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TAXATION QUIZZER PART 1 BASIC PRINCIPLES OF TAXATION 1. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power to activate and operate it, resulting in its destruction? a. Power to destroy theory b. Lifeblood theory c. Sumptuary theory d. Symbiotic doct...

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TAXATION QUIZZER PART 1 BASIC PRINCIPLES OF TAXATION 1.

Which theory in taxation states that without taxes, a government would be paralyzed for lack of power to activate and operate it, resulting in its destruction? a. Power to destroy theory b. Lifeblood theory c. Sumptuary theory d. Symbiotic doctrine

2.

The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as a. Assessment. b. Levy. c. Payment. d. Collection.

3.

Although the power of taxation is basically character, it is NOT the function of Congress to a. Fix with certainty the amount of taxes. b. Collect the tax levied under the law. c. Identify who should collect the tax. d. Determine who should be subject to the tax.

4.

An example of a tax where the concept of progressivity finds application is the a. Income tax on individuals. b. Excise tax on petroleum products. c. Value-added tax on certain articles. d. Amusement tax on boxing exhibitions.

5.

Ligaya Educational Foundation, Inc., a stock educational institution organized for profit, decided to lease for commercial use a 1,500 sq. m. portion of its school. The school actually, directly, and exclusively use the rents for the maintenance of its school buildings, including payment of janitorial services. Is the leased portion subject to real property tax? a. Yes, since Lualhati is a stock and for profit educational institution. b. No, since the school actually, directly, and exclusively used the rents for educational purposes. c. No, but it may be subject to income taxation on the rents it receives. d. Yes, since the leased portion is not actually, directly, and exclusively used for educational purposes.

6.

Which among the following concepts of taxation is the basis for the situs of income taxation? a. Lifeblood doctrine of taxation b. Symbiotic relation in taxation

legislative

in

c. d. 7.

Compensatory purpose of taxation Sumptuary purpose of taxation

DONOR’S TAX Which of the following transactions is deemed a taxable gift? a. Condonation or remission of a debt b. Sale of residential house and lot for less than adequate and full consideration in money or money’s worth c. Both (a) and (b) d. Neither (a) nor (b)

8.

Which of the following statements relative to donor’s tax is false? a. The spouses shall file separate donor’s tax returns where the thing donated is common property. b. Each parent shall be entitled to the P10,000 exemption on account of marriage of a child. c. Exemptions and deductions cannot be claimed where the 30% tax rate on stranger is applicable. d. None of the foregoing.

9.

The spouses Esme and Carlisle wanted to donate a parcel of land to their son Edward who is getting married in December, 2016. The parcel of land has a zonal valuation of P420,000.00. What is the most efficient mode of donating the property? a. The spouses should first donate in 2016 a portion of the property valued at P20,000, then spread the P400,000 equally for 2017, 2018, 2019 and 2020. b. Spread the donation over a period of 5 years by the spouses donating P100,000 each year from 2016 to 2020. c. The spouses should each donate a P110,000 portion of the value of the property in 2016 then each should donate P100,000 in 2017. d. The spouses should each donate a P100,000 portion of the value of the property in 2016, and another P100,000 each in 2017. Then, in 2018, Esme should donate the remaining P20,000.

10.

Exempted from donor’s taxation are gifts made a. For the use of the barangay. b. In consideration of marriage. c. To a school which is a stock corporation. d. To a for-profit government corporation.

11.

Caroline donated P110,000.00 to her friend Vicky who was getting married. Caroline gave no other gift during the calendar year. What is the donor's tax implication on Caroline’s donation? a. The P100,000 portion of the donation is exempt since given in consideration of marriage. b. A P10,000 portion of the donation is exempt being a donation in consideration of marriage.

c. d.

Caroline shall pay a 30% donor's tax on the P110,000 donation. The P100,000.00 portion of the donation is exempt under the rate schedule for donor's tax.

12.

A non-stock, non-profit school always had cash flow problems, resulting in failure to recruit well-trained administrative personnel to effectively manage the school. In 2017, Don Leon donated P100 million pesos to the school, provided the money shall be used solely for paying the salaries, wages, and benefits of administrative personnel. The donation represents less than 10% of Don Leon's taxable income for the year. Is he subject to donor's taxes? a. No, since the donation is actually, directly, and exclusively used for educational purposes. b. Yes, because the donation is to be wholly used for administration purposes. c. Yes, since he did not obtain the requisite NGO certification before he made the donation. d. No, because the donation does not exceed 10% of his taxable income for 2017.

13.

What law shall govern the imposition of donor’s tax? a. The law in force at the time of perfection of the donation b. The law in force at the time of completion of the donation c. The law in force at the time of perfection or completion depending upon the agreement of the parties d. None of the choices

14.

Andy, married, donated a land commonly owned by him and her spouse worth P500,000 to her friend Joan. Only Andy signed the deed of donation. Joan assumed P200,000 unpaid mortgage on the property. How much is the donor’s tax due? a. P6,000 c. P1,000 b. P90,000 d. P45,000 500k - 200k = 300k x 30% = 90,000

15.

Dondie, resident citizen, made the following donations on April of the current year:  To his sister, Donna,P175,000 worth of property situated Paris, France. The donor’s tax paid is P40,000.  To Dara, his girlfriend in the Philippines, jewelry valued P225,000.  To International Rice Research Institute, cash amounting P50,000. The donor’s tax due after tax credit is – a. P69,000 c. P29,000 b. P38,813 d. P5,625

28 in at to

225,000 x 30% = 67,500 + (175,000 - 100,000 (69,000 x 175k/400k) = 38,813

x 2% Tabular) = 69,000 -

ESTATE TAX 16. Which of the following is not a part of the gross estate? a. Conjugal property b. Community property c. Exclusive property of the decedent d. Exclusive property of the surviving spouse 17.

Who among the following transferors is not liable for estate tax on the property transferred during his lifetime? a. The testator who bequeaths property to his heirs in a last will and testament executed and probated during his lifetime b. The donor who reserves his right to amend or revoke the donation of property in favor of the donee c. The donee of an appointed property who is required under a power of appointment to transfer such property upon death to his eldest child d. The transferor of personal property who sold it for insufficient consideration

18.

Which of the following properties of the spouses will be part of common properties under a regime of Conjugal Partnership of Gains? a. Land inherited during the marriage b. Fruits of land inherited c. Jewelry inherited during the marriage d. Building donated before marriage

19.

Which of the following items is not considered as a “special deduction” in computing the taxable net estate of the decedent? a. Vanishing deduction b. Medical expenses c. Standard deduction d. Family home allowance

20.

When the payment of estate tax will cause undue hardship upon the heirs or the estate which is undergoing judicial settlement before the court, the BIR Commissioner may grant an extension for a period not exceeding: a. 5 years b. 3 years c. 2 years d. 1 year

Next three (3) questions are based on the following: Orland, married resident citizen, died on August 20, 2016. The estate reported the following assets and deductions: Conjugal Properties: Fishpond, Bulacan P1,500,000 Family Home, Makati 1,500,000 Cash in bank 900,000

Exclusive Properties of Orland: Land, inherited from his father who died on July 20, 2012. The value of land at the time of inheritance was P210,000. The land was mortgaged for P30,000 which was unpaid at the time of death of his father,P10,000 of which was paid by Orland before he died. Land, donated on February 14, 2013 by his mother who died on November 2, 2014. The value of the land when donated was P500,000 while upon death of his mother was P400,000. Exclusive Properties of Wife: Farm in Laguna, acquired before marriage

22.

23.

The gross estate is: a. P4,000,000 b. P4,710,000

600,000

2,000,000

Deductions claimed: Funeral expenses Fire loss of apartment (occurred 4 months after death) Bad debts (represents unpaid receivable from Bert, an insolvent) Mortgage on inherited land Vanishing deduction on inherited land Vanishing deduction on donated land Standard deduction 21.

P400,000

c. d.

P7,000,000 P5,000,000

The vanishing deduction is: a. P184,000 b. P220,800

c. d.

The net taxable estate is: a. P819,200 b. P804,200

c. P829,200 d. P579,200

P255,760 P292,560

250,000 80,000 100,000 30,000 40,000 20,000 2,000,000

SOLUTION: Properties Exclusive Fishpond, Bulacan Family Home, Makati Cash in bank Land, inherited from Father died on July 20, 2012. 400,000 Land, Donated from Mother on Feb 14, 2013. 600,000 Claims to Insolvent GROSS ESTATE 1,000,000 Allowable Deductions: Funeral Expenses Fire Loss Bad Debts Mortgage on Land (20,000) Vanishing Deductions* (220,800) Net Estate before Special Deductions 759,200 Special Deductions: Family Home (1,500,000 x 1/2) Special Deduction Share of Surviving Spouse NET TAXABLE ESTATE

Conjugal P1,500,000 1,500,000 900,000

Total 1,500,000 1,500,000 900,000 400,000

100,000 4,000,000 (200,000) (80,000) (100,000)

3,620,000

*VANISHING DEDUCTIONS: Land Inherited by Father: Value at the time of Death Less: Mortgage Paid Initial Basis Pro rata: 200/5000 x 400,000 Final Basis Vanishing Rate (4 years but not more 5 yrs) Vanishing Deduction

600,000 100,000 5,000,000 (200,000) (80,000) (100,000) (20,000) (220,800) 4,379,200 (750,000) (1,000,000) (1,810,000) 819,200

210,000 (10,000) 200,000 (16,000) 184,000 20% 36,800

Land Donated by Mother: Value at the time of Donation Initial Basis Pro rata: 500/5000 x 400,000 Final Basis Vanishing Rate (3 years but not more 4 yrs) Vanishing Deduction

500,000 500,000 (40,000) 460,000 x 40% 184,000

TOTAL VANISHING DEDUCTIONS

220,800

**If TRAIN Law is applied the Estate tax is P 49,152 (P819,200 x 6%)

24.

Abe, married resident alien, died on January 15, 2017. She left the following properties, expenses and obligations: Community properties, Philippines (including family home valued at P1,800,000) Community properties, Abroad Exclusive properties, Philippines Actual funeral expenses Judicial expenses Medical expenses (incurred w/in 1yr. before death) Devise to National Gov’t Legacy to Local Gov’t The net taxable estate is: a. P3,780,000 b. P3,680,000

RESIDENT ALIEN Particulars Exclusive All Properties w/i & w/o 3,000,000 Funeral Expense Judicial Expense Transfers (50,000 + 70,000) (120,000) Gross Estate 2,880,000 Share of Surviving Spouse Medical Expenses Family Home (1/2 of 1,800,000) Standard Deductions Net Estate 25.

2,000,000 3,000,000 300,000 200,000 600,000 50,000 70,000

P3,580,000 P3,530,000

Community 7,000,000 (200,000) (200,000) 6,600,000

Total 10,000,000 (200,000) (200,000) (120,000) 9,480,000 (3,300,000) (500,000) (900,000) (1,000,000) 3,780,000

Based on the above problem, if the decedent is a non-resident alien, how much is the net taxable estate? a. P2,755,000 c. P5,220,000 b. P2,880,000 d. P5,380,000

NON - RESIDENT ALIEN Particulars Exclusive All Properties w/i Only 3,000,000 Funeral Expense 200,000 Judicial Expense 200,000 Allowable Deduction 400,000 x 8M/10M Transfers(50,000 + 70,000) (120,000) Gross Estate 2,880,000 Share of Surviving Spouse Net Estate 26.

c. d.

P5,000,000

Community 5,000,000

Total 8,000,000

(320,000)

(320,000) (120,000) 7,560,000 (2,340,000) 5,220,000

4,680,000

Arthur, Filipino, married died leaving the following estate:

Car acquired before marriage by Arthur

P 300,000

Car acquired before marriage by wife House and lot acquired during marriage Jewelries of wife Personal properties inherited by Arthur during marriage Benefits from SSS Retirement benefits Proceeds of group insurance taken by his employer Land inherited by the wife during marriage Income earned from the land inherited by wife (25% of which was earned after death)

450,000 1,500,000 100,000 250,000 50,000 150,000 75,000 1,000,000 200,000

16. How much is the gross estate if the property relationship is conjugal partnership of gains is: a. P2,600,000 c. P1,950,000 d. P2,200,000 b. P3,600,000 Car acquired before marriage by Arthur House and lot acquired during marriage Personal properties inherited by Arthur during marriage Income earned from the land inherited by wife (25% of which was earned after death) Gross Estate 27. a. b.

P 300,000 1,500,000 250,000 150,000 2,200,000

Based on the preceding number, the gross estate if the property relationship is absolute community of property is: P2,600,000 c. P1,950,000 P3,600,000 d. P2,500,000

Car acquired before marriage by Arthur Car acquired before marriage by wife House and lot acquired during marriage Jewelries of wife Personal properties inherited by Arthur during marriage Gross Estate

P 300,000 450,000 1,500,000 100,000 250,000 2,600,000

VAT 28.

LBJ made the following sales during the 12-month period: Sales, VAT taxable transactions Sales, VAT zero-rated transactions Sales, VAT exempt transactions Total

P1,500,000 400,000 100,000 P2,000,000

Which of the following statements is correct? a. LBJ may not register under the VAT system because his sales from VAT taxable transactions did not exceed P1,919,500. b. LBJ may not register under the VAT system because his sales from VAT taxable and zero-rated transactions did not exceed P1,919,500.

c. LBJ is required to register because his total 12-month sales exceeded P1,919,500. d. None of the foregoing. 29.

Which of the following a. Common carriers Philippines b. Common carriers Philippines Common carriers c. Philippines d. Common carriers Philippines

is exempt from VAT? transporting passengers by air within the transporting passengers by sea within the transporting passengers by land within the transporting

cargoes

by

air

within

the

30.

Which statement is correct about value-added tax on goods or properties sold? a. It is based on gross sales and not on net sales; b. May be due even if the goods or properties were not actually sold; c. Does not cover goods exported; d. It forms part of the selling expense of the trader.

31.

For value-added tax purposes, which of the following transactions of a VAT-registered taxpayer may not be zero-rated? a. Export sales b. Foreign currency denominated sales c. Sale of goods to the Asian Development Bank Sale of goods to an export oriented enterprise d.

32.

A subdivision developer sold five (5) residential house and lots, each to different vendees, for P3,000,000 per lot, or a total sales of P15,000,000 for the taxable period. These sales shall be classified as: a. 12% VAT transactions b. 0% VAT transactions VAT exempt transactions c. d. None of the foregoing **3,199,000 each is the threshold

33.

CP operated a retail business that had been generating sales not exceeding the threshold for VAT exempt persons. However, he desires to be registered under the VAT system for the first time in order to benefit from input tax credits. What benefit may CP be entitled to once he registers under the VAT system? a. Tax refund b. Presumptive input tax credit c. Transitional input tax credit d. None of the foregoing

34.

What institution is required to deduct and withhold a final VAT of 5% on the purchase of goods or services subject to VAT? a. National government or any political subdivision thereof b. Government-owned or controlled corporations c. Both (a) and (b) d. Neither (a) nor (b)

35.

In the value-added tax on sale of services, the output tax is computed: a. On the billings of the month On collections of the month on all billings made b. c. On the contract price of contracts completed during the taxable period d. Only and strictly on labor performed under the contract for services

36.

Which statement is wrong? a. There is a transitional input tax from purchases of goods properties; b. There is a transitional input tax from purchases services; c. There is a transitional input tax from purchases materials; d. There is a transitional input tax from purchases supplies.

or of of of

37.

Which of the following statements is correct on the inventory balance in the financial statements at any given date of a VATregistered person? Balance, net of input taxes a. b. Balance, inclusive of input taxes c. Balance on which the transitional input tax is computed annually d. Balance where the VAT thereon may be calculated by multiplying it by 12%

38.

Genson Distribution Inc., a VAT taxpayer, had the following data in a month: Cash sales Open account sales Consignment: 0 to 30 days old (on which there were remittances from consignees of P200,000) 31 to 60 days old 61 days old and above How much is the output tax? a. P348,000 c. P264,000 b. P216,000 d. P108,000

P200,000 500,000

600,000 700,000 900,000

Cash sales Open account sales Consignment: 0 to 30 days old (on which there were remittances from consignees of P200,000) 61 days old and above Total VATABLE SALES VAT RATE OUTPUT VAT 42.

P200,000 500,000

200,000 900,000 1,800,000 12% 216,000

The financial records of Benz Corp., a VAT-registered taxpayer, for the taxable year 2016 disclosed the following: Local sales to private entities 1,500,000 Export Sales 500,000 Local sales to government 800,000 How much is the total sales subject to value-added tax? a. P2,800,000 c. P2,000,000 b. P2,300,000 d. P1,500,000 Local sales to private entities Export Sales Local sales to government Total VATABLE SALES

43.

1,500,000 500,000 800,000 2,800,000

Mantika Corp., a VAT-registered Corp., is a producer of cooking oil from coconut and corn. It had the following data for the month of January 2017: Sales, gross of VAT P 784,000 Corn & Coconut, 12-31-16 50,000 Purchases of Corn & Coconut 330,000 Corn & Coconut, 1-31-17 20,000 Purchases from VAT suppliers, VAT included: Packaging Materials 56,000 Supplies 16,800 The value-added tax payable for the month: a. P56,060 c. P60,650 b. P54,900 d. P63,000 Sales, gross of VAT P 784,000 Output TAX 84,000 Purchases of Corn & Coconut (330,000 x4%) Purchases from VAT suppliers, VAT included: Packaging Materials 56,000 Supplies 16,800 72,800 x3/28 VAT PAYABLE

(13,200) (7,800) 63,000

44.
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