Midterm with answer - exam PDF

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The following must be contained in ITR: i. Pesonal profile and information; ii. Total gross sales, receipts or income from compensation of services rendered, conduct of trade or business or the exercise of a profession, except income subject to final tax as provided under the tax code; iii. Allowabl...

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1. The following must be contained in ITR: i. Pesonal profile and information; ii. Total gross sales, receipts or income from compensation of services rendered, conduct of trade or business or the exercise of a profession, except income subject to final tax as provided under the tax code; iii. Allowable deductions under the Tax Code; iv. Taxable income as defined in the Tax Code; v. Income Tax due and Payable a. i, ii, iii, iv b. ii, iii, iv and v c. i, ii, iii, iv and v d. iv and v 2. In 2021, Caruso, a resident Filipino citizen, received dividend income from U.S- Based corporation which owns a chain of Filipino restaurant in the West Coast, U.S.A. The dividend remitted to Caruso is subject to U.S withholding tax with respect to a non-resident alien-like Caruso. The dividend is subject to: a. Final income tax b. Basic income tax c. Capital gains tax d. Exempt from tax 3. Jose was employed by Timberland Inc., within how many days Jose needs to obtain Tax Identification Number from BIR? a. 1st day of employment b. 10th day of employment c. 1st month of employment d. 1st year of employment. 4. Z is a Filipino immigrant living in the United States for more than 10 years. He is retired and he came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays here for about a month. He regularly receives a pension from his former employer in the United States, amounting to US$1,000 a month. While in the Philippines, with his pension pay from his former employer, he purchased 3 condominium units in Makati which he is renting out for P15,000 a month each. Does the US$1,000 pension become taxable because he is now in the Philippines? a. Yes, Income received in the Philippines by non-resident citizens is taxable. b. Yes, Income received in the Philippines or abroad by non-resident citizens is taxable. c. No, Income earned abroad by non-resident citizens are no longer taxable in the Philippines. d. No, the reason is exempt from taxation being one of the exclusions from gross income. 5. A privilege granted to a taxpayer to deduct or set-off against Phil. Income tax, the income, war profits and excess profits taxes that he has paid or has accrued to a foreign country a. Tax redemption b. Tax deduction c. Tax consolidation d. Tax credit

6. F sold his residential house to Ms. P for PSM. Its FMV when he inherited it was P6M although its presents FMV is P8M. The tax on the above transaction is: a. P360,000 CGT b. P480,000 CGT c. 6% donors tax d. VAT 7. Continuing #6, but assuming the residential house is located abroad, the capital gain's tax is: a. P360,000 b. P480,000 c. P120,000 d. P0 8. PCSO and lotto winnings are: a. Exempt from tax b. Subject to 20% final tax c. Exempt from tax not exceeding 10,000 any in any will be subject to 20% final tax. d. Half will be exempt half will be tax. 9. Who can avail 8% Gross Sales or Receipts Tax? a. Self-employed with Gross Receipts or Sales not exceeding 3,000,000 b. Compensation earners with Gross compensation not exceeding 3,000,000 c. Mixed income earners with Gross Receipts or Sales and other income not exceeding 3,000,000 d. All of the above. 10. An individual shall be subject to maximum income tax rate of? a. 6% b. 8% c. 32% d. 35% 11 The following are similarities of the inherent power of taxation, eminent domain, and police power, except one: a.

Are necessary attributes of sovereignty

b.

Interfere with private rights and property

c.

Superior to the non-impairment clause

d.

Are legislative in character

12 All of the following is territoriality doctrine except one: a.

Residence of the taxpayer

b.

Source of income

c.

Situs of the thing or property taxed

d.

International organizations

13. Who is not allowed the option to be taxed at 8%? a.

Compensation income earner

b.

Business income earner

c.

Professional income earner

d.

Mixed income earner

14.

Which tax credit against the tax due under Form 1700?

a.

Form 2316

b.

Form 2307

c.

1701Q

d.

All of these

15.

Which is a source of tax credit against the tax due under Form 1701

a.

Form 2316

b.

Form 2307

c.

1701Q

d.

All of these

16.

An employee who earned income from other sources shall use which annual return?

a.

Form 1700

b.

Form 1701

c.

Form 1701A

d.

Form 1702

17.

An adjustment return is least likely to be required when

a.

The employee receives compensation from multiple employers

b.

The employee has two successive employers during the year

c.

The employer has under-withheld the tax

d.

The employer has over-withheld the tax

18. Trusts and estates shall use which tax for a.

Form 1700

b.

Form 1701

c.

Form 1701A

d.

Form 1702

19. Who is not required to file quarterly income tax return? a.

Pure compensation income earner

b.

Pure business income earner

c.

Professional income earner

d.

Mixed income earner

20. Which of the following does the substituted filing system apply? a.

Purely employed taxpayers

b.

Taxpayers purely engaged in business

c.

Mixed income taxpayers

d.

Any of these

21. Who is a resident citizen? a.

A citizen who went on tour abroad

b. A citizen of the Philippines who establishes to the satisfaction of the CIR the fact of his physical presence abroad with a definite intention to reside therein c. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad d. A citizen of the Philippines who works and derives income abroad and whose employment requires him to be physically present abroad most of the time during the year 22. Statement 1: Each partner of a general professional partnership shall report as gross income in his return , his distributive share in the net income of the partnership, whether actually or constructively received Statement 2: If the partner of a GPP elects the itemized deductions, his tax shall be based on his share of the net income of the GPP. a.

Statement 1 & 2 are false

b.

Statement 1 is true but Statement 2 is false

c.

Statement 1 is false but Statement 2 is true

d.

Statement 1 and 2 are true

23. A taxable partnership maybe subject to the following taxes: I. Minimum corporate income tax II. Gross income tax III. Improperly accumulated earnings tax a. I, II and III b. I and II only

c. I and III only d. I only

24. For the purposes of taxation, which of the following statements regarding partnership is correct? I. II. III.

Classified into two major categories, partnership in trade and general professional partnership. Partnership in trade is treated as corporate taxpayer. General Professional Partnership is exempt from income tax

a. I, II, and III b. I and II only

c. I and III only d. I only

25. Joseph provided the following data on sale of his personal property sold in 2018 held by him for 15 months: Cost Mortgage assumed by the buyer Installment Collection Schedule: - 2018 - 2019 - 2020

P225,000 270,000 67,500 67,500 45,000

How much is the income subject to income tax in 2018, 2019, and 2020? a. P 56,250, P 33,750 and P 22,500, respectively b. P 112,500, P 67,500 and P 45,000, respectively c. P 225,000, P 0 and P 0, respectively d. None of the choices

26. A resident citizen of the Philippines has the following data on income and expenses: Gross compensation income (net of exclusions) P200,000 Gross sales 900,000 Cost of sales 500,000 Business expenses 200,000 He avails himself of the Optional Standard Deduction (OSD). How much is his taxable net income? a. P740,000 c. P420,000 b. P 610,000 d. P 390,000 27. Assume the taxpayer is general partnership (disregard compensation income), the distributable income using OSD should be:

a. P168,000 c. P240,000 b. P600,000 d. P378,000 28. Assume the taxpayer is general professional partnership (disregard compensation income), the distributable income using OSD should be: a. P168,000 c. P240,000 b. P600,000 d. P540,000

29. Advance payment in a lease contract by the lessee may be I. II. III. IV. a. b. c. d.

A loan to the lessor from the lessee An option money for the property A security deposit to insure faithful performance of certain obligations of the lessor Prepaid rent

All of the above. I, II and III only None of the above I, II and IV only

30. Which of the following interest income are subject to final withholding tax, except I. II. III. IV. a. b. c. d.

Interest income earned or derived from the normal course of trade or business Interest income earned or derived from notes receivable Interest income earned or derived from the over-payment of income tax for previous years Interest income derived from investments in government bonds

I only. I, II and III only I and II only All of the above

31. The following interest income are subject to final withholding tax except a. Interest income earned from financial institutions b. Interest income from any currency bank deposit

c. Interest income received from expanded foreign currency deposit system earned by residents d. Interest income received from expanded foreign currency deposit system earned by nonresidents

Abo Gado, a VAT-registered CPA received the following in 2019 (amounts are net of VAT, if applicable). Salary Overtime pay Holiday pay 13th month pay Cash payment made by clients Retainer fee of Php 10,000 per month from clients Out of pocket expenses to be reimbursed by clients Capital gains from sale of jewelry

Php 360,000 40,000 20,000 30,000 880,000 2,000,000 50,000 10,000

32. How much is Mr. Gado’s gross compensation income? a. Php 420,000 c. Php 430,000 b. Php 450,000 d. Php 460,000 33. How much is Mr. Gado’s vatable transactions? a. None c. Php 2,880,000 b. Php 2,930,000 d. Php 2,940,000

34. Kat Tok’s piece of land measuring 500 sq. meters in the City of Taguig was assessed as commercial with an FMV of Php 20,000 per sq. meter. How much is the highest possible amount of annual basic real property tax can be collected from her? A .None c. Php 100,000 b. Php 50,000 d. Php 20,000 Paz Ado is a CPA, lawyer, who is engaged in providing legal services to her clients. She is also a licensed real estate broker. She is registered with the BIR, and the following data are made available for the year 2020. (All amounts are gross of withholding tax.)

1) Revenues from her profession as a CPA lawyer amounting to 2) Commissions received as a real estate broker amounting to 3) Cost of services amounted to 4) Business related expenses amounted to 5) Gain on sale of real property held for investment amounts to (selling prices is Php 4,000,000)

Php 6,000,000 1,200,000 1,400,000 800,000

6) Wagering gain amounting to (net of wagering loss of Php 200,000) 7) Royalties from books published and sold amounts to 8) Interest income from banks amounts to 35. Compute 22 A, Page 1 of BIR Form no. 1701, assuming Ms. Ado opted to use itemized deduction in computing her income tax. a. Php 1,482,000 c. Php 1,332,000 b. Php 1,620,000 d. Php 2,880,000 36. Compute 17 A, Page 2 of BIR Form no. 1701, assuming Ms. Ado opted to use OSD in computing her income tax. a. Php 1,450,000 c. Php 2,880,000 b. Php 2,160,000 d. Php 1,200,000 37. How much is the final withholding income tax of Ms. Ado assuming 2/3 of interest income from banks was realized from time deposit with maturity of 5 years? a. Php 114,000 c. Php 34,000 b. Php 94,000 d. Php 274,000

Lila and Nau inherited a four-storey commercial lot and building from their parents in 2018. In 2019, the property realized rental income of Php 3,600,000, in which they shared the revenue equally. They did not register the co-ownership with the SEC. In addition, Lila and Nau reported their personal income and expenses as follows: Nau – Gross compensation income (inclusive of 13th month and other benefits amounting to Php 150,000) Lila – Net income from her dry cleaning service business

Php 1,950,000

1,000,000 100,000 300,000 60,000

(net of cost and expenses of Php 900,000)

Php 300,000

38. How much final withholding income tax should the co-ownership remit representing the revenue distribution to the co-owners? a. Php 360,000 c. Php 180,000 b. Php 540,000 d. None 39. How much is the income tax due of Nau in his annual income tax return, assuming OSD is used in determining his expenses? a. Php 771,600 c. Php 584,600 b. Php 541,200 d. Php 308,000 40. How much is the income tax due of Lila in her annual income tax return assuming OSD is used in determining her expenses? a. Php 304,000 c. Php 430,000 b. Php 324,000 d. Php 554,000 41. When is the deadline for filing of the annual income tax return of the co-ownership for taxable year 2019? a. April 15, 2020 c. October 15, 2020 b .May 15, 2020 d. Exempted from filing ITRs. 42. This power is superior to the non-impairment clause and is broader in application because it is the power to make and implement the laws. a. Power of Taxation b. Power of Recall c. Power of Eminent Domain d. Police Power 43. Which tax principle is described in the statement "The more income earned by the taxpayer, the more tax he has to pay." a. Fiscal adequacy b. Theoretical justice/Equitability c. Administrative feasibility d. Inherent in sovereignty

44. An instrument with a maturity period of 10 years was held by Mr. X (a resident citizen) for 2 years and was transferred to Mr. Y (a resident alien) who, in turn, held it for 8 years. How much is final withholding tax due of Mr. X? a. Exempt b. 20% c. 12% d. 5% 45. An instrument with a maturity period of 10 years was held by Mr. X (a resident citizen) for 2 years and was transferred to Mr. Y (a resident alien) who, in turn, held it for 8 years. How much is final withholding tax due of Mr. Y? a. Exempt b. 20% c. 12% d. 5% An instrument with maturity period of 10 years was held by Mr. X (a non-resident citizen) for 3 years and transferred it to Mr. Y (a resident alien). Mr. Y held it for 2 years before subsequently transferring it to Mr. Z (a resident citizen), who held it until the day of maturity or for 5 years. How much is the final withholding tax due 46. Mr. X a. Exempt b. 20% c. 12% d. 5% 47. Mr. Y a. Exempt b. 20% c. 12% d. 5% 48. Mr. Z a. Exempt b. 20% c. 12% d. 5%

An individual taxpayer holds shares of stock as investment which he bought from a publiclylisted company for P500,000 (P500,000 par value). The shares are listed and traded in the local stock exchange. During the current year, he sells them for P750,000. 49. How much is the documentary stamp tax, if any? A. 4,500 B. 9,000

C. 2,500 D. 3,750 50. How much is the capital gains tax on the sale assuming the corporation from which the shares are bought are not compliant with the mandatory minimum public ownership? A. 37,500 B. 30,000 C. 45,000 D. 40,000 Mr. C. Avenido acquired his principal residence in 2016 at a cost of P1,000,000. He sold the said property on January 1, 2018, with a fair market value of P5,000,000 for a consideration of P4,000,000. Within the 18-month reglementary period he purchased his new principal residence at cost of P7,000,000. 51. How much is the capital gains tax due? A. 60,000 B. 300,000 C. 240,000 D. None 52. How much is the documentary stamp tax? A. 60,000 B. 75,000 C. 15,000 D. None 53. How much is the basis of the new principal residence? A. 1,000,000 B. 3,000,000 C. 4,000,000 D. 7,000,000

A married resident citizen supports three (3) qualified dependent children and a brother-in-law who is a PWD, unmarried and not gainfully employed. He has the following data on income and expenses for the year 2020: Salary, Philippines

P 560,000

Gross business income, Philippines (gross sales, P1,700,000)

500,000

Business expenses, Philippines

180,000

Gross business income, USA (gross sales, P1,500,000) Business expenses, USA Interest income from bank deposit, Philippines

900,000 300,000 50,000

Interest income from bank deposit, USA Interest income from domestic depository bank under EFCDS Interest income from a debt instrument not within the coverage of deposit substitute, Philippines, gross of 20% creditable withholding tax (issue price is P300,000) Interest income from a debt instrument within the coverage of a deposit substitute, Philippines (issue price P500,000) Royalty on book published in the Philippines Prize in a contest he joined in the Philippines Philippine Charity Sweepstakes winnings

70,000 80,000 50,000 60,000 100,000 5,000 1,000,000

Gain from sale of shares of stock not traded through the local stock exchange (P200,000 par value) Dividend received from a domestic corporation

150,000

Tax payments, first three (3) quarters

100,000

54. How much is the total final tax on certain passive income? A. 206,000 B. 224,000 C. 212,000 D. 248,000 55.How much is the capital gains tax A. 18,500 B. 20,500 C. 20,000 D. 22,500 56 . How much is the taxable net income A. 1,305,000 B. 1,505,000 C. 1,405,000 D. 1,605,000 57. How much is the passive income subject to regular income tax A. 50,000

40,000

B. 120,000 C. 70,000 D. 125,000 58. How much is the tax due? A. 301,500 B. 321,500 C. 351,500 D. 371,500 59. How much is the tax payable? A. 201,500 B. 211,500 C. 251,500 D. 261,500

A resident alien individual supports two (2) qualified dependent adopted children and a foster child. He asks you to assist him in the preparation of his tax return for his income in 2020. He provides you the following information: Gross business income, Philippines (gross sales, P3,000,000) Gross business income, Japan (gross sales, P7,000,000)

P 1,000,000 5,000,000

Business expenses, Philippines

200,000

Business expenses, Japan Philippine Charity Sweepstakes winnings

800,000 500,000

Japanese Sweepstakes winnings

400,000

Interest income, Bank of Tokyo, Japan

100,000

Interest income received from a depository bank under EFCDS, Philippines Interest on peso bank deposit, Philippines Income taxes paid for the first three (3) quarters

300,000

60 . How much was the taxable net income if he avails 8%? A. 2,750,000 B. 3,250,000 C. 3,000,000 D. 2,500,000 61. How much is the tax due if he avails 8%? A. 220,000 B. 270,000 C. 170,000 D. 120,000

100,000 50,000

62. How much is the tax payable if he avails 8%? A. 220,000 B. 270,000 C. 170,000 D. 120,000 63. How much was the final tax on passive income? A. 165,000 C. 120,000 B. 145,000 D. 100,000 64. How much was the final tax on passive income? A. 165,000 C. 120,000 B. 145,000 D. 100,000 65. Assuming the taxpayer failed to avail of the 8% income tax, how much is his taxable income? A. 800,000 C. 600,000 B. 700,000 D. 500,000 66. Assuming the taxpaye...