a corporation;
d. A general professional partnership in trade is not taxable as a corporation.

The next four (4) questions are based on the following data:

Carlo, married, with two dependent children, received the following income:
Rent, Philippines P1,000,000
Rent, Hongkong 200,000
Interest, peso deposit, MBTC 100,000
Interest, US$ deposit, BDO ($10,000 x P42) 420,000
Interest, deposit in Hongkong (HK$10,000 x P5) 50,000
Prize (cash) won in a local contest 8,000
Prize (TV) won in a local lottery 50,000
PCSO/Lotto winnings 2,000,000
Prize won in contest in U.S. 300,000
Lotto winning in U.S. 100,000
Dividend, domestic company 600,000

23. Assuming the taxable year is 2017, determine the taxable net income assuming he is:

RC NRC RA NRA-ETB
a. P80,000 P180,000 P830.000 P180,000
b. 180,000 80,000 1,000,000 1,000,000
c. 1,558,000 908,000 908,000 908,000
d. 1,658,000 1,008,000 1,008,000 1,008,000

Answer: C

Solution:
RC NRC, RA, NRA-ET
Rent, Philippines 91,000,000 91,000,000
Rent, Hongkong 200,000
Interest, peso deposit, MBTC 20% FWT 20% FWT
Interest, US$ deposit, BDO 7.5% FWT 7.5% FWT for RA;
Exempt for NRC&NRAET
Interest, deposit in Hongkong 50,000
Prize (cash) won in a local contest 8,000 8,000
Prize (TV) won in a local lottery 20% FWT 20% FWT
PCSO/Lotto winnings Exempt Exempt
Prize won in contest in U.S. 300,000
Lotto winning in U.S. 100,000
Dividend, domestic company 10% FWT 10%FWTforRA&NRC
20%forNRAET
Basic exemption (50,000) (50,000)
Additional exemption (50,000) (50,000)
Taxable net income P1,558,000 P908,000

NOTE:
• Taxable income:
= generally pertaining to incomes subject to basic income tax and included in the income tax
return of the taxpayer
• Passive income subject to final withholding taxes and capital gains subject to CGTs are
nonreturnable income.
• Passive income subject to FWT shall refer only to those derived from Philippine sources.
Passive incomes derived from abroad received by RCs are subject to basic tax.
• The final tax on interest income earned under FCDS (7.5% prior to 2018; 15% beginning
Jan. 1, 2018) is applicable only to resident taxpayers.
• Prior to TRAIN Law, PCSO/Lotto winnings are exempt, except if received by NRANETB
• Prizes:
o Not more than P10,000 = basic tax
o More than P10.000 = 20%FWT; 25% FWT for NRANETB
• Winnings:
o PCSO/Philippine Lotto
Prior to TRAIN Law; Exempt, except if received by NRANETB Beginning 2018;
■ Not more than P10,000 = Exempt
■ More than P10,000 = 20% FWT (RC, NRC, RA);
■ Received by NRAETB = Exempt regardless of amount; not revised under
TRAIN Law; one of the obvious errors under the TRAIN Law
■ Received by NRANETB = 25% FWT regardless of amount. All income received from
sources within the Philippines by NRANETB is subject to
25% FWT except for interest income received under FCDS or FCDU

24. Assuming the taxable year is 2018, determine the taxable net income assuming he is:
RC NRC RA NRA-ETB
a. P80,000 P180.000 P830,000 P180,000
b. 180,000 80,000 1,000,000 1,000,000
c. 1,558,000 908,000 908,000 908,000
d. 1,658,000 1,008,000 1,008,000 1,008,000

Answer: D
RC NRC, RA, NRA-ET
Rent, Philippines P1,000,000 91,000,000
Rent, Hongkong 200,000
Interest, peso deposit, MBTC 20% FWT 20% FWT
Interest, US$ deposit, BDO 15% FWT 15% FWT for RA;
Exempt for NRC&NRAET
Interest, deposit in Hongkong 50,000
Prize (cash) won in a local contest 8,000 8,000
Prize (TV) won in a local lottery 20% FWT 20% FWT
PCSO/Lotto winnings Refer to NOTES above
Prize won in contest in U. S. 300,000
Lotto winning in U.S. 100,000
Dividend, domestic company 10% FWT 10%FWTforRA&NRC
20%forNRAET
Basic exemption NA NA
Additional exemption NA NA
Taxable net income P1,658,000 P1,008,000

Under RA No. 10963 (TRAIN Law), personal exemptions (basic and additional) as deductions from
gross income are no longer allowed beginning January 1,2018.

25. Assuming the taxable year is 2017, determine the total final tax assuming he is:
RC NRC NRAET NRA-ET
a. P553.000 P490,000 P550.000 P150,500
b. 121,500 90,000 150,000 687,500
c. 131,000 90,000 90,000 90,000
d. 142,000 90,000 150,000 150,000
Answer: B

Solution:
RC&RA NRC NRA-ET NRA-NET
Interest, peso deposit, MBTC @ 20%; 25% 920,000 P20.000 920,000 925,000
Interest, US$ deposit, BDO @ 7 <A% 31,500 exempt exempt exempt
Prize (TV) won in a local lottery @ 20%; 25% 10,000 10,000 10,000 12,500
PQSO/Lotto winnings exempt exempt exempt 500,000
Dividend, domestic company @ 10% 60,000 60,000
Dividend, domestic company @ 20% 120,000
Dividend, domestic company @ 25% 150,000
Total FWT P121,500 P90,000 P150,000 P687,500

26. Assuming the taxable year is 2018, determine the total final tax assuming he is:
RC NRC RA NRA-ET
a. P553,000 P490,000 P150,000 P687,500
b. 121,500 90,000 121,500 150,000
c. 131,000 90,000 90,000 90,000
d. P553,000 P490,000 P550,000 P687,500

Answer: A
Solution:
RC&RA NRC NRA-ET NRA-NET
Interest, peso deposit, MBTC® 20% 920,000 920,0009 20,000 925,000
Interest, US$ deposit, BDO@ 15% 63,000 exempt exempt exempt
Prize (TV) won in a local lottery @ 20%: 25% 10,000 10,000 10,000 12,500
PCSO/Lotto winnings® 20%; 25% 400,000 400,000 -*** 500,000
Dividend, domestic company @ 10% 60,000 60,000
Dividend, domestic company @ 20% - - 120,000
Dividend, domestic company @ 25% - - 150,000
Total FWT P553,000 P490,000 P150,000 P687,500
***The exemption of PCSO/Lotto winnings for NRA-ETB was not repealed under TRAIN Law

40. The following data were taken from Juan (single), holding managerial position for 2018 taxable
year:
Gross salaries @ P50.000 per month P600.000
SSS contributions 12,000
Philhealth contributions 7,200
Pag-ibig contributions 4,800
Union dues 3,000
Withholding tax on compensation income 73,250
Allowances, not subject to liquidation 100,000
Gasoline allowances, subject to liquidation 17,000
13th month pay 50,000
De minimis benefits 12,000
202. The total income tax expense of Juan is:
a. P127,096
b. P141,000
c. P170,760
d. P179,400

Answer: A

Compensation income subject to basic tax P573,000


Basic personal exemption -
Taxable income P573,000

Basic Tax [30,000 + (173,000 x 25%)] P73,250


FB T as computed above 53,846
Total income tax expense of Juan P127,096
B The FBT is the income tax expense of the employee, not the employer.
Use the following data for the next four (4) questions:
Bryan sold the following shares of stock of domestic corporations which he bought for investment
purposes':
Listed and Traded Not Listed and Traded
Selling price 250,000 143,680
Selling expense 12,000 3,680
Cost 118,000 80,000
121. Determine the capital gains tax assuming the sale was made in 2017 (before effectivity of
TRAIN Law) and 2018 (upon effectivity of TRAIN Law)
2017 2018
a. P3,000 P9,000
b. 3,184 9,552
c. 3,184 9,000
d. 3,000 9,552

Answer: A

2017:
CGT = 5% on 1st P100,000 gain; 10% in excess of P100,000 gain
CGain = P143,680 - 3,680 - 80,000 = P60,000
CGT = P60,000 x 5% = P3,000

2018 (TRAIN Law):


CGT = 15% of capital gain
CGT = P60,000x15% = P9,000

122. Bryan's total income tax expense for 2017 and 2018 is:
2017 2018
a. P3,000 P9,000
b. 4,250 30,552
c. 3,0552 9,000
d. 9,000 4,250
Answer: A

Income tax expense = Basic income tax + FWT on passive income + CGT.
The sale of listed shares is not subject to income tax, but to stock transaction tax of:
1½of 1 % of GSP prior to 2018
6/10 of 1% of GSP beginning Jan 1, 2018 (TRAIN Law)

123. Assume Bryan is a dealer in securities, the capital gains tax in 2017 and 2018 is
2017 2018
a. P3,000 P9,000
b. 9,000 3,000
c. 0 9,000
d. 0 0

Answer: D

30. An instrument with a maturity period of ten (10) years was held by Smith
(nonresident alien engage in trade or business) for three (3) years and
transferred it to Juan, a resident citizen. Juan held it for two (2)
years before subsequently transferring it to James (resident alien) who
pre-terminated it after four (4) years. The final withholding tax are
as follows:
A. B. C. D.
Smith-12% final tax True. True True True
Juan-20% final tax True True False False
James - exempt True False False True

30. Prior to 2018, Filipino counterparts of aliens employed by regional or area headquarters and regional
operating headquarters of multinational companies in the Philippines, which are engaged in
international trade with affiliates and subsidiary branch offices in the
Asia-Pacific region may taxed at 15% preferential tax rate subject to the following rules, except
I. The employee must occupy managerial or technical position and must be exercising such functions
pertaining to said position.
II. The employee must have received or is due to received under a contract of employment, a gross
taxable compensation income of at least P975.000 (whether or not this is actually received).
III. The employee must be exclusively working for the RHQ or ROHQ as a regular employee and not just a
consultant or contractual personnel.
a. I and II only c. I, II, and III
b. I and III only d. None of the above

1. Chiko operates a cockpit. Inside the cockpit, he also operates a restaurant. Data for the
particular quarter follow:

Gross receipts:

Cockpit operation P500,000

Restaurant operation
Sale of food 100,000

Sale of liquor 150,000

The amusement tax due from Chiko is:

a. P90,000 b. P135,000 c. P120,000 d. P75,000

Questions 40 through 41 are based on the following are the inventory of the estate of Mr.
Pumayapa who died on September 11, 2005.
Properties:
Jewelries P 1,600,000
Old Vehicle 800,000
Shares of stock, domestic corporation 250,000
Real estate inherited August 9, 2000. This was previously
taxed at P250,000. It was inherited from his uncle and
the decedent assumed unpaid mortgaged of P70,000,
of w/c P50,000 was paid by the present decedent before
his death. 300,000
Collectibles, excluding P50,000 claims against insolvent
person and P100,000 cancelled in a written will 350,000
Peso bank deposit 150,000
Investment in bonds 100,000
Amount received by heir under R.A 4917 300,000
Expenses:
Funeral Expenses 190,000
Judicial Expenses 120,000
Loans payable, duly notarized 50,000
Stolen Jewelry, part of the gross estate 10,000
Medical Expenses 250,000
Legacy to the City of Manila 100,000
1. The following Vanishing deduction
a. P34,700 b. P34,600 c. P34,390 d. P35,000
2. Using the above data, the total deductions from the gross estate
a. P2,124,600 b. P1,124,000 c. P2,124,700 d. P2,125,000