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CPA Review School of the Philippines

Manila
Final Pre-Board Examination September 2023
Taxation Solutions Atty. Llamado/De Vera

1. B 7. C 13. B 19. C
2. C 8. D 14. B 20. A
3. A 9. B 15. C 21. A
4. B 10. D 16. A 22. D
5. C 11. A 17. B 23. D
6. D 12. B 18. A 24. B

25. D
Sales to registered activities P 5,000,000 Sales to P 1,000,000
unregistered
activities
Allocated Cost of Sales Allocated Cost of
(5M/6M *3M) 2,500,000 Sales (1M/6M 500,000
*3M)
2,500,000 Gross Income 500,000
Tax Rate for National Gov’t 3% Less: Allocated 200,000
Expenses
(1M/6M *1.2M)
75,000 300,000
Corporate Income 25%
Tax Average Rate
for 2022
75,000
Share of National Government in P 75,000
GIT 5%
Corporate Income Tax 75,000
Total tax due to the National Gov’t P 150,000

Allocation of Cost of Sales is based on 5M registered sales over 6M total Sales.

Allocation of Expenses is based on 1M unregistered sales over 6M total Sales.

26. D
Taxable income 300,000
Bad Debts (5,000)
R&D (100,000)
Depreciation (40,000)
Taxable income before contributions 155,000
Limit 10%
Allowed contribution 15,500
Contribution in full 50,000
TOTAL ALLOWABLE CONTRIBUTION 65,500
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27. A
Charitable Contribution 65,500
Bad Debts 5,000
R&D 100,000
Depreciation 40,000
ALLOWABLE DEDUCTION 210,500
28. B

Taxable Income Before Deductions 300,000

Less: Allowable Deductions 210,500
TAXABLE INCOME 89,500

29. C
Compensation 360,000
ADD: Housing loan 48,000
Premiums 6,000
HIPP 4,800
TAXABLE COMPENSATION 418,800

30. B 31. D

32. B
Rent 2,800,000
ADD: Advance Rent 200,00
Sale of real property 2,000,000
Total REVENUE 5,000,000

33. D
Documentary Stamp Tax 30,000
ADD: Permits 20,000
TAXES 50,000

34. D
Actual EAR Ceiling Prevail
2/5 x 40,000 16,000 10,000 10,000
3/5 x 40,000 24,000 30,000 24,000
Allowed EAR 34,000
35. C
Gross Income (5,000,000-1,500,000) 3,500,000
Allowable Deductions
(1,300,000-130,000-6,000-9,900) 1,154,100
Taxable income 2,345,900
Tax Due 703,770
Tax Credit (450,000)
TAX PAYABLE 253,770
36. D
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37. A

Number of authorized shares 1,200,000

Number of unissued shares 400,000
Number of outstanding shares 800,000

Capital stock (₱4.00 x 800,000 outstanding shares) ₱ 3,200,000

Retained Earnings 600,000
Stockholders' equity ₱ 3,800,000

Stockholders' equity ₱ 3,800,000

Divided by number of outstanding shares ÷ 800,000
Book value per share ₱ 4.75

Book value per share ₱ 4.75

x Number of shares of J. Cruz × 100,000
Total value of J. Cruz's shares ₱ 475,000

38. B

Out of the remaining assets of B, the estate will be paid only ₱24,000 (40% of
₱60,000). The remaining portion of the credit in the amount of ₱16,000 (₱40,000 less
₱24,000) shall be available as a deduction by the estate for purposes of computing the
estate tax.

39. B

VD on Land
Value of land (PPT) ₱ 50,000
Less: Mortgage on land paid by decedent (30,000)
Net value of PPT ₱ 20,000
Less: Prorated deductions
₱20,000 (Net value of PPT) x ₱90,000 = (1,475)
₱1,220,000 (Gross estate)
Final basis ₱ 18,525
x Rate (interval of over 2 years,
but less than 3 years) x 60%
Vanishing Deduction ₱11,115
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40. B

VD on Land
Value of land (PPT) ₱ 50,000
Less: Mortgage on land paid by decedent (20,000)
Net value of PPT ₱30,000
Less: Prorated deductions
₱30,000 (Net value of PPT) x ₱100,000 = (2,459)
₱1,220,000 (Gross estate)
Final basis ₱27,541
x Rate (interval of over 2 years,
but less than 3 years) x 60%
Vanishing deduction ₱16,525

41. A 42. D

43. B
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44. A
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Notes:

a) All properties located within and without the Philippines are included in the
gross estate, the decedent being a resident of the Philippines at the time of his
death. His estate is taxed like the estate of a citizen of the Philippines.

b) The claim against the insolvent debtor was taken up as a deduction because the
corresponding account receivable from the same debtor was included in the
gross estate.

c) Loss from business is not a deduction from the gross estate.

d) Actual funeral expenses and the judicial expenses incurred in the settlement of
the estate are not allowed as deductions for purposes of calculating the taxable
net estate.

e) The legacy to PNRC, a charitable institution, is classified as an exemption under

Section 87(D) of the Tax Code. However, if such item is included in the gross
estate, it may then be properly deducted as a transfer for a public purpose in
computing the taxable net estate. In this case, there is no indication that the
legacy to PNRC was excluded from the gross estate of the decedent.

f) The standard deduction of ₱5,000,000 is a special deduction from the gross

estate of a resident alien.

45. D
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a) Only properties located in the Philippines were included in the gross estate,
the decedent being a non-resident alien. The foreign shares, and account
receivable from a debtor residing in the U.S. are properties located outside
the Philippines, and were not included in the gross estate.

b) The claim against the insolvent person cannot be deducted because the
corresponding account receivable was not included in the gross estate.

c) When the decedent is a non-resident alien, the CCLUT expenses are prorated.
The formula for prorating is:

Gross estate in the Philippines

x CCLUT
Worldwide gross estate

d) A standard deduction of ₱500,000 is deductible from the gross estate of a

non-resident alien decedent.

46. A

47. D

48. C

49. D
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50. A. 51. B 52. A 53. A

(1) April 12, 2021

Current gross gift ₱ 850,000
Less: Deductions
Mortgage assumed by donee (30,000)
Current net gift ₱ 820,000
Less: Exemption (250,000)
Total net gift subject to tax ₱ 570,000
Donor's tax (6%) ₱ 34,200

(2) June 6, 2021

Current gross gift ₱ 20,000
Less: Deductions -
Current net gift ₱ 20,000
Add: Total prior net gifts 820,000
Total net gifts ₱ 840,000
Less: Exemption (250,000)
Total net gifts subject to tax ₱ 590,000
Donor's tax (6%) ₱ 35,400
Less: Donor's tax paid on previous gifts (34,200)
Donor's tax payable ₱ 1,200

(3) July 30, 2021

Current gross gift ₱ 40,000
Less: Deductions -
Current net gift ₱ 40,000
Add: Total prior net gifts 840,000
Total net gifts ₱ 880,000
Less: Exemption (250,000)
Total net gifts subject to tax ₱ 630,000
Donor's tax (6%) ₱ 37,800
Less: Donor's tax paid on previous gifts (35,400)
Donor's tax payable ₱ 2,400

(4) November 24, 2021

Current gross gifts ₱ 60,000
Less: Deductions
Gift to accredited NGO (PNRC) (50,000)
Current net gift ₱ 10,000
Add: Total prior net gifts 880,000
Total net gifts ₱ 890,000
Less: Exemption (250,000)
Total net gifts subject to tax ₱ 640,000
Donor's tax (6%) ₱ 38,400
Less: Donor's tax paid on previous gifts (37,800)
Donor's tax payable ₱ 600
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54. B 55. B
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59. C 60. A 61. B 62. A 63. B 64. B 65. D

66. A 67. B
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68. B 69. B
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70. C

THE END