Finals Examination PDF

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Summary

Jordan Gevala had the following information during first quarter of his business:Sales P1,490, Cost of Sales 500, Other income 200, Itemized Deductions 300, Creditable Taxes Withheld 15,1. Can Jordan opt to be taxed at 8% flat rate of income tax? Yes or No? 2. If Jordan availed of the 8% flat rate o...

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Jordan Gevala had the following information during first quarter of his business: Sales P1,490,000 Cost of Sales 500,000 Other income 200,000 Itemized Deductions 300,000 Creditable Taxes Withheld 15,000 1. Can Jordan opt to be taxed at 8% flat rate of income tax? Yes or No? 2. If Jordan availed of the 8% flat rate of income tax, how much is his income tax due and payable for the year? 2 points 3. If Jordan also earned P250,000 as compensation, how much is his income tax due and payable if he avails of the 8% flat rate of income tax? 2 points 4. In relation to the preceding number, if Jordan’s compensation income is P200,000, how much is his income tax due and payable? 2 points 5. If in the next three quarters, Jordan had the following information: Sales

2nd quarter 3rd quarter October November December

1,000,00 0 300,000 200,000 800,000 150,000

Other nonoperatin g income

150,000

Cost of Sales

Itemized Deduction s

350,000

210,000

175,000 50,000 230,000 45,000

140,000 45,000 205,000 40,000

CWTs

10,00 0 5,000 2,500 8,000 1,500

How much is his income tax due and payable for the year? 2 points Lancelot Castador, an OFW working in Alaska, returns to Philippines to marry the love of his life Angela Secret in 2015. For the year 2021, Lancelot Castador had the following information: Gross Compensation Income SSS, PAGIBIG, Philhealth Employer’s share in SSS, PAGIBIG, Philhealth Union Dues Rice Allowance Employee Cash Achievement Award Christmas Bonus Productivity Bonus Medical Cash Allowance to Dependents Monetized SL credits (rate of P1,000 per day) Monetized VL credits (same rate) Uniform Allowance given in cash 13th and 14th month pay Actual medical assistance

3,500,000 102,000 150,000 60,000 24,000 10,000 90,000 80,000 3,000 10,000 15,000 6,000 80,000 10,000

The SSS, PAGIBIG, Philhealth contributions and union dues were included in the gross compensation income. 6. How much is total exempt income of Lancelot (Exempt, De Minimis and Other Benefits)?

7. How much is Lancelot’s taxable income? 8. In relation to the above, if Lancelot sold the family car for a gain of P50,000 and incurred P400,000 in the tuition fees of their 2 children. Likewise, the spouses earned P1,000,000 in rental income for a conjugal property leased to a friend in Barcelona. How much would be the additional taxable income of Lancelot? 9. If Lancelot received a housing benefit as a manager of the Company, where the latter purchased a house and lot with a fair market value of P1,000,000 and Lancelot paid P600,000, which represents 50% of the selling price, how much is the FBT due on such benefit? MimiChael, single na, dump by his last 99 boyfriend had the following data for the taxable year 2021 (all in pesos): Compensation Income Business Income, Philippines Business Income, abroad Business Expenses, Philippines Business Expenses, abroad Dividend income, Dividend income, Interest income, Interest income, Interest income, Creditable Taxes

domestic corporation non-resident foreign corporation (a) BPI Manila branch BPI New York branch BPI Manila branch, FCDU Withheld

Taxes withheld from compensation Household expenses Gain on sale of house and lot inherited from parents (b) Gain on sale of 10,000 shares of stock of a domestic corporation not listed or traded in a local stock exchange (the shares were originally bought for P40,000)(c)

1,300, 000 2,000, 000 500,00 0 1,300, 000 350,00 0 40,000 30,000 20,000 10,000 10,000 200,00 0 220,00 0 1,800, 000 250,00 0 100,00 0

Additional Information: a. The non-resident foreign corporation from which dividends were earned did not earn any income from the Philippines in the last three years prior to declaration of dividends b. Fair Market Value at the time of inheritance was P1,500,000; Zonal Value is P1,000,000 and Fair Market Value of the house as per local assessor is P600,000, while the land had a fair market value of P800,000. c. The domestic corporation had net assets amounting to P15,000,000, with 1,000,000 outstanding shares of stock; among its assets is land with a book value of P3,000,000 but the Fair Market Value is P3,500,000. 10.

How much is MimiChael’s income tax still payable if she is a non-resident citizen for the year 2021? 11. How much is MimiChael’s total capital gains tax due? 12. Assuming the house and lot sold was the principal residence and MimiChael was able to use P1,487,500 of the proceeds to acquire a new principal residence within 18

13.

months from disposal, how much is CGT due? Assuming the shares of stock were purchased 18 months ago, how much is the CGT due?

Son Hoku, a writer of Eleceed series in twitter, earned the following passive income for the taxable year 2018:

Royalty income from copyright Royalty income from trademarks Raffle draw winnings Philippine lottery winnings

P2,200,000 550,000 10,000 150,000

Dividend Dividend Interest Interest Maybank

income income income income

from domestic corporation from foreign corporation* from FCDU of PNB on peso deposits in

10,000 15,000 20,000 10,000

*the foreign corporation earned 75% of its income from within the Philippines in the last three years prior to declaration of dividends. 14. a. b. c. d. e.

How much is the final tax due if Son Hoku is a/an: 5points Resident Citizen Resident Alien Non-Resident Citizen Non-Resident Alien Engaged in Trade or Business Non-Resident Alien Not Engaged in Trade or Business

MYFATHERISAPOLICEMAN CORPORATION ACCOUNTING BOOKS CONTAINS THE FOLLOWING FOR THE YEAR 2021: Gross Sales Cost of Sales Gross Income from sales Other non-operating income Interest from receivables Interest from peso deposits Interest income on US dollar deposits (100,000 from BPI US Branch) Gain on sale of land (cost P2,500,000; FMV 2,800,000) Gain on sale of shares of stock (cost P2,300,000) Dividend income (100,000 from domestic corporation; 200,000 from resident foreign corporation) Rental Income (gross of 5% withholding tax) Total Gross Income Expenses Operating Expenses Depreciation Expense Loss on sale of building held as capital asset (cost is P1,200,000; FMV 1,100,000) Provision for bad debts (net of P500,000 written-off) Taxes and Licenses Interest Expense Contributions to Retirement Fund Senior Citizen Discounts Impairment Loss Loss from fire (carrying amount of the machinery) Selling and Admin Expenses Net Loss

P 20,000,000 (4,000,00) 16,000,000 400,000 300,000 100,000

500,000 400,000 300,000

700,000

2,300,000 P 18,300,000

(2,216,000) (200,000) (3,000,000) (4,000,000) (300,000) (3,500,000) (250,000) (300,000) (400,000) (6,100,000)

(20,266,000) (P1,966,000)

Note: a. Taxes and Licenses consists of the following: Mayor’s Permit and Registration Costs Local Business Tax

100,000 1,200,000

Real Property Tax Capital Gains Tax Output Value-Added Tax

1,000,000 280,000 1,420,000

b. Per actuarial report, the current service cost for the pension fund of the employees is P2,500,000. c. Machinery lost in the fire had a carrying amount of P400,000 and was insured. Amount recovered from the insurance company

is P200,000. d. The shares of stock sold were those of ABC Corporation which is an unlisted company and sold to DEF Corporation, a company listed in the PSE. 15. How much is the income tax due and payable of the Company? 2points 16. How much is the deductible interest expense? 17. How much is the deductible taxes and licenses? 18. How much is the deductible retirement expense? 19. How much is the total CGT due? 20. How much is the total FWT due? 21. If the Company’s RCIT the following year was P250,000 while the MCIT is P200,000, how much would be the tax payable?

Christine Joyce and Angela Grace formed a business partnership, partners sharing 3:1, respectively, has the following data for the calendar year ended 2021: Gross income 1,000,000 Deductible expenses 300,000 Yield from deposit substitutes, net of 62,500 withholding tax Withdrawals on the share in the net income of the partners, net of 150,000 withholding tax Rent income, net of withholding tax of 437,000 5% Quarterly payments of income tax 120,000 Christine Joyce has two dependent minor brothers. He also has a trading business of his own. The following are data pertaining to taxable year 2021: Gross Income, trading business P800,000 Expenses, trading business 100,000 Interest Income from checking account 20,000 Salaries as part-time teacher, gross 100,000 of withholding tax of P10,000 22. How much is the income tax due and payable of the partnership, if any? 2points 23.How much is the distributable income of the partnership, if any? 24.How much is the final tax on income received by Christine Joyce? 25.How much is the taxable income of Christine Joyce, if any? 26.If the partnership is a general professional partnership (assuming rent is P460,000 and there are no quarterly tax payments), how much is the distributable income? 27.How much is the taxable income of Christine Joyce, if any?

Part II

1. Mr. Yo filed his 2019 ITR on July 15, 2020. The BIR discovered a deficiency income tax on August 30, 2021. When should the deficiency tax assessment be served? a. On or before August 30, 2024 b. On or before April 15, 2023 c. On or before August 30, 2031 d. On or before July 15, 2023 2. Ms. Wa filed her 2019 ITR on March 15, 2020. On September 15, 2023, the BIR discovered a fraudulent intention to avoid the payment of income tax because the income was understated by more than 40% of the correct amount. On April 15, 2024, the BIR issued a deficiency income tax assessment which was received by Ms. Wa on April 30, 2024. Which of the following statements is correct? a. The assessment should have been made not later than April 15, 2023. b. Ms. Wa should protest the assessment because the right of the BIR to assess has prescribed. c. The BIR has ten (10) years to assess counted from the due date or filing of the return whichever is later. d. Ms. Wa should protest with the CIR within 30 days from the receipt of the assessment otherwise, the assessment becomes final and unappealable. 3. Which of the following statements is/are correct? Statement A: Filipino citizens are taxable on all income derived from sources within the Philippines. Statement B: Domestic corporations are taxable on all income derived from sources within and without the Philippines. Statement C: Foreign corporations are taxable only on all income derived from sources within the Philippines Statement D: Aliens are taxable only on all income derived from sources within the Philippines

a. b. c. d.

Statements Statements Statements Statements

B, C, A, B, A, B, A and

and D are correct are correct. and D are correct. C, and D are correct. B are correct.

4. Which of the following are basic principles of a sound tax system? a. Fiscal Adequacy, Equality or Theoretical Justice and Administrative Feasibility b. Fiscal Adequacy, Economic Sufficiency and Administrative Feasibility c. Administrative Justice, Theoretical Feasibility and Fiscal Sufficiency d. Theoretical Justice, Fiscal Efficiency and Administrative Feasibility 5. Which of the following statements is/are correct? Statement A: Dado filed his 2019 ITR (not false nor fraudulent) on March 15, 2020. The last day for the BIR to collect the tax by judicial action, if no assessment was made is on April 15, 2023. Statement B: Dede’s 2019 ITR was filed and the tax due paid on May 15, 2020. The last day for the BIR to send an assessment is on April 15, 2023. Statement C: On July 15, 2020, Dodo filed an amended return which is substantially different from the 2019 ITR which he filed on April 10, 2020. The last day to send an assessment is April 15, 2023.

a. Statements A, B, and C are correct. b. Statement A is correct. c. Statements A and C are correct.

d. Statements B and C are correct. 6. If a taxpayer believes in good faith that the assessment against him is erroneous and doubtful but the same has become final and

unappealable, and he asks for advice, what is the best available remedy for him? a. Apply and request for a compromise of his tax liability. b. Ask for the interest to be waived. c. Protest the assessment with the CIR d. File an injunction or certiorari with the CTA. 7. The concept of “situs of taxation” is based on which inherent limitation of the power of taxation? a. Non-delegability of the power to tax b. International Comity c. Territorial Jurisdiction d. Exemption of the government from taxation 8. Which of the following statements is/are correct? Statement A: The power to tax includes the power to exempt. Statement B: The power to tax includes the power to destroy. Statement C: The power to license includes the power to tax. Statement D: The power to tax and police power are superior to the nonimpairment clause of the Constitution.

a. b. c. d.

Statements Statements Statements Statements

A B A C

and and and and

C D B D

are are are are

correct. correct. correct. correct.

9. If the taxpayer refuses to submit books of accounts and records relating to the pending tax investigation by the offices of the BIR, the BIR shall a. Issue a final assessment based on the financial statements submitted by the taxpayer. b. Give the BIR the authority to enter the premises of the taxpayer to obtain any available records relating to the tax investigation. c. Issue subpoena duces tecum against the taxpayer to submit the pertinent records to the office of the BIR d. File an action with the CTA or the regular courts to compel the taxpayer to present the necessary documentation 10. What basic characteristic of taxation is violated if the President of the Philippines and the President of the USA entered into an executive agreement on a loan facility to the Philippines from USA whereby there was a stipulation that interest on loans granted by private US financial institutions in the Philippines shall not be subject to Philippine income tax laws. a. Legislative in character b. Equality or Theoretical Justice c. Inherent limitation d. Exception of the government from taxation In the course of your examination, as a revenue officer, of the audited financial statements of Bagito Corporation which sells and leases real estate, and by virtue of a Letter of Authority duly issued by the BIR, the income statement of Bagito Corporation on its first year of operation shows: Revenues: Gain on sale of residential lots

Php 600,000

Bank interest income 32,000

Dividend from Delicious Corporation Rental income Total

8,000 2,400,000 Php 3,040,000...