Sample/practice exam 6 October 2011, questions and answers PDF

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NATIONAL FEDERATION-JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTSNational Mock Board Examination 2019 Taxation A nonresident citizen arrives in the Philippines on July 31, 2018 to reside here permanently after many years of living abroad. The following data for the year 2018 on his income are made avai...

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P a g e | 1 TAX NATIONAL FEDERATION-JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS National Mock Board Examination 2019 Taxation A nonresident citizen arrives in the Philippines on July 31, 2018 to reside here permanently after many years of living abroad. The following data for the year 2018 on his income are made available: Gross income, foreign sources (in Philippine pesos) January 1 to July 31 P500, 000 Gross income, Philippine sources, August 1 to December 31 300,000 Gross. income, foreign sources, (in Philippine pesos) August 1 to December 31 400,000

1.

For Philippine income tax purposes, how much is his taxable gross income? a. P800, 000 c. P400,000 b. P700,000 d. P300,000 2.

A nonresident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during the calendar year shall be deemed a “nonresident alien doing in the Philippines”: regardless of whether or not he is actually engaged in business in the Philippines. a. only when he is actually engaged in business in the Philippines. b. when his income dces not come from the performance of personal services in the Philippines. c. d. when he comes to the Philippines for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the Philippines, although it may be his intention at all times to return to his domicile abroad.

3.

Ms. Allyza is employed in JBC Corporation. She receives the following for the current year: Statutory minimum wage, inclusive of the 13th month pay P175, 000 Overtime pay 40, 000 Night-shift differential 25, 000 Commission from the same employer 20, 000 Total P260, 000 How much is the exempt amount? P260,000 c. P20,000 a. P240,000 d. None of the choices b.

4 to 6 are based on the following: In 2018, Mr. Cris Yabut owns a nightclub and videoke bar, with gross sales/ receipts of P 2, 500, 000.00 for the period under consideration. His cost of sales and operating expenses are PI, 000, 000. 00 and P600, 000.00, respectively, and with non-operating income of PI00, 000.00. 4.

How much is the business tax due from Mr. Yabut? a. P750,000

5.

c. P375,000

b. P450, OOO d. P250,000 What BIR Form No. is he going to file? 2550 M c. 2551 MY a. 2550 Q d. 2551 Q b.

6. When is the last day for the filing of the BIR Form in the preceding number assuming it covers the first taxable period of the calendar year? a. April 20, 2018 b. April 25, 2018 7

c. September 30, 2018 d. None of the choices

to 9 are based on the foil owing: Mr. Flong Aranas, an officer of AMBS International Corp. earned in 2018 an annual compensation of PI, 200, 000.00, exclusive of 13th s month and other benefits in the amount of P 120, 000.00.

7. Can he avail of the 8% income tax rate option? a. Yes, because net income from operation does not exceed the VAT threshold.

P a g e | 2 TAX b. No, because his gross sales exceed the VAT threshold. c. Yes, because his sale of farm products is subject to income tax. d. No, because mixed income earners are not allowed to avail of the 8% income tax rate option. 8.

How much is his taxable compensation income for 2018? a. P3, 100.000 c. PI, 110,000 b. PI, 200,000 d. None of the choices

9. What business tax is he liable to? a. Value-Added Tax b. 3% Percentage Tax under Sec. 119 c. 3% Percentage Tax under Sec. 116 d. None of the choices 10.

Individuals earning purely compensation income shall be taxed based on the: graduated income tax rates. 8% income tax rate if the total compensation income does not exceed the VAT threshold. b. income tax rate or graduated income tax rates at his discretion. c. a.

d. graduated income tax rates provided his tot.al compensation income exceeds the VAT threshold. 11.

Under the TRAIN, the term 'taxable income' as applied to individuals means: a.

b.

c. d.

12.

the pertinent items of gross, income specified in the Tax Code, less deductions if any, authorized for such types of income by the Tax Code or other special laws. the pertinent items of gross income specified in the Tax Code, less deductions including personal exemptions, if any, authorized for such types of income by the Tax Code or other special laws. the pertinent items of gross income specified in the Tax Code. the pertinent items of gross income specified in the Tax Code excluding salaries. received from employment.

Which of the following statements is incorrect? The term “minimum wage earner” shall refer to a worker in the private sector paid the statutory minimum

a.

wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned. b.

Minimum wage earners shall be exempt from the payment of income tax on their taxable income.

c. The holiday pay, overtime pay, night shift differential pay, and hazard pay received by such minimum wage earners shall likewise be exempt from income tax. d. None of the choices. 13.

Self-employed individuals ano/or professionals shall have the options to be taxed at: I – graduated income tax rate on taxable income or II – an eight percent (8%) tax on gross sales receipts excluding non-operating income in excess of Two hundred fifty thousand pesos (P250, 000) in lien of the graduated income tax rates and the percentage tax under Section 116 of this Code. a. b.

14.

Both options are correct Both options are incorrect

c. Only the first statement is correct d. Only the second statement is correct

Which of the following statements is incorrect? a. If at any time during a given year, a taxpayer' s gross sales or receipts exceeded the VAT Threshold (P3, 000,000.00), he/she shall automatically be subjected to the graduated rates under Section 24 (A) (2) (a) of the Tax Code, as amended. b.

A non-VAT registered taxpayer initially opted to avail of the 8% option but has exceeded the VAT threshold durinq the taxable year, shall be subject to Percentage Tax on the first P 3, 000, 000.00 of his/her gross sales/ receipts under Section 116

P a g e | 3 TAX of the Tax Coder as amended, with imposition of penalty if Payment is timely made c.

on the following month when the threshold is breached. The excess of the threshold shall be subject to VAT prospectively, and the income tax previously paid shall be credited to the Income Tax Due under the graduated rates provided in Section 24 (A) (2) (a) of the Tax Code, as amended.

15.

d. None of the choices Under the TRAIN, individual. taxpayers are allowed to claim: I - Basic personal exemption of P50, 000 II - Additional exemption of P25, 000 per qualified child not exceeding four

16.

a. I and II correct c. Only I is correct b. I and II are incorrect d. Only II is correct Transfer taxes are taxes imposed upon the gratuitous disposition of property: a. b. c. d.

Whether real or personal, tangible or intangible. Which are real and tangible only. Which are personal only. Whether real or personal only.

Mr. Paul Cruises, was an American citizen residing in the Philippines. He died in the USA when he visited his son. For Philippine estate tax purposes, the Estate of Paul Cruises would include: All Properties wherever situated. a. All properties situated in USA only. b. All properties situated in the Philippines only. c. None of the choices. d. The administrator of the Estate of Juan Santos claims as deduction from the gross estate a receivable from a person who absconded. His assertion is that the claim against that person can no longer be collected. He also explains that for income tax purposes bad debts are deductible from the gross income so the receivable from a person who absconded shall also be treated in the same manner as in estate tax. Despite the administrator's contention the BIR disallowed as deduction the claim against a person who absconded. Is the BIR correct? a. Yes, to be allowed as deduction from the gross estate the claim must be against an insolvent debt or and that the incapacity of the person must be a fact and not merely alleged. b. No, not to allow it to be deducted from the gross estate will be a great injustice because of the fact that collection is almost impossible. c. No, all items that are deductible from gross income for income tax purposes are also allowed to be deducted from the gross estate. d. Yes, the regulations are not clear and it requires BIR ruling for such claim to be allowed as deduction. The gross estate of the decedent is PI0,000,000. The total amount of funeral expenses 19. incurred is P230,000, where P20,000 is still unpaid. The funeral incurred is in addition to the memorial plan of decedent amount to P50, 000.

17.

18.

How much is the deductible funeral expenses if the decedent dies on December 21, 2017? a. P500, 000 c. P250,000 b. P280, 000 d. None of the choices Using the same information in the preceding number, suppose the decedent dies on January 20. 1, 2018, how much is the deductible funeral expenses? a. P200, 000 c. P150, 000 b. P180, 000 d. None of the choices Under the TRAIN (R.A. No. 10936), the estate of a non-resident alien decedent cannot 21. deduct which of the following items of deductions from its gross estate? a. Family home deduction c. Claims against insolvent debtor b. Standard deduction d. None of the choices The decedent dies on May 31, 2018, the available cash of the estate us insufficient to pay 22. the total estate tax due. Which of the following is correct?

P a g e | 4 TAX a.

Payment by installment shall be allowed within two (2) years from statutory date for its payment without civil penalty and interest. b. Payment by installment shall be allowed within two (2) years from statutory date for its payment subject to civil penalty and interest. c. Payment by installment shall be allowed within one (1) year from statutory date for its payment without civil penalty and interest. d. Payment by installment shall not be allowed under the TRAIN. Your client dies on March 15, 2018. The estate’s gross is P10, 000, 000 which includes car, 23. land and shares of stock. The total deductions amounts to P15, 000, 000. Which of the following is not required to be filled? a. Notice of death b. Estate tax return c. Statement certified to by a CPA d. All of the choices Your client dies on July 14, 2018. You are appointed as administrator. You withdraw from 24. his bank deposit P100, 000 because the estate needs cash to settle some obligations. What is the consequence of your withdrawal from the decedent’s ban deposit? a. Subject to final withholding tax of 6% b. Subject to creditable withholding tax of 6% c. Not subject to withholding tax d. Subject to penalty and interest because such withdrawal is not allowed. If the decedent dies on June 1, 2018, the estate tax return shall be filled and the estate tax 25. shall be paid to avoid penalties in or before: a. December 1, 2018. c. June 1, 2020 b. June 1, 2019. d. None of the choices If the family home valued at P25, 500,000 is conjugal property and the resident decedent 26. dies on November 1, 2017, how much is the deductible family home? a. P2, 500, 000. c. P1, 000, 000. b. P1, 250, 000. d. None of the choices If the family home valued at 22, 500, 000 is conjugal property and the non–resident alien 27. decedent dies on November 1, 2018, how much is the deductible family home? a. P22, 500, 000. c. P10, 000, 000. b. P11, 250, 000. d. None of the choices 28 to 30 are based on the following: The decedent is a non-resident citizen, unmarried head of family, with the following data (dies May 14, 2017): Real and personal properties (consisting of piece of land valued P1, 000, 000; car valued at P300, 000; pieces of jewelry valued a P500, 000; claims P50, 000 against insolvent debtors and bank deposit valued at P900, 000 of which P100, 000 was transferred mortis causa to the government) P2, 700, 000 Funeral expenses 200, 000 Other deductions (includes claims against the estate amounting t P50, 000 1, 000, 000 The deductible amount from gross estate excluding special deductions is: 28. a. P2, 240, 000 c. P1,140, 000 b. P1, 285, 000 d. None of the choices The taxable net estate us: 29. a. P1, 565, 000 c. P1,140,000 b. P1, 285, 000 c. None of the choices Estate tax return to avoid penalties shall be filed on or before: 30. a. November 14, 2017 c. May 14, 2019 b. May 14, 2018 d. None of the choices Which of the following statements regarding donor’s tax is incorrect? 31. a. A donation inter vivos is deemed perfected form the moment the donor learned of the donee’s acceptance of the donation, making the done the absolute owner of the property donated. b. Title to immovable property does not pass from the donor to the done by virtue of Deed of donation until and unless it has been accepted in a public instrument and the donor duly notified of such acceptance.

P a g e | 5 TAX c.

If the acceptance of the donation is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments. d. An acceptance clause does not indicate that the donation is inter vivos, since acceptance is not a requirement for donation inter vivos, such requirement is for donation mortis causa. On February 14, 2018, Ocho Derecho Corp., VAT-registered real estate dealer, sold a 32. residential lot to a client for P1, 000, 000. The fair market value of the residential lot at the time of sale was P1, 500, 000. Its cost was P500, 000. The sale of property was made in the ordinary course of business which was a bona fide transaction, at arm’s length, and was free from any donative intent. What national taxes are due from this particular sale, if any? a. VAT, donor’s tax and income tax b. VAT and donor’s tax only c. Income tax only d. None Under the TRAIN, the tax for each calendar year shall be: 33. a. Six percent (6%) computed on the basis of the total gifts made during the calendar year. b. Six percent (6%) computed on the basis of the total gifts in excess of three hundred thousand pesos (P300, 000) exempt gift made during the calendar year. c. Six percent (6%) computed on the basis of the total gifts including those made in the previous calendar year in excess of Two hundred fifty thousand pesos (P250, 000) exempt gift made during the calendar year. d. Six percent (6%) computed on the basis of the total gifts in excess of Two hundred fifty thousand pesos (P250, 000) exempt gift made during the calendar year. Mr. Bam Diokno, revocably transfers his car to his nephew. He challenges his nephew to 34. pass the CPA Licensure Examination because if he does, he will waive his power to revoke the transfer. The nephew tops the CPA Licensure Examination. Mr. Reyes waives his power to revoke the transfer. The transfer is subject to: a. Estate tax. b. Donor’s tax. c. Either donor’s tax or estate tax. d. Neither donor’s tax nor estate tax. On November 30, 2017, Mr. Erin Macalintal cancelled the debt Mr. Mar Aljano, son of his 35. first cousin without the latter rendering service in favor of Mr. Macalintal. The condonation is: a. Subject to the 30% donor’s tax. b. Subject to the donor’s tax based on the 2% to 15% rates. c. Subject to 6% donor’s tax. d. Subject to final tax on dividends. Under the TRAIN, which of the following is no longer allowed to be deducted from the gross 36. gifts. a. Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first P10, 000. b. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said government. c. Gifts in favor of an educational and/ or charitable, religious, cultural organization, trust or philanthropic organization or research institution or organization. d. Encumbrance on the property donated if assumed by the donee Which of the following shall not be exempt from donor’s tax? 37. a. Donation to the Integrated Bar of the Philippines (IBP) b. Donation of parcel of land to the Government made by a Philippine Corporation to be used as relocation site for the less fortunate c. Donation to parish church where more than 30% of the said gifts shall be used by the parish church were more than 30% of the said gifts shall be used by the parish church for administration purposes d. Donation to a political party which filed a return of contributions with COMELECT On January 15, 2018, Mr. Pilo Gutoc donated a conjugal piece of land valued at P500, 000 38. to a son who graduated summa cum laude and an exclusive piece of land valued at P600, 000 to

P a g e | 6 TAX a daughter who is getting married Which of the following is not correct in connection with the donations? a. Only one return shall be filed by Mr. Pilo Gutoc for the two donations to the different donees made on the same date. b. Mr. Pilo Gutoc will declare one-half of the value of the conjugal piece of land full value of exclusive piece of land as his gross gifts. c. Mr. Pilo Gutoc will file BIR Form No. 1800 on or February 14, 2018. d. Mr. Pilo Gutoc shall give a notice of donation on these donations. 39 to 40 are based on the following: On March 1, 2017, Ms. Samira Aquino donated a piece of land to her best friend, Mar Roxas. She also donated to anon-profit religious organization. The donation to her friend was a piece of land which had an assessed value of P1, 000, 000 and zonal value of P800, 000 at the time of donation. The donations and an automobile with a purchase price of P700, 000. The piece of land was encumbered with an unpaid mortgage of P300, 000 which was not assumed by the done. In addition, the done agreed to pay the applicable donor’s tax of P210, 000. How much is the value of the gross gifts? 39. a. P1, 900, 000 c. P1, 000, 000 b. P1, 700, 000 d. None of the choices How much was the total deductions? 40. a. P1, 410, 000 c. P900,000 b. P1, 200, 000 d. None of the choices How much were the taxable net gifts? 41. a. P1, 900, 000 c. P900, 000 b. P1, 000, 000 d. None of the choices How much was the donor’s tax due? 42. a. P570, 000 c. P270, 000 b. P300, 000 d. None of the choices Assuming the donations were given on March 1, 2018, how much is the donor’s tax due? 43. a. P114, 000 c. P45, 000 b. P60, 000 d. None of the choices Donor’s tax is not; 44. a. A property tax. c. A direct tax. b. A national tax. d. An excise tax. A non-resident citizen donor is taxed on his donation of properties: 45. a. Situated in the Philippines only. b. Wherever situated c. Situated outside the Philippines only. d. Situated in the Philippines subject to the rule of reciprocity. Value-Added Tax is not: 46. a. An ad valorem tax c. A national tax. b. An indirect tax. d. A progressive tax. 47 and 48 are based on the following: In the year 2018, Mr. Romy Tanada has the following transaction: Gross receipts, trucking business P3, 800, 000 Gross receipts, leace of residential units (monthly rental is (15, 000 per unit) 3, 500, 000 Gross receipts, practice of accountancy 1, 000, 000 Sale of four (4) residential lots at P1, 500, 000 each to Four (4) individual buyers 6, 000,000 Sale of three (3) parking spaces at P500,000 each 1, 500,000 How much is the VAT-exempt gross receipts, assuming the taxpayer is VAT-registered? 47. a. P9, 500, 000 c. P1, 00, 000 b. P3, 500, 000 d. None of the choices How much is total VAT-subject amount, assuming the taxpayer is VAT-registered? 48. a. P14, 300, 000 c. P6, 500,000 b. P13, 300, 000 d. None of the choices Yummy Fruits, Inc. is going to engage in processing of fruits. It registers under the VAT 49. system on January 1, 2018. For VAT purposes, Yummy Fruits can avail as input tax credit:

P a g e | 7 TAX a. Passed-on VAT only b. Passed-o...