DIRECTIONS: Select the best answer for each of the following questions.

Mark/Write only one answer for each

item on the space provided before each item. Strictly NO ERASURES ALLOWED. Erasures will render your
examination answer sheet INVALID. Show your solutions on a separate sheet of paper. GOODLUCK!

1. PCSO or Lotto Winnings above P10,000 is

a. Exempt from final tax for any taxpayer
b. Subject to regular tax for aliens
c. Subject to regular tax if the recipient is a non-resident foreign corporation
d. Subject to 20% final tax for a non-resident alien not engaged in business

2. Mr. Piga is a self-published author. He prints his book and contracted Rex Bookstore, another book
publisher and distributor, to market his book. He gives Rex Bookstore a 30% discount of the total invoice
price of his books. During the month, Rex Bookstore purchased a total of P3,000,000. Which of the
following is correct?
a. Mr. Piga is subject to regular tax on his gross income.
b. Rex Bookstore shall withhold a 10% final tax on Mr. Piga’s income
c. Mr. Piga shall withhold a final tax from the pre-agreed discounts of Rex Bookstore
d. None of these.

3. ABC Company, a domestic corporation owned 60% of the stocks of DEF Corporation, a corporation
incorporated according to the laws of Vietnam. DEF Corporation also owns 10% stake in ABC Company.
During the year, ABC declared P1,000,000 dividend while DEF also declared P500,000 dividends.
Which of the following statements is correct?
a. The dividends due ABC Company shall be subject to a final tax.
b. The dividends due DEF Corporation shall be subject to final tax.
c. The dividends due ABC Company shall be subject to a regular tax.
d. The dividends due DEF Corporation shall be subject to regular tax.

4. Atty. Salas wrote a book entitled “The Sexy’s Diary” published under Barongot publishing.
Barongot Publishing pays an annual royalty of 10% of net sales. During the year, “The Sexy’s
Diary” fetched a gross sales of P 10,000,000 before P800,000 sales discounts and P2,000,000
bookstore commissions. There were unsold copies with total retail prices of P2,000,000.

Compute Atty. Salas’ final tax.

a. P184,000 c. P 92,000
b. P100,000 d. P 72,000

5. Ronie Banco Delicado had the following depositor’s account with their corresponding interest at
the end of the month.
Interest on deposit account Time deposit duration
Mr. Calbo Sayaman,CPA P 24,000 1 year
Calbo,Panot & Associates, P 20,000 2 years
CPA’s
Berde Corporation P 30,000 5 years
TOTAL P 74,000

Compute the total amount of final tax to be withheld by Banco Delicado.

a. P 8,400 c. P 4,800
b. P 14,800 d. P 10,800

6. Which is not subject to final tax?

a. Compensation income of a special alien
b. Domestic Dividends to a non-resident corporate shareholder
c. Deposit interest to a non-resident alien not engaged in business
d. None of these.

7. Macquarie,Inc., had the following transactions in the shares of stocks of San Miguel Corporation
(SMC), a domestic listed company, through its broker Coyiuto Securities:
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 a) January 8, 2018: Purchased 100,000 shares of SMC at its par value of 45/share
b) February 14, 2018: Received 50,000 shares as stock dividend of SMC when the shares were
trading P35/share
c) June 5, 2018: Disposed 50,000 shares for 52.8/share to Mr. Ramon Ang, SMC’s chief executive
officer. Coyiuto Securities charged a commission of 1/10 of 1% of the selling price.
Compute the final gains tax.
a. P 0 c. P 107,892
b. P 108,736 d. P 169,338

8. Mr. Jeffrey Ponsica,LCB started a professional practice earlier in 2018 as a sole proprietorship.
With increasing clients, he was convinced of the need to have a partner. He met a charming and
passionate accountant, Mr. Charlestone Taguinod .So he decided to admit Charlestone into his
professional practice on February 14, 2018. The lover-partners agreed to share profit equally. The
firm registered a profit of P 1,000,000 which is inclusive of P200,000 earned before February 14.

Compute Mr. Ponsica’s reportable gross income in 2018.

a. P200,000 c. P600,000
b. P500,000 d. P1,000,000

9. Hyundai Tuguegarao,Inc., a dealer of car, sold a Hyundai Accent for P4,500,000 on January
17,2018 to JhunJhun. The car had a cost of P3,000,000. The buyer agreed to pay 20% down
and the balance in 36 equal monthly installments starting February 2018. Compute the reportable
gain in 2018.

a. P 1,500,000 c. P 458,333
b. P 666,667 d. P 1,000,000

10. Dae Corporation disposed a building for P5,000,000 on November 30, 2018. The property
which has a fair value of P6,000,000 had an acquisition cost of P2,000,000 ten years ago. The
property was previously mortgage for P2,500,000 which was assumed by the buyer. The buyer
agreed to pay P500,000 upfront cash with the balance due in 20 monthly equal installments.

Compute the initial payment.

a. P500,000 c. P1,000,000
b. P600,000 d. P1,100,000

11. Compute the reportable gain in 2018 for the preceding number.
a. P2,500,000 c. P1,000,000
b. P1,100,000 d. P550,000

12. Amboy, a realty dealer, exchanged a pension house in exchange for the residential house of
Pedro, a medical doctor. Pedro’s residential house is located in a highly urbanized locality. The
pension house and the residential house have zonal values of P3.5M and P7M and adjusted
cost basis of P2M and P3M, respectively. Amboy made additional cash payments in favor of
Pedro.

Which is incorrect?
a. Both parties to the exchange are subject to income tax.
b. Amboy shall report a P2M gain subject to regular income tax.
c. Pedro shall pay 6% capital gains tax on the P7M fair value of his property.
d. None of these.

13. After four years of selling, Don Romantico was able to dispose his agricultural land for P22.5M.
The sale made at 10% discount of zonal value. The property was acquired eight years ago at
P23M.Which statement is correct?
a. Half of the loss on the sale of land is a capital loss that is deductible to the extent of the
capital gain.

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 b. The loss on the sale of the land is neither a deduction to capital gains nor deduction to a gross
income.
c. The sale of the land is subject to a capital gains tax at its P22.5M selling price.
d. The sale of the land is not subject to a capital gains tax since the transaction resulted
into a loss.

14. John disposed a real property capital asset on July 15, 2018. The property had a zonal value of
P12,000,000 and was acquired for P8,000,000. John reported a P5,000,000 gain on the sale
which he reported in his 2018 income tax return. On July 1, 2019, the BIR handed him an
assessment for failure to pay capital gains tax on the sale. The assessment was based on
the selling price of the property.

Which of the following statements is correct?

a. John should not be subject to capital gains tax since he already paid the regular tax on
the transaction in good faith.
b. John should be assessed capital gains tax but the same should be based on the fair value of
the property.
c. John should settle the assessment for capital gains tax but shall file a claim for refund for
overpayments in regular taxes.
d. None of these.

15. In the immediately preceding problem, what is the deadline of the capital gains tax due on
the sale?
a. July 31, 2018 c. August 14,2018
b. August 15, 2018 d. August 5, 2018

16. In the immediately preceding problem, what is the deadline of the documentary stamp tax
due on the sale?
a. July 31, 2018 c. August 14,2018
b. August 15, 2018 d. August 5, 2018

17. Assuming the property was sold to the government n pursuant to an expropriation, is the
assessment valid?
a. Yes, the involuntariness of the sale does not affect the taxability of the property being a
real property capital asset.
b. No, the assessment should have been based on the fair value of the property.
c. Yes, the transaction involves a real property capital asset which is subject to capital
gains tax not to regular tax.
d. No, this is an instance of direct double taxation. The assessment would find no basis in
law.

18. Which is the applicable tax rate on deposit interest to a non-resident citizen?
a. 20% c. 10%
b. 25% d. 30%

19. Which is the applicable tax rate on deposit interest through the expanded foreign currency
depositary unit of a resident citizen?
a. 7.5% c. 15%
b. 20% d. 10%

20. Which statement is a precise preference to time?

Statement 1: We are currently reviewing your application.
Statement 2: We are at this moment reviewing your application.

a. Statement 1 c. Either of the two

b. Statement 2 d. Neither of the two

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