TAX -LEAD Batch 3- preweek 1 PDF

Preview

Summary

LEAD TAX Pre Week Page 1 of 28LEARNING ADVANCEMENT REVIEWCENTERRM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST. SAMPALOC, MANILA CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364PW 1TAXATION GARCIA/ CO/ WONGBASIC PRINCIPLES -INHERENT POWERS OF TAXATION1. Taxation is the act...

Description

LEARNING ADVANCEMENT REVIEW CENTER

PW 1

RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST. SAMPALOC, MANILA CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364

TAXATION

GARCIA/ CO/ WONG

PART 1 BASIC PRINCIPLES -INHERENT POWERS OF TAXATION 1. Taxation is the act of laying a tax, i.e. the process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses of government. The power of taxation proceeds upon the theory that the existence of the government is a necessity, that it cannot continue without means to pay its expenses and that for this means it has a right to compel all its citizens and property within its limits to contribute. A. True; True B. True ; False C. False ; True D. False ; False 2.

The principal purpose of taxation is to raise revenue for governmental needs (revenue purpose), which of the following secondary purposes of taxation is not a compensatory purpose A. To reduce excessive inequalities of wealth B. To maintain high level of employment C. To control inflation D. To implement the police power of the State to promote the general welfare.

3.

The basis is the reciprocal duties of protection and support between the State and its inhabitants. The State collects taxes from the subjects of taxation in order that it may be able to perform the functions of government. The citizens on the other hand, pays taxes in order that they may be secured in the enjoyment of the benefits of organized society (benefits receivedtheory). Taxes are the lifeblood of the Government and their prompt and certain availability are imperious (expecting obedience) need. A. True; True; True B. True ; False; True C. False ; True; True D. False ; False; True

4.

Which is not a manifestation of the lifeblood theory? A. Imposition of tax even in the absence of Constitutional grant. B. Right to select objects of taxation. C. No injunction to enjoin (or stop) tax collection. D. Fixing the amount or rate of the tax.

5.

The power of taxation is comprehensive, plenary, unlimited and supreme. This power is, however, subject to inherent and constitutional limitations. It is subject to Constitutional and inherent limitations, hence, it is not an absolute power than can be exercised by the legislature anyway it pleases. A. True; True B. True ; False C. False ; True D. False ; False

6.

Which is not a characteristics or nature of the state’s power to tax? A. It is inherent in sovereignty. B. It is legislative in character. C. It is subject to Constitutional and inherent limitations. D. It is essentially administrative in character.

7.

Which is not a basic principle of a sound tax system? A. Fiscal Adequacy B. Equality or Theoretical Justice C. Administrative Feasibility D. Eminent Domain

BASIC PRINCIPLES-LIMITATIONS ON POWER OF TAXATION 8.

Which is not an inherent limitation of taxation? A. International comity B. Territorial jurisdiction C. Double taxation D. Due Process of Law

BASIC PRINCIPLES - TAX AND OTHER CHARGES 9.

Which is not a characteristic of TAX? A. It is an enforced contribution; B. It is proportionate in character; C. It is payable in money;

LEADTAX Pre Week

Page 1 of 28

LEARNING ADVANCEMENT REVIEW CENTER D. 10.

LEAD

It is levied on persons and property within and without the jurisdiction of the State.

Which is false? Tollis a sum of money collected for the use of something. Special assessment is an enforced proportional contribution from owners of lands for special benefits resulting from public improvements. C. License fee or permit is a charge imposed under the police power for the purpose of regulations. D. A Internal revenue is pecuniary aid directly granted by the government to an individual or private commercial enterprise deemed beneficial to the public. A. B.

11. Shifting is the transfer of the burden of a tax by the original payer or the one to whom the tax was assessed or imposed to another or someone else. Tax evasion (tax dodging) is the use by the taxpayer of illegal means to defeat or lessen the payment of tax. A. True; True B. True ; False C. False ; True D. False ; False POWERS AND AUTHORITY OF THE COMMISSIONER OF INTERNAL REVENUE 12. Which of the following is not a power of the commissioner of internal revenue? A. Interpret tax laws and to decide tax cases. B. Obtain information and to summon, examine, and take testimony of persons. C. Make assessments and prescribe additional requirements for tax administration and enforcement. D. Delegate the powers vested in him under the pertinent provisions of the Tax Code. TAX REMEDIES- COMMISSIONER OF INTERNAL REVENUE 13. Which is not an authority of the commissioner of Internal Revenue? A. Compromise the payment of any internal revenue tax; B. Cancel or abate tax liability; C. Credit or refund. D. Enact tax laws. TAX REMEDIES- GOVERNMENT 14. Which is a civil remedy for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency? a) Distraint of personal property and b) Levy upon real property and interest in or rights to real property. c) Civil action or d) Criminal action. A. a and b B. b and c C. a,b and c D. a, b, c, and d TAX REMEDIES- GOVERNMENT 15. (Phil. CPA) A taxpayer filed her income tax return for 2000 on April 15, 2001 and paid the tax of P12,000. Upon audit of the BIR, an assessment notice was issued on May 2, 2003 requiring the taxpayer to pay a deficiency tax of P50,000 not later than July 15, 2003. The taxpayer may: A. Go to the Supreme Court if the issues involved are pure question of law; B. Ignore the assessment as the date of collection is beyond three (3) years as the taxable year covers 2000; C. Request for an extension of time to pay the deficiency income tax; D. Go to the Court of Tax Appeals to appeal the assessment made by the BIR.

16. (Phil. CPA modified) The following are related to the tax assessment of a taxpayer: Date when assessment was received Petition for reconsideration was filed with BIR BIR decision of denial was received Second request for reconsideration was filed with the BIR Date revised assessment was received The A. B. C. D.

October 1, 2017 October 9, 2017 July 2, 2018 July 15, 2018 July 5, 2019

last day to appeal to the Court of Tax Appeals is on: July 15, 2019; August 6, 2019; August 4, 2019; September 5, 2019.

Additions to Tax 17. (Phil. CPA Modified) Pio Company did not file his monthly VAT declaration for the month of January, 2017, which was due for filing on February 20, 2017. He was notified by the BIR of his failure to file the declaration, for which reason, he filed his declaration and paid the tax only after the said notice on June 30, 2018. The tax due per monthly VAT declaration was P100,000.

LEAD TAX Pre Week

Page 2 of 28

How A. B. C. D.

much was the total amount due on June 30, 2018? P100,000.00 P172,222.23 P177,214.62 P277,214.62

18. (Adapted) XYZ Corporation filed its income tax return for calendar year 1997 with a net taxable income of P500,000. At the applicable income tax rate of 35% for the year 1997, its income tax amounted to P175,000. However, upon investigation, it was disclosed that its income tax return was false or fraudulent because it did not report a taxable income amounting to another P500,000. On its net income of P1,000,000, per investigation, the income tax due is P350,000. Deducting its payment per return filed, the deficiency, excluding penalties, amounted to P175,000. It was duly informed of this finding through the Preliminary Assessment Notice. Failing to protest on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 1999 calling for payment of the deficiency income tax on or before June 30, 1999. a. How much was the total amount due? b. Assuming that the calendar year 1997 deficiency income tax assessment against XYZ Corporation was not paid by June 30, 1999, the deadline for payment of the assessment and assuming further that this assessment had already become final and collectible. The corporation paid its tax assessment only by July 31, 1999. a. b. A. P175,000.00 P175,000.00 B. P304,771.68 307,784.25 C. P304,771.68 P312,863.79 D. P42, 271.68 P 45,284,25 19. (Phil. CPA) For filing false and fraudulent return, a surcharge is imposed. Which of the following is correct? A. 50% administrative penalty B. 50% criminal penalty C. 25% plus 50% D. 25% criminal penalty

ELECTRONIC FILING OF TAX RETURNS AND PAYMENT OF TAXES 20. It refers to the control number issued by the AAB to the BIR to confirm that tax payment has been credited to the account of the government or recognized as revenue (internal revenue tax collection) by the Bureau of Treasury. A. Electronic Filing and Payment System (EFPS) B. Filing Reference Number C. Confirmation Number D. Acknowledgement Number Receipts, Invoices and Books of Accounts 21. In cases where the sales or receipts in the preceding year exceed P30,000, receipt or invoice is issued for each sale or transfer of merchandise or for services rendered valued at: A. Not less than P10; B. Not less than P20; C. Not less than P25; D. Regardless of the value. 22. When the quarterly sales, earnings, receipts or output exceed P50,000, what books of account shall be maintained by a business entity? A. Simplified set of bookkeeping records; B. Journal and a ledger or their equivalents; C. Either simplified set of bookkeeping records or journal and a ledger or their equivalents; D. No books of account required. TRANSFER TAXES 23. (ADAPTED) Which of the following is not included in the gross estate of a resident decedent who is under conjugal partnership of gains? A. House and lot inherited by the decedent during the marriage from his who predeceased the decedent. B. Condominium unit transferred to his son for an insufficient consideration. C. Jewelry purchased by the decedent during the marriage with his exclusive money of the decedent. D. SMC Shares of stock inherited by the decedent’s surviving spouse during the marriage 24. Which of the following is not included in the gross estate of a resident decedent who is under conjugal partnership of gains? A. House and lot inherited by the decedent during the marriage from his who predeceased the decedent. B. Condominium unit transferred to his son for an insufficient consideration. C. Jewelry purchased by the decedent during the marriage with his exclusive money of the decedent. D. SMC Shares of stock inherited by the decedent’s surviving spouse during the marriage 25and 26. are based on the following: 25. (Adapted) A decedent dies on January 15, 2013. The interment is on January 31, 2013. The gross estate of the decedent is P4,000,000. The following expenses are presented to you: Expenses during the wake borne by relatives and friends P30,000 Mourning clothing of the widow and unmarried minor children 20,000 Obituary notice in a newspaper 50,000 Card of thanks published in a newspaper 30,000 Burial plot 80,000 Flowers placed on top of the burial lot when relatives visited on February 14, 2013 5,000

Expenses during a family’s gathering to commemorate the 40thday after death of the decedent on February 23, 2013 Accountant’s fee in gathering to commemorate the 40th day after death of the decedent on February 23, 2013 Lawyer’s fee in representing the estate in case filed on August 15, 2013 Executor’s fee January 15, 2013 to July 15, 2013 July 16, 2013 to December 31, 2013 The A. B. C. D. 26. The A. B. C. D.

15,000 50,000 70,000 P120,000 120,000

240,000

deductible funeral expenses are: P150,000. P180,000. P200,000. none of the choices. deductible judicial expenses are: P360,000. P240,000. P170,000. none of the choices.

27.(Adapted) The following taxes are claimed as deduction from the gross estate of a decedent who dies on July 1, 2013. Income tax on income earned from January 1 to June 30, 2013 P100,000 Income tax on income earned from July 1, 2013 to December 31, 2013 120,000 Real estate tax paid, January 1 to June 30, 2013 50,000 Unpaid real estate tax, July 1 to December 31, 2013 50,000 Unpaid property tax, January 1 to June 30, 2013 60,000 The correct amount of deductible taxes shall be: A. P380,000. B. P210,000. C. P170,000. D. none of the choices. 28. Which of the following shall be allowed as deduction from the gross estate of a non-resident alien decedent?

Old Law A. B. C. D.

Train Law Standard deduction / Transfer for public use Standard deduction / Transfer for public use Standard deduction / Transfer for public use Standard deduction / Transfer for public use

Family home deduction Medical expenses Standard deduction Transfer for public use

29. Which is of the following period for filing is true?

Notice of death is filed Estate tax returns are filed

Old Law 2 months after the decedent’s death 6 months after the decedent’s death

Notice of death is filed A. B. C. D.

Train Law Not required 1 year after the decedent’s death Estate tax returns are filed

True True False False

True False False True

30. S1-Under the TRAIN Law, the standard deduction is now P5,000,000

S2-Under the TRAIN Law, a CPA certification is required if the gross estate exceeds P5,000,000. S3-Under the TRAIN Law, payment of estate tax is now allowed within 2 years from the date of death without civil penalties or interest. S1 A. B. C. D.

True True True False

S2 True True False False

S3 True False False False

31. to 34. are based on the following: Harry had the following donations/transactions: Date Donations January 1 Donated a P150,000 diamond ring to her sister who was getting married in March 15 of the same year. March 1 Sold her personal car valued at P500,000 for P200,000 to his uncle. April 1 Sold his residential house to his brother for P1,500,000. The fair market value of the residential house at the time of sale was P2,000,000. June 1 Donated P100,000 to BinanCityfor public purpose and P50,000 to her brother who graduated from De La Salle University. 31.How much was the donor’s tax for the gift made on January 1? Old Law A. P 30,000

Train Law P0

B. C. D.

P 1,000 P 800 P 30,000

32.How much was the donor’s tax for the gift made on June 1? Old Law A. P 32,000 B. P 14,000 C. P 2,000 D. None of the choices 3.

Donation is A. B. C. D.

P0 P 30,000 None of the choices

Train Law P 9,000 P 30,000 P 3,000 None of the choices

completed: when the donee accepts the donation and the acceptance is made known to the donor. when the property donated is delivered actually or constructively to the donee. when the donor’s tax is finally paid. when it is determined that the donor has the capacity to make donations.

34.Donor’s return shall be filed within: A. thirty (30) days after the donor executes a Deed of Donation. B. thirty (30) days after the date the gift is made. C. six (6) months after the date the gift is made D. thirty (30) days after the donor pays the donor’s tax.

BUSINESS TAXES (Theories) 35.First statement: Only VAT-registered taxpayers are required to pay Value-Added Tax. Second statement: Taxpayers whose gross annual sales or receipts exceed the VAT threshold amount are required to pay Value-Added Tax in all cases. A. B. C. D.

Both Both Only Only

statements are correct statements are incorrect the first statement is correct the second statement is correct.

For Items 36 and 37 36.A VAT-registered lessor of apartment houses has the following gross rentals for the first quarter of the current year: Gross rentals of 30 units at P10,000 per month per unit P3,600,000 Gross rentals of 10 units at P15,000 per month per unit 1,800,000 Total .................................................. P5,400,000 The VAT-registered lessor of apartment houses shall be: A. subject to VAT on his gross rentals of P5,400,000. B. subject to VAT on his gross rentals of P1,800,000. C. subject to VAT on his gross rentals of P3,600,000. D. exempt from VAT on his total gross rentals. 37.Under the TRAIN Law, the VAT-registered lessor of apartment houses shall be: A. subject to VAT on his gross rentals of P5,400,000. B. subject to VAT on his gross rentals of P1,800,000. C. subject to VAT on his gross rentals of P3,600,000. D. exempt from VAT on his total gross rentals. 38. The following transactions during the month of January, 2013 are recorded in the books of a VAT-registered taxpayer: Purchase of three (3) office equipment at P150,000 each Purchase of five (5) office furniture at P50,000 each Importation of vehicle for transport used in business, P1,500,000 Based on the above data: A. B. C. D.

The total input taxes on the above transactions shall be amortized. The input tax on office equipment and office furniture shall be credited in full. Only the VAT on importation of vehicle for land transport shall be amortized. The total input taxes on the above transactions may be amortized or credited in full depending on the choice of the taxpayer.

39. Which of the following is allowed presumptive input tax? A. Processor of sardines, mackerel and milk B. Manufacturer of raw sugar C. Processor of canned fruits D. Manufacturer of packed instant champorado 40. The quarterly VAT return is filed: A. Within twenty (20) days following the end of the quarter. B. Within twenty-five (25) days following the end of the quarter. C. Within sixty (60) days following the end of the quarter. D. When the VAT payable is finally determined.

41. One of the following is subject to the 3% percentage tax under Sec. 116: A. Seller of fresh mangoes whose annual gross sales do not exceed the VAT threshold amount B. Seller of canned fish whose annual gross sales exceed the VAT threshold amount C. Seller of refined sugar whose annual gross sales do not exceed the VAT threshold amount D. Seller of office supplies who is VAT-registered but whose gross annual sales do not exceed the VAT threshold amount. 42. Which of the following is subject to common carriers tax? A. Transportation contractors by land on their transport of goods and cargoes B. Person who transports passengers by air C. Domestic carrier by land relative their transport of passengers. D. Person who transports goods and cargoes by sea 43. (Easy) Which of the following is not subject to franchise tax? A. Franchise grantee of radio and/or television broadcasting whose gross annual receipts of the preceding year does not exceed P10,000,000 B. Franchise grantees of gas and water utilities C. PAGCOR and its licensees and franchisees D. Franchise grantee of electric utilities 44. Rentals of property, real or personal, received by bank and non-bank financial intermediaries performing quasi-banking functions are: A. subject to Value-added Tax at 12%. B. subject to Gross Receipts Tax at 7%. C. subject to Gross Receipts Tax if the annual gross rentals do not exceed the VAT threshold amount. D. not subject to any tax. 45.Which of the following is not subject to amusement tax? A. Proprietor of videoke bars B. Operator of cockpits C. Lessee of bowling alleys D. Lessee jai-alai and racetracks For Items 46 and 47 46. Mr. X, a minimum wage earner, works for 123 Co. Mr. X is not engaged in business nor has any other source of income other than his employment. For 2018, Mr. X earned a total compensation income of P135,000.00.The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5,000.00 and has received 13th month pay of P11,000.00. How much is his income tax due? A. EXEMPT B. P135,000.00 C. P119,000.00 D. None of the choices 47. The following year, Mr. X earned, aside from his basic wage, additi...