Tax-compiled.docx

TAX First Preboard 2020 Items 1 and 2 are based on the following information: When there is contrast of outcome between the application of Tax Laws (TL) and Philippine Accounting Standards (PAS) on a given issue a) TL shall prevail over PAS b) PAS shall prevail over TL c) Both TL and PAS shall be enforced d) The issue is irresolvable. 1. The right course of action to take in Financial Accounting is? B 2. The right course of action to take in Tax Accounting is? A 3. The following are similarities of the State's inherent power of taxation eminent domain, and police power. Which one is not? A. Exist independently of the constitution. B. Are legisiative in nature and character. C. Each presupposes an equivalent compensation. D. Affect all persons or the general public. 4. Which of the following statements is false? A. The provisions of taxation in the Philippine constitution are limitations in the exercise of the State's power of taxation B. The State can have the power of taxation even if the Philippine Constitution does not expressly grant it the power to tax. C. For the exercise of the power of taxation, the State can tax anything, at any time, and at any amount. D. The exemption from taxation provided in the Philippine Constitution prohibits the imposition of any tax on a Religious order. 5. Taxation as distinguished from police power A. The amount imposed has no limit. B. Superior to the non-impairment of obligations clause of the Philippine Constitution. C. The purpose of the imposition is to promote public moral, public health, public safety and/or general welfare of the people D. It involves the taking of property by the Government. 6. An enforced proportional contribution by persons and/or property livid by the lawmaking body of the State by virtue of its sovereignty on them and within its territorial jurisdiction for the support of the Government and all public needs is called a: A. Tax B. License fee C. Toll fee D. Special assessment 7. Pioneer enterprises are exempt from certain taxes for a certain period of time that are otherwise applicable to other enterprises. Which of the following statements is wrong? A. This will provide employment opportunities. B. This is a sound tax incentive for development of the national economy. C. This will not involve unconstitutional delegation of the power of taxation even as certain Government agencies, other than the Congress of the Philippines, will determine who qualify as pioneer enterprises. D. This violates the constitutional requirement of rule of uniformity and equity in taxation. 8. Statement 1: Under the Philippine Constitution, all revenues and assets of non-stock, non-profit educational institutions, used actually, directly and exclusively for educational purposes, are exempt from taxes and duties. Statement 2: Under the Philippine Constitution, charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and non-profit cemeteries, and all

kinds of lands, buildings and improvements, actually, directly or exclusively used for religions or charitable purposes shall be exempt from taxation. A. Both statements are true. B. Both statements are false. C. Statement 1 is true while statement 2 is false D. Statement 1 is false, while statement 2 is true 9. The following are excise taxes, except one, which one is it? A. Income Tax B. Transfer Tax C. Real property Tax D. Value-added Tax 10. Which of the following is not a scheme of shifting the incidence of taxation? A. The manufacturer transfers an indirect tax to the purchaser by adding it to the selling price of the goods B. The manufacturer transfers the value-added tax to the distributor, then in turn to the wholesaler in C. The purchaser insists for a discount or refuses to buy at regular prices unless it is reduced by the D. Changing the terms of the sale from FOB shipping point in the Philippines to FOB destination 11. Statement 1: The estate tax is a tax on property of person transmitting his properties upon his death. Statement 2: The donor's tax is an excise tax on a person transmitting his properties effective while still alive. A. Both statements are true. B. Both statements are false. C. Statement 1 is true, while statement 2 is false D. Statement 1 is false, while statement 2 is true. Items 12 and 13 are based on the following information: Pepito, Filipino, married, died leaving the following properties Car acquired before marriage by Pepito P300,000 Car acquired before marriage by wife P450,000 House and lot acquired during marriage P 1,500,000 Jeweiries of wife, acquired before marriage P 100,000 Personal properties inherited by Pepto during marriage P 250,000 Benefits from SSS P50,000 Retirement benefit from a private firm (under R.A. 4917) 150,000 Proceeds of group insurance taken by Pepito's empioyer 75,000 Land inherited by the wife during marriage 1,000,000 Income earned from the land inherited by wife above (25%P 300,000 200,000 which was earned after death) 12. The gross estate under Absolute Community of Property is A. P2,350,000D. B. P2,750,000 C. P2,600.000B. D. P2,500,000 13. The gross estate under Conjugal Partnership of Gains is: A. P2,350,000 B. P2,750,000 C. P2,600,000B. D. P2,500,000 14. Which of the following statements is wrong? A. Income out of labor of the husband is conjugal property. B. Income out of the exclusive property of the wife is conjugal property. C. Amount receivable under R.A. 4917 during the marriage is conjugal property./ D. Property inherited when the fair market value was P1,000,000, sold for cash during the marriage when the value was P1,300,000, resulted in a gain of P300,000. The gain is conjugal property. 15. Right after going through a massive cardiac arrest, Mr. Heart instantaneously made a last will and

Testament disposing of his properties cited in the said last will and testament. On the same day, he Made gift is inter vivos to his children. Few days later he died. Are the donated properties still to be included in the gross state? A. No, if the donor's tax had been paid already on the donations B. No because they were not his properties anymore at the of his death. C. No, because the donations were not transfers mortis causa, since the donations were not Simultaneous with the execution of the last will and testament. D. Yes, because the donations were actually transfers in contemplation of death, hence, must be governed by the rules on estate tax. 16. Statement 1: A donation mortis causa is subject to estate tax Statement 2: A donation inters Vivos in subject to donor's tax. A. Both statements are correct. B. Both statements are wrong C. Statement 1 is correct, but statement 2 is wrong. D. Statement 2 is correct, but statement 1 is wrong. 17. Tito died leaving, a grand lyric piano to his brother Vic, by last will and testament. The will of Tito gave Vic the power to appoint by will Joey as successor to the piano. When Vic died, Joey succeeded to the property. Which of the choices below is incorrect? A. Joey is succeeding to the estate of Tito and not of Vic. B. B The value of the lyric piano must not be included in the gross estate of Vic C. The value of the lyric piano must be included in the gross estate of Vic. D. The value of the lyric piano must be included in the gross estate of Tito 18. Which of the following statements is wrong? A. If the family house is community property, the deduction for family home is ¼ of its value, and from the total of exclusive and community estate B. If the family house is conjugal property, the deduction for family home is ¼ of its value, and from the gross conjugal estate to arrive at the net conjugal estate. C. The standard deduction is against the total of exclusive and community estate. D. The retirement benefit received by the heirs of an employee-decedent under R.A. 4917 is a deduction against the total of exclusive and conjugal estate. ltems 19 and 20 are based on the following information: Decedent was single when he died at the PGH on November 1, 2019. 19. How much is the net taxable estate? A. P2,500,000 B. P4,000,000 C. P6 900,000 D. P8,250.000 20. How much is the net distributable estate? A. P8,250,000 B. P7,660,000 C. P8,010,000 D. P6,510,00021. 21. Situation 1: Daddy Groovy, on American and resident of New York City, gave a gift check of $100,000to a future daughter -in- law who is to be married to his son in the Philippines Situation 2: XYZ Company, a multi-national corporation doing business in the Philippines, donated one thousand shares of its own stocks to its resident manager in the Philippines. Statement 1. The transactions are gifts. Statement 2. The gifts are subject to donor's tax. A. Both statements are true. B. Both statements are false C. Statement1 is true, but statement 2 is false D. Statement 1 is false, but statement 2 is true. 22. An owner of real property has a cost to him of P5,000,000. On December 31, 2019, with a fair market value of P8,000,000 and a zonal value of P10,000,000, the owner donated one-half of the property pro-indiviso interest to a son. On January 2, 2020, he donated the other half pro-indiviso to the same son. Statement 1: The value of the gross gift on December 31, 2019, is P5, 000,000 and on January 2, 2020, is P5, 000,000. Statement 2: The value of the gross gift on December 31, 2019, is P10,000,000 because the splitting

up of the donations into two is from a single intent of donating P10,000,000. A. Both siatements are correct. B. Both statements are wrong. C. Statement 1 is correct, while statement 2 is wrong. D. D Statement 1 is wrong, while statement 2 is correct. 23. Which of the following statement/s is/are correct? Statement A. Non-resident citizens are taxable on all income derived from sources within the Philippines. Statement B. Resident citizens and domestic corporations are taxable on all income derived from sources within or without the Philippines. Statement C.: Foreign corporations, whether engaged or not in trade or business in the Philippines are taxable from sources within or without the Philippines’. Statement D.: Aliens, whether residents or not in trade or business in the Philippines are taxable from sources within or without the Philippines. A. Statements C and D are correct B. Statements A, B and D are correct C. Statements A,C and D are correct D. Statements A and D are correct 24. Which of the following are basic principles of a sound tax system? A. Fiscal Adequacy, Economic Feasibility and Theoretical! Justice B. Fiscal Adequacy, Administrative Feasibility and Theoretical Justice C. Progressive Taxation, Ability to Pay, Symbiotic Relationship D. Fiscal Deficit, Administrative Feasibility and Ability to Pay 25. Mr. SMALL TIME's piece of land measuring 500 sq meters in Makati City was assessed as commercial with a fair market value P 20,000 per sq. meter. How much is highest possible amount of annual basic real property tax can be collected from him? A. P20,000 B. P 50,000 C. C.P 40,000 D. P 100,000 26. How much discount is granted to a senior citizen on his purchase of basic and prime commodities, Subject to limitation? A. 20% B. 15% C. 5 % D. 10% 27. The concept of "situs of taxation" is based on which limitation of taxation? A. Teritoriality B. International comity C. Exemption of the government D. Public purpose 28.Which of the following statements is/are CORRECT? I. The power to license includes the pwer to tax. II. The power to tax may not include the power to destroy III. The power to tax includes the power to exempt A. II and III B. I and II C. II only D. I only (TRAIN LAW) Mr JAC, single and a non-resident alien, died of a heart attack in 2018, leaving the following properties in favor of his heirs: Gross estate within the Philippines estate outside the Philippines Funeral expense and administrative expenses Claims against the estate His gross estate includes family home valued at P8,000,000.

29. How much is the gross taxable estate of Mr. JAC's estate? A. P45,000,000 B. P35,000,00029 C. P30,000,000 D. P50,000,000 30. How much is the deductible ordinary deductions of Mr. JAC's estate? A. P4,320,000 B. P3,000,000 C. P5,000,000 D. P4,200,000 31. How much is the deductible special deductions of Mr. JAC's estate? A. 1,000,000 B. 5,500,000 C. 8,500,000 D. 500,000 32.How much is the estate tax due of Mr. JAC's estate? A. 1,110,000 B. 1,510,800 C. 1,590,000 D. 1,518,000 Numbers 33 and 34 are 0ased on the following information: An American living in Toronto, Canada, died intestate leaving the following properties (denominated in Philippine pesos) in 2018: Tiny house in Toronto Dodge caliber in Toronto Fixtures in the Tiny house Proceeds of life insurance with Philamerican (philam) Life Insurance Company 33. Which of the above properties will be included in the decedent's gross estate? A. None B. All the properties C. Only properties outside the Philippines D. Only the life insurance proceeds. 34. Which of the following may be deducted from the decedent's gross estate? A. Standard deduction B. Medical expenses C. Funeral expenses D. Family home Numbers 35 through 38 are based on the following information Mr. Bigay made the following donations in 2020: February: To a legitimate daughter who got married on Valentine's day amounting to P300,000 August: To legitimate son's birthday celebration amounting to P200,000To an adopted child who got married amounting to P10,000 35. Compute the Donor's tax due for the month of February? A. P 2,400 B.P 3,000 C. 5,600 D. 18,000 36. Compute the Donor's tax due for the month of August? A P8,000 B. P11,400 C. P 12,600 D. P12,000 37. Compute the Donor's tax due for the month of August if the gift given to the son was split into two: P100,000 in August and P100,000 in September 2021? A. P4,400 B.P4,000 C P6,600 D. P8,000 38. Compute the Donor's tax due for the month of September 2021? A. P6,000 B.P5,600 C. 8,000 D. Exempt 39. On July 1, 2019, Pedro sold his idie residential lot to his ciose friend for only P800,000 when the prevailing fair market value was P1,200,000. The cost to him though was only P500,000. He gave a commission of P20,000 and spent for documentary stamp taxes and transfer fees of P60,000.

Choose the correct answer: A. The amount by which the tair market vafue of the property sold exceeded the value of the Consideration shall be deemed a gift and shall be included in computing the amount of gifts made during the calendar year. B. The sale being a bona fide arm's length transaction and free from any donative intent shall still be considered as made for an adequate and full consideration in money or money's Worth, hence, not subject to donor's tax. C. While there is a perceived gift in the transaction (as cited in letter a. choice above), the appropriate internal revenue tax to apply is the Final Capital Gains Tax in income taxation, rather than the Donor's Tax in transfer taxes. D. None of the choices is correct. 40. Continuing Number 39 above the correct national internal revenue tax payable, therefore is: A. Donor's tax of P9,000 B. Donor's tax of P24,000 C. Final capital gains tax of P40,800. D. Final capital gains tax of P72,000. 41. Going back to Number 39, only that this time Pedro is a duly licensed real estate dealer selling (among others) idle residential lots to his would-be customers in the ordinary course of trade or business and the one sold on July 1, 2019, was part of his real properties available for sale, then choose the correct answer: A. The amount by which the fair market value of the property sold exceeded the value of the consideration shall be deemed a gift and shall be included in computing the amount of gifts made during the calendar year. B. The sale being a bona fide arm's length transaction and free from any donative intent shall Still be Considered as made for an adequate and full consideration in money or money's Worth, hence, not subject t0 donor's tax. C. While there is a perceived gift in the transaction (as cited in letter a. choice above) the appropriate internal revenue tax to apply is the Final Capital Gains Tax in income taxation, rather that the Donor's Tax in transfer taxes D. None of the choices is correct. 42. Continuing Number 39 above, the correct national internal revenue tax payable is A. Donor's tax B. Final capital gains tax C. Value-added tax or other percentage tax D. Value-added tax and other percentage tax 43. A non-stock, non-profit entity shuts down and transfers all its property in favor of another entity. It will not be subject to tax if it meets the requirements of the law, unless: A. The transferee is another non-stock, non-profit organization. B. Not more than 30% of the donation is used for administrative purpose. C. The transferee is an educational, charitable, religious, Cultural or social welfare, philanthropic organization. D. The transferee is a non-government organization. 44. Which statement is correct? Under the system of conjugal partnership of gains and absolute community of property: A. Property acquired during the marriage by inheritance or gifts exclusive property under both systems. B. Property owned before the marriage is exclusive property under both systems. C. Income of property under (a) is exciusive property under both systems.

D. Property under (a) may be conjugal or community when expressly declared by the benefactor as conjugal or community. 45. The following are requisites for vanishing deduction, except one. Which one is it? A. The property with respect to which deduction is sought for can be identified. B. The estate tax of the prior succession must have been finally determined. C. The present decedent died within five (5) years from date of death of the prior decedent. D. The property must have formed part of the gross estate situated in the Philippines of the prior decedent. 46. Which of the following statements is correct? A. If the family home is community property, the deduction for family home is 1/4 of its value, and from the total of the net exclusive and community estate. B. If the family home is conjugal property, the deduction for family home is of its value, and from the gross conjugal estate to arrive at the net conjugal estate C. If the family home is an exclusive property of the decedent, the deduction for family home is 100% of its value, and from the gross exclusive estate to arrive at the net exclusive estate. D. The standard deduction is against the total gross exclusive and conjugal or community estate. 47. Inday, a Filipina with stage three cancer, made a last will and testament disposing of properties mentioned in the last will and testament. On the same day, she made gifts inter vivos to her children. A few days later she died. Were the donated properties still to be included in her gross estate? A. No, if the donor's tax had been paid already on the donations. B. No, because they were not her properties anymore at the time of her death. C. Yes, because the donations were donations mortis causa and must be governed by the rules on estate taxation. D. No, because they were not transfer in contemplation of death since the donations were 'not simultaneous with the execution of the last will and testament. 48. A pinoy husband maintained a joint account with his wife in a local bank with authority to withdraw either by the husband or the wife under an "and/or account. The husband in early 2019 died and the BIR included the cash in the bank in that account in the gross estate of the decedent. The wife objected on the ground that the account is not actually a joint account and in fact the balance in the account was already allowed. by the bank to be withdrawn by her. Statement 1: The BIR was correct. Joint properties (community or conjugal) are includible in the gross estate of the spouse who died. Statement 2: The bank was in error in allowing the withdrawal of the deposit if it had knowledge of death of the husband and the BIR will not be precluded from collecting the 6% Final withholding tax on the amount withdrawn by the wife from the erring tank. A. Both statements are true. B. Both statements are false. C. The 1 statement is true, while the 2" statement is false. D. The 1 statement is false, while the 2 statement is true. 49. With information from an obituary in a newspaper of general circulation on the death of a wellknown Filipino politician, the BIR communicated with banks asking them to give information on the bank deposits of the decedent. Can the bank give information on the bank deposit? A. Definitely no. B. Yes, at the option of the bank. C. No, because of the restriction in the Bank Secrecy Law on deposits

D. Yes, because this is one of the exceptions in the Secrecy of Bank Deposit Law. 50. At the time of his death, a resident of China left among other properties shares of stock of a Philippine Corporation. The estate tax of China was paid on this property. The BIR seeks to impose the Philippine estate tax on the same property. If the decedent was a citizen of the Philippines, is the BIR correct in what it seeks? Statement 1: The BIR is correct because his estate subject to Philippine estate tax would include all properties regardless of location. Statement 2: The BIR cannot allow an exclusion of such property from the gross estate but can allow only a tax credit against the Philippine estate tax for the foreign estate taxpaid. A. Both statements are correct. B. Both statements are wrong C. Statement 1 is correct, but not statement 2. D. Statement 2 is correct, but not statement 51. What if in No. 50, the decedent was a non-resident Chinese? His ownership of shares of stock of a Philippine corporation shall be treated as A. Part of his gross estate for Philippine estate taxation purposes. B. Not part of his Philippine gross estate as intangible personal property follows the domicile of the owner Chinese and resident of China decedent. C. Part of his Philippine gross estate even if the "reciprocity clause in the Philippine estate tax law applies. D. Not part of his Philippine gross estate because the shares of stock of a Philippine corporation have not acquired business situs in the Philippines 52. Decedent was a Citizen of the Philippines The vanishing deduction i5 A. P573,000 B. P592,000 C. P 767,750 D. P 749,25 Number 53 and 54 are based on the following data. 53. The taxable net asset is.: A. P1,000,000 BP1.500,000 C. P 1,300,000D. P1,400,000254. 54. The distributable net estate is: A. P4,390,000 B. P5,390,000 C. P5,940,000 D. P6,000,000 Numbers 55 through 58 are based on the following accounting records of a VAT registered enterprise 55. How much is vatable sales? A. P230,00055. B. P240,000 C. P250,000 D. Not given 56. How much is the output tax? A. P28,800 B. P27,600 C. P30,000 D. P24,000 57. How much is the input tax? A. P8,400 B P10, 800 C. P10,200 D. Not given 58. What if the VAT registered enterprise above is a seller of service, then the value-added tax payable is? A. P19,800 B. P 19,200 C. P 18.600 D. P 17,400 Numbers 59 through 61 are based on the following data of a VAT registered person: 59. The output Vat for the month is A. P36,000 B. P40,200 C. P54,000 D. P58,320 60. The input VAT for the month is A.P 7,500 B. P12,000D. C. P34, 500 D. P 22,500 61. The Vat payable for the month is A. P1,500 B. P10.800 C P13.500 D. P24,000 62. Prior to that VAT aw, sales of cars were subject to sale tax but tax applied only to the original on the first sale; the second and subsequent sales were not subject to tax. WALDS Motors

Incorporation hit on the idea of setting up a wholly subsidiary, Yamaha Motors and of selling its assembled cars to Yamaha at a low price so it would pay a lower tax on the first sale. Yamaha would then sell the cars to the public at a higher price without paying any sales tax on this Subsequent sale. Characterize the arrangement. A. The plan is legitimate exercise of tax planning and merely takes advantage of a loophole in the law B. The plan is legal because the government collects taxes anyway C. The plan is improper; the veil of corporate fiction can be pierced so that the second sale will Considered the taxable sale D. The government must respect Yamaha separate juridical personality and WALDS's taxable sale to it. Numbers 63 through 65 are based on the following data taken from the accounting records of a VAT registered entity (VAT inclusive 63.How much is the output VATT? A P12,000 BP37,500 C. P49,500 D. P79,000241 64. How much is the input VAT? A. P53,200 B. P57,000 C. P62,000 D. P63,840 65. How much is creditable withholding VAT? A. Zero BP12,000 C. P5,000 D. P7,000 Numbers 66 through 68 are based on the following data: 66. How much is Stephen gross compensation income? A. P250,000 B. P270,000 C P500,000 DP550,000 67. If Stephen chose to be a VAT-registered person, how much will be his vatable transactions? A. P300,000 B. P700,000 C. P800,000 D. P830,000 68. Ignoring No. 68 and Stephen, instead, chose to be taxed the optional income tax rate of 8%, then income tax due and payable for 2019 is: A. P44,000 B. P64,000 C. P130,000 D P134,000G 69. Which of the following is exempt from VAT? A. Sale of passenger or cargo vessels and aircrafit, including engine, equipment and spare parts thereof for domestic or international transport operations. B. Sale of professional instrument and implements wearing apparel, domestic animals and personal household effect C. Sale of fuel, goods and supplies by persons engaged in international shipping or air transport operations. D. importation by persons who are not vat registered 70. Sales during the year 2018Subject to: Who is/are subject to VAT? A. A, B, C and D B. B and C C. A, B and C D. Only D.

DRILLS BATCH TAXATION

MAY 2020

1. Ms. Dimaano, a Filipina, made the following donations in 2018: RECIPIENT Niece Land in Quezon City with zonal value of P800,000. Its fair market value per assessor’s office is P500,000. First Cousin 200 preferred shares in Domestic Corporation, traded in stock market with par value of P80 per share but with a book value of P100 per share. The highest and lowest bid price in the stock market for the said shares are P250 and P200, respectively. Daughter of first cousin 100 ordinary shares in a corporation, organized under the laws of China, with par value of P150 per share. 80% of the business of said corporation is located in the Philippines. Second cousin Jewelries in a safety deposit box in China worth P50,000. Daughter Car in China valued at P250,000 with unpaid chattel mortgage of P150,000 assumed by the donee. It is given on account of marriage celebrated last 20 August 2017. The donor’s tax paid on China is P9,000. How much is the donor’s tax payable? A. P38,150 B. P7,450 C. P45,600 D. P50,000 2. Assuming that the donor is a non-resident alien, how much is the donor’s tax payable? A. P35,700 B. P45,600 C. P45,500 D. P36,500 3. Ace died leaving gross estate of P3,500,000. The actual funeral expense on his burial is P300,000. Of the said amount, P100,000 is unpaid. How much is the funeral expense that can be claimed in computing the taxable net estate? A. P300,000 B. P200,000 C. P175,000 D. P100,000 4. Based on the above data, how much is the deductible claims against the estate? A. P100,000 B. P75,000 C. P50,000 D. Nil

The next three (3) questions are based on the following: Pedro, head of the family, died intestate on August 20, 2017 leaving the following properties: Land and house (family home) P8,000,000 Agricultural land inherited from his father who died 2 ½ years before his death 800,000 Other real properties 1,000,000 Other tangible personal properties 200,000 Bank deposit, PNB-Manila representing amount received by heirs under R.A. No. 4917 500,000

Obligation of and charges against certain properties follow: Medical expenses of last illness (unpaid as of the time of death, supported by bills and statements from hospital) Actual funeral expenses (30% paid for from the estate, 70% paid for by relatives) Judicial expenses incurred within six (6) months after death Claims against the estate other than unpaid mortgage Unpaid mortgage on inherited agricultural land Claims against insolvent persons

P600,000 500,000 100,000 270,000 30,000 100,000

The value of the agricultural land at the time of inheritance was P500,000. It had an unpaid mortgage of P80,000. 5. How much was the vanishing deduction? A. 265,178 B. 253,443 C. 159,107 D. 318,214 6. How much was the taxable net estate? A. 6,684,822 B. 6,696,557 C. 6,790,893 D. 6,631,786 7. Assume the decedent died in 2018, how much was the taxable net estate? A. 1,684,822 B. 1,711,339 C. 1,790,893 D. 1,631,786 8. The power of taxation is basically legislative in character. Which of the following is a legislative function? A  Fix with certainty the amount of tax Yes  Identify who should collect the tax Yes  Determine who should be subject to tax Yes

B No Yes Yes

C Yes No Yes

D Yes Yes No

9. Which theory of taxation states that without taxes, a government would be paralyzed for lock of power to activate and operate it, resulting in its destruction? A. Power to destroy theory C. Sumptuary theory B. Lifeblood theory D. Symbiotic doctrine 10. Which of the following statements regarding special assessment is incorrect A. It is based on the government’s need for money to support its legitimate objectives B. It is levied only on land C. It is based solely on the benefits derived by the owners of the land. D. None of the above. 11. An example of a tax where the concept of progressivity finds application is the A. Income tax on individuals B. Excise tax on petroleum products. C. Value-added tax on certain articles. D. Amusement tax on boxing exhibitions. 12. Which of the following justifies the validity of the laws providing for summary remedies in the collection of taxes? A. Due process clause B. Equal protection clause

C. Benefits-protection theory D. Lifeblood doctrine 13. A municipality, Urbiztondo, has an ordinance which requires that all stores, restaurants, and other establishments selling liquor should pay a fixed annual fee of P20,000. Subsequently, the municipal board proposed an ordinance imposing a sales tax equivalent to 5% of the amount paid for the purchase or consumption of liquor in stores, restaurants and other establishments. Is there double taxation? A. No, The impositions are of different nature and character. The fixed annual fee is in the nature of a license fee imposed through the exercise of police power, while the 5% tax on purchase or consumption is a local tax imposed through the exercise of taxing powers. B. No. The prohibition against direct duplicate taxation only applies to the national government and not on local governments. C. Yes. The impositions are both taxes and therefore are prohibited for being violative of uniformity and equal protection sanctioned by the Constitution. D. Yes. However, the impositions are valid since the case is only indirect duplicate taxation. 14. On January 15, 2018, Rose gave a piece of land to her brother-in-law who is getting married on February 14, 2018. The assessed value and zonal value of the land were P750,000 and P1,000,000 respectively. The land had an unpaid mortgage of P200,000, which was not assumed by the donee and an unpaid realty tax of P10,000 which was assumed by the donee. How much was the donor’s tax due? A. P297,000 B. P237,000 C. P59,400 D. P44,400 15. Mr. Lino Bartolome, a non-resident alien, donates a brand new car valued at P1,200,000 to his legitimate son who is getting married in the Philippines. The son agreed to pay the unpaid tax of P120,000 on the car. For Philippine donor’s tax purposes, the total amount of deduction shall be: A. P130,000 B. P120,000 C. P10,000 D. None 16. Mr. Paul Hanson, a Canadian citizen but resident of San Carlos City Pangasinan, donated in 2018 his car in Canada to his future daughter-in-law who is to be married to his only son in Canada. His son and future daughter-in-law are both citizens and residents of Canada. What is the tax implication of the above donation? A. The donation is not subject to donor’s tax since the donee is a non-resident alien and the donated property is located in Canada. B. The donation is taxable, however, dowry exemption may be claimed as deduction. C. The donation is taxable at 6% in excess of P250,000 without any deduction for dowry. D. The donation is subject to graduated rates. 17. Which of the following may reduce the taxable estate but not the inheritance? A. Claim against the estate B. Losses C. Judicial expense D. Family home 18. On the belief that Mauro is about to die, he sold to his daughter a parcel of land, valued at P3,000,000 for the same amount. One (1) year later, Mauro died of a car accident. At that time, the property had already a value of P3,500,000. For Philippine estate tax purposes, the amount includible in the gross estate is

A. B. C. D.

nil P500,000 P3,000,000 P3,500,000

19. An American living in New York died intestate leaving the following properties: Dodge caliber in New York P 3,000,000 Tiny House in New York 5,000,000 Fixtures in the Tiny House 1,000,000 Proceeds of life insurance with Philam (philamerican) life 2,000,000 Which of the above-listed properties will be included in the decedent’s gross estate? A. None. B. All his properties. C. Only the life insurance proceeds. D. Only properties outside the Philippines.

Numbers 20 to 21 are based on the following information: Sir Bigay made the following donations for the year 2018, as follows: January – to his son amounting to P250,000. February – to an officemate P30,000. March – to his daughter who got married in the month P 60,000; and to his daughterin-law P40,000. 20. How much is the donor’s tax for the month of January? A. Exempt B. P 1,800 C. P 6,000

D. P 7,800

21. How much is the donor’s tax for the month of February? A. P 9,000 B. P 7,800 C. P 6,000

D. P 1,800

22. How much is the donor’s tax for the month of March? A. P 6,000 B. P 7,800 C. P 9,000

D. P 14,000

Numbers 23 to 26 are based on the following information Mr. Regalo made donations for calendar year 2018 as follow: Feb: 350,000. July:

To a legitimate daughter who got married on valentine’s day amounting to P To legitimate son’s birthday celebration amounting to P450,000. To the National Government cash of P100,000.

23. How much is the donor’s tax due for the month of February? A. P 5,400 B. P 6,000 C. P 20,400

D. P 21,000

24. How much is the donor’s tax due for the month of July? A. P 18,000 B. P 26,400 C. P 27,000

D. P 33,000

25. Compute the donor’s tax due for the month of July if the gift given to the son was split into two: P 225,000 in July and P 225,000 in August 2019? A. P 12,900 B. P 13,500 C. P 19,000 D. P 19,500 26. The donor’s tax due for the month of August 2019 is: A. P 19,500 B. P 13,500

C. P 12,900

D. Exempt

27. The Bureau of Internal Revenue may grant an extension of time for filling the Estate Tax Return settled judicially within? A. I month B. I year C. 2 years D. 5 years

Numbers 28 to 31 are based on the following information: Don Pepe, single, but head of family, Filipino and resident of Manila died intestate on November 1, 2018. He left the following properties and interests: House and lot ( family home ) in Manila P Vacation house in New York City Commercial land in Manila donated by his father in 2012 Toyota car in Manila being used by his fiancée Proceeds of life insurance where the beneficiary is his fiancée (revocable) Furniture and appliances in Manila house Claims against an insolvency person (Filipino resident) whose assets total P10,000 and whose liabilities total P100,000 Shares of stock in XYZ Corporation (domestic)with FMV of The expenses and charges against the estate are as follows: Funeral expenses Unpaid real property taxes Medical expenses of last illness Claims against the estate

800,000 5,500,000 2,000,000 500,000 1,000,000 1,000,000 100,000 100,000 P 250,000 600,000 800,000 310,000

28. What is the gross estate and the allowable deductions therefrom? A. P 5,500,000; P 3,500,000 B. 10,000,000; 6,110,000 C. 10,990,000; 6,200,000 D. 11,000,000; 6,800,000 29. What is the taxable net estate and the estate tax due? A. P 2,000,000; P 120,000 B. 3,890,000; 233,400 C. 4,200,000; 252,000 D. 4,790,000; 272,400

30. If the decedent was a non – resident alien, what would be the gross estate for Philippines estate tax purposes and the allowable deductions therefrom if there was no reciprocity? A. P 5,500,000; P 1,000,000 B. 5,490,000; 1,400,000 C. 5,200,000; 1,200,000 D. 5,500,000; 500,000 31. In No. 30 what is the taxable net estate and the estate tax due? A. P 5,000,000; P 300,000 B. 4,000,000; 240,000 C. 4,090,000; 225,400 D. 4,500,000; 270,000 32. Which of the following is not one of the canons of a sound tax system? A. Quantifiability B. Equality C. Certainty D. Convenience 33. Treating persons who are similarly situated in the same manner – A. Uniformity of taxation; B. Equality of taxation C. Due process of law D. Non-delegation of legislative 34. Diplomatic officials such as heads of states and ambassadors are exempt from taxes and duties because of A. International comity B. Reciprocity provisions C. Principle of territoriality D. Exemption in the tax code

35. Which of the following is not an example of excise tax? A. Transfer tax B. Sales tax C. Real property tax D. Income tax

FIRST MONTHLY EXAM INTEG REVIEW

TAXATION BATCH 2020

1. The principal purpose of taxation is A. To encourage the growth of home industries through the proper use of tax incentives B. To implement the police power of the State C. To reduce excessive inequalities of wealth D. To raise revenue for governmental needs 2. After having been informed that most of the massage parlors in the city are being used as fronts for prostitution, the Sanguniang Panlungsod ng Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such “onerous taxes” that leave them no other alternative but to stop operating. The passage of the ordinance is a valid exercise of A. Taxation B. Police power C. Eminent domain D. Police power and power of taxation 3. Statement 1: A provision on taxation in the Philippine Constitution is a grant of power. Statement 2: The power to tax includes the power to destroy. Statement 3: Sumptuary purpose of taxation is to raise funds for the government. A B C D Statement 1: True True False False Statement 2: True True True True Statement 3: True False True False 4. Statement 1: Income tax collected from the taxpayers is the main source of revenue of the local government. Statement 2: Taxes collected are the main source of revenue of the government. A B C D Statement 1: True True False False Statement 2: True False True False 5. A tax must be imposed for a public purpose. Which of the following is not a public purpose? A. National defense B. Public education C. Improvement of sugar industry D. None of the choices 6.

Which of the following statements is not correct? A. Taxes maybe imposed to raise revenue or to provide disincentives to certain activities within the State. B. The State can have the power of taxation even if the Constitution does not expressly give it the power to tax. C. In the exercise of the power of taxation, the State can tax anything at any time. D. The power of taxation in the Philippine Constitution are grants of power and not limitations on taxing power.

7.

The following are the differences between the Power of Taxation and the Power of Eminent Domain, except: Power of Taxation Power of Eminent Domain A. Enforced proportionate contribution Property to be taken is for public use B. Government has no obligation to pay Government is a debtor of the property taken C. It operates in a community It operates on an individual D. Attribute of sovereignty Fundamental power

8.

Which of the following statements is not correct? A. The government automatically possesses the power to collect taxes from its inhabitants. B. The government can enforce contribution upon its citizens only when the Constitution grants it. C. Taxation power exists inseparably with the State. D. The State has the supreme power to command and enforce contribution from the people within its jurisdiction.

9.

Statement 1: The power to tax is supreme, plenary, comprehensive and without any limit because the existence of the government is necessity. Statement 2: The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the constitution provides otherwise. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect

10.

Which statement is false about succession A. The successor inherits all of the transmissible property of a decedent including his liabilities B. The successor of the decedent beyond the value of the asset he received C. In succession, fruits and credits maturing after the death of the decedent pass to the heirs even if they were not subjected to estate tax D. In succession, the successor can refuse the inheritance

11.

Which of the following could legally transfer of properties through succession? I. By virtue of a will II. By operations of law III. By onerous transfer a. I only c. I and III only b. I and II only d. I, II and III

12. Vlad died on October 20, 2018. During his lifetime, upon knowing that he had Stage 4 cancer, sold his Lamborghini car to his son for P4,000,000. The fair market value of the car at the time of sale is P3,000,000 while it is already valued at P5,000,000 at the time of death. The amount that will be added to gross estate is a. P1,000,000 c. P2,000,000 b. P5,000,000 d. Nil 13. Pedro, decedent, owns a property valued at P1,500,000 at the time of his death. The said property was sold by Pedro during his lifetime to Juan for P700,000 when its value was P1,200,000. It was agreed by Pedro and Juan that the former will enjoy the income of the property as long as he lives. For Philippine estate tax purposes, how much will be included in determining gross estate? a. P500,000 c. P800,000 b. P1,200,000 d. P0 14. The following are deemed transfers in contemplation of death, except a. While still alive, the decedent donated property where the donation will take effect at the time of his death. b. The decedent transferred a property in the regular course of the business operation c. The decedent donated a property with the condition that he/she is still alive. d. The decedent transferred a property to take effect after his/her death.

15. 16. 17. 18.

The next four (4) questions are based on the data provided below: Mr. Jones died leaving the following properties: Rest house in Cebu, acquired before marriage Income from rest house in Cebu Condominium in Davao, brought to marriage by wife Income from condominium in Davao Town house in Quezon City, acquired during marriage Income from town house in Quezon City Car, inherited by wife during marriage (the decedent provided in his Will that it shall form part of the common properties of the spouses) Jewelry, acquired during marriage for exclusive use of the wife How much is the conjugal properties under Conjugal Partnership of Gains? a. 12,510,000 c. 18,510,000 b. 23,310,000 d. 23,610,000 How much is the gross estate under Conjugal Partnership of Gains? a. 12,510,000 c. 18,510,000 b. 23,310,000 d. 23,610,000 How much is the community properties under Absolute Community of Property? a. 12,510,000 c. 18,510,000 b. 22,310,000 d. 23,610,000 How much is the gross estate under Absolute Community of Properties? a. 12,510,000 c. 18,510,000 b. 22,310,000 d. 23,610,000

6,000,000 600,000 3,600,000 360,000 10,500,000 1,050,000 1,300,000 200,000

19. Lele Sy, 95 years old, was diagnosed of various aliments on January 1, 2018. Motivated by though of death, he decided to dispose all his properties to his children and relatives. He executed a last will and testament disposing all his properties in the Philippines to his children. On the same day, he made donations inter-vivos to his other relatives as to his properties in the United States. Lele Sy died a month after disposing all his properties. Should the properties donated by Lele Sy to his other relatives be included in his gross estate upon his death? a. No, because they were not his properties anymore at the time of death. b. Yes, because the donations were donations mortis causa and should be governed by the rules on estate taxation. c. No, if the donor’s tax had been paid already on the donations d. No, because they were not transfers in contemplation of death, since the donations were not simultaneous with the execution of the last will and testament. 20. Samuel sells shoes in Makati through a RETIAL STORE. He pays the VAT on his gross sales to the BIR and the municipal license tax based on the same sales to the City of Makati. He comes to you for advise because he thinks he is being subjected to double taxation. What advice will you give him? a. Yes, there is double taxation and it is oppressive b. The City of Makati does not have the power. c. Yes, there is double taxation and it is illegal in the Philippines d. Double taxation is allowed where the tax is imposed by the national government and the other by the local government 21. Statement 1: A tax differs from a fine or penalty because a tax is not intended to deter or punish unacceptable behavior. Statement 2: A tax is considered sufficient if it generates enough funds to pay for the goods and services provided by the government levying the tax. a. Only statement 1 is correct c. Both statements are correct b. Only statement 2 is correct d. Both statements are incorrect 22. The method by which the manufacturer or producer upon whom the tax is imposed pays the tax and strives to recover such expense through lower production cost without sacrificing the quality of his product a. Shifting c. Transformation b. Capitalization d. Tax exemption

23. The reduction in the selling price of income producing property by an amount equal to the capitalized value of future taxes that may be paid by the purchaser a. Shifting c. Transformation b. Capitalization d. Tax exemption 24. Toll as distinguished from tax a. Demand of sovereignty b. Imposed by government only c. Amount is based on the cost of construction of public improvement used d. Paid for the support of the government 25. A tax must be imposed for a public purpose. Which of the following is not a public purpose? a. National defense c. Improvement of sugar industry b. Public education d. None of the choices 26. As to scope of legislative power to tax, which of the following is correct? a. The power to tax is supreme, plenary, comprehensive and without any limit because the existence of the government is a necessity. b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the constitution provides otherwise. c. Congress has the right to levy a tax of any kind at any amount as it sees fit, even in the absence of any constitutional provision. d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided the purpose is public and the courts may not review the levy of the tax to determine whether or not the purpose is public. 27. A fundamental rule in taxation is that “the property of one country may not be taxed by another country”. This is known as a. International law c. International comity b. Reciprocity d. International inhibition 28. One of the characteristics of a tax is that: A. It is generally based on contract B. It is generally payable in money

C. It is generally assignable D. Answer not given

29. Tax of a fixed proportion of the value of the property with respect to which the tax is assessed and requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined is known as: A. Specific C. Special or regulatory B. Ad valorem D. Answer not given 30. A religious order, a lessee of a piece of land, constructed a seminary and church on a portion of the land. On the portion of the land not used as seminary and church, it constructed a one-story building that is sub-leased to private individuals selling religious materials, food and refreshments. The rent income is used to finance teaching at the seminary. Statement 1. The rent income of the religious order is subject to income tax; Statement 2. The exemption from taxation provided in the Philippine Constitution prohibits the imposition of any tax on the religious order. A. True, true B. False, false C. True, false D. False, true

TAXATION BATCH FIRST PRE-BOARD EXAMINATION 10:30AM

MAY 2019 FEB 9, 2019; 7:30AM-

1.

The power to tax is not without limitations. Such limitations maybe inherent (restrict the power not embodied in the constitution) or constitutional (expressly found in the Constitution or implied in its provisions). Which of the following is an inherent limitation? A. Equal protection of the laws. B. No imprisonment for non – payment of poll tax. C. Exemption from taxation of government entities. D. Exemption of religious, charitable and educational entities, non – profit cemeteries and churches from property taxation.

2.

Which of the following is not a condition imposed by the Constitution in the exercise of the power of eminent domain? A. The payment of just compensation. B. The observance of due process in taking private property. C. The existence of public use for taking private property. D. The consent of the private property owner to sell the property to the government.

3.

How broad is the power of the legislature to impose taxes? Ans. 1 – The legislature has limited discretion as to the persons, property or occupations to be taxed, where there are no constitutional restrictions, provided the subject or object to be taxed is within the territorial jurisdiction of the State. Ans. 2 – The legislature has the right to finally determine the amount or rate of tax, in the absence of any constitutional prohibitions and it may levy a tax of any amount it sees fit. A. True, True B. True, False C. False, True D. False, False

4.

Account receivable by the estate of the decreased, his executor or administrator as insurance under a policy taken by the decedent covering his own life is: A. Excluded from gross estate. B. Part of gross estate if the beneficiary is revocable. C. Part of gross estate if the beneficiary is irrevocable. D. Part of gross estate whether the beneficiary is revocable or irrevocable.

5.

The following, except one, are the basic principles of a sound taxation system. The exception is: A. It is generally payable in money. B. It should consider the taxpayer’s ability to pay. C. It should be capable of being effectively enforced. D. The sources of revenue must be sufficient to meet government expenditures and other public needs.

6.

Statement I. Government owned and controlled corporations are subject to tax unless expressly exempted. Statement II. Government agencies performing governmental and proprietary functions are exempt from tax unless expressly taxed. A. True, True B. False, False C. True, False D. False, True

7.

It is an aspect of taxation that is administrative in character and the power to exercise it is vested to the department of finance. A. Levying B. Collection C. Imposition D. Legislation

PAGE 20 8.

9.

Which of the following aspects of taxation is (are) administrative in nature? I. Levy II. Assessment A. I only B. I and II C. II and III D. III only Which of the following are the elements of impact of taxation? I. Levy II. Imposition III. A. I only B. I, II and III C. III and IV D. I, II, III and IV

III.

Collection

Assessment

IV.

Collection

10. Congress passed a sin tax law that increased the excise tax rates on cigarettes by 1,000%. The law was thought to be sufficient to force many cigarettes manufacturers out of business. One cigarette manufacturer that would go out of business questioned in court the new sin tax law because it would not be able to pay the increased tax. The cigarette manufacturer is: A. Wrong because taxes are the lifeblood of the government. B. Correct because Congress, in this case exceeded its power to tax. C. Correct because no government can deprive a person of its livelihood. D. Wrong because the law recognizes the fact that the power to tax carries with it the power to destroy. 11. The Municipality of Itogon passed an ordinance imposing a tax on installation managers. At that time, there was only one installation manager in the municipality, thus, only he would be liable for the tax. Is the law constitutional? A. It is unconstitutional for lack of legal basis B. It is constitutional as it applies to all persons in that class. C. It is constitutional because the power to tax is the power to destroy. D. It is unconstitutional because it clearly discriminates against this person. 12. Yamaha Corporation manufactures motorcycles and is almost at the point of bankruptcy. It has no more cash and all it has are unsold motorcycles. It received an assessment from the BIR for deficiency income taxes. It wants to pay but due to lack of cash it seeks permission to pay in kind with motorcycles. Should the BIR grant the requested permission? A. It should grant permission to make payment convenient to taxpayers. B. It should not grant permission because a tax is generally a pecuniary burden. C. It should grant permission else Yamaha Corporation would not be able to pay. D. It should not grant permission because the government does not have the storage facilities for motorcycles. 13. Panelco is a power generation and distribution company operating mainly in Agno, Pangasinan. It owns electric poles which it also rents out to other companies that use poles such as telephone and cable companies. The municipality of Agno passed an ordinance imposing a fee equivalent to 1% of the annual rental for these poles. Panelco questioned the legality of the ordinance on the ground that it imposes an income tax which local government units are prohibited from imposing. Rule in the validity of the ordinance: A. The ordinance is valid as an LGU may impose tax on income. B. The ordinance is void as the 1% of annual rental fee is excessive and oppressive. C. The ordinance is valid as it is a legitimate exercise of police power to regulate electric poles. D. The ordinance is void as the fee is based on rental income and is therefore a tax on income. 14.

Which of the following statements is incorrect? A. In case of doubt, statutes levying taxes are construed strictly against the government. B. The reversal of ruling shall not generally be given retroactive application if said reversal will be prejudicial to the taxpayer. C. The construction of a statute made by his predecessor is not binding upon the successor if thereafter he becomes satisfied that a different construction should be given. D. A memorandum circular promulgated by the Commissioner of Internal Revenu (CIR) that imposes penalty for violations of certain rules need not be published in a newspaper of general circulation or official gazette because it has the force and effect of law.

15.

Which statement below expresses the lifeblood theory? A. The assessed taxes must be enforced by the government. B. Taxation is an arbitrary method of exaction by those who are in the seat of power.

PAGE 21 C. D.

The underlying basis of taxation is government necessity for without taxation a government can neither exist nor endure. The power of taxation is an inherent power of the sovereign to impose burdens upon subject and objects within its jurisdiction for the purpose of raising government revenues.

16.

Which statement is wrong? A. The power to tax is subject to certain constitutional limitations. B. The money contributed as tax becomes part of the public funds. C. Generally, there is no limit on the amount of tax that may be imposed. D. The power of taxation may be exercised by the government, its political subdivisions and public utilities.

17.

The government is said to be exempt from taxation. Which of the following is an exception to this rule? A. A government employee buying 30 printers for office use. B. DSWD claiming tax exemption or goods donated by the LGUs of Laoag City. C. A contractor for the government claiming exemption from contractor’s tax. D. A contract entered into by the PNP and SM where SM furnishes the PNP with police uniforms.

18.

Which of the following is not within the scope of tax legislation? A. Assessment of tax B. Fixing the possible tax rate. C. Determining the purpose of the tax. D. Determining the subjects to be taxed.

19.

Which of the following is not an inherent limitation in the exercise of the power of Taxation? A. Territoriality B. International comity C. Public purpose test D. Veto power of the President

20.

Which of the following is not an exclusion from the gross estate? A. Transfer to government. B. Proceeds of life insurance C. Transfer passing under a limited power of appointment D. Foreign corporation shares of stock where 80% of its operation is in the Philippines owned by a nonresident alien decedent.

21.

A non- stock, non- profit entity shuts down and transfers all its property in favor of another entity will not be subject to tax if it meets the requirements of the law, except: A. The transferee is a non – government organization. B. The transferee is another non –stock, non – profit organization. C. Not more than 30% of the donation is used for administrative purpose. D. The transferee is an educational, charitable, religious, cultural, social welfare, or philanthropic organization.

22.

What cannot be allowed as deduction from the gross estate? A. Family home B. Vanishing deduction C. Optional standard deduction D. Share of surviving spouse

23.

Which of the following may be deducted from the gross estate? A. Medical expenses C. Funeral expenses B. Standard deduction D. Judicial expenses

24.

If a Briton was a resident of the Philippines, is the property located outside the Philippines be included in his gross estate? A. No, only property located in the Philippines will be included because he was a Briton. B. Yes, regardless of the location of the property will be included in the gross estate because he was a resident. C. No, he must be both a resident and Filipino citizen to include property outside the Philippines in his gross estate. D. Yes, regardless of location of the property will be included in the gross estate because he was a British citizen.

25.

An American living in New York died intestate leaving the following properties: Dodge caliber in New York

P 3,000,000

PAGE 22 Tiny House in New York Fixtures in the Tiny House Proceeds of life insurance with Philam (philamerican) life Which of the above-listed properties will be included in the decedent’s gross estate? E. None. F. All his properties. G. Only the life insurance proceeds. H. Only properties outside the Philippines.

5,000,000 1,000,000 2,000,000

Nos. 26 to 28 are based on the following information: Sir Bigay made the following donations for the year 2018, as follows: January – to his son amounting to P250,000. February – to an officemate P30,000. March – to his daughter who got married in the month P 60,000; and to his daughter-in-law P40,000. 26.

How much is the donor’s tax for the month of January?

E. 27.

Exempt

G. P 6,000

H. P 7,800

G. P 6,000

H. P 1,800

G. P 9,000

H. P 14,000

How much is the donor’s tax for the month of February?

E. 28.

F. P 1,800

P 9,000

F. P 7,800

How much is the donor’s tax for the month of March?

E.

P 6,000

F. P 7,800

Nos. 29 to 32 are based on the following information: Mr. Regalo made donations for calendar year 2018 as follow: Feb: July:

29.

How much is the donor’s tax due for the month of February?

E. 30.

H. P 21,000

P 18,000

F. P 26,400

G. P 27,000

H. P 33,000

P 12,900

F. P 13,500

G. P 19,000

H. P 19,500

P 19,500

F. P 13,500

G. P 12,900

H. Exempt

The Bureau of Internal Revenue may grant an extension of time for filling the Estate Tax Return settled judicially within?

E. 34.

G. P 20,400

The donor’s tax due for the month of August 2019 is:

E. 33.

F. P 6,000

Compute the donor’s tax due for the month of July if the gift given to the son was split into two: P 225,000 in July and P 225,000 in August 2019?

E. 32.

P 5,400

How much is the donor’s tax due for the month of July?

E. 31.

To a legitimate daughter who got married on valentine’s day amounting to P 350,000. To legitimate son’s birthday celebration amounting to P450,000. To the National Government cash of P100,000.

I month

F. I year

G. 2 years

H. 5 years

A non- stock non- profit entity shuts down and transfers all its property in favor of another entity. It will not be subject to tax if it meets the requirements of the law, except? A. The transferee is non – government organization. B. The transferee is another non –stock, non – profit or organization. C. Not more than 30% of the donation is used for administrative purpose. D. The transferee is an educational, charitable, religious cultural or social welfare, or philantrophic organization.

Nos. 35 to 39 are based on the following information: Don Pepe, single, but head of family, Filipino and resident of Manila died intestate on November 1, 2018. He left the following properties and interests: House and lot ( family home ) in Manila P 800,000 Vacation house in New York City 5,500,000 Commercial land in Manila donated by his father in 2012 2,000,000 Toyota car in Manila being used by his fiancée 500,000 Proceeds of life insurance where the beneficiary is his 1,000,000 fiancée (revocable)

PAGE 23

Furniture and appliances in Manila house Claims against an insolvency person (Filipino resident) whose assets total P10,000 and whose liabilities total P100,000 Shares of stock in XYZ Corporation (domestic)with FMV of The expenses and charges against the estate are as follows: Funeral expenses Unpaid real property taxes Medical expenses of last illness Claims against the estate 35.

36.

1,000,000 100,000 100,000

P 250,000 600,000 800,000 310,000

What is the gross estate and the allowable deductions therefrom? E. P 5,500,000; P 3,500,000 F. 10,000,000; 6,110,000 G. 10,990,000; 6,200,000 H. 11,000,000; 6,800,000 What is the taxable net estate and the estate tax due? E. P 2,000,000; P 120,000 F. 3,890,000; 233,400 G. 4,200,000; 252,000 H. 4,790,000; 272,400

37.

If the decedent was a non – resident alien, what would be the gross estate for Philippines estate tax purposes and the allowable deductions therefrom if there was no reciprocity? E. P 5,500,000; P 1,000,000 F. 5,490,000; 1,400,000 G. 5,200,000; 1,200,000 H. 5,500,000; 500,000

38.

In No. 37 what is the taxable net estate and the estate tax due? E. P 5,000,000; P 300,000 F. 4,000,000; 240,000 G. 4,090,000; 225,400 H. 4,500,000; 270,000

39.

What if Don Pepe before dying, asked your advice on how to transfer his properties to his heir with the least tax consequences? What advice would you give? A. Sell all properties to his heir. B. Donate all properties to his heir. C. Get a life insurance policy. When he dies the proceeds from such policy shall cover the estate tax. D. Create 2 corporations: Corporation X holding the assets of Don Pepe and Corporation Y in which the heir is a majority shareholder. Have the 2 corporations merged or consolidated where the heir exchanges his shares in Corporation Y for the shares in Corporation X, as set forth in Sec. 40 (a) (2) of the Tax Code, as amended.

40.

To mitigate the harmful effect of successive taxation of the same property occasioned by the death occurring within a short period of time, the law allows as deduction: A. Vanishing deduction. C. Share of surviving spouse. B. Claims against the estate. D. Claims against insolvent person.

41.

Which of the following is not a condition for the allowance of family home deduction in estate taxation? A. The total value of the family home must be included as part of the gross estate of the decedent. B. The family home must be the actual residential house of the decedent and his family at the time of his death, as certified by the Barangay Chairman of the locality where the family home is situated. C. Allowable deduction must be an amount equivalent to the current fair market value of the family home as declared or included in the gross estate or to the extent of the decedent’s interest (whether conjugal/community or exclusive property), whichever is higher, but not exceeding P10,000,000. D. None of the choices.

42.

Benru, revocably transferred his Montero car to his nephew. He challenged his nephew to pass the CPA Licensure Examination because if he does, he will waive his power to revoke the transfer. The nephew topped the CPA Licensure Examination, so Benru; waved his power to revoke the transfer. The transfer is subject to: A. Estate tax B. Donor’s tax

PAGE 24 C. D.

Either estate tax or donor’s tax Neither donor’s tax or estate tax

43.

Which of the following renunciation is not subject to donor’s tax? A. General renunciation by an heir, including the surviving spouse of his/her share in the hereditary estate left by the deceased. B. Renunciation by the surviving spouse of his/ her share in the conjugal partnership or absolute community estate after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s. C. Renunciation by an heir, including the surviving spouse of his/her share in the hereditary estate left by the deceased specifically done in favor of identified heir/s to the exclusion or disadvantage of the co – heirs in the hereditary estate. D. None of the choices.

44.

Your bachelor client, a Filipino residing in Baguio City, wants to give his girlfriend a gift of P500,000 in 2018. He seeks your advice for purposes of reducing, if not eliminating, the donor’s tax on the gift. What advice will you give? A. Advise his girlfriend to go abroad with him and give the gift while they are outside the country. B. Give the full gift of P500,000 in 2018 and tell his girlfriend not to tell anyone that she receives a gift because the BIR will not know that the gift is made to her. C. Split the gifts into two: the first P250,000 gift to be given on December 25, 2018 and other P250,000 to be given on January 1, 2019. Both gifts will be exempted from donor’s tax. D. None of the choices

45.

X and Y were to marry in three (3) months time. Meanwhile to express his affection, X donated a house and lot to Y. Y, wrote back, accepting the donation and took possession of the property. Before the wedding, however, Y suddenly died of heart attack. Can Y’s heirs get the property? A. No, since the marriage did not take place. B. No, since the donation and acceptance were not in public instrument. C. Yes, since X freely donated the property to Y who became its owner. D. Yes, since all the requisites of a donation of an immovable property are present.

46. Revocable transfer Land Automobile Shares of Stock Bond certificates Transfers under power of appointment: Farm land, limited power Land and building, general power

FMV, date of Death Transfer P 5,200,000 P 4,000,000 0 1,000,000 200,000 500,000 400,000 300,000 1,300,000

1,500,000

0

1,800,000

2,000,000

1,000,000

Additional gross estate (if still any) is: A. None B. P 3,000,000 47.

48.

Consideration received P 3,000,000 1,500,000 400,000 350,000

C. P 3,500,000

D. P 4,300,000

The records pertinent to same properties of a resident citizen, who died on February 14, 2018, reveal the following information: Fair market value FMV Date Acquired Date acquired 2/14/18 Land (inherited) 2/1/2017 P 500,000 P 700,000 Car (donated) 12/25/2014 300,000 200,000 Jewelry (inherited) 1/1/2013 100,000 150,000 The car donated to the decedent was mortgaged by the donor for P60,000 which was paid by decedent before he died. The gross estate of the decedent amounted to P10 million while total of deductible losses, indebtedness, taxes, and donation to the Government for public purpose amounted to P2 million. The vanishing deduction is: A. P 360,000 B. P 364,800 C. P 380,800 D. P 524,800 The following transactions are considered “in the course of trade or business” and, therefore, subject to business taxes, except: A. Isolated services in the Philippines by non- resident foreign persons. B. Isolated sale of goods or services for a gross selling price or receipts of P300,000. C. Regular conduct or pursuit of a commercial or an economic activity by a stock private organization. D. Regular conduct or pursuit of a commercial or an economic activity by a non – stock, non – profit private organization.

PAGE 25 49.

Which of the following shall be subject to the 3% percentage tax on VAT – exempt person under Section 109 (BB) of the Tax Code, as amended? A. Sale of mango; gross annual sales do not exceed P3,000,000. B. Milling of palay into rice; gross annual receipts exceed P3,000,000. C. Sale of office supplies; seller not VAT – registered; gross annual sales do not exceed P3,000,000. D. Sale of processed agricultural product; not VAT – registered; gross annual sales exceed P3,000,000.

Nos. 50 to 52 are based on the following accounting records of a VAT-registered taxpayer: Accounts receivable, beginning P 100,000 Accounts receivable, ending 140,000 Inventory, beginning 50,000 Inventory, ending 65,000 Purchases 90,000 Sales 250,000 Purchase discount 5,000 Sales return 10,000 Collections 200,000 Cost of sales 70,000 50.

51.

52.

53.

54.

55.

56.

How much is vatable sales? A. P 250,000 B. P 240,000

C.

P 230,000 D.

P 200,000

How much is output tax? A. P 24,000 B. P 27,000

C.

P 28,800

D.

How much is input tax? A. None B. P 10,200

C.

P 10,800

D. P 8,400

P 30,000

The following events happened in a VAT enterprise: June : Performance of service. July : Received invoice in the amount of P112,000. August : Paid the services. When and how much input VAT can be claimed? A. July, P 12,000 B. July, P 13,440 C. August, P12,000 D. August, P13,440 No. 54 to 56 are based on the following information: Viva Corporation has the following sales (total invoice) during a month: Sale to private entities P 224,000 Sale to export-oriented enterprise 100,000 Sale of exempt goods 100,000 The following input taxes were passed – on by its VAT – registered suppliers during the month: Input tax on taxable goods 5,000 Input tax on zero – rated sales 3,000 Input tax on sale of exempt goods 2,000 Input tax on depreciable capital goods not attributable to any particular activity 20,000 The output VAT for the month is: A. P 24,000 B. P 26,880 C. P 36,000 D. P 48,000 The input VAT for the month is: A. P 5,000 B. P 8,000

C.

P 15,000

D. P 23,000

The VAT payable for the month is: A. P 1,000 B. P 7,200

C.

P 9,000

D. P 16,000

57.

The input taxes on zero – rated sales of goods may at the option of the VAT – registered person be, except: A. Credited. B. Carried over to the next taxable quarter. C. Refunded or converted into tax credit certificate. D. Used as payment for other internal revenue tax, including withholding taxes.

58.

When may a VAT registered person claim input taxes as allowable expense deductions from his income tax return? A. Input taxes from export sales. B. Input taxes from exempt sales

PAGE 26 C. D.

Input taxes from capital goods Input taxes from zero – rated sales.

Nos. 59 to 63 are based on the following data taken from a VAT – registered entity, inclusive of VAT.

Sales to Government Regular sales Zero – rated sales Exempt sales Purchases 59.

60.

P 112,000 350,000 250,000 87,500 532,000

How much is the output VAT? A. P 12,000 B. P 37,500

C. P 49,500

D. P 79,000

How much is the actual input VAT? A. P 20,350 B. P 49,750

C. P 57,000

D. P 563,840

61.

How much of the actual input VAT can actually be claimed as input tax credit against the output VAT? A. P 50,350 B. P 49,750 C. P 57,000 D. P 63,840

62.

How much VAT is charged to expense? A. P 6,650 B. P 7,250

C.

P 14,250

D.

P 33,250

How much is the final withholding VAT? A. P 4,400 B. P 5,000

C.

P 7,000

D.

P 12,000

63.

64.

Which of the following transactions is exempt from the value-added tax? A. Services rendered by artists, actors and athletes. B. Generation, transmission and distribution of electricity. C. Services rendered by professionals, such as CPAs, Physicians and Lawyers. D. Services rendered by international shipping or air passenger transport operations.

Nos. 65 and 66 and based on the following information: A VAT-registered construction materials supplier is the winning bidder to exclusively supply construction materials for the construction of a common terminal in Baguio City. For the month, it has the following data, VAT exclusive: Sales, net P 400,000 Purchases of merchandise 80,000 Purchase of delivery equipment, 5 – year life 1,200,000 PLDT bill 30,000 65.

How much can the local government of Baguio City withhold as VAT from its payment to the VAT – registered construction materials supplier? A. None B. P 20,000 C. P 28,000 D. P 48,000

66.

What if the buyer of the construction materials is non – government entity. How much will be the VAT payable for the month? A. None B. P 32,400 C. P 36,000 D. P 38,400

67.

When to file the VAT return? A. Weekly B. Monthly

C. Quarterly

D.

Yearly

Nos. 68 to 70 are based on the following information: Lola Bertol, 65 years old, grandmother, was treated by her grandchildren Luz, Vi and Minda to Max’s Restaurant during grandparents day and their total bill is P2,240. 68.

How much is the discount of the Senior Citizen? A. P 100 B. P 160 C. P 200

D.

P 400

PAGE 27 69.

70.

How much is the VAT? A. P 60

B.

P 100

C.

P 180

D.

P 240

If the seller is non – VAT enterprise, how much is the discount of the Senior Citizen? A. P 100 B. P 112 C. P 160 D. P 180

DRILL – TAXATION

MAY 2019 BATCH

1.

Gundam Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and corn. It had the following data for the month of January 2018: Sales, gross of VAT P784,000 Corn & Coconut, Dec. 31, 2018 50,000 Purchases of Corn & Coconut in 2018 330,000 Corn & Coconut, Jan. 1, 2018 20,000 Purchases from VAT suppliers, VAT included: Packaging materials 56,000 Supplies 16,800 The value-added tax payable for the month: A. P56,060 B. P54,900 C. P60,650 D. P63,000

2.

When is the input tax on purchases of capital assets is amortized over 60 months or useful lives of the capital assets if shorter than 60 months? A. If capital assets have been acquired from enterprises registered with and located at the export processing zones. B. If the aggregate monthly purchases of capital assets, excluding vat, exceeds P1,000,000. C. If the value of the capital asset purchased, excluding vat, exceeds P1,000,000. D. If the vat taxpayer has secured prior approval for him to amortized input tax on purchases of capital assets.

3.

Statement 1: The input vat on purchase of capital goods valued at P1,000,000 shall be spread over 60 months if the life of property is equivalent to 5 years or more. Statement 2: The input vat on purchase of capital goods valued at P1,000,000 shall be spread over the life of property if the life of property is less than 5 years. A. Statement 1 is true, Statement 2 is false B. Statement 1 is false, Statement 2 is true C. Both statements are correct D. Both statements are incorrect

4.

A taxpayer has excess credit as a result of input taxes paid on purchases of capital goods. He may: A. Have his excess tax credit refunded to a VAT registered person. B. Make his application for refund in the subsequent period following the period during which the purchases were made. C. Use it in payment of any internal revenue tax of a VAT registered person. D. Carry-over and apply his excess tax credit against output taxes in the subsequent period or periods.

5.

Dwaine, vat-registered, made the following purchases during the month of January 2018: Goods for sale, inclusive of VAT P246,400 Supplies, exclusive of VAT 20,000 Packaging materials, total invoice amount 56,000 Home appliances for residence, gross of VAT 17,920 Office machines (5pcs), 8 years useful life, net of VAT 2,000,000 Creditable input taxes are: A. P38,800 B. P34,800 C. P37,440 D. P35,520

6.

Which of the following importation is subject to value added tax? A. Importation for personal use of the importer B. Importation intended for resale C. Importation of machinery for the importers factory D. All of the above

Use the following data for the next four (4) questions: World Power Corp. imported an article from Japan. The invoice value of the imported articles was $7,000 ($1=P50), however, customs officials valued the imported article for P500,000. The following additional costs were incurred in connection with the importation: Insurance Freight from Japan Postage Wharfage Arrastre charges Brokerage fee Facilitation fee

P15,000 10,000 5,000 7,000 8,000 25,000 3,000

PAGE 28 The imported article was imposed P50,000 customs duty and P30,000 excise tax. The Company likewise spent P50,000 for trucking fee from the customs warehouse to its warehouse in Quezon City. The carrier is a vat-registered entity. 7.

The VAT on importation is: A. P60,000 B. P78,000

C. P60,600

D. P80,000

8.

Based on the preceding number, if the imported article was sold for P800,000 (exclusive of vat), the VAT payable is: A. P24,000 B. P12,000 C. P36,000 D. P30,000

9.

Assume the BOC did not provide the valuation for the imported article, the vat on importation is: A. P60,000 B. P42,000 C. P60,600 D. P80,000

10.

Based on the preceding number, if the imported article was sold for P800,000, VAT exclusive, the VAT payable is: A. P24,000 B. P12,000 C. P36,000 D. P30,000

11.

Which of the following statements is incorrect? A. VAT on importation is paid to the Bureau of Customs before the imported goods are released from its custody. B. When a person who enjoys tax-exemption on his importation subsequently sells in the Philippines such as imported articles to non-exempts person, the purchaser-non-exempt person shall pay the VAT on such importation. C. Expenses incurred after the goods are released from Customs custody are disregarded in computing VAT on importation. D. Imported goods which are subject to excise tax are no longer subject to value-added tax.

12.

Durant, not a vat registered taxpayer, was sent a package of goods by his brother who was abroad. The package was claimed by Durant. The Bureau of Customs required him to pay vat on importation. Durant refused to pay the vat on the ground that he was not a vat registered and therefore not an importer. Was Durant’ ground in refusing to pay vat correct? A. Yes, because only vat registered importers should be subject to vat. B. No, because importation, unless exempted, should be subject to vat. C. Yes, because to goods were for his personal use, and therefore, he was not an importer. D. No, because the package of goods sent by his brother had value.

13.

Statement 1: Under RMC 70-2015, transport network vehicle services, such as but not limited to the likes of UBER, GRAB TAXI, their partners/ suppliers and similar arrangements, which are holders of a valid and current Certificate of Public Convenience for the transport of passengers by land, shall be subject to 3% common carriers tax under Sec. 117. Statement 2: Transport network vehicle services, such as but not limited to the likes of UBER, GRAB TAXI, their partners/ suppliers and similar arrangements, which are not holders of a valid and current Certificate of Public Convenience for the transport of passengers by land, shall be subject to 3% common carriers tax under Sec. 117. A. Both statements are correct B. Both statements are incorrect C. Only the first statement is correct D. Only the second statement is correct

14.

The owner(s) of the vehicles, other than the TNVS, used in transporting passengers and/or goods in TNVS, shall be referred herein as _______. A. Domestic common carriers B. International carriers C. Transportation network vehicle services D. Partners

15.

______ is a pool of land transportation vehicles whose accessibility to the riding public is facilitated through the use of common point of contact which may be in the form of text, telephone, and/or cellular calls, email, mobile application or by other means. A. Domestic common carriers B. International carriers C. Transportation network vehicle services D. Partners

16.

JAM Lines, a VAT-registered person, has the following gross receipts in February Bus 1 (carriage of goods, P18,000) 100,000 Bus 2 (carriage of goods, P13,500) 165,000 Taxi 90,000 Jeepney 35,500 Cargo truck 45,000 Sea vessel 250,000 Additional information:  Salaries of drivers and conductor 125,000  Cost of oil and gasoline 175,000

During the month, Bus 1 was bumped by another bus owned by Mandaon Lines and paid JAM Lines P120,000 for the damage. The percentage tax due on JAM Line in February is:

PAGE 29 A.

P10,770

B.

P14,370

C.

PP11,715

D.

Nil

17.

The Republic of Korea, as an act of goodwill, does not impose business taxes to Philippine carriers. Korean Air is operating in the Philippines having two flights a week. If you were engaged by Korean air as its tax consultant and asked you whether it is liable to percentage tax, which of the following will be your advice? A. Korean Air is liable to percentage tax based on gross receipts from passengers, goods, cargoes and mails. B. Korean Air is liable to percentage tax based on gross receipts from passengers only. C. Korean Air is liable to percentage tax based on gross receipts from goods, cargoes and mails only. D. Korean Air is not liable to percentage based on the principle of reciprocity.

18.

Statement 1: Banks are subject to VAT on its interest income. Statement 2: Resident international carriers are subject to the 0% VAT on its gross Philippine billings on flight originating from the Philippines to a foreign destination. A. Both statements are correct B. Both statements are incorrect C. Only the first statement is correct D. Only the second statement is correct

19.

Statement 1: International air carriers and international shipping carriers shall not be subject to 12% value added tax but to 3% common carrier’s tax based on gross receipts derived from their transport of passengers and goods from Philippines to other countries. Statement 2: In cases when the Gross Philippines Billings Tax of 2.5% for international carriers is not applicable (i.e., tax exempt based on reciprocity or treaty) the common carrier’s tax under Section 118 of the NIRC, as amended, shall still apply. A. Both statements are correct B. Both statements are incorrect C. Only the first statement is correct D. Only the second statement is correct

20.

Maligalig Insurance Corporation furnished its data shown below:  Insurance Premiums collectible is P3,750,000  The breakdown of the above premiums is as follows: Life Insurance Premiums 75% Non-life Insurance Premiums 25%



During the month, 70% of collectible life insurance premiums and 50% of collectible non-life insurance premiums were collected The Premiums Tax Payable is: A.

P39,375

B.

P78,750

C.

P94,437.50

D.

P196,875

21.

Aling Dolor, administrator, claims the following funeral expenses for a decedent who died in 2017: Expenses of interment (paid by friend) P60,000 Cost of burial and tombstone (1/2 paid by relatives) 42,000 Other funeral parlor expenses 36,000 Expenses during the wake 13,000 Obituary notice 7,500 Card of thanks 3,500 Mourning clothing of friends 15,000 Mourning clothing of unmarried minor children 5,000 If the gross estate is P1,500,000, the allowable funeral expenses is: A. P75,000 B. P82,500 C. P93,500 D. P174,500

22.

Based on the preceding number, but the gross estate is P2,500,000, the allowable funeral expenses is: A. P75,000 B. P82,500 C. P93,500 D. P174,500

Use the following data for the next two (2) questions: The estate of Augustine, resident citizen decedent, married, who died on April 1, 2018 are as follows: House and lot (Family Home) The lot was acquired at a cost of P3M before marriage while the house was constructed on March 1, 2018, during marriage, at a cost of P10M from partnership funds. The lot had a FMV of P4,000,000 after construction of the house. Other properties acquired during marriage Jewelry inherited on Feb. 14, 2017, during marriage, then with a fair market value of P1,300,000 Property in U.S., received as gift during marriage from a friend on Jan. 12, 2017 (the applicable donor’s tax was not paid by the donor) Rental income on the above property up to the time of death Expenses/Claims: Funeral expenses Judicial expenses Casualty losses incurred on Dec. 10, 2018 Claims against the estate

P14,000,000

6,000,000 2,500,000

2,300,000 1,200,000 420,000 800,000 600,000 1,600,000

PAGE 30 Medical expenses within 1 year prior to death, only half was receipted 23.

24.

4,000,000

How much is the net taxable estate under Conjugal Partnership of Gains? A. P3,926,000 B. P6,426,000 C. P3,426,000

D.

P1,348,000

How much is the net taxable estate under Absolute Community of Property? A. P4,836,000 B. (P2,174,000) C. P1,174,000

D.

P2,174,000

25.

A domestic Corporation pays royalty to a foreign Corporation but it withholds a tax lower than Philippine tax laws based on a treaty. What documents need to be presented to prove the imposition of a lower withholding tax? A. Treaty law; B. Memorandum of agreement between the local and international company; C. Reciprocity clause; D. Tax treaty relief application;

26.

Mr. A, CPA practioner, Is also employed with a manufacturing company and receives the following for the year: Salary 150,000.00 Overtime 30,000.00 13th month 15,000.00 Deposit of client 20,000.00 Retainer fee of 5,000/month 60,000.00 Out of pocket charged to client 80,000.00 Capital gains, car 25,000.00 How much is Mr. A’s gross compensation income? A. 180,000.00 C. 265,000.00 B. 240,000.00 D. 215,000.00

27.

Kiel, a resident Corporation provided you the following information for the year 2015:

Sales net of withholding tax in the Philippines Sales without the Philippines Capital Gains Direct Cost Dividends paid to stockholders Determine the taxable income: A. B. C. D.

6,200,000 6,700,000 4,500,000 2,790,000

Php 4,455,000 Php 5,500,000 500,000 3,800.000 650,000

28.

Tan is a professional with gross receipts of P2,000,000 and deductible expenses of P1,200,000, for the calendar taxable year 2018. How much will be the income tax to be paid for 2018 by taking into account your best recommendation as Tax Adviser on the most economical option to avail of in taxing his selfemployment income? A. P110,000 B. P 130,000 C. P140,000 D. P 160,000

Nos. 29 and 30 are based on the following information: A closely-held domestic corporation had the following data in 2018: Gross income from business Dividend from domestic corporation Capital gain on sale of idle land on a selling price of P3,600,000, but with a zonal valuation of P4,000,000 Capital gain on direct sale to buyer of shares of stock of domestic corporation

P

1, 000,000 200,000 100,000 2,000,000 250,000 150,000 500,000 800,000 900,000 1,000,000

Interest on Philippine currency bank deposit Business expenses Net operating loss in 2017 Income taxes paid for the first three quarters of the year Dividend declared and paid within the year Appropriation of retained earnings for additional working capital purposes Retained earnings at the start of the year Paid-in capital 29.

30.

The income tax still due and payable in 2018 is: A. P 60,000 B. P 75,000 The Improperly Accumulated Earnings Tax (IAET) is: A. P 27,000 B. P 36,000

INTEGRATED REVIEW QUIZ 1 1.

2.

3.

4.

5.

6.

C.

P 150,000 D.

C.

P 51,000

3,000,000 125,000

P 225,000

D.

P 61,000

MAY 2019 BATCH TAXATION

Estate tax is A. A property tax because it is imposed on the property transmitted by the decedent to his heirs. B. An indirect tax because the burden of paying the tax is shifted on the executor or any of the heirs of the decedent. C. An excise tax because the object of which is the shifting of economic benefits and enjoyment of property from the dead to the living. D. A poll tax because it is also imposed on residents of the Philippines whether Filipino citizens or not. An executor or administrator, after paying the estate tax, and to escape a future liability for a deficiency estate tax, must secure a written discharge from personal liability from: A. The heirs B. The Commissioner of Internal Revenue C. The court where the estate was being settled D. Need not secure a written discharge as long as he has a receipt on payment of the estate tax. Statement 1: The making of a will is strictly a personal act. It cannot be left in whole or in part of the discretion of a third person, or accomplished through the instrumentality of an agent of attorney. Statement 2: The burden of proof that the testator was not of sound mind at the time of making his dispositions is on the person who opposes the probate of the will; but if the testator, one month, or less, before making his will was publicly known to be insane, the person who maintains the validity of the will must prove that the testator made it during a lucid interval. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect Which of the following transfer is not included in the gross estate? A. Transfer with reservation of certain rights. B. Transfer for insufficient consideration. C. Transfer for an adequate and full consideration in money or money’s worth. D. Transfer in contemplation of death. Pedro, decedent, owns a property valued at P1,500,000 at the time of his death. The said property was sold by Pedro during his lifetime to Juan for P700,000 when its value was P1,200,000. It was agreed by Pedro and Juan that the former will enjoy the income of the property as long as he lives. For Philippine estate tax purposes, how much will be included in determining gross estate? A. P0 B. P500,000 C. P800,000 D. P1,200,000 Which of the following is not included in the gross estate? A. Revocable transfer where the consideration is not sufficient.

Page 32

7.

8.

9.

10.

11.

12.

13.

B. Revocable transfer where the power of revocation was not exercised. C. Proceeds of life insurance where the beneficiary designated is the estate and the designation is irrevocable. D. Proceeds of life insurance where the beneficiary designated is the mother and the designation is irrevocable. Which is deductible from gross estate? A. Interment fees unsupported by receipts or otherwise B. Expenses incurred after interment C. Interment expenses borne by the decedent’s best friend D. Death and interment notice published and duly receipted Judicial expenses may be deducted from the gross estate of a decedent who died before 2018. However, expenses not essential in the proper settlement of the estate but incurred for the individual benefit of the heirs, legatees, or devisees are not allowed as judicial expenses. Which of the following is non-deductible under this category? A. Attorney’s fees paid by the heirs to their respective lawyers arising from conflicting claims are not deductible as judicial expenses. These expenses should be separately borne by them. B. Premiums paid by a judicial administrator on his bond are not deductible because the ability of the appointee to give bond is in the nature of a qualification. C. Compensation of trustees such as expenses being for the account and benefit not of the estate but of the beneficiaries. D. All of the above. Which of the following is not a requirement in claiming unpaid mortgage as deduction for estate tax purposes? A. The fair market value of the mortgaged property, net of the mortgage indebtedness, should be included in the gross estate. B. The fair market value of the mortgaged property undiminished by the mortgage indebtedness should be included in the gross estate. C. The loan must be contracted in good faith. D. The loan must be for an adequate and full consideration. Pedro, a citizen of the Philippines and resident of Makati City, died testate on May 10, 2018. Among his gross estate were properties inherited from his deceased father who died on April 4, 2015. What percentage of the deduction would be used in computing the amount of vanishing deduction? A. 60% B. 40% C. 20% D. nil A decedent died in 2016 leaving properties he inherited 2 ½ years ago which had fair market value of P8,000,000 at the time of his death (P6,500,000 at the time of inheritance, and unpaid mortgage of P500,000 paid by the present decedent). After inheritance, the decedent mortgages the property for P500,000 and paid the same before his death. Other properties in his gross estate had fair market value of P10,000,000. The total expenses, losses, indebtedness, taxes and transfer for public purpose amounted to P3,000,000. How much is the vanishing deduction? A. P2,000,000 B. P2,750,000 C. P3,000,000 D. P3,120,000 One of the following statements is wrong. Claims against insolvent persons A. Should always be included in the gross estate. B. If entirely uncollectible, may be omitted in the computation for the net taxable estate. C. Can give rise to reduction even if the debtor had some properties. D. Can be a deduction even if secured by a mortgage. The gross estate of Juan includes P80,000 receivables which is duly notarized from debtor Pedro whose records show: Assets P 100,000 Indebtedness to:  Government (unpaid taxes) 40,000  Juan 80,000  Other creditors 20,000

The deductible claims against insolvent person is 14.

15.

A. P29,285 B. P32,000 C. P48,000 D. P80,000 The following statements are correct regarding standard deduction under the TRAIN LAW, except: A. A deduction in the amount of P5,000,000 shall be allowed as an additional deduction without need of substantiation. B. The full amount of P5,000,000 shall be allowed as deduction for the benefit of the decedent. C. Standard deduction is not allowed to decedents who are non-resident aliens. D. None of the above. If a decedent died prior to 2018, standard deduction from his gross estate is allowed for P1,000,000, unless the decedent A. Has a gross estate valued not more than P1,000,000 B. Has his estate opted for itemized deduction C. Was a resident alien

Page 33 D. Was a non-resident alien 16.

17.

18.

19.

20.

21.

22.

23.

24.

Medical expense is allowed as a deduction from the gross estate of a decedent who died prior to the effectivity of the TRAIN Law. Which of the following is correct? I. If the actual amount of medical expenses incurred is P300,000, then only P300,000 shall be allowed as deduction and not to the extent of the P500,000 threshold amount. II. If the actual amount of medical expenses incurred within the year prior to decedent’s death is P700,000, only the maximum amount of P500,000 shall be allowed as deduction. If in case the excess of P200,000 (P700,000 – P500,000) is still unpaid, such amount shall be deducted from the gross estate as “claims against the estate” A. I only B. II only C. I and II D. None of the above Which of the following statements is incorrect in connection with family home deduction prior to TRAIN Law? A. Family home deduction shall be allowed only if such family home is situated in the Philippines B. The total value of the family home must be included as part of the gross estate of the decedent C. For purposes of availing family home deduction, a person may constitute only one family home D. Family home deduction may not be lower than P1,000,000 A decedent died on Nov. 1, 2017 leaving a family home composed of the following: Conjugal house worth P800,000, and the land which he exclusively owned valued at P400,000. He also owns a vacation house in Baguio worth P700,000. The deductible amount of family home is: A. P800,000 B. P1,000,000 C. P1,200,000 D. P1,900,000 Prior to TRAIN Law, which of the following is deductible from the gross estate of a non-resident alien decedent? A. Funeral and judicial expenses C. Family home allowance B. Death benefits under RA 4917 D. Standard deduction Under TRAIN Law, all of the following, except one, are not deductible from the gross estate of a nonresident alien: A. Funeral and judicial expenses C. Family home allowance B. Death benefits under RA 4917 D. Standard deduction Bonifacio, head of family died on January 15, 2018, leaving the following properties and obligations: Cash in bank, 50%, donated mortis causa to Natl Govt; 50-% to Q.C. govt P3,000,000 House and lot in Makati, F. Home 15,000,000 Personal properties 15,000,000 Farm lot 8,250,000 Claim against an insolvent debtor 2,250,000 Transfer in contemplation of death (gratuitous) 15,000,000 Transfer passing under special power of appointment 750,000 DEDUCTIONS CLAIMED: Funeral expenses 5,750,000 Judicial expenses 675,000 Donation mortis causa to Quezon City government 1,500,000 Unpaid mortgage on the farm lot 750,000 Medical expenses (included in the funeral expenses incurred within the 1 year period with receipts) 2,250,000 The farm lot was inherited 5 ½ years by the decedent before his death with a value then of P5,750,000 and a mortgage indebtedness of P1,500,000. The taxable net estate is: A. P26,720,000 B. P37,500,000 C. P41,500,000 D. P50,500,000 In computing the estate tax, which of the following shall not be allowed tax credit for taxes paid abroad? A. Resident alien decedent B. Non-resident alien decedent C. Resident citizen decedent D. Non-resident citizen decedent Which of the following is not allowed with tax credit for payments of estate tax on foreign countries? A. A resident alien B. A non resident alien C. An alien who was a resident of his own country at the date of death D. An American residing in the Philippines at the date of death

Statement 1: If the decedent died before 2018, a notice of death is always required to be filed. Statement 2: If the decedent died before 2018, the notice of death shall be filed by the executor, administrator or any of the legal heirs within two (2) months after the decedent’s death, or within like period after qualifying as such executor or administrator. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

Page 34 25.

26.

27.

28.

29.

30.

31.

32.

Lolo Sot died in 2017 leaving a gross estate amounting to P150,000 only. No estate tax is due based on the tax code. The gross estate is composed of a second hand car worth P80,000, shares of stocks valued at P50,000 and P20,000 time deposit. The administrator believes that only notice of death should be filed since the value of the gross estate is exempt from tax. What will you tell him? A. Notice of death and estate tax return have to be filed because the gross estate exceeds P20,000 and when the gross estate consists of registered or registrable properties, estate tax is required to be filed regardless of the value of the gross estate. B. Only notice of death is required to be filed because the gross estate exceeds P20,000. Estate tax return is required to be filed only when the gross estate exceeds P200,000 and/or there is estate tax due. C. Neither notice of death nor estate tax return need to be filed in this particular case. D. Only estate tax return has to be filed because the filing of the return also serves as the notice of death. A decedent died before the effectivity of the TRAIN Law, under which of the following situations an estate tax return is not required to be filed? A. Transfers which are subject to estate tax. B. The gross value of the estate exceeds P200,000. C. The estate consists of registered or registrable properties for which a clearance from the BIR is required as a condition precedent for the transfer of ownership. D. The gross value of the estate consisting of non-registrable properties does not exceed P200,000 and the deductions amount to P150,000. A decedent died upon the effectivity of the TRAIN Law, under which of the following situations an estate tax return is not required to be filed? A. Transfers which are subject to estate tax. B. The estate consists of registered or registrable properties for which a clearance from the BIR is required as a condition precedent for the transfer of ownership C. The gross value of the estate consisting of non-registrable properties does not exceed P5,000,000. D. None of the above The Estate Tax Return shall be filed and payment made with A. An Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death. B. If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer of duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent. C. If the required filer has no legal residence in the Philippines, the Estate Tax return will be filed with the Office of the Commissioner or in the Philippine Embassy or Consulate in the country where the decedent was residing at the time of his or her death. D. All of the above. Statement 1: Husband and wife are considered as separate and distinct taxpayers for purposes of the donor’s tax. Statement 2: If what was donated is a conjugal or community property and only the husband signed the deed of donation, there is only one donor for donor’s tax purposes, without prejudice to the right of the wife to question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil Code of the Philippines and the Family Code of the Philippines. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect Which of the following political subdivisions of the government has no power of taxation? A. Barrios. B. Barangays, Municipalities, Provinces and Cities. C. Autonomous Region in Muslim Mindanao (ARMM). D. Cordilleras Autonomous Region (CAR). Which one of the following statements is correct? A tax reform (like the TRAIN under the Duterte administration) at any given time underscores the fact that: A. Taxation is essentially a legislative function. B. Taxation is an inherent power of the State. C. The State shall evolve a progressive system of taxation. D. Taxation is a power that is very broad. This is an inherent limitation on the power of taxation: A. The rule of taxation shall be uniform and equitable. B. No law impairing the obligations of contracts shall be enacted. C. The tax laws cannot apply to the property of foreign governments. D. Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries, and all kinds of lands, buildings and improvements actually, directly and exclusively used for religious or charitable purposes shall be exempt from taxation.

Page 35 33.

34.

35.

36.

37.

TRAIN also simplifies the payment of donor’s taxes to a single tax rate of 6% of net donations is imposed for gifts above P250,000 yearly given to A. Direct Family members only B. Members of the family up to fourth level of consanguinity C. Regardless of relationship D. None of the above TRAIN reduces and restructures the estate tax to a low and single tax rate of 6% based on the net value of the estate with a standard deduction of A. P 1,000,000 C. P 10,000,000 B. P 5,000,000 D. None of the above Which of the following statements is wrong? A donation by husband and wife out of conjugal community property to a brother of the wife is: A. one-half a donation to a non-stranger by the wife. B. one-half a donation to stranger by the husband. C. a donation on which the husband must pay a donor’s tax of 30%on his net gift. D. a donation on which the husband must pay the graduated donor’s tax on his net gift. Which of the following statements is not correct? A. Taxes may be imposed to raise revenues or to regulate certain activities within the state B. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax C. For the exercise of the power of taxation, the state can tax anything at any time D. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers As a basic principle of taxation, “taxes must be based on the taxpayer’s ability to pay” is called:

A. B. 38.

B. C. D.

Taxes may be imposed to raise revenue or to provide incentives to certain activities within the State. The State can have the power of taxation even if the Constitution does not expressly give it the power to tax. For the exercise of the power of taxation, the state can tax anything at anytime. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on the taxing power.

Which statement is wrong? A revenue bill:

A. B. C. D. 40.

C. Ability to pay theory D. Equity in taxation

Which of the following statements is not correct?

A.

39.

Equality in taxation Theoretical justice

Must originate from the House of Representatives and on which same bill the Senate may propose amendments. May originate from the Senate and on which same bill the House of Representatives may propose amendments. May have a House version and a Senate version approved separately. May be recommended by the President to Congress.

A taxpayer who had gross receipts derived from business in the preceding year did not declare it when he paid the poll tax. He paid only the basic tax and did not pay the additional poll tax based on gross receipts. Will he be imprisoned?

A. B. C. D.

No. No person shall be imprisoned for non-payment of poll tax. Yes. This is a case of tax evasion. Tax evasion is now a criminal offense. No. Paying the basic poll tax is enough. The additional poll tax is discretionary. Yes. Non-payment of poll tax is punishable by imprisonment.

GRADUATED RATES OF INCOME TAX ON INDIVIDUALS ON TAXABLE COMPENSATION, BUSINESS, PROFESSION AND OTHER INCOME Rates Taxable (January 1, 2018 to Income December 31, 2022) P250,000 or less 0% Over P250,000 to P400,000 20% in excess of P250,000 Over P400,000 to P800,000 P30,000 + 25% in excess of P400,000 Over P800,000 to P2,000,000 P130,000 + 30% in excess of P800,000 Over P2,000,000 to P8,000,000 P490,000 + 32% in excess of P2,000,000 Over P8,000,000 P2,410,000 + 35% in excess of P8,000,000

Page 36

TAXATION AVEARAGE 1. Which of the following individuals shall not be subject to the income tax under Section 24 (A)? a. Individual citizen of the Philippines residing therein; b. Individual citizen of the Philippines who residing outside the Philippines including overseas contract workers; c. Individual alien who is a resident of the Philippines; d. Individual alien who is not a resident of the Philippines. 2. Which of the following income is not from a related trade, business or activity of a domestic proprietary educational institution? a. Income from rent of available office spaces in one of the school buildings b. Income from the hospital where medical graduates are trained for residency c. Income from the canteen situated within the school campus d. Income from bookstore situated within the school campus 3. How much is the annual community tax for individuals? a. P 25 c. P 10 b. P 20 d. P 5 4. Under this system there is a merger of all the properties of the husband and the wife owned by them at the time of the celebration of the marriage, or those acquired thereafter. a. Conjugal partnership of gains b. Absolute community of properties c. Complete separation of properties d. None of the choices 5. Which is not an essential characteristic of tax? a. Limited as to amount b. Proportionate in character

c. d.

Payable in money Regular payment

6. Statement 1. An article may be subject to both value-added tax and excise tax. Statement 2. The sale or exchange of shares of stock in a domestic corporation that are not listed and traded at the local stock exchange is subject to final percentage tax. a. Both statements are true. b. Both statements are false. c. Only statement 1 is true but not statement 2. d. Only statement 2 is true but not statement 1. 7. Which of the above will be subject to a 25% civil penalty of the tax or of the deficiency tax? a. Willful neglect to file the return within the period prescribed by the Tax Code or rules and regulations b. A false or fraudulent return is willfully made c. A person who is not VAT-registered issues an invoice or receipt showing his TIN, followed by the word "VAT" d. Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and regulations on the date prescribed 8. Penalties and/or interest imposed on the taxpayer may be abated or cancelled on the ground that the imposition thereof is unjust and excessive, except when: a. The taxpayer is declared insolvent or bankrupt. b. The filing of the return or payment of the tax is made at the wrong venue. c. The taxpayer’s mistake in payment of his tax is due to erroneous written official advice of a revenue officer. d. The assessment is brought about or a result of the taxpayer’s non-compliance with the law due to a difficult interpretation of the said law.

Page 37 9.

Statement 1. The lease of commercial spaces in a building with monthly rental of P12,800 per unit is exempt from value-added tax and other percentage tax. Statement 2. A cellular phone text message originating from the Philippines sent abroad is subject to the percentage tax on overseas communications. A. Both statements are true. B. Both statements are false. C. Only statement 1 is true but not statement 2. D. Only statement 2 is true but not statement 1.

10.

A common carrier by land is engaged in the transport of passengers, goods, and cargoes. The operation is not VAT-registered. What business taxes shall the operator be liable to? a. 3% common carrier’s tax. b. 12% value-added tax. c. 3% common carrier’s tax on gross receipts from transport of passengers and 12% VAT on gross receipts from transport of goods and cargoes. d. 3% OPT on gross receipts from transport of goods and cargoes and 3% common carrier’s tax on gross receipts from transport of passengers.

11.

Which of the following shall not be subject to income tax? I- Pedro Reyes, an official of Corporation X, asked for an “early retirement” because he was emigrating to Australia. He was paid P2,000,000 as a separation pay in recognition of his valuable services to the corporation. II- Juan Cruz, another official of the same company was separated for occupying a redundant position. He was given P500,000 as separation pay. III- Jose Bautista was separated due to his failing eyesight. He was given P500,000 as separation pay. All the three (3) were not qualified to retire under the BIR-approved pension plan of the corporation. a. I, II and III c. I only b. I AND II d. II AND III ONLY

12.

This refers to the control number issued by authorized agent bank (AAB) to the taxpayer and BIR to acknowledge that the taxpayer's account has been successfully debited electronically in payment of his tax liability. a. Filing Reference Number b. Acknowledgment Number c. Confirmation Number d. Taxpayer's Information Number

13.

On May 1, 2018, a domestic corporation engaged in the real estate business sold a building for P10 million, but with total fair market value of P12 million. The sale is subject to: a. Transaction tax at 6%. b. Value-added tax at 12%. c. Other percentage tax at 3%. d. Presumed capital gains tax at 6%.

14.

A taxpayer paid excessive tax on April 15, 2013. On December 20, 2014, she filed a written claim for refund. Her claim was denied by the BIR and she received the denial on March 15, 2015. She filed a motion for reconsideration with the BIR on March 31, 2015. On April 10, 2015, she received the final denial of the BIR. What will be the taxpayer’s remedy? a. File another motion for reconsideration with the BIR within 30 days after the receipt of the final denial b. File an appeal with the Court of Tax Appeals on or before May 10, 2015 c. File an appeal with the Court of Tax Appeals on or before April 15, 2015 d. The taxpayer has no more remedy against the final denial

15.

The Bureau of the Internal Revenue is under the control and supervision of a. The Court of Tax Appeals c. The Department of Finance b. The Bureau of Customs d. The Legislative body

16.

Which of the following is not a power vested in the bureau of Internal Revenue (BIR)? a. The assessment and collection of all national internal revenue taxes, fees and charges b. The enforcement of all forfeitures, penalties and fines c. The granting of tax exemptions and other incentives to taxpayers d. The execution of judgments in all cases decided in its favor by the court of tax appeals and the ordinary courts

17.

They are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices. a. Revenue regulations b. Revenue Memorandum Circular c. Revenue Memorandum orders d. All of these

18.

Which of the following statements is correct? A CPA can have his certificate automatically revoked or cancelled upon conviction in a criminal case: a. For offering to the taxpayer the use of wrong accounting records; b. For willfully falsifying any audit report; c. For rendering a report on unconfirmed statements; d. All of the above.

19.

A corporation which is included in exempt corporations under Section 30 of the National Internal Revenue Code (e.g., organized and operated for charitable purposes) which did not file its articles of incorporation and bylaws with the Bureau of Internal Revenue: a. Is required to file an income tax return and pay the income tax b. Is required to file an income tax return although not required to pay the income tax c. Needs to file only an information return and will not be required to pay the income tax d. Needs to file an information return and pay the income tax

20.

A Chinese tourist comes in and goes out of the Philippines very often. During the year 2015, he stayed in the Philippines for more than 180 days on the aggregate. For Philippine income tax purposes, the Chinese citizen shall be classified as: a. Resident alien. b. Nonresident alien engaged in trade or business. c. Nonresident alien not engaged in trade or business. d. Not subject to Philippine income tax.

TAXATION 1.

Which of the following statements is wrong? a. PFRS/PAS shall prevail over the Tax Code in financial accounting. b. Deferred tax asset and deferred tax liability apply only in financial accounting. c. The Tax Code shall prevail over PFRS/PAS in taxation. d. Deferred tax asset and deferred tax liability apply only in taxation.

2.

Statement 1. Government agencies performing essential governmental functions are subject to tax unless expressly exempted. Statement 2. Government owned or controlled corporations (GOCCs) performing proprietary functions are exempt from tax unless expressly taxable. a. Only statement 1 is correct. b. Only statement 2 is wrong. c. Both statements are wrong. d. Both statements are correct.

3.

Which statement is incorrect? A tax bill: a. May be recommended by the President to Congress. b. May have a House version and a Senate version approved separately. c. Must originate from the House of Representatives and on which same bill the Senate may propose amendments. d. Must originate from the Senate and on which same bill the House of Representatives may propose amendments.

Page 39

4.

Taxation could be exercised by the following, except one. Which one? a. Judiciary. b. Legislative . c. Executive (President) in certain cases. d. Local Government Units (LGUs).

5.

Chief Justice Marshall said that the power to tax involves the power to destroy while Chief Justice Holmes maintains that the power to tax is not the power to destroy. Which among the following statements does not reconcile the two seemingly inconsistent positions? a. The power to tax could not be the subject of set-off or compensation. b. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayer’s property. c. Chief Justice Marshall’s view refers to a valid tax while Chief Justice Homes’ view refers to an invalid tax. d. The imposition of a valid tax could not be judicially restrained merely because it would prejudice taxpayer’s property.

6.

Consider the following statements: I. Taxes are based upon lifeblood theory. II. The power of taxation involves the promulgation of rules. III. There should be no improper delegation of the power to tax. IV. The State has the power to impose taxes even without a Constitutional grant. Choose the correct answer from among the following: a. Statements I and IV are both manifestations of taxation being inherent in nature. b. Statements II and IV are both manifestations of taxation being legislative in nature. c. Statements II and III are both manifestations of taxation being inherent in nature. d. Statements III and IV are both manifestations of taxation being legislative in nature. Statement 1. Jurisdiction is the reason why the Government could impose transfer taxes on properties of resident aliens located outside the Philippines. Statement 2. Symbiotic relation is the reason why citizens must provide support to the State so that the latter could continue to give protection. a. Both statements are true. b. Both statements are false. c. Only statement 1 is correct but not statement 2. d. Only statement 2 is correct but not statement 1.

7.

8.

The Tax Code, as amended, imposes different kinds of taxes on disposition of property. These are estate tax, donor’s tax, VAT, OPT, excise taxes, etc. Which among the following transactions would be subject to a transfer tax? a. Sale of cigars and cigarettes by a wholesaler. b. Sale of articles that are exempt from VAT. c. Sale of a personal car for less than an adequate and full consideration. d. Sale of shares of stock that are listed and traded at the local stock exchange.

9.

This rule is not applicable on the construction of tax laws: a. Provisions intended for the security of the taxpayer or to insure equality or uniformity in taxation are mandatory. b. If the intent of the tax is not clear as to whether the taxpayer is covered by the obligation, the law shall be construed against the Government. c. Where the intent of the tax is clear and the taxpayer claims he/she is exempt from the tax obligation, the law shall be construed against the taxpayer. d. If the law is repealed, taxes assessed before repeal of the law may no longer be collected.

10.

In 2018, a funny man was engaged by Viva Films to perform a pantomine act in a movie it was making. The actor was to be paid P250,000 for his performance and the parties signed the necessary contract. He (the funny man) then gratuitously assigned his rights under the contract to his son. The son later on collected the P250,000 artist fee of his father from Viva Films. The national internal revenue tax/es payable is/are: a. Income tax only. b. Donor’s tax only.

SET A

Page 40

c. Both income and donor’s tax. d. Neither income tax nor donor’s tax. 11.

An Octogenarian retired businessman fell in love with a 20-year old hospitality girl in a night club. Although the alluring girl refused to marry the man, she agreed though to be his “live-in” partner. In gratitude, the Octogenarian transferred to the girl a condo unit (where they both live) under a deed of absolute sale for P10 million. He paid capital gains tax of 6% on the P10 million. The Commissioner of Internal Revenue (CIR) found that the property was transferred to the hospitality girl by the Octogenarian because of the companionship she was providing. Accordingly, the CIR made a determination that the girl had compensation income of P10 million in the year the condo unit was transferred to her and issued a deficiency income tax assessment. The hospitality girl (assisted by an expert tax consultant) protests the assessment and claims that the transfer of the condo unit was a gift and, therefore, excluded from income.

12.

Is the protest of the girl against the deficiency income tax assessment by the CIR valid? a. No, because she indeed earned compensation income for the services she rendered under the “live-in” partner arrangement with the Octogenarian. b. Yes, because the sale to her was a fictitious sale due to the absence of consideration that passed between her and the Octogenarian, other than the pure act of liberality or generosity, hence subject to donor’s tax (not income tax). c. No, the deficiency income tax assessment by the CIR is valid as the girl actually realized a P10 million worth of service income arising from the companionship arrangement she agreed to with the Octogenarian. d. Yes, the capital gains tax already paid on the P10 million consideration of the sale will just be offset against whatever donor’s tax that will be due on the gift. One of the following statements is wrong, which one is it? a. Income out of the labor of the husband is community property. b. Income out of the separate property of the wife is separate property under the system of absolute community of property. c. Property received during marriage as donation when the fair market value was P2,000,000 is sold for cash when the value was P2,500,000, resulting in a gain of P500,000. The gain is community property. d. Amount receivable under Republic Act No. 4917 during the marriage is community property.

13.

Proceeds of a life insurance policy taken out by the decedent covering his own life shall not form part of the gross estate if the beneficiary is: a. A third person and the designation is revocable. b. A third person and the designation is irrevocable. c. The estate, whether the designation is revocable or irrevocable. d. The executor or administrator, whether the designation is revocable or irrevocable.

14.

At the time of her death, Natalie was a resident of the United States. She left, among others, shares of stock of a Philippine Corporation. The estate tax of the United States was paid on this property. The BIR seeks to impose the Philippine estate tax on the same property. If the decedent was a non-resident alien, is the BIR correct in what it seeks. Statement 1. The BIR is correct because her estate subject to Philippine estate tax would include all properties regardless of location. Statement 2. The BIR cannot allow an exclusion of such property from the gross estate but can allow only a tax credit against the Philippine estate tax due for the foreign estate tax paid. a. Both statements are correct. b. Both statements are incorrect. c. Statement 1 is correct but statement 2 is incorrect. d. Statement 1 is incorrect but statement 2 is correct.

15.

Estate tax and donor’s tax are now examples (under the Tax Code, as amended) of: a. Proportional tax b. Progressive tax c. Regressive tax

SET A

Page 41

d. Local Government Unit (LGU) tax. Numbers 16 and 17 are based on the following information: The decedent was married at the time of death.

16. 17.

Cash owned before the marriage P 10,000,000 Real property inherited during the marriage 12,000,000 Personal property by the wife received as gift before the marriage 800,000 Property acquired with cash owned before the marriage 1,200,000 Clothes of the decedent purchased with the exclusive money of the wife 1,000,000 Jewelry purchased with exclusive cash 2,000,000 Property unidentified when and by whom acquired 2,400,000 Cash income during the marriage 4,000,000 The gross estate under the system of conjugal partnership of gains is: a. P33,400,000 b. P32,600,000 c. P31,600,000 d. P33,400,000 The gross estate under the system of absolute community of property is: a. P 13,000,000 b. P 20,400,000 c. P32,600,000 d. P33,400,000 Numbers 18 to 21 are based on the following information: Funeral expenses Judicial expenses Medical expenses Claims against the estate Claims against insolvent persons Taxes Losses Mortgage indebtedness on property Transfer to the Government for public purpose Vanishing deduction Family home Amount receivable under R.A. 4917 The decedent was single but head of the family.

P

250,000 500,000 600,000 200,000 40,000 25,000 60,000 120,000 100,000 28,000 12,000,000 150,000

18.

The total of ordinary deductions from the gross estate is: a. P 573,000 b. P 1,273,000 c. P 1,323,000

d. P 1,423,000

19.

The total of special deductions from the gross estate is: a. P 2,650,000 b. P 2,750,000 c. P 15,150,000

d. P17,150,000

20.

Assuming that the single decedent was not a head of the family, the total of special deductions from the gross estate is: a. P 1,650,000 b. P 1,750,000 c. P 5,000,000 d. P 5,150,000

21.

Going back to the original problem data but this time decedent was married and the share of the surviving spouse in the net conjugal or community estate is P 1,250,000, the total of special deductions from the gross estate is: a. P 2,175,000 b. P 3,425,000 c. P11,075,000 d. P12,400,000

22.

X died leaving an antique jar of the Ming Dynasty to his son Y by way of a last will and testament. The will gave Y the power to appoint by will Z as successor to the precious jar. When Y died, Z succeeded to the property. Which statement is incorrect? a. Z is succeeding to the estate of X and not of Y. b. The value of the jar should be included in the gross estate of X. c. The value of the jar should be included in the gross estate of Y. d. The value of the jar should not be included in the gross estate of Y.

SET A

Page 42

23.

Revocable transfers: Land Automobile Shares of stock Bond certificates Transfer under power of appointment: Farm land, limited power Land and building, general power

The estate a. P

b. P 3,000,000

FMV, date of Consideration Death Transfer received P 5,200,000 P 4,000,000 P 3,000,000 0 1,000,000 6,000,000 200,000 500,000 400,000 300,000 200,000 250,000 1,300,000 1,800,000

c. P 3,050,000

1,500,000 2,000,000

0 1,000,000

gross is: 2,200,000

d. P 4,350,000

24.

Statement 1. One-half of the value of the family home constructed solely by the surviving spouse before she got married on June 3, 2018, to the decedent, is a special deductible item in arriving at the taxable net estate. Statement 2. The Bureau of Internal Revenue (BIR) may examine the bank deposits of a decedent for the purpose of ascertaining the decedent’s gross estate without violating the Bank Secrecy Law (R.A. 1405). a. Both statements are correct. b. Both statements are wrong. c. Statement 1 is correct but statement 2 is wrong. d. Statement 2 is correct but statement 1 is wrong.

25.

X died leaving a property acquired by purchase from Y who died 3 ½ years ago. The property is now in X’s gross estate. The estate’s vanishing deduction rate is: a. 0% b. 20% c. 40% d. 60% The records pertinent to some properties of a resident citizen, who died on February 14, 2018, reveal the following information:

26.

Land (inherited) Car (donated) Jewelry (inherited)

Date Fair Market Value Acquired Date acquired 2/14/2018 2/1/2017 P 500,000 P 700,000 12/25/2014 300,000 200,000 1/1/2013 100,000 150,000

The car donated to the decedent was mortgaged by the donor for P 60,000 which was paid by decedent before he died. The gross estate of the decedent amounted to P 10 million while total of deductible losses, indebtedness, taxes, and donation to the Government for public purpose amounted to P 2 million. The vanishing deduction was: a. P 360,000 b. P 364,800

c. P 380,800

d. P 524,800

Numbers 27 to 30 are based on the following information: Dina Cabangon, a citizen of the Philippines and resident of the United States, and under the system of conjugal partnership of gains, died in the United States and was shipped to and buried in the Philippines. She had the following data: Real property in the Philippines (inherited 3 1/2 years ago, with a fair market value of P9,000,000 when inherited) Real property in the U.S., used as family home Tangible personal properties in the Philippines Tangible personal properties in the United States Funeral expenses in the United States Funeral expenses in the Philippines Unpaid obligations Claim against an insolvent person in the Philippines 27.

The gross estate is:

SET A

P 11,000,000 13,000,000 200,000 700,000 110,000 110,000 600,000 100,000

Page 43

a. P 17,500,000

b. P 18,000,000

c. P 24,900,000

d. P 25,000,000

28.

The deduction for family home is: a. P 0 b. P 5,000,000

c. P 6,500,000

d. P10,000,000

29.

The vanishing deduction is: a. P 3,499,200 b. P4,299, 200

c. P 9,000,000

d. P 11,000,000

The taxable net estate is: a. Nil

c. P 4,150,800

d. P 9,150,800

30.

b. P 2,650,000

Numbers 31 to 36 are based on the following: A non-resident alien, married, died October 7, 2018. He left the following: Conjugal properties: Philippines P 3,000,000 Foreign country 4,000,000 Exclusive properties: Philippines 2,000,000 Foreign country 1,000,000 The following deductions were claimed: Actual funeral expenses Judicial expenses Claims against the conjugal estate Claims against the exclusive estate Transfer for public use Medical expenses Losses (part of exclusive properties in the Philippines) Domestic shares Share in a partnership Other tangible personal properties

31.

100,000 300,000 500,000 150,000 200,000 600,000 100,000 P 600,000 300,000 2,100,000

Included in the Philippine conjugal gross estate above were the following:

The Philippines exclusive properties were all tangible personal properties. These included a car which was inherited 3 ½ years before the present decedent’s death and had a fair market value of P 400,000. The foreign country where the decedent was a citizen and a resident at the time of his death did not impose transfer taxes of any character on the intangible personal properties of Filipinos not residing therein. How much was the total taxable gross estate in the Philippines? a. P 4,100,000 b. P 5,000,000 c. P 9,100,000 d. P 10,000,000

32.

How much was the total deductions from the exclusive gross estate in the Philippines? a. P 436,295 b. P 442, 695 c. P 450,000 d. P590, 195

33.

How much was the total deductions from the conjugal gross estate in the Philippines? a. P 205,000 b. P 369,000 c. P 500,000 d. P 900,000

34.

How much was the vanishing deduction? a. P 133,140 b. P 133,795

35.

How much was the Philippines taxable net estate? a. P 2,004,805 b. P2,429,205 c. P 2,504,805

d. P 2,952,305

36.

The Philippines estate tax due and payable is: a. P 177,138 b. P 150,288

d. P 120,288

37.

Which of the following transactions is deemed a taxable gift? a. Remission or condonation of debt.

SET A

c. P 140,195

c. P 145,752

d. P 148,000

Page 44

b. Sale of residential house and lot for less than adequate and full consideration in money or money’s worth. c. Both “a” and “b”. d. Neither “a” nor “b”. 38.

Statement 1. The donor’s tax shall apply whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible, and even if the transfer is merely in trust. Statement 2. Renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent is exempt from donor’s tax even if done in favor of an identified heir to the exclusion or disadvantage of other co-heirs in the hereditary estate. a. Both statements are true. b. Both statements are false. c. Statement 1 is true but not statement 2. d. Statement 2 is true but not statement 1.

39.

SK Litton, Filipino, has one year more to reach the compulsory retirement age of 65 years old as an employee of a private firm. Unfortunately, he met a fatal vehicular accident that caused his instantaneous death. He is survived by his wife and received P1,000,000 from SK Litton’s employer as benefit under R.A. 4917. The amount that must be included as part of SK Litton’s gross estate is: a. None, exempt b. P 250,000 c. P 500,000 d. P 1,000,000

40.

Continuing No. 39, the amount that must be claimed as a special deduction from SK Litton’s gross estate for the benefit received under R.A. 4917 is: a. None, exempt b. P 250,000 c. P 500,000 d. P 1,000,000 Going back to No. 39 and assuming that SK Litton was single when he died, the amount that must be claimed as a special deduction from the gross estate for the benefit received under R.A. 4917 is: a. None b. P 250,000 c. P 500,000 d. P 1,000,000

41.

42.

Referring again to No. 39, the taxable net estate arising from the retirement benefit received under R.A. 4917, irregardless of whether or not SK Litton died as married or single, is: a. None b. P 250,000 c. P 500,000 d. P 1,000,000

43.

Which of the following statements is incorrect? a. Gift splitting is a form of tax dodging. b. A gift made on February 14, 2018, is to be added to the gift made on December 25, 2018, in determining the donor’s tax in a calendar year. c. Renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by a decedent is subject to donor’s tax if done in favor of an identified heir to the exclusion or disadvantage of other heirs in the hereditary estate. d. Spouses shall file separate donor’s tax returns where the thing donated is a conjugal or community property.

44.

Spouses Chito and Angie wanted to donate cash of P1,200,000 to their daughter Chika who is getting married in June of 2018. What is the most efficient mode of donating the money? a. The spouses should each donate P600,000 in 2018. b. Spread the donation over a period of 2 years with the spouses donating P 300,000 each year in 2018 and 2019. c. The spouses should each donate P100,000 in 2018 and P500,000 each in 2019. d. Spread the donation over a period of 3 years with the spouses donating P100,000 each in 2018 then each should donate P 250,000 in 2019 and 2020. Numbers 45 and 46 are based on the following information: A resident donor gave the following donations in 2018: Jan. 24 – Land located in the Philippines valued at P 2,000,000 to her Uncle subject to the condition that the latter will pay the donor’s tax due and unpaid mortgage amounting to P500,000. Nov. 30 – Building in the USA valued at P 4,500,000 to her sister. Donor’s tax paid in the USA was P 260,000.

SET A

Page 45

45.

The donor’s tax due on the Jan. 24 donation is: a. P 75,000 b. P 90,000

c. P 105,000

d. P 120,000

46.

The donor’s tax due on the Nov. 30 donation after tax credit on foreign donor’s tax paid is: a. P 10,000 b. P 11,250 c. P 85,000 d. P 86, 250

47.

Digong donated a parcel of land to Harry, his brother. Which of the following statements is correct in connection with this particular donation? a. The donation can be made orally when the value is P 5,000 or less. b. The donation shall be made in public instrument and the acceptance of the donation may be done orally. c. The acceptance of the donation may be made by the donee in the same deed of donation which may be done even after the death of the donor. d. The donation shall be made in public instrument and the acceptance shall be made in another public instrument but duly annotated in the deed of donation. Numbers 48 to 50 are based on the following information: Donation of properties, with fair market values, as follows: Land in Hongkong P 1,000,000 Land and building in the Philippines 1,500,000 Shares of stock of a domestic corporation 500,000 Shares of stock of a foreign corporation 400,000 Receivable from a friend (residing in the same country as that of the donor) 50,000 Transfer inter vivos of property in the country of the transferor: consideration received, P 90,000; fair market value of property at the time of transfer 200,000 Cancelation of indebtedness of a resident of the country where the transferor resides, as an act of liberality 20,000

48.

The gross gifts if the donor is a citizen or resident of the Philippines: a. P 2,080,000 b. P 2,580,000 c. P 3,580,000

49.

The gross gifts if the donor is a non-resident, not citizen of the Philippines: a. P 1,500,000 b. P 2,000,000 c. P 2,900,000 d. P 3,580,000

50.

The gross gifts if the donor is a non-resident, not citizen of the Philippines, and the reciprocity clause of the estate tax law applies: a. P 1,500,000 b. P 2,000,000 c. P 2,900,000 d. P 3,580,000

51.

While driving their brandnew SUV car to Banaue last month, Babalu, together with his wife, Pokwang and only daughter, Zorayda, met a vehicular accident that caused the instantaneous death of Zorayda. The following day, Pokwang also died in the hospital. The spouses and their daughter had the following assets and liabilities at the time of death:

Cash Cars Land Residential house Mortgage payable Funeral expenses

Pokwang Exclusive Conjugal P 20,000,000 P 3,000,000 5,000,000 2,000,000 8,000,000 25,000,000 10,000,000 1,500,000

Zorayda P 5,000,000

Question 1: Is the estate of Zorayda liable for estate tax? Question 2: Is vanishing deduction applicable to the estate of Pokwang? a. No to both questions. b. Yes to both questions. c. No to Question 1 but yes to Question 2.

SET A

d. P 3,670,000

Page 46

d. Yes to Question 1 but no to Question 2. 52.

When a donation mortis causa which paid the estate tax was actually a donation inter vivos as ascertained by the Bureau of Internal Revenue (BIR), which of the following is true? a. The donation shall not pay anymore any transfer tax. b. The donation shall pay the donor’s tax in addition to the estate tax previously paid. c. The donation shall be required to pay the donor’s tax and the donor’s tax computed shall be reduced by the estate tax already paid. d. The donation shall be required to pay the donor’s tax on its proper valuation at the time of gift and file a claim for refund of the erroneously paid estate tax.

53.

The gross sales and/or receipts of a taxpayer for the year 2018 are from the following sources: Convenience store P 3,000,000 Sale of gold to the BSP 1,000,000 Passenger jeepneys for hire 500,000 Which of the following statements is correct? a. The taxpayer is required to register for VAT because the basis for compulsory registration is the total gross sales and/or receipts of P 4,500,000. b. The taxpayer may elect to register for VAT because his total annual gross sales and/or receipts as basis for optional registration amount to only P 3,000,000. c. The taxpayer is required to register for VAT because the basis for compulsory registration is the total gross sales and/or receipts of P 4,000,000. d. The taxpayer is not required to register for VAT because his total annual gross sales and/or receipts has no bearing in the optional or compulsory registration as VAT taxpayer.

54.

A sales invoice prepared by a VAT-registered taxpayer showed the following details: Selling price Value-added tax Total

P 200,000 18,400 P 218,400

The output tax that should be in the books of accounts that goes into the computation of the VAT payable is: a. P 18,400 b. P 23,400 c. P 24,000 d. P 26,208 55.

The taxpayer is a VAT-registered owner of an eatery place. Data on a certain gross receipts follows: Foods Beverages Service charge City tax How much is the output tax on the sale? a. P 405.00 b. P 445.50

P 3,360.00 420.00 378.00 54.60 c. P 453.60

d. P 498.96

56.

Continuing No. 55, what shall the Official Receipt (O.R) show? a. P 4,617.60 b. P 4,658.10 c. P 4,666.20

57.

A VAT-registered medical practitioner received P97,000 from a retainer medium-sized establishment for professional services rendered. The physician’s expected annual gross income has always been more than P 720,000. The output tax included in the Official Receipt (O.R) issued is: a. P 10,714 b. P 11,412 c. P 11,640 d. P 12,000

58.

The following journal entry was made in the Purchases Journal of a VAT-registered taxpayer: Purchases Cash or Accounts Payable The journal entry signifies that the: a. Purchases were from a non-VAT supplier.

SET A

xxx xxx

d. P 4,711.56

Page 47

b. Purchases were from VAT-registered supplier. c. Purchases were either from non-VAT or VAT registered supplier. d. Input tax has been taken as part of the cost of purchase. 59.

A VAT-registered taxpayer has the following sales in a month: Cash sales Open account sales Consignment sales (at suggested retail price): 0-30 days old (Consignees remittances, P 336,000) 31-60 days old 61 days old and above a. P 268,500

b. P 282,000

P 300,000 750,000 1,008,000 1,050,000 1,120,000

c. P 453,000

How much is the output tax for the month? d. P 466,500

Numbers 60 to 66 are based on the following information: Sales to private entities Sale to the government Sales of exempt goods Input taxes passed on by VAT-registered suppliers on: Sales to private entities Sales to the government Sales of exempt goods Purchase of depreciable capital goods not attributable to any specific activity (monthly amortization for 60 months)

60. 61.

Domestic P 500,000 500,000 500,000

Export P 500,000

30,000 25,000 10,000

20,000

120,000

The sales to the government were subjected to the automatic deduction of the 1% creditable withholding tax (CWT) on its purchases from domestic suppliers. The value-added tax payable on the domestic sales to private entities is: a. Zero b. (P10,000) c. P60,000 d. P70,000 The total input taxes attributable to zero-rated sales is: a. P 20,000 b. P 30,000 c. P 50,000

d. P 60,000

62.

If the input taxes attributable to zero-rated sales are claimed as tax credit, the net input value-added tax refundable is: a. Zero b. P 40,000 c. P 50,000 d. P 60,000

63.

The actual input taxes attributable to the domestic sales to the government is: a. P 25,000 b. P 30,000 c. P 55,000 d. P 65,000

64.

The value-added tax payable on the domestic sales to the government which was withheld as final withholding VAT is: a. P 5,000 b. P 25,000 c. P 30,000 d. P 35,000

65.

The journal entry to take up the domestic sales to the government is: a.

Cash/AR Sales b. Cash/AR Sales Output tax c. Cash/AR Final withholding VAT Sales Output tax

SET A

560,000 560,000 560,000 500,000 60,000 535,000 25,000 500,000 60,000

Page 48

d. Cash/AR Final withholding VAT Creditable withholding tax Sales Output tax 66.

530,000 25,000 5,000 500,000 60,000

The journal entry to reflect the excess of actual input VAT over the statutorily allowed input tax on the domestic sales to the government is: a.

Output tax Revenue and expense summary Input tax Final withholding VAT b. Output tax Input tax Final withholding VAT Revenue and expense summary c. Output tax Input tax Revenue and expense summary d. Output tax Revenue and expense summary Input tax Cash/AP

60,000 20,000 55,000 25,000 60,000 15,000 25,000 20,000 60,000 55,000 5,000 60,000 20,000 55,000 25,000

Numbers 67 to 69 are based on the following information: From the books of accounts were transactions for each of the months of October, November and December (last quarter) of 2018 of a VAT-registered taxpayer: October November December P 492,800 P 616,000 P 770,000

Credits to sales account Debits to purchases account on local purchases of goods from: VAT-registered persons 123,200 739,200 369,600 Non-VAT registered persons 44,800 67,200 33,600 There was debit balance in the Input Taxes account in the preceding quarter of P 15,600. 67.

The value added tax payable at the end of October is: a. P 190,200 b. P 24,000 c. P 23,376

68.

The value-added tax payable (refundable) at the end of November is: a. Payable of P0 c. Refundable of P13,200 b. Payable of P20,400 d. Refundable of P 14,784

69.

The value-added tax payable at the end of December is: a. P 18,480 b. P 33,264 c. P 34,320 d. P 49,104

SET A

d. P 28,752

70.

PAGE After recognizing the value-added tax payable for the last calendar quarter of 2017, the books49 of accounts of a VAT-registered retail store showed a debit balance in the Input Taxes account of P 2,500. Transactions in the first calendar quarter of 2018 per books were.

Sales P 2,100,000 Sales discounts 42,000 Sales returns and allowances 105,000 Purchases (at total invoice costs) of: Goods for sale from VAT-registered suppliers 84,000 Goods for sale from non-VAT registered persons 336,000 Services from VAT-registered service providers 280,000 Equipment (6-year life) bought at start of year from VAT-registered person 1,176,000 Operating expenses 505,000 Value-added tax paid first two months of the quarter 16,920 Importation for sale: Invoice cost from country of origin (1$ = P55.00) $10,000 The valueFreight and insurance P15,000 added tax on the Customs duty 26,000 importation is: a. P 69,140 Excise tax 2,500 P 71,640 c. P 71,880 d. P 72,480 Otherb.expenses: Prior to removal of the goods from customs custody 3,500 Numbers 71 to 73 After removal of the goods from customs custody 2,000 are based on the Facilitation expense (TARA) 5,000 following information: Manoy, an unmarried minimum wage earner, works for Yutivo Company. He is not engaged in business nor has any other source of income other than his employment. For 2018, Manoy earned a total compensation income of P140,000. He likewise earned, aside from his basic wage, additional pay of P150,000, which consists of holiday pay – P30,000; overtime pay – P55,000; night shift differential pay – P40,000; and hazard pay – P25,000. The taxpayer contributed to the SSS, Philheath, Pag-IBIG, and Union Dues amounting to P5,000 and has received 13th month pay of P11,500. 71. The taxable income per se of Manoy in 2018 is: a. None b. P 223,500 c. P 273,500 d. P 240,000 72. 73.

The income tax liability of Manoy (if any) in 2018 is: a. Exempt b. P 3,525 c. P 4,700

d. P 8,000

If Manoy signified his intention not to be taxed the graduated income tax rates of 0% - 35% under the Sec. 24 (A)(2)(a) of the Tax Code, as amended, his income tax liability in 2018 is: a. P 17,880 b. P 21,880 c. P 23,880 d. Can not avail of the special 8% income tax rate on his gross receipts from his employment income. Numbers 74 to 77 are based on the following information: Bungo, a married executive of SK Litton Corporation, earned in 2018 an annual compensation income of P1,250,000, inclusive of 13th month pay and other benefits in the amount of P 120,000. The taxpayer contributed to the SSS, Pag-IBIG, and Philhealth amounting to P50,000. Aside from employment income, Bungo operates a nightclub and videoke bar with gross receipts of P 2,500,000. His business cost of sales and operating expenses were P1,000,000 and P600,000, respectively, and with non-operating income of also P100,000 in 2018.

74. 75.

The total taxable income of Bungo in 2018 is: a. P 2,060,000 b. P 2,080,000

c. P 2,110,000

The income tax due and payable in 2018 of Bungo is: a. P 296,800 b. P 413,000 c. P 509,200

d. P 2,160,000 d. P 525,200

76.

77.

PAGE 50 derived Supposing Bungo signified his intention to elect the special 8% income tax rate on gross receipts from his business income? The total income tax due and payable in 2018 for being a mixed income earner is: a. P 276,800 b. P 411,000 c. P 431,000 d. P 525,200 Aside from income tax, Bungo is also liable to pay what kind of business tax? a. 3 % OPT b. 12% VAT c. 18% OPT d. Exempt Numbers 78 and 79 are based on the following information: Talino, bachelor and CEO of Tanyag Company, with his own practice of profession (being a CPA-Lawyer) by the side, had the following data for 2018: Gross receipts from practice of profession P3,000,000 Expenses on practice of profession 1,800,000 Gross compensation income as a CEO in a private company (net of all exclusions) 8,000,000

78.

The income tax due and payable in 2018 of Talino is: a. P 2,830,000 b. P 2,812,500 c. P 2,650,000

79.

If Talino signified his intention in his 1st Quarter Percentage Tax Return not to be taxed the graduated income tax rates of 0% - 35% under Sec. 24(A)(2)(a) of the Tax Code, as amended, his total income tax liability for 2018 is: a. P 2,630,000 b. P 2,650,000 c. P 2, 792,500 d. P 2, 812,500

80.

d. P 2,630,000

Lapera, head of family, has the following data for calendar year 2018: Gross sales from self-employment Interest on Philippine currency bank deposit Interest on US$ deposit, Banco de Oro Capital gain on sale of land in the Philippines (Selling price, P5 Million; Zonal value, P6 Million) Capital gain on sale of shares of stock of a domestic corporation sold directly to buyer Deductible expenses and losses from the sales derived from self-employment most economical option in taxing his self-employment income is: a. P 457,750 b. P 517,750 c. P 537,750

P 2,000,000 10,000 5,000 1,000,000 100,000 1,100,000

The total income taxes paid by Lapera for 2018 taking into account the

d. P 597,750

GRADUATED RATES OF INCOME TAX ON INDIVIDUALS ON TAXABLE COMPENSATION, BUSINESS, PROFESSION AND OTHER INCOME

Taxable Income P250,000 or less Over P250,000 to P400,000 Over P400,000 to P800,000 Over P800,000 to P2,000,000 Over P2,000,000 to P8,000,000 Over P8,000,000 INTEGRATED REVIEW TAXATION VALIDATING EXAMINATION 1.

Rates (January 1, 2018 to December 31, 2022) 0% 20% in excess of P250,000 P30,000 + 25% in excess of P400,000 P130,000 + 30% in excess of P800,000 P490,000 + 32% in excess of P2,000,000 P2,410,000 + 35% in excess of P8,000,000

August 6, 2018; 11:15 – 12: 45 PM

John, single, receives a monthly salary of P21,000. Under the TRAIN law, the amount of income tax that will be deducted from his salary will amount to: A. P 0 B. P 21,867

C.

P 80,640

D.

Cannot be determined

PAGE 51

2.

Mr. John Cruz is a call center agent with a family of three, receives a monthly salary of P21,000 or P252,000 annually. Under the TRAIN law, Mr. Cruz will be allowed a total exemption of: A. P 50,000 C. P 100,000 B. P 75,000 D. None of the above

3.

Ms. Dahlia Gomez receives a monthly salary of P 120,000. Under the TRAIN Law, how much will be included in the taxable amount from Ms. Gomez’s 13th month pay? A. P 120,000 C. P 30,000 B. P 90,000 D. None of the above

4.

Mr. Alvin Cruz, a professional engineer, single with no dependent, earns a gross receipts of P120,000 a month from rendering professional services, under the Train Law, how much will be the income tax that must be paid by Mr. Cruz? A. P 118,500 C. P 247,000 B. P 115,200 D. P 69, 120

5.

Under TRAIN, VAT exempt taxpayers will have the following options, except: A. Personal Income Tax schedule with 40% OSD on gross receipts or gross sales plus 3% percentage tax B. Personal Income Tax schedule with itemized deductions plus 3% percentage tax C. Flat tax of 8% on gross sales or gross revenues in lieu of percentage tax and personal income tax. D. None of the above

6.

Under the TRAIN Law, husbands and wives who are both working can benefit from a total maximum exemptions amounting to: A. P 200,000 C. P 400,000 B. P 300,000 D. P 0

7.

TRAIN also simplifies the payment of donor’s taxes to a single tax rate of 6% of net donations is imposed for gifts above P250,000 yearly given to A. Direct Family members only B. Members of the family up to fourth level of consanguinity C. Regardless of relationship D. None of the above

8.

TRAIN reduces and restructures the estate tax to a low and single tax rate of 6% based on the net value of the estate with a standard deduction of A. P 1,000,000 C. P 10,000,000 B. P 5,000,000 D. None of the above

9.

Under TRAIN, which of the following are generally still VAT exempt: A. Raw Agriculture Food C. Medicine B. Education D. All of the above

10.

Under the TRAIN the VAT threshold will be A. P 1.9 million B. P 3.0 million

C. D.

Either a or b None of the above

11.

Statement 1: The estate tax accrues upon the death of the decedent-owner of the properties transmitted by succession; Statement 2: The estate tax should be paid by the executor or administrator or the heir, before title to any registerable property may be registered in the name of the heir to whom it is given by succession. A. false, true C. false, false B. true, true D. true, false

12.

Mr. Tatang owned one hundred hectares of agricultural land. The Government took nine hundred ninety-five hectares under the Agrarian Reform Act, with payment for it not yet received. Mr. Tatang died. What value shall be included in his gross estate? A. One hundred hectares of agricultural land B. Five hectares of agricultural land plus the amount receivable from the Government on the appropriation of ninety-five hectares C. Five hectares of agricultural land D. None74

13.

For death of a father in an airplane crash, the children received insurance proceeds of P350,000 by the insurer and airline. Statement 1. The 350,000 shall be included in the gross estate because it was a receivable at the time of death. Statement 2. The P350,000 shall not be included in the gross estate because the life insurance was not taken out by the himself on his own life.

A. false, true B. true, true

PAGE 52

C. false, false D. true,false

14.

In the last will and testament, a decedent provided that the properties he leaves must not be sold or disposed of for ten years following his death. He had real estate in his gross estate as follows: At the time of death – zonal value of P500,000 At the end of ten years after death: Fair market value – P2,500,000; Declared value in the estate tax return – P1,500,000; Zonal value – P3,000,000 What value will be used for purposes of estate tax? A. P 500,000 C. P2,500,000 B. P1,500,000 D. P3,000,000

15.

Mr. Manalo with stage three cancer, made a last will and testament disposing of [properties mentioned in the last will and testament. On the same day, he made gifts inter vivos to his children. A few days later he died. Are the donated properties to be included in the gross estate? A. No, because they were not his properties anymore at the time of death. B. Yes, because the donations were donations mortis causa, and must be governed by the rules on estate tax. C. No, if the donor’s tax had been paid already on the donations. D. No, because they were not transfers in contemplation of death, since the donations were not simultaneous with the execution of the last will and testament.

16.

Alicia died with a receivable from Bertol. Bertol has properties worth P220,000 and obligations of P320,000. Included in the obligations are P20,000 owed to the Government of the Republic of the Philippines for unpaid taxes and P60,000 owed to Alicia. The estate of Alicia has a deduction for claim against insolvent person of:

a. P60,000 17.

d. P0

They must be existing against the estate. They must have been prescribed. They must be reasonably certain as to amounts. They must be enforced by the claimants.

Which statement is correct? Real property with a cost of P300,000 and a fair market value at the time of death of P1,000,000, but subject to a mortgage of P200,000.

A. B. C. D. 19.

c. P20,000

The following are the requisites in order that claims against the decedent’s estate may be deductible, except:

A. B. C. D. 18.

b. P41,250

Shall be in the taxable net estate at P800,000. Shall be in the gross estate at the decedent’s equity of P800,000. Shall be in the gross estate at P300,000. Shall be in the gross estate at the decedent’s equity of P100,000.

A citizen of the Philippines and a resident of the United States, under the system of conjugal partnership of gains died in the United States, and was shipped to and buried in the Philippines. He had the following data:

Real property in the Philippines (inherited 3 ½ years ago, with a fair market value of P9,000,000 when P 11,000,000 inherited) Real property in the U.S., used as family home 13,000,000 Tangible personal properties in the Philippines 200,000 Tangible personal properties in the United States 700,000 Funeral expense in the United States 110,000 Funeral expenses in the Philippines 100,000 Unpaid obligations 600,000 Claim against an insolvent person in the Philippines 100,000 Estate tax paid to the United States 120,000 The taxable net estate is: a. P2,565,000 b. P2,650,800 c. P9,150,800 d. P7,650,800 20.

Statement 1: When an estate under administration has income-producing property, the annual income is not part of the estate subject to estate tax but when distributed in the year that the income was earned becomes income to the heir subject to income tax. Statement 2: When an estate under administration has income-producing properties, the annual income of the estate becomes part of the estate subject to the estate tax.

A. B. C. D. 21.

22.

PAGE 53

Both statements are correct Both statements are wrong The 1st statement is correct and the 2nd is wrong The 1st statement is wrong and the 2nd is correct

An individual, single, had the following data in 2016: Salaries Sales of trading business: Gross sales: Cash Open account Sales Sales allowances Collections on open account sales Cash received as income from property: Dividend income Interest on bank deposit Rentals from real property: Cash received Receivable How much is the additional community tax for 2017? A. P893 B. P675

P125,300

P300,000 200,000 4,000 2,000 130,400 3,000 3,300 120,500 5,200 C. P555 D. P245

Mr. and Mrs. Alpha, citizens and residents of the Philippines, had the following data for 2016: Mr. A On business in Manila: Net sales (with cash receipts of P345,246) P500,000 Cost of sales 150,000 Operating expenses 600,000 On practice of profession in Pasig City, cash received 323,430 On real property in Quezon City: Rentals received 120,000 Assessed value 100,000 Dividend received 20,000

Mrs. A On practice of profession in Makati City: Professional fees received from clients Professional fees receivable from clients On real property in Pasay City Rentals received Assessed value How much is the additional community tax of Mr. and Mrs. A for 2017? A. P1,070 C. P725 B. P904 D. P511

236,465 56,320 46,342 48,350

23.

Statement 1. There are no centavos in the basic community tax and additional community tax. Statement 2. Centavos in an actual payment of community tax is due to interest for late payment, as authorized by the law itself. A. True, True C. True, False B. False, False D. False, True

24.

The following are the requisites of a donation for purposes of the donor’s tax, except one. A. Capacity of the donor C. Delivery of the subject matter or gift B. Capacity of the done D. Donatives intent

25.

For the donation to be considered valid, acceptance of the donation must be made: A. during the lifetime of the donor only. B. during the lifetime of the donee only. C. during the lifetime of the donor and the done. D. none of the choices.

26.

For purposes of donor’s tax, a “stranger” is a person who is not a:

I- brother, sister (whether by whole or half blood), spouse, ancestor, and lineal descendant; II- relative by consanguinity in the collateral line within the fourth degree of relationship; A. a. Both are correct B. b. Both are incorrect

c. Only I is correct d. Only II is correct

PAGE 54 27.

One of the following statements is false:

A. Contracts of donation between husband and wife are void in all cases. B. A donation by Rico Puno to P-Noy, the President of the Philippines, in view of his public office is void in all cases. C. Donations between persons guilty of adultery or concubinage are void. D. Donations to conceived or unborn children are valid. 28.

Which statement is wrong? The donor’s tax on donations to non-strangers:

A. B. C. D.

Is computed on the basis of the net gifts of a calendar year. Is computed and paid within thirty days from the date of donation. Is computed separately for each spouse in case of a joint donation. Becomes proportionately bigger on later donations.

29.

One of the following statements is correct. a. A donation inter vivos by the husband and the wife jointly during the marriage is a donation of conjugal property that will require one computation of the donor’s tax, if the spouses are under the system of conjugal partnership of gains. b. A donation inter vivosby the husband and the wife jointly during the marriage is a donation of community property that will require one computation of the donor’s tax, if the spouses are under the system of absolute community of properties. c. A donation inter vivosby the husband and the wife jointly during the marriage is a donation of exclusive property by either spouse that will require one computation of the donor’s tax, if the spouses are under the system of conjugal partnership of gains. d. A donation inter vivos by the husband and the wife jointly during the marriage is a donation of each spouse to the extent of one-half that will require separate computations for two donor’s taxes, under whichever property relationship exists between the spouses.

30.

Which of the following statements is wrong? A donation by husband and wife out of conjugal community property to a brother of the wife is: a. one-half a donation to a non-stranger by the wife. b. one-half a donation to stranger by the husband. c. a donation on which the husband must pay a donor’s tax of 30%on his net gift. d. a donation on which the husband must pay the graduated donor’s tax on his net gift.

31.

Which of the following statements is not correct? a. Taxes may be imposed to raise revenues or to regulate certain activities within the state b. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax c. For the exercise of the power of taxation, the state can tax anything at any time d. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers

32.

Taxes are: a. Retroactive b. Prospective c. Generally proportionate d. Personal to the taxpayer

33.

What kind of taxes, fees and charges are considered as National Internal revenue taxes under the National Internal Revenue Code (NIRC)? I. Real property taxes II. Excise taxes III. Income taxes IV. Estate taxes V. Donor’s taxes VI. Value added taxes VII. Community taxes or poll taxes VIII. Other percentage taxes IX. Documentary stamp taxes a. I, II, III, IV, V, VI b. I, II, III, IV, V, VI, VII c. II, III, IV, V, VI, VIII, IX d. II, III, IV, V, VI, VII, IX

34.

Which is the correct and best statement? A tax reform at any given time undergoes the fact that: a. Taxation is an inherent power of the estate b. Taxation is essentially a legislative power c. Taxation is a power that is very broad

PAGE 55

35.

36.

d. The estate can and should adopt progressive taxation Statement 1: Tax credit from Foreign donor’s taxes paid by a donor, including non-resident alien donor, is allowed as deduction from Philippine donor’s tax due. Statement 2: The allowable donor’s tax credit is higher between the statutory limit and the actual foreign donor’s tax. a. True, False c. True, True b. False, True d. False, False Statement 1: When the donee or beneficiary is stranger, the tax payable by the donor shall be thirty percent (30%) of the gross gifts.

Statement 2: The computations of the donor’s tax is on a cumulative basis over a period of one calendar or fiscal year. a. b. c. d.

True, False False, True True, True False, False

Numbers 37 and 38: Land in the Philippines Land outside the Philippines Car in the Philippines Motorcycle outside the Philippines Shares of stock of a domestic corporation Shares of stock of a foreign corporation 37.

PAGE 56 P2,000,000 1,000,000 500,000 200,000 300,000 200,000

What is the gross estate if the decedent was a resident or citizen of the Philippines?

a. b. c. d.

P3,800,000 P3,900,000 P4,000,000 P4,200,000

38.

What is the gross estate if the decedent was a non-resident or not citizen of the Philippines? a. 2,800,000 b. 3,000,000 c. 3,200,000 d. 3,500,000

39.

Senior Celia, 63 years old grandmother, was treated by her grandchildren Jek, Roel and Mike to Aristocrat restaurant during grandparent’s day and their total bill is P2,240. How much is the discount of the senior citizen? a. P100.00 b. P160.00 c. P200.00 d. P400.00

40.

As a frequent traveler and avid fan of tourism and outdoor adventures you seek employment in a transportation company for you to avail fare discounts and travel promotions. In your job interview, one of your potential employer 2GO Corp., common carriers by air and sea, asked you if 2GO is a domestic corporation which among the following statement is true? I. 2GO is subject to VAT; II. 2GO is subject to VAT and OPT; III. 2GO carriage of goods are vatable but carriage of passenger exempt from vat; IV. 2GO domestic carriage goods or passenger is subject to vat but its international carriage of goods or passenger is subject to 0 rated VAT. a. Only I b. Both I and II c. Both II and III d. Both I and IV

TAXATION: QUIZ1 1. Which of the following statements is not correct? a. Taxes may be imposed to raise revenue or to provide incentives to certain activities within the State. b. The state can have the power of taxation if the Constitution does not expressly give the power to tax. c. For the exercise of the power of taxation, the state can tax anything at anytime. d. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on the taxing power. 2. The power of taxation proceeds upon what theory? a. Government is a necessity theory b. Ability to pay theory c. Benefits received theory d. Severance test theory 3. One of the characteristics of our internal revenue laws is that they are: a. Political in nature. b. Penal in nature c. Generally prospective in operation although the tax statute may nevertheless operate retrospectively, provided it is clearly the legislative intent. d. Criminal in nature 4. Is the amount collected annually by the Land Transportation Office (LTO) from motor vehicle owners, on the basis of horse power of engines thereof, an exercise power of taxation or police power? a. Taxation power b. Both power of taxation and police power c. Police power d. Neither power of taxation nor police power

PAGE 5. The city of Makati passed an ordinance imposing an annual tax of P5,000 to be paid by an operator of 57 massage clinic and an annual fee of P50 to be paid by every attendant or helper in the said clinic. Is the imposition a tax or a license? a. The imposition on the operator of the massage clinic is both a tax and license fee, while the imposition on every helper or attendant is a license fee. b. The imposition on the operator of the massage clinic is a license fee, while the imposition on every helper or attendant is a tax. c. Both imposition are taxes. d. Both impositions are license fees. 6. 1st Statement: The various impositions constitute double taxation because your neighbor is taxed twice. 2nd Statement: While the various impositions constitute double taxation, it is not prohibited by the Constitution as it is not direct duplicate taxation. a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct 7. One of the following statements is false: a. Taxation is the lifeblood of the government. b. The power of taxation must first be expressly granted, either by law or the Constitution, before the state may validly exercise. c. A government that imposes more direct taxes than indirect taxes is said to have managed to evolve a progressive system of taxation. d. Taxes are imposed primarily to raise revenue, while fees and charges are imposed primarily for regulation purposes. 8. Which of the following is correct? a. An overstatement of gross income is an example of tax evasion. b. Under the withholding tax system, the recipient of the income deducts the withholding tax and remits the same to the BIR within the period prescribed by law. c. Where a taxpayer was entitled to a tax refund regarding his prior taxes and the same is already barred by prescription, he may nevertheless offset such refund with his current tax liability d. The constitutional exemption granted to religious, charitable and non-stock, non-profit educational institution refers to real property taxes only. 9. Which of the following statement is correct? a. An overstatement of gross income is an example of tax evasion. b. Under the withholding tax system, the recipient of the income deducts the withholding tax and remits the same to the BIR within the period prescribed by law. c. Where a taxpayer was entitled to a tax refund regarding his prior taxes and the same is already barred by prescription, he may nevertheless offset such refund with his current tax liability d. The constitutional exemption granted to religious, charitable and non-stock, non-profit educational institution refers to real property taxes only. 10. When is donation perfected? a. The moment the donor knows of the acceptance by the done. b. The moment the thing donated is delivered, either actually or constructively, to the done. c. Upon payment of the donor’s tax. d. Upon execution of the deed of donation. 11. The following are the requisites of a donation for the purposes of the donor’s tax, except one: a. Capacity of the donor b. Capacity of a done c. Delivery of the subject matter or gift d. Donative intents 12. For the donation to be considered valid, acceptance of the donation must be made: a. During the lifetime of the donor only. b. During the lifetime of the donee only. c. During the lifetime of the donor and the donee d. None of the choices 13. Which of the following donation inter vivos may not require that it be made in writing? a. Donation of personal (movable) property, the value of which exceeds P5,000 b. Donation of personal (movable) property, the value of which is P5,000 c. Donation of personal (immovable) property, the value of which is less than P5,000 d. Donation of personal (immovable) property, the value of which exceeds P5,000 14. Which of the following statements regarding donation of an immovable property is incorrect?

PAGE a. The donation must be made in a public document specifying therein the property donated58and the value of the charges which the done must satisfy. b. The acceptance may be made in the same Deed of Donation or in separate public document, but it shall not take effect unless it is done during the lifetime of the donor. c. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. d. None of the choices. 15. One of the following is not distinction between donation inter vivos and donation mortis causa a. Donation inter vivos takes effect during the lifetime of the grantor while donation mortis causa takes effect after the death of the grantor. b. Donation inter vivos is subject to donor’s tax while donation mortis causa is subject to estate tax. c. Donation inter vivos requires a public document while donation mortis causa may not require a public document. d. Donation inter vivos is valued at fair value at the time the property is given while donation mortis causa is valued at the fair market value at the time of death of the grantor. 16. Motivated by love, Mr. D donated a car to his brothers, Mr. E and Mr. F, the naked to Mr. E and usufruct to F is a valid donation? a. Yes the transfer of naked title to Mr. E and usufruct to F is a valid donation, provided all the donees are living at the same of donation. b. No, the donation is not valid because it is specifically provided in the civil code that such donation is not allowed. c. Yes, the donation is valid provided that Mr. E agrees to the donation of usufruct to Mr. F. d. No, the donation is not valid because a right (usufruct) cannot be donated. 17. The tax imposed on the transfer of property without considered between two or more persons who are living at the same the transfer. a. Estate tax c. Business tax b. Donor’s tax d. Property tax 18. Donor’s tax is: a. A property tax c. a business tax b. A personal tax d. an excise tax 19. First Statement: Donor’s tax shall be levied, assessed, collected and paid upon the transfer of property by any person, resident or non-resident, as a gift. Second Statement: the donor’s tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, intangible or tangible. a. True, true c. True, true b. False, false d. False, true 20. For the purpose of donor’s tax, a “stranger” is a person who is not a: I. Brother, sister (whether by whole or half blood ), spouse, ancestor, and lineal descendant; II. Relative by consanguinity in the collateral line within the fourth degree of relationship. a. Both statement are correct c. Only statement I is correct b. Both statement are incorrect d. Only II is correct 21. First Statement: a legally adopted child is entitled to all the rights and obligations of legitimate children as provided by law and therefore, donation to him shall not be considered a donation to stranger. Second Statement: Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger. a. Both statement are correct b. Both statement are incorrect c. Only the first statement is correct d. Only the second statement is incorrect 22. Which of the following is a stranger for donor’s tax purposes? a. The son of the donor’s first cousin b. The donor’s grandmother c. The donor’s spouse d. A children out of wedlock of parents who are legally impeded to many each other at the time the child is being conceived. 23. Statement I: Any contribution in cash or in kind to any candidate, political party or coalition of parents for campaign purposes, shall be governed by the Election Code, as amended. Statement II: Any provision of law to the contrary notwithstanding, any contribution in cash or in kind or political party or coalition of parties for campaign purposes duly reported to the COMELEC shall not be subject to the payment of any gift tax. a. Both statements are correct b. Both statement are incorrect

PAGE c. Only first statement is correct 59 d. Only second statement is incorrect 24. First statement: The donor’s tax shall not apply unless until there is a completed gift. Second statement: The law in force at the time of the completion of the donation shall govern the imposition of the donor’s tax. a. Both statements are correct b. Both statement are incorrect c. Only first statement is correct d. Only second statement is incorrect 25. When is the donation completed? a. The moment the donors knows the acceptance by the donee. b. The moment the thing donated is delivered, either actually or constructively, to the donee c. Upon payment of the donor’s tax d. Upon execution of the deed of donation 26. A gift is incomplete because of reserved powers, become a complete when: I-the donor renounces the power II- his right to exercise the reserved power ceases because of some event or contingency or the fulfillment of some condition, other than the donor’s death. a. True in both I and II c. True in I only b. Not true in both I and II d. True in II inly 27. Which of the following renunciations shall not be subject to donor’s tax? a. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s b. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent. c. Renunciation by an heir, including the surviving spouse, of his/her in the hereditary estate left by the decedent categorically in favor of identified heir/s to the exclusion or disadvantage of the co-heirs d. None of the choices Questions 28 through 31 are based on the following information: A decedent left the following: Land in Italy (with P1M unpaid mortgage) P2,000,000 Land in Davao City, (zonal value 750,000) 500,000 Franchise in USA 100,000 Receivable from debtor in Phil. 50,000 Receivable from debtor in USA. 100,000 Bank deposit in Phil. 20,000 Bank deposit in USA. 80,000 Shares of stock PLDT, Phil. 75,000 Shares of stock of ABC, foreign corp. 125,000 75% of the business in the Phil. Shares of stock of XYZ, a foreign corp. 80% of the business Is in the Phil. (proceeds was used to expand business in the Phil) 30,000 28. If the decedent is a non-resident citizen his gross estate is: a. P 3,650,000 c. P 2,500,000 b. P 3,600,000 d. P 2,650,000 29. If the decedent in is non-resident alien estate is: a. P 1,195,000 b. P 750,000 c. P 1,250,000 d. P 1,070,000 30. If in the preceding number, reciprocity law can be applied the gross estate is: a. P 1,050,000 b. P 750,000 c. P 1,250,000 d. P 1,070,000 31. Based on the original problem but assuming the PLDT shares of stock (PLDT) are not in the local Stock Exchange, & there are 1,000 shares at the time of death, the company’s outstanding shares were 10,000 shares. Its retained earnings was P 2,000,000, par value per share was P50/share. The gross estate should show the said shares at: a. P 75,000 b. P 250,000 c. P 200,000 d. P 0 Questions 32 to 35 are based on the following information: Building, USA P 5,000,000 House & lot in Bulacan (500 sq. meters) zonal value is P10,000 per sq. meter 4,500,000 Life insurance proceeds, beneficiary is the wife, the Administrator, irrevocable 500,000 Life proceeds with another company, beneficiary, his son Irrevocable 200,000

PAGE Claims against a debtor whose liabilities exceeds its 60 asset (50% collectible) 50,000 Death benefits from US veteran Administration 100,000 Death benefits from SSS 40,000 Paraphernal property of his surviving wife 2,000,000 He also transferred mortis causa the following: S Price FMV- Transfer FMV- Death Car, Mla. P 500,000 P 1,000,000 P 800,000 Land,Mla. 1,500,000 2,000,000 1,000,000 Land, USA 2,000,000 1,800,000 3,000,000 32. If the decedent is a Filipino citizen, his gross estate is: a. P10,850,000 b. P12,900,000 c. P10,959,000 d. P11,050,000 33. If the decedent is a non-resident alien and his country does not impose transfer tax on any intangible properties left by a Filipino decedent, his gross state is: a. P 5,350,000 b. P 5,300,000 c. P 6,500,000 d. P 6,000,000 34. The gross estate of a non-resident alien is P2,000,000, 75% of which is from abroad. The actual funeral expenses totaled to P80,000, ¼ of which by his employer. The deductible funeral expense is: a. P 6,250 b. P20,000 c. P60,000 d. P80,000 35. Based on the preceding number ((the same world G.E.) but the decedent is a non-resident citizen, the deductible funeral expense is : a. P15,000 b. P20,000 c. P60,000 d. 80,000 st 36. 1 statement: A note contracted 11 years ago is a deduction from the gross estate if notarized. 2nd statement: To be deductible, medical expenses must be paid within one year period before death. a. True, True c. True, False b. False, False d. False, True st 37. 1 statement: Unpaid mortgage indebtedness is deductible from the gross estate provided the said property subject to the indebtedness is included in the gross estate net of the mortgage indebtedness. 2nd statement: A donation inter vivos by the decedent to the Phil. Government few months before his death is a deduction from the gross estate. a. True, True c. True, False b. False, False d. False, True 38. Purobuto, non-resident Japanese, died leaving the following: Exclusive properties, Philippines P 560,000 Conjugal properties, Philippines 420,000 Conjugal properties, Abroad 1,820,000 Deductions claimed: Funeral expenses 100,000 Judicial expenses 100,500 Unpaid expenses 150,500 Losses: occurring 3 mos. After death due to fire 120,000 Donation mortis causa to Makati City Hall 180,000 Family Home (inc. above), located abroad 1,000,000 Standard deduction 1,000,000 39. The taxable net estate is: a. P 516,500 c. P1,900,000 b. P 635,150 d. P2,100,000 40. A tax return is considered false and fraudulent, except: a. If there is a deliberate intention to deprive the government of its right to collect taxes. b. If there is a failure to report sales, receipts, or income in an amount exceeding 30% of that declared per tax return c. If there is a claim of deductions in an amount exceeding 30% of actual deductions. d. If there are differences in interpretation of whether the taxpayer may avail of tax credit on income taxes. Taxation Exam 1 1.

2.

In every case of doubt, tax statutes are construed a. Strictly against the government and the taxpayer b. Liberally in favor of the government and the taxpayer c. Strictly against the government and liberally in favor of the taxpayer d. Liberally in favor of the government and strictly against the taxpayer In every case of doubt, tax exemptions are construed a. Strictly against the government and the taxpayer

PAGE

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

b. Liberally in favor of the government and the taxpayer 61 c. Strictly against the government and liberally in favor of the taxpayer d. Liberally in favor of the government and strictly against the taxpayer Which of the following statements is not correct? a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are not presumed and, when granted, are strictly construed against the taxpayer because such provisions are highly disfavored by the government c. Exemptions from taxation are highly disfavored in law and he weho claims tax exemption must be able to justify his claims or right d. The Bureau of Internal Revenue has the duty and the exclusive power of enacting, implementing and interpreting the tax laws Which one of the following is not a characteristic or element of a tax? a. It is an enforced contribution b. It is legislative in character c. It is based on the ability to pay d. It is payable in money or in kind Which of the following is not a scheme of shifting the incidence of taxation? a. The manufacturer transfer the tax to the consumer by adding the tax to the selling price of the goods sold b. The purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to the tax he will pay c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines d. The manufacturer transfer the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer Which of the following statements is not correct? a. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the states b. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax c. For the exercise of the power of taxation, the state can tax anything at any time d. The provisions of taxation in the Philippine Constitution are grants of power enabling the state to impose taxes Statement I: the power of taxation is inherent in sovereignty being essential to the existence od every government. Hence, even if not mentioned in the Constitution the state can still exercise power and is essentially a legislative function. Statement II: even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making. a. True, true c. False, true b. True, false d. False, false Statement I: the President has a power to veto a revenue bill even id such bill was already proved by Congress. Statement II: the President is superior to Congress as he/she can veto any bill even if already approved by Congress. a. True, true c. False, true b. True, false d. False, false 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. It is paid by a local government unit c. The payment is passed in audit by the COA d. It is part of a lawmaker’s pork barrel The power to tax is the power to destroy. Is this always so? a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory b. Yes. The tax collections should enforce a tax law even if it results to the destruction of the property rights of a taxpayer c. Yes. Tax laws should always be enforced because without taxes the very existence of the State is endangered d. No. The Supreme Court may nullify a tax law, hence, property rights are not affected Statement I: A died giving B power to appoint a person who will inherent A’s house and loit. B however can only choose among C, D, E and F. B decided to transfer the property to C, in B’s will when he was old already. The transfer from B to C is subject to estate tax. Statement II: During A’s lifetime, he decided to give B as gift his car subject to the condition that if B does not become CPA within three years, A shall revoke the transfer. In the second year however, A died. The car can no longer form part A’s gross estate. a. True, true c. False, true b. True, false d. False, false Statement I: Dories or gifts made on account of family celebration, on or before its celebration, or within one year thereafter, by parents to each of their legitimate, recognized natural or adopted children, to the extent of the first P10,000 shall be exempt from donor’s tax. Statement II: Donations in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization provided that no amount of said gifts shall be used by the done for administration purposes shall be used by the done for administration purposes shall be exempt from donor’s tax. a. True, true c. False, true b. True, false d. False, false Statement I: Husband and wife are considered as separate and distinct taxpayers for p[purposes of the donor’s tax.

PAGE

Statement II: If what was donated is a conjugal community property and only husband signed the deed of donation, there is 62 only one donor for donor’s tax purposes, without prejudice to the right of the wife to question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil Code of the Philippines and the Family Code of the Philippines. a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct 14. In the last will and testament, a decedent provided that the properties he leaves should not be sold or disposed of ten years following his death. He had real estate in his gross estate as follows: At the time of death- zonal value of P500,000 At the end of ten years after death: Fair market value – P2,500,000 Declared value in the estate tax return – P1,500,000 Zonal value – P3,000,000 What value shall be used for purposes of estate tax? a. P3,000,000 c. P2,500,000 b. P1,500,000 d. P500,000 15. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In this sense, double taxation, a. Violates substantive due process b. Does not violate substantive due process c. Violate the right to equal protection d. Does not violate the right to equal protection Numbers 16-18 are based on the following: A married non-resident alien, died on September 11, 2011. He left the following: Conjugal properties, Philippines P 3,000,000 Exclusive properties, Philippines 2,000,000 Conjugal properties, Foreign Country 4,000,000 Exclusive properties, Foreign Country 1,000,000 The following deductions were claimed: Actual funeral expenses 100,000 Judicial expenses 300,000 Claims against the conjugal estate 500,000 Claims against the exclusive estate 150,000 Transfer for public use 200,000 Medical expenses 600,000 Losses (part of exclusive properties in Philippines) 100,000 Included in the Philippine gross estate were the following: Domestic shares 600,000 Share in a partnership 300,000 Other tangible personal properties 2,100,000 The Philippine exclusive properties were all tangible personal properties. These included a car, which was inherited 3 ½ years before the present decedent’s death, and had a fair market value of P400,000. The foreign country where the decedent was a citizen and a resident at the time of his death did not impose transfer taxes of any character on the intangible personal properties of Filipinos not residing therein. 16. How much was the taxable exclusive property in the Philippines? a. P1,900,000 c. P3,000,000 b. P2,000,000 d. none of the choices 17. How much was the vanishing deduction? a. P200,693 c. P133,140 b. P436,295 d. none of the choices 18. How much was the total deductions from the exclusive gross estate in Philippines? a. P503,193 c P436,650 b. P436,295 d. none of the choices

19. A citizen of Malaysia, residing in Kuala Lumpur, with properties in the Malaysia and the Philippines, had the following data on properties and rights at the time of his death and their values: Real estate, Malaysia Real estate, Philippines Shares of stock of a domestic corporation Shares of stock of a Malaysian corporation Shares of stock of Indonesian corp, doing business in Philippines only Philippine peso deposit in BDO bank Receivable under a life insurance with an insurance company Doing business in Malaysia The gross estate that should be reported in the Philippines is: a. P4,350,000 c. P4,000,000 b. P3,700,000 d. P2,800,000 20. A citizen and resident of the Philippines died leaving: Cash on hand and in banks (of which P150,000 was

P 1,000,000 2,000,000 200,000 300,000 100,000 500,000 200,000

Provided in the will to be given to charitable institution) Real property in the Philippines: Assessed value per assessment rolls of the city Zonal value per Bureau of Internal Revenue Selling price of adjacent piece of land the day preceding the Date of death Real property in Malaysia, FMV Car in the Philippines with mortgage of P200,000 Receivables: From a friend whom there is no possibility of recovery From a sister whose ratio of asset to liabilities is 1:3 Amounts under insurance contracts: Receivable under life insurance, with the mother as irrevocable beneficiary Receivable under accident insurance, for accident that happened 1 yr ago Receivable under property insurance, for damage caused to his car Revocable transfer: To sister (fair market value at the time of transfer was P40,000 And consideration received was P10,000) To father (fair market value at the time of transfer was P30,000 And consideration received was P30,000) To mother (fair market value was P40,000 and consideration received was P50,000) The gross estate is: a. P2,737,000 b. P2,807,000 21. From the following:

1,000,000

PAGE 63

100,000 500,000 600,000 450,000 400,000 20,000 15,000 200,000 50,000 12,000

50,000 60,000 70,000

c. P2,627,000 d. P1,350,000

Funeral expenses Judicial expenses Medical expenses Claims against the estate Claims against insolvent person Taxes Losses Mortgage or indebtedness on property Transfer for public use (e.g. legacy to Gov’t, nat’l and local)

150,000 500,000 400,000 200,000 40,000 25,000 60,000 120,000 100,000

Vanishing deduction Family home Standard deduction Net share of surviving spouse in conjugal/community estate

28,000 700,000 1,000,000 950,000

Amounts receivable under Republic Act 4917 20,000 How much are the special deductions from the gross estate? a. P1,620,000 b. P2,620,000 c. P2,220,000 d. P2,120,000 22. Mr. Z was a non-resident, not citizen of the Philippines, single, who died with a gross estate in the Philippines of P4,000,000 and outside the Philippines of P6,000,000. He left the following obligations and charges: Medical expenses, Philippines, in the year of death Funeral expenses, foreign Claims against insolvent person, Philippines Judicial expenses testamentary proceedings, Philippines Judicial expenses testamentary proceedings, foreign Other claims against the estate, Philippines Transfer to the Philippine Government, for public use of property in foreign Unpaid taxes, foreign country Mortgage payable, foreign country Losses, Philippines

1,000,000 800,000 250,000 300,000 350,000 900,000 400,000 20,000 180,000 100,000

Deductions from Philippines gross estate is : a. P1,250,000 c. P1,760,000 b. P1,550,000 d. P1,1160,000 23. Mr. B died on June 30,2013, leaving among others, the following charges and obligations: Real property tax for the calendar year 2013 – P20,000; On an interesting-bearing promissory note (notarized): face value of the note – P10,000; accrued interest on the note at the time of death P600; and interest to accrue on the note from the date of the death to the date maturity – P400. The deduction from the gross estate is: a. P20,600 c. P31,000 b. P30,600 d. P21,000 24. Decedent was citizen of the Philippine who was single at the time death, with properties and charges thereon: Properties: Inherited two and one-half years ago: Property outside the Philippines 300,000 Property in the Philippines: Fair market value when inherited 650,000 Fair market value at death 700,000 Mortgage on the property when inherited 150,000

Mortgage on the property at death Property acquired thru own labor Charges: Ordinary deductions from gross estate

100,000 2,000,000

PAGE 64

390,000

Vanishing deduction? a. P522,000 c. P313,000 b. P417,600 d. P208,800 25. The decedent was a resident citizen, single at the time of death. He left the following: Properties inherited 2 ½ years ago: Value in the present estate 500,000 Fair market value when inherited 430,000 Mortgage on the property when inherited 60,000 Mortgage on the property paid by present decedent 30,000 Properties received as a gift within the year: Value in the present estate 300,000 Value when received 320,000 Other properties 1,200,000 Ordinary deductions, not including vanishing deduction 500,000 Net taxable estate? a. P95,000 c. P320,000 b. P500,000 d. P275,000 26. Ms. Laureen McDonald, a citizen and resident of Brisbane, Australia, died leaving properties and obligations in Australia and in the Philippines; Data on her properties and obligations follows: Properties in Australia (inherited within the year) of which P1,000,000 is family home) 3,000,000 Properties in the Philippines 1,000,000 Funeral expenses in Australia 250,000 Unpaid obligations in Australia 700,000 Medical expenses in the Philippines 200,000 The net taxable estate in the Philiipines is: a. P1,000,000 b. P800,000 27. Data on estate:

Gross estate Claims against the estate

c. P775,000 d. P0

Philippines P 6,000,000 1,000,000

Foreign P4,000,000 1,000,000

How much was the Philippine estate tax due if the decedent was a non-resident, not citizen of the Philippines, and there was a foreign estate tax payment of P500,000? a. P0 b. returned of P57,000 c. P265,800 d. P443,000 28. A resident citizen died leaving (all before standard deduction): Net estate in the Philippines – P1,000,000; net estate in Foreign Country A – P250,000; net estate in Foreign Country B – P750,000. His estate paid estate taxes to Foreign Country A of P7,500 and to Foreign Country B of P18,125. Tax credit against the Philippine estate tax? a. P25,000 c. P27,500 b. P25,625 d. P26,405 29. A citizen of the Philippines residing in Japan, with a legitimate son and a legitimate daughter, made the following donations: April 2, 2016: Donation on account of marriage to a legitimate son 180,000 Donation on account of marriage to a legitimate daughter 150,000 June 12, 2016: Donation to legitimate son 100,000 September 3, 2016: Donation to legitimate daughter 120,000 March 6, 2017: Donation on account of marriage, to the legitimate son 140,000 April 11, 2017: Donation to a legitimate daughter of property with a fair market value of P150,000, with an assumption by the daughter of a P50,000 indebtedness of the property. Donor’s tax on the donation of April 11, 2017? a. P3,600 c. P3,100 b. P2,800 d. some other amount 30. Mr. Leonardo de Velez, a citizen and resident of the Philippines, made donations on January 10, 2017, as follows: Donations to Arman, a legitimate son, on account of marriage, To be celebrated on February 14, 2017, property in the US (on which a US donor’s tax of P1,200 was paid), with a Fair market value of 110,000 Donation to Arman, cash in the Philippines of 100,000 Donor’s tax credit for donor’s tax paid to the US: a. P1,200 c. P 600 b. P1,000 d. P850

PAGE

31. A donation was made by Mr. A, a citizen and resident of the Philippines, to B Co., of property in a foreign country with a fair 65 market value of P300,000. Foreign donor’s tax of P70,000 was paid. There was a donation earlier in the year of P150,000 cash to Mr. C, a legitimate child. How much was the donor’s tax on the donation to B Co. after foreign donor’s tax credit? a. P20,000 c. P35,333.33 b. P29,333.33 d. P32,677.67 32. Mr. P is a citizen and resident of the Philippines. On July 8,2017, he made donations to Mr. Q, a friend of properties in Country Y and Country Z. donor’s taxes were paid t country Y and Country Z P95,000 and P50,000, respectively. The property in Country Y had a fair market value of P300,000, while the property in country Z had a fair market value of P200,000. Donor’s tax still due after credit for foreign donor’s taxes paid? a. P0 c. P145,000 b. P15,000 d. P10,000 Numbers 33-34 are based on the following: Donations were made as follows: Of cash in the Philippines: To a legitimate daughter, on account of marriage P500,000 To an illegitimate son, on account of marriage 600,000 To a legally adopted daughter, on account of marriage 9,500 To a friend, on the occasion of her birthday 2,000 To the Paco Catholic Church, Philippines 50,000 Of cash in the united States: To a recognized natural child 100,000 To the Quiapo Catholic Church, in the Phil. 60,000 Of land in Malaysia to legitimate son, on account of marriage, But the son will assume a mortgage on the land of P200,000 500,000 33. Deductions from the gross gifts, if the donor was a citizen of resident of the Philippines? a. P559,500 c. P449,500 b. P359,500 d. some other amount Foreign country A : 250,000/2,000,000*55,000= 6,875 vs. 7,5000 Foreign country B: 750,000/2,000,000*55,000= 20,625 vs. 18,125 Second limitation: 100,000/200,00*55,000= 27,500 vs. 25,625 Foreign country A: 6,875 Foreign country B: 18,125 Tax credit 25,000 34. Deductions from the gross gifts, if the donor was not a citizen or resident of the Philippines? a. P0 c. P250,000 b. P50,000 d. some other amount 35. Donati0ons were made as follows: On account of marriage: Of property in the Philippines, to a legitimate son P500,000 Of property in Malaysia, to a recognized natural daughter 600,000 Of a property in Indonesia, to an illegitimate child 300,000 Of property in the Philippines, to an adopted child 200,000 Of property in the Philippines, to a brother, with an assumption By the brother of a P15,000 mortgage on the property 50,000 Of cash to the Philippine National government 150,000 Of cash to the Philippine National Red Cross 20,000 Deductions from the gross gifts, if the donor is a non-resident, not citizen of the Philippines? a. P170,000 c. P205,000 b. P185,000 d. P195,000 Items 36 t0 38 are based on the following information: A resident citizen died leaving (all before standard deduction): Net Philippine estate-1M; net Foreign Country A-250K; Net Foreign Country B-750K. his estate paid estate taxes to Foreign Country A of 7,500 and Foreign Country B of 18,125. Allowable estate tax credit against the Philippine estate tax is 36. The allowable estate tax credit against the Philippine estate tax is a. 25,000 c. 205,000 b. 25,625 d. 195,000 37. Allowed tax credit on Foreign Country A under Limitation A a. 6,875 c. 6,285 b. 7,500 d. 20,625 38. Allowed tax credit on Foreign Country A under Limitation B a. 20,625 c. 18,125 b. 6,875 d. 25,000 39. The decedent is a married man with a surviving spouse with the following date: Conjugal real properties P5,000,000 Conjugal family home 1,500,000 Exclusive properties 2,500,000 Conjugal ordinary deductions Funeral expenses P200,000 Other deductions 1,000,000 1,200,000

Medical expenses

500,000

PAGE 66

Additional information: a. 20% of the fenural expenses were borne by the estate. b. Other deductions includes P200,000 judicial expenses incurred to settle the conflicting claims of the heirs The taxable net estate is: a. P3,400,000 b. P3,080,000

c. P3,200,000 d. P2,750,000

40. An unmarried decedent died leaving properties he inherited 4 ½ years ago which had fair market value of P800,000 at the time of his death (P650,000 at bthe time of inheritance, and unpaid mortgage of P50,000 paid by the present decedent). Other properties in his gross estate had fair market value of P1,000,000. The total expenses, losses, indebtedness, taxes and transfer for public purpose amounted to P300,000. How much was the vanishing deduction? a. P500,000 c. P200,000 b. P225,000 d. P100,000 41. It refers to a mode of transferring & acquiring properties left by the decedent. a. Estate transfer c. Donation b. Succession d. Execution of a will 42. The property, rights & obligations of a person which are not extinguished by his death& those which have accrued thereto since the opening of succession: a. Inheritance c. Estate b. Capital d. Devisee 43. The estate tax accrues from the moment of: a. The filing of notice of death b. Expiration of a month after death

c. The death of the decedent d. The filing of estate tax return

44. Which shall not form part of the gross estate of a decedent: a. Intangible personal property of non-resident alien decedent without reciprocity law b. Revocable transfer c. Transfer passing under special power of appointment d. Life insurance where the executor is the beneficiary & it is irrevocable. 45. All of the following are considered intangible in the Philippines, except: a. Franchise which must be exercised in the Philippines b. Shares, obligations or bonds issued by any foreign corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws. c. Shares, obligations or bonds issued by any corporation 75% of the business of which is located in the Philippines. d. Shares, obligations of bond issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines. e. Shares or rights in any partnership, business or industry established in the Philippines. 46. A person who inherits personal property thru a will: a. Devisee c. Heir b. Legatee d. Successor 47. A person who inherits real property thru a will: a. Devisee b. Legatee

c. Heir d. Successor

48. Succession wherein the decedent did not leave any will: a. Voluntary succession c. Mixed succession b. Legal succession d. Testamentary succession 49. Which statement is false about succession: a. The successor inherits all the transmissible property of a decedent including his liabilities. b. The successor can be made liable for the obligations of the decedent beyond the value of the asset he received. c. In sucession, fruits and credits maturing after theb death of the decedent beyond the value of the asset he received. d. In succession, the successor can refuse the inheritance. 50. Donations of property and cash were all done, on one by Vincent, father, as follows: To Lizzy, a legitimate daughter on account of her marriage, land with a fair market value of P500,000 but subject to a mortgage of P100,000 which was assumed by Lizzy. To Alex, a legitimate son, on account of his marriage, cash of P200,000. The net gifts made were: a. P680,000 c. P590,000 b. P700,000 d. P580,000 Questions 51 to 54 are based on the following; Mr. and Mrs. Smith made the following donations during the calendar year 2014 (common property unless otherwise stated):

Date January 2

February 3

October 4

Donations To Maria, legitimate daughter, on account of her forthcoming marriage, 10,000 shares which are not traded in the stock exchange. The book value at the time of donation was P50 per share.

PAGE 67

To Juliana, family friend of couple, on account of her birthday, P20,000 To Petra, legitimate daughter, on account of her marriage on February 1,2013, a piece of antique jewelry from the capita property of Mr. Smith. The pawn value of the jewelry was P50,000. To Lourdes, Mrs. Smith’s sister; on account of her forthcoming marriage, cash P100,000. To ACE University, a non-profit educational institution 250,000 To Tiger Shipping Company, a piece of ;land valued at P700,000 To Courtney, legitimate son, on account of his forthcoming marriage, cash of P200,000

51. How much is the tax due and payable of Mr. Smith on gifts made on January 2? a. P19,600 b. P7,000 c. P6,600 d. none of these 52. How much is the tax due and payable of Mr. Smith on gifts made on October 4? a. P58,400 b. P51,800 c. P36,800 d. none of these 53. How much is the tax due and payable of Mr. Smith on gifts made on October 4? a. P126,000 c. P111,000 b. P111,800 d. none of the choices 54. This is subject to a 30% gift tax rate, a gift to a. The son of the granddaughter of the grandson of the donor’s granddaughter b. The grandson of the sister of the donor’s farther c. A legitimate son of the donor on account of marriage d. The daughter of the brother of the donor’s mother 55. A donated a parcel of land to b, his 15 year old son on account of B’s graduation. A did not pay the gift tax on the property donated. Then, b took possession of the property and received the rental derived from it. In 2017, an assessment on the income defined from the property was issued against B, which is correct? a. The assessment against b is correct b. The assessment against B should be deferred c. The income should be included in A’s income tax return d. A validly effected a transfer of the property to b by virtue of delivery 56. One of the characteristics of our internal revenue laws is that they are: a. Political in nature b. Penal in nature c. Generally prospective in operation although the tax statute may nevertheless operate retrospectively, provided it is clearly the legislative intent. d. Criminal in nature. 57. Which of the following statements is not correct? a. An inherent limitation of taxation may be disregarded by the application of a Constitutional limitations. b. The property of an educational institution operated by a religious order is exempted from property tax, but its income is subject to income tax. c. The prohibition of delegation by the State of the power of taxation will still allow the Bureau of Internal Revenue to modify the rules on time for filling returns and payment of taxes. d. The internal power of taxation is shared by the legislative and executive departments of government. 58. A taxpayer who had gross receipts derived from business in the preceding year did not declare it when he paid the poll tax. He paid only the basic tax and did not pay the additional poll tax based on gross receipts. Will he be imprisoned? a. No. No person shall be imprisoned for non-payment of poll tax. b. Yes. This is a case of tax evasion. Tax evasion is now a criminal offense. c. No. Paying the basic poll tax is enough. The additional poll tax is discretionary. d. Yes. Non-payment of poll tax is punishable by imprisonment. 59. Which of the following statements is correct? a. Tax amnesty is an immunity from all criminal, civil and administrative liabilities arising from nonpayment of taxes. b. Tax exemption is an immunity from civil liability only. It is an immunity or privilege, a freedom from a charge or burden to which others are subjected to. c. Tax amnesty applies only to past tax periods, hence of retroactive application, while tax exemption has prospective application. d. All of the above. 60. The following, except one, are exceptions to the rule that tax exemptions must be strictly construed. a. Where the statute granting the exemption provides for the liberal interpretation thereof. b. The taxpayer does not fall within the purview of exception by clear legislative intent. c. Case of special taxes relating to special cases and affecting special classes of persons. d. Exemptions refer to public property.

PAGE

TAXATION: 68 Exam 2 1. Statement 1. The basis of or rationale for taxation explains the reason why a State may impose taxes. Statement 2. The theory of taxation explains why there is a need to impose taxes. a. Both statements are true b. Both statements are false. c. Statement 1 is true while statement 2 is false d. Statement 2 is true while statement 1 is false. 2. Nature of the power of taxation: a. An inherent power only b. A legislative power only c. Both an inherent power and a legislative power. d. Neither an inherent power nor a legislative power. 3. A person may be imprisoned for: a. Failure to pay a debt b. Non-payment of capitalization tax c. Failure to pay the community tax d. Non-payment of value-added tax 4. The NIRC of 1997 imposes different kinds of taxes on dispositions of property. These are VAT, OPT, excise taxes, estate tax, donor’s tax, etc. which among the following transactions would be subject to a transfer tax? a. Sale of articles that are exempt from VAT. b. Sale of cigars and cigarettes by a manufacturer. c. Sale of automobile for less than adequate and full consideration. d. Sale of shares of stock that are listed and traded at the local stock exchange. 5. Donor’s tax is imposed on the privilege to: a. Receive a property inter vivos. b. Transfer property inter vivos. c. Receive property mortis causa. d. Transfer property mortis causa. 6. Which among the following distinguishes an estate tax from other kinds of taxes that are presently imposed under the provisions of the NIRC of 1997? a. It is a tax that is imposed upon gratuitous transfers. b. It is a tax that is imposed only upon the death of a person. c. It is a tax imposed upon the net value of the properties are transferred. 7. Statement 1. In determining the situs of taxation, the subject matter of the tax is not to be considered at all. Statement 2. In a gratuitous transfer of property, situs is the taxpayer’s residence, citizenship or location of the property a. Both statements are true b. Both statements are false. c. Statement 1 is true while statement 2 is false d. Statement 2 is true while statement 1 is false 8. Which of the following statements is not correct? a. In the exercise of the power of taxation, the State can tax anything at any time. b. Taxes may be imposed to raise revenues or to provide disincentives to certain within the State. c. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers. d. The State can have the power of taxation even if the Constitution does not expressly give it the power to tax. 9. In donation, donor’s tax is imposed as the ownership of the property passes from the: a. Donee to the donor b. Donor to the donee c. Decedent to the heir d. Heir to the successor. 10. How many degrees or generation apart are third cousins? a. Two b. Four c. Six d. Eight 11. Dina Cabangon, a resident citizen, died on November 1, 2016 and her estate incurred losses due to: 1st loss: From fire on February 5, 2017, of improvement of her property not compensated for by insurance. 2nd loss: From tsunami triggered by tectonic-origin earthquake on may 10, 2017, of household furnitures and fixtures also not compensated by insurance. a. Both losses are deductible from gross estate. b. Both losses are not deductible from gross estate. c. 1st loss is deductible from gross estate while the 2nd is not d. 1st loss is not deductible from the gross estate while the 2nd loss is 12. Palito, a citizen not the Philippines and resident of Baguio City, died intestate on July 4, 2017.among his gross estate is a property inherited from his deceased father who died June 10, 2014. What percentage of deduction will be used in computing the amount of vanishing deduction? a. 21% b. 40% c. 60% d. 80% 13. In one view, the power to tax involves the power to destroy while in another view, the power to tax does not involve the power to destroy. Which among the following statements does not reconcile the two seeming inconsistent views? a. The power to tax could not be the subject of compensation and set-off b. The first view refers to a valid tax while the second view refers to an invalid tax. c. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayer’s property. d. The imposition not a valid tax be judicially retrained merely because it would prejudice taxpayer’ property. 14. Statement 1. Jurisdiction is the reason why the government could impose estate tax on the property of resident decedents located outside the Philippines. Statement 2. Symbiotic relationship between the taxpayers and the State is the reason why the former must provide support to the latter so that it could continue to give protection.

PAGE

15.

16.

17.

18.

19.

20.

21.

a. Both statements are true 69 b. Both statements are false. c. Statement 1 is true but not statement 2 d. Statement 2 is true but not statement 1 A tax does not meet the public purpose inherent limitation if it: a. Is for the benefit principally of limited subjects or objects. b. Affects the areas as a community rather than as were individuals. c. Is for welfare of the nation or greater portion of the population. d. Is designated to support the services of government for some of its recognized objects. In transfer in contemplation of death, revocable transfer and transfer under the special power of appointment, there are rules to observe to determine what amount to include in the gross estate. Which of the following is not a rule to observe? a. If the transfer was in the nature of a bona fide sale for an adequate and full consideration in money or money’s worth, no value shall be included in the gross estate. b. If there was no consideration received on the transfer as in donation mortis causa, the value to include in the gross estate shall be the FMV of the property at the time of the transfer. c. If there was no consideration received on the transfer as in donation mortis causa, the value to include in the gross estate shall be the FMV of the property at the time of the decedent’s death. d. If the amount received on the transfer in the gross estate shall be the excess of the FMV of the property at the time of the decedent’s death over consideration received. For proceeds of life insurance not to be included as part of the gross estate: a. Must have been taken out by the decedent upon his own life. b. Must have designated the estate of the decedent as revocable or irrevocable beneficiary. c. Must have designated a third person other than the estate, the decedent’s executor or administrator as revocable beneficiary. d. Must have designated a third person other than the estate, the decedent’s executor or administration as irrevocable beneficiary. SK Litton, Filipino, has one year more to reach the optional retirement age of 60 years old as an employee of a private firm. Unfortunately, he met a fatal vehicular accident that caused his instantaneous death. He was survived by his wife and received P500,000 from SK’s employer as benefit under R.A 4917.The amount that must be included as part of SK Litton’s gross state is: a. None b. P200,000 c. P250,000 d. P500,000 Continuing No. 18 and assuming this time that SK Litton was single when he died, the amount that must be claimed as a special deduction from the gross estate for the benefit received under R.A. 4917 is: a. None b. P200,000 c. P250,000 d. P500,000 Going back to No. 18 and assuming this time that SK Litton was single when he died, the amount that must be claimed as a special deduction from the gross estate the benefit received under R.A 4917 is: a. None b. P200,000 c. P250,000 d. P500,000 Referring again to No.18, the taxable net estate arising from the retirement benefit received under R.A. 4917 irregardless of whether or not SK Littton died as married or single is: a. None b. P200,000 c. P250,000 d. P500,000 Number 22 to 26 are based on the following information: The decedent was a head of the family Filipino citizen. The administrator of the estate arrived at a net taxable estate as follows: Real and personal properties Family home Ordinary deductions : Funeral expenses Other deductions Special deductions: Family home Medical expenses Taxable net estate

P5,000,000 1,500,000 (400,000) (950,000) (1,500,000) (600,000) P3,050,000

22. The gross estate is: a. P5,000,000 b. P5,750,000 c. P6,000,000 d. P6,500,000 23. The deduction for funeral expense is: a. P0 b. P200,000 c. P325,000 d. P400,000 24. The deduction for family home is: a. P0 b. P750,000 c. P1,000,000 d. P1,500,000 25. The total deduction to be claimed is: a. P2,650,000 b. P2,950,000 c. P3,650,000 d. P3,875,000 26. The taxable net estate shall be: a. P2,850,000 b. P2,125,000 c. P2,350,000 d. P2,800,000 27. An estate meet not be filed by the executor, administrator or any of the legal heirs on: a. Transfer subject to tax b. Transfer consisting of registered or registrable property. c. Exempt transfers where the gross value of the estate exceeds P200,000. d. Exempt transfers where the gross value of the estate is P200,000 and below. 28. Statement 1. When there is reciprocity, the transfer of intangible personal property located in the Philippines of a resident alien is subject to tax. Statement 2. Where a personal property classified as capital asset is transferred for less than adequate and full consideration in money’s worth, he fair market value of the property less the consideration received is deemed a gift subject to donor’s tax. a. Both statement are right.

PAGE

29.

30. 31.

32.

33.

34.

35.

36.

37.

38.

39. 40.

b. Both statements are wrong 70 c. Statement 1 is right but statement 2 is wrong. d. Statement 2 is right but statement 1 is wrong. Mayaman wanted the painting on the wall of his living room replace with a new one. He then sell to his bosom friend, Salamat, at a very low price of P500,000. Its fair market value is P750,000. He bought the painting several years ago at an exhibit held in Shangri-La for P300,000. The gain on sale of the painting is: a. P200,000 b.P300,000 c. P450,000 d. P500,000 Continuing No. 29, how much, if any, is deemed gift? a. None b. P250,000 c. P300,000 d. P450,000 In the preceding number, the rate/s of donor’s tax, if applicable is: a. 30% of the net gift b. Not subject to donor’s tax. c. 5% on the first P100,000 of the taxable net giftand10% on any amount of taxable net gift in excess of P100,000. d. The progressive rates under Sec. 99 (A) of the NIRC of 1997 based on aggregate net gifts made during a calendar year. Which of the following statements is wrong? a. Gift-splitting is a form of tax avoidance. b. The uncle who is a brother of the donor’s father-in0law is a stranger to the done for purposes of the donor’s tax. c. A gift made to a relative in January 2017 is to be added to the gift made to the same relative in December 2017 in determining the donor’s tax. d. Renunciation by an heir including the surviving spouse of his share in the hereditary estate left by the decedent is exempt from donor’s tax even if done in favor of identified heir to the exclusion or disadvantage of other co-heirs in the hereditary estate. Properties owned before marriage and brought into the marriage are generally classified as: I. Exclusion properties under conjugal partnership of gains. II. Common properties under absolute community of properties. a. Only I is correct c. both I and II are correct b. Only II is correct d. both I and II are incorrect. Statement 1. The Philippine Constitution does not prohibit double taxation. Statement 2. If direct duplicate taxation occurs, the taxpayer may seek relief under the uniformity rule or equal protection guarantee. a. Only statement 1 is true. b. Only statement 2 is false. c. Both statements 1 and 2 are true. d. Both statements 2 and 2 are false. Community properties shall include all properties owned by the spouses at the time of the celebration of the marriage or acquired thereafter. Which of the following is an exclusive property? a. Properties inherited by the spouses as donation before the marriage. b. Properties acquired by the spouses as donation before the marriage. c. Properties acquired using the income of either spouse earned before marriage. d. Properties acquired before marriage by either spouse who had legitimate descendants by a former marriage. Statement 1. Donations by an adopter to a legally adopted child or vice-versa shall be considered as donations made to nonstranger. Statement 2. Donations by and between a legally adopted child and the children or other blood relatives of the adopter and vice-versa shall be considered as donations made to stranger. a. Both statements are correct b. Both statement are incorrect c. Statement 1 is correct but not statement 2. d. Statement 2 is correct but not statement 1. Mr. and Mrs. Bigay wanted to donate a parcel of land to their son Pogi who is getting married in December 2016. The parcel of land has a zonal value of P420,000. What is the most efficient mode of donating the property? a. Spread the donation over a period of years by the spouses donating P100,000 each year from 2016 to 2019 and P20,000 in 2020 b. The spouses should first donate a P110,000 portion of the value of the property in 2016 then each should donated P100,000 in 2017. c. The spouses should first donate in 2016 a portion of the property valued at P20,000 then spread the P400,000 equally for 2017, 2018,2019 and 2020. d. The spouses should each donated o P100,000 potion of the value of the property in 2016 and another P100,000 each in the 2017. Then, 2018, they should donated the remaining P20,000. Malakas and Maganda got married before the effectivity of the New Family Code, devoid of any prenuptial agreement. A year later, Maganda received a donation consisting of a 400 square-meter lot with a modest bungalow house erected thereon. The couple leased the house to a tenant and several all the rentals thereon. The said rental receipts were then used to construct their own residence on the vacant one-half portion (200 sq.m) of the same lot. Maganda died, and the following information was available at the time of her death: FMV of 400 sq, m lot P800,000 FMV of rented bungalow house 200,000 FMV of family house 500,000 The gross estate of Maganda amounts to: a. P800,000 b. P1,000,000 c. P1,250,000 d. P1,500,000 Continuing no., 38, the deduction for family home is: a. P250,000 b. P650,000 c. P1,000,000 d. P1,050,000 Assume the same facts in No. 38, except that the couple got married after the effectivity of the New Family cod and assume further that it was Malakas who died (not Maganda). The gross estaea of Malakas woukd be: a. Zero b.P250,000 c. P500,000 d. P700,000

41. Going back to No., 38, the gross estate of Malakas if he was the one who died a. Zero b. P250,000 c. P500,000

( not Maganda) would be: d. P700,000

PAGE 71

Nos. 42 to 50 are based on the following information: Kalansay, Filipino citizen, died on February 14, 2016, leaving the following: Exclusive properties P2,000,000 Conjugal real properties (including the Family home brought by the spouses with FMV of P1,200,000 at the time he died) 2,500,000 Funeral expenses (40%) 122,000 Judicial expenses (20% incurred 8/31/16) 60,000 Unpaid mortgage on inherited property 30,000 Notes payable (1/2 notarized) 80,000 Claim against insolvent person (50% collectible) 400,000 Proceeds of life insurance (beneficiary-estate, irrevocable 100,000 Medical expenses (1/2 paid) 300,000

42. 43. 44. 45. 46. 47. 48. 49.

The exclusive properties had FMV of P500,000 when inherited 2 ½ years ago witj P80,000 unpaid mortgage. Based on the foregoing data: The total conjugal property is : a. P2,500,000 b. P2,600,000 c. P2,900,000 d. P3,000,000 The total exclusive property is: a. P420,000 b. P500,000 c. P1,970,000 d. P2,000,000 The total ordinary conjugal deduction is: a. P420,000 b. P422,000 c. P440,000 d. P462,000 The total ordinary exclusive deduction is: a. P30,000 b. P88,000 c. P246,000 d. P276,240 The amount of vanishing deduction is : a. P229,824 b. P246,240 c. P257,184 d. P273,600 The deduction for family home is: a. None b. P600,000 c. P1,000,000 d. P1,200,000 The total amount of special deduction is: a. P300,000 b. P1,300,000 c. P1,900,000 d. P2,900,000 The share of the surviving spouse in the net conjugal property is: a. P1,269,000 b. P1,280,000 c. P1,289,000 d. P1,295,000

50. The taxable net estate is: a. P270,000 b. P929,000 c. P1,118,760 d. P2,118,760 51. A VAT-registered person made the following sales for the month of June 2016: Cash sales, exclusive of VAT P330,000 Open account sales, invoice price 550,000 Installment sales, invoice price 990,000 Consignments, VAT exclusive: June 1 (sold already) 400,000 April 1 800,000 June 15 300,000 The total output tax is: a. P249,000 b. P345,000 c. P364,800 d. P381,000 52. The gross sale and/or receipts of a taxpayer for the year are from the following sources: Grocery store P1,500,000 Sale of gold to the BSP 419,500 Passenger jeepneys for hire 500,000 Which of the following statements is correct? a. The taxpayer is required for register for VAT because the basis for registration is the total gross sales and/or receipts of P2,419,500. b. The taxpayer may elect to register for VAT because his annual gross sales and/or receipts as basis for optional registration amount to only P1,919,500. c. The taxpayer may elect to register for VAT because his annual gross sales and/or receipts as basis for optional registration amount to only P1,500,000. d. The taxpayer is not required to register for VAT because his annual gross sales and/or receipts has no bearing in the optional or compulsory registration as VAT taxpayer. 53. As regards a revenue measure, which of the following statements is wrong? a. The President may recommend a revenue bill to Congress. b. The House of Representatives may propose amendments if the bill originates from the senate. c. The Senate may propose amendments if the bill originates from the House of Representatives. d. A House of Representatives version and a Senate version approved separately and then consolidated in the Bicameral Committee with both houses approving the consolidated version. 54. NatyGok, a spinster Filipino citizen and an avowed devotee of Mama Mary, is living cancer patient (stage four) and given only a month to live by her doctor. Her only asset is composed of cash amounting to P5,000,000. Prior to her death, she asks you whether she would transfer her property by way of donation inter vivos (donor’s tax) or donation mortis causa (estate tax) to a well-to-do cousin who pledged paying for the funeral expense when her last moment comes. You presented to her that the aggregate donor’s tax due is P204,000 plus 10% of excess over P3,000,000 and the aggregate estate tax due is P135,000 plus 11% of excess over P2,000,000. Naturally, NatyGok preferred paying the tax by means of donation inter vivos (rather than thru donation mortis causa) because of the lesser transfer tax to be paid. Is she correct?

PAGE

a. Yes. Because NatyGok is still alive. 72 b. No. because the estate tax is cheaper by P49,000. c. No. because whether donor’s tax or estate tax is to be paid, the transfer tax amount would be the same. d. Yes, because there will be tax savings of P61,000. 55. Supposing that in the preceding number, the wealthy would be successor of NatyGok’s property is a second cousin, yet she still prefers paying donor’s tax over that estate tax. Is she correct? a. Yes, because she is still alive. b. No, because the amount of transfer tax to be paid would be the same under either donor’s taxation or estate taxation. c. No, because the donor’s tax will be expensive by over a million pesos. d. Yes, because her wealthy successor is still a non-stranger cousin. Nos. 56 to 58 are based on the following information: A widowed non-resident alien donor made the following donations, all on the same day. Done To a daughter on her wedding day. To Development Academy of the Philippines. To a son on his birthday.

Property FMV House and lot in the P2,000,000 Philippines. Time deposit in BDO 500,000 Unibank. Savings account in PNB 300,000 Unibank There is unpaid mortgage of P500,000 on the house and lot which the daughter assumed. Also, the donor wants 25%of the gift to the son be donated to a Roman Catholic Church of his choice in the Philippines. 56. The total gross gifts is: a. P2,225,000 b.P2,300,000 c. P2,500,000 d. P2,800,000 57. The total exemptions or deductions is: a. P75,000 b. P225,000 c. P1,075,000 d. P1,085,000 58. The taxable net gift is: a. P1,425,000 b. P1,625,000 c. P2,075,000 d. P2,150,000 59. The commissioner of Internal Revenue may grant an extension of time for the payment of the estate tax or any part thereof in case the estate is settled extrajudicially for a period not exceeding: a. Two years from grant of the extension b. Five years from grant of the extension c. Two years from the settlement of the estate d. Five years from the settlement of the estate. 60. Which of the following is not the characteristics or nature of value-added tax (VAT)? a. It is an indirect tax b. It is a percentage tax c. It is a tax on property d. It is tax on consumption 61. The following are the various methods and systems. Which one is a contradiction? a. Tax credit method b. Cost deduction method c. Neither tax credit method nor cost deduction method d. Mixture of tax credit method and cost deduction method. 62. A business operator has his main office and two branch offices in Makati. How many certificates of registration shall be issued by Bureau of Internal Revenue (BIR)? a. Two, for the two branches b. Two, one for Manila and one for Makati c. Three, for two branches and the main d. One, only for the main office in Manila 63. Which one of the following is subject to VAT? a. Keepers of garages b. Customs brokers and dealers in securities. c. Crop insurance of non-life insurance companies. d. Sale of marine food products in their original state by a dealer. 64. In the course of trade, business or exercise of profession taxpayers are required to register with the BIR: a. Monthly b. Quarterly c. Every year January 31. d. Once only before commencing operation. 65. A VAT registered entity had the following data for the month of October 2016: Sales (VAT excluded) P980,000 Merchandise paid to creditors (VAT excluded) 436,000 Purchase of goods (VAT included): From VAT registered supplier 756,000 From non-VAT person 75,000 Purchases of services (VAT included): From Vat registered person 61,600 From non-VAT registered person 25,000 Salaries and wages 50,000 Operating expenses 150,000 Purchases from person to percentage tax 25,000 The value added tax payable for October 2016 is: a. P64,200 b. P69,816 c. P76,800 d. P82,416 Nos. 66 t0 68 are based on the following information: From the books of accounts were transactions for each of the months of October, November and December (last quarter) of 2016 of VAT-registered taxpayer.

Credits to sales account Debits to purchases account on Local purchases of goods from: VAT-registered person Non-VAT person

October P492,800

November P616,000

December P770,00

123,200 44,800

739,200 67,200

369,600 33,600

PAGE 73

There was debit balance in the input taxes account in the preceding quarter of P15,600. 66. The value added tax payable at the end of October is: a. P19,200 b. P24,000 c. P23,376 d. P28,752 67. The value added tax at the end of November is: a. Payable of P0 c. Refundable of P13,200 b. Payable of P20,400 d. Refundable of P14,784 68. The value added tax payable at the end of December is: a. P18,480 b. P33,264 c. P34,320 d. P49,104 69. After recognizing the value added tax payable for the last calendar quarter of 2016, the books of accounts of a VAT registered retail store showed a debit balance in the input taxes account of P2,500. Transactions in the first calendar of 2017 per books were: Sales P2,100,000 Sales discounts 42,000 Sales returns and allowances 105,000 Purchases (at total invoice costs) of: Goods for sale from VAT registered suppliers 840,000 Goods for sale from non-VAT registered persons 336,000 Service from VAT-registered service providers 280,000 Equipment (6 years life) bought at the start of year: Vat-registered person 1,176,000 Operating expenses 505,000 Value-added tax paid first two mo0nths of the quarter 16,920 Importation sale: Invoice cost from country of origin(1$=P48.00) Freight and insurance $10,000 Customs duty P15,000 Excise tax 26,000 Other expenses: 2,500 Prior to removal of the goods from customs custody After removal of the goods from customs custody 3,500 Facilitation expense 2,000 5,000

The value-added tax on the importation is: a. P62,040 b. P63,180 c.P63,240 d.P63,480 70. Continuing No., 69 the value-added tax payable at the end of the quarter is: a. P25,400 b. P31,790 c. P32,030 d. P32,820 EXAM 3 1.

2.

3.

4.

5.

Which statement is correct? The value added tax on an importation: a. Should be paid by the tax-exempt importer, if the subsequent sells the goods to a non-tax exempt purchaser. b. Should be paid by the non-tax purchaser to whom the tax-exempt importer sells it. c. Is a liability either of tax-exempt importer of the non-tax-exempt purchaser. d. Shall not pay the value-added tax because the transaction was exempt at the point of importation In the value added tax on sales of service, the output tax is computed: a. Only and strictly on labor performed under the contract for services. b. On the contracts completed during the contract for services. c. On collections of the month on all billings made. d. On billings of the month. A domestic carrier by land is engaged in the transport of passengers. It is no VAT-registered but its annual gross receipts exceed P1,919,500. To what business taxes is it liable? a. 3% common carrier’s tax b. 3% tax-exempt persons c. 12% value added tax d. Not subject to business tax First statement: In the books of accounts of VAT-registered taxpayer, purchaser are recorded net of input taxes. Second Statement: In the books of accounts of VAT-registered taxpayer, sales are recorded net of output taxes. a. True, false b. False, true c. False, false d. True, true The VAT accrues on the sale of services upon the occurrence of the following event: a. Payment by the customer of the complete price of the service b. Issuance of a statement of account by the supplier to the customer

PAGE

c. Completion of the service by the supplier to the customer 74 d. Payment by the customer for any part of the service. 6. Which of the following transactions is subject to zero-rated value-added tax? a. Services rendered to persons engaged in international shipping or air transport operations. b. Services rendered by professionals such as CPAs, Physicians and Lawyers c. Service rendered by banks, non-bank financial intermediaries d. Generation, transmission and distribution of electricity 7. VAT is a regression tax. RA 9337 added more transactions to be subject to the VAT. The law is valid because a. Due process and equality are not violated b. VAT is a consumption tax c. A regressive tax is not prohibited by the Constitution d. The progressive system of taxation is not prohibited. 8. Mr. D is a civil engineer who pays the occupation tax under the Local Government Code. He is also a building contractor. The tax that he should pay is: a. Excise tax b. Percentage tax c. None of the choices d. Value added tax 9. First statement: Banks are subject to the value-added tax. Second Statement: Banks are subject to the gross receipts tax, which is a percentage tax. a. The first statement is wrong while the second statement is correct. b. Both statements are corrected c. Both statements are wrong d. The first statement is correct while the second statement is wrong. 10. The following information are requirements that should be contained in a VAT receipt issued for the purchase of goods or services except a. The date of the transaction, quantity, unit cost and description of the goods or properties or the nature of the service b. The amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT c. The statement that the seller is a VAT registered person with the TIN number of the seller d. The amount of the VAT paid, which shall be shown as a separate item in the receipt, or if the transaction is zero rated or exempt, the applicable VAT thereon, regardless of the amount of the transaction Items 11 and 13 are based on the following information: A perfume, classified as non-essential article (20% excise tax rate), was imported for sale, the particulars of which are as follows: Value of importation $10,000 Freight and insurance P10,000 Customs duties 20,000 Other expenses prior to the release of goods from customs custody 5,000 Facilitation expense 5,000 Rate of exchange of 1 US Dollar is P56.

11. The Value added tax due on the importation is : a. P67,000 b. P71,400 c. P85,680 d. Exempt 12. An importer wishes to withdraw his importation from the Bureau of Customs. The imported goods were subjected to a 10% customs duty in the amount of P12,500 and to other charges in the amount of P9,500. The value-added tax due is: a. P12,500 b. P13,500 c. P17,640 d. P14,700 13. On April 2014, Ms. D registered with the BIR her business of renting her only property not realizing that she was registered as a VAT taxpayer. The total rental from March to December 2014 was P236,880. May Ms. D request for the cancellation of her VAT registration and for the exemption from paying VAT for 2014? a. No, the BIR will not allow the cancellation of VAT registration for a period of 3 years and she is still liable for VAT. b. No, the BIR will not allow the cancellation of VAT registration but she will be exempt from VAT c. Yes, the BIR will allow the cancellation of VAT registration but she is still liable for VAT d. Yes, the BIR will allow the cancellation of her VAT registration and grant the exemption from VAT 14. Mozila Net operates a website wherein it sells goods and products manufactured in the Philippines for delivery to the relatives of its customs in the Philippines. The said payment is remitted by the credited card companies through the Philippine banking system to Mozila Net, the said sale shall a. Subject to the ordinary 12% VAT as a sale of goods b. Subject to VAT at the rate of 0% c. Subject to the ordinary 12% VAT as a sale of service d.

Not subject to VAT because it is an exempt transaction under Section 109

15. A foreign corporation whose activities are subject to VAT in the Philippines will be collected the VAT by the following manner: a.

The domestic payor shall be required to withhold the VAT at 12% of the selling price and remit the same to the BIR in favor of the foreign corporation

b.

PAGE 75

The foreign corporations shall be required to file and pay the VAT upon receipt of the payment from the Philippine source through the Philippine consular or embassy services.

c.

The domestic payor shall be required to withhold the VAT at 12% of the selling price and remit the same to the same to the BIR in the name of the domestic payor

d.

The foreign corporation shall be required to file and pay the Vat up0n receipt of payment from the Philippine source on the due date prescribed by the NIRC

16. TAN Corporation has the following sales during the month: Sale to private entities

224,000

Sale to export-oriented enterprises

100,000

Sale of exempt goods

100,000

The following input taxes were passed on by its VAT suppliers during the month: Input tax on taxable goods

5,000

Input tax on zero rated sales

3,000

Input tax on sale of exempt goods

2,000

Input tax on depreciable capital good not attributable to any specific activity

20,000

The input (output) VAT for the month: a.

48,000

b.

36,000

c.

26,880

d.

24,000

17. The input VAT for the month: a.

5,000

b.

8,000

c.

23,000

d.

15,000

18. The VAT payable for the month: a.

1,000

b.

7,200

c.

9,000

d.

16,000

19. Alexander is a Canadian company that manufactures glutathione. Its Philippine exclusive distributor is REH Industries Philippines Incorporated. Alexander receives royalty income from sources within the Philippines. As a certified public accountant, which of the following is correct with regard to the applicable tax impose upon the royalty income? a.

Subject to final withholding tax of 10%

b.

Subject to final withholding tax of 20%

c.

Subject to final withholding tax of 30%

d.

Subject to profit remittance tax of 15%

20. Date taken from a VAT registered entity, inclusive of VAT: Sales to government

112,000

Regular sales

350,000

Zero rated sales

200,000

Exempt sales

75,000

Purchases

532,000

How much is the output VAT? a.

12,000

b.

37,500

c.

49,500

d.

79,000

21. How much is the input vat? a.

57,000

b.

62,000

c.

49,840

d.

53,200

PAGE 76

22. How much is creditable withholding vat? a.

12,000

b.

7,000

c.

5,000

d.

Zero

23. How much is the vat charged to expense? a.

7,500

b.

2,500

c.

12,500

d.

Zero

24. Taxpayer is VAT-registered. Importation were for: Any value-added tax not included: Invoice cost (exchange rate is $:P50

$80,000

$4,000

4%

4%

6%

6%

½%

½%

Based on cost: Freight and insurance Other expenses up to the point of removal from customs house Transfer expenses from customs house to warehouse in Manila

Selling price of goods (imported for sale) within the same taxable period of importation, value-added tax included, was P5,600,000. Value-added tax payable on the sale: a.

P0

c. P60,000

b.

P50,000

d. P72,000

25. Importation of which of the following if belonging to persons coming to settle in the Philippines for their own use and not for sale barter or exchange is subject to VAT a.

Wearing apparel

b.

Professionals instrument and implements

c.

Domestic animals

d.

Vehicle

26. In 2016, Rommel paid the VAT on the importation of his merchandise inventory. In 2016, Rommel was able to sell the imported merchandise and correspondingly paid the appropriate VAT on the sale deducting the import VAT as his input tax. Which of the following statements is applicable to the foregoing facts? a.

The tax benefit rule applies

b.

In the determination of taxable income, Rommel may deduct the import VAT he paid.

c.

The import VAT may be claimed as a tax credit on his income tax payable

d.

The import VAR can not be deducted from Rommel’s income.

Questions 27 and 28 are based on the following: CENTURY PARK HOTEL, VAT-registered, offers different services to its guests. The following date taken from the books of the taxpayer are for the first month of the first quarter of 2016: Revenues

Collections

P800,000

P700,000

Sale of food and refreshments

1,000,000

850,000

Sale of wine, beer and liquor

700,000

600,000

Sale of food and refreshment

600,000

550,000

Sale of wine, beer and liquor

500,000

450,000

Hotel rooms (local guests) Dining hall:

Disco:

PAGE 77

27. How much is the output tax using 12% VAT rate? a.

P432,000

b. P378,000

c. P258,000

d. none of these

c. P150,000

d. none of these

28. How much is the total amusement tax? a.

P300,000

b. P180,000

29. Three of the following are exempt from the value-added tax. Which is the exception? a.

Importation of books and any newspaper, magazines, review or bulletin.

b.

Importation of agricultural and marine food products in their original state.

c.

Importation of petroleum products and their raw materials.

d.

Importation or sale of fish, prawn, livestock and poultry feeds.

30. One of the following statements is wrong. Identify. For a taxpayer who becomes liable for the first time to the value-added tax: a.

There can be an input tax on purchases he made when not yet a VAT taxpayer.

b.

He must use a VAT invoice on the sale of the goods purchased when not yet a VAT taxpayer.

c.

He must still use the non-VAT invoice in use when he was not yet a VAT taxpayer on the sale of goods on hand on the transition date.

d.

There will be an adjustment on the inventory valuation on the transition date.

Taxation Monthly Exam 31. In every case of doubt, tax statutes are construed e. Strictly against the government and the taxpayer f. Liberally in favor of the government and the taxpayer g. Strictly against the government and liberally in favor of the taxpayer h. Liberally in favor of the government and strictly against the taxpayer 32. In every case of doubt, tax exemptions are construed a. Strictly against the government and the taxpayer b. Liberally in favor of the government and the taxpayer c. Strictly against the government and liberally in favor of the taxpayer d. Liberally in favor of the government and strictly against the taxpayer 33. Which of the following statements is not correct? a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are not presumed and, when granted, are strictly construed against the taxpayer because such provisions are highly disfavored by the government c. Exemptions from taxation are highly disfavored in law and he weho claims tax exemption must be able to justify his claims or right d. The Bureau of Internal Revenue has the duty and the exclusive power of enacting, implementing and interpreting the tax laws 34. Which one of the following is not a characteristic or element of a tax? a. It is an enforced contribution b. It is legislative in character c. It is based on the ability to pay d. It is payable in money or in kind 35. Which of the following is not a scheme of shifting the incidence of taxation? a. The manufacturer transfer the tax to the consumer by adding the tax to the selling price of the goods sold b. The purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to the tax he will pay c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines d. The manufacturer transfer the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer 36. Which of the following statements is not correct?

PAGE a. Taxes may be imposed to raise revenues or to provide disincentives to certain activities 78 within the states b. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax c. For the exercise of the power of taxation, the state can tax anything at any time d. The provisions of taxation in the Philippine Constitution are grants of power enabling the state to impose taxes 37. Statement I: the power of taxation is inherent in sovereignty being essential to the existence od every government. Hence, even if not mentioned in the Constitution the state can still exercise power and is essentially a legislative function. Statement II: even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making. a. True, true c. False, true b. True, false d. False, false 38. Statement I: the President has a power to veto a revenue bill even id such bill was already proved by Congress. Statement II: the President is superior to Congress as he/she can veto any bill even if already approved by Congress. a. True, true c. False, true b. True, false d. False, false 39. 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. It is paid by a local government unit c. The payment is passed in audit by the COA d. It is part of a lawmaker’s pork barrel 40. The power to tax is the power to destroy. Is this always so? a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory b. Yes. The tax collections should enforce a tax law even if it results to the destruction of the property rights of a taxpayer c. Yes. Tax laws should always be enforced because without taxes the very existence of the State is endangered d. No. The Supreme Court may nullify a tax law, hence, property rights are not affected 41. Statement I: A died giving B power to appoint a person who will inherent A’s house and loit. B however can only choose among C, D, E and F. B decided to transfer the property to C, in B’s will when he was old already. The transfer from B to C is subject to estate tax. Statement II: During A’s lifetime, he decided to give B as gift his car subject to the condition that if B does not become CPA within three years, A shall revoke the transfer. In the second year however, A died. The car can no longer form part A’s gross estate. a. True, true c. False, true b. True, false d. False, false 42. Statement I: Dories or gifts made on account of family celebration, on or before its celebration, or within one year thereafter, by parents to each of their legitimate, recognized natural or adopted children, to the extent of the first P10,000 shall be exempt from donor’s tax. Statement II: Donations in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization provided that no amount of said gifts shall be used by the done for administration purposes shall be used by the done for administration purposes shall be exempt from donor’s tax. a. True, true c. False, true b. True, false d. False, false 43. Statement I: Husband and wife are considered as separate and distinct taxpayers for p[purposes of the donor’s tax. Statement II: If what was donated is a conjugal community property and only husband signed the deed of donation, there is only one donor for donor’s tax purposes, without prejudice to the right of the wife to question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil Code of the Philippines and the Family Code of the Philippines. a. Both statements are correct b. Both statements are incorrect

PAGE c. Only the first statement is correct 79 d. Only the second statement is correct 44. In the last will and testament, a decedent provided that the properties he leaves should not be sold or disposed of ten years following his death. He had real estate in his gross estate as follows: At the time of death- zonal value of P500,000 At the end of ten years after death: Fair market value – P2,500,000 Declared value in the estate tax return – P1,500,000 Zonal value – P3,000,000 What value shall be used for purposes of estate tax? c. P3,000,000 c. P2,500,000 d. P1,500,000 d. P500,000 45. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In this sense, double taxation, a. Violates substantive due process b. Does not violate substantive due process c. Violate the right to equal protection d. Does not violate the right to equal protection Numbers 16-18 are based on the following: A married non-resident alien, died on September 11, 2011. He left the following: Conjugal properties, Philippines P 3,000,000 Exclusive properties, Philippines 2,000,000 Conjugal properties, Foreign Country 4,000,000 Exclusive properties, Foreign Country 1,000,000 The following deductions were claimed: Actual funeral expenses 100,000 Judicial expenses 300,000 Claims against the conjugal estate 500,000 Claims against the exclusive estate 150,000 Transfer for public use 200,000 Medical expenses 600,000 Losses (part of exclusive properties in Philippines) 100,000 Included in the Philippine gross estate were the following: Domestic shares 600,000 Share in a partnership 300,000 Other tangible personal properties 2,100,000 The Philippine exclusive properties were all tangible personal properties. These included a car, which was inherited 3 ½ years before the present decedent’s death, and had a fair market value of P400,000. The foreign country where the decedent was a citizen and a resident at the time of his death did not impose transfer taxes of any character on the intangible personal properties of Filipinos not residing therein. 46. How much was the taxable exclusive property in the Philippines? a. P1,900,000 c. P3,000,000 b. P2,000,000 d. none of the choices 47. How much was the vanishing deduction? a. P200,693 c. P133,140 b. P436,295 d. none of the choices 48. How much was the total deductions from the exclusive gross estate in Philippines? a. P503,193 c P436,650 b. P436,295 d. none of the choices 49. A citizen of Malaysia, residing in Kuala Lumpur, with properties in the Malaysia and the Philippines, had the following data on properties and rights at the time of his death and their values: Real estate, Malaysia Real estate, Philippines Shares of stock of a domestic corporation Shares of stock of a Malaysian corporation Shares of stock of Indonesian corp, doing business in

P 1,000,000 2,000,000 200,000 300,000

Philippines only 100,000 Philippine peso deposit in BDO bank 500,000 Receivable under a life insurance with an insurance company Doing business in Malaysia 200,000 The gross estate that should be reported in the Philippines is: c. P4,350,000 c. P4,000,000 d. P3,700,000 d. P2,800,000 50. A citizen and resident of the Philippines died leaving:

PAGE 80

Cash on hand and in banks (of which P150,000 was Provided in the will to be given to charitable institution) 1,000,000 Real property in the Philippines: Assessed value per assessment rolls of the city 100,000 Zonal value per Bureau of Internal Revenue 500,000 Selling price of adjacent piece of land the day preceding the Date of death 600,000 Real property in Malaysia, FMV 450,000 Car in the Philippines with mortgage of P200,000 400,000 Receivables: From a friend whom there is no possibility of recovery 20,000 From a sister whose ratio of asset to liabilities is 1:3 15,000 Amounts under insurance contracts: Receivable under life insurance, with the mother as irrevocable beneficiary 200,000 Receivable under accident insurance, for accident that happened 1 yr ago 50,000 Receivable under property insurance, for damage caused to his car 12,000 Revocable transfer: To sister (fair market value at the time of transfer was P40,000 And consideration received was P10,000) 50,000 To father (fair market value at the time of transfer was P30,000 And consideration received was P30,000) 60,000 To mother (fair market value was P40,000 and consideration received was P50,000) 70,000 The gross estate is: c. P2,737,000 d. P2,807,000 51. From the following:

c. P2,627,000 d. P1,350,000

Funeral expenses Judicial expenses Medical expenses Claims against the estate Claims against insolvent person Taxes Losses Mortgage or indebtedness on property Transfer for public use (e.g. legacy to Gov’t, nat’l and local)

150,000 500,000 400,000 200,000 40,000 25,000 60,000 120,000 100,000

Vanishing deduction Family home Standard deduction Net share of surviving spouse in conjugal/community estate

28,000 700,000 1,000,000 950,000

Amounts receivable under Republic Act 4917 20,000 How much are the special deductions from the gross estate? b. P1,620,000 b. P2,620,000 c. P2,220,000 d. P2,120,000 52. Mr. Z was a non-resident, not citizen of the Philippines, single, who died with a gross estate in the Philippines of P4,000,000 and outside the Philippines of P6,000,000. He left the following obligations and charges: Medical expenses, Philippines, in the year of death Funeral expenses, foreign Claims against insolvent person, Philippines Judicial expenses testamentary proceedings, Philippines Judicial expenses testamentary proceedings, foreign Other claims against the estate, Philippines

1,000,000 800,000 250,000 300,000 350,000 900,000

PAGE Transfer to the Philippine Government, for public use of property in foreign 400,000 81 Unpaid taxes, foreign country 20,000 Mortgage payable, foreign country 180,000 Losses, Philippines 100,000 Deductions from Philippines gross estate is : c. P1,250,000 c. P1,760,000 d. P1,550,000 d. P1,1160,000 53. Mr. B died on June 30,2013, leaving among others, the following charges and obligations: Real property tax for the calendar year 2013 – P20,000; On an interesting-bearing promissory note (notarized): face value of the note – P10,000; accrued interest on the note at the time of death P600; and interest to accrue on the note from the date of the death to the date maturity – P400. The deduction from the gross estate is: a. P20,600 c. P31,000 b. P30,600 d. P21,000 54. Decedent was citizen of the Philippine who was single at the time death, with properties and charges thereon: Properties: Inherited two and one-half years ago: Property outside the Philippines 300,000 Property in the Philippines: Fair market value when inherited 650,000 Fair market value at death 700,000 Mortgage on the property when inherited 150,000 Mortgage on the property at death 100,000 Property acquired thru own labor 2,000,000 Charges: Ordinary deductions from gross estate 390,000 Vanishing deduction? c. P522,000 c. P313,000 d. P417,600 d. P208,800 55. The decedent was a resident citizen, single at the time of death. He left the following: Properties inherited 2 ½ years ago: Value in the present estate 500,000 Fair market value when inherited 430,000 Mortgage on the property when inherited 60,000 Mortgage on the property paid by present decedent 30,000 Properties received as a gift within the year: Value in the present estate 300,000 Value when received 320,000 Other properties 1,200,000 Ordinary deductions, not including vanishing deduction 500,000 Net taxable estate? c. P95,000 c. P320,000 d. P500,000 d. P275,000 56. Ms. Laureen McDonald, a citizen and resident of Brisbane, Australia, died leaving properties and obligations in Australia and in the Philippines; Data on her properties and obligations follows: Properties in Australia (inherited within the year) of which P1,000,000 is family home) 3,000,000 Properties in the Philippines 1,000,000 Funeral expenses in Australia 250,000 Unpaid obligations in Australia 700,000 Medical expenses in the Philippines 200,000 The net taxable estate in the Philiipines is: c. P1,000,000 c. P775,000 d. P800,000 d. P0 57. Data on estate:

Gross estate Claims against the estate

Philippines P 6,000,000 1,000,000

Foreign P4,000,000 1,000,000

PAGE 82

How much was the Philippine estate tax due if the decedent was a non-resident, not citizen of the Philippines, and there was a foreign estate tax payment of P500,000? b. P0 b. returned of P57,000 c. P265,800 d. P443,000 58. A resident citizen died leaving (all before standard deduction): Net estate in the Philippines – P1,000,000; net estate in Foreign Country A – P250,000; net estate in Foreign Country B – P750,000. His estate paid estate taxes to Foreign Country A of P7,500 and to Foreign Country B of P18,125. Tax credit against the Philippine estate tax? a. P25,000 c. P27,500 b. P25,625 d. P26,405 59. A citizen of the Philippines residing in Japan, with a legitimate son and a legitimate daughter, made the following donations: April 2, 2016: Donation on account of marriage to a legitimate son 180,000 Donation on account of marriage to a legitimate daughter 150,000 June 12, 2016: Donation to legitimate son 100,000 September 3, 2016: Donation to legitimate daughter 120,000 March 6, 2017: Donation on account of marriage, to the legitimate son 140,000 April 11, 2017: Donation to a legitimate daughter of property with a fair market value of P150,000, with an assumption by the daughter of a P50,000 indebtedness of the property. Donor’s tax on the donation of April 11, 2017? c. P3,600 c. P3,100 d. P2,800 d. some other amount 60. Mr. Leonardo de Velez, a citizen and resident of the Philippines, made donations on January 10, 2017, as follows: Donations to Arman, a legitimate son, on account of marriage, To be celebrated on February 14, 2017, property in the US (on which a US donor’s tax of P1,200 was paid), with a Fair market value of 110,000 Donation to Arman, cash in the Philippines of 100,000 Donor’s tax credit for donor’s tax paid to the US: c. P1,200 c. P 600 d. P1,000 d. P850

31. A donation was made by Mr. A, a citizen and resident of the Philippines, to B Co., of property in a foreign country with a fair market value of P300,000. Foreign donor’s tax of P70,000 was paid. There was a donation earlier in the year of P150,000 cash to Mr. C, a legitimate child. How much was the donor’s tax on the donation to B Co. after foreign donor’s tax credit? c. P20,000 c. P35,333.33 d. P29,333.33 d. P32,677.67 32. Mr. P is a citizen and resident of the Philippines. On July 8,2017, he made donations to Mr. Q, a friend of properties in Country Y and Country Z. donor’s taxes were paid t country Y and Country Z P95,000 and P50,000, respectively. The property in Country Y had a fair market value of P300,000,

PAGE while the property in country Z had a fair market value of P200,000. Donor’s tax still due after 83 credit for foreign donor’s taxes paid? c. P0 c. P145,000 d. P15,000 d. P10,000 Numbers 33-34 are based on the following: Donations were made as follows: Of cash in the Philippines: To a legitimate daughter, on account of marriage P500,000 To an illegitimate son, on account of marriage 600,000 To a legally adopted daughter, on account of marriage 9,500 To a friend, on the occasion of her birthday 2,000 To the Paco Catholic Church, Philippines 50,000 Of cash in the united States: To a recognized natural child 100,000 To the Quiapo Catholic Church, in the Phil. 60,000 Of land in Malaysia to legitimate son, on account of marriage, But the son will assume a mortgage on the land of P200,000 500,000 33. Deductions from the gross gifts, if the donor was a citizen of resident of the Philippines? c. P559,500 c. P449,500 d. P359,500 d. some other amount Foreign country A : 250,000/2,000,000*55,000= 6,875 vs. 7,5000 Foreign country B: 750,000/2,000,000*55,000= 20,625 vs. 18,125 Second limitation: 100,000/200,00*55,000= 27,500 vs. 25,625 Foreign country A: 6,875 Foreign country B: 18,125 Tax credit 25,000 34. Deductions from the gross gifts, if the donor was not a citizen or resident of the Philippines? c. P0 c. P250,000 d. P50,000 d. some other amount 35. Donati0ons were made as follows: On account of marriage: Of property in the Philippines, to a legitimate son P500,000 Of property in Malaysia, to a recognized natural daughter 600,000 Of a property in Indonesia, to an illegitimate child 300,000 Of property in the Philippines, to an adopted child 200,000 Of property in the Philippines, to a brother, with an assumption By the brother of a P15,000 mortgage on the property 50,000 Of cash to the Philippine National government 150,000 Of cash to the Philippine National Red Cross 20,000 Deductions from the gross gifts, if the donor is a non-resident, not citizen of the Philippines? c. P170,000 c. P205,000 d. P185,000 d. P195,000 Items 36 t0 38 are based on the following information: A resident citizen died leaving (all before standard deduction): Net Philippine estate-1M; net Foreign Country A-250K; Net Foreign Country B-750K. his estate paid estate taxes to Foreign Country A of 7,500 and Foreign Country B of 18,125. Allowable estate tax credit against the Philippine estate tax is 36. The allowable estate tax credit against the Philippine estate tax is c. 25,000 c. 205,000 d. 25,625 d. 195,000 37. Allowed tax credit on Foreign Country A under Limitation A c. 6,875 c. 6,285 d. 7,500 d. 20,625 38. Allowed tax credit on Foreign Country A under Limitation B c. 20,625 c. 18,125 d. 6,875 d. 25,000 39. The decedent is a married man with a surviving spouse with the following date: Conjugal real properties P5,000,000

Conjugal family home Exclusive properties Conjugal ordinary deductions Funeral expenses P200,000 Other deductions 1,000,000 Medical expenses

1,500,000 2,500,000

PAGE 84

1,200,000 500,000

Additional information: c. 20% of the fenural expenses were borne by the estate. d. Other deductions includes P200,000 judicial expenses incurred to settle the conflicting claims of the heirs The taxable net estate is: c. P3,400,000 d. P3,080,000

c. P3,200,000 d. P2,750,000

40. An unmarried decedent died leaving properties he inherited 4 ½ years ago which had fair market value of P800,000 at the time of his death (P650,000 at bthe time of inheritance, and unpaid mortgage of P50,000 paid by the present decedent). Other properties in his gross estate had fair market value of P1,000,000. The total expenses, losses, indebtedness, taxes and transfer for public purpose amounted to P300,000. How much was the vanishing deduction? c. P500,000 c. P200,000 d. P225,000 d. P100,000 41. It refers to a mode of transferring & acquiring properties left by the decedent. c. Estate transfer c. Donation d. Succession d. Execution of a will 42. The property, rights & obligations of a person which are not extinguished by his death& those which have accrued thereto since the opening of succession: c. Inheritance c. Estate d. Capital d. Devisee 43. The estate tax accrues from the moment of: c. The filing of notice of death c. The death of the decedent d. Expiration of a month after death d. The filing of estate tax return 44. Which shall not form part of the gross estate of a decedent: e. Intangible personal property of non-resident alien decedent without reciprocity law f. Revocable transfer g. Transfer passing under special power of appointment h. Life insurance where the executor is the beneficiary & it is irrevocable. 45. All of the following are considered intangible in the Philippines, except: f. Franchise which must be exercised in the Philippines g. Shares, obligations or bonds issued by any foreign corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws. h. Shares, obligations or bonds issued by any corporation 75% of the business of which is located in the Philippines. i. Shares, obligations of bond issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines. j. Shares or rights in any partnership, business or industry established in the Philippines. 46. A person who inherits personal property thru a will: c. Devisee c. Heir d. Legatee d. Successor 47. A person who inherits real property thru a will: c. Devisee c. Heir d. Legatee d. Successor 48. Succession wherein the decedent did not leave any will: c. Voluntary succession c. Mixed succession d. Legal succession d. Testamentary succession 49. Which statement is false about succession: e. The successor inherits all the transmissible property of a decedent including his liabilities.

PAGE f. The successor can be made liable for the obligations of the decedent beyond the value 85 of the asset he received. g. In sucession, fruits and credits maturing after theb death of the decedent beyond the value of the asset he received. h. In succession, the successor can refuse the inheritance. 50. Donations of property and cash were all done, on one by Vincent, father, as follows: To Lizzy, a legitimate daughter on account of her marriage, land with a fair market value of P500,000 but subject to a mortgage of P100,000 which was assumed by Lizzy. To Alex, a legitimate son, on account of his marriage, cash of P200,000. The net gifts made were: c. P680,000 c. P590,000 d. P700,000 d. P580,000 Questions 51 to 54 are based on the following; Mr. and Mrs. Smith made the following donations during the calendar year 2014 (common property unless otherwise stated): Date Donations January 2 To Maria, legitimate daughter, on account of her forthcoming marriage, 10,000 shares which are not traded in the stock exchange. The book value at the time of donation was P50 per share. February 3

To Juliana, family friend of couple, on account of her birthday, P20,000 To Petra, legitimate daughter, on account of her marriage on February 1,2013, a piece of antique jewelry from the capita property of Mr. Smith. The pawn value of the jewelry was P50,000.

October 4

To Lourdes, Mrs. Smith’s sister; on account of her forthcoming marriage, cash P100,000. To ACE University, a non-profit educational institution 250,000 To Tiger Shipping Company, a piece of ;land valued at P700,000 To Courtney, legitimate son, on account of his forthcoming marriage, cash of P200,000

51. How much is the tax due and payable of Mr. Smith on gifts made on January 2? b. P19,600 b. P7,000 c. P6,600 d. none of these 52. How much is the tax due and payable of Mr. Smith on gifts made on October 4? a. P58,400 b. P51,800 c. P36,800 d. none of these 53. How much is the tax due and payable of Mr. Smith on gifts made on October 4? a. P126,000 c. P111,000 b. P111,800 d. none of the choices 54. This is subject to a 30% gift tax rate, a gift to e. The son of the granddaughter of the grandson of the donor’s granddaughter f. The grandson of the sister of the donor’s farther g. A legitimate son of the donor on account of marriage h. The daughter of the brother of the donor’s mother 55. A donated a parcel of land to b, his 15 year old son on account of B’s graduation. A did not pay the gift tax on the property donated. Then, b took possession of the property and received the rental derived from it. In 2017, an assessment on the income defined from the property was issued against B, which is correct? e. The assessment against b is correct f. The assessment against B should be deferred g. The income should be included in A’s income tax return h. A validly effected a transfer of the property to b by virtue of delivery 56. One of the characteristics of our internal revenue laws is that they are: e. Political in nature f. Penal in nature g. Generally prospective in operation although the tax statute may nevertheless operate retrospectively, provided it is clearly the legislative intent.

PAGE 86

h. Criminal in nature.

57. Which of the following statements is not correct? e. An inherent limitation of taxation may be disregarded by the application of a Constitutional limitations. f. The property of an educational institution operated by a religious order is exempted from property tax, but its income is subject to income tax. g. The prohibition of delegation by the State of the power of taxation will still allow the Bureau of Internal Revenue to modify the rules on time for filling returns and payment of taxes. h. The internal power of taxation is shared by the legislative and executive departments of government. 58. A taxpayer who had gross receipts derived from business in the preceding year did not declare it when he paid the poll tax. He paid only the basic tax and did not pay the additional poll tax based on gross receipts. Will he be imprisoned? e. No. No person shall be imprisoned for non-payment of poll tax. f. Yes. This is a case of tax evasion. Tax evasion is now a criminal offense. g. No. Paying the basic poll tax is enough. The additional poll tax is discretionary. h. Yes. Non-payment of poll tax is punishable by imprisonment. 59. Which of the following statements is correct? e. Tax amnesty is an immunity from all criminal, civil and administrative liabilities arising from nonpayment of taxes. f. Tax exemption is an immunity from civil liability only. It is an immunity or privilege, a freedom from a charge or burden to which others are subjected to. g. Tax amnesty applies only to past tax periods, hence of retroactive application, while tax exemption has prospective application. h. All of the above. 60. The following, except one, are exceptions to the rule that tax exemptions must be strictly construed. e. sWhere the statute granting the exemption provides for the liberal interpretation thereof. f. The taxpayer does not fall within the purview of exception by clear legislative intent. g. Case of special taxes relating to special cases and affecting special classes of persons. h. Exemptions refer to public property. TAXATION

FIRST PRE-BOARD EXAMINATION

INSTRUCTIONS. Select the correct answer for each of the following questions. Mark only one answer for each item by the corresponding of your choice on the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No. 2 only

1. In one view, the power to tax involves the power to destroy while in another view, the power to tax does not involve the power to destroy. Which among the following statements does not reconcile the two seemingly inconsistent views? A. The power to tax could not be the subject of compensation and set-off. B. The first view refers to a valid üx while the second view refers to an invalid tax. C. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayer's property. D. The imposition of a valid tax could not be judicially retrained merely because it would prejudice taxpayer's property. Ans: A

PAGE 2. Statement 1. Jurisdiction js the reason why the government could impose estate tax on the property of 87 resident alien decedents located outside the Philippines. Statement 2. Symbiotic relationship between the taxpayers and the State is the reason why the former must provide support to the latter so that it could continue to give protection. A. Both statements are true, B. Both statements are false. C. Only statement 1 is true but not statement 2, D. Only statement 2 is true but not statement 1. Ans: A

3. A tax does not meet the public purpose inherent limitation if it: A. Is for the benefit principally of limited subjects or objects. B. Affects the areas as a community rather than as were individuals. C. Is for the welfare of the nation or greater portion of the population. D. Is designed to support the services of government for some of its recognized objects. Ans: A Nos. 4 to 6 are based on the following information: KaLansay, Filipino citizen, died on February 14, 2016, leaving the following: Exclusive properties

P2,000,000

Conjugal real properties (including the family home bought by the spouses with FMV of at the time he died)

2, 500,000

Funeral expenses (40% Unpaid)

122,000

Judicial expenses (20% incurred 8/31/16)

60,000

Unpaid mortgage on inherited property

30,000

Notes payable (1/2 notarized)

80,000

Claim against insolvent person (50% collectible)

400,000

Proceeds of life insurance (beneficiary - estate irrevocable)

100,000

Medical expenses (1/2 paid)

300,000

The exclusive properties had FMV of P500,000 when inherited2-1/2 years ago with P80,000 unpaid mortgage. Based on the foregoing data: 4. The total conjugal property is: A. P 2,500,000

B. P2,600,000

C. 2,900,000

D. P 3,000,000

Ans: D Solution Conjugal rea property 2,500,000.00 Claims againts Insolven person 400,000.00 Proceeds of life Insurance(irrevocable) 100,000.00 Total Conjugal property 3,000,000.00

5. The total exclusive property is: A. P420,000 Ans: D Solution

B. P500,000

C. P 1970,000

D. P 2,000,000

Exclusive propeties

PAGE 88

2,000,000.00

6. The total ordinary conjugal deduction is: A. P410,000

B. P422,000

C. P 440, 000

D. P 462,000

Ans: A 7. The total ordinary exclusive deduction is: A. P 30,000

B. P88,000

C. P 246,000

D. P 276,240

C. P 257,184

D. P 273,600

C. P1,000,000

D. P1, 200,000

Ans: D 8. The amount of vanishing deduction is: A. P229,824

B. P246,240

Ans: B 9. The deduction for family home is: A. None

B. P600,OOO

Ans: B 10. The total amount of special deduction is: A. P300,000

B. P 1,300,000

C. P 1,900,000

D. 2, 900,000

11. . The share of the surviving spouse in the net conjugal property is: A. P 1,269,000

B. P 1,280,000

C. P 1, 289,000

D. P1, 295, 000

C. P 1,118,760

D. P 1,295,000

Ans: D 12. TheTaxable net estate is: A. P270,000

B. P 929, 000

Ans: C 13. Dina Cabangon, a resident citizen, died on November 1, 2016 and her estate incurred losses due to: 1st loss: From fire on February 5, 2017, of improvement on her property not compensated for by insurance. 2nd loss: From tsunami triggered by tectonic-origin earthquake on May 10, 2017, of household furniture and fixtures also not compensated by insurance. A. Both losses are deductible from gross estate. B. Both losses are not deductible from gross estate. C. 1st loss is deductible from gross estate while the 2nd is not. D. 1st loss is not deductible from gross estate while the 2nd loss is. Ans: C

14. Palito, a citizen of the Phi!ippines and resident of Baguio City died intestate on Ju!y 4, 2017. Among his gross estate is a property inherited from his deceased father who died June 10, 2014. What percentage of deduction will be used in computing the amount of vanishing deduction? A, 21%

B. 40%

C. 60%

D. 80%

Ans: B

Number 15 to 19 are based on the following information: I ne decedent was a head of famiiy Fiiipino citizen. The administrator of the estate arrived at a net taxable estate as follows:

Real and personal properties

P 5,000,000

Family home

1,5000,000

PAGE 89

Ordinary deductions: Funeral expenses

(400,000)

Other deductions

(950,000)

Special deductions: Family home

(1,500,000)

Medical expenses

(600,000)

Taxable net estate

P 3,050,000

15. The gross estate is: A. P 5,000,000

B. P 5,750,000

C. P 6,000,000

D. P 6,500,000

C. P 325,000

D. P 400,000

C. P 1,000,000

D. P 1,500,000

C. P 3,650,000

D. P 3,875,000

C. P3,650,000

D. P 3,875,000

Ans: D 16. The deduction for funeral expenses is: A. P 0.

B. P 200,000

Ans: B 17. The deduction for family home is: A. P 0.

B. P750,000

Ans: C

18. The total deductions to be claimed is: A. P 2,650/000

B. P 2,950,000

Ans: C 19. The taxable net estate shall be: A. P 2,850,000

B. P 2,950,000

Ans: A 20. An estate tax return need not be filed by the executor, administrator or any of the (egal heirs on: A. Transfers subject to tax. B. Transfers consisting of registered or registrable property. C. Exempt transfers where the gross value of the estate exceeds P200,000. D. Exempt transfers where the gross value of the is P200,000 and below. Ans: D 21. In transfer in contemplation of death, revocable transfer and transfer under a general power of appointment, there are rules to observe to determine what amount to include in the gross estate. Which of the following is not a rule to observe? A. If the transfer was in the nature of a bona fide sale for an adequate and full consideration in money or money's worth, no value shall be included in the gross estate. B. If there was no consideration received on the transfer as in donation mortis causa, the value to include in the gross estate shall be the FMW of the property at the time of the transfer. C. If there was no consideration received on the transfer as in donation mortis causal the value to include in the gross estate shall be the FMV of the property at the time of the decedent's death. D. If the amount received on the transfer was less than adequate and full consideration in money or money's worth, the value to include in the gross estate shall be the excess of the FMV of the property at the time of the decedent's death over the consideration received. Ans: B 22. For proceeds of life insurance not to be included as part of the gross estate:

A. Must have been taken out by the decedent upon his own life

PAGE 90

B. Must have designated the estate of the decedent as revocable or irrevocable beneficiary, C. Must have designated a third person other than the estate, the decedent's executor or administrator as revocable beneficiary. D. Must have designated a third person other than the estate, the decedent's executor or administrator as irrevocable beneficiary. Ans: D 23. SK Litton, Filipino, has one year more to reach the optional retirement age of 60 years old as an employee of a private firm. Unfortunately, he met a fatal vehicular accident that caused his instantaneous death. He was survived by his wife and received P500,000 from SK's employer as benefit under RIA, 4917, The amount that must be included as part of SK Litton's gross estate is: A. None

B. P 200,000

C. P250,000

D. P500,000

Ans: D 24. Continuing No. 23, the amount that must be claimed as a special deduction from SK Litton's gross estate for the benefit received by the wife under R.A. 4917 is: A. None

B. P200,000

C. P250,000

D. P500,000

Ans: C 25. Going back to No. 23 and assuming this time that SK Litton was single when he died, the amount that must be claimed as a special deduction from the gross estate for the benefit received under RSA, 4917 is: A. None

B. P200,000

C. P 250,000

D. P500,000

Ans: D 26. Referring again to No. 23, the taxable net estte arising from the retirement benefit received under R.A. 4917 irregardless of whether or not SK Litton died as married or single is: A. None

B. P200,000

C.P250,000

D. P500,000

Ans: A 27. Statement 1: When there is reciprocity; the transfer of intangible personal property located in the Philippines of a resident alien donor is subject to tax. Statement 2. Where a personal property classified as capital asset is transferred for less than adequate and full consideration in money or money's worth, the fair market value of the property less the consideration received is deemed a gift subject to donor's tax. A. Both statements are right. B. Both statements are wrong. C. Statement 1 is right but statement 2 is wrong. D. Statement 2 is right but statement 1 is wrong. Ans: A 28. Mayaman wanted the painting hanging on the wall of his living room replaced with a new one. He the sells it to his bosom friend, Salamat, at a very low price of P500,000. Its fair market value is P750,000. He bought the painting several years ago at an exhibit held in Shangri-La for P300,000. The gain on sale of the painting is A. P200,000

B. P 300,000

C. P450,000

D. P500,000

29. Continuing No. 28, how much, if any, is the deemed gift? A. None Ans: B

B. P250,000

C. P300,000

D. P450,00

30. In the preceding number, the rate/s of donor's tax, if appiicabie, is:

PAGE 91

A. 30% of the net gift. B. Not subject to donors tax. C. 5% on the first P100,000 of the taxable net gift and 10% on any amount of taxable net gift in excess of P100,000. D. The progressive rates under Sec. 99 (A) of the NIRC of 1997 based on aggregate net gifts made during a calendar year. Ans: A

31. Which of the following statement is wrong? A. Gift-splitting is a form of tax avoidance. B. The uncle who is a brother of the donor's father-in-law is a stranger to the donor for purposes of the donor's tax. C. A gift made to a relative in January 2017 is to be added to the gift made to the same relative in December 2017 in determining the donor's tax. D. Renunciation by an heir including the surviving spouse of his share in the hereditary estate left by the decedent is exempt from donor's tax even if done in favor of identified heir to the exclusion or disadvantage of other co-heirs in the hereditary estate. Ans: D 32. Properties owned before marriage and brought into the marriage are generally classified as: I. II.

Exclusive properties under conjugal partnership of gains. Common properties under absolute community of properties. A. Only I is correct,

C. Both I and Il are correct

B. 11 is correct.

D. Both I and Il are incorrect.

Ans: C 33. Statement 1. The Philippine Constitution does not prohibit double taxationStatement 2. If direct duplicate taxation occurs, the Éxpayer may seek relief under the uniformity rule or equal protection guarantee. A. . Only statement 1 is true. B. Only statement 2 is true C. Both statements 1 and 2 are true. D. Both statements 1 and 2 are false. ans: B 34. Community properties shall include all properties owned by the spouses at the time of the celebration of the marriage or acquired thereafter. Which of the following is an exclusive property? A. . Properties inherited by the spouses as donation before the marriage. B. Properties acquired by the spouses as donation before the marriage. C. Properties acquired using the income of either spouse earned before marriage. D. Properties acquired before marriage by either spouse who had legitimate descendants by a former marriage.

PAGE 92 35. Statement 1. Donations by an adopter to a legally adopted child or vice-versa shall be considered as Ans: D

donations made to non-stranger. Statement 2. Donations by and between a legally adopted child and the children or other blood relatives of the adopter and vice-versa shall be considered as donations made to stranger. A. Both statements are correct. B. Both statements are incorrect. C. Statement 1 is correct but not statement 2. D. Statement 2 is correct but not statement 1, Ans: A 36. Mr. and Mrs. Bigay wanted to donate a parcel of land to their son Pogi who is getting married in December 2016. The parcel of land has a zonal value of P420,000. What is the most efficient mode of donating the property? A. Spread the donation over a period of 5 years by the spouses donating PIOO,OOO each year from 2016 to 2019 and P20,OOO in 2020. B. The spouses should each donate a PI 10,000 portion of the value of the property in 2016 then each should donated PIOO,OOO in 2017. C. The spouses should first donate in 2016 a portion of the propetf valued at P20,000 then spread the P400,OOO equally for 2017, 2018, 2019 and 2020. D. The soouses should each donate a PIOO,OOO portion of the value of the proper-W in 2016 and another P100,000 each in 2017. Then, in 2018, they should donate the remaining P20,000. Ans: B 37. Malakas and Maganda got married before the effectivity of the New Family Code, devoid of any prenuptial agreement, A year later, Maganda received a donation consisting of a 400 square-meter lot with a modest bungalow house erected thereon. The couple leased the house to a tenant and saved all the rentals thereon. The said rental receipts were then used to construct their own residence on the vacant one-half portion (200 square-meter) of the same lot. Maganda died, and the following information was available at the time of her death. FMV of 400 square-meter lot

P 800,000

FMV of rented bungalow house

200,000

FMV of family house

500,000

The gross estate of Maganda amounts to: A. P800,000

B. P1,000,000

C. P 1,250,000

D. P 1,500,000

Ans: D

38. Continuing No.38, the deduction for family home is: A. P250,000

B. P 650,000

C. P1,000,000

D. P1,050,000

Ans: B 39. Assume the same facts in No. 38, except that the couple got married after the effectivity of the New Family Code and assume further that it was Malakas who died (not Maganda). The gross estate of Malakas would be: A. Zero Ans: A

B. P250,000

C. P500,000

D.P700,000

PAGE 40. Going back to No. 38, the gross estate of Malakas if he was the one who died (rather than Maganda) 93 Would d be. A. Zero

B. P250,000

C. P500,000

D. P700,000

Ans: C 41. A VAT-registered person made the following sales for the month of June 2016: Cash sales, exclusive of VAT

P 300,000

Open account sales, invoice price

550,000

Installment sales, invoice price

990,000

Consignments, VAT exclusive: June 1 (sold already)

400,000

April 1

800,000

June 15

300,000

The total output tax is: A. P 249,000

B. P345,000

C. P364,000

D. P381,000

42. The gross sale and/or receipts of a taxpayer for the year are from the following sources: Grocery store

P1,500,000

Sale of gold to the BSP

419,500

Passenger jeepneys for hire

500,000

Which of the following statement is correct? A. The taxpayer is required to register for VAT because the basis for registration is the total gross sales and/or receipts of P2,419,500. B. The taxpayer may elect to register for VAT because his annual gross sales and/or receipts as basis for optional registration amount to only P1,919,500. C. The taxpayer may elect to register for VAT because his annual gross sales and/or receipts as basis for optional registration amount to only D. The taxpayer is not required to register for VAT because his annual gross sales and/or receipts has no bearing in the optional or compulsory registration as VAT taxpayer. Ans: B 43. As regards a revenue measure, which of the following statements is wrong? A. The President may recommend a revenue bill to Congress. B. The House of Representatives may propose amendments if the bill originates from the Senate. C. The Senate may propose amendments if the bill originates from the House of Representatives. D. A House of Representatives version and a Senate version approved separately and then consolidated in the Bicameral Committee with both houses approving the consolidated version. Ans: B 44. NatyGok, a spinster Filipino citizen and an avowed devotee of Mama Mary, is a living cancer patient (stage four) and given only a month to live by her doctor. Her only asset is composed of cash amounting to P5/000,000. Prior to her death, she asks you whether she would transfer her property by way of donation inter vivos (donor's tax) or donation mortis causa (estate tax) to a well-to-do cousin who pledged paying for the funeral expenses when her last moment comes. You presented to her that the aggregate donor's tax due is P204,000 plus 10% of excess over and the aggregate estate tax due is P135,000 plus 11% of excess over P2,000,000. Naturally, NatyGok preferred paying the tax by means of donation inter vivos (rather than thru donation mortis causa) because of the lesser transfer tax to be paid. Is she correct?

PAGE 94

A. Yes, because NatyGok is still alive. B. No, because the estate tax is cheaper by P49,000.

C. No, because whether donor's tax or estate tax is to be paid, the transfer tax amount would be the same, D. Yes, because there will be tax savings of P61,000. Ans: B 45. Supposing that in the preceding number, the wealthy would be successor of NatyGok's property is a second cousin, yet she still prefers paying donor's tax over that of estate tax. Is she correct? A. Yes, because she is still alive. B. NO, because the amount of transfer tax to be paid would-be the same under either donor's taxation or estate taxation. C. No, because the donor's tax will be expensive by over a million pesos. D. Yes, because her wealthy successor is still a non-stranger cousin. Ans: C

Nos. 46 to 48 are based on the following information: A widowed non-resident alien donor made the following donations, all on the same day: Donee

Property

FMV

To a daughter on her

House and lot in the Philippines

P2,000,000

wedding day. To Development Academy Time deposit in BDO of the Philippines.

Unibank.

To a son on his birthday.

Saving account in PNB Unibank

500,000

300,000

There is an unpaid mortgage of P500,000 on the house and lot which the daughter assumed. Also, the donor wants 25% of the gift to the son be donated to a Roman Catholic Church of his choice in the Philippines, 46. The total gross gifts is: A. P2,225,000

B. P2,300,000

C. P2,500,000

D. P2,800,000

C. P1,075,000

D. P1,085,000

C. P2,075,000

D.P2,150,000

47. The total exemptions or deductions is: A. P75,000

B. P225,000

Ans: C 48. The taxable net gift is: A. P 1,425,000

B. P1,725,000

Ans: B 49. The Commissioner of Internal Revenue may grant an extension of time for the payment of the estate tax or any part thereof in case the estate is settled extrajudicial for a period not exceeding: A. Two years from grant of the extension. B. Five years from grant of the extension. C. Two years from the settlement of the estate. D. Five years from the settlement of the estate, Ans: A 50. Which one of the following is not among the characteristics or nature of value-added Ex (VAT)? A. It is an indirect tax. B. It is a percentage tax.

PAGE 95

C. It is a tax on property. D. It is a tax on consumption. Ans: C 51. The following are the various VAT methods and systems. Which one is a contradiction? A. Tax credit method, B. Cost deduction method. C. Neither tax credit method nor cost deduction method. D. Mixture of tax credit method and cost deduction method. Ans: C

52. A business operator has his main office in Manila and two branch offices in Makati. How many certificate of reaistratjon shall be issued by Bureau of Internal Revenue (BIR)? A. Two, for the two branches. B. Two, one for Manila and one for Makati. C. Three, for the two branches and the main office. D. One, only for the main office in Manila. Ans: C 53. Which one of the following is subject to VAT? A. Keepers of garages. B. Customs brokers and dealers in securities. C. Crop insurance of non-life insurance companies, D. Sale of marine food products in their original state by a dealer. Ans: B 54. In the course of trade, business or exercise of profession taxpayers are required to register with the BIR: A. Monthly. B. Quarterly, C. Every year on January 31. D. Once only before commencing operation. Ans: C 55. A VAT-registered entity had the following data for the month of October 2016: Sales (VAT excluded)

P980,000

Merchandise paid to creditors (VAT excluded)

436,000

Purchases of goods (VAT included): From VAT-registered supplier

756,000

From non-VAT person

75,000

Purchases of services (VAT included): From VAT-registered person

61,600

From non-VAT person

25,000

Salaries and wages

50,000

Operating expenses

150,000

Purchases from person subject to percentage tax

25,000

The value-added tax payable for October 2016 is: A. P64,200

B. P69,816

C. P76,800

Ans: D Nos. 56 to 58 are based on the following information:

D. P82,416

PAGE From the books of accounts were transactions for each of the months of October, November and December (last 96 quarter) of 2016 of a VAT-registered taxpayer: October

November

December

P492,800

P616,000

P770,000

VAT-registered persons

123,200

739,200

369,600

Non-VAT registered persons

44,800

67,200

33,600

Credits to sales account Debit to purchases account on local purchases of goods from:

There was debit balance in the Input Taxes account in the preceding quarter of P15,600. 56. The value-added tax payable at the end of October is: A. P19,200

B. P24,000

C. P23,376

D. P28,752

Ans: D

57. The value-added tax at the end of November is: A. Payable of PO

C. Refundable of P13,200

B. Payable of P20,400

D. Refundable of P14,784

Ans: A 58. The value-added tax payable at the end of December is: A. P18,4800

B. P33,264

C. P34,320

D. P49,104

Ans: B 59. After recognizing the value-added tax payable for the last calendar quarter of 2016, the books of accounts of a VAT-registered retail store showed a debit balance in the Input Taxes account of P2,500. Transactions in the first calendar quarter of 2017 per books were: Sales

P2,100,000

Sales discounts

42,000

Sales returns and allowances

105,000

Purchases (at total invoice costs) of: Goods for sale from VAT-registered suppliers

840,000

Goods for sale from non-VAT registered persons

336,000

Services from VAT-registered service providers

280,000

Equipment (6-year life) bought at start of year from VAT-registered person

1.176,000

Operating expenses

505,000

Value-added tax paid first two months of the quarter

16,920

Importation for sale: Invoice cost from country of origin (1$ : P48.00)

$10,000

Freight and insurance

P15,000

Customs duty

26,000

Excise tax

2,500

Other expenses: Prior to removal of the goods from customs custody

3,500

After removal of the goods from customs custody

2,000

Facilitation expense

5,000

PAGE 97

The value-added tax on the importation is: A. P62,040

B. P63,180

C. P63, 240

D. P63,480

60. Continuing No. 69, the value – added tax payable at the end of the quarter is: A. P 25, 400

B. P31,790

C. P32,030

D. P32, 820

61. Statement 1. The basis of or rationale for taxation explains the reason why a state may impose taxes Statement 2. The theory of taxation explains why there is a need to impose taxes. A. Both statements are true B. Both statements are false. C. Statement 1 is true while statement 2 is false. D. Statement 2 is true while statement 1 is false. Ans: A 62. Nature of the power of taxation: A. An inherent power only. B. A legislative power only. C. Both an inherent power and a legislative power. D. Neither an inherent power nor a legislative power. Ans: C 63. A person may be imprisoned for: A. Failure to pay a debt. B. Non-payment of capitation tax. C. Failure to pay the community tax. D. Non-payment of value-added tax. Ans: C 64. The NIRC of 1997 imposes different kinds of taxes on dispositions of property. These are VAT, OPT, excise taxes, estate tax, donor's tax, etc. Which among the following transactions would be subject to a transfer tax? A. Sale of articles that are exempt from VAT. B. Sale of cigars and cigarettes by a manufacturer. C. Sale of automobile for less than an adequate and full consideration. D. Sale of shares of stock that are listed and traded at the local stock exchange. Ans: C 65. Donor's tax is imposed on the privilege to: A. Receive property inter vivos. B. Transfer property inter vivos. C. Receive property mortis causa. D. Transfer property mortis causa. Ans: B 66. Which among the following distinguishes an estate tax from other kinds of taxes that are presently imposed under the provisions of the NIRC of 1997? A. It is a tax that is imposed upon gratuitous transfers. B. It is a Ex that is imposed only upon the death of a person. C. It is a tax imposed on the privilege to transfer property ownership. D. It is a tax that is imposed upon the net value of the properties that are transferred. Ans. C

PAGE 67. Statement 1. In determining the situs of taxation, the subject matter of the tax is not to be considered at 98 all. Statement 2. In a gratuitous transfer of property, situs is the taxpayer's residence, citizenship or location of the property. A. Both statements are correct. B. Both statements are incorrect. C. Statement 1 is correct but statement 2 is incorrect. D. Statement 2 is correct but statement 1 is incorrect. Ans: D 68. Which one of the following statements is not correct? A. In the exercise of the power of taxation, the state can tax anything at any time. B. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the State. C. The provisions of in the Philippine Constitution are grants of power and not limitations or taxing powers. D. The State can have the power of taxation even if the Constitution does not expressly give it power to tax. Ans: C 69. In donation, donor's tax is imposed as the ownership of the property passes from the: A. Donee to the donor. B. Donor to the donee. C. Decedent to the heir. D. Heir to the successor. Ans: B 70. How many degrees or generation apart are third cousins? A. Two

B. Four

C. Six

D. Eight

Ans:

D

QUIZ 1 1. Which of the following statements is not correct? a. b. c. d.

Taxes may be imposed to raise revenue or to provide Incentives to certain activities within the State. The State can have the power or taxation even if the Contribution does not expressly give it the power to tax. For The exercise of the power of taxation, the state can tax anything at any time. The provision of taxation of the Philippine Constitution are grants of power and not limitation on taxing power.

2. The power of taxation proceeds upon what theory? a. b. a. c.

Government is a necessity theory ability to pay theory C. Benefits received theory severance test theory

3. One of the characteristics of our internal revenue laWs is that they are: a. b. c. d.

Political in nature. Penal in nature. Generally prospective in operation although the tax statute may nevertheless operate retrospectively, provided It is clearly the legislative intent Criminal in nature.

4. Is the amount collected annually by the Land Transportation Office (LEO) from motor vehicles owners, On the basis of horse power of the engines thereof an exercise of power of taxation or police power. a. b.

Power of taxation Police power .

c. Both power of taxation and police power d Neither power of taxation nor police power

5. The City Makati passed an ordinance imposing an annual tax of P5,000 to be paid by an operator of massage clinic and an annual fee of P50 to be pod by every attendant or helper in the said clinic is the imposition a tax or license fee? a.

The imposition on the Operator of the massage clinic is both tax and license fee while the imposition.

b. c. d.

PAGE

The imposition on vie operator of the massage clinic is a license fee while the imposition on every helper or attendants is a 99 tax C. Both impositions are taxes Both imposition are license fees

6. 1st statement: The various impositions constitutes double taxation because your neighbor is taxed twice. 2nd Statement: While the various imposition constitutes double taxation, it is prohibited by the constitutions as it is not duplicate taxation. a Both statements are correct c. Only the first statement is correct b. both statement are incorrect d. Only the second statement is correct 7. The following statement is false a. b. c. d.

a Taxation is the lifeblood of government b The power of taxation must first be expressly granted, either by law or the constitution before the state may validly exercise it A government that imposes more direct taxes than indirect taxes is said to have managed to evolves a progressive system of taxation Taxes we imposed primarily to raise revenue, while fees and charges are imposed primarily for regulation purposes.

8. Which of the following statements is correct, a. b. c. d.

An overstatement of gross income is an example of tax evasion Under the withholding tax system. the recipient of the income deducts the withholding tax and remits the same to BIR within the period prescribe by law. Where the tax payer was entitled to tax refund regarding his prior taxes and the same is already barred by prescription, he may nevertheless offset such refund with his current tax liability. The constitutional exemption granted to religious, charitable and non-stock, non-profit educational institutions refers to real property taxes only.

9. Which of the following statement is correct? a. b. c. d.

An overstatement of gross income an example of tax evasion. Under the Withholding tax system; the recipient of the income deducts the withholding tax and remit same to the BIR within the period prescribed by law. Where a taxpayer was entitled to tax refund regarding his prior taxes and the same already by prescription, he may nevertheless offset such refund with his current tax liability The constitutional exemption granted to religious, charitable. and non-Stock, non-profit educational institutions refers to real property taxes only

10. When is the donation perfected? a. b. c. d.

The moment the donor knows or the acceptance by the done. The moment the thing donated is delivered, either actually or constructively, to be done. Upon payment of the donors tax Upon execution of the deed of donation

11. The following are the requisites of a donation for purpose of the donor’s tax, except one. a. b. c. d.

Capacity of the donor Capacity of the done Delivery Of the subject matter or gift Donatives intent.

12. For the donation to be considered valid, acceptance of the donation must be made: a. b. c. d.

during the lifetime of the donor only . during the lifetime of the donee only during the lifetime of the donor and the donee none of the choices

13. Which of the following donations inter vivos may not require that it be in writing? a. b. c. d.

Donation of personal (movable) property, the value of which exceeds P5,000. Donation of personal (Movable) property, the value of which is 5,000 . Donation of real (immovable) property, the value of less than P5000 Donation of real (immovable) property, the value of which exceeds P5000.

14. Which of the statements regarding donation of an immovable property is incorrect? a. b. c. d.

The donation must be made in a Public document specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same Deed of Donation or in separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. None of the choices.

15. One of the following is not distinction between donation inter vivos and donation mortis causa. a. b. c.

Donation inter vivos take effect during the lifetime of the grantor while donation Mortis cause takes effect after the death of the grantor. Donation inter vivos is subject to donor's tax while donation mortis causa is subject to estate tax. Donation inter vivos requires a public document while mortis Causa may not require e public documents

d.

PAGE

Donation inter vivos is valued at fair market value at the time the property is given while donation mortis cause is valued at 100 the fair market value at the time of death of the grantor.

16. Motivated by love, Mr. D donated a car to his brothers, Mr. E and Mr. F the naked title to Mr. E and usufruct to Mr. F for one year. Is the transfer of the. car, naked title to Mr.E and usufruct to Mr. F valid donation? a. b. c. d.

Yes the transfer of the naked title to E. and usufruct to F is a valid donation, provided all the donees are living at the time of donation. No the donation is not valid because it is specifically provided in the Civil Code. that such donation is not allowed. Yes the donation is valid provided that Mr. E agrees to the donation of usufruct to Mr. F. No the donation is not valid because. a right (usufruct) cannot be donated

17. The tax imposed on the transfer of property without consideration between two or more persons who are living at the same the transfer. a. Estate tax c. Business tax b. Donor’s tax d. Property tax 18. Donor's tax is: a. a property tax. C. a business tax b. a personal tax d. an excise tax. 19. First Statement Donor's tax shall be levied, assessed, collected and paid upon the transfer of property by any person, resident or non-resident, as a gift. Second Statement: The donor' tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible. a. True, True c. True, False b. False. False d. False, True 20. For purposes of donor's tax, a "stranger" is a person who is not a: I- brother, sister (whether by whole or half-blood), spouse, ancestor, and lineal descendant; II- relative by consanguinity in the collateral line within the fourth degree of relationship; a. Both are correct c. Only I is correct. b. Both are incorrect d. Only II is correct 21. First Statement: A legally adopted child is entitled to all the rights and obligations of legitimate children as provided by law and therefore, donation to him shall not be considered a donation made to a stranger. Second Statement: Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger. a. b. c. d.

Both statements are correct Both statements are incorrect Only the first statement is correct Only the second statement is correct

22. Which of the following is a stranger for donor's tax purposes? a. b. c. d.

The son of the donor's first cousin The donor's grandmother The donor's spouse A child born out of wedlock of parents who are legally impeded to marry each other at the time the child is being conceived.

23. Statement I: Any contribution in cash or in kind to any candidate political party or coalition of parties for campaign purposes, shall be governed by the Election Code, as amended. Statement II: Any provision of law to the contrary notwithstanding, any contribution in cash or in kind to any candidate or political party or coalition of parties for campaign purposes duly reported to the COMELEC shall not be subject to the payment of any gift tax a. b. c. d.

Both statements are correct Both statements are incorrect Only the first statement is correct Only the second statement is correct.

24. First Statement: The donor's tax shall not apply unless and until there is a completed gift. Second Statement The law in force at the time of the completion of the donation shall govern the imposition of the donor's tax. a. b. c. d.

Both statements are correct Both statements are incorrect Only the first statement is correct Only the second statement is correct

25. When is the donation completed? a. b. c. d.

The moment the donors knows of the acceptance by the done The moment the thing donated is delivered, either actually or constructively; to the donee Upon payment of the donor's tax , Upon execution of the deed of donation

26. A gift that is incomplete because of reserved powers, becomes complete when: I- the donor renounces the power.

PAGE II- his right to exercise the reserved power ceases because of some event or contingency or the fulfillment of 101 some condition, other than the donor's death. a. True in both I and II c. True in I only b. Not true in both I and II d. True in II only 27. Which of the following renunciations shall not be subject to donor's tax? a. b. c. d.

Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent. Renunciation by an heir, Including the surviving spouse, of his/her in the hereditary swine left by the decedent categorically In favor of identified heir/s to the exclusion or disadvantage of the co-heirs None of the choices

Questions 28 through 31 are based on the following information: A decedent left the following properties: Land in Italy (with P1M unpaid mortgage) P2, 000,000 Land in Davao City, Phil. (zonal value 750.000) 500,000 Franchise in USA 100,000 Receivable from debtor in Phil. 50,000 Receivable from debtor in USA 100,000 Bank deposit in Phil. 20,000 Bank deposit in USA 80,000 Shares of stocks of PLDT, Phil. 75,000 shares of stock of ABC, foreign corp. 125,000 75% of the business in the Phil. Shares of stock of XYZ, a foreign corp. .80% of the business is in the Phil. (proceeds was used to expand business in the Phil.) 300,000 28. If the decedent is a non-resident citizen his gross estate is: a. P 3,650,000 c. P,2,500,000. b. P 3,600,000 d. P 2,650,000

28 Land in ITALY

2,000,000.00

Land in DAVAO -ZV

750,000.00

Franchise in USA

100,000.00

Rec. from Debtor in Phil

50,000.00

Rec. from Debtor in USA

100,000.00

Bank deposit in Phil

20,000.00

Bank deposit in USA

80,000.00

Shares Of stock-PLDT

75,000.00

Shares Of stock-Foreign

125,000.00

Shares of stock-XYZ

300,000.00

Gross Estate

3,600,000.00

29 If the decedent is non-resident alien his gross estate is: a. P 1,195,000 c. P 1,250,000 b. 750,000 d. P 1,070,000 29 Land In DVO @ ZV 750,000.00 Rec. from Debtor PHIL 50,000.00 Bank Deposit - PHIL 20,000.00 Shares of Stock- PLDT 75,000.00 Shares of Stock- XYZ 300,000.00 Gross Estate 1,195,000.00

PAGE 102

30. If in the preceding number, reciprocity law can be applied the gross estate is: a. P 1,050.000 c. P 1,250,000 b. P 750,000 d. P 1,070,000 30 Land In DVO

750,000.00

31. Based on the original problem but assuming the PLDT shares of stocks (PLDT) are not listed in the Local Stock Exchange,& there are 1,000 shares at the time of death, the company's outstanding shares were 10,000 shares. Its retained earnings was P2,000,000, par value per share was P50/share. The gross estate should show the said shares at: a. P 75,000 c. P 200,000 b. P 250,000 d. P 0 31 Retained Earnings 2,000,000.00 1000/10000 shares outs. 10% 200,000.00 PLDT shares of stock: 1000 @ P50/share

50,000.00

Gross Estate

250,000.00

Questions 32 to 35 are based on the following information: Building, USA . P5,000,000 House & lot in Bulacan (500 sq. meters) zonal value is P10,000 per square meter 4,500,000 Life insurance proceeds, beneficiary is the wife, the administrator, irrevocable 500,000 Life insurance proceeds with another company, beneficiary, his son, irrevocable 200,000 Claims against a debtor whose liabilities exceeds its assets(50% collectible) 50,000. Death benefits from US Veteran Administration 100,000 Death benefits from SSS 40,000 Paraphernal property of his surviving wife He also transferred mortis cause the following: S Price FMW- Transfer Car, Mla. P 500,000 P1,000,000 Land, Mla. 1,500,000 2,000,000 Land, USA . 2,000,000 1,800,000 32. If the decedent is a Filipino citizen, his gross estate is: a. P10, 850,000 c. P 10,950,000 b. P 12,900,000 d. P 11,050,000 32 Building in USA 5,000,000.00 House & Lot @ ZV 5,000,000.00 Life Insurance, beneficiary is the wife 500,000.00 Claims against a debtor 50,000.00 Gain on Transfer of Car 300,000.00 Gross Estate 10,850,000.00

2,000,000 FMV - Death P 800,000 1,000.000 3,000,000

33. If the decedent is a non-resident alien and his country does not 'impose transfer, tax on any intangible properties left by a Filipino decedent, his gross estate is: a. P 5,350,000 c. R 6,500,000 b. P 5,300,000 d. P 6,000,000 33 House & Lot in Bulacan

5,000,000.00

Gain on Transfer of Car

300,000.00

Gross Estate

5,300,000.00

34. The gross estate of a non-resident alien' is P 2,000,000, 75% of which is from abroad. The actual funeral expenses totaled to P. 80,000, % of which was paid by his employer. The deductible funeral expense is: a. P 6,250 c. P 60,000 b. P 20,000 d. P 80,000 34 World Gross Estate Actual Funeral Exp.

Percentage w/n the Phil Phil Gross Estate

2,000,000.00 25%

80,000.00 Percentage paid

500,000.00 1.25% 6,250.00

PAGE 103 75%

60,000.00

whichever is lower

35. Based on the preceding number (the same world G.E.) but the decedent is a non-resident citizen, 'the deductible funeral expense is: a. P 15,000 C. P60, 000 b. P 20,000 d. 80,000 35 World Gross Estate 2,000,000.00 Provision for Funeral Exp 5% 100,000.00 Actual Funeral Expense Percentage Paid

80,000.00 75% 60,000.00

whichever is lower

36. 1st statement: A note payable contracted 11 yrs. ago is a deduction from the gross estate if notarized. 2nd Statement: To be deductible medical expenses must be paid within one year period before death. a. True, True c. True, False b. False, False d. False, True 37. 1st Statement: Unpaid mortgage indebtedness is deductible from the. gross estate provided the said property subject to the indebtedness is included in the gross estate net of the mortgage indebtedness. 2nd Statement: A donation inter vivos by the decedent to the Phil. government few months before his death is a deduction from the gross estate. a. True, True c. True, False b. False, False d. False. True 38. Purobuto, non-resident Japanese, died leaving the following: Exclusive properties, Philippines P 560;000 Conjugal properties, Philippines 420,000 Conjugal properties, Abroad 1,820,000 Deductions claimed: Funeral expenses 100,000 Judicial expenses 100,500 Unpaid expenses 150,500 Losses: occurring 3 mos. After death due to fire 120,000 Donation mortis causa to Makati City Hall 180,000 Family Home (inc. above), located abroad 1,000,000 Standard deduction 1,000,000 39. The taxable net estate is: a. P 516,500 c. P 1,900,000 b. P 635,150 d. 2,100,000 39 Exclusive Conjugal Total Properties-Phil less: World ELITc*(PGE/WGE) Donation for Public Purposes

560,000.00

420,000.00

980,000.00

73,500.00

73,500.00

180,000.00

180,000.00

486,500.00

420,000.00

726,500.00 50% 210,000.00

210,000.00

516,500.00

Share of Surviving Spouse 486,500.00 Net Taxable Estate 40. A tax return is considered false and fraudulent, except:

516,500.00

a. b. c. d.

PAGE

If there is a deliberate intention to deprive the government of its right to collect taxes. 104 If there is a failure to report sales, receipts, or income in an amount exceeding 30% of that declared per tax return. If there is a claim of deductions in an amount exceeding 30% of actual deductions. If there are differences in interpretation of whether the taxpayer may avail of tax credit on income taxes.

TAXATION: QUIZ1 41. Which of the following statements is not correct? e. Taxes may be imposed to raise revenue or to provide incentives to certain activities within the State. f. The state can have the power of taxation if the Constitution does not expressly give the power to tax. g. For the exercise of the power of taxation, the state can tax anything at anytime. h. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on the taxing power. 42. The power of taxation proceeds upon what theory? e. Government is a necessity theory f. Ability to pay theory g. Benefits received theory h. Severance test theory 43. One of the characteristics of our internal revenue laws is that they are: e. Political in nature. f. Penal in nature g. Generally prospective in operation although the tax statute may nevertheless operate retrospectively, provided it is clearly the legislative intent. h. Criminal in nature 44. Is the amount collected annually by the Land Transportation Office (LTO) from motor vehicle owners, on the basis of horse power of engines thereof, an exercise power of taxation or police power? e. Taxation power f. Both power of taxation and police power g. Police power h. Neither power of taxation nor police power 45. The city of Makati passed an ordinance imposing an annual tax of P5,000 to be paid by an operator of massage clinic and an annual fee of P50 to be paid by every attendant or helper in the said clinic. Is the imposition a tax or a license? e. The imposition on the operator of the massage clinic is both a tax and license fee, while the imposition on every helper or attendant is a license fee. f. The imposition on the operator of the massage clinic is a license fee, while the imposition on every helper or attendant is a tax. g. Both imposition are taxes. h. Both impositions are license fees. 46. 1st Statement: The various impositions constitute double taxation because your neighbor is taxed twice. 2nd Statement: While the various impositions constitute double taxation, it is not prohibited by the Constitution as it is not direct duplicate taxation. e. Both statements are correct f. Both statements are incorrect g. Only the first statement is correct h. Only the second statement is correct 47. One of the following statements is false: e. Taxation is the lifeblood of the government. f. The power of taxation must first be expressly granted, either by law or the Constitution, before the state may validly exercise. g. A government that imposes more direct taxes than indirect taxes is said to have managed to evolve a progressive system of taxation. h. Taxes are imposed primarily to raise revenue, while fees and charges are imposed primarily for regulation purposes. 48. Which of the following is correct? e. An overstatement of gross income is an example of tax evasion. f. Under the withholding tax system, the recipient of the income deducts the withholding tax and remits the same to the BIR within the period prescribed by law. g. Where a taxpayer was entitled to a tax refund regarding his prior taxes and the same is already barred by prescription, he may nevertheless offset such refund with his current tax liability h. The constitutional exemption granted to religious, charitable and non-stock, non-profit educational institution refers to real property taxes only. 49. Which of the following statement is correct? e. An overstatement of gross income is an example of tax evasion. f. Under the withholding tax system, the recipient of the income deducts the withholding tax and remits the same to the BIR within the period prescribed by law. g. Where a taxpayer was entitled to a tax refund regarding his prior taxes and the same is already barred by prescription, he may nevertheless offset such refund with his current tax liability h. The constitutional exemption granted to religious, charitable and non-stock, non-profit educational institution refers to real property taxes only. 50. When is donation perfected? e. The moment the donor knows of the acceptance by the done. f. The moment the thing donated is delivered, either actually or constructively, to the done. g. Upon payment of the donor’s tax. h. Upon execution of the deed of donation. 51. The following are the requisites of a donation for the purposes of the donor’s tax, except one: e. Capacity of the donor

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52.

53.

54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

f. Capacity of a done 105 g. Delivery of the subject matter or gift h. Donative intents For the donation to be considered valid, acceptance of the donation must be made: e. During the lifetime of the donor only. f. During the lifetime of the donee only. g. During the lifetime of the donor and the donee h. None of the choices Which of the following donation inter vivos may not require that it be made in writing? e. Donation of personal (movable) property, the value of which exceeds P5,000 f. Donation of personal (movable) property, the value of which is P5,000 g. Donation of personal (immovable) property, the value of which is less than P5,000 h. Donation of personal (immovable) property, the value of which exceeds P5,000 Which of the following statements regarding donation of an immovable property is incorrect? e. The donation must be made in a public document specifying therein the property donated and the value of the charges which the done must satisfy. f. The acceptance may be made in the same Deed of Donation or in separate public document, but it shall not take effect unless it is done during the lifetime of the donor. g. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. h. None of the choices. One of the following is not distinction between donation inter vivos and donation mortis causa e. Donation inter vivos takes effect during the lifetime of the grantor while donation mortis causa takes effect after the death of the grantor. f. Donation inter vivos is subject to donor’s tax while donation mortis causa is subject to estate tax. g. Donation inter vivos requires a public document while donation mortis causa may not require a public document. h. Donation inter vivos is valued at fair value at the time the property is given while donation mortis causa is valued at the fair market value at the time of death of the grantor. Motivated by love, Mr. D donated a car to his brothers, Mr. E and Mr. F, the naked to Mr. E and usufruct to F is a valid donation? e. Yes the transfer of naked title to Mr. E and usufruct to F is a valid donation, provided all the donees are living at the same of donation. f. No, the donation is not valid because it is specifically provided in the civil code that such donation is not allowed. g. Yes, the donation is valid provided that Mr. E agrees to the donation of usufruct to Mr. F. h. No, the donation is not valid because a right (usufruct) cannot be donated. The tax imposed on the transfer of property without considered between two or more persons who are living at the same the transfer. c. Estate tax c. Business tax d. Donor’s tax d. Property tax Donor’s tax is: c. A property tax c. a business tax d. A personal tax d. an excise tax First Statement: Donor’s tax shall be levied, assessed, collected and paid upon the transfer of property by any person, resident or non-resident, as a gift. Second Statement: the donor’s tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, intangible or tangible. c. True, true c. True, true d. False, false d. False, true For the purpose of donor’s tax, a “stranger” is a person who is not a: III. Brother, sister (whether by whole or half blood ), spouse, ancestor, and lineal descendant; IV. Relative by consanguinity in the collateral line within the fourth degree of relationship. c. Both statement are correct c. Only statement I is correct d. Both statement are incorrect d. Only II is correct First Statement: a legally adopted child is entitled to all the rights and obligations of legitimate children as provided by law and therefore, donation to him shall not be considered a donation to stranger. Second Statement: Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger. e. Both statement are correct f. Both statement are incorrect g. Only the first statement is correct h. Only the second statement is incorrect Which of the following is a stranger for donor’s tax purposes? e. The son of the donor’s first cousin f. The donor’s grandmother g. The donor’s spouse h. A children out of wedlock of parents who are legally impeded to many each other at the time the child is being conceived. Statement I: Any contribution in cash or in kind to any candidate, political party or coalition of parents for campaign purposes, shall be governed by the Election Code, as amended. Statement II: Any provision of law to the contrary notwithstanding, any contribution in cash or in kind or political party or coalition of parties for campaign purposes duly reported to the COMELEC shall not be subject to the payment of any gift tax. e. Both statements are correct f. Both statement are incorrect g. Only first statement is correct

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64.

65.

66.

67.

68.

69. 70. 71.

72. 73.

h. Only second statement is incorrect 106 First statement: The donor’s tax shall not apply unless until there is a completed gift. Second statement: The law in force at the time of the completion of the donation shall govern the imposition of the donor’s tax. e. Both statements are correct f. Both statement are incorrect g. Only first statement is correct h. Only second statement is incorrect When is the donation completed? e. The moment the donors knows the acceptance by the donee. f. The moment the thing donated is delivered, either actually or constructively, to the donee g. Upon payment of the donor’s tax h. Upon execution of the deed of donation A gift is incomplete because of reserved powers, become a complete when: I-the donor renounces the power II- his right to exercise the reserved power ceases because of some event or contingency or the fulfillment of some condition, other than the donor’s death. c. True in both I and II c. True in I only d. Not true in both I and II d. True in II inly Which of the following renunciations shall not be subject to donor’s tax? e. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s f. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent. g. Renunciation by an heir, including the surviving spouse, of his/her in the hereditary estate left by the decedent categorically in favor of identified heir/s to the exclusion or disadvantage of the co-heirs h. None of the choices Questions 28 through 31 are based on the following information: A decedent left the following: Land in Italy (with P1M unpaid mortgage) P2,000,000 Land in Davao City, (zonal value 750,000) 500,000 Franchise in USA 100,000 Receivable from debtor in Phil. 50,000 Receivable from debtor in USA. 100,000 Bank deposit in Phil. 20,000 Bank deposit in USA. 80,000 Shares of stock PLDT, Phil. 75,000 Shares of stock of ABC, foreign corp. 125,000 75% of the business in the Phil. Shares of stock of XYZ, a foreign corp. 80% of the business Is in the Phil. (proceeds was used to expand business in the Phil) 30,000 If the decedent is a non-resident citizen his gross estate is: c. P 3,650,000 c. P 2,500,000 d. P 3,600,000 d. P 2,650,000 If the decedent in is non-resident alien estate is: b. P 1,195,000 b. P 750,000 c. P 1,250,000 d. P 1,070,000 If in the preceding number, reciprocity law can be applied the gross estate is: b. P 1,050,000 b. P 750,000 c. P 1,250,000 d. P 1,070,000 Based on the original problem but assuming the PLDT shares of stock (PLDT) are not in the local Stock Exchange, & there are 1,000 shares at the time of death, the company’s outstanding shares were 10,000 shares. Its retained earnings was P 2,000,000, par value per share was P50/share. The gross estate should show the said shares at: b. P 75,000 b. P 250,000 c. P 200,000 d. P 0 Questions 32 to 35 are based on the following information: Building, USA P 5,000,000 House & lot in Bulacan (500 sq. meters) zonal value is P10,000 per sq. meter 4,500,000 Life insurance proceeds, beneficiary is the wife, the Administrator, irrevocable 500,000 Life proceeds with another company, beneficiary, his son Irrevocable 200,000 Claims against a debtor whose liabilities exceeds its asset (50% collectible) 50,000 Death benefits from US veteran Administration 100,000 Death benefits from SSS 40,000 Paraphernal property of his surviving wife 2,000,000 He also transferred mortis causa the following: S Price FMV- Transfer FMV- Death Car, Mla. P 500,000 P 1,000,000 P 800,000 Land,Mla. 1,500,000 2,000,000 1,000,000 Land, USA 2,000,000 1,800,000 3,000,000 If the decedent is a Filipino citizen, his gross estate is: b. P10,850,000 b. P12,900,000 c. P10,959,000 d. P11,050,000 If the decedent is a non-resident alien and his country does not impose transfer tax on any intangible properties left by a Filipino decedent, his gross state is: b. P 5,350,000 b. P 5,300,000 c. P 6,500,000 d. P 6,000,000

PAGE

74. The gross estate of a non-resident alien is P2,000,000, 75% of which is from abroad. The actual funeral expenses totaled to 107 P80,000, ¼ of which by his employer. The deductible funeral expense is: b. P 6,250 b. P20,000 c. P60,000 d. P80,000 75. Based on the preceding number ((the same world G.E.) but the decedent is a non-resident citizen, the deductible funeral expense is : b. P15,000 b. P20,000 c. P60,000 d. 80,000 76. 1st statement: A note contracted 11 years ago is a deduction from the gross estate if notarized. 2nd statement: To be deductible, medical expenses must be paid within one year period before death. c. True, True c. True, False d. False, False d. False, True 77. 1st statement: Unpaid mortgage indebtedness is deductible from the gross estate provided the said property subject to the indebtedness is included in the gross estate net of the mortgage indebtedness. 2nd statement: A donation inter vivos by the decedent to the Phil. Government few months before his death is a deduction from the gross estate. c. True, True c. True, False d. False, False d. False, True 78. Purobuto, non-resident Japanese, died leaving the following: Exclusive properties, Philippines P 560,000 Conjugal properties, Philippines 420,000 Conjugal properties, Abroad 1,820,000 Deductions claimed: Funeral expenses 100,000 Judicial expenses 100,500 Unpaid expenses 150,500 Losses: occurring 3 mos. After death due to fire 120,000 Donation mortis causa to Makati City Hall 180,000 Family Home (inc. above), located abroad 1,000,000 Standard deduction 1,000,000 79. The taxable net estate is: c. P 516,500 c. P1,900,000 d. P 635,150 d. P2,100,000 80. A tax return is considered false and fraudulent, except: e. If there is a deliberate intention to deprive the government of its right to collect taxes. f. If there is a failure to report sales, receipts, or income in an amount exceeding 30% of that declared per tax return g. If there is a claim of deductions in an amount exceeding 30% of actual deductions. h. If there are differences in interpretation of whether the taxpayer may avail of tax credit on income taxes. Taxation Quiz 2 1. Which of the following shall be subject to VAT? a. Sale of a residential house and lot b. Sale of an apartment house c. Sale of a private car by its owner d. All of the above 2. Mr. Andres, VAT registered real estate dealer, transferred a parcel of land held for sale to his son as gift on account of his graduation. For VAT purposes, the transfer is: a. Not subject to VAT because it is a gift b. Subject to VAT because it is deemed sale transaction c. Not subject to VAT because it is subject to gift tax d. Subject to VAT because it is considered actual sale 3. The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported is an export sales if: I. Paid for in acceptable foreign currency or its equivalent in goods or services II. Accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) a. Only I is correct c. Both I and II are correct b. Only II is correct d. Neither I nor II is correct 4. Which of the following is not an export sale? a. The sale of the raw materials or packing materials to an export-oriented enterprise whose export sales exceeds seventy percent (70%) of total annual production. b. Sale of gold to Bangko Sentral ng Pilipinas (BSP). c. Transaction considered export sales under Executive Order No. 226, otherwise known as the Omnibus investments Code of 1987, and other special laws d. The exportation of goods on consignment where the export products consigned are in fact not sold by the consignee 5. A VAT-registered person engaged in a taxable activity as a wholesaler of goods decides to discontinue the activity and engages instead in life insurance business, a business not subject to VAT. What is the tax consequence on his goods or properties originally intended for sale or use in business, and capital goods which already existed when he decided to change his business? a. The goods are not subject to VAT because the taxpayer is already VAT-exempt b. The goods are subject to VAT as deemed sale transaction c. The goods are not subject to VAT because the wholesaler are generally exempt from VAT

PAGE

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

d. The goods are subject to VAT only when they are actually sold by the new owner 108 First statement: VAT on importation is imposed on goods brought into Philippines, whether for use in business or not. Second statement: The VAT on importation shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus custom duties, excise tax, if any, and other charges, such as postage, commission, and similar charges prior to the release of the goods from customs custody. a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct First statement: The rates for VAT prescribed under the Tax Code shall be applicable to all importations withdrawn from customs custody unless exempted. Second statement: The VAT on importation shall be paid by the importer prior to the release of such goods from customs custody. a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct The VAT on importation of goods which are subsequently used or sold in the course of trade or business by a VATregistered importer shall be treated as: a. Expense c. tax credit b. Inventoriable cost d. none For dealers of securities, the term “gross receipt” means: a. Gross selling price b. Gross selling price less cost c. Gross receipt without any deduction d. None of the choices This refers to the non-agricultural feeds for race horses, fighting cocks, aquarium fish, zoo animals, and other animals generally considered as pets. a. Fish and prawn feeds b. Specialty feeds c. Livestock and poultry feeds d. None of the choices The following goods when imported shall be subject to Vat, except: a. Vehicle c. machinery b. Vessel d. professional instrument Educational services are exempt from VAT if rendered by: I – private educational institutional duly accredited by DepEd, CHED, and TESTA II- government educational institution a. Both I and II are correct c. Only I is correct b. Neither I nor II is correct d. only II is correct All of the following cooperatives enjoy VAT exemption on their sales or receipts except: a. Agricultural cooperatives b. Credit and multi-purpose cooperative c. Non-agricultural, non-electric and non-credit cooperatives d. Electric cooperatives Which of the following shall be exempt from VAT? IExport sales by persons who are not VAT-registered IIExport sales by persons who are VAT-registered a. Both I and II are correct c. I only b. Neither I nor II d. II only VAT invoice or official receipt shall be prepared at least in duplicate: IThe original to be given to the buyer IIThe duplicate to be retained by the seller as part of his accounting records. a. Only I is correct c. Neither I nor II is correct b. Only II is correct d. Both I and II are correct A VAT-registered trader made the following sales of goods during the second calendar quarter of the current year: Cash sales P 200,000 Open account sales 100,000 Installment sales (receipt, 40,000) 100,000 Consignment sales (not yet sold as of end of the quarter): June 15 100,000 May 15 100,000 ` April 15 100,000 How much is the output tax for the quarter using 12% VAT rate? a. 60,000 c. 40,000 b. 48,000 d. 24,000 Butch, Vat-registered, made the following purchases during the month of January, 2011: Goods for sale, inclusive of VAT 246,400 Supplies, exclusive of VAT 20,000 Office air-conditioner, total invoice price (estimated life is 3 years) 56,000

Home appliances for residence, gross of VAT 17,920 Service for store repair, contractor not VAT-registered, Total invoice amount 33,000 Service for repainting of store, total invoice amount Evidenced by ordinary receipt issued by contractor 4,480 How much was the total allowable input tax of Butch for the month using 12% VAT rate? a. 38,688.00 c. 34,800.00 b. 35,337.60 d. 34,542.86 18. The following data are taken from the books of accounts of VAT-registered taxpayer: Third quarter: Sales 1,000,000 Purchases 800,000 Excess input VAT as of end of Second quarter 25,000 Fourth quarter: sales 1,500,000 Purchases 1,100,000 How much is the VAT payable (excess input tax) for the third quarter using 12% VAT rate? a. 36,000 c. (5,000) b. 24,000 d. (1,000) 19. Sweet Tooth, Inc. manufacturer refined sugar. The following selected data are taken from its books: Sale of refined sugar, net of VAT Purchases of sugar cane from the farmers Purchases of packaging materials, gross of VAT Purchase of label, gross of VAT Advance payment of VAT before release from refinery

20.

21.

22.

23.

24.

25.

PAGE 109

How much is the VAT payable using 12% VAT rate? a. 124,000 c. 64,000 b. 84,000 d. 20,000 An importer wishes to withdraw its importation from the Bureau of Customs. The imported goods are subjected to 10% custom duties in the amount of P12,500 and to other charges in the amount of P9,500. The value-added tax due using 12% rate is: a. 12,500 c. 14,000 b. 13,364 d. 17,640 A business tax that is based on a given ratio between the gross sales or receipts and the burden imposed upon the taxpayer which is based on a set ratio between the volume of sales and the amount of tax. a. Percentage tax c. Donor’s tax b. Income tax d. Value-added tax Banks and non-bank financial intermediaries performing quasi-banking functions are subject to: a. Value-added tax c. Franchise tax b. Gross receipts tax d. Amusement tax The lease of property, real or personal, by a bank is subject to: a. 7% on gross receipt c. 1% on gross receipts b. 5% on gross receipts d. 0% on gross receipts The operator of one of the following places is not subject to amusement tax. a. Cockpits c. Bowling alleys b. Racetracks d. KTV Karaoke joints The following data are taken from the records of Ms. Tammy Dee, not VAT-registered, who owns various businesses for the year 2015: Gross sales from sale of shoes and clothes 300,000 Gross sales from boutique 400,000 Gross receipts from her parlor 500,000

During the month of January 2015, the following data are presented: Gross sales from sale of shoes and clothes 30,000 Gross sales from boutique 40,000 Gross receipts from her parlor 50,000 How much is the percentage tax due for the month of January 2015? a. 2,400 c. 3,600 b. 2,700 d. 6,000 26. Hermes is a common carrier by sea. During a particular quarter, its receipts consist of the following: Gross receipts, without tax: Transport of passengers 1,000,000 Transport of goods 1,500,000 Transport of cargoes 500,000 The output VAT and OPT due for the quarter are: Output VAT OPT due Output VAT OPT due a. 240,000 30,000 c. 360,000 0 b. 0 90,000 d. 360,000 30,000 27. a VAT-registered business reported a VAT purchase invoice amounting to P84,000. The same goods were sold at 120% of cost. How much be the total VAT sales invoice amount? a. 110,880 b. 100,800 c. 112,896 d. 184,800 28. The treatment of the difference between the actual input VAT and the standard input VAT in this problem is: a. income b. expense c. liability d. input tax credit 29. Fees for lodging paid by students to Unisex Dormitory, a private entity operating a student dormitory at a monthly fee of P10,000 per boarder and where the gross fees received per annum is in vicinity of P1.5million to P2.0million, is:

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a. exempt from VAT and OPT 110 b. subject to VAT at 12% c. subject to OPT at 3% d. subject to VAT at 0% 30. A VAT-registered taxpayer engaged in the supply of services has the following data taken from its books for the month of January 2011: Accounts receivable, January 1, 2011 560,000 Sales on account for the month of January 1,000,000 Cash sales for the month of January 300,000 Accounts receivable, January 31, 2011 784,000 How much is the output tax for the month of January, 2011 using 12% VAT rate? a. 156,000 c. 129,120 b. 132,000 d. 110,000