TAX - Tax PDF

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TAXEASY The power to regulate liberty and property to promote the general welfare: a. Taxation c. Eminent domain b. Police power d. Power of recall When is the donation perfected? a. The moment the donor knows of the acceptance by the donee b. The moment the thing donated is delivered, either actual...

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TAX EASY 1. The power to regulate liberty and property to promote the general welfare: a. Taxation c. Eminent domain b. Police power d. Power of recall 2. When is the donation perfected? a. The moment the donor knows of the acceptance by the donee b. The moment the thing donated is delivered, either actually or constructively, to the donee c. Upon payment of the donor’s tax d. Upon execution of the deed of donation 3. Which of the following is subject to the 3% common carrier’s tax? a. Transportation contractors on their transport of goods or cargoes. b. Common carriers by air and sea relative to their transport of passengers. c. Owners of animal-drawn two-wheeled vehicle. d. Domestic carriers by land for the transport of passengers. 4. Which of the following statements is false? a. BBC, an international news agency, is required to pay 10% percentage tax from messages originating from the Philippines by telephone or telegraph. b. Amounts paid for messages transmitted by an embassy and consular offices of a foreign government is not subject to 10% overseas communications tax. c. Overseas communications initiated by a resident citizen not engaged in trade or business is subject to overseas communication tax. d. None of the above 5. Which of the following sale or importation of goods shall not be exempt from VAT? a. Fertilizers b. Seeds, seedlings and fingerlings c. Fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds d. Specialty feeds. 6. The person who is statutorily liable to pay VAT is: a. The seller b. The buyer c. Either the “a” or “b” d. Neither “a” nor “b” 7. Due to his expertise, Engr. Pedro D. Magiba (a freelancer) was hired by a foreign petroleum contractor in Thailand to provide technical assistance for two months from February to March. He was hired again for the months of June-July and October-December of the same taxable year. Engr. Pedro D. Magiba is a: a. Resident citizen b. Nonresident citizen c. Special Filipino employee d. None of the above 8. A non-resident alien derived interest income from his bank deposit here in the Philippines under the FCDU system of a domestic bank. The interest amounted to $500. How much is the income tax due of the said alien? ($1=Php50) a. P0 c. P3,750 b. P1,875 d. P10,000 9. If a non-resident citizen received his share in the income of a non-taxable joint venture, what type of income tax that will apply on the said income?

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PROFESSIONAL REVIEW and TRAINING CENTER, INC. a. Final withholding tax on passive income b. Capital gains tax c. Basic income tax d. Fringe benefit tax 10. Which is not a characteristic of corporate income tax: a. Progressive tax c. General tax b. Direct tax d. National tax

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PROFESSIONAL REVIEW and TRAINING CENTER, INC. AVERAGE 1. The statement “Taxes are what we pay for a civilized society” refers to: a. Lifeblood doctrine b. Benefits-protection theory c. Necessity theory d. None of the choices 2. Units of participation in any association, recreation or amusement club (such as golf, polo, or similar clubs shall be valued using: a. Arithmetic mean between the highest and lowest bid price b. Bid price nearest the date of death published in any newspaper or publication of general circulation. c. Par value d. Book value 3. X, to a. b. c. d.

a multinational corporation not doing business in the Philippines, donated 100 shares of stock of said corporation Mr. “Y”, a Filipino citizen. What is the tax liability, if any, of “X” corporation? The donation is not subject to donor’s tax. The donation is subject to 30% donor’s tax based on net gift. The donation is subject to graduated rates based on net gift. The donation is subject to 30% donor’s tax based on gross gift.

4. Virgin Corporation, a closely held corporation offered for the first time its own shares of stock at par of P20 per share. The corporation’s authorized capital stock is P5,000,000, with a P2,000,000 outstanding capital stock before the IPO. The gross receipts at its initial public offering was P600,000. The percentage tax for the initial public offering is: c. P24,000 a. P9,900 b. P31,000 d. P18,900 5. On January 5, 2018, Towell Co., VAT-registered, sold on account goods for P112,000. The term was: 2/10, n/30. Payment was made on January 10, 2018. The total amount due is: a. P110,000 c. P112,000 b. P107,800 d. P109,760 6. If a dealer in securities sold shares in the local stock exchange, what business tax will apply to such transaction? a. VAT based on Gross Selling Price b. VAT based on gain c. Capital Gains Tax d. Stock Transaction Tax of 6/10 of 1% 7. Because of dire necessity, Juan sold a parcel of land for P8,000,000 with a cost of P10,000,000. At the time of sale, the fair market value of the land was P11,000,000. The proceeds of the sale were used to purchase principal residence at Manila. As such, within 30 days from the sale, he informed the Commissioner of Internal Revenue of his intention to avail of the exemption and set-up an escrow deposit equivalent to the capital gain’s tax. The sale of land resulted to a tax consequence of: a. P480,000 capital gains tax on sale of real property. b. P600,000 capital gains tax on sale of real property. c. P660,000 capital gains tax on sale of real property. d. None. 8. Mr. Cabarles placed a time deposit with a local bank with a maturity of 4 years. With 6 months remaining of the original maturity, he pre-terminated the deposit because of an urgent need. What is the applicable rate on his interest income? a. 20% b. 12% c. 5% d. Exempt

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PROFESSIONAL REVIEW and TRAINING CENTER, INC. 9. In the year 2018, Bank of Philippine Archipelago Inc. paid for the quarterly rental of a residential house of its branch manager, Mr. Tolentino, amounting to P90,000. How much is the fringe benefit expense? c. P90,000 a. P15,750 b. P45,000 d. P105,750 10. Aplets Corporation is registered under the laws of the Virgen Islands. It has extensive operations in Southeast Asia. In the Philippines, its products are imported and sold at a mark-up by its exclusive distributor, Kim’s trading, Inc. The BIR compiled a record of all the imports of Kim from Aplets and imposed a tax on Aplets net income derived from its exports to Kim. Is the BIR correct? a. Yes. Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines. b. No. The tax should have been computed on the basis of gross revenues and not net income. c. No. Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines. d. Yes. Aplets is doing business in the Philippines through its exclusive distributor Kim’s Trading, Inc.

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PROFESSIONAL REVIEW and TRAINING CENTER, INC.

1.

After having been informed that some massage parlors are being used as fronts for prostitution, the Sanguniang Panlungsod of Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such onerous taxes that leave them no other alternative but to stop operating. The passage of the ordinance is a valid exercise ofa. Taxation b. Police power c. Eminent domain d. Police power and power of taxation

2.

Cito Yu has a building located in Shorthorn Quezon City currently leased to various tenants. Since he is old already and wants to retire from active business, he sold the same to Janjan, his son, for 20 million pesos. The value of the building at the time of sale is 40 million pesos. Which of the following statements is correct? a. The sale is for sufficient consideration b. The sale is for insufficient consideration subject to donor’s tax c. The sale is for insufficient consideration but exempt from donor’s tax since the object is a real property d. The sale is subject to capital gains tax and donor’s tax.

3.

Mr. MAG, a financial Comptroller of JAB Company, earned annual compensation income in 2018 of 1,500,000, inclusive of 13th month and other benefits in the amount of P120,000 but net of mandatory contributions to SSS and Philhealth. Aside from employment income, he owns a convenience store, with gross sales of P2,400,000. His Cost of Sales and operating expenses are P1,000,000 and P600,000, respectively, and with non-operating income of P100,000. Assume he signified his intention to be taxed at 8% income tax rate in his 1st quarter return, the total income tax due is: a. P513,000 c. P313,000 b. P589,200 d. P493,000

4.

Lorna, a minimum wage earner, works for E di Wow, Incorporated. She earned compensation income of P135,000 in 2018. Aside from her basic pay, she also earned P140,000 consisting of P80,000 overtime pay, P30,000 night shift differential, P15,000 hazard pay, and P15,000 holiday pay. She also contributed to the SSS, Philhealth, and HDMF amounting to P5,000 and has received a 13th month pay of P11,000. Lorna’s income tax due for the taxable year should be: a. P1,800 c. P7,200 d. P0 b. P3,600

5.

International Phone Inc. owns a condominium unit. During the year 2018, it allowed its CEO to use the said property as his residence. The zonal value of the property is P10,000,000 while its fair market value as shown in its current Real Property Tax Declaration amounts to P8,000,000. How much is the quarterly fringe benefit tax expense? c. P33,654 a. P50,000 b. P23,529 d. nil

6.

KABA LESS Inc. sold its vacant lot to the City Government of Davao for P10,000,000 which it acquired at a cost of P5,000,000. The fair market value of the said property per tax declaration is P12,000,000, while its zonal value is P15,000,000. How much is the income tax applicable on the transaction? a. P900,000 c. P600,000 b. P1,500,000 d. Either “a” or “b” upon the choice of the seller

7.

In 2016, Alpha Corp., a income was P820,000. In a. P41,000 b. P45,000

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calendar-year corporation, contributed P80,000 to a religious organization. Alpha’s net 2016 what amount can Cable deduct as charitable contributions? c. P51,000 d. P80,000

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PROFESSIONAL REVIEW and TRAINING CENTER, INC. 8.

Juan Dela Cruz, a proprietor, maintained accounting records on cash basis. He provided the following information for 2018 taxable year: Cash Accounts receivable, Jan. 1 Inventory, Jan. 1 Furniture and fixtures Accumulated dep’n, Jan. 1 Accounts payable, Jan. 1 Dela Cruz, Capital, Jan. 1 Sales Purchases Salaries Payroll taxes Insurance expense Utilities Living expenses

 

P320,000 1,600,000 600,000 1,200,000 300,000 200,000 2,000,000 6,500,000 3,050,000 1,750,000 110,000 90,000 150,000 130,000 P9,000,000

P9,000,000

Accounts receivable totaled P3,600,000 on December 31. The inventory totaled P750,000 at cost based on a physical count of the goods on December 31.

How much is the business tax for the year? a. P255,000 c. P1,020,000 b. P780,000 d. P1,212,000

9.

A VAT-registered trader has the following transactions for the month of July 2019: Sale of goods to private entities, net of VAT P2,500,000 Purchases of goods sold to private entities, gross of 12% VAT 896,000 Sales to a government owned corporation (GOCC), net of VAT 1,500,000 Purchases of goods sold to GOCC, net of 12% VAT 700,000 Purchases of Machineries, gross of VAT, useful life is 6 years 11,200,000 How much is the VAT payable to the BIR? a. P280,000 c. P191,500 b. P224,000 d. P300,000

10. Alpha Corporation (vat registered) has the following data for the month: Sales – private entities P2,000,000 Sales – vat exempt goods 1,000,000 Sales – government 1,000,000 The following input taxes were passed-on by vat suppliers to Alpha Corporation during the month: Input vat on taxable goods P80,000 Input vat on sale of exempt goods 20,000 Input vat on sale to the government 40,000 160,000 Input tax on depreciable capital goods not directly attributable to any specific activity (monthly amortization for 60 months) The amount of input vat not available for tax credit but may be recognized as cost or expense is: a. P60,000 c. P80,000 b. P70,000 d. P140,000

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PROFESSIONAL REVIEW and TRAINING CENTER, INC. TIE BREAKER 1.

Which of the following statements regarding “Taxpayer’s Suit” is incorrect? a. It is one brought or filed by a taxpayer arguing the validity of a tax statute and its enactment or the constitutionality of its alleged public purpose. b. It is a case where the act complained of directly involves the illegal disbursement of public funds derived from taxation. c. Only taxpayers have “locus standi” to question the validity of tax measures or illegal expenditures of public money. d. A taxpayer is relieved from the obligation of paying a tax because of his belief that it is being misappropriated by certain officials

2.

Your bachelor client, a Filipino residing in Quezon City, wants to give his girlfriend a gift of P200,000. He seeks your advice, for purposes of reducing if not eliminating the donor’s tax on the gift, on whether it is better for him to give all of the P200,000 on Christmas 2016 or to give P100,000 on Christmas 2016 and the other P100,000 on January 1, 2017.

Which of the following will be your advice? a. Split the donation to totally relieve the donor from the donor’s tax. b. Split the donation to reduce the donor’s tax. c. Splitting the donation will not reduce the applicable donor’s tax. d. The gift should be made on account of their planned marriage to avail of dowry exemption.

3.

In 2017, Jana Corporation purchased a residential house and lot for P2,300,000. The property was later sold to its General Manager for P1,980,000. The fair market value per Assessor’s Office is P2,200,000 while the zonal value is P2,100,000.

How much is the fringe benefit tax? c. P150,588 a. P103,529 b. P56,471 d. nil

4. Which of the following organizations shall be exempted from income tax for income earned by them as such? a. Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes, or for the rehabilitation of veterans, but part of its net income or asset shall belong or inure to the benefit of any member, organizer or any specific person. b. Mutual savings bank having capital stock represented by shares and cooperative bank with capital stock organized and operated not for mutual purposes and with profit. c. Business league, chamber or commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stockholder or individual. d. Farmers, fruit growers, or like association organized and operated as the central distributor of all agricultural products in a particular region.

5. Apol owns 51% of JJ Corporation valued at P25,000,000. Due to bankruptcy, JJ was liquidated. P20,000,000 as liquidating dividend. Was the loss deductible? a. No, because Apol and JJ are considered related parties. b. Yes, the loss is classified as capital loss and could be deducted from capital gain, if any. c. No, because the amount received by Apol was subject to capital gains tax. d. Yes, because losses as a rule are deductible.

Apol received

6. Assuming that the taxpayer submitted the documents supporting his motion on August 26, 2014, until when can the taxpayer wait for the reply of the BIR before he can assume that the protest was indirectly denied? a. September 26, 2014 c. February 26, 2014 b. April 15, 2015 d. February 22, 2015

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PROFESSIONAL REVIEW and TRAINING CENTER, INC.

7. Which a. b. c. d.

of the following is taxed on gross income? Domestic corporation Resident foreign corporation Non-profit cemetery Non-resident foreign corporation

8. The Improperly Accumulated Earnings Tax shall not apply to the following, except? a. Banks and other non-bank financial intermediaries b. Insurance companies c. Publicly-held corporation d. Closely-held corporation

9. Which a. b. c. d.

of the following cannot be claimed as deduction by an individual earning purely compensation income? Basic Personal Exemption Additional Personal Exemption Premium payments on health and/or hospitalization insurance Optional Standard Deduction

10. Which a. b. c. d.

of the following is not a characteristic of a deduction? It is a reduction of wealth that helped earn the income subject to tax. It is not a receipt. It is a subtraction to arrive at income subject to tax. An immunity or privilege, a freedom from a charge or burden to which others are subjected.

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