CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION Transfer Taxes 1. Transfer Tax is a tax imposed on the privilege to transfer property ownership: A. gratuitously. C. mortis causa. B. inter vivos. D. through a will. Donor’s Tax 2. A, an individual, sold to B, his brother-in-law, his residential lot with a market value of P1,000,000 for P600,000.00. A’s cost in the lot is P100,000.00. B is financially capable of buying the lot. What tax should be imposed and collected from A as a result of the transaction? A. Donor's Tax. C. Real properly Tax. B Presumed capital gains Tax. D. Tax on the transfer of real property. 3. Who among the following donations is considered a stranger for purposes of donor's taxation? A. A first cousin of the donor. C. The donor's great grandchild. B. The brother of the donor's father. D. The mother of the donor's spouse. Estate tax 4. Which of the following should be treated as real property? A. A Porshe sports car B. An Amorsolo painting C. Shares of stock of San Miguel Corporation D. A contract for the construction of public road 5. A died in 1990 leaving all real estate owned by him with direction that such real property shall not be sold or disposed of for a period of 10 years after his death and ordered that the property be given to B upon the expiry of that period. In 1999, the estate left by A had BIR zonal value of P500,000.00. In 2009, the fair market value of said estate increased to P2,500,000.00, it was declared for taxation in 2009 for P1,500,000.00 and the BIR zonal valuation was P3,000,000.00. What value should be used for the purpose of estate taxation? A. P 500,000.00 C. P2,500,000.00. B. P1,500,000.00 D. P3,000,000.00 Business Taxes Value-Added Tax 6. Mr. Andres, VAT registered real estate dealer, transferred a parcel of land field for sale to his son as gift, on account of his graduation. For VAT purposes, the transfer is: October 2014 Preweek A. B. C. D. not subject to VAT because it is a gift. not subject to VAT because it is subject to gift tax. subject to VAT because it is considered an actual sale. subject to VAT because it is a deemed sale transaction. 7. If two or more adjacent lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots does not exceed: A. P1,919,500. C. P3,199,200. B. P2,559,200 D. P3,838,900. 8. The sale of parking lot by a VAT-registered real estate dealer shall be subject to VAT A. regardless of the amount of selling price. B. only when it is included as part of the sale of condominium unit. C. only when it is sold separately from the sale of condominium unit. D. provided the amount of selling price exceeds the threshold amount. 9. Which of the following sales to senior citizens shall not be exempt from VAT? A. Sale of single serving seat meals with beverage for an individual senior citizen B. Bulk orders which are within the context of pre-contracted or pre-arranged group meals or packages C. Sale of medicines from drug stores, hospital pharmacies, medical and optical clinics and similar establishments including non-traditional outlets dispensing medicines D. Sale of food, drinks, dessert and other consumable items served by the establishments, including value-meals and promotional meals, offered for consumption of the general public 10. During a particular year, the following gross sales/receipts subject to VAT are recorded by a taxpayer who is not VAT-registered: Gross receipts, transport of goods and cargoes P 1,000,000 Gross receipts, practice of profession 700,000 Gross sales, grocery store 800,000 Gross sales, agricultural food products in their original state 300,000 Based on the above data, will he be subject to VAT? A. No, he is not subject to VAT because- he is not VAT-registered. B. No, he is not subject to VAT because his sales/receipts in each business do not exceed the VAT threshold amount. C. Yes, he is subject to VAT because aside from the practice of his profession, he also Page 1 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES derives revenue from other lines of business which are subject to VAT and applying the aggregation rule his combined gross sales /receipts subject to VAT exceed the threshold amount. D. Answer not given. 11. A VAT-registered company acquired one vehicle for land transport for the use of an official or employee valued at P2,400,000. Which of the following statements is correct? A. The input tax on the purchase of the vehicle for land transport as well as the input taxes on maintenance expenses incurred on the said vehicle shall be allowed as input tax credit. B. The input tax on the purchase of the vehicle for land transport as well as the input taxes on maintenance expenses incurred on the said vehicle shall not be allowed as input, tax credit. C. The input tax on the purchase of the vehicle for land transport shall be allowed as input tax credit while the input taxes on maintenance expenses incurred on the said vehicle shall not be allowed as input tax credit. D. The input tax on the purchase of the vehicle for land transport shall not be allowed as input tax credit while the input taxes en maintenance expenses incurred on the said vehicle shall be allowed as input tax credit. 12. VAT withheld by a resident withholding agent on payments to non-residents shall be remitted within how many days following the end of the month the withholding was made? A. 10 days C. 20 days B. 15 days D. 25 days 13. When shall the application for tax credit certificate or refund be filed? A. Within fifteen (15) days after the close of the month B. Within twenty (20) days after the close of the quarter C. Within two (2) years after the close of the taxable month when such sales were made D. Within two (2) years after the close of the taxable quarter when such sales were made 14 In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate or refund for creditable input taxes within how many days from the date of submission of complete documents in support of the application filed? A. One hundred (100) days C. One hundred twenty-live (125) days B. One hundred twenty (120) days D. One hundred thirty (130) days 15. A VAT-registered person shall issue for every sale, barter or exchange of goods or properties October 2014 Preweek TAXATION a: A. VAT credit certificate. B. VAT invoice. C. VAT official receipt. D. VAT refund. 16. Which of the following statements is incorrect? A. The amount of VAT shall be shown as a separate item in the invoice or receipt. B. If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt. C. If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt. D. The VAT-subject seller does not have the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. 17. "A", at the time of retirement, had 1,000 pieces of merchandise which was deemed sold at a value of P20,000.00 with an output tax of P2,400.00. After retirement, "A" sold to "B" 500 pieces of these for P12,000.00. In the contract of sale or invoice, "A" stated the sales invoice number wherein the output tax on "deemed sale" was imposed and the corresponding tax. paid on the 500 pieces. He prepared the following invoice: Gross selling price P 10,800 VAT previously paid on "deemed sale: 1,200 Total P 12.000 How much is the input tax of "B"? A. P1,000 C. P2.400 B. P1,200 D. None of the choices 18. The VAT-registered purchaser in a transaction where a seller who is not VAT-registered issues an invoice or receipt showing his TIN, followed by the word "VAT": A. shall be liable to the percentage taxes applicable to the transaction. B. shall claim a refund for the erroneous VAT provided the requisite information required under the Regulations is shown on the invoice or receipt. C. shall recognize as an input tax credit the "passed on VAT" provided the requisite information required under the Regulations is shown on the invoice or receipt. D. none of the choices. 19. If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction, but fails to display prominently on the invoice or receipt the words "VAT-exempt sale", the transaction shall A. still be exempt from value-added tax. Page 2 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION B. be effectively subject to zero percent. C. be considered erroneous transaction and must be disregarded. D. become taxable and the issuer shall be liable to pay VAT thereon. 20. All persons liable to VAT such as manufacturers, wholesalers, service-providers, among others, shall be required to submit summary lists of purchases if their quarterly purchases: A. exceed P1,000,000. B. amount to P1,000,000 or less. C. regardless of the amount of quarterly purchases. D. answer not given. Questions 21 thru 23 are based on the following information. LBH Corporation sold capital goods on installment on October 1, 2014. It is agreed that the selling price, including the VAT, shall be payable in five (5) equal monthly installments. The data pertinent to the sold assets are as follows: Selling price (exclusive of VAT) P5,000,000 Passed-on VAT 600,000 Original cost of the asset 3,000,00.0 Accumulated depreciation at the time of sale 1,000,000 Unutilized input tax on sold asset 100,000 21. How much is the gain on sale of asset? [1] A. P2,000,000 B. P2,600,000 22. How much is the VAT payable? [2] A. P200,000 B. P300,000 C. P3,000,000 D. P3,600,000 C. P400.000 D. P500.000 23. How much is the creditable withholding tax of the buyer in this case? [3] A. P 8,333.33 C. P100,000.00 B. P10,000.00 D. P500.000.00 Other Percentage Taxes 24. Who shall be liable to the amusement taxes under Section 125? A. Patrons of amusement places B. Lessors of amusement places C. Proprietor, lessees, or operator of amusement places October 2014 Preweek D. None of the choices 25. Who of the following is not subject to tax on winnings under Section 126? A. Winners in cockfighting B. Owners of winning race horses C. Person who wins in horse races D. Winners from double, forecast/quinella and trifecta bets 26. Which of the following statements is incorrect? A. The percentage taxes are generally paid monthly. B. The percentage taxes are basically on sale of services. C. The percentage taxes may be shifted to customers or clients. D. An isolated transaction not in the course of trade or business will not result in a liability for a percentage tax. 27. Which of the following is incorrect? The percentage tax is: A. imposed on a sale of goods. B. a tax on a sale of sale of services. C. imposed together with the excise tax. D. imposed together with the value-added tax. Tax Remedies 28. (Phil. CPA) In which of the following cases where civil penalties of 25% or 50% imposed by the Tax Code is not applicable? A. In case of false or fraudulent return B. Failure to file certain information required by the Tax Code C. Failure or willful neglect to file the tax return within the period prescribed by law D. Failure to pay the full amount of tax shown on any return required to be filed under the law 29. The amount still due and collectible from a taxpayer upon audit or investigation. A. Deficiency C. Interest B. Delinquency D. Surcharge 30. Except for the provision in Section 222, internal revenue taxes shall be assessed within how many years after the last day prescribed by law for the filing of the return? A. Two (2) years C. Four (4) years B. Three (3) years D. Five (5) years Page 3 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES 31. (Phil. CPA) The Commissioner of Internal Revenue cannot: A. abate or cancel tax liability. B. compromise payment of internal revenue taxes. C. credit or refund taxes erroneously or illegally collected. D. compromise the criminal aspect of tax violation.already filed in court. TAXATION I - Appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180)-day period. II - Await the final decision of the Commissioner's duly authorized representative on the disputed assessment. A. I only C. Both I and II B. II only D. Neither I nor II 32. (Phil. CPA) Ms. J. Cruz filed an income tax return for the calendar year 2002 on March 10, 2003. The BIR issued a deficiency assessment income tax on April 10, 2004, which has become final. When is the last, day for the BIR to collect? A. March 10, 2006 C. April 15, 2008 B. April 15, 2006 D. April 10, 2009 37. The power to interpret the provision of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner of Internal Revenue subject to review by: A. Court of Appeals. C. Municipal Courts. B. Court of Tax Appeals. D. Secretary of Finance. 33. It refers to a plea of re-evaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both. A. Request for compassion C. Request for reconsideration B. Request for informal conference D. Request for reinvestigation Income Taxes 38. A married individual deriving income within the Philippines whose spouse is unemployed or is a nonresident citizen deriving income from foreign sources, shall be entitled to a personal exemption of: A. P40,000 only. C. P64,000 only. B. P50,000 only. D. P100,000 only. 34. It refers to a plea of re-evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present. It may also involve a question of fact or of law or both. A. Request for compassion C. Request for reconsideration B. Request for informal conference D. Request for reinvestigation 35. If the protest is not acted upon by the Commissioner's duly authorized representative within one hundred eighty (180) days counted from the date of filing of the protest in case of a request for reconsideration, the taxpayer may either: I - Appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty (180) -day period. II - Await the final decision of the Commissioner's duly authorized representative on the disputed assessment. A. I only C. Both I and II B. II only D. Neither I nor II 36. If the protest is not acted upon by the Commissioner's duly authorized representative within one hundred eighty (ISC') days counted from date of submission by the taxpayer of the required documents within sixty (60) days from the date of filing of the protest in case of a request, for reinvestigation, the taxpayer may either: October 2014 Preweek 39. Which of the following shall entitle the taxpayer to an additional exemption during the year? A. A legitimate child, 24 years old, who got married during the year B. A legally adopted child, 21 years old, who gained employment in the previous year C. A legitimate child, 25 years did. who was insane at the beginning of the year but who became well within the year D. A married minor daughter whose marriage was annulled during the year and now lives with and depends upon her parents for chief support 40. A benefactor has a qualified dependent senior citizen. For income tax purposes, which of the following statements is incorrect? A. The benefactor shall be entitled to both basic personal exemption and additional exemption. B. The benefactor shall be entitled only to the basic personal exemption allowed to head of family. C. If required to file an income tax return (ITR), the benefactor shall state therein the name, birthday and Office for Senior Citizen Affairs (OSCA) ID number of the dependent senior citizen, D. The benefactor shall register the senior citizen as his dependent and himself/herself as Page 4 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES benefactor in the RDO having jurisdiction over the place where he/she and the senior citizen resident. 41. What is the minimum corporate income tax (MCIT) rate imposed upon any domestic corporation on its gross income within and without the Philippines? A. Two percent (2%) C. Ten percent (10%) B. Five percent (5%) D. Fifteen percent (15%) 42. A domestic corporation was registered with the BIR on January 1, 2014: What year would the first MCIT be imposed on such corporation? A. 2014 C. 2018 B. 2017 D. 2020 43. A tax imposed in the nature of a penalty to the corporation to deter tax avoidance of shareholders who avoid paying the dividends tax on the earnings distributed to them by the corporation. A Capital gains tax C. Minimum corporate income tax B. Improperly accumulated earnings tax D. Optional corporate income tax 44. When shall a tax-exempt organization file its annual information return? A. On or before April 15 of each year B. On or before June 15 of each of year C. On or after December 31 of each year D. None of the choices 45. (Phil. CPA) Lots being rented when subsequently sold are classified as: A. capital assets. C. liquid assets. B. fixed assets. D. ordinary assets. 46. Which of the following retirement benefits received from private firms is not taxable? A. Received from an employer under its reasonable pension plan, employee is 51 years old and has served the company for 9 years B. Received from an employer under its reasonable pension plan, employee is 52 years old and has served the company for 11 years C. Received from an employer under its reasonable pension plan employee is 49 years old and has served the company for 12 years D. Received from an employer which has no reasonable pension plan, employee is 53 years old and has served the company for 12 years October 2014 Preweek TAXATION 47. A VAT-registered drugstore sells ten (10) pieces of prescription medicine to a Senior Citizen at an undiscounted selling price of P5.00 per piece. It issues the following receipt: Selling price (VAT-exempt) of 10 pcs. @ P5.00 each P50..00 Less: 20% discount 10,00 Amount payable by the Senior Citizen P40.00 How much is the deductible amount from the gross income of the drug store? A P10.00 C. P50.00 B. P40.00 D. None 48. The taxpayer's otherwise allowable deduction for interest expense shall be reduced by how much starting January 1.2009? A. Twenty-five percent (25%) of the interest income subjected to final tax B. Thirty-three percent (33%) of the interest income subjected to final tax C. Forty-two percent (42%) of the interest income subjected to final tax D. Forty-five percent. (45%) of the interest income subjected to final tax 49. Which of the following shall be allowed as a deduction from the gross income? A. Depreciation for vehicle for land transport used in the business the value of which exceeds P2,400,000 B. Depreciation for vehicle for land transport used for personal purposes the value of which does not exceed P2,400,000 C. Depreciation for airplanes and/or aircrafts the value of which exceeds P2,400,000 where the taxpayer's main line. of business is sale of goods and properties and the vehicles purchased are used in said operations D. Depreciation for land vehicles the value of which exceeds P2,400,000 where the taxpayer's main line of business is transport operations or lease of transportation equipment and the vehicles purchased are used in said operations 50. In lieu of the itemized deductions, an individual subject to tax under Section 24, other than a nonresident alien, may elect a standard deduction in an amount not exceeding: A. ten percent (10%) of his gross income. B. forty percent (40%) of his gross income. C. forty percent (40%) of his gross sales or gross receipts. D. twenty percent (20%) of his gross sales or gross receipts. 51. This is designed to prevent the exclusion from taxable income of items, the actual receipt of which could, at the option of a taxpayer on the cash basis, be deferred or indefinitely Page 5 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES postponed. A. Cross Border Principle B. Destination Principle TAXATION C. Doctrine of Constructive Receipt D. Separability Doctrine 52. A minimum wage earner (MWE) was promoted during the latter part of the year (e.g. December) and was given a raise in salary which is beyond the minimum wage. Is the entire salaries earned during the calendar year taxable? A. Yes, the entire salaries during the calendar year is taxable because they exceeded the statutory minimum wage. B. No, the minimum wage earner shall be subject to income tax only in the following year after he exceeded the statutory minimum wage. C. Yes, as a rule, the moment the statutory minimum wage is exceeded the entire salaries during the calendar year shall be subject to income tax. D. No, the minimum wage earner shall still be exempted from income tax during the time that his salary does not exceed the statutory minimum wage. 53. Under this system, the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income. A. Creditable withholding tax C. Global tax system B. Final withholding tax D. Schedular tax system 54. Under this system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. A. Creditable withholding tax C. Global tax system B. Final withholding tax D. Schedular tax system 55. These are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes. A. Revenue Memorandum Circulars C. Revenue Memorandum Rulings B. Revenue Memorandum Orders D. Revenue Regulations 56. These are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued.by the BIR and other agencies/offices. A. Revenue Memorandum Circulars C. Revenue Memorandum Rulings B. Revenue Memorandum Orders D. Revenue Regulations October 2014 Preweek 57. ASEAN means: A. Association of South East Asian Nations. B. Accountants in the Service of All Nations. C. Accountants in South East Asian Nations. D. Association of South East Asian Accountants. 58. The ASEAN MRA is an agreement of all ten. ASEAN countries to facilitate movement of accountants among ASEAN member states. MRA means: A. Membership of Recognized Accountants. C. Mutual Recognition Agreement. B. Movement for Regional Accountants. D. Mutual Recognition Arrangement. 59. Any person required to file a tax return, statement or document shall be registered and assigned a TIN. What does TIN mean? A. Tax Identification Number C. Tax Informers Number B. Tax Information Number D. Temporary Identification Number 60. If after review and evaluation by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to the taxpayer a PAN. What is meant by PAN? A. Preliminary Assessment Notice C. Preliminary Assessment Number B. Post Assessment Notice D. Previous Assessment Number 61. If the taxpayer fails to respond within fifteen (15) days from the date of receipt of the PAN or if the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that he/it disagrees with the findings of deficiency tax or taxes FAN shall be issued. What, is meant by FAN? [4] A. Fiscal Assessment Notice C. Final Assessment Number B. Final Assessment Notice D. Formal Assessment Notice 62. Under the Tax Code, how much shall be taken into account in computing the net income, if a gain is realized by an individual taxpayer from the sale or exchange of capital assets (other than real properties and shares of stock) held for more than twelve months? (M) A. 5% of the capital asset sold C. P5,000 B. 50% of the net capital gain D. P50,000 63. Which of the following statements is incorrect? (M) A. Actual sale, barter or exchange of capital assets must always transpire before capital Page 6 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES gains and losses are recognized. B. Gains and losses from short sales of property shall be considered as gains or losses from sale or exchange of capital assets. C. If securities become worthless during the taxable year and are capital assets, the loss shall be considered as a loss from the sale, barter or exchange of capital assets on the last day of each taxable year. D. Amounts received by the holder upon the retirement of bonds, debentures or other evidence of indebtedness issued by any corporation including those issued by the Government with interest coupon or in registered from, shall be considered as amounts in exchange thereof, and may result to capital gains or losses. 64. Rowena expects that within a week, the market price of Angeles Corporation shares, which is selling at P10 per share, will go down. She does not. have Angeles Corporation shares so she calls up her stockbroker and asks him to sell for her 10,000 shares of Angeles Corporation shares. Rowena and the stockbroker agree that the sold shares are to be replaced within one week after the sale. The stockbroker sells for Rowena the 10,000 shares at P10 per share. One week after, when the sold shares are about to be replaced, the selling price of Angeles Corporation shares rises to P16 per share, contrary to Rowena's expectation. Nevertheless, she orders her stockbroker to buy for her 10,000 Angeles Corporation shares to cover the same number of shares she borrowed a week ago. How much is the capital gain (loss) from the short sale? (M) [5] A. P60,000 loss C. P 50,000 gain B. P30,000 loss D. P100,000 gain 65. The term shall mean an alternative form of obtaining funds from the public other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations, or financing their own needs or the needs of their agent or dealer. (M) A. Banking activities C. Deposit substitutes B. Mutual funding D. Quasi-banking activities 66. Which of the following is not included in the term "deposit substitutes'? A. Promissory notes B. Bankers' acceptances C. Debt instruments issued for interbank call loans with maturity of not more than five (5) days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasi-banks D. Repurchase agreements, including reverse repurchase agreements entered into by and October 2014 Preweek TAXATION between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank, certificates of assignment or participation and similar instruments with recourse 67. First statement: The tax on interest income from foreign currency deposit shall be imposed unless the depositor who is a nonresident citizen or nonresident alien can present documentary evidence that he is not a resident of the Philippines. Second statement: To be entitled to an exemption from the tax on interest income on foreign currency deposit, the Foreign Currency Bank Account shall be in the name of the nonresident individual or nonresident corporation. (M) A. B. C. D. 1st Statement Correct Correct Incorrect Incorrect 2nd Statement Correct Incorrect Correct Incorrect 68. Which of the following valuation of fringe benefits is incorrect? (M) A. If the fringe benefit is granted in money, or is directly paid for by the employer, then the value is the amount granted or paid for. B. If the fringe benefit is granted or furnished by the employer in property other than money but ownership is not transferred to the employee, the value of the fringe benefit is equal to the depreciation value of the property. C. If the fringe benefit is granted or furnished by the employer in property other than money and ownership is transferred to the employee, then the value of the fringe benefit shall be equal to the fair market value of the property as determined in accordance with the authority of the Commissioner to prescribe real property values. D. None of the choices 69. The grossed-up monetary value of the fringe benefit shall be determined by dividing the actual monetary value of the fringe benefit by: (E) a. 66%. c. 68%. b. 67%. d. 70%. 70. The fringe benefit furnished to employees who are nonresident aliens not engaged in trade or business within the Philippines shall be taxed at: (E) A. 15%. C. 32%. B. 25%. D. 33%. 71. During the current year, a nonresident alien not engaged in trade or business, came to the Philippines to fulfill a contract commitment. He stayed at one of the five-star hotels in Makati City. His local contact paid him P500.000 for the services rendered and P90,000 for his Page 7 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES hotel bills. How much is the fringe benefit tax, if any? [6] (E) A. P 30,000 C. P196,667 B. P125,000 D. None 72. An alien manager employed by an offshore banking unit in the Philippines received fringe benefits amounting to P680,000 during the first quarter of the current year. How much was the fringe benefit tax, if any? [7] (E) A. P 120,000 C. P 226,667 B. P 217,600 D. None Questions 73 thru 76 are based on the following information. (Difficult) XYZ Corp. owns a condominium unit. During the year 2011, the said corporation furnished and granted the said property for the residential use of its Assistant Vice President. The fair market, value of the property per BIR amounts to P10,000,000 while its fair market value as shown in its current Real Property Declaration amounts to P8.000,000 73. How much is the value of the fringe benefit? [8] A. P 400,000 C. P 8,000,000 B. P 500,000 D. P 10,000,000 74. How much is the monetary value of the fringe benefit? [9] A. P 200,000 C. P4,000,000 B. P 250,000 D. P 8,000,000 75. How much is the monthly fringe benefit expense? A. None C. P 20,833 B. P 16,667 D. P 41,667 76. How much is the monthly fringe benefit tax expense? [10] A. P 7,843 C. P16,667 B. P9,804 D. None 77. The cost of educational assistance extended by an employer to the dependents of an employee shall be treated as taxable fringe benefits of the employee unless the assistance was (M) A. given through the employee-parent of the dependent. B. paid directly to the school where the dependents are studying. C. provided through a competitive, scheme under the scholarship program of the company. October 2014 Preweek TAXATION D. none of the choices. 78. A VAT-registered trader sold goods to a person with disability. The amount of sales, net of VAT, is P100. How much is the total amount to be paid by the person with disability? [11] (M) A. P80.00 C. P112.00 B. P 89.60 D. None of the choices 79. One of the following is not deductible as bad debts (M) A. Difference between the amount received in distribution of assets of a bankrupt company and the amount of claims against the said company. B. Difference between the amount received by a creditor of a decedent in distribution of the assets of the decedent's estate and the amount of his claim. C. Difference between the purchase price and the indebtedness, where under foreclosure of a mortgage, the mortgagee buys the mortgaged property and credits the indebtedness to the purchase price. D. Worthless debts arising from unpaid wages, salaries, rents and similar items of taxable income, the income such items represent has been included in the returns of income for the year in which the deduction for bad debt is sought to be made, or in a previous year. 80. Which of the following statements is incorrect? (M) A. The responsibility of establishing the existence of such facts and circumstances shall rest with the Government at all times. B. Any change in the agreed rate and useful life of the depreciable property as specified in the agreement shall not be effective for taxable years prior to the taxable year in which notice in writing by certified mail or registered mail is served by the party initiating such change to the other party to the agreement. C. Where the taxpayer has adopted such useful life and depreciation rate for any depreciable and claimed the depreciation expenses as deduction from his gross income, without any written objection on the part of the Commissioner or his duly authorized representatives, the aforesaid useful life and depreciation rate so adopted by the taxpayer for the aforesaid depreciable asset shall be considered binding for purposes of depreciation. D. Where under rules and regulations prescribed by the Secretary of Finance upon recommendation of the Commissioner, the taxpayer and the Commissioner have entered into an agreement in writing specifically dealing with the useful life and rate of depreciation of any property, the rate so agreed upon shall be binding on both the taxpayer and the National Government in the absence of facts and circumstances not taken into consideration during the adoption of such agreement. Page 8 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES 81. Which of the following shall be deductible in full? (M) A. Donations made for the use of the Government of the Philippines or any of its agencies or any political subdivision exclusively for public purpose B. Donations made to accredited domestic corporations or associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or rehabilitation of veterans C. Donations to foreign institutions or international organizations in pursuance of or in compliance with agreements, treaties, or commitments entered into by the Government of the Philippines and the foreign institutions or international organizations or in pursuance of special laws D. None of the choices 82. Research and development expenses treated as deferred expenses shall be allowed as deduction ratably distributed over a period of not less than: (E) A. 60 months beginning with the month ending the taxpayer's taxable year. B. 6 months beginning with the month in. which the taxpayer first realizes benefits from such expenditures. C. 30 months beginning with the month in which the taxpayer first realizes benefits from such expenditures. D. 60 months beginning with the month in which the taxpayer first realizes benefits from such expenditures. 83. Any amount, paid or payable which is otherwise deductible from, or taken into account in computing gross income or for which depreciation or amortization may be permitted, shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld there from has been: (M) A. claimed as deduction by the taxpayer from his gross income. B. correctly computed in accordance with the provisions of the Tax Code. C. paid to the Bureau of Internal Revenue in accordance with the provisions in the Tax Code. D. none of the choices. 84. In lieu of the itemized deductions, an individual subject to tax under Section 24, other than a nonresident alien, may elect a standard deduction in an amount not exceeding: (E) A. ten percent (10%) of his gross income. B. forty percent (40%) of his gross income. C. forty percent (40%) of his gross sales or gross receipts. October 2014 Preweek TAXATION D. twenty percent (20%) of his gross sales or gross receipts. 85. In the case of domestic corporation or a resident foreign corporation, it may elect a standard deduction in an amount not exceeding (E) A. ten percent (10%) of its gross income. B. forty percent (40%) of its gross income. C. forty percent (40%) of its gross sales or gross receipts. D. twenty percent (20%) of its gross sales or gross receipts. Questions 86 & 87 are based on the following information. A retailer of goods, whose accounting method is under the accrual basis, has a gross sales of P1,000,000 with a cost of sales amounting to P800,000 for year 2009. The taxpayer is qualified to choose OSD as deductions. 86. How much is the net taxable income assuming the taxpayer is a single individual with no dependents? [12] (M) A. P120,000 C. P550,000 B. P200.000 D None of the choices 87. How much is the net taxable income c. arming the taxpayer is a corporation? [13] A. P120,000 C. P550.000 B. P200,000 D. None of the choices 88. Case 1- A family corporation paid the premiums on the life insurance policy of its president and named his wife as beneficiary. Case II- A corporation paid the premiums on the insurance policy covering the lives of its two executives naming each other the beneficiary. Which of the above premiums paid shall be deductible? (M) A. I only C. Both I and II B. II only D. Neither I nor II 89. Mr. Tony Dee created a trust in favor of his son, Tony II. He appointed Atty. Mars Bona as a trustee. Mr. Conrad Oh also created a trust in favor of his mother, Connie. Mr. Oh appointed Mr. Ging Aye as trustee. Atty. Mars Bona sold his business car to Mr. Ging Aye at a loss. Can Atty. Bona deduct the loss from the sale of the car? (M) A. No, because Atty. Bona does not have a capital gain. B. Yes, because losses as a rule are always deductible. C. No, because both Atty. Bona and Mr. Aye were both fiduciaries of trusts. Page 9 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES D. Yes, because Atty. Bona and Mr. Aye are fiduciaries hot of the same grantor. 90. The request for approval of the change in accounting period should be filed at anytime not less than how many days prior to the beginning of the proposed new accounting period? (E) A. Fifteen (15) days C. Sixty (60) days B. Thirty (30) days D. Ninety (90) days. 91. The certification approving the adoption of a new accounting period must be released within how many working days from the date of receipt of the complete documentary requirements? (E) A. Fifteen (15) days C. Sixty (60) days B. Thirty (30) days D. Ninety (90) days. 92. Ms. Achie Dizon sold a personal property, a capital asset., for P600,000 on March 27, 2011 payable as follows: Down payment P 100,000 Installment due, 2012 200,000 Installment due, 2013 200,000 The property was purchased on May 19. 2010 at a cost of P270.000. It was mortgaged with a balance of P100,000, which was to be assumed by the buyer. The commission on the sale was P30.000. How much was the returnable capital gain of Ms. Dizon in 2011? [14] (D) A. P 15,000 C. P 60,000 B. P 30,000 D. P 90,000 93. The Bureau of Internal Revenue is using the Net Worth Method of investigation on Mr. Art Angeles, a married taxpayer with two (2) qualified dependents. The investigation covers the years 2007 to 2011. There are no discrepancies discovered for the years 2007 to 2010. However, the BIR discovers discrepancies for 2011. Mr. Angeles paid P20,500 income tax on the income declared for 2011. The assets, liabilities and net worth at the end of 2010 and 2011 follow: 12.31.10 12.31.11 Assets P 700,000 P 900,000 Liabilities 200,000 100,000 Net worth P 500,000 P 800,000 The following data pertain to 2011: Personal, family and living expenses 72,000 Other non-deductible expenses 30,000 October 2014 Preweek TAXATION Philippine Lotto winnings Other non-taxable income How much is the deficiency income tax per investigation? [15] (D) A. P6,090 C. P 32,500 B. P 12,000 D. None of the choices 100,000 22,000 94. A capital gains tax return for the sale or exchange of shares of stock not traded through a local stock exchange as prescribed under Section 24(c) by an individual shall be filed within (E) A. ten (10) days after each transaction. C. twenty (20) days after each transaction. B. fifteen (15) days after each transaction. D. thirty (30) days after each transaction. Questions 95 & 96 are based on the following information. A taxpayer, widower, and his five (5) children have the following data for the year 2009: Gross business income (taxpayer) P 120,000 Business expenses 30,000 Income of children: Abigail,16 years old, salary 70,000 Beth, 14 years old, income from property inherited from her uncle 50,000 Cathy, 12 years old, income from property received as gift from the taxpayer (donor's tax has been paid) 60,000 Desiree, 10 years old, income from property received as gift from the taxpayer (exempt from donor's tax) 65,000 Emily, 8 years old, income from property received as gift from the taxpayer (donor's tax not yet paid) 80,000 95. How much is the total gross income of the taxpayer? [16] (M) A. P120.000 C. P330,000 B. P200,000 D. P375,000 96. How much is the total personal exemptions of the taxpayer? [17] (M) A. P50.000 C. P150,000 B. P 75,000 D. None of the choices 97. If the sum of the quarterly tax payments made during the said taxable year is notequal to the total tax due on the entire taxable income of that year, what shall the corporation do? (E) A. Carry-over the excess credit B. Pay the balance of tax still due Page 10 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES C. Be credited or refunded with the excess amount paid D. Any of the choices 98. This refers to the system developed and. maintained by the Bureau of Internal Revenue (BIR) for electronically filing tax returns, including attachments, if any, and paying taxes thereon, specifically through the internet. (E) A. Manual Filing and Payment System B. Electronic Filing and Payment System C. Up-to-date Filing and Payment System D. Advance Technological Filing and Payment System 99. (Easy) Who of the following taxpayers shall file their return and pay their taxes through EFPS: (E) I - Large taxpayers. II - The volunteering 200 or more Non-large Taxpayers previously identified by the BIR. A. I only C. Both I and II B. II only D. Neither I nor II 100. Under this system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. (E) A. Creditable withholding tax C. Global tax system B. Final withholding tax D. Schedular tax system 101. For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) shall be filed and payments should be made, within how many days after the end of each month (except December)? (E) A. five(5) days C. fifteen (15) days B. ten (10) days D. twenty (20) days 102. For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) for the month of December of each year, shall be filed on or before: (E) A. January 10 of the following year. C. January 31 of the following year. B. January 15 of the following year. D. March 15 of the following year. October 2014 Preweek TAXATION 103. With respect to taxpayers, whether large or non-large, who availed of the electronic filing and payments (EFPS), the deadline for electronically filing the applicable withholding tax returns and paying the taxes due via the EP'PS shall be: (E) A. five (5) days later than the deadlines set for manual filing and payment. B. ten (10) days later than the deadline set for manual filing and payment. C. fifteen (15) days later than the deadline set for manual filing and payment. D. twenty (20) days later than the deadline set for manual filing and payment. 104. For final withholding taxes, the statement should be given to the payee on or before: (E) A. January 10 of the succeeding year. B. January 15 of the succeeding year. C. January 31 of the succeeding year. D. March 15 of the succeeding year. 105. If in lieu of the automatic application of his excess credit, the taxpayer wants a cash refund or a tax credit certificate for use in payment of his other national internal revenue tax liabilities, he shall make a written request therefor, within: (E) A. two (2) years after the payment of the tax. B. three (3) years after the payment of the tax. C. five (5) years after the payment of the tax D. none of the choices. 106. The penalty for non-issuance of receipts or invoices are as follows: (E) A. Fine of not less than P1,000 but not more than P50,000 B. Imprisonment for not less than two (2) years but not more than four (4) years. A. A only C. Both A and B B. B only D. Neither A nor B 107. Which of the following persons is required to issue a receipt? (E) A. Those whose value of merchandise sold or the service rendered is P100 or more B. Those exempted b> the Commissioner of Internal Revenue under meritorious cases C. Market vendors selling exclusively domestic meat, fruits, vegetables, game, poultry, fish and other food products D. Those whose value of merchandise sold or the service rendered is less than P25, and whose gross sales or receipts in the preceding year do not exceed P30,000 108. These are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the Page 11 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing. (E) A. Revenue Memorandum Circulars C. Revenue Memorandum Rulings B. Revenue Memorandum Orders D. Revenue Regulations TAXATION A. B. C. D. Car revocably transferred by the decedent before he died to his son Shares of stock inherited by the decedent's surviving spouse during the marriage Land inherited during the marriage from the father who predeceased the decedent Jewelry purchased during the marriage using the exclusive money of the decedent. 109. Which of the following transactions in the course of trade or business requires actual payment of VAT before an input tax is allowed as tax credit from the output tax? (E) A. Purchase of services B. Transactions deemed sale C. Domestic purchase of goods for use as raw materials supplied in the sale of services D. Domestic purchase of goods for use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code 113. One of the following is an intangible personal property situated in the Philippines. (M) A. Franchise which is exercised in a foreign country B. Shares or rights in a partnership established in Malaysia by Filipinos C. Shares, obligations or bonds issued by a foreign corporation 80% of the business of which is situated in the Philippines D. Shares, obligations or bonds issued by a corporation organized and constituted in the Philippines in accordance with its laws 110. A VAT-registered company acquired one vehicle for land transport for the use of an official or employee valued at P2,400,000. Which of the following statements is correct? (M) A. The input tax on the purchase of the vehicle for land transport as well as the input taxes on maintenance expenses incurred on the said vehicle shall be allowed as input tax credit. B. The input tax on the purchase of the vehicle for land transport as well as the input taxes on maintenance expenses incurred on the said vehicle shall not be allowed as input tax credit. C. The input tax on the purchase of the vehicle for land transport shall be allowed as input tax credit while the input taxes on maintenance expenses incurred on the said vehicle shall not be allowed as input tax credit. D. The input tax on the purchase of the vehicle for land transport shall not be allowed as input tax credit while the input taxes on maintenance expenses incurred on the said vehicle shall be allowed as input tax credit. 114. Mr. Octavio Paz transferred his properties to his relatives to provide independent income for them. This is an example of: (M) A. Transfer for insufficient consideration B. Transfer not in contemplation of death C. Transfer with retention or reservation of certain rights D. Transfer passing under general power of appointment 111. A VAT-registered domestic carrier operating air, land and sea transport equipment acquired vehicles for use in its operation to transport goods and cargoes. The domestic carrier: (E) A. can claim input taxes on the said acquisitions. B. cannot claim input taxes on the said acquisitions. C. can claim input taxes only on the acquisition of land transport vehicles. D. can claim input taxes only on the acquisitions of air and sea transport vehicles. 112. Which of the following is not included in the gross estate of a resident decedent who is under conjugal partnership of gains? (M) October 2014 Preweek 115. Mr. Julian Cruz procured a life insurance upon his own life. He designated his nephew as a beneficiary. For estate tax purposes, the proceeds of life insurance is: (M) A. Not included in the gross estate of Mr. Julian Cruz because the designation of the beneficiary is not clear. B. Not included in the gross estate; because, as a rule, proceeds of life insurance are generally not subject to estate tax. C. Included in the gross estate of Mr. Julian Cruz because when a relative is a beneficiary the designation is always revocable. D. Included in the gross estate of Mr. Julian Cruz because the designation of the beneficiary is not clear, hence, it is revocable. 116. Mr. Nolasco de la Paz dies leaving a residential lot in an exclusive subdivision. The value per tax declaration and the zonal value at the time of death are P3,000,000 and P4,000,000 respectively. An adjacent lot is sold by another lot owner for P5,000,000 on the date Mr. de la Paz dies. For estate tax purposes, the value that shall be included in the gross of the decedent is (E) A. P3,000,000 C. P5,000,000 B. P4,000,000 D. Some other amount Page 12 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION Questions 117 & 118 are based on the following: (Difficult) Questions 6 & 6 are based on the following information. A decedent dies on January 15, 2013. The interment is on January 31, 2013. The gross estate of the decedent is P4,000,000. The following expenses are presented to you: Expenses during the wake borne by relatives and friends P30, 000 Mourning clothing of the widow and unmarried minor children 20,000 Obituary notice in a newspaper 50, 000 Card of thanks published in a newspaper 30,000 Burial plot 80,000 Flowers placed on top of the burial lot when relatives visited on February 14, 2015 5,000 Expenses during a family's gathering to commemorate the 40th day after death of the decedent on February 23, 2013 15,000 Accountant's fee in gathering the assets of the decedent incurred on February 15, 2013 50,000 Lawyer's fee in representing the estate in case filed on August 15, 2013 70,000 Executor's fee: January 15, 2013 to July 15, 2013 P120,000 July 16, 2013 to December 31, 2013 120,000 240,000 117. The deductible funeral expenses are [18] A. P150,000. C. P200,000. B. P180,000. D. none of the choices. 118. The deductible judicial expenses are [19] A. P170,000. B. P240,000. C. P360,000. D. none of the choices 119. The following taxes are claimed as deduction from the gross estate of a decedent who dies on July 1, 2013. Income tax on income earned from January 1 to June 30, 2103 P100,000 Income tax on income earned from July 1, 2013 to December 31, 2013120,000 Real estate tax paid, January 1 to June 30, 2013 50,000 Unpaid real estate tax, July 1 to December 31, 2013 50,000 Unpaid property tax, January 1 to June 30, 2013 60,000 The correct amount of deductible taxes shall be (D) [20] A. P170.000. C. P380,000. B. P210,000. D. none of the choices. October 2014 Preweek 120. Which of the following shall be allowed as deduction from the gross estate of a non-resident alien decedent? (E) A. Family home deduction C. Standard deduction B. Medical expenses D. Transfer for public use 121. The estate tax is paid (E) A. as the return is filed. B. after the tax due is properly determined. C. six (6) months following the death of. the decedent. D. on the day an administrator is appointed by the court. 122. One of the following is not allowed as deduction from the gross gifts of a non-resident alien donor. (E) A. Gifts made on account of marriage B. Gifts made in favor of a religious corporation. C. Gifts made to or for the use of the National Government D. Encumbrance on the property donated assumed by the done 123. Which of the following inter vivos transfers is not subject to donor's tax. (M) A. Transfer for insufficient consideration of a personal car B. Transfer for insufficient consideration of an apartment house C. Transfer for insufficient consideration of a residential house and lot D. Transfer of real property by a real estate dealer to a son who is getting married 124. Donation is completed (E) A. when the donor's tax is finally paid. B. when it is determined that' the donor has the capacity to make donations. C. when the property donated is delivered actually or constructively to the donee. D. when the donee accepts the donation and the acceptance is made known to the donor. 125. Which of the following statements is incorrect when a conjugal property is donated? (M) A. The husband and wife shall be considered as separate and distinct taxpayers for purposes of donor's tax. B. Neither spouse may donate any community property or conjugal property without the consent of the other and this is without any exception. C. The husband and wife may each claim the dowry deduction if the donation of conjugal property is made on account of marriage of a legitimate child. Page 13 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES D. If what was donated is a conjugal property and only the husband signed the Deed of Donation, there is only one donor for donor's tax purposes, without prejudice to the right of the wise to question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil Code of the Philippines and the Family Code of the Philippines. 126. Donor's return shall be filed within (E) A. six (6) months after the date the gift is made. B. thirty (30) days after the date the gift is made. C. thirty (30) days after the donor pays the donor's tax. D. thirty (30) days after the donor executes a Deed of Donation. 127. A restaurant owner v/ho sells food and drinks in his restaurant is (E) A. a seller of goods. C. not subject to value-added tax. B. a seller of services. D. a seller of both goods and services. 128. A VAT-registered store owner who sells different VAT-subject goods decides to replace his old store furniture and equipment. He sells them as pre-owned store furniture and equipment. The sale is: (M) A. not subject to VAT because he is not a dealer of store furniture and equipment. B. subject to VAT because he is considered a dealer of store furniture and equipment. C. not subject- to VAT because the store furniture: and equipment may be fully depreciated. D. subject to VAT because the sale of store furniture and equipment falls under the definition of "in the course of trade or business 129. In case where output tax is greater than the input tax, the difference will be recognized as a (E) A. current asset. C. deductible expense. B. current liability. D. miscellaneous income. 130. First statement: Only VAT-registered taxpayers are required to pay Value-Added Tax. Second statement: Taxpayers whose gross annual sales or receipts exceed the VAT threshold amount are required to pay Value-Added Tax in all cases. (M) A. B. C. D. 1st Statement Correct Correct Incorrect Incorrect 2nd Statement Correct Incorrect Correct Incorrect October 2014 Preweek TAXATION 131. A VAT-registered taxpayer is able to harness wind to produce power which he sells to the community. This is an example of a: (E) A. VAT-exempt transaction. B. Zero-rated VAT-subject transaction. C. Transaction subject to percentage tax. D. VAT-subject transaction subject to the 12% VAT. 132. A VAT-registered lessor of apartment houses has the following gross rentals for the first quarter of the current year: Gross rentals of 30 units at P10,000 per month per unit P3,600,.000 Gross rentals of 10 units at P15,000 per month per unit 1,800,000 Total P5,400,000 The VAT-registered lessor of apartment houses shall be: (M) A. exempt from VAT on his total gross rentals. B. subject to VAT on his gross rentals of P1,800,000. C. subject to VAT on his gross rentals of P3,600,000 D. subject to VAT on his gross rentals of P5,400,000. 133. Which of the following is a creditable input tax? (E) A. VAT oh importation of goods for personal use B. VAT on purchase on account of goods evidenced by a VAT invoice C. VAT- on unpaid bill on services rendered by a VAT-registered service-provider D. VAT on purchase of furniture for use in the residential house of a VAT-registered person 134. The following transactions during the month of January, 2013 are recorded in the Books of a VAT-registered taxpayer: Purchase of three 3) office equipment at'P150,000 each Purchase of five (5) office furniture at P50,000 each Importation of vehicle for transport used in business, P1,500,000 Based on the above data (D) A. The total input taxes on the above transactions shall be amortized. B. The input tax on office equipment and office furniture shall be credited in full. C Only the VAT on importation of vehicle for land transport shall be amortized, D. The total input taxes on the above transactions may be amortized or credited in full depending on the choice of the taxpayer. 135. Which of the following is allowed presumptive input tax? (E) A. Processor of canned fruits Page 14 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES B. Manufacturer of raw sugar C. Processor of sardines, mackerel and milk D. Manufacturer of packed instant champorado 136. The quarterly VAT return is filed (E) A. When the VAT payable is finally determined. B. Within sixty (60) days following the end of the quarter. C. Within twenty (20) days following the end of the quarter. D. Within twenty-five (25) days following the end of the quarter. 137. One of the following is subject to the 3% percentage tax under Sec. 116 (M) A. Seller of canned fish whose annual gross sales exceed the VAT threshold amount B. Seller of refined sugar whose annual gross sales do not exceed the VAT threshold amount C. Seller of fresh mangoes whose annual gross sales do not exceed the VAT threshold amount D. Seller of office supplies who is VAT-registered but whose gross annual sale's do not exceed the VAT threshold amount 138. Which of the following is subject to common carriers tax? (E) A. Person who transports passengers by air B. Person who transports goods and cargoes by sea C. Domestic carrier by land relative their transport of passengers. D. Transportation contractors by land on their transport of goods and cargoes 139. Which of the following is not subject to franchise tax? (E) A. Franchise grantee of electric utilities B. PAGCOR and its licensees and franchisees C. Franchise grantees of gas and water utilities D. Franchise grantee of radio and/or television broadcasting whose gross annual receipts of the preceding year does not exceed P10,000,000 140. Rentals of property, real or personal, received by bank and non-bank financial intermediaries performing quasi-banking functions are (E) A. not subject- to any tax. B. subject to Value-added Tax at 12%. C. subject to Gross Receipts Tax at 7%. D. subject to Gross Receipts Tax if the annual gross rentals do not exceed the VAT October 2014 Preweek TAXATION threshold amount. 141. Which of the following is not subject to amusement tax? (E) A. Lessee jai-alai and racetracks C. Operator of cockpits B. Lessee of bowling alleys D. Proprietor of videoke bars 142. A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a (E) A. tourist. B. resident alien. C. non-resident alien doing business in the Philippines. D. non-resident alien not doing business in the Philippines. 143. An individual who is a pure compensation income earner is allowed to deduct the following from his gross compensation income except: (E) A. Personal expenses. B. Additional exemption. C. Basic personal exemption. D. Premium payment on health and/or hospitalization insurance. 144. Who among the following is taxed on income from sources within and outside the Philippines? (E) A. Resident citizen B. Resident alien C. Non-resident citizen D. Non-resident alien engaged in trade or business. 145. One of the following cannot avail of the optional standard deduction. (E) A. Estate and trust C. Non-resident citizen B. Non-resident alien D. Resident citizen 146. Who of the following is not considered a nuclear family? (E) A. Single person living alone B. Single parent with children C. Father, mother, unmarried children living together as one household D. None of the choices 147. Who of the following dependents will entitle the taxpayer/benefactor to additional exemption? Page 15 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES (M) A. B. C. D. Senior citizen A child who is naturally adopted Person with disability who is not related to the benefactor Person with disability who is legitimate, illegitimate or legally adopted child, whether minor or of legal age. 148. Which of the following will change the status of the taxpayer? (M) A. Death during the year of the taxpayer's spouse B. Birth during the year of the taxpayer's fourth child. C. Marriage during the year of a qualified dependent child D. Employment during the year of a qualified dependent child 149. An- individual who avails of optional standard deduction cannot deduct the following except: (M) A. cost of sales. B. business expenses. C. premium on health and/or hospitalization insurance. D. basic personal exemptions and additional exemption. TAXATION Fatima, child, 12 years old George, child by natural adoption, 15 years old The following information pertain to his income and expenses in the year 2014: Salary, net of P20,000 withholding tax Rent expense, apartment house Health insurance premium paid (P500 per month starting July, 2014) Gross receipts from practice of profession Cost of services Business expenses Gain from sale of shares of stock listed and traced in the local stock exchange (gross selling price is P100,000) 153. The deductible health insurance premium is (D) A. P1,200. C. P3,000. B. P2,400. D. None. Not qualified. 154. The output tax assuming the taxpayer is not VAT-registered. [22] (D) A. P144,000 C. P240,000 B. P180,000 D. None. Not VAT-registered. 151. The husband shall be the proper claimant of the additional exemption for qualified dependent children except when: (M) A. he is employed but his wife's salary is greater than his. B. he explicitly waives his additional exemption in favor of his wife. C. he is a non-resident citizen deriving income from foreign sources. D. he and his wife agree to let the wife claim the additional exemption. 155. The stock transactions tax is [23] (D) A. P250 B. P 500 October 2014 Preweek 50,000 152. The total additional exemptions for the year are (D) [21] A. P50,000. C. P100,000. B. P 75,0'00. D. None of the choices. 150. The personal exemption allowed to estate and trust is: (E) A. P20,000 C. P50,000 B. P25,000 D. none. Not allowed personal exemption. Questions 152 thru 157 are based on the following information. A married resident citizen has the following dependents for the taxable year 2104: Aida, child, 25 years old, person with disability, dies previous year Benigna, child of his wife in a previous marriage, 18 years old Carlos, child, becomes 21 years old on January 1, 2014 Dennis, child, 21 years old, lives with the taxpayer's parents Edna, person with disability, 13 years, illegitimate child P230,000 36,0.00 3,000 2,00,000 500,000 300,000 C. P2,500 D. none. Not subject to percentage tax. 156. The deductible amount assuming the taxpayer opts to avail of the optional standard deduction is [24] (D) A. P600,000. C. P900,000. B. P800,000. D. none. Cannot avail of OSD. 157. The total taxable net income is: [25] (D) A. P1,297,600. B. P1,300,000. C. P1,350,000. D. none of the choices Page 16 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION Questions 158 & 159 are based on the following: (Difficult) Questions 47 thru 50 are based on the following information. A VAT-registered real estate dealer sold the following during the month of January 2014: One (1) residential lot valued at P 2,000,000 Two (2) adjacent condominium units covered by separate titles sold to one buyer, each unit is valued at P1,500,000 (exclusive of two (2) parking spaces valued at P300,000 each) 3,000,000 He also had the following acquisitions during the month: Domestic purchase of supplies, net of VAT 100,000 Domestic purchase of three (3) units of office computers valued at P50,000 each, net of VAT (4 years estimated life) 150,000 Importation of one vehicle for land transport used in business (5 years estimated life) 2,500,000 Maintenance expenses, vehicle for land transport, net of VAT 70,000 Office rental, net of VAT 100,000 158. How much is the output VAT? A. P312,000 B. P600,000 164. Politics (is, are) the cause of too much mudslinging among dishonest politicians. [29] A. Is C. Either B. Are D. Neither 165. Earl and (me, I) are having a lively discussion about the new BIR regulations. A. Me C. Either B. I D. Nither 1. Answer is (C) Selling price Less: Book value (3,000,000 - 1,000,000) Gain on sale of assets 2. Answer is (C) Output tax Less: Unutilized input tax on sold asset VAT payable 3. Answer is (B) Creditable input tax (600,000/ 60 months) = P10,000 4. Note: Also known as FLD (Formal Letter of Demand) 5. Answer is (A) Selling price (P10.000 X 10) Less: Cost (P10,000 X 16) Loss on short sales C. P672,000 D. None of the choices 159. How much is the creditable input tax on vehicle for land transport? A. P5,000 C. P300,000 B. P120,000 D. None Grammar 160. The financial statements (that, which) are presented by the Chief Accountant are in office of the VP-Treasury. [26] A. That C. Either B. Which D. Neither 161. The company is importing (new machinery, a new machinery, new machineries). [27] A. New machinery C. New machineries B. A new machinery D. None of the choices 162. The auditor has (much evidence, many evidence, much evidences, many evidences) to warrant a full blown forensic audit. [28] A. Much evidence C. Much evidences B. Many evidence D. Many evidences October 2014 Preweek 163. The student went, to see the Dean for (advice, an advice, advise, an advise) A. Advice C. Advise b. An advice D. An advise 6. Answer is (A) Grossed-up monetary value of the fringe benefit (P90,000/75%) Tax rate P5,000,000 2,000,000 P3,000,000 P500,000 100,000 P400,000 P100,000 ( 160.000) (P 60.000) P120,000 25% Page 17 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION Fringe benefits tax 7. P30,000 Answer: A Grossed-up monetary value of the fringe benefit (P680,000/85%) Tax rate Fringe benefits tax P 800,000 15% P 120.000 8. Answer is (B). (5% X P10,000,000) = P500,000 9. Answer is (B) (50% X P500,000) = P250,000 10. Answer is (B) (P250.000 / 68% X 32% / 12 months) = P9,804 11. Answer is (B) Amount of sales P100.00 Less: 20% discount 20.00 VATable sale 80.00 Add: 12% VAT (12% x 80) 9.60 Total amount to be paid P89.60 Persons with disability do not enjoy VAT exemption unlike Senior Citizens. 12. Answer is (C). Gross sales Less: Cost of sales Gross sales / Gross income Less: OSD Basic personal exemption Taxable net income 13. Answer is (A). Gross sales Less: Cost of sales Gross sales / Gross income Less: OSD October 2014 Preweek Individual P 1,000.000 . 1,000.000 (400,000) (50,000) P550,000 Corporation P 1,000,000 ( 800.000) 200,000 80,000) . P120,000 Individual P 1,000.000 . 1,000.000 (400,000) Corporation P 1,000,000 ( 800.000) 200,000 80,000) Basic personal exemption Taxable net income (50,000) P550,000 14. Answer is (C) Selling price Less: Cost P 270,000 Commission 30,000 Capital gain (short term) 2011 - P300,000/P500,000 X P100.000 a.) Selling price Cash received FMV, property received Installment obligations Mortgage assumed Selling price b.) Contract price Selling price Less: Mortgage assumed Balance Add: Excess of mortgage assumed over cost Contract price c.) Initial payments Downpayment Add: Installments, year of sale Excess of mortgage assumed over cost Initial payments d.) Initial payments over selling price (P100,000/P600,000) = 16.67% 15. Answer is (B) Net worth, 12.31.11 Net worth, 12.31.10 Increase in net worth Add (Deduct): Personal, family and living expenses Other non-deductible expenses Philippine Lotto winnings . P120,000 P 600,000 ( 300,000) P 300,000 P60,000 P 100,000 400,000 100.000 P 600.000 P 600,000 ( 100.000) 500,000 500,000 P 100,000 P 100,000 800,000 500.000 300,000 72,000 30,000 (100,000) Page 18 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES Other non-taxable income-. Net income per investigation Less: Basic personal exemption Additional exemption Taxable net income per investigation Tax due Sec. 24 (A) Less: Income tax paid per return Deficiency income tax TAXATION P 50.000 50.000 ( 22,000) P 280,000 100.000 P 180.0.00. P32,500 ( 20,500) P12,000 16. Answer is (B) Gross business income (taxpayer) Add: Income from property received as gift from the taxpayer by Emily Total gross income 17. Answer is (B) Basic personal exemption Additional exemption (Emily only) Total personal exemptions 18. Answer is (A) Mourning clothing of the widow and unmarried minor children Obituary notice in a newspaper Burial plot Total actual funeral expenses Limit (5% x P4,000,000) Allowed funeral expenses (lower) P 120,000 80.000 P 200,000 P50,000 25,000 P75.000 P 20,000 50,000 80,000 P150,000 P200,000 P150,000 19. Answer is (A). Accountant's fee in gathering the assets of the decedent incurred on February 15, 2013 Executor's fee: January 15, 2013 to July 15, 2013 Deductible judicial expenses P 50,000 120,000 P170,000 20. Answer is (B) Income tax on income earned from January 1 to June 30, 2103 Unpaid real estate tax, July 1 to December 31, 2013 P10C000 50,000 October 2014 Preweek 60,000 P210.000 Unpaid property tax, January 1 to June 30, 2013 Deductible taxes 21. Answer is (C) Benigna, child of his wife in a previous marriage, 18 years old Carlos, child, becomes 21 years old on January 1, 2014 Edna, person with -disability, 18 years, illegitimate child Fatima, child, 12 years old Total 22. Answer is (C) Gross receipts from practice of profession Tax rate Output tax P 25,000 25,000 25,000 25,000 P100,000 P2,000,000 12% P 240,000 23. Answer is (B) Gross selling price (shares listed and traded) Tax rate Stock transactions tax P100,000 .05 500 24. Answer is (B) Gross receipts from practice of profession Optional standard deduction rate Output tax P2,00,000 40% P 800,000 25. Answer is (B) Gross compensation income Less: Basic personal exemption Additional exemption Taxable compensation income Gross receipts Less: Cost of services Gross income Less: Expenses Total taxable net income 50,000 100,000 2,000,000 500,000 1,500,000 300,000 P250,000 150,000 100,000 1,200,000 P1,300,000 Page 19 of 20 CPA REVIEW SCHOOL OF THE PHILIPPINES TAXATION 26. That is the defining, or restrictive, pronoun, which the non-defining, or nonrestrictive. 27. The following are examples of non-countable nouns also sometimes referred to as mass nouns. These take singular form have no plural form. (Equipment, furniture, jewelry, luggage, baggage, machinery, scenery, decor, houseware, glassware, dinnerware, hardware, merchandise, garbage, traffic, school wear, men's wear, children's wear, evidence, legislation and applause.) 28. We do not use many or few to describe or modify mass or non-countable nouns. Instead, we use much or little. 29. Some nouns look plural, but are actually singular. Here are a few examples. (Ethics, politics, physics. Phonetics, statistics, economics, aeronautics, rabies, mumps, rickets, measles, meningitis, AIDs, news, billiards, checkers, a shambles) October 2014 Preweek Page 20 of 20