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TAXATION PROF. ROEL E. HERMOSILLA

WEEK 14
QUIZZER

Situation 6 – (TRAIN LAW)

Mr. and Mrs. JBL had the following conjugal transfers during the year 2018.
January 26 Donated a parcel of land to their son, on account of his marriage. Their son’s wedding is
on July 31,2018. The fair market value of the land at the time of donation was P500,000. The fair
market value of the land at the time of marriage was P550,000. The donated property was subject to
P100,000 mortgage which was assumed by their son.

October 29 Donated P300,000 to the sister of Mr. JBL who was diagnosed with cancer. They
donated the amount for the medication of Mr. JBL’s sister.

December 20 Sold 300,000 shares of stocks from ABC Corporation to their daughter for P 300,000.
The book value per share as per latest audited financial statements of ABC Corporation is P1.50 per
share. The shares of stocks were acquired two years ago for P200,000

1. How much is the donor’s tax due of Mr. JBL on the January 26 transfer?
A. P16,500 C. P24,000
B. P12,000 D. none

2. How much is the donor’s tax due of Mrs. JBL on the October 29 transfer?
A. P 6,000 C. P21,000
B. P57,000 D. P45,000

3. How much is the capital gains tax due of Mr. JBL on the December 20 transfer?
A. P22,500 C. P15,000
B. P41,250 D. P 7,500

4. How much is the donor’s tax still due of Mr. JBL on the December 20 transfer?
A. P4,500 C. P25,500
B. None D. P 9,000

Situation 5 – (TRAIN LAW)

Mr. X sold on April 30,2018, 5,000 shares of stocks of XYZ Corporation for P 10,000,000. Said
shares of stocks were acquired 3 years ago at par value. XYZ Corporation has 10,000 outstanding
shares with par value of P 1,000 per share. The total assets and liabilities of XYZ Corporation in its
latest audited financial statements are P20,000,000 and P5,000,000, respectively.

Assuming that the book value of all its assets and liabilities is also the market value with the
exception of its real property. Assume further that the market values of the real property of XYZ
Corporation are as follows:

Book Value MV per TD* Zonal Value Appraised Value

Land A P2,000,000 P2,500,000 P5,000,000 P6,000,000
Land B P2,000,000 P2,200,000 P4,000,000 P3,500,000
Building A P1,000,000 P2,400,000 P3,000,000
Building B P 500,000 P2,000,000 P1,950,000

*MV per TD – market value per tax declaration

5. How much is the capital gains tax due on the sales of Mr. X’s shares of stock?
A. A. P1,046,250 C. P 495,000
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B. B. P1,087,500 D. P 750,000

6. How much is the documentary stamp tax due on the sale of Mr. X’s shares of stock?
A. A. P37,500 C. P18,750
B. B. P91,875 D. P75,000

7. How much is the donor’s tax due if any?

A. A. P103,500 C. P120,000
B. B. P 90,000 D. P72,000

8. Assuming that Mr. X donated the 5,000 shares of stocks of XYZ Corporation, instead of
being sold, How much is the donor’s tax due on the said donation?
A. A. P720,000 C. P672,000
B. P585,000 D. P703,500

Situation 4 – (TRAIN LAW) Lucky Go, is a practicing lawyer, who is engaged in providing legal
services to his clients. He is also a licensed real estate broker. Both businesses were registered with
the BIR and had the following data made available for year 2018 (amounts are gross of withholding
tax):

 Revenues from his profession as a lawyer amounting to P3,000,000;

 Commission received as a real estate broker amounts to P600,000;
 Cost of services and business related expenses amounted to P700,000 and P400,000,
respectively;
 Gain on sale of real property held for investment amounts to P500,000 (selling price is
P2,000,000);
 Wagering gain amounting to P50,000 (net of wagering losses of P100,000);
 Royalties from books published and sold amounting to P150,000; and
 Interest income from banks amounting to P30,000.

9. Compute 22A, Page 1 of BIR Form No. 1701,assuming Mr. Go opted to use itemized
deduction in computing his income tax.
A. P 810,000 C. P 666,000
B. P 698,000 D. P 826,000

10. Compute 17A, Page 2 of BIR Form No. 1701, assuming Mr. Go opted to use optional standard
deduction in computing his income tax.
A. P2,240,000 C. P1,500,000
B. P2,300,000 D. P1,440,000

11. How much is the final withholding income tax of Mr. Go, assuming 2/3 of interest income from
banks were realized from time deposits with maturity of 5 years?
A. P 47,000 C. P 21,000
B. P 17,000 D. P137,000

12. Mr. Bona filed his 2014 income tax return on June 30, 2015. The Bureau of Internal Revenue
discovered a deficiency income tax on August 15, 2016. When should the deficiency tax
assessment be served?
A. On or before August 15, 2019 C. On April 15, 2018
B. On or before June 30, 2018 D. On or before April 15, 2018

13. On March 5, 2015, the Bureau of Internal Revenue discovered a deficiency value added tax for
the quarter ended September 2008. The deficiency did not arise from error or fraud. Which of
the following statements is correct?
A. The BIR must send the assessment notice before March 5. 2018.
B. The BIR has no more remedies since the tax prescribed.
C. The BIR must send the assessment notice before September 30, 2018.
D. The BIR must send the assessment notice before March 5, 2005.

Situation 3 – (TRAIN LAW)

IT’S EASY CORPORATION is engaged in the business of PHARMACY.
The following data were made available for the first quarter 2019:
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Revenues P 10,000,000
Cost of services 6,000,000
Operating expenses 1,500,000
Receivables, beginning 200,000
Receivables, ending 150,000

Additional information were as follows:

 All sales for the quarter were cash and credit card sales.
 Receivables at the beginning and ending of quarter are outstanding receivables from credit
card companies. Amounts are VAT inclusive.
 All sales from senior citizens are cash sales.
 Sales is net of senior citizens discount amounting to P200,000.
 Sale is inclusive of sales of medicines prescribed for diabetes, high cholesterol and
hypertension to non-senior citizens amounting to P300,000.
 Input tax credit from purchase of goods and services for the quarter amounts to P300,000.
 Included in the operating expense is entertainment, amusement and recreation expense
amounting to P150,000

14. How much is the output tax due for the first quarter of 2019?
A. P1,044,000 C. P1,068,000
B. P1,104,000 D. P1,080,000

15. How much is the deductible creditable input tax for the 1 st quarter of 2019?
A. P255,172 C. P300,000
B. P261,000 D. P256,180

16. How much is the income tax due for the 1 st quarter of 2019, assuming itemized deduction was
used?
A. P765,000 C. P720,000
B. P779,700 D. P780,000

17. How much is the income tax due for the 1 st quarter of 2019, assuming the optional standard
deduction was used?
A. P 1,808,400 C. P 720,400
B. P 618,000 D. P 1,770,000

Situation 2 - (TRAIN LAW) iWash Corporation, a VAT-registered company is engaged in the

laundry business. During the first quarter of 2018, the following information were made available:

Net revenues, 1st quarter 2018 P 1,000,000

Receivables from customer, January 1,2018 224,000
Receivables from customer, March 31,2018 336,000
Creditable VAT withheld, 1 st quarter 2018 5,000
VAT purchases, other than capital goods,1 st quarter 2018 300,000
VAT purchases, capital goods,1 st quarter 2018 1,200,000
(all in January 2018)

Receivables balance are all income related and are inclusive of value-added tax. Revenues
purchases are VAT exclusive. Capital goods are estimated to have a useful life of 10 years.

18. Compute item 19B of BIR Form No. 2550Q.

A. P 106,560 C. P 132,000
B. P 108,000 D. P 120,000

19. Compute item 22 of BIR Form No. 2550Q.

A. P 180,000 C. P 36,000
B. P 43,200 D. P 185,000

20. Compute the deferred input tax as of March 31,2018

A. P141,600 C. P140,400
B. P136,800 D. None
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21. Compute item 23B of BIR Form No. 2550Q.

A. P13,500 closed to expense
B. P11,000 closed to expense
C. P 2,200 closed to income
D. P 2,680 closed to income
Situation 1 – (TRAIN LAW) HUMILITY Corporation, is a domestic corporation engaged in the
business of manufacturing textiles. For the fiscal year end June 30,2019, its profit and loss
statement reported the following:

Sales P 100,000,000
Cost of goods manufactured and sold 60,000,000
Gross income from operations 40,000,000
Other income 5,000,000
Total gross income 45,000,000
Operating expense 15,000,000
Finance costs 5,000,000
Net income before income tax 25,000,000
Income tax expense 4,500,000
Net income after income tax P 20,500,000

Additional information were made available for tax reconciliation purposes:

 Withholding tax credit from sales of textiles (supported by BIR Form No. 2307) – P 600,000
 Other income is broken down as follows:
- Interest income from savings deposits (net of final withholding tax) – P200,000
- Gain from sale investment property (the property was not used in the primary activity of
the corporation but held for lease)- P4,000,000 (gross of withholding tax amounting to
P900,000)
- Rental income from investment property- P800,000 (gross of withholding tax)
 Operating expense include allowance for bad debts expense amounting to P500,000.
 During the year, the Corporation has written-off bad debts which are certainly uncollectible
amounting to P300,000.
 Finance cost is broken down as follows:
- Interest expense on loan from various financial institutions – P3,000,000. Interest
expense on loans from a majority stockholder – P2,000,000
 Income tax expense, represents quarterly income tax paid.

22. Compute page 4, Schedule V, Item 4 of BIR Form No. 1702 - RT (net income per books
should refer to net income before income tax).
A. P 5,000,000 C. P 5,824,000
B. P 27,082,500 D. P 25,000,000

23. Compute page 4, Schedule V, Item 9 of BIR Form No. 1702-RT.

A. P 200,000 C. P 300,000
B. P 4,500,000 D. P 500,000

24. Compute page 2, Item 55 of BIR Form No. 1702-RT.

A. P 600,000 C. P 5,100,000
B. P 5,140,000 D. P 6,040,000

25. How much withholding tax should HUMILITY Corporation remit on its loan interest payments
assuming the Corporation is including in the BIR list of top withholding agents?
A. P 460,000 C. P 100,000
B. P 750,000 D. P 360,000

reh/cde