ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 44  Oct 2022 CPALE  25 September 2022  8:00 - 11:00 AM
TAXATION
FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions.
Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. The gross estate of a decedent is valued at P3,000,000 composed of registered and
registrable properties. Total deductions are P4,000,000. Which of the following
statements is/are correct?
I - The estate of the decedent is required to submit notice of death.
II - The estate of the decedent is required to file an estate tax return.
III - The estate of the decedent is required to submit a statement certified
by a CPA.
a. Statements I, II and III
b. Statements II and III
c. Statement II
d. None of the statements
2. Gross gifts of non-resident alien donor shall be composed of:
a. real properties, personal properties and taxable transfers wherever
situated.
b. real properties and personal properties wherever situated.
c. real properties, personal properties and taxable transfers situated
in the Philippines.
d. real properties and personal properties situated in the Philippines
except intangible personal properties when there is reciprocity.
3. A VAT-registered taxpayer service provider has the following data taken from the
books of account for the month of January 2021:
Accounts receivable, January 1, 2021
Sales on account for the month of January
Services paid in cash for the month of January
Accounts receivable, January 31, 2021
Cash purchases for the month of January 2021
P
560,000
1,120,000
336,000
784,000
448,000
How much is the output tax for the month of January, 2021 using 12% rate?
a. P201,600
c. P132,000
b. P147,840
d. P96,000
4. Who of the following individual taxpayer shall not be required to file an income
tax return?
a. Individuals deriving compensation from two or more employers concurrently or
successively at any time during the taxable year;
b. Individual taxpayer receiving purely compensation income, regardless of
amount, from only one employer in the Philippines for the calendar year, the
income tax of which has been withheld correctly by the said employer.
c. Employees deriving compensation income, regardless of the amount, whether from
a single or several employers during the calendar year, the income tax of
which has not been withheld correctly (i.e., tax due is not equal to the tax
withheld) resulting to collectible or refundable return.
d. Individuals receiving purely compensation income from a single employer,
although the income tax of which has been correctly withheld, but whose
spouse is required to file income tax return
5. The books of account may be kept in:
a. Native language.
c. Chinese language.
b. Korean language.
d. Japanese language.
6. The filing of the withholding tax returns (BIR Form No. 1601EQ) for creditable
withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603Q
for final tax withheld on fringe benefits, and 1601FQ for all other final withholding
taxes and payment of the taxes withheld at source shall be made:
a. not later than the last day of the month following the close of the quarter
during which the withholding was made.
b. not later than the 20th day of the month following the close of the quarter
during which the withholding was made.
c. not later than the 25th day of the month following the close of the quarter
during which the withholding was made.
d. not later than the first day of the month following the close of the quarter
during which the withholding was made.
Page 1 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
7. Which of the following is not an effect of failure to affix the required DST?
a. An instrument, document or paper which is required by law to be stamped and
which has been signed, issued, accepted or transferred without being duly
stamped, shall not be recorded.
b. An instrument, document or paper or any copy thereof or any record of transfer
of the same which is required by law to be stamped shall not be admitted or
used in evidence in any court until the requisite stamp or stamps are affixed
thereto and cancelled.
c. No notary public or other officer authorized to administer oaths shall add
his jurat or acknowledgment to any document subject to documentary stamp tax
unless the proper documentary stamps are affixed thereto and cancelled.
d. An instrument, document or paper which is required by law to be stamped and
which has been signed, issued, accepted or transferred without being duly
stamped, shall make the transaction void.
8. The Commissioner may compromise the payment of any internal revenue tax, when:
I - there is a reasonable doubt as to the validity of the claim against the
taxpayer
II - the tax or any portion thereof appears to be unjustly or excessively
assessed.
a. Both I and II are correct
c. Only I is correct
b. Both I and II are incorrect
d. Only II is correct
9. Who has the power to lift the order of distraint?
a. Secretary of Finance
b. Commissioner of Internal Revenue exclusively
c. Commissioner of Internal Revenue or his duly authorized representative
d. Revenue District Officer
10. A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001, she filed a
written claim for refund. Her claim was denied by the BIR and she received the
denial on March 16, 2002. She filed a motion for reconsideration with the BIR on
March 31, 2002. On April 18, 2002, she received the final denial of the BIR. What
will be the taxpayer’s remedy?
a. File another motion for reconsideration with the BIR within 30 days after the
receipt of the final denial
b. File an appeal with the Court of Tax Appeals within 30 days after the receipt
of the final denial
c. File an appeal with the Court of Tax Appeals within 15 days after the receipt
of the final denial
d. The taxpayer has no more remedy against the final denial
11. The following are common to the inherent power of taxation, power of eminent domain
and police power, except for which of the following?
a. They are necessary attributes of sovereignty.
b. They interfere with private rights and property.
c. They affect all persons or the public.
d. They are legislative in implementation.
12. Which statement is wrong? A revenue bill:
a. must originate from the House of Representative and on the same bill the
Senate may propose amendments.
b. may originate from the Senate and on which same bill the House of
Representative may propose amendments.
c. may have a House version and a Senate version approved separately.
d. may be recommended by the President to Congress.
13. One of the following is not a characteristic or an element of tax:
a. It is levied by the legislature.
b. It is payable in money or in kind.
c. It is proportionate in character.
d. It is an enforced contribution.
14. 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. Secretary of Finance.
c. Court of Appeals.
b. Court of Tax Appeals.
d. Municipal Courts.
Page 2 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
15. Unless otherwise provided in Local Government Code, all local taxes, fees, and
charges shall be paid:
a. within the first twenty (20) days of January or of each subsequent quarter,
as the case may be.
b. within the first fifteen (15) days of January or of each subsequent quarter,
as the case may be.
c. within the first ten (10) days of January or of each subsequent quarter, as
the case may be.
d. within the first five (5) days of January or of each subsequent quarter, as
the case may be.
16. A senior citizen is engaged in the sale of VATable goods. His gross annual sales,
however, do not exceed the VAT threshold and he is not VAT-registered. During the
first quarter of the current year, his gross sales amounted to P250,000. How much
is the business tax due, if any?
a. P7,500
b. P5,000
c. P2,500
d. None, senior citizens are exempt from business taxes
17. An individual is operating a trading business enterprise. He is asking you to assist
him to register his business under the Barangay Micro Business Enterprise (BMBE) so
he can avail of the incentives granted under it. His total assets including the cash
of P300,000 he loaned from a bank amounted to P3,500,000. The total assets also
include P500,000 value of the land on which the particular business entity's office,
plant and equipment are situated. Is the individual qualified?
a. No. Because he is engaged in a trading business which is specifically excluded
from those who can register under BMBE.
b. Yes. Because his total assets excluding the land on which the particular
business entity's office, plant and equipment are situated do not exceed
P3,000,000.
c. No. Because only juridical persons are qualified to register under BMBE.
d. Yes. Because trading business is automatically qualified regardless of the
total assets.
18. This model generally favors retention of greater so called “source country” taxing
rights under a tax treaty—the taxation rights of the host country of investment—as
compared to those of the “residence country” of the investor.
a. OECD Model Tax Convention
b. UN Model Double Taxation Convention
c. United States Model Income Tax Convention
d. None of the choices
19. If the goods or services are used in both the registered project or activity and
administration purposes and the proper allocation could not be determined, the
purchase of such goods and services shall be:
a. subject to 12% VAT.
c. exempt from VAT.
b. subject to 0% VAT.
d. disregarded.
20. First statement: Registered Business Enterprises (RBEs) which are categorized as
Domestic Market Enterprises (DME) are not entitled to VAT zero-rating on local
purchases.
Second statement:
Sale of goods or services to a registered domestic market
enterprise shall be exempt VAT.
a. Both statements are correct
c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
SITUATIONAL
X Company has been assessed deficiency income tax of P1,000,000, exclusive of interest
and surcharge, for taxable year 2015. The tax liability has remained unpaid despite
the lapse of June 30, 2017, the deadline for payment stated in the notice and demand
issued by the Commissioner. Payment was made by the taxpayer only on February 10, 2018.
How much is the total amount due on February 10, 2018?
21. How much is the interest on deficiency from April 16, 2016 to June 30, 2017 (441
days)?
a. P302,054.79
c. P181,232.87
b. P241,643.83
d. P144,986.30
Page 3 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
22. How much is the additional interest on deficiency from July 1, 2017 to December
31, 2017 (184 days)?
a. P126,027.39
c. P75,616.43
b. P100,821.91
d. P60,493.50
23. How much is the interest on delinquency from July 1, 2017 to December 31, 2017
(184 days)?
a. P151,232.87
c. P90,234.23
b. P150,390.39
d. P75,616.43
24. How much is the interest on delinquency from January 1, 2018 to February 10, 2018
(41 days)?
a. P33,698.63
c. P22,465.75
b. P33,510.90
d. P20,106.54
25. How much is the total amount due on February 10,2018?
a. P2,012,962.67
c. P1,512,962.67
b. P1,762,962,67
d. P1,262,962.67
SITUATIONAL
On July 1, 2021, Ms. Cris Cruz sold shares of stock for P200,000. The shares, acquired
on June 1, 2018 at a par value of P150,000, were held as investment, and were sold
directly to a buyer under the following terms:
Down payment, July 1, 2021
P 30,000
Installment due, October 10, 2021
30,000
Installment due, October 10, 2022
75,000
Installment due, October 10, 2023
75,000
26. How much was the capital tax due in July 1, 2021?
a. P7,500
c. P1,125
b. P1,875
d. None
27. When should the capital gains tax return be filed?
a. August 1, 2021
c. July 16, 2021
b. July 31, 2021
d. July 30, 2021
28. How much was the documentary stamp tax due?
a. P1,500
c. P563
b. P1,125
d. None
SITUATIONAL
The following were taken from the Statement of Income and Expenses of ABC Corporation
for the taxable year 2021:
Gross profits from sales
P800,000
Less: Business expenses
440,000
Provision for bad debts
80,000
Write-off of inventories lost due to spoilage
20,000
540,000
Net income from operation
260,000
Add: Other income
Dividend income from a domestic corporation
50,000
Interest on Philippine bank peso deposit
30,000
80,000
Net income
P340,000
Additional information:
1) Accounts written off during the year and charged to allowance for bad debts,
P50,000;
2) Recoveries on accounts receivable previously written off in 2020 and
credited to allowance for bad debts:
Allowed as deduction by BIR, P30,000;
Disallowed as deduction by BIR, P20,000.
29. How much is the total non-deductible expenses/taxable other income?
a. P410,000
c. P110,000
b. P130,000
d. P100,000
30. How much is the non-taxable income and income subject to final tax?
a. P130,000
c. P80,000
b. P100,000
d. P30,000
Page 4 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
31. How much was the taxable net income using Reconciliation Net Income Per Books
Against Taxable Income?
a. P340,000
c. P390,000
b. P370,000
d. P440,000
32. LAB Corporation, a domestic manufacturing corporation, had a gross sales of
P100,000,000.00 for fiscal year ending June 30, 2021. It incurred cost of sales
of P60,000,000.00 which includes Direct Labor Wage of P20,000,000.00 and operating
expenses of P17,500,000.00 which include training expenses amounting to
P3,000,000.00. The corporation complied with all the prescribed requirements (e.g.
Apprenticeship Agreement, Certification from DepED or TESDA or CHED, whichever is
applicable). How much is the corporation’s net taxable income for the taxable year?
a. P22,500,000
c. P20,500,000
b. P21,000,000
d. None of the choices
33. CPL Corporation secured in 2018 a bank loan for its business expansion, and incurred
interest expense of P2,000,000.00 in calendar year 2020 on the said bank loan. In
the same year, it likewise earned interest income of P300,000.00 subjected to final
tax of 20% and royalties of P100,000 subjected to 20% final tax. For calendar year
2020, its gross income amounted to P20,000,000.00. Its gross assets, including the
P20,000,000 value of the land where its building and plant are situated, is
P120,000,000.00. Its operating expenses amounted to P15,000,000.00, inclusive of
the interest expense of P2,000,000.00. How much is the allowable interest expense?
a. P1,894,000
c. P1,920,500
b. P1,934,000
d. P1,950,500
34. GCC Corporation, a domestic corporation, owns 20% of the outstanding shares of BTS
Corporation, a non-resident foreign corporation (NRFC), since August 1, 2015. On
May 1, 2021, it received dividends amounting to P1,000,000 from the said NRFC. On
September 1, 2022, GCC Corporation utilized P800,000 for its dividend payments. On
January 1, 2023, it utilized the remaining P200,000 for its working capital.
How much is tax-exempt dividend, if any?
a. P1,000,000
c. P200,000
b. P 800,000
d. None of the choices
35. In 2021, Taprolani Corporation purchased a residential house and lot for P2,300,000.
The property was sold to the President of the corporation for P2,500,000. The fair
market value per BIR and per Assessor's Office were P3,500,000 and P3,000,000
respectively.
How much was fringe benefits tax, if any?
a. P1,884,615
c. P538,462
b. P1,615,385
d. None
36. KLM Corporation, a manufacturer, has gross sales of P190,000,000 for CY 2021, its
fourth year of operation. Its total assets amounted to P150,000,000, net of the
value of the land of P6,000,0000 where its manufacturing plant and business
operations are situated. Its cost of sales and allowable operating expenses amounted
to P100,000,000 and P89,000,000, respectively.
How much is the income tax due?
a. P1,800,000
b. P 250,000
c. P200,000
d. None of the choices
37. Using the same data in preceding number and it is the corporation’s fifth year of
operation. How much is the income tax due?
a. P1,800,000
c. P250,000
b. P 900,000
d. P200,000
38. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance are:
a. included in the gross estate of Mr. Julian Cruz because when the executor of
the estate is a beneficiary the proceeds are included in the gross estate
regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the designation of
the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of life
insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life insurance
are generally not subject to estate tax.
Page 5 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
39. Mr. Rigoberto Collado, a citizen and resident of Puerto Rico, dies during the year.
Puerto Rico does not impose transfer taxes on properties of decedent not residing
therein. He left the following properties among others:
Shares of stock, San Miguel Corporation, Manila
House and lot, Puerto Rico
Leasehold on a condominium unit, Philippines
Contract for public works, Philippines
The executor of his estate in Philippines asked you what properties are to be
included in his Philippine gross estate. What answer will you give him?
a. Include all the properties.
b. Include contract for public works only
c. Include all properties except shares of stock and house and lot
d. Include all properties except house and lot in Puerto Rico.
40. How much discount is granted to senior citizens on his purchase of basic and prime
commodities, subject to limitations?
a. 20%
c. 10%
b. 15%
d. 5%
SITUATIONAL
Mr. Pat Tayna, a single and a non-resident alien, died of a heart attack in 2018,
leaving the following properties in favor of his heirs:
Gross estate within the Philippines
(including P8,000,000 family home)
P 30,000,000
Gross estate outside of the Philippines
P 20,000,000
Funeral expense
P
500,000
Judicial and administrative expenses
P 2,000,000
Claims against the estate
P 5,000,000
Unpaid taxes accrued before death
P
300,000
Losses due to robbery
P
200,000
Medical expenses
P
500,000
41. How much is the taxable gross estate of the Estate of Pat Tayna?
a. P50,000,000
c. P35,000,000
b. P45,000,000
d. P30,000,000
42. How much is the deductible ordinary deductions of the Estate of Pat Tayna?
a. P8,000,000
c. P4,800,000
b. P5,500,000
d. P3,300,000
43. How much is the deductible special deductions of the Estate of Pat Tayna?
a. P8,500,000
c. P500,000
b. P5,000,000
d. None
44. How much is the estate tax due of the Estate of Pat Tayna?
a. P2,070,000
c. P1,782,000
b. P2,010,000
d. P1,572,000
SITUATIONAL
The following data are taken from the books of a dealer in securities:
Selling price, shares held as inventory
P3,000,000
Selling price, shares held as investment
2,000,000
Acquisition cost, shares held as inventory
1,000,000
Acquisition cost, shares held as investment
1,500,000
Other income, shares held as inventory
200,000
45. How much is the output tax using 12% rate?
a. P360,000
c. P240,000
b. P264,000
d. P220,000
46. How much is the capital gains tax assuming that the shares held as investment are
sold not through the local stock exchange?
a. P300,000
c. P45,000
b. P 75,000
d. Not subject capital gains tax.
Page 6 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
47. How much is the percentage tax on the shares held as investment assuming that the
shares are listed and traded in the local stock exchange?
a. P12,000
c. P3,060
b. P10,000
d. Not subject percentage tax.
48. How much is the percentage tax on the shares held as investment and are from a
closely held corporation and were sold in the secondary offering where the ratio
of the shares sold over the outstanding shares is 25%?
a. P80,000
c. P20,000
b. P40,000
d. Not subject to percentage tax
49. Which of the following has an option to register under the VAT system?
a. Common carriers by land transporting passengers the gross receipts of which
exceed P3,000,000 during the year
b. VAT-registered seller with mixed transactions as far as his VAT-exempt sales
are concerned
c. Operator of cockpit the receipts of which do not exceed P3,000,000 during the
year
d. Seller of VAT-subject services the gross receipts of which exceed P3,000,000
during the year
50. A keeper of garage whose gross receipts for the year exceed P3,000,000 is subject
to:
a. value-added tax.
c. garage sales tax.
b. common carrier’s tax.
d. franchise tax.
51. As a general rule, proceeds of insurance are not taxable because they only
constitute a return of what was lost (return of capital). Which of the following
are taxable proceeds?
a. Proceeds of life insurance
c. Proceeds of property insurance
b. Proceeds of accident or health insurance
d. Proceeds of crop insurance.
52. Which of the following statements in INCORRECT?
a. No uniform method of accounting can be prescribed for all taxpayers.
b. Each taxpayer is required by law to make a return on his true income.
c. The taxpayer has to adopt accrual method of accounting because it is in
accordance with generally accepted accounting principles.
d. Where purchase or sale of merchandise is an income-producing factor;
inventories on hand shall be taken at the beginning and at the end of year.
53. Papable Aljon Lee sold a painting (capital asset) which he purchased in 2018 at a
cost of P30,000. He sold the painting to Mamable Tonee Dee, on the following terms:
June 1, 2021 down payment
P10,000
August 1, 2021 installment due
10,000
October 1, 2021 installment due
20,000
October 1, 2022 installment due
40,000
October 1, 2023 installment due
40,000
For the year 2021, Papable Aljon will report a gross income of:
a. P90,000
c. P30,000
b. P45,000
d. P15,000
54. Using the same data in the preceding number, assuming Papable Aljon is a dealer in
paintings, how much will he report as gross income for 2021?
a. P15,000
c. P45,000
b. P30,000
d. P90,000
55. The results of operation of Yummy Convenient Store, not VAT-registered sole
proprietorship, owned by Ms. Alicia, for the first three (3) quarters of 2021 are
as follows:
Gross income
Deductions
First quarter
P300,000
P150,000
Second quarter
350,000
200,000
Third quarter
250,000
150,000
How much is taxable income for the third quarter assuming Ms. Alicia is married and
has five (5) qualified dependent children?
a. P400,000
c. P250,000
b. P300,000
d. P100,000
Page 7 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
56. One of the following individuals is not subject to income tax in the Philippines.
a. An American engineer who makes the Philippines his residence because of the
nature of his work
b. A Japanese visiting professor who occasionally teaches at one of the leading
universities in the Philippines, and stays here for an aggregate of 185 days
c. A Taiwanese singer who performs in one of the hotels in the Philippines for
one (1) week, and then leaves after he is through with his performances
d. A Filipino residing and working in America who comes to the Philippines to
visit his relatives
57. A domestic corporation has the following data for three (3) years:
Normal income tax
MCIT
2019
P 50,000
P 75,000
2020
P 60,000
P100,000
2021
P100,000
P 60,000
How much is the tax payable in 2021?
a. P100,000
c. P35,000
b. P 60,000
d. Zero
58. A VAT-registered seller sold goods to Asian Development Bank. It did not get
permission from the BIR to zero-rate the sale. As a consequence of the failure to
get the permission, the sale:
a. should be exempt from VAT.
b. should be subject to 12% VAT.
c. should be subject to 0% VAT.
d. should not be subject to any business tax.
59. Which of the following is allowed to claim presumptive input tax?
a. Processor of canned fruits
b. Miller of refined sugar not for his account
c. Miller of refined sugar for his own account
d. Public works contractor
60. Tax laws, being imposition of burden, are construed:
a. strictly against the taxpayer.
b. strictly against the government.
c. by filing a case before a regular court.
d. by strict adherence to opinions of tax expert.
61. On August 11, 2018, an individual taxpayer not engaged in real estate business acquired
a parcel of land which would be used as a site for office building for P3,000,000.
Unfortunately, the planned office building was not built due to financial problem that
hounded the taxpayer. The land was idle up to August 11, 2022. The taxpayer presented
a proof to the BIR that the land had not been used in business since its acquisition.
Subsequently, the land was sold by the taxpayer for P5,000,000 on September 5, 2022.
What was the tax consequence of the sale?
a. There was taxable gain of P2,000,000 which would be subject to Section 24 (A).
b. The sale would be subject to 6% capital gains tax based on the selling price.
c. The sale would be exempt from tax because the property was not used for
business.
d. The gain of P2,000,000 will be subject to 6% capital gains tax.
62. One of the following is deductible from the gross income even if not business related.
a. Rent expense
c. Bad debts
b. Travel expenses
d. Charitable contributions
63. An operator of an illegal horse-betting business, single, has the following data:
Receipts from illegal bets
P 500,000
Rent of space where bets are received, gross of 5% withholding tax
20,000
Salaries of assistants, gross of creditable withholding tax
100,000
Bribe money to obtain protection from arrest and prosecution
50,000
How much is the income tax due?
a. P66,000
b. P26,000
Page 8 of 14
c. P25,000
d. Not subject income tax
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
64. Maris bought from Pretty Corporation ten (10) shares of stock. Sixty (60) days
thereafter, the corporation was adjudged bankrupt and its stock as worthless. The
loss of Maris to be reported for income tax purposes is classified as:
a. a wagering loss.
b. non-deductible loss for income tax purposes.
c. short-term capital loss.
d. casualty loss.
65. Fly Me to the Moon, a resident international carrier, has the following data for
the current year:
Gross income of P700,000 and expenses of P200,000 from the
Philippines; Gross income of P500,000 and expenses of P100,000 from Hongkong. How
much is the Philippine income tax payable of the corporation?
a. P288,000
c. P30,000
b. P160,000
d. P17,500
66. The imposition of this tax will require payment of corporate income tax even if the result
of operation is a net loss.
a. Optional corporate income
b. Minimum corporate income tax
c. Regular corporate income tax
d. Improperly accumulated earnings tax
67. The following data are presented to you by the administrator of the Estate of Mr.
X:
Gross sales
P500,000
Cost of sales
200,000
Business expenses
50,000
Distribution of year’s income to the heirs
30,000
How much is the taxable income using optional standard deduction?
a. P300,000
c. P180,000
b. P270,000
d. P150,000
68. There is no taxable income until such income is recognized. Taxable income is
recognized when the:
a. taxpayer fails to include the income in his income tax return.
b. income has been actually received in money or its equivalent.
c. income has been received, either actually or constructively.
d. transaction that is the source of the income is consummated.
69. With the following data, how much is the deductible pension/retirement plan
contribution for 2022?
Pension/retirement plan contribution (2020)
P500,000
Pension/retirement plan contribution (2021)
P500,000
Pension/retirement plan contribution (2022)
P500,000
The breakdown of the P500,000 per actuarial valuation:
Normal cost
Past service cost
Total
a. P500,000
c. P420,000
b. P430,000
d. P400,000
P400,000
100,000
P500,000
70. A system of taxation that places emphasis on direct rather than indirect taxation,
with ability to pay as the principal criterion.
a. Regressive tax system
c. Global tax system
b. Progressive tax system
d. Schedular tax system
- END of EXAMINATION -
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TAXATION
TAX Final Pre-Board Exam
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
ANSWERS & SOLUTIONS/CLARIFICATIONS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
C
D
C
B
A
A
D
C
C
D
C
B
B
A
A
C
B
B
A
C
B
B
B
D
B
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
A
B
B
B
C
A
B
D
B
D
D
Bonus
A
B
D
D
D
C
D
B
B
A
D
B
B
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
D
C
B
B
A
D
C
C
C
B
B
D
B
C
D
B
A
C
B
B
3.
Services paid in cash for the month (336,000/1.12
Account receivable beginning (560,000/1.12)
Add: Sales on account (1,120,000/1,12)
Total
Less: Accounts receivable, ending (784,000/1.12)
Collections
Total
Tax rate
Output tax
P 300,000
500,000
1,000,000
1,500,000
700,000
800,000
1,100,000
12%
P 132,000
9.
The Commissioner or his duly authorized representative shall, subject to rules and regulations
promulgated by the Secretary of Finance, upon recommendation of the Commissioner, have the
power to lift such order of distraint: Provided, further, That a consolidated report by the Revenue
Regional Director may be required by the Commissioner as often as necessary.
10.
The last day to appeal to the Court of Tax Appeals is April 15, 2002 which is within two (2) yeas
from the date of payment of tax.
Claims for refund must be elevated to the CTA before the expiration of the two-year period
because the prescriptive period will not be suspended regardless of any supervening event.
11.
Similarities among the three inherent powers:
1) They are inherent in the State;
2) They exist independently of the Constitution;
3) They constitute the three methods by which the State interferes with private rights and
property;
4) They are legislative in nature and character;
5) Each presupposes an equivalent compensation.
12.
All appropriation, revenue or tariff bills authorizing increase of the public debt, bills of application,
and private bills shall originate exclusively in the House of Representatives, but the Senate may
propose or concur with amendments (Art. VI, Sec. 24).
Page 10 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
13.
Essential
Characteristics of
Tax
1) It is an enforced contribution;
2) It is levied pursuant to legislative authority;
3) It is proportionate in character;
4) It is payable in money;
5) It is levied on persons and property within the jurisdiction of the State;
6) It is levied and collected for the purpose of raising revenue to be used for public
purpose;
7) It is commonly required to be paid at regular intervals (not all taxes).
16.
Gross sales
Tax rate
Percentage tax
P250,000
1%
P 2,500
17.
BMBE refers to any business entity or enterprise engaged in the production, processing or manufacturing of
products or commodities, including agro-processing, trading and services, whose total assets including those
arising from loans but exclusive of the land on which the particular business entity's office, plant and
equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00).
“Services" shall exclude those rendered by any one, who is duly licensed by the government after having
passed a government licensure examination, in connection with the exercise of one's profession.
20.
RBEs which are categorized as Domestic Market Enterprises (DME) are not entitled to VAT zero-rating on
local purchases.
Sale of goods or services to a registered domestic market enterprise shall be subject to VAT at 12%.
21.
Interest on deficiency from April 16, 2016 to June 30, 2017 (1,000,000 x 20% x 441/365 days)=
P241,643.83
22.
20% interest on deficiency from July 1, 2017 to December 31, 2017 (1,000,000 x 20% x 184/365 days) =
P100,821.91
23.
20% interest on delinquency from July 1, 2017 to December 31, 2017 (1,491,643.83 x 20% x 184/365
days) = P150,390.39
24.
12% interest on delinquency from January 1, 2018 to February 10, 2018 (1,491,643.83 x 12% x 41/365
days) = P20,106.54
25.
Basic tax due (income tax)
Add: 25% surcharge for late payment (25% x 1,000,000)
Interest on deficiency from April 16, 2016 to June 30, 2017
(1,000,000 x 20% x 441/365 days)
Total amount due, June 30, 2017
Add: 20% interest on deficiency from July 1, 2017 to December 31,
2017 (1,000,000 x 20% x 184/365 days)
20% interest on delinquency from July 1, 2017 to December 31,
2017 (1,491,643.83 x 20% x 184/365 days)
12% interest on delinquency from January 1, 2018 to February 10,
2018 (1,491,643.83 x 12% x 41/365 days)
Total amount due, February 10, 2018
P1,000,000.00
250,000.00
241,643.83
491,643.83
1,491,643.83
100,821.91
150,390.39
20,106.54
271,318.84
P1,762,962.67
26.
Selling price
P200,000
Less: Acquisition cost
150,000
Capital gain
50,000
Tax rate
15%
Capital gains tax
P 7,500
Initial payments are P60,000 (30,000 + 30,000). Initial payments over selling price 60,000/200,000 is
30%. Capital gains tax cannot be paid in installment because initial payments exceed 25% over the
selling price.
Page 11 of 14
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TAXATION
TAX Final Pre-Board Exam
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
28.
150,000/200 x 1.50 = P1,125
29-30
Using Reconciliation of Net Income Per Books Against Taxable Income
Net income per books
Add: Non-Deductible Expenses/Taxable Other Income
Provision for bad debts
Write-off of inventories lost due to spoilage
Bad debts recovery
Total
Less: A) Non-Taxable Income and Income Subject to Final Tax
Dividend income
Interest income
B) Special/Other Allowable Deductions
Accounts written-off
Total
Net Taxable Income (Loss)
32.
Gross sales
Less: Cost of sales
Gross income
Less: Operating expenses (before the
additional deduction)
Additional deduction from training
expenses
1/2 x 3,000,000.00) (lower)
10% x 20,000,000.00
Net taxable income
P340,000
80,000
20,000
30,000
470,000
50,000
30,000
50,000
130,000
P340,000
P100,000,000.00
60,000,000.00
40,000,000.00
17,500,000.00
1,500,000.00
2,000,000.00
33.
Interest expense before interest arbitrage
Less: Interest arbitrage
January 1 to June 30, 2020
(300,000.00 x 33% x 6/12)
July 1, to December 31, 2020)
(300,000.00 x 0% x 6/12)
Allowable interest expense
1,500,000.00
19,000,000
P21,000,000.00
P2,000,000.00
49,500.00
0.00
49,500.00
P1,950,500.00
34.
The P800,000.00 shall be treated as tax-exempt since it was properly utilized within 2022. On the other
hand, the P200,000.00 shall be declared as taxable income for the calendar year 2021, subject to surcharge,
interest and penalty, since the utilization in not within the following taxable year, which is in 2022.
36.
Gross sales
Less: Cost of sales
Gross income
Less: Allowable deductions
Net taxable income
Normal/regular corporate income tax (1,000,000 x 25%)
Minimum corporate income tax (not yet subject)
Tax due (higher)
P190,000,000.00
100,000,000.00
90,000,000.00
89,000,000.00
P 1,000,000.00
P 250,000.00
P 250,000.00
37. BONUS
Gross sales
Less: Cost of sales
Gross income
Less: Allowable deductions
Net taxable income
Normal/regular corporate income tax (1,000,000 x 25%)
Minimum corporate income tax (90,000,000 x 1%)
Tax due (higher)
P190,000,000.00
100,000,000.00
90,000,000.00
89,000,000.00
P 1,000,000.00
P 250,000.00
P 900,000.00
P 900,000.00
MCIT rate: 2% - Up to June 30, 2020; 1% - July 1, 2020 to June 30, 2023; 2% - July 1, 2023
Page 12 of 14
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
TAX Final Pre-Board Exam
42.
30,000,000/50,000,000 x 5,500,000 = 3,300,000
43.
Standard deduction – P500,000
44.
Gross estate
Less: Ordinary deductions
Net estate before special deductions
Less: Standard deduction
Net taxable estate
Tax rate
Estate tax due
P30,000,000
3,300,000
26,700,000
500,000
26,200,000
6%
P 1,572,000
45.
Selling price, shares held as inventory
Less: Acquisition cost, shares held as inventory
Gross income
Add: Other income, shares held as inventory
Gross receipts
Tax rate
Output tax
P3,000,000
1,000,000
2,000,000
200,000
2,200,000
12%
P 264,000
46.
Selling price, held as investment
Less: Acquisition cost, shares held as investment
Capital gain
Tax rate
Capital gains tax
P2,000,000
1,500,000
500,000
15%
P 75,000
47.
Selling price, held as investment
Tax rate
Stock transactions tax
P2,000,000
.006
P 12,000
48.
Repealed under Sec. 6 RA No. 11494 (Bayanihan to Recover as One Act)
See Sec. 2 RR No. 23-2020
53.
Selling price
Less: Cost
Capital gain (long-term)
Income to be recognized (50%)
P120,000
30,000
P 90,000
P 45,000
Initial payments over selling price = 40,000/120,000 = 33%
54.
Selling price
Less: Cost
Ordinary gain
P120,000
30,000
P 90,000
Income to be reported in 2021 (90,000/120,000 x 40,000 = 30,000)
55.
Gross income
Less: Deductions
Taxable income this quarter
Add: Taxable income, previous quarters
(150,000 + 150,000)
Taxable income to date
57.
Tax due (higher)
Less: Unexpired excess MCIT (25,000 + 40,000)
Tax payable
Page 13 of 14
P250,000
150,000
100,000
300,000
P400,000
P100,000
65,000
P 35,000
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TAXATION
ReSA Batch 44 – October 2022 CPALE Batch
25 September 2022  8:00 AM to 11:00 AM
63.
Gross receipts
Less: Rent expense
Salaries expense
Taxable net income
Tax due under Section 24 (A)250,000
130,000 x 20%
TAX Final Pre-Board Exam
P500,000
20,000
100,000
0
26,000
120,000
P380,000
P 26,000
65.
Gross Philippines Billings
Rate
Tax payable
P700,000
2.5%
P 17,500
67.
Gross sales
Less: OSD (40% x 500,000)
Taxable net income
P500,000
200,000
P300,000
69.
Normal cost for 2022
Add: 1/10 x 100,000 (2020)
1/10 x 100,000 (2021)
1/10 x 100,000 (2022)
Total
P400,000
10,000
10,000
10,000
P430,000
Page 14 of 14
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