c 0 is Ae aR NSCOR The Professional CPA Review School ‘Main: 3F C. Villaroman Bldg. 873 P, Campa St. cor Espana, Sampatoc, Manila ® (02) 735 8901 / 735 9031 Branch: Rudel Bldg. V, Lower Mabini cor Diego Sitang. Baguio City WF (074) 4221440 email add: crc_acewyahoo.com TAXATION PRE-WEEK OCTOBER 2014 BATCH The prescriptive period for the issuance of a formal letter of demand and final assessmentnotice {FLD'FAN) may not ordinarily be stayed because of the lifeblood theory. However, there are certain instances where the running of the prescriptive period may be suspended. Which among the following. is not among the recognized exceptions which suspend the prescriptive period within which to assess? A. Where the taxpayer requests for and is granted a reinvestigation by the Commissioner. B. Ifthe taxpayer is out of the country. C. Ifthe taxpayer changes his address informing the Commissioner of such change. D. When the Commissioner of Internal Revenue is prevented from making an assessment and within 60 days thereafter. after Date assessment was received Wyo daysadouments —— March 8, 2014 Date petition for reinvestigation was filed with the BIR 67 Sube:thed March 18, 2014 Date of filing of documents to support the petition bet me ays offer _ April 8, 2014 No decision on the protest is received as of eo 99 49 AEE tober 1, 2014 The last day to appeal to the CTA is: A. October 31,2014 B, October 8, 2014 November 4,2014 —_D. March 8, 2016 . Date assessment was received March 8, 2014 Date petition for reinvestigation was filed with the BIR March 18,2014 Date of filing of documents to support the petition April 8, 2014 Date of decision of denial of the petition was received April 28, 2014 Request for reconsideration was filed with the BIR. May 7, 2014 Dute of decision of denial of request for reconsidevation was received June 2, 2014 ‘The last day to appeal to the CTA is: A. July 2, 2014 B. June 7, 2014 ©. June 23, 2014 D. June 21,2014 Date of payment of tax erroneously paid( aytr= claim for wand ) Jamuary 15, 2014 Date a claim for refund was filed February 16, 2015 Date of decision of denial by the BIR was received October 18, 2015 ‘The last day to appeal to the CTA is: A. January 15,2016 B. March 1, 2016 C. November 17,2015 D. November 17, 2017 Using No. 4, if date of decision of denial by the BIR was received on December 21, 2015, the last day to appeal to the CTA is: (hindi dapat magbeyend 56 24 .yung Y0days ) Hefer te 448 ‘A. January 20,2016 B, January 15,2016 C. April 15, 2016 D, March 17, 2016 Date of tax erroneously paid (June (0, role last S49 f eppeal hind: June 10, 2014 ; alampas sm Sune 10, Vole Date of claim for refund was filed with the BIR. # Stars) March 3, 2016 Date of BIR decision of denial was received June 2, 2016 ‘The last day to appeal to the CTA is: A. June 10, B. July 2, 2016 C. July 10, 2016 D. August 2, 2016 -The'fower to decide)isputed assessments, refunds of internal revenue taxes, fees or other charges, penalties “& relation thereof, or other matters arising under the Tex Code or other laws or ositions thereof administered by the BIR is vested in the: ‘A. Regional Trial Court - “C.Seeretary of Finance TAX = 1026 B, Court of Tax Appeals D. Commissioner of Internal Revenue Which of the following statements is true? 157. A. The final tax on compensation of special kind of non-resident aliens is 25% of the gross income, B, Informer's reward is subject to final tax of 10% based on the 10% of the value of the tax assessment or P1,000,000 whichever is higher. C. Prizes exceeding P10,000 derived by non-resident alien not engaged in trade or business here in the Philippines is subject to a final tax of 20%. s2 kA NN CRC-ACE/TAX: Preweek Quizzer (October 2014 batch) Page 2 10. u 12. 13, 14. 15. D, Interest income from a foreign currency depository unit in the Philippines of a non-resident alien is not subject to final tax. ‘The Commissioner is prohibited by law to look into the bai accounts of taxpayer, except when: . Taxpayer applies for compromise on tax obligations on account of financial incapacity. B. Taxpayer is accused of heinous crime. C. During the tax investigation, taxpayer did not invoke his right to privecy. D. The Commissioner has reason to believe that taxpayer has filed a false and fraudulent return. A domesticcorporation has the following results of operations from 2011 to 2014: 202012, 2013, a1 Gross Sales 550,000 650,000 800,000 — 1,200,000 Cost of Sales 300,000 350,000 400,000 $00,000 Allowable deductions 300,000 375,000 300,000 300,00 The corporation was incorporated on July 28, 2008. The income taxes due and payable for taxable calendar year: 2014 ae P 117,250 B. 8,000 93,500 Cc. 8,000 112,250 D. 8,000 98,500 Date the national internal revenue tax was erroneously paid - January 5, 2014; Date a claim for refund. ‘was filed with Bureau of Internal Revenue - February 6, 2015; Date of decision of denial by the Bureau of Internal Revenue was received - October 28, 2015. Last day to appeal to the Court of Tax Appeals: A. February 6, 2016 C. December 27, 2014 B. January 5, 2017 D. November 27, 2015 X Incorporated, engaged in healthy products, had the following investment transactions in common, stocks of SMC Corporation for the year 2014: March 10 - Purchase 200 shares P200,000 @ 1940 /sh- March 25 - Sales 50 shares 47,500 vs (59x 1900) = (2590) April 15 - Purchase 75 shares 90,000 50 = 19, April 25 - Sales 225 shares 200,000 2 XIN = [tier How much would be the cost of the April 25 sales transactions? A. P 240,000 B. P 200,000 C.P 150,000 D.P 242,500 Kapuso Company which operates a water and radio broadcasting franchise provides the following in 2014: Gross receipts: Water franchise P 2,000,000 Radio franchise 10,000,000 Operating expenses 5,000,000 Net income 7,000,000 ‘The total percentage tax on franchise is: . ‘A, P240,000 'B. P340,000 . P360,000 D. P210,000 Which of the following is subject to 10% percentage tax? ‘A. Life insurance policy premiums collected by agent of domestic insurance company. 27. B. Life insurance policy premiums collected by a resident foreign insurance company. 57. C. Life insurance policy premiums collected by agent of non-resident foreign insurance company. D. Premiums on insurance policy taken directly by the owner of the property insured with foreign insurance company. Which of the following wVATe Sale of non-food agricultural products in their original state by farmers, Services OT HOH-VAT person subject to percentage tax. aig HE 2 Sale or importation of agricultural and marine food produets in their original state None of the above. TAX - 1026 pope6. A domestic corp g selected data in the preceding year: oration had the following sel Cash sales Cou of aes a erg ioeo00 Operating expenses ¢ 3,051,000 Dividend received from a domestic corporation "225,000 Assessed value of land 2,250,000 7 219%. Assessed value of building 3130000 f a Assessed value of machinery 6,750,000) * 4340.67 How much would be the additional community tax in the current year? at A. P10,000 B. P10,500 C. PI10S2 p.puiss2 17.A closely held corporation has initially offered its shares in the Philippine Stock Exchange, The following data pertain to the initial public offering: Number of shares sold in IPO 500,000 shares Total outstanding shares, before the listing in the Philippine Stock Exchange 1,800,000 shares Gross value money of the IPO) Wht 26 10,000,000 The percentage tax due i Hap iaks fomnd centage tax du is 1) 3h over Jom x dy, » dea,000- ‘A. P50,000 B.P100,.000 . P200,000 'D. P00,000 18, Shares of Stock held as investment wher sold no? Yarough the local stock exchange shall be subjectto: A. 1/2 of 1% based on gross selling price oF gross value in money. B, 12% VAT based on gross income. C. 5% on first P100,000 capital gain; 10% on excess of P100,000, D. 4%; 2%; 1% based on gross selling price or gross value in money. 19. Shares of stock held as investment when sol (1vove) ine local stock exchange shall be subject to: A. 1/2 of 1% based on gross selling price o7 lue in money. B. 12% VAT based on gross income. C. 5% on first P100,000 capital gain; 10% on excess of P100,000. D. 4%; 2%; 1% based on gross selling price or gross value in money. 20. Which of the following is subject to the 0% gross receipts tax? A. Gross receipts on interest, commissions and discounts from lending activities and income from financial leasing B. Dividends and equity shares in net income of subsidiaries. C. Royalties, rentals of property (real or personal), profits from exchanges and all other items treated ‘as gross income in the Tax Code, D. Net trading gains within the taxable year on foreign currency, debt securities, derivatives and other similar financial instruments, 21. The lease of property, real or personal, is subject to: TAX - 1026 1, 7% gross receipts tax ifthe lessor is a bank, IL 12% VAT if the lessor is not a bank, 1 A. Yes to [and HI B, No toTand If ©. Yes to Tonly D. Yes to IT only Questions 22 and 23 are based on the following information: 8 Mighty Builders is a contractor. It entered into a contract on February 1, 2013, which was completed on February 15, 2014. If received the total value of the contract amounting to PS,500,000 on February 25, 2014, Mighty Builders spent for the materials used in the contract which it acquired from VAT-registered suppliers costing P1,500,000. During the month of February 2014, it purchased an equipment with total agreed price of P2,500,000 and paid P1,000,000. All amounts were, exclusive of value-added tax. ingut 185,00 22. The value-added tax payable for February 2014 is: Ont prt A. P180,000 B, P315,000 CC. P360,000 1 PA75,000 23, Assuming the amount collected was P2,090,900, the value-added tax for February 2014 is: ‘A, Payable of PO Ine ; C. Refimdable of P60,000 ® B. Payable of P55,000 248 D. Refundable of P240,000 24. A VAT registered public worScontractor has the following data for the second quarter of 2014 (VAT exclusive): i Contract price (private sector clients) 5,000,900 Contract price (Government) s 3,000,000eee, 4 raiment contracts subjected to 5% 950,000 ions from private sector clients , ng the quarter (used on private sector eli “nono eer paarna is or clients contracts) 800,000 A coger) OF services of a VA\T-reginered sub-contractor (used in Government + 400,000 Purchases during the quarter (used in both private sector clients and Government 300,000 contracts) The value-added taxes e fi ‘led taxes payable for the quarter on sales to the Government and sales to the private sector clients are, respectively: fovernment —_” Private sector n Pri £ iv s ivate eso P120,000 C.P60,000 Pr2o000 a0 D. PS0,400 121,500 D 25. Which of the following excess input tax cannot he refunded or converted into tax credit certificate? a inp at associated with sale of goods to Asian Development Bank. B. frp tax associated with sale of yoods to International Rie Resear Institue Input tax assoviated with export sales of VAT-registered {axpayers. D. Input tax associated with exports of non-VAT exporter. CL + 26-A married decedent died leaving the following: ‘Community property 5,000,000 Exclusive property 3,000,000 Community deductions 450,000 Exclusive deduction 850,000 Among those included in the exclusive property were the following: '* A piece of larid inherited from the decedent's father who predeceased him 3 1/2 years ago. FMV at the time of inheritance was P800,000 (no mortgage indebtedness); FMV at the time of present decedent's death, P900,000. This was morigaged during the marriage for the benefit of the family for 300,000 which was paid by the decedent before he died. zag * Car which was received as gift 18 months before the present decedent's death. donation, P500,000: FMV date of death, P400,000. 447777 2GRerD The vanishing deduction was: ‘A. P335,000 B. P435,500 £. PS36,000 D. P636,500 (27. Properties owned before marriage an brought ito the mange are generally classified as: 1. Exclusive properties under conjugel partnership of gains. Ti. Common properties under absolute community of properties. A. Only Lis correct C. Both Land If are correct B. Only ITs correct D. Both [and II are incorrect {B . 28. Aresident alien donor donated to a Philippine domestic corporation a property located abroad valued et 500,000, The foreign donor's tex on the donation was P100,000. A donation earlier within the same ‘The donor's tax due on oy wd calendar year was made {0 a legitimate daughter, property valued at P the last donation after credit for foreign donor's tax paid is: Oe guy ‘A.P50,000 + B, P52,500 Cips6oco | FM 85l509 29. The following data pertain to the estate of a married decedent: Cigrne ‘Conjugal real properties 5,000,000 2 tie Conjugal family home 2,000,000 Exclusive properties 2,500,000 Conjugal ordinary deductions: Ce Funeral expenses 250,000 as 8 Other deductions 1,300,000 1,550,000 re) Medial expenses 500,000 ‘The tan Spe} estate is: nips.7s0 Be" B. 3,350,000 g. P2,750,000 D. P2,200,000 430. The following data pertain to the estate of an unmarried but Read ofthe family dogedent ‘Real and personal properties 5,000.00 Family home Ordinary deduetios Funeral expenses 300,000 TAX - 1026 °31. The h i 7 ae ak the religious sect Tres Personas Solo Dios, a8 corporation sole, rented out a 5,000 sq. tered in its name for use as school site of a school organized for profit. The sect used the rentals for the support and upkeep of its priests. The rented lot is: A. Notexeny Be pt from real property taxes because the user is organized for profit. PD from real property taxes since it is actually, directly, and exclusively used for religious purports. ———E—E——eer CONot exempt from real seat property taxes since K i fon Tee perty ince it is the rents, not the land, that is used for religious D. tempt from real property taxes since it is actually, directly, and exclusively used for educational S. Use to intensify VAT coftection 32, tn “Operation Kandado,” the BIR temporarily closed business establishments, including New Dynasty 3 Corporation ted To comply with VAT regulations. New Dynasty contends that it should not be 2 temporarily closed since it has a valid and exiting VAT registration, it faithfully issued VAT receipts, and filed the proper VAT returns. The contention may be rejected if the BIR investigation reveals that: AA. The taxpayer has not been regulary filing its income tx returns forthe past 4 yrs. B, The taxpayer deliberately fled a fase and fraudulent return wit deliberate intention to evade exes C. The taxpayer used falsified documents to suppor is application ‘of taxes. 1ere was an understatement of taxable sales or receipts by 1 declared in the return for the taxable quarter. = fatehien 33. Which among the following concepts of taxation is the basis for thé situsbf income taxation? A. Lifeblood doctrine of taxation C. Compensatory purpose of taxation B. Symbiotic relation in taxation D. Sumptuary purpose of taxation DL 34. which of the following wlRor tally imposed when there is a tax amnesty? A. Civil, criminal, and administrative penalties _B, Civil and administrative penalties C. Civil and criminal penalties D. Criminal and administrative penalties 35. The taxpayer seasonably filed his protest together with all the supporting documents. It is already July 31, 2014, or 180 days from submission of the protest but the BIR Commissioner has not yet decided on e his protest. Desirous of an early resolution of his protested assessment, the taxpayer should file his appeal to the’ Court of Tax Appeals not later than: 30 Aays after July 31, 201y A. August 31, 2014, C. August 15,2014. B, August 30, 2014. D. August 1, 2014. {A 36. Money collected from taxation shall not be paid to any religious dignitary EXCEPT when: ‘A. The religious dignitary is assigned to the Philippine Army. B, Itis paid by a local government unit CC. The payment is passed in audit by theCOA. D. Itis part ofa lawmeker's pork barrel. 37, What should the BIR do when the prescriptive period for the assessment of a tax deficiency is about to e prescribe but the taxpayer has not yet complied with the BIR requirements for the produetion of books ‘of accounts and other records to substantiate the claimed deductions, exemptions or credits? ‘A. Call the taxpayer to a conference to explain the delay. Immediately conduct an investigetion of the taxpayer's activities, TAX - 1026 ve ajeopardy assessment coupled witha letter of demand. D. Issue a notice Df Constructive distraint to protect government interest. result of an erroneous or illegal assessment by the provincial or city assessor. What should be done in such instance to avoid an injustice? ‘A. Question the legality of the no-refund rule before the Supreme Court. B. Enact a new ordinance amending the erroneous or illegal assessment to correct the error. C. Subsequent adjustment in tax computation and the application ofthe excess payment to future real. = property tax liabilities. “ D. Pass a new ordinance providing for the refund of real property taxes that have been erroneously of illegally collected. Other deductions 1,306 zx 0.000 1,500,000 Medical st Y The taxable net estates ert on .P: y 2 3,000,000 8°62,200000 .P3.200,000 D. P1,500,000 ‘ CL 38. Apparently the law does not provide forthe refund of real property taxes that have been collected as ai Se CRC-ACE/TAX: Preweck Quizzer (October 2014 batch) Pose 6 39, Lusthati Educational Foundation, Inc., a stock educational institution organized for profit, decided to lease for commercial use a 1,500 sq. m. portion of its school, The seheal actually. dircetly. and exclusively used the rents for the ranintenance of its school buildings, including payment of janitorial services. Is the leased portion subject to real property tax?” A. Yes, since I uathati isa stock and for profit educational instit B. No, since the school actually, directly, and exclusively used the rents for educational purposes. C. No. but it may be subject to income taxation on the rents it receives, D. Yes, since the leased portion is not actually, directly, and exclusively used for educational purposes. 40. Pierre de Savigny, a Frenchman, arrived in the Philippines on January 1, 2014 and continued to live and engage in business in the Philippines, He went on a tour of Southeast Asia from August 1 to November 5, 2014. He returned to the Philippines on November 6, 2014 and stayed until April 15, 2015 when he returned to France, Ie earned during his stay in the Philippines a gross income of P3 million from his investments in the country. For the year 2014, Pierre's taxable status is that Of:— yy gy, A. Anon-resident alien not engaged in trade or business in the Philippines. Mette nn tye & B. Anon-tesident alien engaged in trade or business in the Philippines, Pipe bales howl C. Aresident alien not engaged in trade or business in the Philippines. ies, Sere D. A resident alien engaged in trade or business inthe Philippines. Engeged in frede yun ness ~Tnagitay ng Mio dams 41, KaTato owns a parcel of land in San Jose, Batangas, declared for real property taxation as agricultural Tn 1993, he used the land for a poultry feed processing plant but continued (o declare the property as agricultural. In March 2014, the local tax assessor discovered KaTato's change of use of his land and informed the local treasurer who demanded payment of deficiency real property taxes from 1993 to 2014, Has the action prescribed? Agessment - 0.4r3 frm the discovery A. No.The deficiency taxes may be collected within five years from when they fell due. B. No. The deficiency taxes for the period 1993 up to 2014 may still be collected within 10 years from March 2014 Yes. More than 10 years had lapsed for the period 1993 up to 2003, hence the right to collect the deficiency taxes has preseribed D. Yes. More than 5 years had lapsed for the collection of the deficiency taxes for the period 1993 up to 2008 42. The excess of allowable deductions over gross income of the business in a taxable Year is known as A. Net operating loss, B. Ordinary loss. C.Net deductible loss. D, NOLCO. 43. The proceeds received under a life insurance endowment contract is NOT considered part of gross insmines Git, fe > avestmenT A. If itis so stated in the life insuraice endowment a B. If the price for the endowment policy was not fully paid. C. Where payment is made as a result of the death of the insured. (deer net crshtute investment ) D. Where the beneficiary was not the one who took out the endowment contract. 44, There is prima facie evidence of a false or fraudulent return where the: ‘A. Tax return was amended after a notice of assessment was issued. B. Tax return wos filed beyond the reglementary period, C. Taxpayer changed his address without notifying the BIR. D. Deductions claimed exceed by 30% of the actual deductions. TAX - 1026 non-profit school always had cash flow problems, resulting in failure to recruit well- trained administrative personnel to effectively manage the school. In 2014, Don Leon donated P100 million pesos to the school, provided the money shall be used solely for paying the salaries, wages, and benefits of administrative personnel, The donation represents less than 10% of Don Leon's taxable income for the year. Is he subject to donor's tax? ‘A. No, since the donation is actually, directly, and exclusively used for educational purposes. B. Yes, because the donation is to be wholly used for administration purposes. C. Yes, since he did not obtain the requisite NGO certification before he made the donation. D. No, because the donation does not execed 10% of his taxable income for 2014. 46. What is the effect on the tax liability ofa taxpayer who does not protest an assessment for deficiency ~ taxes? ‘A. The taxpayer may appeal his li Commissioneron the matter. 45. A non-stock iability to the CTA since the assessment is a final decision of the47. 48. 49, si. 52. 33. . Dondon and Helena were legally separated. They had B the BIR could already enforce the collection of the wxpayer's liability if it could secure authority from the CTA, The taxpayer's liabitity becomes fixed and subject to edUcetion as the assessment becomes final and collectible. 1. The taxpayer's liability remains suspended for 180 days from the expiration of the period to protest c Celia donated P110,000 to her friend Victoria who was getting married, Celia gave no other gift during the calendar year. What is the donor's tax implication on Celia's donation? A. The P100,000 portion of the donation is exempt since given in consideration of marriage. B. A P10,000 portion of the donation is exempt being a donation in considerationofmarriage C. Celia shall pay a 30% donor's tax on the P110,000 donation 1D, The P100,000 portion of the donation is exempt under the rate schedule for donor's tax. AS a general rule, within what period must a taxpayer elevate to the Court of Tax Appeals a denial of his application for refiind of income tax overpayment? A. Within 30 days from receipt of the Commissioner's denial of his application for vefund Be Within 30 daysfrom receipt of the denial which must not exceed 2 years trompayment of income tax ©, Within 2 years from payment of the income taxes sought to be refunded. D. Within 39 daystronn receipt of the denial or within two year rom payment. pe Guestionshle Jeopardy wsseSsiient ts.a valid ground to compromise a tax liability: A. Involving deficiency income taxes only, but not for other taxes, B. Hecause of doubt as to the validity of the assessment. C. If the compromise amount does not exceed 10% of the basic tax. D. Only when there is an approval of the National Evaluation Board, inor children, all quali additional exemptions for income tax purposes. The court awarded custody of two of the children to Dondon and three to Helena, with Dondon directed to provide fail financial support for them as well. The court awarded the 6th child to Dondon's father with Dondon also providing full financial support. Assuming that only Dondon is gainfully employed while Helena is not, for how many children could Dondon claim additional exemptions when he files his income tax return? A. Six children B. Five children €. Three children D. Two children In March 2014, Tonette, who is fond of jewelries, bought a diamond ring for P750,000, a bracelet for 250,000, a necklace for P500,000, and a brooch for 500,000. Tonette derives income from the exercise of her profession as a licensed CPA. In October 2014, Tonette sold her diamond ring, bracelet, and necklace for only P1.25 million incurring a loss of P250,000. She used the P1.25 million to buy a solo diamond ring in November 2014 which she sold for P1.5 million in September 2015. Tonette had no other transaction in jewelry in 2015, Which among the following describes the tax implications arising from the above transactions? ‘A. Tonette may deduct his 2014 loss only from her 2014 professional income. B. Tonette may carry over and deduct her 2014 loss only from her 2015 gain. © Toneite may carry over and deduct her 2014 loss from her 2015'professional income as well as from hergain, D. Tonette may not deduct her 2014 loss from both her 2015 professional income and her gain. Gerardo died on July 31, 2014. His estate tax return showld be filed within: A. Six months from filing of the notice of death. B. Sixty days from the appointment of an administrator, : C. Six months from the time he died on July 31, 2014, D, Sixty days from the time he died on July 31, 2014. TAX - 1026 Spanflex Int'l Ine. received a notice of assessment from the BIR. It seasonably filed a protest with all the necessary supporting documents but the BIR failed to act on the protest, Thirty days from the lapse ‘of 180 days fiom the filing of its protest, Spanflex still has not elevated the matter to the CTA. What remedy, if any, can Spanflex take? ‘A. It may file a motion to admit appeal if it could prove that its failure toappeal was due to the negligence of counsel. B. Ttmay no longer appeal since there is no BIR decision from which it could appeal C. Hhmay wait for the final decision of the BIR on his protest and appeal it to the CTA within 30 days from receipt of such decision : D. None. Its right to appeal to the CTA bas prescribed, :B 34. 55. 56. 37. 58. 59. 60. 61. 62. at iel| Foods, Inc., received a notice of assessment and a letter of demand on its ijustment return from the BIR. Miguel Foods then filed a request tor reinvestigation together with the requisite supporting documents on April 25, 2010. On June 2. 2010. the BIR issued a final assessment reducing the amount of the tax demanded. Since Miguel Foods was satisfied with the reduction, itdid not do anything anymore. On April 15, 2015 the BIR garnished the corporation's bank deposits to answer for the tax liability. Was the BIR action proper? A. Yes. The BIR has $ years from the filing of the protest within which to collect, B. Yes. The BIR has 5 years from the issuance of the final assessment within which to collect. C. No. The taxpayer did not apply for a compromise. D. No. Without the taxpayer's prior authority, the BIR action violated the Bank Deposit Secrecy Law. Income is considered realized for tax purposes when: A. It is recognized as revenue under accounting standards even if the law does not do so. B. The taxpayer retires from the business without approval from the BIR. C. The taxpayer has been paid and has received in cash or near cash the taxable income. D. The earning process is complete or virtually complete and an exchange has takenplace. On Mareh 30, 2010) Alain Descartes, a Freneh citizen permanently residing in the Philippines, received several items during the taxable year. Which among the following subject to Philippine income taxation? A. Consultancy fees received for designing a computer program and installing the same in the Shanghai facility of Chinese firm. B. Interests trom his deposits in a local bank of foreign currency eared abroad converted to Philippine pesos, C. Dividends received fiom an American corporation which derived 60% of its annual gross receipts from Philippine sources for the past 7 years, D. Gains derived from the sale of his condominium unit located in The Fort, Taguig City, to’ another resident alien, On July 31, 2014, Esperanza received a preliminary assessment notice from the BIR demanding that she pays P180,000 deficiency income taxes on her 2012 income. How many days from July 31, 2014 should Esperanza respond to the notice? A. 180 days B. 30 days C. 60 days D. 15 days KaPedringMatibag, a sole proprietor, buys and sells "kuméot at kulambo” both of which are subject to value- added tax. Since he is using the calendar year as his taxable year, his taxable quarters end on the last day of March, June, September, and December. When should KaPedring file the VAT quarterly return for his gross sales or receipts for the period of July 1 to September 30? A. Within 25 days from September 30 C. Within 15 days from September 30 B. Within 45 days from September 30 D. Within 30 days from September 30 What is the rule on the taxability of income that a government educational institution derives from school operations? Such income is: ‘A. Subject to 10% tax on its net taxable income as if it is a proprietary educational institution B. Exempt from income taxation if itis actually, directly, and exelusively used for educational purposes. . C. Subject to the ordinary income tax rates with respectto incomes derived from educational activities. D. Exempt from income taxation in the same manner as government-owned and controlled corporations. Exempted from donor's taxation are gifts made: TAX - 1026 A. For the use of the barangay. (fer public purpse ) C. To a school which is a stock corporation. B. In consideration of marriage. D. To a for-profit government corporation. In 2014, Juliet Ulbod earned PS00,000 as income from her beauty parlor and received P2S0.000 as Christmas gift from her spinster aunt. She had no other receipts for the year. She spent P150,000 for operation of her beauty parlor. For tax purposes, her gross income for 2014 is: ‘730.000 B, P500,000 CC. P350,000 D. P600,000 ty in which the eamer does not have any Passive income includes income derived from an acti substantial participation. This type of ineeme is: ‘A. Usually subject to afinaltax. B. Exempt from income taxation. C. Taxable only if earned by acitizen. D. Inclyded in the income tax return.mye th 63. Although the 0 Cc a Power of taxation is basically legislative in character, it is NOT the function of Congress 4 Me with certainty the amount of taxes, C. Identify who should collect the tax. ‘ollect the tax levied under the law. D. Detérmine who should be subject to the tax. 64, Theactualett thes ‘waleffortexertedbythegovernmenttoeffecttheexactiono fwhatisduefromthetaxpayerisknownas: ssessment B. Levy C, Payment ~~ D. Collection 65. is 2613, Spratz Inc.'s net profit before tax was P35 million while its operating expenses was P31 ‘milion. In 2014, its net profit before tax was P40 million and its operating expenses was P38 million. It int del we dividends for 2013 at 2014. And it has no proposed capital expenditures for 2015 and \¢ immediate future. May Spratz be subject to the i i Ponmedine atts May Sp ‘Subject to the improperly accumulated tax on its retained profits A. Yes, since the accumulated amounts are reasonable for operations in relation to.what it usually + needed annwally. 8. Yes, sinee the accumulation is not reasonably necessary for the immediate needs of the business. ‘C. No, because there is no showing that the taxpayer's 2013 and 2014 net profit before tax exceeded its paid-up capital, ‘No, because the taxpayer is not shown to be a publicly-listed corporation, a bank, or an insurance company. D. 66. Aplets Corporation is registered under the laws of the Virgin Islands. It has extensive operations in Southeast Asia, In the Philippines, its products are imported and sold at a mark-up by its exclusive distributer, Kim's Trading, Inc. The BIR compiled a record of all the imports of Kim from» Aplets and imposed a tax on Aplets net income derived from its exports to Kim. Is the BIR correct™~> VAT en unper terion A. Yes, Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines. B. No, The tax should have been computed on the basis of gross revenues and not net income. C. No, Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines. D, Ye Aplets is doing business in the Philippines through its exclusive distributor, Kim's Trading. ne. 67. Anktryd, Inc,, bought a parcel of land in 2013 for P7 million as part of its inventory of real properties. In 2014, it sold the land for P12 million which was its zonal valuation. In the same year, it incurred 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. Anktryd shall be subject to a tax of 6% of P 12 million, B. Anktryd could deduct its P 6 million loss from its P 5 million gain. 4 C. Anktrye’s gain of P 5 million shall be subject to the holding period. D. Anktry<’s P6 million loss could not be deducted from its P 5 million gain: 68, Tong Siok, a Chinese billionaire and a Canadian resident, died and left assets in China valued at P80 billion and in the Philippines assets valued at P20 billion. For Philippine estate tax purposes the allowable deductions for expenses, losses, indebtedness, and taxes, property previously taxed, transfers for public use, and the share of his surviving spouse in their conjugal partnership amounted to PIS billion. Tong's gross estate for Philippine estate tax purposes is: A. P20 billion + B, 100 billion C.5 billion D. 85 billion 69. The payor of passive income subject to’final tax is required to withhold the tax from the payment due the recipient. The withholding of the tax has the effect A. A final settlement of the tax liability on the income. B. A credit from the recipient's income tax liability. C. Consuummating the transaction resulting in an income. TAX - 1026 D. A deduction in the recipient's income tax return. 70. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In this sense, double taxat a A, Violates substantive due process. C. Violates the right to equal protection. 7 B. Does not violate substantive due process. D. Does not violate the right to equal protection. 71, Mia, « compensation income earner, filed her income tax return for the taxable year 2010 on March 30. 2011. On May 20, 2014, Mia received an assessment notice and letter of demand covering the taxable ~ ‘year 2010 but the postmark on the envelope shows April 10, 2014. Her return is net @ false and fraudulent return. Can Mia raise the defense of prescription? 4 sole pablem Kasi Agaymn daw door to dear nay yan be cea, ee pil BBs eeApril 10,2014. B. Yes. The 3 year prescriptive period started to run on April 15, 2011, hence, it had alrea aire tise ae Per © run on Api . henee, it had already ex; C. No. The prescriptive period started to run on March 30, 2011, hence, the 3 year period expired on April 10, 2014, bd. Re _Sinee the 3-year prescriptive period started fo ran on March 30, 2011, it already expired by lay 20, 24 red (2 Spouses Helena and Feu ate ico wanted to donate a parcel of land to their son Dondon who is getting macried i mber, 2014. The parcel of Jand has @ zonal valuation of P420,000. What is the most efficient mode of donating the property? ie A. The spouses should first donate in 2014% portion of the property valued at P20,000 then spread the ; 400,000 equally for 2015, 2016, 2017 and 2018. ; ; B. Spread the donation over # period of S years by the spouses donating P100,000 each year from 2014 | A A No. The 3 year prescriptive period started to run on April 15, 2011, hence, it has not yet expired on é | to 2018. | C. The spouses should each donate @ P110,000 portion of the value of the property in 2014 then each should donate P100,000 in 2015. D. The spouses should cach donate a P100,000 portion of the value of the property in 2014, and | | | | another P100,000 each in 2015. Then, in 2016, Helena should donate the remaining P20,000. 73. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power & to activate and operate it, resulting in its destruction? Br Fiscal Adequacy /Necessity A. Power to destroy theory C. Sumptuary theory B. Lifeblood theory D. Symbiotic doctrine 74, Keyrand, Ine., a Philippine corporation, sold through the local stock exchange 10,000 PI.DT shares that dD it bought 2 years ago, Keyrand sold the shares for P2 million end realized a net gain of P200,000. How shall it pay tax on the transaction? A. It shall declare a P2 million gross income i expense. B. Itshall report the P200,000 in its corporate income tax return adjusted by the holding period. sagas C. Iishall pay 5% tax on the first P100,000 of the P200,000 an 10% tax on the remaining P100,000(# tat ; D. It shall pay a tax of one-half of 1% of the P2 million gross sales. its income tax return, deducting its cost of acquisition A. Taxpayer fails to include the income in his income tax return. B. Income has been actually received in money or its equivalent. TAX - 1026 C. Income has been received, either actually or constructively. D. Transaction that is the source of the income is consummated, 76 Astegards a revenue bill, which ofthe following is not correct? . The Senate may propose amendments if the bill originates from the House of Representatives. (1 44.cmafu. B. The House of Representatives may propose amendments if the bill originates from the Senate. fru Sagoat Peep C. The President may recommend a revenue bill to Congress. D. A House of Representative version and a Senate version approved separately and then consolidated with both houses approving the consolidated version. (L_77-Statement 1 - The levying, imposition an collection of tax are legislative in character. Statement 2- The aspects of taxation are shared by: the legislative and executive branches of the government. True, false C. False, true D. False, false A. True, true B. |b. 78 Ths isan inherent timitation on the power of taxation: | ‘A. The rule on taxation shall be uniform and equitable. B. No law impairing the obligations of contracts shall be enacted. C. Charitable institutions, churches, personages or convents appurtenants thereto, mosque and non- profits cemeteries and all kinds of lands, buildings and improvements actually, directly ant Exclusively used for religious or charitable purposes shall be exempt from taxation. 1D. The tax laws cannot apply to the property of foreign governments. ( [ytermational Comity ) Forcian recionutn fami - | | ‘ 75. There is no taxable income until such income is recognized. Taxable income is recognized when the:EROACETAXS Preweek Quizzer (October 2014 batch) Page 11. Q 79, A took a lite insyance polivy for PSM where the annual premium is P 20,000. The proceeds will be PAWL A alter 28 yours oF tiv A's estate should A die before completing 25 years payment. If A outlived We policy, which of the following is earect”? i | | A. The proceeds will be part of A's taxable income, | VW. The proceeds will be part of A's gross estate, | (The proweeds will be partly taxable income and partly exempt, i 1. The proceeds will be partly taxable estate and parily exempt. CL BO. Using the preceding number, but after paying the annual payment for 10 years, A transferred the policy {o 1 for P290,000 and 1 paid the annual premiums as they mature, After 10 years, A died. Which of the Uollovwinge is correct? A. Vhe amount received by A thom B is part of A's taxable income, R,_ The proceeds received by IV is part of his taxable income. G. The amount received by A from B is partly taxable income and partly exempt. 1. The proceeds will be part of A's gross estate, - TAX - 1026 rdivrehee 2c a¢ 10.D Sich aia ae ta Sate uD 12.D 13.8 14.¢ 15. 16.4 7D 18. 19. 20.B 2A 22.D Main: 3F C. Villaroman Bldg. 873 P. Campa St. cor Espana, Sampalic, Manila (02) 799 A901 / 748 903 Branch: Rudet BI website 4c 1D 3B 8.D 6A oA 2011 $50,000 00,000) Gl 250,000 AD (300,000) Nolco (NOL) Th (50,0 itp: NCIT @ 30% of TI : MCIT 2% of GI - Payable (higher) : Excess MCIT (TC) : ITs dueépayable 2 From: March 10 purchase 150/200 x 200,000 April 15 purchase 75 shares Capita 47,300 - (50/200 x 200,000) ‘Total cost of the 225 shares sold ANSWERS/SOLUTIONS TO TAXATION PRE-WEEK, 2012 650,000 250,000) 300,000 (375,000) (25,900) 6,000 6,000 6,000 ized non-deductible loss on wash sale 2.000.000 x 2% 40,000 10,000,000.x 3% 300,000 Total OPT 340,000 RPAV 12,150,000/5,000 x 24,860 BDi GR 15,480,000/5,000 x 26,192 Total 11,052 Statutory maximum 10,000 Selling price of IPO shares 10,000,000 OPT rate threshold: ———500,000.___ or 25% 500,000 * 1,500,000 OPT rate applicable 4% OPT due 400,000 orn 5,500,000 x .12 660,000 1,500,000 x 412 (180,000) 2,500,000 x .12 x 1/60 £3,000) VAT payable 475,000 V, Lower Mabini cor Diego Stang, Bayulo City (074) A4Z 1440 wcteace.coth / email add: cre sceayahyn cust OCTORER 2014 BATCH. 2013 2014 i 800,000, 1,200,040) (400,000) | «Suv,w00) 400,000" 700,000 (300,000) (400,000) (100,000), (28,000 > S2s.oud : 112,500 8,000 14,000 8000 112,800 2 (14,000) 8,000 98,500 150.000 90,000 2,500aor 25.D 26. 27,C 28.8 2,000,000. x .12 1,500,000 x 12 2,500,000 x 12 x 1/60 VAT payable 950,000/.95 x .12 2,000,000 x 12 800,000 x 12 950,000/.95 x .07 300,000. x 12 x 23 VAT payable Initial value (lower FMV) Prorated deductions: 800,000/8,000,000 x 1,300,000 400,000/8,000,000 x 1,300,000 Final basis VD rate VD (Total, P536,000) Taxable NG DTD: 500,000 x 30% Up to 200.000 Excess 100,000 x 4% Total DID TC on FDT paid: Actual 100.000 Limit 5/8 x 156,000 97,500 Allowed DID on last donation GE OD: FE ~ Actual 250,000 Limit 9.5M x 5% 475,000 SM 200,000, Allowed Others NE SD: FH STD. deduction ME SSS 1/2 x 5,500,000 Taxable NE 240,000 (180,000) (5,000) $5,000 ora Government Private sector 120,000 240,000 (96,000) (70,000) (24,000) $0,000 120,000 Inheritance Donation 800,000 400,000 (130,000) £65,000) 670,000 335,000 40% 80% 268,000 268,000 Stran; Relative 500,000 300,000 150,000 2,000 4,000 150,000 6,000 (97,500) 52,50 Separate Conjugal 5,000,000 2,000,000 2,500,000 2,500,000 7,000,000 (200,000) 300,000) 2.500.000 5,500,000 Separate 5,000,000 $00,000 . 5,800,000 - 8,000,000 (1,000,000) (1,000,000) (500,000) (2,250,000) 2,750,000.31. 32. 33. 34. 35. 36. 37, 38. 39, 40. PMOUANSFBePWIY + 42, FE - Actual 200,000 Limit 5.8M x 5% 290,000 SM ° 200,000. Allowed * Others SD: FH STD. deduction ME Taxable NE 41.B 51.B 61.B A 52. C 62.A 43.C 53.D 63.B 44.D 54. B 64.D 45.B 55.D 65.B 46.C 56.A ° 66.C 47.C 57.D 67.B 48.B 58.A, 68.A 49.B 59.B 69,A 50. D 60. A 70.C (200,000) (1,300,000) (800,000) (1,000,000) (300,000) 2,200,000 T1LA 72.C 73.B 74.D 75.C 76.B 77.C 78.D 79.C 80.C