Icare TAX First Preboard Examinations Batch 3 PDF

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Lipa City, Batangas, Philippines Mobile : 0927 283 8234 Telephone : (043) 723 8412 Gmail : icarecpareview@gmailTAXATIONiCARE Accountancy Review 1 st Open Preboard Examination, Batch 3INSTRUCTIONS: Choose the best answer among the given choices. Policies on academic honesty are strictly enforced. Our...

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No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

TAXATION iCARE Accountancy Review 1 st Open Preboard Examination, Batch 3 INSTRUCTIONS: Choose the best answer among the given choices. Policies on academic honesty are strictly enforced. 1. Our national internal revenue laws are a. Political in nature c. Criminal in nature b. Penal and nature d. Civil in nature 2. A law was passed by Congress which granted estate tax amnesty to those who have not estate tax due on or before January 1, 2020. The same law does not provide for refund of taxes to those who have properly paid estate tax covered by the amnesty. Those who have paid their estate tax complained and asked that the law be declared unconstitutional on the ground of being violative of the equal protection clause and discriminatory. The law is: a. Valid because there is a valid classification. b. Not valid because those who did not pay their taxes are favored over those who have paid their taxes. c. Valid because it was Congress that passed the law and it did not improperly delegate the power to tax. d. Not valid because only the President with the approval of Congress may grant amnesty. 3. The constitutional limitation declaring churches, parsonages, mosques are exempt from taxation applies only to what kind of tax. a. Real estate tax b. Income tax c. Value-added tax d. Donor’s tax 4. Reese Poon, a student activist, wants to impugn the validity of a tax on text messages. Aside from claiming that the law adversely affects her since she sends messages by text, what may she allege that would strengthen her claim to the right to file a taxpayer’s suit? a. A. That she is entitled to the return of the taxes collected from her in case the court nullifies the tax measure. b. That tax money is being extracted and spent in violation of the constitutionally guaranteed right to freedom of communication. c. That she is filing the case in behalf of a substantial number of taxpayers. d. That text messages are an important part of the lives of the people she represents. 5. The payor of passive income subject to final tax is require to withhold the final tax from the payment due to the recipient. The withholding of the tax, has the effect of a. A final settlement of the tax liability on the income b. A credit from the recipient’s taxable income c. Consummating the transaction resulting in an income

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AESCARTIN/TLOPEZ/ JPAPA

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

d. A deduction in the recipient’s income tax return 6. The following are laws which should exclusively originate from the House of Representatives, except a. Tariff bills b. Revenue bills c. Appropriations bill d. Laws amending the jurisdiction of the Supreme Court. 7. The following are elements of direct double taxation, except: a. Both taxes are levied for the same purpose b. Both taxes are imposed by the same taxing authority c. Both taxes are imposed upon the same person d. Both taxes are imposed on the same amount 8. Government agencies performing governmental functions are exempt from tax unless expressly taxed while those performing proprietary functions are subject to tax unless expressly exempted. What inherent limitation on the power of taxation is described. a. The tax imposed should be for public purpose. b. There should be no improper delegation of the taxing power. c. The power to tax is limited to the territorial jurisdiction of the taxing government. d. Exemption of government entities from taxation. 9. The following are constitutional limitations, except: a. Due process clause b. Equal protection clause c. Doctrine of international comity d. Non-impairment clause 10. Which of the following statements regarding “Taxpayer’s Suit” is incorrect? a. It is one brought or filed by a taxpayer arguing the validity of a tax statute and its enactment or the constitutionality of its alleged public purpose. b. It is a case where the act complained of directly involves the illegal disbursement of public funds derived from taxation. c. Taxpayers have “locus standi” to question the validity of tax measures or illegal expenditures of public money. d. A taxpayer is relieved from the obligation of paying a tax because of his belief that it is being misappropriated by certain officials 11. In case of ambiguity, tax laws imposing a tax shall be interpreted a. Strictly against the taxpayer b. Liberally in favor of the taxpayer c. Liberally in favor of the government d. None of the choices 12. Receipt of the following by a minimum wage earner is subject to income tax, except a. Fringe benefit b. Allowance c. Commission d. Holiday Pay

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No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

13. Aljur Padilla, worked in the United States as an actor. Has been residing in the States for the past 15 years. He arrived in the Philippines on July 1, 2021 to reside here permanently. Which of the following statements is correct with respect to Aljur’s classification for income tax purposes? a. He will be classified as nonresident citizen from January 1, 2021 until the date of his arrival in the Philippines. b. He will be classified as nonresident citizen for the whole year of 2021. c. He will be classified as resident citizen for the whole year of 2021. d. He will be classified as neither resident nor nonresident citizen for the year 2021. 14. 1st Statement: Resident individual taxpayer are subject to 15% final tax on their interest income from expanded foreign currency deposit. 2nd Statement: There shall be a 6% capital gains tax on all sale by an individual of shares of stocks of a domestic corporation. a. true, true; b. true, false; c. false, false; d. false, true 15. 1st Statement: Gain on sale of all kinds of capital assets are subject to the final tax on capital gains. 2ndstatement: Gain from sale of real property classified as capital asset and located in Miami, Florida is subject to the final tax on capital gains. a. true, true; b. true, false; c. false, false; d. false, true; 16. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, issued a Revenue Regulation using gross income as the tax base for corporations doing business in the Philippines. Is the Revenue Regulation valid? a. Yes, the Secretary of Finance has the power to issue rules and regulations. b. Yes, gross income taxation over corporations is valid. c. No, Secretary of Finance has virtually amended the NIRC, which is beyond the power of the executive to do. d. No, only the Commissioner of the BIR has the authority to make revenue rules and regulations. 17. Who among the following is taxed on his worldwide income? a. Resident citizen. b. Resident alien. c. Nonresident citizen. d. Nonresident alien. 18. Angus corporation declared and distributed to its stockholders shares of Mcgyver Corporation. One of its stockholders, Menemis, who is a Filipino, received 100 shares of Mcgyver Corporation shares as dividends. At the date of dividend declaration, the fair market value of Mcgyver Corporation shares was P120 per share and by the time Menemis received the dividend, the fair market value per share was P180. Which of the following is correct? The dividend is…. a. A stock dividend, hence, exempt from income taxation.

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AESCARTIN/TLOPEZ/ JPAPA

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

b. A property dividend, hence, taxable subject to the graduated tax rate that ranges from 5% to 35%. c. A property dividend, hence, taxable and subject to the final tax rate of 10%. d. A property dividend, hence, taxable and subject to the final tax rate of 20%. 19. The following income are subject to final tax, except: a. Royalty income received by a domestic corporation from another domestic corporation. b. Cash dividend received by a domestic corporation from a resident foreign corporation. c. Stock dividends received by a domestic corporation from another domestic corporation. d. Interest income received by a resident foreign corporation from a Philippine bank. 20. A corporation may employ as a basis for filing its annual corporate income tax return: a. Calendar year only which begins January 1 and ends December 31. b. Fiscal year only which could be any day within the calendar year at the discretion of the corporation. c. Either fiscal year or calendar year at the discretion of the corporation. d. Fiscal year only which coincides on the day of registration with the BIR. 21. A corporation should file its quarterly return within. a. 30 days following the end of each of the first three quarters of the taxable year. b. 60 days following the end of each of the first three quarters of the taxable year. c. 60 days following the end of each of the 4 quarters of the taxable year. d. 30 days following the end of each of the 4 quarters of the taxable year. 22. A corporation on a fiscal year ending June 30, should file its annual income tax return: a. On or before April 15 of the same year. b. On or before April 15 of the following year. c. On or before October 15 of the same year. d. On or before July 15 of the following year. 23. Which of the following may be subject to corporate income tax: a. Non-stock and non-profit educational institution. b. A public educational institution. c. A private educational institution. d. Local water district 24. The MCIT shall not apply to the following Foreign Corporations, except: a. RFC engaged in business as international air carrier subject to 21/2% of its gross Philippine billings. b. Non-resident Foreign Corporation (NRFC) on gross income derived from lease of vessel c. RFC engaged in business as a Regional Operating Headquarters (ROHQ) for the year ending December 31, 2021. d. RFC engaged in importing Cranes and Heavy equipment into the Philippines.

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AESC ARTIN/TLOPEZ/JPAPA

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

25. The following present the rules of income taxation of an estate, except: a. A taxable estate is taxable like an individual b. An estate may claim as deduction from gross income distribution of income to the heirs c. An executor or administrator handling separate estate for and on behalf of the same heirs is required to submit a consolidated income tax return for the multiple estate d. A taxable estate may claim as deduction casualty loss as long as not claimed as a deduction from the gross estate in the course of determining estate tax. 26. Which of the following statements is not correct? a. When the co-owners invest the income of the property co-owned in a business or in any income producing properties or activities constituting themselves into a business partnership, such partnership is consequently subject to income tax as a corporation. b. As a rule, co-ownership is not subject to income tax because the co-owners are limited to the preservation and enjoyment of the property and the collection of the income there from. c. A co-owner is subject to income tax on his share in the net income of the coownership actually or constructively received. d. Partnerships, no matter how created or organized are considered corporation subject to corporate income tax. 27. Beginning April 11, 2021, which of the following statements is correct? a. Partners of a taxable partnership are considered as stockholders and profits distributed to them by the partnership are considered as dividends. b. A taxable partnership shall be subjected to the improperly accumulated earnings tax. c. Partners share in the distributable income after tax of a business partnership shall be subjected to the 10% creditable withholding tax. d. Partner’s share in the distributable income after tax of a business partnership shall be added to the partner’s gross income for purposes of the latter’s personal income tax. 28. One of the following is not an accepted basis of relief from the MCIT. a. Prolonged labor dispute b. Force majeure problems c. Legitimate business reverses d. Intercorporate dispute 29. The following are taxable with income derived from sources within the Philippines only, except: a. Micro Corporation USA, a corporation created under the laws of the United States of America. b. Philippine Bearing Inc, a corporation created under the laws of the Philippines. 99% owned by Bearing USA, Inc, a corporation created under the laws of the USA. c. Micro Corporation Philippine Branch. Registered branch of Micro Corporation USA. d. Continental Air MicroAsia, a corporation created under the laws of Malaysia who has landing rights in the Philippines. 30. The following are subject to Net Income Taxation, except:

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No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

a. b. c. d.

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

Resident citizen Domestic Corporation Non-Resident Citizen engaged in Business Non-Resident Alien not engaged in trade or business

31. Mr. Wonka is 67 years old, married and retired. During 2021 he received a retirement pension from his former employer of 8 years in the amount of P400,000. His net income from business is P105,000 and received P5,000 social security benefits. What is Mr. Wonka’s taxable income? a. P 95,000 b. P105,000 c. P510,000 d. P505,000 32. Mr. Lewis, a cemetery lot dealer sold real properties to different buyers as follows:

House & Lot Farm Lot Cemetery Lot

Selling Price P 2,000,000 P 800,000 P 45,000

Cost P1,250,000 P 300,000 P 20,000

The house and lot was Mr. Lewis’ principal residence that was sold to reacquire a new principal residence noting that the entire proceeds thereof was utilized. What is Mr. Lewis’ capital gains tax, assuming that all the selling price are at fair market value? a. P170,700 b. P168,000 c. P 48,000 d. P 50,700 33. In 2020, Totoy, Inc. had the following items of income and expenses: Sales P500,000 Cost of services, salary of personnel directly engaged in 250,000 business Dividends received 25,000 The dividends were received from a domestic corporation. The general and administrative expenses include factory facilities expense and cost of manufacturing supplies of P25,000 and P15,000, respectively. What amount should be reported as gross income for minimum corporate income tax? a. P210,000 b. P235,000 c. P250,000 d. P275,000 34. Phoenix Corp., a calendar-year corporation realized taxable income of P36,000 from its regular business operations for calendar-year 2020. In addition, Phoenix had the following capital gains and losses during 2020. Short-term capital gain P8,500 Short-term capital loss (4,000) Long-term capital gain 1,500 Long-term capital loss (3,500)

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No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

Phoenix did not realize any other capital gains or losses since it began operations. What is Phoenix’ total taxable income for 2020. a. P36,250 b. P38,500 c. P39,500 d. P40,500 35. Jose and Berto, both unmarried, formed a general professional partnership. The partners agreed to share profits equally. During the year 2020, the partnership earned a net income of Php500,000. Berto, also engaged in the business of buying and selling cars, reports net income from his business amounting to Php750,000. The income tax due of the partnership is: a. Php150,000 b. Php160,000 c. Php0 d. Php125,000 36. Based on number 35, Berto’s taxable income shall be: a. Php750,000 b. Php1,000,000 c. Php875,000 d. Php500,000 37. Pedro received annual clothing allowance amounting to P10,000. His 13th month pay amounted to P80,000. No other benefits were received during the year. Which of the following statements is correct? Statement 1: The 4,000 excess of the annual clothing allowance received over the prescribed minimum amount shall be added to the 13th month pay and other benefits. Statement 2. The Php84,000 13th month pay and other benefits shall be exempt from income tax a. Statement 1 only b. Statement 2 only c. Both statements 1 and 2 d. Neitther statements 1 and 2 38. Gena is a compensation income earner from Ghana Inc. She did not have another employer and her income tax is correctly withheld by her employer Pedro – Deriving purely compensation income from Frodo Inc, had only one employer during the year and employer properly withheld from him the correct amount of tax. Pedro is married to Berta. Berta owns and operates a nail salon and foot spa. a. Gena and Berto are both allowed to avail of the substituted filing b. Neither Gena nor Berto are allowed to avail of the substituted filing c. Only Gena can avail the substituted filing d. Only Berto can avail of the substituted filing. 39. Which of the following transactions is subject to 6% capital gains tax: a. Sale of condominium units by a real estate dealer b. Sale of real property utilized for office use c. Sale of apartment houses d. Sale of vacant lot by an employee

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