Multiple Choice Questions
CPA Reviewer in Taxation
INCOME TAXATION OF INDIVIDUALS & CORPORATION
Instruction: Select the best answer to each of the following questions.
1.
An exemption allowed to a taxpayer that has qualified legitimate, and/or recognized or legally adopted
children:
a. Additional exemption.
b. Special additional personal exemption.
c. Optional standard deduction.
d. Personal exemption.
2.
A feature of ordinary gains as distinguished from capital gains:
a. Gains from sales of assets not stock in trade.
b. May or may not be taxable in full.
c. Sources are capital assets.
d. No holding period.
3.
The following, except one, may claim personal exemptions:
a. Non-resident alien not engage in trades or business in the Philippines.
b. Non-resident alien engage in trade or business in the Philippines.
c. Resident alien.
d. Citizen.
4.
On capital gain tax on real property, which of the following statements is not true?
a. The tax should be paid, if in one lump sum, within 30 days from the date of sale.
b. The term “initial payment” is synonymous to “down payment”.
c. The installment payment of the tax should be made within 30 days from receipt of each installment
payment on the selling price.
d. The tax may be paid in installment if the initial payments do not exceed 25% of the selling price.
5.
Which of the following taxpayers whose personal exemption is subject to the law on reciprocity under
the Tax Code?
a. Non-resident citizen with respect to his income derived outside the Philippines.
b. Non-resident alien who shall come to the Philippines and stay therein for an aggregate period
more than 180 days.
c. Resident alien deriving income from a foreign country.
d. Non-resident alien not engage in trade or business in the Philippines whose country allows
personal exemption to Filipinos who are not residing but are deriving income from said country.
6.
RDE was retired by his employer corporation in 2003 and paid P1,000,000 as a retirement gratuity
without any deduction for withholding tax. The corporation became bankrupt in 2004. Can the BIR
subject the P1,000,000 retirement gratuity to income tax?
1st answer: Yes, if the retirement gratuity was paid based on a reasonable pension plan were RDE
was 50 years old and has served the corporation.
2nd answer: No, if the RDE was forced by the corporation to retire.
a. Both answers are wrong.
b. Both answers are correct.
c. 1st answer is correct, 2nd answer is wrong.
d. 1st answer is wrong, 2nd answer is correct.
7.
The widow of your best friend has just been paid P1,000,000 on account of life insurance policy of the
decease husband. She asks you whether she should declare the amount for income taxes purposes
or for estate tax purposes.
1st advice: The proceeds of life insurance paid to the beneficiary upon the death of the insured are
exempt from income tax and need not be declared for income tax purposes.
2nd advise: The proceeds of life insurance would have to be declared for the estate tax purposes if
the designation of the beneficiary was irrevocable, otherwise it need not be declared.
a. Both advises are correct.
b. 1st advice correct, 2nd advice are wrong.
c. Both advises are wrong.
d. 1st advice wrong, 2nd advice correct.
8.
Mr. Juan dela Cruz transferred his commercial land with a cost of P500,000 but with a fair market
value of P 750,000 to JDC Corporation in exchange of the stocks of the corporations with par value of
P1,000,000. As a result of the transfer he became the major stockholder of the corporation.
As a result of the transfer,
1
Multiple Choice Questions
CPA Reviewer in Taxation
a. The recognized gain is the difference between the fair market value of the shares of stocks and
the cost of the land.
b. The recognized gain is the difference between the par value of the stock and the fair market value
of the land.
c. No recognized gain because the land was in exchange or purely stocks and Mr. dela Cruz
became the majority stockholders.
d. No recognized gain because the land was in exchange of stocks of the corporation.
9.
Gross income is reported partially in each taxable year in proportion to collections made in such period
as it bears to the total contract price refers to:
a. Crop year basis method.
b. Percentage of completion basis method.
c. Accrual method.
d. Installment sales method.
10.
“Schedular system of income taxation” means:
a. All types of income are added together to arrive at gross income.
b. Separate graduated rates are imposed on different types of income.
c. Capital gains are excluded in determining gross income.
d. Compensation income and business professional income are added together in arriving at gross
income.
11.
It is important to know the source of income for tax purposes (i.e., from within or without the
Philippines) because:
a. Some individual and corporate taxpayers are taxed on their worldwide income while others are
taxable only upon income from sources within the Philippines.
b. The Philippines imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
12.
In cases of deduction and exemption on income tax return doubts shall be resolved:
a. Strictly against the taxpayer.
b. Strictly against the government.
c. Liberally in favor of the taxpayer.
d. Liberally in favor of the employer.
13.
The term “capital assets” includes:
a. Stock in trade or other property included in the taxpayer’s inventory.
b. Real property not used in the trade or business of taxpayer.
c. Property primarily for sale to customers in the ordinary course of his trade or business.
d. Property used in the trade or business of the taxpayer and subject to the depreciation.
14.
Lots being rented when subsequently sold are classified as:
a. Capital assets.
b. Liquid assets.
c. Ordinary assets.
d. Fixed assets.
15.
The following are examples of corporate expenses deductible from gross income, except one:
a. Representation expenses designed to promote business.
b. Contributions to drum up business, like contributions of soft drinks to barrio fiestas.
c. Expenses paid to an advertising firm in order to create a favorable image for the corporation.
d. Premiums on life insurance covering the life of an employee if the beneficiary is his heirs.
16.
ABC Corporation took two key men insurance on the life of its President, Mr. X. In one policy, the
beneficiary is the corporation to compensate it for its expected loss in case of death of its president.
The other policy designates Mr. X’s wife as its irrevocable beneficiary.
Question 1 – Are the insurance premium paid by X corporation in both policies deductible?
Question 2 – Will the insurance proceeds be treated as income subject to tax by the corporation
and by the wife?
a.
b.
c.
d.
Yes to 1st and No to 2nd questions.
Yes to both questions.
No to 1st question and Yes to 2nd question.
No to both questions.
2
Multiple Choice Questions
CPA Reviewer in Taxation
17.
Who among the following is a non-resident alien?
a. An alien who comes to the Philippines for a definite purpose which in its nature may be promptly
accomplished.
b. An alien who comes to the Philippines for a definite purpose which in its nature would require an
extended stay.
c. An alien who has acquired residence in the Philippines.
d. An alien who lives in the Philippines with no definite intention as to his stay.
18.
An exemption provided by the law to take care of personal, living and family expenses of the taxpayer
and the amount of which is determined according to the status of the taxpayer are:
a. Optional standard deduction.
b. Personal exemption.
c. Additional exemption.
d. Special additional personal exemption.
19.
The personal exemption of the non-resident alien engaged in trade or business in the Philippines is
equal to that allowed by:
a. The income tax law of his country to a citizen of the Philippines not residing there.
b. The income tax law of his country to a citizen of the Philippines not residing there or the amount
provided by the NIRC to a citizen or resident, whichever is lower.
c. The National Internal Revenue Code to a citizen or resident.
d. The income tax law of his country allows to a citizen of the Philippines not residing there or the
amount provided by the NIRC to a citizen or resident alien whichever is higher.
20.
If an individual performs services for a creditor who in consideration thereof cancels the debt, the
cancellation of indebtedness may amount:
a. To a gift.
b. To a capital contribution.
c. To a donation inter vivos.
d. To a payment of income.
21.
Statement 1. A non-resident citizen is taxable on his income from within the Philippines.
Statement 2. A non-resident citizen is not taxable on his income from outside the Philippines.
Statement 3. A non-resident citizen is taxable on his income from within and outside the Philippines.
a. True, true, true.
b. False, false, false.
c. True, true, false.
d. False, false, true.
22.
The following are the general principles of income taxation:
a. A citizen of the Philippines residing therein is taxable on all income derived from sources within and
without the Philippines.
b. A nonresident citizen is taxable on income derived from sources within the Philippines.
c. An individual citizen of the Philippines who is working and deriving income from abroad as an
overseas contract worker is taxable only on income from sources within the Philippines.
d. An alien individual, whether a resident or not of the Philippines, is taxable only on income derived
from sources within the Philippines.
e. A domestic corporation is taxable on all income derived from sources within and outside the
Philippines.
f. A foreign corporation, whether engaged or not in business in the Philippines, is taxable only on
income derived from sources within the Philippines.
a.
b.
c.
d.
23.
All the statements are true.
All the statements are false.
One of the statements is false.
Some of the statements are false.
A citizen of the Philippines was a non-resident citizen in 2003. On May 15, 2004, he arrived in the
Philippines to reside permanently in the Philippines. His income for the year was:
A – From January 1, 2004 to May 14, 2004.
B – From May 15, 2004 to December 31, 2004.
Which of the following is wrong?
a. He is considered a resident citizen on his “B” income.
b. He is considered a non-resident citizen on his “A” income.
c. He is considered a resident citizen on his “A” and “B” income.
d. He is not taxable on his “A” income.
3
Multiple Choice Questions
CPA Reviewer in Taxation
24.
Statement 1. If a taxpayer marries or has dependents during the year, or dies during the year, or his
spouse dies during the year, he/his estate may claim personal exemption in full for such year.
Statement 2. If a dependent child dies within the year, or becomes twenty-one years old within the
year, the taxpayer may still claim additional exemption.
a. First statement is correct while second statement is wrong.
b. First statement is wrong while second statement is correct.
c. Both statements are wrong.
d. Both statements are correct.
25.
Statement 1. An illegitimate child dependent upon the taxpayer is a unit of additional exemption.
Statement 2. A dependent who marries within the year or who becomes gainfully employed during the
year is still a dependent with additional exemption for the year.
a. True, true.
b. True, false.
c. False, false.
d. False, true.
26.
Which of the following is not an income tax on corporation?
a. Normal tax.
b. Minimum corporate income tax.
c. Gross income tax.
d. Stock transaction tax.
27.
The normal tax of an ordinary corporation effective January 1, 2000 is:
a. 34%.
b. 33%.
c. 32%.
d. 30%.
28.
The minimum corporate income tax of a domestic or resident trading or manufacturing corporation is:
a. 2% of gross income.
b. 5% of gross sales.
c. 15% of gross income.
d. 15% of gross sales.
29.
The minimum corporate income tax of a domestic or resident service corporation is:
a. 2% of gross receipts.
b. 2% of gross income.
c. 15% of gross receipts.
d. 15% of gross income.
30.
One of the following statements is correct. Which is it? The minimum corporate income tax of a
corporation is computed:
a. In the quarterly and annual returns of the corporation.
b. In the annual income tax return only of the corporation.
c. In the quarterly returns only of the corporation.
d. In all the taxable years of operations of the corporation.
31.
One of the following is wrong. Which is it? The gross income tax on corporation is:
a. Applicable to domestic corporations.
b. Not applicable to resident corporation.
c. Applicable to non-resident corporation.
d. May begin only beginning 2000.
32.
Which statement is wrong? The gross income tax:
a. Is optional to a qualified corporation.
b. Available only if the ratio of cost of sales does not exceed fifty-five per cent of gross sales or
receipts from all sources.
c. The choice shall be irrevocable for three consecutive years that the corporation is qualified under
the scheme.
d. Is always computed to compare with the normal income tax and minimum corporate income tax.
33.
Which statement is wrong? The gross income tax of the corporation is:
a. 15% of gross income.
b. 15% of gross sales.
c. 15% of gross profit from sales.
d. 15% of gross receipts.
4
Multiple Choice Questions
CPA Reviewer in Taxation
34.
One of the following statements is wrong. Identify. The improperly accumulated earnings tax imposed
on corporations:
a. Is calculated to force corporations to pay out dividends.
b. Is computed on improperly accumulated income over several years.
c. Is based on the net income per books after income tax.
d. Is based on a statutory formula for improperly accumulated income.
35.
All, except one, of the following, are not subject to the improperly accumulated earnings tax. Which is
the exception?:
a. Publicly-held corporations.
b. Banks and other nonbank financial intermediaries.
c. Insurance companies.
d. Service enterprises.
36.
The following, except one, give rise to the presumption that a corporation is improperly accumulating
profits. Identify the exception:
a. The corporation is a mere holding company.
b. The corporation is an investment company.
c. The corporation permits its profits to accumulate beyond the reasonable needs of the business.
d. The corporation is a service enterprise.
37.
Which of the following is not treated as a corporation?
a. General partnership in trade.
b. General professional partnership.
c. Mutual fund company.
d. Regional operating headquarters of multi national company.
38.
Which of the following statements is wrong?
a. A general partnership in trade is not taxable as a corporation.
b. A joint venture for undertaking construction projects is not taxable as a corporation.
c. A consortium for energy operations pursuant to an operating consortium agreement under a
service contract with the government is not taxable as a corporation.
d. A co-ownership where the activities of the co-owners are limited to the preservation of property
and collection of income from the property is not taxable as a corporation.
39.
As a general rule, proceeds of insurance are not taxable because they only constitute a return of
capital (of what was lost). Which is the exception?
a. Proceeds of life insurance.
b. Proceeds of accident or health insurance.
c. Proceeds of property insurance.
d. Proceeds of crop insurance.
40.
Which of the following is taxable?
a. Separation pay received by a 50-year old employee due to the retrenchment program of the
employer.
b. Retirement pay received from a benefit plan registered with the Bureau of Internal Revenue where
at the time the employee retired he was 55 years of age, retiring from employment for the first time
in his life, and was employed with the employer from whom retiring for 6 years prior to retirement.
c. Social security benefit received by a balikbayan from employer abroad at the age of 35.
d. SSS and GSIS benefit.
41.
Which of the following is taxable?
a. Agricultural land inherited.
b. Cash received as gift.
c. Philippine Charity Sweepstakes winnings.
d. Interest on government bonds.
42.
Which of the following is taxable?
a. Prize won in as essay contest.
b. The Nobel prize.
c. Prize won as member mythical team in the PBA.
d. Award for being a model employee.
43.
Which of the following items that reduce salaries of employees is not an exclusions from gross
income?
a. GSIS or SSS contributions.
b. Pagibig contributions.
c. Labor union dues.
d. IOU’s.
5
Multiple Choice Questions
CPA Reviewer in Taxation
44.
Which of the following is taxable?
a. Interest on long-term deposit on banks of individuals.
b. Gain on sale of 10-year bond.
c. Prize exceeding P10,000.
d. Lotto winning.
45.
Which of the following is not gross compensation income?
a. Salary of P20,000 of an employee.
b. Bonus of P20,000 of an employee.
c. Salaries of P20,000 of a partner of a general partnership in trade.
d. Honorarium of P20,000 of an employee who is a member of the board of directors of a
corporation.
46.
Which of the following tax refunds constitutes income?
a. Refund of Philippine income tax.
b. Refund of estate tax.
c. Refund of donor’s tax.
d. Refund of percentage tax.
47.
Statement 1. Only business expenses may be deducted from the gross income of taxpayers.
Statement 2. Itemized deductions from gross income should be duly supported by vouchers or
receipts.
a. First statement is true while second statement is false.
b. First statement is false while second statement is true.
c. Both statements are true.
d. Both statements are false.
48.
Statement 1. Interest paid or incurred in the acquisition of fixed assets may be capitalized to the asset
account.
Statement 2. An individual on the cash basis of accounting shall deduct interest paid in advance in the
year that the principal is paid.
a. Statement 1 is correct while statement 2 is wrong.
b. Statement 1 is wrong while statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.
49.
One of the following is not correct for deductibility of losses from gross income:
a. It must arise from fire, storm, or other casualty, robbery, theft, or embezzlement.
b. It must not be compensated by insurance or any form of indemnity.
c. A declaration of loss by casualty should be filed with the Bureau of Internal Revenue.
d. It is of property owned by the taxpayer, whether used in business or not.
50.
Statement 1. In a total loss due to casualty, the measure of loss is the book value of the asset reduced
by any form of indemnity.
Statement 2. In a partial loss due to casualty, the measure of loss is the cost of the property, or the
cost to restore the property to its normal operating condition, whichever is lower, reduced by any form
of indemnity.
Statement 3. In a wash sale, loss is not deductible.
Statement 4. In a merger or consolidation, or transfer to a controlled corporation, loss is not
deductible.
a. True, true, true, true.
b. False, false, false, false.
c. True, false, true, false.
d. False, true, false, true.
51.
Statement 1. A net operating loss is the excess of allowable deductions over the gross income from
business for a taxable year.
Statement 2. A net operating loss which had not previously been deducted from gross income shall be
carried over as a deduction only in the next year immediately following the year of such loss.
a. True, true.
b. False, false.
c. True, false.
d. False, true.
52.
Statement 1. Bad debt is an expense in the books of account when a provision is made for it.
Statement 2. Bad debt is a deduction from the gross income when the account is written off.
a. The first statement is true while the second statement is false.
b. The first statement is false while the second statement is true.
c. Both statements are true.
d. Both statements are false.
6
Multiple Choice Questions
CPA Reviewer in Taxation
53.
Statement 1. The cost of leasehold improvements shall be deductible by the lessee by spreading the
cost of the improvements over the life of the improvements or remaining term of the lease, whichever
period is shorter.
Statement 2. Deprecation expense can be a deduction for both tangible and intangible property with
limited useful life.
a. True, true.
b. False, false.
c. True, false.
d. False, true.
54.
Statement 1. Contributions by the employer to a pension trust for past service cost is deductible in full
in year that the employer made the contributions, if he is on the cash basis of accounting.
Statement 2. Contributions or donations given directly to individuals cannot be deducted from gross
income.
a. True, true.
b. False, false.
c. True, false.
d. False, true.
55.
Which statement is not correct?
a. The deduction of an individual for contribution subject to limitation should not exceed ten percent
(10%) of his taxable income from business, trade or profession before deduction for contributions.
b. The deduction of a corporation for contributions subject to limitation should not exceed five
percent (5%) of its taxable income from business or trade before deduction for contributions.
c. Contributions to media in its fund drive for the relief of the calamity victims are deductible from
gross income.
d. Contributions of canned goods to student organizations during the Christmas season for
distribution to Muntinglupa inmates are deductible from gross income.
56.
Which statement is wrong/ research and development costs:
a. When related to the acquisition and/or improvement of land and building, must be capitalized.
b. If not related to land and building, may be treated as an outright deduction.
c. If not related to land and building, may be treated as a deferred expense which may be amortized.
d. Cannot be deducted because it has unlimited life.
57.
Which statement is wrong? The deduction for premiums on hospitalization and health insurance is:
a. Not to exceed P2,400 a year per family.
b. Not to exceed P200 per month.
c. Not allowed if the family income exceeds P250,000.
d. In the case of married persons, can be claimed by either spouse.
58.
Which statement is wrong? Deduction for premiums on hospitalization and health insurance is:
a. Allowed a citizen with a gross compensation only.
b. Allowed a citizen with business or professional income only.
c. Allowed a citizen with mixed income.
d. Only if the taxpayer is taking itemized deduction from gross income.
59.
The Optional Standard Deduction is ten percent (10%) of the gross income. Choose the correct and
best answer: For purposes of the Optional Standard Deduction of an individual (other than nonresident alien) gross income means:
a. If a trading concern, gross profit from sales.
b. If a service concern, gross receipts lee direct cost of services.
c. Means gross profit from sales, or gross receipts or revenues less direct cost of services, plus all
other items of gross income.
d. Includes the net capital gain of an individual.
60.
Which statement is wrong? The rule that capital losses are deductible only to the extent of capital
gains is applicable:
a. To a corporation.
b. To an individual.
c. To the individual taking the Optional Standard Deduction.
d. To the individual taking the itemized deduction from gross income.
61.
Which statement is wrong? The fringe benefit tax is:
a. Imposed on the employer.
b. Imposed on the employee.
c. Withheld at source.
d. Deductible by the employer.
7
Multiple Choice Questions
CPA Reviewer in Taxation
62.
Which statement is wrong? The amount on which the fringe benefit tax rate is applied is:
a. The monetary value of the fringe benefit.
b. The grossed-up monetary value of the fringe benefit.
c. The amount deductible by the employer from his/its gross income.
d. Reflected in the books of accounts in the two account of fringe benefits expense and fringe benefit
tax expense.
63.
Which of the following fringe benefit is not subject to the fringe benefits tax?
a. Contributions of the employer for the benefit of the employee to retirement, insurance and
hospitalization benefit plans.
b. Housing.
c. Expense account.
d. Vehicle of any kind.
64.
Statement 1. A fringe benefit which is subject to the fringe benefit tax is taxable income of the
employee.
Statement 2. A fringe benefit which is not subject to the fringe benefit tax is taxable income of the
employee.
a. First statement is true while second statement is false.
b. First statement is false while second statement is true.
c. Both statements are true.
d. Both statements are false.
65.
Statement 1. The fringe benefit tax is deductible from the gross income of the employer.
Statement 2. The fringe benefit tax is withheld by the employer.
a. The first statement is true while second statement is false.
b. The first statement is false while second statement is true.
c. Both statements are true.
d. Both statements are false.
66.
Statement 1: A corporation cannot deduct a loss arising from a sale between the corporation and the
controlling individual stockholders.
Statement 2: A corporation cannot deduct a loss arising from a sale between the corporation and the
controlling parent corporation.
a. First statement is correct, but the second statement is wrong.
b. First statement is wrong, but the second statement is correct.
c. Both statements are correct.
d. Both statements are wrong.
67.
The family of an individual shall include his brothers and sisters, whether by whole or half blood,
spouse, ancestors and lineal descendants. In which of the following does the concept not apply?
a. Non-deductible loss from sales or exchange of property between members of the family.
b. Non-deductible bad debts on transaction between members of the family.
c. Non-deductible interest expense between members of the family.
d. Deductible premiums on hospitalization and health insurance of the family.
68.
Which of the following losses is deductible?
a. Loss on wash sale.
b. Loss on merger.
c. Loss on a transfer of property to a corporation solely stock resulting in control.
d. Loss on a transfer of property to a controlled corporation solely for stock.
69.
Which interest expense can be deducted from gross income?
a. Interest expense on money borrowed to buy government bonds.
b. Interest expense on money borrowed to finance petroleum operations.
c. Interest expense between a corporation and the controlling individual.
d. None of the above.
70.
Which statement is wrong? The net operating loss carry-over (NOLCO) is:
a. Available to a domestic corporation.
b. Available to a registered general partnership in business in the Philippines.
c. Available to an individual in business in the Philippines.
d. Not available to a general professional partnership in the Philippines.
71.
Which statement wrong? Research and development cost:
a. On land and building acquired for research and development purposes is not deductible as
research and development cost.
b. May be claimed as an outright deduction from gross income.
c. May be treated as a deferred expense to be amortized over the period which will benefit from the
expenditure.
d. May be treated as a deferred expense to be amortized over a period of not less than sixty months
from the date benefit from expenditure is derived.
8
Multiple Choice Questions
CPA Reviewer in Taxation
72.
Which of the following statements is wrong?
a. A deduction for bad debt is not available when a provision for it is made.
b. A deduction for bad debt is available only when a write off is made.
c. There is no deduction for bad debt when there is a surety for the debtor against whom collection
may be enforced.
d. A deduction for uncollectible account is available to a taxpayer whether he is on the cash or
accrual method of accounting.
73.
Which statement is wrong? Contributions made by an employer to a pension trust:
a. For lump sum payment to cover past service cost, is allowable as deduction beginning with the
year the payment was made.
b. For lump sum payment to cover past service cost is allowable as deduction amortized for period of
ten years.
c. For a lump sum payment to cover past service cost, may be amortized over a period of more than,
but not less than ten years.
d. For present service cost, is deductible in the year that payment is made.
74.
Which statement is not correct? Deduction for depletion:
a. Is allowed on wasting assets only.
b. For foreign corporations engaged in doing business in the Philippines is allowed only if the mine is
located in the Philippines.
c. For domestic corporations, shall be allowed only if the mine is located in the Philippines.
d. Is separate from deduction for depreciation of building in the mine site.
75.
For an individual on the cash basis of accounting, prepaid interest on an indebtedness is deductible:
a. In the year that the interest is prepaid.
b. In the year that the principal is paid.
c. For the portion expired corresponding to the current accounting period.
d. None of the above.
76.
Income which is constructively received is already taxable income is a rule under this method of
accounting:
a. Cash method.
b. Accrual method.
c. Installment method.
d. Deferred payment method.
77.
Which statement is wrong?
a. Income from a general professional partnership is constructively received by a partner when his
share in the net income is credited to his capital account.
b. Income from a taxable partnership is constructively received by a partner in the same taxable year
that the partnership determined its net income after tax.
c. Any distribution of dividends made to shareholders of a corporation shall be deemed to have been
made from the most recently accumulated earnings or surplus.
d. Accumulated profits of any year distributed to shareholder of a corporation shall be considered
dividend subject to final tax on the distributee in the year received.
78.
Which is wrong? Deferred recognition of income is allowed in:
a. Installment sales where the initial payments do not exceed twenty-five percent of the selling price.
b. Installment sales where the initial payments exceed twenty-five percent of the selling price.
c. Long-term contracts.
d. Advance rental received.
79.
One of the following statements is wrong. Identify:
a. The base stock method of valuing inventory is not recognized for income tax purposes.
b. Second hand and odd or broken lots goods in the inventory should be valued at cost or market,
whichever is lower.
c. The Commissioner of Internal Revenue may prohibit the method of inventory valuation used in the
books even if such method used conforms to accounting rules.
d. The Commissioner of Internal Revenue may determine the taxable income of a taxpayer by using
standards developed from other taxpayers.
80.
The taxpayer is not a dealer of personal property regularly selling on installment. Installment method of
reporting income is available to him on a sale of property if the initial payments on the sale:
a. Exceed 25% of the selling price.
b. Do not exceed 25% of the selling price.
c. Regardless of the ratio of initial payments to the selling price.
d. Do not exceed 25% of the contract price.
9
Multiple Choice Questions
CPA Reviewer in Taxation
81.
Deferred payment method of reporting income on an installment sale is available to a taxpayer if, there
being a requirement of the law on the ratio of initial payments to the selling price, the initial payments
on the sale:
a. Exceed 25% of the selling price.
b. Do not exceed 25% of the selling price.
c. Regardless of the ratio of initial payments to the selling price.
d. Do not exceed 25% of the contract price.
82.
Which is wrong? The net worth-expenditure method of investigation which is used by the Bureau of
Internal Revenue to determine taxable income that was fraudulently concealed by an individual is
based on:
a. The statutory authority of the Commissioner of Internal Revenue to promulgate rules and
regulations.
b. The statutory authority of the Commissioner of the Internal Revenue to determine the taxable
income of a taxpayer from the best evidence obtainable.
c. The statutory authority of the Commissioner of Internal Revenue to have the income of a taxpayer
computed under such method as in his opinion clearly reflects the income.
d. All of the above.
83.
Under the net worth-expenditure method of investigation, unexplained increase in net worth is attribute
to undeclared income.
Statement 1. The finding of the Bureau of Internal Revenue of undeclared income is presumed correct,
unless the taxpayer proves otherwise.
Statement 2. The underdeclaration of income is presumed to be fraudulent and the assessment of the
tax by the Bureau of Internal Revenue will imposed a surcharge of fifty percent.
a. The first statement is true, the second statement is false.
b. The first statement is false, the second statement is true.
c. Both statements are true.
d. Both statements are false.
84.
Which method of inventory valuation is not recognized for income tax purposes?
a. Cost.
b. Cost or market, whichever is lower.
c. Farm price method.
d. Base stock method.
85.
Statement 1. The Commissioner of Internal Revenue can, if he makes a finding that the nature of
stock on hand (e.g., scarcity, liquidity, marketability or price movements) is such that inventory gains
should be considered realized for tax purposes, require a change in the inventory valuation method of
a taxpayer.
Statement 2. The accrual method of accounting is required of trading, manufacturing and service
enterprises.
a. First statement is correct, second statement is wrong.
b. First statement is wrong, second statement is correct.
c. Both statements are correct.
d. Both statements are wrong.
86.
If a general professional partnership is on the accrual method of accounting, and a partner, on his own
transactions, is on the cash method of accounting, in the partner’s determination of his taxable income
for a year:
a. He can consolidate his share in the net income of the partnership, determined by the partnership
under the accrual method, with his own income determined under the cash method.
b. He must convert his income from the partnership into cash method before consolidating it with his
own income on the cash method.
c. He must convert his own income into accrual method before consolidating it with his own income
from the partnership under the accrual method.
d. He does not have to report his income from the partnership because the partnership is exempt
from income tax.
87.
An individual making a casual sales or disposition of property involving deferred payment, not in the
course of trade or business, must report his income:
a. On the cash method.
b. On the accrual method.
c. On the installment method.
d. Any of the above.
10
Multiple Choice Questions
CPA Reviewer in Taxation
88.
Statement 1. Where different enterprises or corporation are owned by the same taxpayer, the
Commissioner of Internal Revenue may make an allocation of income and expenses among them so
as to clearly reflect the income of each enterprise or corporations.
Statement 2. In the interest of determining the correct taxable income, it is legal for the Commissioner
of Internal revenue to determine the revenue and gross income of a taxpayer based on industry
standards developed by the Bureau of Internal Revenue from an industry study.
a. Both statements are correct.
b. Both statements are wrong.
c. First statement is correct, but second statement is wrong.
d. First statement is wrong, but second statement is correct.
89.
Which statement is wrong? When a taxpayer controls a manufacturing corporation and a marketing
corporation, sales made by the manufacturing corporation to the marketing corporation, as recorded,
in the books of account, may be considered by the Bureau of Internal Revenue as not reflective of
correct selling price.
a. Under the rule of “piercing the veil of corporate fiction”.
b. Under the provision of the National Internal Revenue Code which authorizes the Commissioner of
Internal Revenue to allocate revenues and expenses of corporations controlled by the same
interests, so as to clearly reflect the income of the taxpayers.
c. Under the provision of the National Internal Revenue Code which authorizes the Commissioner of
Internal revenue to determine the correct taxable income from the best evidence obtainable.
d. Cannot be done by the Bureau of Internal revenue.
90.
Which is correct? When it takes more than one year from the time of planting to the time of harvesting
and selling, income may be reported under the crop year method, under which, deductions for
expenses shall be allowed in the year that the income from the crop is realized.
a. This is an accounting period of more than twelve months.
b. This is still an accounting period of twelve months.
c. There are two accounting periods, one, a one-year period, and the other, a less-than-one-year
accounting period.
d. There is no definite accounting period.
91.
Statement 1. There can be an accounting period of less than twelve months.
Statement 2. There cannot be an accounting period of more than twelve months.
a. Both statements are correct.
b. Both statements are wrong.
c. The first statement is correct, while the second statement is wrong.
d. The first statement is wrong, while the second statement is correct.
92.
Statement 1. A change in the method of accounting requires a prior approval of the Commissioner of
Internal Revenue.
Statement 2. A change in accounting period does not require prior approval of the Commissioner of
Internal Revenue as long as the necessary income tax returns for the different accounting periods (old,
interim and new) are filed.
a. Both statements are correct.
b. Both statements are wrong.
c. First statement is correct, while second statement is wrong.
d. First statement is wrong, wile second statement is correct.
93.
Which statement is wrong? In income tax allocation:
a. Permanent difference is an item of revenue in the books of accounts but which is not a taxable
income.
b. Permanent difference is an item of taxable income which is not revenue in the books of accounts.
c. Timing difference is an item of revenue in the books of accounts in one accounting period but
which is taxable income in another accounting period.
d. Timing difference is an item of expense in one accounting period and is not a deduction for
income tax purposes.
94.
One of the following is correct:
a. Income from long-term contracts may be reported on the completed contracts method of
accounting.
b. Income from long-term contracts must be reported only on the percentage of completion method
of accounting.
c. Income from deferred payment sales may not be reported on the accrual method.
d. Where in a deferred payment sales the initial payments exceed twenty-five percent of he selling
price, the income from the sales must be reported on the accrual method.
11
Multiple Choice Questions
CPA Reviewer in Taxation
95.
Which income from sources partly within and partly outside the Philippines is allocated on the time
basis?
a. Income of an international shipping corporation with vessels touching Philippine ports.
b. Income of a telegraph company with transmission from the Philippines to points abroad.
c. Income from goods produced in whole or in part in the Philippines and sold in a foreign country, or
vice-versa.
d. Income from personal services performed in part in the Philippines and in part abroad.
96.
Who of the following need not file income tax return?
a. A taxable corporation, if with a net loss.
b. A taxable partnership, if with a net loss.
c. A general professional partnership, with a net income or net loss.
d. An employee with a gross compensation income of P48,500 when the withholding tax by an
employee was correct.
97.
The income tax return of a parent includes the income of an unmarried child:
a. If the child is minor and the income was derived from property inherited by the child, where the
estate tax was paid.
b. If the child is minor and the income was derived from property received as gift from a living parent,
where the donor’s tax was not paid.
c. If the child was minor and the income was derived from property received as gift from the living
parent, where the donor’s tax was paid.
d. If the child is minor and the income was derived from his labor.
98.
Statement 1: The income tax return of husband and wife may be signed by one of the spouses only
designated by them as the income tax return filer.
Statement 2: The income tax return of husband and wife must be signed by both spouses.
a. Both statements are correct.
b. Both statements are wrong.
c. Statement 1 is correct, but Statement 2 is wrong.
d. Statement 1 is wrong, but Statement 2 is correct.
99.
Which statement is wrong:
a. The income tax return of a receiver of a corporation is the income tax return of the corporation.
b. The income tax of a minor, unmarried child, from personal services, filed by the guardian of the
child, is an income tax return of the child.
c. The income tax return of a person under disability, from services, or from property, filed by the
guardian, is an income tax return of the child.
d. The income tax return by an agent or authorized representative of the taxpayer, as indicated in the
return, is under the sole responsibility of the agent or authorized representative.
100.
A corporation which is included in exempt corporation under Section 30 of the National Internal
Revenue Code. (e.g., organized and operated for charitable purposes) which did not file its article of
incorporation and by-laws with the Bureau of Internal Revenue:
a. Is required to file an income tax return and paid 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.
101.
A general professional partnership is exempt from income tax, but is required to file an income tax
return:
a. For statistical purposes.
b. Because the net income of the partnership will be traced into the income tax return of the partners.
c. Because all income earners are required to file income tax return.
d. None of the above.
102.
When an individual taxpayer is under temporary disability:
a. Income tax return is required to be filed for him by his guardian.
b. No income tax return is required of him.
c. Income tax return for the period when he was under disability shall be required only when
becomes able.
d. None of the above statements are correct.
103.
Statement 1. A corporation with an annual income tax paid or payable of at least P1,000,000 for the
preceding taxable year is a large taxpayer.
Statement 2. When a corporation is dissolve and is under receivership, the corporation is still the
taxpayer until the close of the liquidation.
a. First statement is correct, while second statement is wrong.
b. First statement is wrong, while second statement is correct.
c. Both statements are correct.
d. Both statements ate wrong.
12
Multiple Choice Questions
CPA Reviewer in Taxation
104.
Which statement is wrong? When an individual, notwithstanding withholding income tax during the
year on his compensation income, is required to file an income tax return at the end of the year, he:
a. May pay the income tax into two installments if the income tax on his taxable income for the year,
before credit for withholding income tax, exceeds P2,000.
b. May pay the income tax into two installments if the income tax on his taxable income for the year,
after credit for withholding income tax exceeds P2,000.
c. May credit the income tax withheld against the first installment tax due.
d. May still pay the income tax in one lump sum even if it exceeds P2,000 and credit the withholding
income tax against it.
105.
Which of the following withholding income tax should be remitted to the Bureau of Internal Revenue as
a final tax?
a. Withholding income tax and compensation income.
b. Withholding income tax on certain passive income.
c. Withholding income tax under the Expanded Withholding Tax System.
d. All of the above.
106.
Dividend received from a foreign corporation shall be subject to withholding income tax if:
a. In all cases where the foreign corporation had business in the Philippines.
b. In all cases where the foreign corporation engaged in business in the Philippines had more than
fifty percent of its world gross income for the three-year period preceding the declaration of
dividend derived from Philippine sources.
c. In all cases where the foreign corporation engaged in business in the Philippines had more than
eighty-five percent of its world gross income for the three-year preceding the declaration of
dividend derived from Philippine sources.
d. None of the above.
107.
Which is not a creditable withholding income tax?
a. Expanded withholding income tax.
b. Withholding income tax on passive income on passive income.]
c. Withholding income tax at source.
d. None of the above.
108.
One of the following statements is correct. A choice by an individual of the Optional Standard
Deductions means that:
a. His income tax return need not be accompanied by financial statements.
b. He need not keep books of accounts.
c. He need not have records of gross income.
d. His choice can still be changed by filing an amended return.
109.
Which of the following is a taxpayer required to file an income tax return?
a. An estate which is under administration.
b. A trust where the fiduciary must accumulate the income of the trust.
c. A trust where the fiduciary may accumulate or distribute the income of the trust, at his discretion.
d. All of the above.
110.
Which is correct? The income tax return shall be accompanied by the following:
a. Statement of Net Worth and Operations, if the gross receipts from business or profession do not
exceed P50,000 in any one quarter.
b. Balance Sheet and Income Statement, if the gross receipts from business or profession exceed
P50,000, but do not exceed P150,000 in any one quarter.
c. Balance Sheet and Income Statement certified by an independent Certified Public Accountant if
the gross receipts from business or profession exceed P150,000 in any one quarter.
d. All of the above.
111.
Statement 1. A donation on which the donor’s tax was not paid is not a valid donation.
Statement 2. Title to the donated real property cannot be transferred to the donee in the Register
Deeds unless the donor’s tax on the donation had been paid.
a. Both statements are correct.
b. Both statements are wrong.
c. The first statement is correct while the second statement is wrong.
d. The first statement is wrong while the second statement is correct.
112.
One of the following is not an excise tax in the Tax Code.
a. Value-added tax.
b. Community tax.
c. Income tax.
d. Percentage tax.
13
Multiple Choice Questions
CPA Reviewer in Taxation
113.
One of the following statements is wrong: books of accounts are required to be kept, as follows:
a. Where the quarterly gross sales, earnings, receipts or output do not exceed P50,000, a simplified
set of bookkeeping records.
b. Where the quarterly gross sales, earnings, receipts or output exceed P50,000 journal and ledger,
or their equivalent.
c. Where the gross quarterly sales, earnings or output exceed P150,000, the books shall be
examined and audited by independent Certified Public Accountants.
d. May be in language other than native, English or Spanish as long as it is in the language of the
taxpayer.
114.
Statement 1; Books of accounts shall be preserved for a period beginning from the last entry in such
books until the expiration of the period of assessment (on transactions recorded there) that may be
made by the Bureau of Internal Revenue.
Statement 2: In the case of the taxpayers whose gross sales, earnings or receipts in any quarter
exceed P150,000, the books of account should be audited and examined by independent Certified
Public Accountants and their income tax returns accompanied with certified financial statements.
a. Both answers are correct.
b. Both answers are wrong.
c. First statement is correct but second statement is wrong.
d. First statement is wrong but second statement is correct.
115.
Mr. Araki, a non-resident alien stockholder, received a dividend income of P300,000 in 2004 from a
foreign corporation doing business in the Philippines. The gross income of the foreign corporation
within and without the Philippines for three years preceding 2004 are as follows:
Sources of Income
2001
From within the Philippines
P16,000,000
From without the Philippines
18,000,000
2002
P12,000,000
14,000,000
2003
P14,000,000
16,000,000
How much of the dividend income received by Mr. Araki is considered income from sources within
the Philippines?
a. Zero.
b. P150,000.
c. P270,000.
d. Answer not given.
116.
The following information are from the records of the Central Plain University, Inc., a private
educational institution, for the fiscal year ended May, 31, 2003:
Income:
Miscellaneous fees
Tuition fees
Income from rents
Net income, school canteen
Net income, book store
Dividends
Interest on time deposits
Expenses: Payroll and administrative salary
Other operating expenses
Interest on P750,000 bank loan
Depreciation, new six-room building
P
362,600
2,843,100
60,000
36,200
24,800
15,000
45,000
1,452,450
762,330
82,100
37,500
In the first month of the fiscal year, the school secured a loan from a bank in the amount of P750,000.
The proceeds of the loan were spent in the construction of a new six-room building.
How much is the income tax due from the Central Plain University, Inc. for the fiscal year ended May
31, 2003?
a. P101,935.
b. P 26,935.
c. P105,685.
d. P30,685.
117.
The West Central College, Inc. is a private educational institution recognized by the Government. It
submitted the following data for the fiscal year ending April 30, 2004:
Tuition fees
Miscellaneous fees
Cash dividends from domestic corporation
Income from book store
Interests on bank deposit
Income of school canteen
P 9,500,000
1,200,000
80,000
350,000
70,000
180,000
14
Multiple Choice Questions
CPA Reviewer in Taxation
Salary, allowances and bonus
Other operating expenses
Other expenditures for improvement of school facilities:
Construction of additional classrooms
Furniture and equipment of library
6,400,000
2,600,000
1,300,000
400,000
The income tax due for the fiscal year ending April 30, 2004:
a. P223,000.
b. P61,000.
c. P780,000.
d. P53,000.
118.
The Central Luzon University, Inc. is a private educational institution recognized by the Government.
The following are financial data for its fiscal year ending April 30, 2004:
Tuition fees
P12,800,000
Miscellaneous fees
2,100,000
Interest on bank deposits
15,000
Rent income from school canteen
120,000
Salary and bonus, all personnel
8,500,000
Other operating expenses
3,750,000
Construction of classroom building
2,150,000
Repayment of loan
500,000
Quarterly (three quarters) income tax paid
36,000
The income tax still payable by the Central Luzon University, Inc. for the year ended April 30, 2004:
a. P62,000.
b. P241,000.
c. P27,580.
d. P26,000.
119.
Mrs. Evangelista owns a parcel of land worth P500,000 which she inherited from her father in 2003
when it was worth P300,000. Her father purchased it in 1990 for P100,000. If Mrs. Evangelista transfer
this parcel of land to her wholly owned corporation in exchange for shares of stocks of said corporation
worth P450,000, Mrs. Evangelista’s taxable gain is:
a. Zero.
b. P50,000.
c. P150,000.
d. Answer not given.
120.
Mr. Santiago purchased a life annuity for P100,000 which will pay him P10,000 a year. The life
expectancy of Mr. Santiago is 12 years. Which of the following will Mr. Santiago be able to exclude
from his gross income?
a. P100,000.
b. P10,000.
c. P20,000.
d. Answer not given.
121.
A store building was constructed on January 2, 1999 with a cost of P570,000. Its estimated useful life
is 16 years with scrap value of P70,000 after 16 years. In January, 2004 replacement of some wornout parts of the building costing P50,000 was spent. After the repairs, the building was appraised with
a fair market value of P770,000. The allowable deduction for depreciation for the year 2004 is:
a. P35,794.45.
b. P43,750.00.
c. P49,431.82.
d. Answer not given.
122.
Mr. Monte was injured in a vehicular accident in 2001. He incurred and paid medical expenses of
P20,000 and legal fees of P10,000 during the year. In 2004, he received P70,000 as settlement from
the insurance company which insured the car owned by the other party involved in the accident. From
the above payments and transactions, the amount of taxable income to Mr. Monte in 2004:
a. Zero.
b. P40,000.
c. P70,000.
d. Answer not given.
15
Multiple Choice Questions
123.
CPA Reviewer in Taxation
On different dates as listed below, Mr. Santos purchased common stock of ABC Corporation. On
May 31, 2004, he received a 50% stock dividend.
Lot
No.
1
2
3
4
Date
Purchased
Oct. 15, 2003
Jan. 15, 2004
Mar. 15, 2004
May. 15,2004
No. of
Shares
400
300
200
100
Cost
Per Share
P 100.00
120.00
140.00
150.00
Total
Cost
P40,000.00
36,000.00
28,000.00
15,000.00
On June 30, 2004, Mr. Santos sold 1,400 shares at P100.00 per share.
Using the first-in-first-out method, the gain or (loss) of Mr. Santos is:
a. P31,000.
b. P(26,600).
c. P28,938.
d. Answer not given.
124.
Mr. Rivera leased his land to Mr. Gomez. The terms of the contract of lease is for fifteen (15) years
and the rental fee is P36,000 a year. The contract provides that Mr. Gomez, the lessee, will construct
a building and at the end of the term of the contract, the building will be owned by Mr. Rivera, the
lessor. The building was constructed at a cost of P600,000 and has a useful life of 30 years.
Assuming Mr. Rivera will spread his income over the term of the contract of lease, for income tax
purposes, his yearly income is:
a. P40,000.
b. P56,000.
c. P76,000.
d. P20,000.
125.
Mr. Pascual bought a 200 square meter land at a cost of P500,000. He leased the land to Mr. Franco
at an annual rental of P40,000. The term of the contract of lease is 15 years. The contract of lease
provides that Mr. Franco will construct a building which will belong to the lessor at the end of the term
of the lease or at the termination of the lease, the building was constructed at a total cost of P400,000
and has an estimated useful life of 20 years which is the basis of a straight-line method of
depreciation.
Assuming that Mr. Pascual will spread his income over the term of the contract of lease, the annual
income of Mr. Pascual is:
a. P46,666.66.
b. P26,666.66.
c. P66,666.66.
d. P40,000.
Assuming the contract of lease was terminated after the tenth (10th) year or at the beginning of the
eleventh (11th) year due to the fault of the lessee, the income of Mr. A Pascual in the eleventh (11 th)
year is;
a. P173,333.34.
b. P200,000.
c. P133,333.34.
d. P400,000.
126.
Mr. B, married, is a citizen and resident of the Philippines. He had the following data on income and
expenses:
Salaries, net of P7,000 SSS, Philhealth,
Pagibig contributions, and labor union dues
Thirteen month pay
Allowances
Gain on sale of asset
P88,000
8,000
16,000
10,000
The income tax withheld on compensation income:
a. P11,015.
b. P8,900.
c. P7,975.
d. P9,875.
127.
In question 126, if the income tax was withheld correctly by the employer, income tax still due at the
end of the year is:
a. P2,640.
b. P14,203.
c. P2,000.
d. P1,900.
16
Multiple Choice Questions
128.
CPA Reviewer in Taxation
Mr. Richard Conception, a citizen and resident of the Philippines, married to Mrs. Dawn SeseConception, with the mother of Mrs. Conception living with the spouses, had the following data for
2004:
Mr.
Gross income from business
P220,000
Gross income from profession,
net income of a 10% withholding tax
Rent income from land and building
Dividend from domestic corporation
Interest on notes receivable
2,000
Interest on Philippine currency
bank deposit
3,000
Capital gain on sale directly to buyer at
P280,000 of shares of domestic
corporation
80,000
Capital gain on sale directly to buyer at
P2,000,000 of land in the Philippines
Interest on government bonds
Capital loss thru the Philippine
Stock exchange at P60,000 of shares of
domestic corporation
Income tax withheld on rent at 5%
Income tax withheld on professional
fees at 10%
Expenses, business/profession
150,000
Mrs.
Mr. & Mrs.
P180,000
P48,000
10,000
1,000
2,000
8,000
300,000
5,000
5,000
2,400
20,000
120,000
10,000
The capital gain taxes paid within the year;
a. P 8,150.
b. P108,000.
c. P124,000.
d. P108,150.
129.
In Question 128, the final tax paid on passive income within the year:
a. P2,500.
b. P2,600.
c. P3,200.
d. P4,600.
130.
In Question 128, the taxable income before personal exemption of Mr. Concepcion:
a. P54,000.
b. P73,000.
c. P91,000.
d. P92,000.
131.
In Question 128, the taxable income after personal exemption of Mr. Concepcion is:
a. P59,000.
b. P91,000.
c. P75,000.
d. P73,000.
132.
In Question 128, the taxable income before personal exemption of Mrs. Concepcion:
a. P68,000.
b. P63,000.
c. P105,000.
d. P100,000.
133.
In Question 128, the taxable income after personal exemption of Mrs. Concepcion:
a. P73,000.
b. P82,000.
c. P68,000.
d. P80,000.
134.
Mr. A married, had the following data for a taxable year:
Gross income, Philippines
Gross income, United States
Expenses, Philippines
Expenses, United States
P380,600.28
255,304.65
194,269.03
193,248.39
17
Multiple Choice Questions
CPA Reviewer in Taxation
If the taxpayer is a resident citizen of the Philippines who is married, his taxable income is:
a. P216,387.
b. P216,387.51.
c. P154,331.25.
d. P154,331.
135.
If in Question 134, the taxpayer was a citizen of the Philippines with residence in the United States
who is married, the taxable income is:
a. P216,387.
b. P216,387.51.
c. P154.331.25.
d. P154,331.
136.
If in Question 134, the taxpayer was a non-resident alien engaged in business in the Philippines who
is married and the law of his country allows full reciprocity on personal exemption, the taxable income
is:
a. P216,387.
b. P216,387.51.
c. P154,331.25.
d. P154,331.
137.
If in Question 134, the taxpayer was a non-resident alien not engaged in business in the Philippines
who is married, the taxable income is:
a. P186,331.25.
b. P380,600.28.
c. P154,335.25.
d. P380,600.
138.
A corporation, in its first year of operations, had the following data:
Gross income
Expenses
Philippines
P400,000
200,000
Foreign
P300,000
200,000
The taxable income, if domestic corporation and the data are on business, is:
a. P200,000.
b. P300,000.
c. P100,000.
d. P400,000.
139.
If in Question 138, the taxpayer is a resident corporation, and the data are on business, the taxable
income:
a. P200,000.
b. P300,000.
c. P100,000.
d. P400,000.
140.
If in Question 138, the taxpayer is a non-resident corporation, and the income and expenses are on
isolated transaction, the taxable income is:
a. P200,000.
b. P300,000.
c. P100,000.
d. P400,000.
141.
A domestic corporation, in its fifth year of operations in 2002, had the following data:
Sales
Cost of sales
Business expenses
P2,000,000
1,000,000
950,000
The income tax of the corporation is:
a. P17,000.
b. P20,000.
c. P1,000.
d. P340,000.
18
Multiple Choice Questions
142.
CPA Reviewer in Taxation
In 2002, a domestic corporation was in its sixth year of operations. The following data are for the years
2001 and 2002:
2001
2002
Gross profit from sales
P600,000
P700,000
Business expenses
580,000
650,000
The income tax for 2001 is:
a. P12,000.
b. P6,800.
c. P4,000.
d. P20,400.
143.
In Question 142, the income tax due fro 2002 is:
a. P10,400.
b. P16,500.
c. P11,300.
d. P17,000.
144.
In year 2002, a domestic corporation had the following data:
Sales
Cost of sales
Business expenses
P4,000,000
1,500,000
1,000,000
The gross income tax of the corporation is:
a. P375,000.
b. P480,000.
c. P600,000.
d. P125,000.
145.
D. Co. is a domestic corporation with the following data for 2002 (first year of operations):
Gross profit from sales
P2,000,000
Dividend from domestic corporation
20,000
Capital gain on sale of land in the Philippines held for two
years (sold at P1,000,000)
200,000
Capital gains on sale of shares of domestic corporation held for two
months (direct sale to buyer)
120,000
Business expenses
1,100,000
Capital loss on bonds of domestic corporation held for 6 months
30,000
The total capital gains taxes for the year:
a. P64,000.
b. P54,000.
c. P67,000.
d. P0.
146.
In Question 145, the normal tax of the corporation at the end of the year:
a. P327,000.
b. P1,070,000.
c. P288,000.
d. P900,000.
147.
Selected cumulative balances were taken from the records of ABC Co., Inc., a domestic corporation,
of its fourth year of operations in 2002, which had an income tax refundable of P10,000 for a
preceding year for which there is a certificate of tax credit:
1stQ
Gross profit from sales
800,000
Capital gain on sale directly to buyer of
shares of domestic corporation
50,000
Dividend from domestic corporation
10,000
Interest on Philippine currency bank deposit
5,000
Business expense
600,000
Income tax withheld
15,000
The income tax due at the end of the first quarter:
a. P39,000.
b. P45,000.
c. P55,000.
d. P60,000.
19
2ndQ
3rdQ
Year
1,600,000 2,400,000 3,100,000
50,000
50,000
100,000
10,000
20,000
20,000
10,000
15,000
20,000
1,200,000 1,700,000 2,100,000
35,000
65,000
115,000
Multiple Choice Questions
CPA Reviewer in Taxation
148.
In Question 147, the income tax due at the end of the second quarter:
a. P50,000.
b. P70,000.
c. P140,000.
d. P44,000.
149.
In Question 147, the income tax due at end of the third quarter:]
a. P66,000.
b. P50,000.
c. P75,000.
d. P140,000.
150.
In Question 147, the income tax due (or refundable) at the end of the year:
a. P245,000.
b. P350,000.
c. (P10,000).
d. P46,000.
151.
A domestic corporation had the following data for 2002, the accumulated earnings for which year the
Bureau of Internal Revenue considered to be improper:
Sales
Cost of sales
Business expense
Interest on Philippine currency bank deposit
Capital gain on sale directly to buyer of shares of domestic
corporation
Dividend income from domestic corporation
Dividend declared and paid during the year
P6,000,000
2,000,000
1,000,000
50,000
120,000
60,000
500,000
The improperly accumulated earnings tax is:
a. P175,300.
b. P221,000.
c. P171,000.
d. P323,000.
152.
AB is a general professional partnership, with A, married, and B, single, participating equally in the
income and expenses. The following are data for the partnership and the partners in a calendar year:
Gross income
Expenses
AB
P600,000
350,000
A
P150,000
70,000
B
P200,000
120,000
The gross income of A from the partnership is:
a. P300,000.
b. P125,000.
c. P600,000.
d. None.
153.
In Question 152, the taxable income of A is:
a. P80,000.
b. P205,000.
c. P173,000.
d. Some other amount.
154.
The YZ & Co. is a general partnership in trade, in its fifth year of operations. In one calendar year it
had a gross profit from sales and business expenses of P2,000,000 and P1,000,000, respectively. Y
and Z share equally in the profits and losses of the partnership.
The income tax of the partnership is:
a. P40,000.
b. P320,000.
c. P640,000.
d. P0.
20
Multiple Choice Questions
CPA Reviewer in Taxation
155.
The income tax of Mr. Y as a consequence of being a partner in the YZ Partnership is:
a. P0.
b. P68,000.
c. P77,000.
d. P32,000.
156.
Thirteenth month pay
Christmas bonus
Productivity incentives pay
P25,000
5,000
8,000
The taxable compensation income is:
a. P38,000.
b. P13,000.
c. P8,000.
d. P1,000.
157.
Mr. A was insured under an endowment policy with a value of P500,000. Total premiums paid by him
during the term of premiums payments on the policy was P490,000, from which there was a return of
P40,000. At the maturity of the policy, Mr. A received P500,000. The income of Mr. A under the policy
is:
a. Zero.
b. P500,000.
c. P10,000.
d. P50,000.
158.
A is an employee in a firm that gives benefits to its rank-and-file employees. He received the
following in a year: Salaries, net of SSS, Philhealth, and Pagibig contributions, and of labor union
dues, P360,000; Thirteenth month pay, 30,000; Productivity incentives pay, 30,000; Mid-year bonus,
15,000; Christmas bonus, 30,000; Rice subsidy, 20,000.
The compensation income of A subject to income tax is:
a. P590,500.
b. P443,000.
c. P473,000.
d. P290,500.
159.
Received by the taxpayer under policies:
Proceeds of life insurance (as beneficiary of mother)
Proceeds of life insurance (as beneficiary of father)
Insurance purchased from the father at cost to taxpayer of
Additional premiums paid by the taxpayer to continue the policy
Amount received upon the death of the father
Proceed of endowment policy, upon maturity, with premium payments
made of P800,000
Proceeds of comprehensive car insurance
Crop insurance, from crop destroyed by typhoon
P400,000
600,000
200,000
50,000
500,000
1,000,000
100,000
50,000
The income from the amounts received is:
a. P2,300,000.
b. P500,000.
c. P600,000.
d. P50,000.
160.
Cost of leasehold improvement
Estimated useful life of improvements
Remaining term of the lease
P1,000,000
50 years
40 years
Income from the improvements, if reported in one lump sum:
a. P1,000,000.
b. P800,000.
c. P200,000.
d. 100,000.
161.
In Question 160, if the income from the improvements is reported annually, the annual income is:
a. P 5,000.
b. P 4,000.
c. P200,000.
d. P20,000.
21
Multiple Choice Questions
CPA Reviewer in Taxation
162.
In Question 160, if the income from the improvements was reported annually, and at the beginning of
the twenty-first year of the improvements, when the fair market value thereof was P250,000, the lessor
took possession of the improvements, his income in Year 21 is:
a. P250,000.
b. P100,000.
c. P150,000.
d. P50,000.
163.
In Question 160, if the income was reported annually, and the leasehold improvements were
destroyed by fire before the end of Year 10, when the fair market value was P800,000 and insurance
recovery for the lessor was P40,000 only, the deductible loss of the lessor is:
a. P5,000.
b. P800,000.
c. P700,000.
d. P45,000.
164.
Recovery of bad debt written off by a taxpayer:
No.1: P20,000 from accounts written off in a year which had a net income of P200,000 before
write-off (write-off for the year was P20,000).
No. 2: P5,000 from accounts written off in a year which had a net loss before write-off of P36,000
(write-off for the year was P5,000).
No. 3: P10,000 from accounts written off in a year which had a net loss income of P8,000 before
write off and a write off for P12,000.
The income from the bad debt recovery is:
a. P35,000.
b. P20,000.
c. P26,000.
d. P30,000.
165.
Mr. Joey Baretto, a citizen and resident of the Philippines, sold to Martin Manzano on July 1, 1998 a
piece of land held as capital asset in the Philippines at a selling price of P5,000,000. The land had a
cost of P2,500,000 and at the time of the sale had a fair market value of P6,000,000 and a mortgage
of P2,000,000, which mortgage was assumed by Mr. Manzano. The sale called for a payment of
P300,000 on the date of sale and P200,000 on December 1, 1998. the balance shall be paid in
installments of P500,000 each on December 1, 1999, December 1, 200, December 1, 2001,
December 1, 2002 and December I, 2003. Mr. Baretto will pay the tax on the transaction in
installments, if qualified
The “initial payments” was:
a. P300,000.
b. P500,000.
c. P700,000.
d. None of the above.
166.
In Question 165, the contract price was:
a. P3,000,000.
b. P2,000,000.
c. P2,500,000.
d. None of the above.
167.
In Question 165, the tax paid on the payment received on July 1, 1998 was:
a. P20,000.
b. P50,000.
c. P30,000.
d. P36,000.
168.
Selling price of land in the Philippines held as capital asset
Fair market value of the land at the time of sale
Cost of land
Payments on the selling price:
Assumption by the buyer of a mortgage on the property
Cash in the year of sale
Cash in the succeeding year
The capital gain tax in the year of sale (installment, if qualified):
a. P17,647.05.
b. P53,333.33.
c. P44,444.44.
d. P100,000.00.
22
P1,700,000
2,000,000
800,000
900,000
300,000
500,000
Multiple Choice Questions
169.
CPA Reviewer in Taxation
The taxpayer is a domestic corporation and the taxable year is 2003. it sold a piece of land and
building abroad held as capital asset at a selling price of P5,000,000 with payment in one lump sum.
The capital gain tax:
a. P0.
b. P250,000.
c. P300,000.
d. None of the above.
170.
A citizen of the Philippines sold his principal residence in the Philippines at a selling price equal to its
fair market value of P4,000,000. The basis or cost of the property was P2,500,000.
If the entire proceeds of the sale is immediately invested in acquiring a net principal residence, the
capital gain tax is:
a. P240,000.
b. P200,000.
c. P0.
d. Some other amount.
171.
In Question 170, how much is the basis of the new principal residence?
a. P0.
b. P249,000.
c. P2,500,000.
d. Some other amount.
172.
In Question 170, if only P3,000,000 out of P4,000,000 was utilized in acquiring a new principal
residence, the capital gain tax is:
a. P60,000.
b. P240,000.
c. P180,000.
d. Some other amount.
173.
Calendar year 2002
Taxpayer is a citizen of the Philippines who is single:
Capital gain on sale of bonds held for 20 months
P50,000
Capital gain on direct sale to buyer of shares of domestic
corporation held for 6 months
120,000
Capital loss on sale of family car held for 11 months
80,000
Capital loss on sale of land in the Philippines held for 3 years
60,000
Net capital loss in 2001 (net taxable income of the year was
P10,000)
20,000
Total capital gains to consider at the end of the year:
a. P145,000.
b. P25,000.
c. P120,000.
d. P130,000.
174.
In Question 173, the net capital loss carry-over from 2001 would have been:
a. P40,000.
b. P55,000.
c. P10,000.
d. P0.
175.
Calendar year 2002:
Taxpayer is a citizen of the Philippines who is single
Capital gain on sale of bonds held for 2 months
Capital gain on sale directly to buyer of shares of domestic corporation
held for 16 months
Capital loss on sale of family car held for 5 years
Capital loss on sale of land in the Philippines held for 3 years on a selling
price of P800,000
Net capital loss in 2001 (net taxable income of the year was P30,000)
The net capital gain in 2002 was:
a. P50,000.
b. P5,000.
c. None.
d. Some other amount.
23
P45,000
120,000
80,000
60,000
20,000
Multiple Choice Questions
CPA Reviewer in Taxation
176.
In Question 175, the net capital loss carry over to 2002 was:
a. P5,000.
b. P20,000.
c. P30,000.
d. Some other amount.
177.
Capital stock issued and outstanding of domestic corporation – Common only
Stock owned:
Acquisition No. 1: 100 shares acquired at P120 per share;
Acquisition No. 2: 50 shares acquired at P130 per share.
Stock dividend received: (Acquisition No. 3) – 20%;
Shares sold directly to a buyer – 110 shares at P110 per share.
If costing is under the FIFO method, the capital gain tax is:
a. P118.
b. P55.
c. P160.
d. P110.
178.
In Question 177, if costing is under the moving average method, the capital gain tax is:
a. P35.75.
b. P121.67.
c. P39.72.
d. P68.60.
179.
Property held by an individual as capital asset (not real property or shares of stock) was sold in 2001.
Data on the property follow:
Selling price
Cost
Payment in 2002
Payment in 2003
Holding period
P60,000
10,000
15,000
45,000
2 years
Capital gain on installment (if opted to) in 2002?
a. P6,250.
b. P12,500.
c. P25,000.
d. P25,500.
180.
In Question 179, capital gain in installment (if opted) in 2003?
a. P50,000.
b. P25,000.
c. P18,750.
d. P37,500.
181.
In 2002, a taxpayer borrowed money from Bank A, that gave him an interest expense of P8,000. He
deposited the money with Bank B, and he had an interest income of P10,000. The deductible interest
expense is:
a. P8,000.
b. P3,900.
c. P4,200.
d. None of those mentioned.
182.
A domestic corporation had:
Year
1998
1999
2000
2001
2002
Gross profit
from business
P600,000
500,000
900,000
850,000
920,000
The taxable income in 2001:
a. P50,000.
b. P0.
c. Loss – (P20,000).
d. Some other amount.
24
Business
Expenses
P700,000
470,000
850,000
900,000
620,000
Multiple Choice Questions
CPA Reviewer in Taxation
183.
In Question 182, the taxable income in 2002 is:
a. P250,000.
b. P0.
c. P300,000.
d. Some other amount.
184.
A taxpayer, a resident citizen who is married, with six qualified dependent children, had a gross
compensation income of P180,000, net of exclusions from gross compensation income, premium
payments on health insurance for the family of P4,000, and expenses related to his employment of
P70,000.
The taxable income is:
a. P113,600.
b. P116,000.
c. P177,600.
d. Some other amount.
185.
The taxpayer is a resident citizen who is married, with gross income from business of P500,000,
business expenses with supporting receipts of P40,000 and premiums on health insurance of P3,000.
If choosing the itemized deductions from gross income, the taxable income is:
a. P460,000.
b. P428,000.
c. P418,000.
d. Some other amount.
186.
In Question 185, if the taxpayer chose the Optional Standard Deduction, the taxable income is:
a. P460,000.
b. P450,000.
c. P418,000.
d. Some other amount.
187.
A citizen who is married, had the following data in 2000:
Gross revenues from services
Capital gain on sale of asset held for 2 years
Dividend from resident corporation
Direct costs of the services
Capital loss on sale of asset held for 6 months
P400,000
10,000
15,000
100,000
5,000
If choosing the Optional Standard Deduction, the taxable income is:
a. P288,000.
b. P256,000.
c. P246,000.
d. Some other amount.
188.
In 2002, an employer gave the following fringe benefits, in cash and in kind, to its employees:
To management level employees
To rank-and-file employees
P2,040,000
5,000,000
The fringe benefit tax is:
a. P960,000.
b. P652,000.
c. P680,000.
d. Some other amount.
189.
In Question 188, the deduction from the gross income of the employer for Fringe Benefit Expense is:
a. P3,000,000.
b. P2,040,000.
c. P8,000,000.
d. P7,040,000.
190.
Journal entry: (Debit) Fringe benefit expense
(Debit) Fringe benefit tax expense
(Credit) Cash
(Credit) Fringe benefit tax payable
25
P389,000
136,000
P389,000
136,000
Multiple Choice Questions
CPA Reviewer in Taxation
Means that the grossed-up monetary value of the fringe benefits to supervisory personnel had a
gross monetary value of:
a. P425,000.
b. P289,000.
c. P186,000.
d. P389,000.
191.
In Question 190, the monetary value of the fringe benefit to the rank-and-file employees is:
a. P425,000.
b. P100,000.
c. P289,000.
d. P389,000.
192.
A management employee borrowed from his employer (advances against salaries) P120,000,
payable from his salaries at P5,000 every payday (fifteen days). Since check-off was to be made
against salaries, there was no interest charged to the loan.
The fringe benefit tax is:
a. P0.
b. P14,400.22.
c. P6,776.47.
d. P21,178.49.
193.
Included in the compensation package of an executive was the free use of the company’s residential
condominium unit in Makati City, Philippines. Data on the condominium unit follow:
Fair market value in the Real Property Declaration
P1,000,000
Zonal value
2,000,000
Fair market value
2,500,000
The monthly gross monetary value of the fringe benefit is:
a. P1,500,000.
b. P2,000,000.
c. P6,127.45.
d. P4,166.67.
194.
In Question 193, how much is the fringe benefit tax?
a. P326,400.
b. P705,832.35.
c. P1960.78.
d. P945,176.47.
195.
A corporation bought a piece of land with a building at a cost of P4,000,000 for the land and
P1,000,000 for the building. It was not the intention of the corporation to use the building but to have it
razed to make the land available for the construction of its offices. Upon razing the old building at a
cost of P200,000, the corporation shall have a deductible loss of:
a. P0.
b. P1,000,000.
c. 1,200,000.
d. P200,000.
196.
A Co. had investments in shares of stock of B Co. that it acquired at a cost of P20,000. It also had
investment in shares of stock of C Co. That it acquired at a cost of P40,000. The value of the shares
of stock of B Co. had decreased to P15,000, while the share of stock of C Co. are now worthless, and
has to be written off.
The deductible loss is:
a. P45,000.
b. P40,000.
c. P60,000.
d. P0.
197.
Contributions and donations were made by a taxpayer, as follows:
To the Quiapo Catholic Church
To the Society for the Blind, Inc., Philippines
To beggars in the streets
To the Sistine Chapel in Rome
P15,000
10,000
5,000
20,000
26
Multiple Choice Questions
CPA Reviewer in Taxation
The actual contributions to be compared with the 5%/10% limitation is:
a. P50,000.
b. P25,000.
c. P45,000.
d. P20,000.
198.
Husband and wife, with five qualified dependent children, (with husband claiming the additional
exemptions) had the following data for 2002:
Wife:
Salaries
P180,000
Thirteenth month pay
15,000
Premiums on health insurance paid
5,000
Husband:
Sales
2,000,000
Dividend from domestic corporation
20,000
Dividend from resident corporation
15,000
Interest on Philippine currency bank deposit
100,000
Royalty from patented invention
60,000
Royalty from books
30,000
Capital gains on assets held for not more than 12 months:
On sale directly to buyer of shares of domestic corporation
135,000
On sale directly to buyer on bond of domestic corporation
40,000
On sale thru the Philippine Stock Exchange of shares of
domestic corporation
60,000
On sale thru a real estate broker of land in the Philippines
(fair market value-P2,800,000, selling price-P3,000,000)
500,000
On sale of vacation house and lot in Malaysia
200,000
Cost of sales
980,000
Capital loss on asset held for more than 12 months:
On sale directly to buyer of land in Indonesia
250,000
On sale of family car
100,000
On sale directly to buyer of bonds of domestic corporation
25,000
Contributions to churches
5,000
Business expenses
500,000
The income tax withheld on the compensation income is:
a. P20,400.
b. P24,500.
c. P32,650.
d. P35,400.
199.
In Question 198, the final tax on passive income is:
a. P35,000.
b. P39,200.
c. P20,000.
d. P37,000.
200.
In Question 198, the capital gain tax on real property:
a. P150,000.
b. P180,000.
c. P100,000.
d. P120,000.
201.
In Question 198, the capital gain tax on shares of stock:
a. P8,500.
b. P17,000.
c. P13,500.
d. P27,000.
202.
In Question 198, the net capital gain (loss) at the end of the year:
a. P105,000.
b. P(135,000).
c. P52,500.
d. P40,500.
27
Multiple Choice Questions
CPA Reviewer in Taxation
203.
In Question 198, the income tax due at the end of the year from the husband and wife:
a. P155,790.
b. P130,920.
c. P163,245.
d. P145,364.
204.
The year is 2002. a domestic corporation in its sixth year of operations had a gross profit from sales
of P2,500,000, and net income per books of P700,000 after considering:
Dividend income:
From domestic corporation
From resident corporation
Interest income:
From trade notes receivable
From Philippine currency bank deposits
Capital gain on sale at P4,000,000 of land in the Philippines
held for ten years
Capital gain on sale of bonds with maturity of 10years
Capital gain on sale of shares of stock of a domestic
corporation held for eight months, sold directly to buyer
Income from trust indenture with the Equitable PCIBank
Bad debts (direct writ-off)
Salaries and wages
Taxes and licenses (including income tax on interest income and
on capital gain of P243,000)
Utilities expense
Losses
Depreciation
Pension trust
Income tax (three quarterly income taxes)
Capital loss on sale of bonds of a domestic corporation held for
two years
Dividend declared and paid
P 20,000
15,000
5,000
8,000
100,000
6,000
12,000
4,000
18,000
100,000
260,000
75,000
90,000
40,000
16,000
80,200
5,500
200,000
The income tax due from the corporation:
a. P200,984.
b. P50,000.
c. P298,758.
d. P0.
205.
In Question 204, if the accumulation of profits in 2002 is adjudged to be improper, the improperly
accumulated earnings tax (IAET) is:
a. P72,328.32.
b. P50,364.86.
c. P37,944.56.
d. P29,901.60.
206.
Mr. A sold property which had a cost to him of P110,000 for a selling price of P200,000. The sale
was on July I, 2002, and under the terms of the sale, the buyer was to assume a mortgage of
P50,000 on the property, pay P50,000 on the date of sale and P50,000 every July 1 thereafter.
The income in 2002 reported under the installment method was:
a. P22,450.
b. P30,000.
c. P90,000.
d. None of the above.
207.
Cielo Co. sold a piece of land (ordinary asset) which had a cost to it of P1,000,000 for a selling price
of P4,000,000. The sale called for an assumption by the buyer of the mortgage on the land of
P1,500,000, cash of P500,000 on the date of sale and installment payment of 500,000 every year
thereafter. The income to report in the year of sale under the installment method of reporting income
is:
a. P500,000.
b. P750,000.
c. P375,000.
d. P1,000,000.
28
Multiple Choice Questions
208.
CPA Reviewer in Taxation
Del Mundo Co. sold a piece of land (ordinary asset) which had a cost of P2,000,000 for P4,000,000
on December 1, 2000. The sale called for a payment on date of sale of P1,500,000, and the balance,
evidenced by a mortgage note for P2,500,000, payable at P1,500,000 on December 1, 2001 and
P1,000,000 on December 1, 2002. The note had a fair market value at the time of execution equal to
eighty-five percent of its face value.
a.
b.
c.
d.
The income in 2000 under the deferred payment method of reporting income:
P3,000,000.
P1,625,000.
P1,500,000.
P2,000,000.
209.
In Question 208, the income in 2001 when P1,500,000 is collected:
a. P0.
b. P235,000.
c. P225,000.
d. P1,500,000.
210.
The taxpayer is a resident citizen who is married with two qualified dependent children. For 2002
which is under investigation, he had the following data:
Net worth, beginning of the year
P400,000
Net worth, end of the year
600,000
Interest received on long-term investment in banks
2,000
Dividend on shares of stock of domestic corporation
5,000
Rent income per books (out of an advance rental of P60,000)
10,000
Income tax paid for 2001
60,000
Income tax shown on the return for 2002
29,000
Interest paid on money borrowed for use in acquiring long-term
investment
1,000
Personal, living and family expenses
100,000
Cost to repair residential house partially destroyed by fire
30,000
Premiums on family health and hospitalization insurance
77,400
Capital gain on bonds of a domestic corporation held for 8
months
30,000
Capital loss on bonds of a domestic corporation held for 18
months
70,000
The taxable income per investigation:
a. P327,000.
b. P466,000.
c. P356,000.
d. P283,000.
211.
Mr. A is not a dealer in securities. In 2002, he had the following transactions of common shares of
stock of Z Co., a domestic corporation:
Purchase on January 5, of 100 shares
Sale of June 18, of the shares purchased on January 5
Purchase on June 22, of 60 shares
Sale on October 5, of the shares purchased on June 22
P7,000
6,000
6,500
8,000
The loss not recognized on the sale of June 18:
a. P1,000.
b. P600.
c. P0.
d. Some other amount.
212.
In Problem 211, the basis of the shares purchased on June 22, 2000 is:
a. P600.
b. P7,100.
c. P6,500.
d. Some other amount.
213.
In Problem 211, the gain on the sale of October 5, 2000 is:
a. P900.
b. P1,500.
c. P0.
d. Some other amount.
29
Multiple Choice Questions
214.
CPA Reviewer in Taxation
Anson Co. was merged into Bono Co., and only Bono Co. continues to exist. Mr. Arnold Custodio, a
stockholder of Anson Co. was asked to surrender his 100 shares of Anson Co. that he acquired for
P100,000 and received under the merger 100 shares of Bono Co. with a fair market value of
P130,000 and cash of 30,000.
The gain to Mr. Arnold Custodio on the merger is:
a. P60,000.
b. P30,000.
c. P0.
d. Some other amount.
215.
In Question 214, the basis to Mr. Arnold Custodio of the shares of Bono Co. received is:
a. P100,000.
b. P130,000.
c. P70,000.
d. Some other amount.
216.
M CO., a domestic corporation, had the following data for 2000:
Taxable income, Philippines
Taxable income, X Foreign Country
Taxable income, Y Foreign Country
Income tax paid to X Foreign Country
Income tax paid to Y Foreign Country
Philippine income tax paid, three quarters of the year
P1,000,000
600,000
400,000
250,000
120,000
110,000
Tax credit for foreign income taxes paid?
a. P540,000.
b. P370,000.
c. P312,000.
d. P340,000.
217.
In Question 216, the Philippine income tax still due, after credit for foreign income taxes paid is:
a. P218,000.
b. P356,000.
c. P570,000.
d. P0.
218.
If in Question 216, the corporation chose to deduct the foreign income tax paid (instead of availing of
a foreign income tax credit), how much would have been the income tax due?
a. P521,600.
b. P640,000.
c. P411,600.
d. Some other amount.
219.
A revocable transfer, with a consideration received:
Consideration received
Fair market value of property at the time of transfer
Fair market value of property at the time of death
P200,000
300,000
250,000
Value to include in the gross estate:
a. P300,000.
b. P250,000.
c. P100,000.
d. P50,000.
220.
A decedent was married at the time of death and under the system of conjugal partnership of gains.
Among the properties in the gross estate were:
Land, inherited before the marriage, fair market value
Family home built by the spouses on the inherited land
Deduction for family home:
a. P900,000.
b. P500,000.
c. P400,000.
d. P450,000.
30
P100,000
800,000
Multiple Choice Questions
CPA Reviewer in Taxation
ANSWER KEY TO QUIZZERS
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Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “B’ is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
31
Multiple Choice Questions
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CPA Reviewer in Taxation
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
32
Multiple Choice Questions
111.
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166.
CPA Reviewer in Taxation
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer (or “D”).
Letter “A” is the correct answer (or “D”).
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “A” and “C” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
33
Multiple Choice Questions
167.
168.
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216.
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220.
CPA Reviewer in Taxation
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
Letter “C” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “B” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “A” is the correct answer.
Letter “C” is the correct answer.
Letter “D” is the correct answer.
Letter “B” is the correct answer.
34