CPA Review School ofthe Philippines TAXATION (C. Llamado) PRE-WEEK BATCH 86 (1) LUGI Corporation, a domestic corporate affairs. F remaining assets. Pursuant transferred to the liquidato shareholders as liquidating divi eine th cour tigate Li's ion, LUGI's ea ordinary assets were ordeted Properties of LUGI were transfered to the Is the tansfer of LUG. Sto the ject tis dei F LUGI's properties to th iduidator subject income tax, VAT, and donor's 1) No.NowNo, 1b) Yes, Yes, Yes. 6) No, Yes,No 4) Yes, Yos, No, Fete tansfer of LUGI's properties ois shareholders as i io ‘ordinary income tax, and to VAT? Pag ete Bee No WEN Yes NoYes @) No, Yeo ion Agency (ex. PEZA, BOI, ete) and (b) availing of ax incentives, su A anit under R.A. No. 10708 (Tax {Incentives Management and Transparency Act (FIMT jy? (@) Nothing (b) State ofthe Nation Report (©) Report Card (8) Annual Tax Incentives Report wich shall contain complete information on income: bused incentives, VAT incenives,duy exemprion, deductions, cred, excisions, wad (the information needed to analyse and monitor he impcet ofthe same othe Pulnpee ‘economy. (9) Init fist year, a domestic corporation didnot dexive any inccme nor any gan as ithad not. yet sarod commercial operations in std yea, However it was mussel a dfideney tn by the BIR, The BIR found thatthe corporation overstated its re-operating expenses sone 2 ‘which were unsubstantiated. Should such disallowed expenses give rise io meen oer 2) Yes. The fect that pre-operating expenses were overstated sho the form of income tax thereon, bb) No. Income tax cannot be imposed in the absenee of any fr received, actually of constructively. ©) No, Assuming thatthe disallowance ofthe pre-opeating expenses was proper, no ingomne ‘ax may result therefrom because the payer di not beuetit fom the delecton of the uld give tise toa penalty in ‘ain or profit which i realizedOy © 6) o @) ement 1: Imported car accesories, which are non-mandatory or optional items that are Separate and distinct from the base vehicle, donot fall within the purview of the definition of “awomobiles”, and hence, not subject to the excise tax ‘Statement 2: However, the importation of car accessories is subject to VAT. 4) Statement I is True ©) Both statements are True b) Statement 2 is True. 4) Both statements are False, What isa stopfiler case? ‘Asp filer case” shall refer toa sy stem-oreated case which arises when a taxpayer fails to file return for a required tax type {or « taxable period, 4In 2018, Phillune Realty, Inc, a VAT-registered real estate development company, sold 4 residential lots valued at P1.3 Million each, Itissued VAT offical receipts to the buyers, but it ‘Gee © indicate therein the team “"VAT-exempt Sale". Are the 4 transactions VATable or VAT-exempt? (a) VaTeexempi. In accordance with Scetion 109(1)(P), the sale ofa residential! lot valued at 'P1,500,000 and below shall be exempt from VAT. (B) VAT-able. ‘Ihe sale of such real propertics which fll within the VAT-exempt threshold shall be subject to VAT ifthe VAT-registered seller fails to indicate the term “VAT-exempt Sale” in the official receipts i issues. (©) It depends on the buyer's use ofthe real properties, (@) None of the above, Idol Brands, Inc, a domestic corporation i in he busines of owning, purchasing, sensing, ‘and acquiring trademarks and other intellectual property tights. How should its royalty fees ‘etaxed? {) They shouldbe tested as passive income subject othe 20% final ta. 1) They should be included in the corporation's ITR, and be subject to the 30% regular ‘coprate incor tx ©) Halfof the royalties eared shall be inclded in the TR, and the othe half shal be subject othe 20% firal tw 4) None ofthe above. Da Cepia ete em ‘construction of its flagship supermarket store in Taguig City. Under said contract, Build-It cnn ager eng Ge ee ‘Buildt unfortunately failed to deliver on time. Consequently it was made to pay liquidated ‘damages in favor of Wholesome for nondelivery ofthe supx market sore amounting to '¥25,000,000, ‘Are the liquidated damages received by Wholesome subject w VAT? (Yes. The liguidated damages rosul in its gross receipts exceoding the threshold of 15,000,000,(8) No There inthe cours oftrade or bases” in Seton 10 of Tax Code meas the regular conduct of pusut of w commercial of economic sone including transactions incidental thereto. "mic activity by any person, (© Idon't know. {@) None ofthe above o (@ None of the above. (90) Seto Corporation sorene its compra i nl January 3, 214 whic was approved by the SEC. On December 31, 2016, ae th ‘On Dee Deed of Conveyance was executed distributing real ‘properties as liquidating dividend to Salbakuta’s sharcholiers (One of the shareholders, JP Corporation recognized the liquidating gain as part of its other ‘taxable income in its 2016 Annual ITR to be subject tothe 30% RCIT. The BIR, however, is ‘assessing JP Corporation deficiency capital gains tax (“COT”) on the transaction. “Which tax tueatmentis correct? 8) SP Corporation is correct. ‘The receipt by a stockholder of real property as liquidating dividends from ¢ dissolving corporation isnot subject to CGT but tothe ordinary income ux. by BIRis correct, Baluga clesny realized a gun fom the liuideting dividend. And since 2a ain wes elt hoe a cing oral properies ty Seogn Bay Chy ih Baluga’s surrender ofits shares, the transection shoubl be subject lo CGT under Section 27 of the Tax Code ©) Bothare correct 4) None of the above 3 ere(2) Semen The tx bse free tn xes he VAT andthe ex Steen 2 The tx sf te VAT ot exci Sule Tet fr the CWT ee i VAT ad he eis Statement 4. Pasessonof moe than one (1) TIN is rinaly punishable under the Tax Code a) Allare tne. b) Allare false. ©) Dare true 4) Dare false. (13) To improve her “pawikan” body, my matbern-law decided to undergo 2 lipase Peete Scout the services of Body Bentfl Clinic which operates quside aos, rea Sal cesned ar the aman of 50,000, incisive of bo the VAT and the $6 ‘excise x. Compute the VAT and the excise tax therein. a) VAT; P5,357; Exeise wx: 22,126 bb) VAT: P5,300; Excise tax: #2,100 ©) VAT: P5625; Excise tax: P2,232 44) None of the above. (14), My mother Macculo a VAT-registered self-employed doctor who practices pared Face Hospital in Makati City. The hospital billed my moth ae aes fee of De Miaculo in te amount of 50,00, scsi ofthe 129 VAT but the rosso etna ter ee forte use of hospital sities and supplies in he ‘amount of P20,000, exclusive ofthe excise 18x. {o) How much will the hospital collet ftom my mother-in-law? a) £73,500 by 955,300 ©) 756,250 4) None ofthe above. {b) 1D, Miaculo is subject othe 10% CWT on professional income, how much wil he Howptal pay him? (The excise tax is alo withheld by the hospital) a) PAs 804 by 985,300 ) P75;600 4) None of the above(15) On December 2018, WTF Drugstore purchased drugs prescribed for diabetes, high hoesterol, and hypertension in the amount of P30.000 which were sold on Jeneey ai with 30% mark-up. As of December 31,2018, the taxpayers exces newt fast es to P150,000. 4 summary ofthe taxpayer's inventory as of December ae Ses following Amount — Input var imparted mesticines For diabetes, high-cholesterol,& hypertension ¥300,000 _#36,000 Other imported medicines 700,000 84,000 Local purchases For dishets,high-cholesterol, & hypertension 5 . Other medicines 250.000 _30,000 TOTAL 1.250.000 P150,000, aghthe P1<0,000, hat amount shal be available as creditable input taxes to WTD Drugstore beginning Janvary 1, 20197 a) P150,000 b) P 36,000 ©) PI14.000 44) None ofthe above, 16) ns decision granting the annulment ofthe marrage ofthe spouses Reyes, the RTC approved OD ee Custody and Support, ad Liquidation Dissolution, and Separation of the Property Regime” entre into by the former spouses. Section 6 of the sald agreement provides that a residential house in Forbes Park Village in Makati City sell be donated to the common child ofthe spouses. Did the agreement, entered into by the spouses porsuant {oan annulment of their marriage. give rise toa donation which shall be subject oa donor's ax? Ie ire i emacs © Se Tew drt ett, mit sare cnt ome ene eroe ee pethioe scree gemma Se coerce me oreo ‘Corporat Returns: (on calender year basis), which stared operations i 2010, has the {2 “following data in 2019: Jes discounts of 580,000 25,000,000 conesan Roma s or12.000 000 eer temptyee (ot of perl deductions) sno age bent piven 7 Rank and file employees ne Nagel eaployeet am Rersatn aheraint ners sie eae) es imum Depreciation expenses mn Bad debe expenes (172 charged ot during yeu) 30.00 Payroll deductions: . Philhealth contributions st ‘Union dues i ES Lactation station expenses i | ther income: ‘no 1 | Cash dividend received from: | “yada mt | a) 70%: Of its income came from Philippine sources 90,000 | Bes | 2 tl en ip si Naemacattgre sa [| Siete citesmeetimn | Tox withheld by customers/ciemts in sth ‘Quarter (BIR Form 2307) 30,009 '] ‘Taxes paid in first 3 quarters: int a rai moar Sy we | Se 444,900 (9) (What annual retum should ithave filed before Api 1, 20207 | Taide eg ART — for Concaions, Partai, and Other Non. {ndividal Texpayers Subject Only to Regular Income For hn ©) TAR corm No. 1702EX — for Compoaons, Putas and Other Non. Individal Taxpayers EXEMPT une, 0 and those exempted Fn 2 and Other Special Laws, with NO Otter Table ease (© BIR Form No, 1702MX ~ for Corpor Individual Taxpayers with MIXED ‘or with Income Subject to Special | (D) None ofthe above, Fe {@) How much isthe co 'Portion’stoal gross sales, and where wilt be indicated inthe ‘annual ITR? (A) 25,550,000; Part IV, Item 27 (B) P12,100,000; Part IV; fem 33, Di ae al(C) 8,187,000; Part 1V, em 37 (D) ¥242,000; Pact IV. Ttem 42 Orca et comerOGs tl gone taxable iocme, and where il it be indicated inthe annual 17R? (A) P25.550,000, Pat IV, ttm 29 (3) F12.100,000; Pant IV lew 34 (C) P8.187.000; Pan IV, eae (by 242.000; Pan IV, fees (©) Hew much is the comoration’s ttl alowsble deductions, and where will it be indicated in the annual 1TR? (a) po Item 27 (8) F12.100,000; Pan IV’ item 33 (© ¥8.187,000; ‘Pat (D) ¥242,000, Past V, Kem 42, (©) How tach isthe corporation's net taxable income. ‘and where will it be indicated in ‘the annual 1129 @) P5.915.000; ParttV, itera 39 (pr Pan TV, tems 41 and 43; Pat tem 14 (5) B1.104,900, Part IV, tem $5; Part I hen 1g (©) P69,0005 Pact V, tm $6; Par I tees Te o Mapes tsa eaten SRC, hee bein inte nml TR? (A) P3,913,000; Part IV, tem 39 (6)21.173,900; Part IV, tems 41 and 43; Pact, er (C) 1,108,900; Part iV, Item $5; Par ]L. Ite tS ) P69,000; Pact 1V, Kem $6; Par I ters te (6) How much is the comporation's MCIT, and whore ITR? (A) 25,550,000, Pam iV, Item 27 (B) 12,100,000; Pact IV) jem (©) 8,187,000: Par IV, lem 37 (D) P282,000; Patt LV, ema Will tbe indicated in the annual (H) How much is th corporat the annual ITR? (A) P3.913,000; Part LV, tem 39 (B)¥1,173.900; Part IV, Mens 41 and 43; Paet (©) 1,108,900; Pact IV" item (D) 169,000; Pact TV, tem $6, ions eta avellabl cre Helen 14 55. Pact, tem 1$ 5 Pat, Nea 16 (©, How much is th corporations income tax pat the annual ITR? (A) 15,913,000, Pare tv, tem 39 FLIER 20 Pan Vs emt ond 43; Pat tm (©)P1.105°900; Part 1V; tem 35, Part ters | (©) P65.000, Part IV, item $6; Pur, ene ny * nl Were will tbe indicated inEstate Tax (18) Don Juli, single he lio, single, bead of fui 1 intestate o7 Filipino, ad resident of Makati City, die November 15.2018. He et the fllowing properies and interests Howe ade ly home) in Makati City Pp 800,000 cation hows in Beverly ils, Califo USA 5,s0,900 Commer land in Makati donated by his fatter in 1980 2oung00 Mustang car locate in Maat bring used by his eens su.00 Proceeds of if insurance whee te beefy isis itrend (revocable) 1,900,000 Collectible toy collection 1,900,000 Clams spins an insolvent perso Filipino reste) non asst fla PION and whose abies ‘total 100,000 100,000 1 ‘Shares of stock in AB Corp (domestic, not listed) i With Book Value of 10? { BPI Peso bank osu sins dour before I ns s,0,000 i rhe expenses and charges onthe eat areas llows ceca > wasn “Accountant's fees incurred before death, ictal expen of is song00 sue,coo aims against the estate ros exate allowable doucins stat tx? «) 5;500,000; 25,500,000 1) 11,000,000; #3,500,000; P840.000 3) Fitsoono00; pesonnce. 252000) [None ofthe above | Whats the asa nonresident lien, what would be the gros estate for “he allowable deductions and estate ax? 9) 5,500,000; P600,0005 454,000 270.000 {None ofthe above (19) Ifthe deoedentin nue 18 Philippine estate tx PHOS: a) P1100, 000, 700.000 fy 500,000; #1, 000. (a Me als Reyes, Fin hie. mai Betis ied om February 1, 2018, ving the folowing ropes: oa wn to Maas (Zn! Ya = 00808 Assessor's Val ~ £2:500,00 in acai ing marige suite (Zonal Value - P5000 Ret ors Value = 7.000.000) : Ce a ms Nab iy eid is = seniuasL (Zonal Valve - | Bay doo Asesors Vite -F 210000) 6) arimbte darng marine sonal (MY. Ps © yn mee natn eee) a (average sie seen Pas 000) do Fiestas whee acy —saiaal (100020[| (8) 1,000 shares of ABC Corporation (domestic, not Jacek ccahane) ~ enables (NAVishare-P100, Book valuelshare "P30 ‘ Deductions claimed by the estate of Mr, Reyes Legacy given in favor of Philippine govern Clas gant the ne PE Bove "ronco0 Funeral expenses 180,000 Judicial expenses 600,000 | Mongage attaching to house and lot in Manila 100,000 (2) What is the total gross estate, and where will it be indiated i 'ss estate, and where will it be indicated in BIR Form No. 1801? (2) F11.80.000; Pac Vs fem 346 (D) 1,800,000; Part I, tem 30, ,000; Part, tem 226 108,000; Part I, tem 31 | (C) P3,250,000; Part 1, Item 29 ie (©) What is the total amount of ordinary deduetions, and where will it be indicated in BIR Form No, 1801? (A) P11,650,000; Part, tem 21¢ (D)P1,800,000; Pare I, tem 30 (B) P500,000; Pact 1V, liem 35(C) (E)P108,000; Part, Item 31 (C) 3,250,000; Part I, tem 29, (©) What is the share of the survi in BIR Form No. 18017 ng spouse in the net estate, and where will it be indicated (A) P11,650,000; Pact I, Item 21C (D)P1,800,000; Part If, em 30 (B) 300,000; Part 1, em 22C (E) P108,000; Part I, Item 31 | (©) 3,250,000; Parti¥, item 39 (2) Whats the tral net taxable este, and where will tbe indicated in BIR Form No. 18012 (A) 11,650,000; Par il Item 21 (D)P1,800,000; Part I, Item 16 (B) 500,000; Par I, em 22C (©)P108,000; Parl, tem 31 (©) P3,250,000; Parti, item 29 (©) Whats the estate tx due, and where wilt be indicated in BIR Form No. 18012 (A) P11,680.000; Part, Item 21C (B) £500,000; Part lem 220 (©) #3,250,000; Parti, Item 29 (D) P1,800.000; Part IL, Rem 30 (©) £108,000, Pac I, tem 18 PWDsSenior Citizens miay aval the 20% discount and VAT exemption ffom the purchases DENS cio pan rdaziodon of in lowhg roost ena identification card issued by the cityhnunicipal mayor, or barangay captain ofthe ph 9 Mee PWD rein o he Sonar Citoe's ID or (fn arent (B) passport: i % oration discount fare identification card issued by the National Council for the (© Siathe of Disabled Perons (NCWDP), (a) Any of the above The End Good Luck!