QUESTIONS

1. Dondie, non-resident alien, made the following donations on April 28 of the current year:
• To his half- sister, Donna,P1,075,000 worth of property situated in Paris, France. The donor’s tax paid is
P40,000.
• To Dara, his girlfriend in the Philippines, jewelry valued at P225,000.
• To International Rice Research Institute, cash amounting to P25,000.
The donor’s tax due after tax credit is –
A. Zero. B. P64,500 C. P24,500 D. P 63,000

2. Which of the following properties of the spouses will be part of common properties under a regime of
Conjugal Partnership of Gains?
a. Land inherited during the marriage
b. Fruits of land inherited.
c. Jewelry inherited during the marriage
d. Building donated before marriage

3. UNDER R.A 10963. Which of the following items is not considered as a “special deduction” in computing
the taxable net estate of the decedent?
a. Medical expenses.
b. Standard deduction
c. Family home allowance
d. None of the above

4. Abe, married resident alien, died on January 15, 2018. She left the following properties, expenses and
obligations:
Community properties, Philippines (including family home valued at P1,800,000) P5,000,000
Community properties, Abroad 2,000,000
Exclusive properties, Philippines 3,000,000
Actual funeral expenses 300,000
Judicial expenses 200,000
Medical expenses (incurred w/in 1yr. before death) 600,000
Devise to National Gov’t 50,000
Legacy to Local Gov’t 70,000
The net taxable estate is:
a. 480,000. b. 1,480,000 c. 540,000 d. zero
5. Arthur, Citizen, married died leaving the following estate: (Married Aug 2 ,1988)
Car acquired before marriage by Arthur P 300,000
Car acquired before marriage by wife 450,000
House and lot acquired during marriage 1,500,000
Jewelries of wife inherited during marriage 100,000
Personal properties inherited by Arthur during marriage 250,000
Benefits from SSS 50,000
Retirement benefits 150,000
Proceeds of group insurance taken by his employer 75,000
Land inherited by the wife during marriage 1,000,000
Income earned from the land inherited by wife (25% of which was earned after death) 200,000
How much is the gross estate if the property relationship is conjugal partnership of gains is:
a. 2,275,000 b. 2,200,000. c. 2,475,000 d. 3,975,000

6. UNDER R.A 10963, LBJ made the following sales during the 12-month period:
Sales, VAT taxable transactions P2,500,000
Sales, VAT zero-rated transactions 400,000
Sales, VAT exempt transactions 200,000
Total P3,100,000
Which of the following statements is correct?
a. LBJ may not register under the VAT system because his sales from VAT taxable transactions did not exceed
P3,000,000
b. LBJ may not register under the VAT system because his sales from VAT taxable and zero-rated transactions did
not exceed P1,919,500
c. LBJ is required to register because his total 12-month sales exceeded P1,919,500
d. None of the foregoing.

7. What institution is required to deduct and withhold a final VAT of 5% on the purchase of goods or services
subject to VAT?
a. National government or any political subdivision thereof
b. Government-owned or controlled corporations
c. Both (a) and (b).
d. Neither (a) nor (b)
8. Genson Distribution Inc., a VAT taxpayer, had the following data in a month:
Cash sales P200,000
Open account sales 500,000
Consignment:
0 to 30 days old (on which there were remittances from consignees of P200,000) 600,000
31 to 60 days old 700,000
61 days old and above 900,000
How much is the output tax?
a. 348,000 b. 264,000 c. 216,000. d. 240,000

9. Mantika Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and corn. It had the
following data for the month of January 2017:
Sales, gross of VAT P784,000
Corn & Coconut, 12-31-16 50,000
Purchases of Corn & Coconut 330,000
Corn & Coconut, 1-31-17 20,000
Purchases from VAT suppliers, gross of VAT:
Packaging Materials 56,000
Supplies 16,800
The value-added tax payable for the month:
a. 76,200 b. 72,144 c.63,000. d.62,064

10. Winterfell, Inc., bought a parcel of land in 2015 for P7 million as part of its inventory of real properties. In
2017, it sold the land for P12 million which was its zonal valuation. In the same year, it incurred a loss of P6
million for selling another parcel of land in its inventory. These were the only transactions it had in its real estate
business. Which of the following is the applicable tax treatment?
a. Winterfell shall be subject to a tax of 6% of P12 million
b. Winterfell could deduct its P6 million loss from its P5 million gain.
c. Winterfell’s gain of P5 million shall be subject to the holding period
d. Winterfell'sP6 million loss could not be deducted from its P5 million gain
11. EMT has the following data on his passive income earned during the
year 2018:
Philippines
Abroad
Interest income from bank deposits 45,000 25,000
Interest income from FCDU 50,000 -0-
Royalties from books 20,000 30,000
Royalties from computer programs 20,000 40,000
Dividend income from a domestic corporation 27,000 13,000
Dividend income from a foreign corporation 33,000 22,000
How much is the final withholding tax if the taxpayer is a resident citizen? Non-resident citizen? Resident
alien? Non-resident alien not engaged in trade or business?

a. P 25,200 ; P 17,700 ; P25,200 ; P36,250.

b. P 25,200; P 25,200 ; P25,200 ; P36,250
c. P 22,500; P 15,000 ; P22,500 ; P36,250
d. P 22,500; P 15,000 ; P22,500 ; P48,750

12. MILTF Corporation is on its fifth year (2018) of business operation when it was assessed by the BIR for
improperly accumulation profits.

Gross income P5,000,000

Business expense 4,400,000
NOLCO prior years 500,000
Dividend income – domestic 100,000
Interest income received – bank deposit 100,000
Gain on sale of domestic stocks directly to buyer 500,000
Gain on sale of land classified as capital asset
(Selling price = P2,000,000; Fair Value = P2,500,000) 500,000
Dividends declared 100,000
Appropriation for treasury stocks 50,000
Appropriation for plant expansion 150,000

MILTF Corporation has share capital of P150,000, share premium of P50,000 and unadjusted retained earnings of
P400,000.
Compute for the improperly accumulated earnings tax.
a. 172,500. b. 179,500 c. 175,500 d. zero
 BASIS/RATIONALE
April 28 of the current year: Transfer taxation: Specifically
ated in Paris, France. The donor’s tax paid is Donations Tax. A non - resident
alien will only be subjected to
P225,000. donations within the
P25,000. Philippines. Situs of the object
of donor's tax will be
considered.
part of common properties under a regime of Property Relations of the
Spouses: The property interest
of the spouses shall be
deteremined based on their
agreed property regime.
Properties held by the spouses
shall be classified as separate or
common properties depending
on the agreed regime.
sidered as a “special deduction” in computing Expressly provided for by the
TRAIN law, the following are
considered: Family Home,
Standard Deductions and
Benefits under RA 4917.
left the following properties, expenses and General principles of
deductions against gross estate.
d at P1,800,000) P5,000,000 Classification and deduction
2,000,000 rules on deductions. List and
3,000,000 limits of items of ordinary and
300,000 special deductions.
200,000 Computational procedures of
600,000 the share of the surviving
50,000 spouse.
70,000
CORRECT ANSWER
(A) is correct *** Dondie is taxable only
within Philippines, the first item has situs
outside the Philippines which means it
not taxable. The second item is taxable.
The third item is exempt. The total
taxable item is P225,000, under RA 10963
this is below P250,000, so no donor’s tax
payable.
(B) is correct. ***Under the regime of
Conjugal Partnership of Gains, the
properties of husband and wife before
marriage is treated as an exclusive
property, but the fruits of these
properties are common properties.
Properties received during marriage are
exclusive property.
SPECIAL DEDUCTIONS
A. Medical expenses
B. Standard Deduction
C. Family Home
RESIDENT ALIEN
Particulars Exclusive Com
All Properties w/i & w/o 3,000,000 7,000
Transfers (50,000 + 70,000) (120,000)
Gross Estate 2,880,000 7,00
Share of Surviving Spouse
Family Home (1/2 of 1,800,000)
Standard Deductions
Net Estate
ried Aug 2 ,1988) General principles of Car acquired before marriage by Arthur( exclusive pro
P 300,000 deductions against gross estate. House and lot acquired during marriage(Common pro
450,000 Classification and deduction Personal properties inherited by Arthur during marriag
1,500,000 rules on deductions. List and
100,000 limits of items of ordinary and Income earned from the land inherited by wife (25% o
250,000 special deductions. death)
50,000 Computational procedures of Gross Estate
150,000 the share of the surviving 2,200,000
75,000 spouse.
1,000,000
h was earned after death) 200,000
conjugal partnership of gains is:

month period: Rule on regularity of (D) is the correct answer. Under R.A
500,000 transactions. Concept of gross 10963, the new VAT threshold is
400,000 selling price and gross receipt. 3,000,000 and the items to be considered
200,000 Types of business taxpayers and are the taxable transactions and the zero
P3,100,000 the VAT threshold. Scope of rated transactions.
zero-rated transactions
om VAT taxable transactions did not exceed

rom VAT taxable and zero-rated transactions did

es exceeded P1,919,500

of 5% on the purchase of goods or services
The government and (C) is correct, it is expressly provided by
instrumentalities shall withhold the law that the sale of goods and
the final VAT before making the services to the government or any of its
payment and remit the same instrumentalities including all GOCC's is
within 10 days following the subject to a 5% final withholding based
end of the month the on the gross payment
withholding was made. The 5%
withheld final VAT shall be
deemed the actual VAT payable
of the seller. Hence, sellers can
claim input VAT equivalent to
7%
g data in a month: There are transactions which Cash sales P20
P200,000 are acquisitions in nature but Open account sales 500,0
500,000 are not coursed through a Remittances from consignees 200,00
purchase transaction by the 61 days old and above 900
nsignees of P200,000) 600,000 consumer. Consequently, these Total P1,8
700,000 transactions are not recorded as Multiply VAT Percentage
900,000 sales by the seller. Output VAT P21
Nevertheless, since these
0,000 transactions are forms of
taxable consumptions, they are
considered "deemed sales" for
VAT purposes.

king oil from coconut and corn. It had the The presumptive input VAT is a
tax incentive to
P784,000 these(SAMAMICOPARE)
50,000 processors of VAT - exempt raw
330,000 materials into processed food
20,000 products. The apparent reason
behind the tax incentive is the
56,000 absence of adequate claimable
16,800 input VAT for these entities.
Output VAT( 784,000 * 12/112 )
Input VAT:
Packaging Materials ( 56,000 * 12/112 ) 6,
Supplies ( 16,800 * 12/112 )
Presumptive (330,000 * 4%) 1
VAT Payable

million as part of its inventory of real properties. In Sale of capital assets other than (B) is correct because it is in ordinary
uation. In the same year, it incurred a loss of P6 real properties and domestic course of business, not subject to 6%
ere the only transactions it had in its real estate shares directly to buyers may capital gains tax.(12,000,000 – 7,000,000)
nt? result to gain or loss. This gain – 6,000,000.
or loss may be subjected to a
ion gain. holding period if it is incurred
ing period by an individual. No holding
million gain period is allowed for
corporation.
ing the The final withholding tax is built
upon taxpayer and government NETB
Philippines convenience. It relieves the Interest income from bank deposits (45,000 * 20%)
taxpayer of the obligation to file Interest income from FCDU( 50,000 * 15%)
45,000 25,000 an income tax return. This is Royalties from books ( 20,000 * 10%)
50,000 -0- very convenient for taxpayers Royalties from computer programs( 20,000 * 20%)
20,000 30,000 who are limited by distance, Dividend income domestic corporation(27,000 * 10%)
20,000 40,000 time and cost to comply. For the Dividend income foreign corporation
27,000 13,000 government, the final Total taxable
33,000 22,000 withholding system is the most 145,000
esident citizen? Non-resident citizen? Resident convenient and effective system General Final tax rate
in collecting taxes on income 25%
where there is high risk of non- Final Withholding Tax
compliance or tax evation.
Under the old law the final tax of the interest income
RFC and NRFC still remains 7.5% and also the final tax
corporation is subject to Regular Tax. NRA-NETB is taxa
Philipppines. Ignore the earnings from abroad since fin
the Philippines. So the correct answer is (A).

ation when it was assessed by the BIR for IAET is a 10% penalty tax
imposed on the improper
accumulation of corporate
P5,000,000 earnings beyond the needs of
4,400,000 business. It is intended as a
500,000 deterrent for corporations
100,000 intending to defeat the 10%
100,000 dividend tax by mere non-
500,000 declaration of dividends. The
imposition of the 10% IAET is
500,000 not automatic. It is due only
100,000 upon formal assessment by the
50,000 BIR upon determination of an
150,000 improper accumulation of
earnings by the corporation.
of P50,000 and unadjusted retained earnings of IAET covers domestic
corporations only
Gross income
Business expense
NOLCO prior years
Taxable Income
100,000
Corporate income tax due – MCIT
Add: NOLCO
500,000
Earnings from regular income
Dividend income – domestic (Exempt)
Interest income received – bank deposit (NET of final t
Net gain on sale of domestic stocks (500,000 * 85%)
Net gain on sale of land, capital asset (500,000 – 150,0
Share Capital
150,000
Retained Earnings
Dividends declared
(100,000)
Appropriation for Treasury stocks
Appropriation for plant expansion
Improperly accumulated earnings
IAET Rate
10%
Improperly accumulated earnings tax
 INCORRECT ANSWER 1 INCORRECT ANSWER 2
(B) is incorrect because they included all (C) is incorrect because they included all
the statements as taxable items. the statements as taxable items with
foreign credit of P40,000

Land inherited during the marriage is an Jewelry inherited during the marriage is
exclusive property. an exclusive property.

OLD LAW RA 10963

Whichever is lower of actual and Repealed under TRAIN law.

P500,000.
Deduction without substantiation Deduction without substantiation
P1,000,000 P5,000,000
Whichever is lower of the half of the Whichever is lower of the half of the
family home value or P1,000,000 family home value or P10,000,000
Answer (B) is incorrect because the Standard Deduction used is P1,000,000 from old
Exclusive Community Total Answer (C) is incorrect because the P120,000 transfers was considered as a deductio
3,000,000 7,000,000 10,000,000 from common property. Answer (D) is incorrect because there will be a positive taxab
(120,000) (120,000) estate.
2,880,000 7,000,000 9,880,000
(3,500,000)
0) (900,000)
(5,000,000)
480,000
by Arthur( exclusive property) P 300,000 Answer (A) is incorrect since it includes the proceeds of group insurance taken by the
marriage(Common property) 1,500,000 employer which is exempt. Answer (C) is incorrect because it includes the Benefits fro
by Arthur during marriage (exclusive property) SSS, Retirement benefits and the proceeds of group insurance taken by the employer
250,000 these are exempt. Answer (D) is incorrect because it includes the Benefits from SSS,
nherited by wife (25% of which was earned after Retirement benefits and the proceeds of group insurance taken by the employer, the
150,000 are exempt and the House and lot acquired during marriage which is a common
property.

(A) is incorrect because it considered the (B) is incorrect because it refers to the
VAT taxable transactions only. It should old VAT threshold which is P1,919,500.
be VAT taxable transactions and VAT
zero-rated transactions.

(A) is incorrect because the withholding (B) is incorrect because the withholding
final VAT of 5% is applicable to the final VAT of 5% is applicable to the
government or any of its government or any of its
instrumentalities including all GOCC's instrumentalities including all GOCC's
 P200,000 (C) is correct, for consignement of goods if actual sale is not made within 60 days
500,000 following the date of such goods were consigned are deemed sale unless it is an
200,000 international consignment wherein it is only considered upon actual sale. So 61 days
900,000 and above is included in the computation of the output tax. (A) is incorrect because i
P1,800,000 considers all the transactions. (B) is incorrect because it considers all except 31 to 60
12% days old. (D) is incorrect because it considers all except 61 days old and above.
P216,000 (C)

) 84,000 (C) is correct, The problem stated that the sales and purchases are at GROSS, which
means that it is inclusive of VAT. No Creditable VAT input for purchases of Corn and
* 12/112 ) 6,000 Coconut since it is still at its original state. Also, the Corporation is a producer of cook
1,800 oil and it is subject to a 4% presumptive input VAT as an incentive. Producer of sardin
13,200 (21,000) mackerel, milk, cooking oil, packed noodles, refined sugar (SAMAMICOPARE) are give
63,000 the same incentives.(A) is incorrect because no presumptive input vat is considered.
is incorrect because the computation of the output and input VAT is assumed to base
on net of VAT. (D) is incorrect because input VAT is assumed based on net of VAT.

It is not (A) because it is not subject to
capital gains tax, the property is an
ordinary asset.
It is not (C), holding period is not
applicable for ordinary gains or losses
and also the entity is a Corporation.
Only individuals can avail the holding
period for capital gains or losses. If
more than a year 50%, less than a year
100%.
 RC NRC RA NRA-

posits (45,000 * 20%) 9,000 9,000 9,000 45,000

0,000 * 15%) 7,500 ------ 7,500 ---------
* 10%) 2,000 2,000 2,000 20,000
ams( 20,000 * 20%) 4,000 4,000 4,000 20,000
poration(27,000 * 10%) 2,700 2,700 2,700 27,000
oration -------- -------- -------- 33,000

25,200 17,700 25,200 36,250

of the interest income from FCDU is 7.5%. Under RA 10963 15% general final tax, except for
% and also the final tax is applicable only to residents. Dividend income from foreign
ar Tax. NRA-NETB is taxable to general final tax of 25% for all income incurred in the
ngs from abroad since final withholding tax is territorial in nature, which means taxable only in
answer is (A).

P5,000,000 (A) is correct because the concept behind IAET is just to get all the income net of any
(4,400,000) and then deduct all mandatory, contractual, and reasonable appropriations.
( 500,000)
(B) is incorrect because the corporate income tax due used is not the MCIT but the R
so the improperly accumulated earnings is overstated by P70,000. As a result higher
CIT (100,000) is imposed.

(C) is incorrect because in computation of the net gain on sale of domestic stocks, the
500,000 old provision was used 5% - 10%.
Exempt) 100,000
nk deposit (NET of final tax) 100,000 (D) is incorrect since the accumulation of earnings in excess of 100% of the paid-up
ocks (500,000 * 85%) 425,000 capital. Based on the solution improperly accumulated earnings is P1,725,000.
al asset (500,000 – 150,000) 350,000

400,000

cks (50,000)
ion (150,000)
ngs 1,725,000

ngs tax 172,500

 INCORRECT ANSWER 3
(D) is incorrect because they included 1st and
2nd statement. 1st statement is not taxable
within the Philippines. Situs of the property
should be considered and the property is
located outside the Philippines.

Building donated before marriage is an

exclusive property.

se the Standard Deduction used is P1,000,000 from old law.

se the P120,000 transfers was considered as a deduction
wer (D) is incorrect because there will be a positive taxable
it includes the proceeds of group insurance taken by the
nswer (C) is incorrect because it includes the Benefits from
the proceeds of group insurance taken by the employer,
) is incorrect because it includes the Benefits from SSS,
proceeds of group insurance taken by the employer, these
nd lot acquired during marriage which is a common

(C) is incorrect because LBJ is not required to

register since the Sales did not exceed the
3,000,000 VAT Threshold.

(D) is incorrect because both are (A) and (B) are

required to withhold final VAT of 5% on its
purchase of goods and services.
 nt of goods if actual sale is not made within 60 days
ods were consigned are deemed sale unless it is an
herein it is only considered upon actual sale. So 61 days old
computation of the output tax. (A) is incorrect because it
. (B) is incorrect because it considers all except 31 to 60
use it considers all except 61 days old and above.

ated that the sales and purchases are at GROSS, which

AT. No Creditable VAT input for purchases of Corn and
riginal state. Also, the Corporation is a producer of cooking
esumptive input VAT as an incentive. Producer of sardines,
acked noodles, refined sugar (SAMAMICOPARE) are given
orrect because no presumptive input vat is considered. (B)
putation of the output and input VAT is assumed to based
because input VAT is assumed based on net of VAT.

It is not (D), both are ordinary gain and loss. It

can be netted.
 (B) is incorrect because non-resident citizen's
interest income from FCDU is not subject to
Final withholding Tax.(C) is incorrect because it
ignored the Dividend income from Domestic
Corporation. (D) is incorrect because it ignored
the Dividend income from domestic
corporation for the Resident citizen, non-
resident citizen and Resident alien and included
the interest income from FCDU for the Non-
resident alien not engaged in trade or business.

ncept behind IAET is just to get all the income net of any tax
ry, contractual, and reasonable appropriations.

orporate income tax due used is not the MCIT but the RCIT,
ed earnings is overstated by P70,000. As a result higher IAET

mputation of the net gain on sale of domestic stocks, the

10%.

mulation of earnings in excess of 100% of the paid-up

n improperly accumulated earnings is P1,725,000.