TAX CREATE LAW Departmental Exam PDF

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10 questions PRINCIPLES OF TAXATION 5 questions TAX REMEDIES 30 questions INCOME TAX 15 questions TRANSFER TAX 25 questions VALUE ADDED TAX (VAT) AND PERCENTAGE TAX 3 questions EXCISE TAX 2 questions DOCUMENTARY STAMP TAX 5 questions TAXATION UNDER THE LOCAL GOVERNMENT CODE 5 questions PREFERENTIAL ...

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10 questions PRINCIPLES OF TAXATION 5 questions TAX REMEDIES 30 questions INCOME TAX 15 questions TRANSFER TAX 25 questions VALUE ADDED TAX (VAT) AND PERCENTAGE TAX 3 questions EXCISE TAX 2 questions DOCUMENTARY STAMP TAX 5 questions TAXATION UNDER THE LOCAL GOVERNMENT CODE 5 questions PREFERENTIAL TAXATION 1 . (Principles of Taxation) Boy Tupada, a student activist, wants to impugn the validity of a tax on online sabong. Aside from claiming that the law adversely affects her since he always bet on online sabong, what may she allege that would strengthen her claim to the right to file a taxpayer’s suit? A. That she is entitled to the return of the taxes collected from her on case the court nullifies the tax measure B. That the 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 online sabong are an important part of the lives of the people she represents. 2. (Principles of Taxation) which among of the following concepts of taxation is the basis of the situs of income taxation? A. Lifeblood doctrine of taxation B. Symbiotic relation in taxation C. Compensatory purpose of taxation D. Sumptuary purpose of taxation 3. (Principles of Taxation) The best source of our tax laws is— A. Statutes B. Court decisions C. Constitution D. BIR Rulings 4. (Principles of Taxation). Which of the following is not a scheme of shifting the incidence of tax burden? A. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold B. The purchaser asks for a discount or refuse to buy at regular price unless it is reduced by an amount equal to the tax he will pay C. changing the term of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead in the Philippines D. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, to the retailer and finally to the consumer.

5. (Principles of Taxation). 1st Statement: Our Constitution does not prohibit double taxation 2nd Statement: If double taxation occurs, the taxpayer may seek relief under the uniformity clause or the equal protection guarantee A. 1st Statement is correct, 2nd Statement is wrong B. 1st Statement is wrong, 2nd Statement is correct C. Both Statements are wrong D. Both Statements are correct 6. (Principles of Taxation) Which of the following terms describes this statement “that the state has compensate discretion on the amount to be imposed after distinguishing between a useful and non-useful activity”? A. Tax B. License fee C. Toll D. Customs duty 7. (Principles of Taxation) In case of ambiguity, tax laws shall be interpreted A. Strictly against the taxpayer B. Strictly against the government C. Liberally in favor of the taxpayer D. Liberally against the government 8. (Principles of Taxation) Which of the following is not one of the canons of a sound tax system? A. Quantifiability B. Equality C. Certainty D. Convenience 9. (Principles of Taxation) Which is the best answer? A tax reform at any given time underscores the fact that (RPCPA) A. Taxation is an inherent power of the state. B. Taxation is essentially a legislative power C. Taxation is a power that is very broad D. The state can and should adopt progressive taxation 10. (Principles of Taxation) A tax must be appropriated and spent for public purpose. Which of the following is not a public purpose? A. dole-out to victims of calamity B. Pantawid Pamilyang Pilipino Program (4 Ps) C. improvement of sugar industry D. construction of a barangay chapel

11. (Tax Remedies) A written notice informing a Taxpayer that the findings of the audit conducted on his books of accounts and accounting records indicate that additional taxes or deficiency assessments have to be paid. a. b. c. d.

Notice of Informal Conference Preliminary Assessment Notice Letter of Authority Formal Assessment Notice

12. (Tax Remedies) An Internal Revenue Officer is allowed only how many days from the date of receipt of an Letter of Authority by the taxpayer to conduct the audit and submit the required report of investigation? a. 30 days b. 60 days c. 120 days d. 180 days 13. (Tax Remedies) First statement: The CTA may sit en banc or in three (3) Divisions, each Division consisting of three (3) Justices. Second statement: Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for session of a Division. a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct 14. (Tax Remedies) 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. b. c. d.

On or before August 30, 2024 On or before April 15, 2023 On or before August 30, 2031 On or before July 15, 2023

15. (Tax Remedies) Which of the following statements is/are correct? Statement A: Dado filed his 2020 ITR (not false nor fraudulent) on March 15, 2021. 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 A, B and C are not correct. Block-least International is a resident citizen, signified her intention to be taxed at 8% income tax rate on gross sales in her first quarter return. However, her gross sales during the taxable year has exceeded the VAT threshold. The following information for the of taxable year 2018: GrossSale s Cost of Sales Other non-operating income Itemized Deductions Creditable Taxes Withheld

1,400,000 500,000 200,000 300,000 15,000

In the next three quarters, Block-least International had the following information: Other nonCost of Itemized Sales operating Deductions Sales income 2nd 1,000,00 quarter 0 350,000 210,000 3rd quarter 300,000 175,000 140,000 October 200,000 50,000 45,000

5,000 2,500

November December

8,000 1,500

800,000 150,000

150,000.00

230,000 45,000

205,000 40,000

CWTs

10,000

16. (INCOME TAX) How much is income tax due and payable for the 1st quarter return? A. 108,000 and 93,000 B. 112,000 and 97,000 C. 92,000 and 77,000 D. 72,000 and 57,000 SOLUTION: GROSS SALES OTHER OPERATING INCOME EXEMPTION TAXABLE RATE TAX PAYABLE CWT TAX DUE

1,400,000 200,000 (250,000) 1,350,000 8% 108,000 (15,000) 93,000

17. (INCOME TAX) How much is income tax due and payable for the 2nd quarter return? A. 188,000 and 70,000 B. 208,000 and 90,000 C. 172,000 and 54,000 D. 136,000 and 28,000 SOLUTION: GROSS SALES OTHER OPERATING INCOME EXEMPTION TAXABLE RATE TAX PAYABLE CWT TAX PAYMENT LAST QUARTER TAX DUE

1,400,000+1,000,000 200,000 (250,000) 2,350,000 8% 188,000 (15,000) + (10,000) (93,000) 70,000

18. (INCOME TAX) How much is income tax due and payable for the 3rd quarter return? A. 212,000 and 19,000 B. 216,000 and 24,000 C. 216,000 and 19,000 D. 212,000 and 24,00 SOLUTION: GROSS SALES

1,400,000+1,000,000+300,000

OTHER OPERATING INCOME EXEMPTION TAXABLE RATE TAX PAYABLE CWT TAX PAYMENT LAST QUARTER TAX DUE

200,000 (250,000) 2,650,000 8% 212,000 (15,000) + (10,000) + (5,000) (93,000) + (70,000) 19,000

19. (INCOME TAX) How much is income tax payable for the final return? A. 176,000 B. 239,000 C. 276,000 D. 339,000 SOLUTION Total Sales Cost of Sales Gross Income from sales Other non-operating income Itemized deductions Taxable income Income Tax Due First 800,000 Excess at 30% Income Tax Due Tax Credits CWTs 8% tax already paid* Income Tax Payable

-

-

-

-

3,850,000 1,350,000 2,500,000 350,000 940,000 1,910,000 130,000 333,000 463,000 42,000 182,000 239,000

20. (VALUE ADDED TAX (VAT) AND PERCENTAGE TAX) How much is the percentage tax under Section 116 for the third quarter? A. 81,000 B. 54,000 C. 90,000 D. 9,000 SOLUTION 3rd quarter sales 300,000 Rate 3% OPT 9,000

21. (VALUE ADDED TAX (VAT) AND PERCENTAGE TAX) How much is output VAT for the fourth quarter, if any? A. 102,000 B. 114,000 C. 138,000 D. 438,000 SOLUTION: TOTAL SALES Sales subject to OPT VATABLE SALES RATE TAX

3,850,000 3,000,000 850,000 12% 102,000

22. (CREATE LAW) (INCOME TAX) Alcantara Hospital, a private hospital, with a asset amounting to 90Million contains the following information, Calendar year 2022,5th year of operation. Related Activities

Unrelated Activities

Total

Gross Sales/Receipts

19,000,000.00

15,000,000.00

34,000,000.0 0

Cost of Sales

10,000,000.00

10,000,000.00

20,000,000.0 0

9,000,000.00

5,000,000.00

14,000,000.0 0

Allowable Deductions 5,000,000.00 Compute the tax due

5,000,000.00

10,000,000.0 0

Gross Income

A. B. C. D.

40,000.00 80,000.00 60,000.00 400,000.00

SOLUTION: Total 34,000,000.00 20,000,000.00 14,000,000.00 10,000,000.00

4,000,000.00 1% 40,000

TAXABLE INCOME TAX RATE TAX DUE

23. (CREATE LAW) (INCOME TAX) Amper Hospital, a private school ,contains the following information, Calendar year 2020, 8th year of operation ASSETS 90M Related Unrelated Activities Activities Total Gross Sales/Receipts

39,000,000.00

15,000,000.00

54,000,000.0 0

Cost of Sales

10,000,000.00

10,000,000.00

20,000,000.0 0

Gross Income

29,000,000.00

5,000,000.00

34,000,000.0 0

3,000,000.00

31,000,000.0 0

Allowable Deductions 28,000,000.00 Compute the tax due A 600,000.00 B 165,000.00 C 300,000.00 D 30,000.00

SOLUTION TAXABLE INCOME 3,000,000 JAN-JUNE 1,500,000 10% = 150,000 JUL-DEC 1,500,000 1% = 15,000 TAX DUE 165,000

23-25. (CREATE LAW) (INCOME TAX) A regional operating headquarters had the following information 2020 2021 2022 Annual Income

Cost of Sales Gross Income

2023

95,000,000. 00

180,000,000. 00

230,000,000. 00

75,000,000. 00

51,250,000. 00

86,000,000.0 0

171,500,000. 00

41,250,000. 00

43,750,000. 00

58,500,000.0 0

33,750,000. 00

Allowable 33,625,000. 66,200,000.0 42,550,000.0 Deductions 00 0 0 23. How much is the tax due for the year 2020

35,125,000. 00

a b c d

94,000,000.0 0

1,012,500.00 2,531,250.00 2,025,000.00 0

24. How much is the tax due for the year 2022 a b c d

1,595,000.00 585,000.00 1,170,000.00 3,987,500.00

25. How much is the tax due for the year 2023 a b c d

506,250.00 337,500.00 675,000.00 843,750.00 SOLUTION

2020

2021

2022

2023

Net Taxable Income Tax Rate

10,125,000.00 10%

27,800,000.00 10%

(1,375,000.00 15,950,000.00 ) 25% 25%

Tax Due

1,012,500.00

2,780,000.00

3,987,500.00

MCIT

NONE

NONE

Gross Income

Tax DUE

1,012,500.00

2,780,000.00

1%

(343,750.00) 1.50%

58,500,000.00

33,750,000.00

585,000.00

506,250.00

3,987,500.00

506,250.00

26-28. (CREATE LAW) (INCOME TAX) For the calendar year 2020, 3rd year of operation, X Corporation had the following data 100,000,000.0 0

Gross Sales Cost of Sales

Direct Materials

30,000,000.0 0

Direct Labor

20,000,000.0 0

Manufacturing Overhead

10,000,000.0 0

Total

60,000,000.00

Operating Expenses Salaries and Wages

7,000,000.00

Taxes

300,000.00

Depreciation

3,500,000.00

Professional Fees Advertising Expense Training Expense Office Supplies

200,000.00 3,000,000.00 6,000,000.00

500,000.00 Assume that the prescribed requirements in this section have been complied with Apprenticeship Agreement, Certification from DepED, CHED or TESDA whichever is applicable 26. How much is the Total operating expense a 20,500,000.00 b 22,500,000.00 c 23,500,000.00 d 22,000,000.00 27. How much is the taxable income a 17,500,000.00 b 19,500,000.00 c 16,500,000.00 d 18,500,000.00 28. How much is the tax due? a 5,250,000.00 b 4,125,000.00 c 4,812,500.00 d 4,537,500.00 SOLUTION Additional Deduction (whichever is lower of): 50% of Training Expense 3,000,000 10% of Direct Labor 2,000,000 Add: Operating Expense TOTAL Operating Expense

20,500,000 22,500,000

SALES COST OF SALES OPERATING EXPENSE TAXABLE INCOME

100,000,000 (60,000,000) (22,500,000) 17,500,000

Jan-June 2020-30% tax rate (17,500,000/2)=8,750,000*30% = 2,675,000 Jul-Dec 2020- 25% tax rate (17,500,000/2)=8,750,000*25% = 2,187,500 TAX DUE 4 ,812,500 29. (CREATE LAW) (INCOME TAX) A Corporation, a resident foreign corporation, provided the following data for taxable year 2021:

Gross Income Dividend from:

PH 40M

USA 20M

Domestic corporation 5M Foreign corporation (100% 4M of its business is in the Phils.) Business expenses 12M 8M A's investment in the foreign corporation was deemed necessary for its own business. The corporation remitted to its head office the P5M dividend income and 40% of its net profit to its head office in USA. The corporation's total tax liability including the tax on the profit remitted is a. P10,944,000 b. P12,448,000 c. P12,944,000 d. P9,944,000

SOLUTION : GROSS INCOME PH ADD EXPENSE NET PROFIT TAX TOTAL TAX LIAB

40,000,000 4,000,000 -12,000,000 32,000,000 25% 8,000,000 1,440,000 9,440,000

24,000,000-NET OF TAX 40% 9,600,000-REMITTED 1,440,000(Remittance Tax)

30 – 32 (CREATE LAW) (INCOME TAX). The A Corporation, with 250million assets inlcuding 100million land, provided the following data for the calendar year ending December 31,2021 ($1=P50) Philippine s USA 4,000,00 $40,000 Gross Income 0 2,500,00 $15,000 Deductions 0 Income Tax Paid $3,000 30. If it is a domestic corporation, its income tax after tax credit is a. P 812,500 b. P 537,500 c. P 962,500 d. P 675,000 31. If it is a resident foreign corporation, its income tax is a. P375,000 b. P 450,000

c. P 480,000 d. P 525,000 32. If it is a non-resident foreign corporation, its income tax is a. P 730,000 b. P 1,000,000 c. P 1,200,000 d. P 1,400,000 SOLUTION DOMESTIC $40,000 x 50 = 2,000,000 + 4,000,000 = 6,000,000 $15,000 x 50 = 750,000 + 2,500,000 = (3,250,000) TAXABLE INCOME ON USA 2,750,000 TAX RATE 25% TAX DUE 687,500 TAX CREDIT $ 3,000 x 50 = 150,000 TAX DUE 537,500

RESIDENT FOREIGN CORP Gross Income PH 4,000,000 Deductions PH 2,500,000 TAXABLE INCOME 1,500,000 RATE 25% TAX DUE 450,000 NON-RESIDENT FOREIGN CORP. Gross Income PH 4,000,000 RATE 25% TAX DUE 1,000,000

33. (INCOME TAX). Rushel and Harvey are co-owners by virtue of a property given by JORDAN as a donation. The co-ownership had a gross income of 500,000,000 and expenses of 300,000 . Rushel and Harvey share in the profits 99% and 1% respectively . Harvey withdraw 49,000,000 from the co-ownership income. The income tax liability of co-ownership is a. 1,021,000 b. 768,000 c. 800,000 d. 0

34. (INCOME TAX). Joel Lopez Co. and Dyna Lopez Co., domestic corporations, both in the construction business, formed a joint venture(JV) to build housesfor the poor, a governement project with an agreed equal sharing ratio in net income. Gross income JV 80,000,000; Expenses JV 60,000,000 The income tax liability of joint venture a. 6,000,000 b. 20,000,000 c. 1,800,00 d. 0

35-37 (INCOME TAX). Date of sale Seller’s Name TIN of Seller Address RDO Buyer’s Name TIN of Buyer Address RDO CCT No. Area sold Tax Declaration No. Location of Property Acquisition Cost Market value per Tax Dec Selling Price

August 15, 2020 Juan Dilla Cruz 238-076-413-000 Unit 7-B La Cantada Condominium, Little Baguio, San Juan City 042 Henry Ang Tan 751-096-572-000 2 Fuschia St., Xavierville Village, Tanauan City 059 2017-9752568 50 sq. m 2015-896-90871 La Cantada Condominium, Little Baguio, San Juan City P 2,000,000 2,500,000

3,000,000 Zonal valuation P 70,000 / sq m 35. Compute the page 1, Item 36 of BIR FORM 1706 A. P 180,000 B. P 120,000 C. P 150,000 D. P 210,000

SOLUTION: Zonal valuation (P 70,000 / sq m x 50 sq. m) = 3,500,000 * 6% = 210,000 36. The capital gains tax payable assuming that Mr. Cruz will utilize only P1,500,000 of the proceeds in acquiring a new residence? A. P 90,000 B. P 210,000 C. P105, 000 D. P0 SOLUTION 210,000 x 1,500,000/3,000,000 = 105,000 37. Based on the preceding question, how much will be the cost basis of the new residence? A. P1, 500,000 B. P 1,000,000 C. P 2,000,000 D. P 2,500,000 SOLUTION 2,000,000 x 1,500,000/3,000,000 = 1,000,000 38. (DOCUMENTARY STAMP TAX) Based on the given data. . Compute the page 1, Item 21 of BIR FORM 2000-OT A. P 52,500 B. P45, 000 C. P 37,500 D. P 210, 000 SOLUTION 3,500,000 x 15/100 = 52,500

39-40 (INCOME TAX). Arielito Conde Buenviaje, a resident of No. 35 Sulucan St., Sampaloc, Manila with TIN 987-042-617, RDO 032 sold the following shares of stock: Listed and traded

Not

Not

Not

traded

traded

traded

Selling price

P 50,000

P 350,000

P

57,000

Acquisition Cost

45,000

220,000

65,000

P

125,000

90,000

Broker’s commission

5,000

3,500

Date acquired

1-14-2020

4-18-2019

Date sold

4-20-2020

7-12-2020

8-15-2020

Corporation

ABC Corp.

XYZ Corp.

LMN Corp.

39.

The capital gain tax on the July 12, 2020 sale is

A. B. C. D.

P130,000 13,000 P19,500 18,975

1,000

2,500

9-12-2018

5-16-2020 11-5-2020 XYZ Corp.

SOLUTION: 350,000 – 220,000 -3,500 x 15% = 18,975 40. The capital gain tax on the August 15, 2020 sale is A. B. C. D.

P18,300 1,200 P7,500 None

SOLUTION AUGUST TRANSACTION RESULTS IN LOSS 41. (Income tax) Ms. Tina supplies special cupcakes on a regular basis to RPSV Supermarket, a top withholding agent pursuant to Section 2.57.2 (I) of RR 2-98, as amended. Prior to 2018, her annual sales to RPSV Supermarket never exceeded P250,000. She only bakes cupcakes upon order. RPSV Supermarket is her lone payor of income; thus, she executed the sworn declaration of gross receipts stating that her gross expected receipts shall not exceed P250,000 for the year from RPSV Supermarket. However, in the latter part of 2018, RPSV Supermarket noted that its purchase...