Taxation KEY PDF

Preview

Summary

Remembering Which of the following statements is true? a. The power of taxation and eminent domain are both exercisable only by the government and its political subdivision. b. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by th...

Description

Remembering 1. Which of the following statements is true? a. The power of taxation and eminent domain are both exercisable only by the government and its political subdivision. b. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by the law making body c. In police power, the property taken is preserved for public use d. The power of eminent domain is created by the constitution Understanding 2. This stems from the principle that we pay taxes for the protection and services provided by the taxing authority which could not be provided outside the territorial boundaries of the taxing state. a. The tax imposed should be for public purpose. b. The power to tax is limited to the territorial jurisdiction of the taxing government. c. There should be no improper delegation of the taxing power. d. Exemption of government entities from taxation. Application 3. A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not acceptable for legally refusing to pay the tax? a. That he will derive no benefit from the tax. b. That he has been deprived of due process of law. c. That there is lack of territorial jurisdiction. d. That the prescriptive period for the tax has lapsed. 4. Mapagbigay School, a non-stock non-profit educational institution, bought from Pedro, a resident citizen, his residential house and lot. Pedro would be using the proceeds of the sale to buy his new residential house and lot. On the other hand, the school will use the parcel of land to construct a new building for its dormitory for its medical students. Which of the following statements regarding liability for the payment of capital gains tax is correct? I. Pedro is liable to capital gains tax. However, if what was sold was his principal residence, he may apply for tax exemption, provided that he complies with the requirements laid down in the Tax Code. II. Pedro is liable to capital gains tax because the tax is imposed on the seller; thus, notwithstanding any exemption enjoyed by the buyer, the tax shall still be imposed. III. Pedro is not liable to capital gains tax because the sale was made in favor of a non-stock, non-profit educational institution and that the property will be used for educationally-related functions. a. I only b. II only c. I and II only d. I and III only 5. When the power to tax is delegated to the local government a. Only the local executive can exercise the power. b. Only the legislative branch of the local government can exercise the power. c. The local executive and the legislative branch of the local government can exercise the power. d. Neither the local executive not the legislative branch of the local government can exercise the power. 6. The city council passed a tax ordinance imposing an occupation tax or profession on occupation of an “industrial engineer”. GJ is the only person with such an occupation in the city. Which of the following is correct? a. GJ can successfully challenge the validity of the ordinance being discriminatory since he is the only one adversely affected. b. The ordinance violates the constitutional rule of equality in taxation. c. The ordinance is a “class legislation” since it does not subject to occupation tax the other industrial engineers. d. The ordinance is a valid exercise of the council’s power to enact tax ordinance to raise revenue under the Local Government Code Remembering

7. Which of the following prescriptive period for the B.I.R. to conduct a tax audit is correct?

a. b. c. d.

Ten (10) years when no return is filed Three (3) years when return filed is false or fraudulent Two (2) years from actual filing of return or from the deadline for filing if the return filed is not fraudulent All of the above

Understanding 8. What is the effect on the tax liability of a taxpayer who does not protest an assessment for deficiency taxes? a. The taxpayer may appeal his liability to the CTA since the assessment is a final decision of the Commissioner on the matter. b. The BIR could already enforce the collection of the taxpayer’s liability if it could secure authority from the CTA c. The taxpayer’s liability becomes fixed and subject to collection as the assessment becomes final and collectible d. The taxpayer’s liability remains suspended for 180 days from the expiration of the period to protest. 9. The following are administrative remedies available to a taxpayer in connection with collection of taxes, except one: a. Filing of claim for tax refund or credit b. Filing a petition for reconsideration or reinvestigation c. Entering into a compromise d. Filing of criminal complaint against erring BIR officials or employees Application 10. The following information was disclosed to you: Erroneous payment of tax Claim for refund was filed Receipt of BIR decision denying claim for refund

April 15, 2011 Feb. 18, 2012 July 5, 2012

The last day to appeal to the Court of Tax Appeals is a. b. c. d.

April 15, 2013 August 5, 2012 August 4, 2012 August 6, 2012

11. Yekka paid her income tax liability for 2012 on April 15, 2013. It was found out later on June 30, 2013 that she overpaid by more than P 100,000. The last day to file a claim for tax refund is? a. April 15, 2014 b. April 15, 2015 c. June 30, 2014 d. June 30, 2015 12. Chloe received a final assessment notice (FAN) from the B.I.R. on October 30, 2016. She submitted her protest and the supporting documents within the time prescribed by the Law. After 180 days, the subsequent step/s available to her shall be: I. Elevate the case on appeal to the CTA, alleging inaction of the CIR, within 30 days from the 180 th day since she submitted the supporting documents on her protest. II. Wait for the decision of the Commissioner of Internal Revenue (CIR) and if adverse, appeal the case before the CTA within thirty days a. I only b. II only c. I or II d. I and II 13. A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001, she filed a written claim for refund. Her claim was denied by the BIR and she received the denial on March 1, 2002. She filed a motion for reconsideration with the BIR on March 31, 2002. On April 18, 2002, she received the final denial of the BIR. What will be the taxpayer’s remedy? a. The taxpayer has no more remedy against the final denial.

b. File another motion for reconsideration with the BIR within 30 days after the receipt of the final denial.

c. File an appeal with the Court of Tax Appeals within 30 days after the receipt of the final denial. d. File an appeal with the Court of Tax Appeals within 15 days after the receipt of the final denial. Understanding 14. It is important to know the source of income for tax purposes (i.e., from within or without the Philippines) because: a. Some individual and corporate taxpayers are taxed on their worldwide income while others are taxable only upon income from sources within the Philippines b. The Philippines imposes income tax only on income from sources within c. Some individual taxpayers are citizens while others are aliens d. Export sales are not subject to income tax Application Juan, married, supporting his three (3) minor children had the following data for the current taxable year (Exchange rate $ 1 – P 50): Philippines Abroad Business income P 1,000,000 $ 20,000 Professional income 400,000 10,000 Salaries 200,000 Business and professional expenses 250,000 8,000 Income tax paid 4,000 15. If Juan is a resident citizen and taxable year is 2018, his income tax payable is: a. P 434,000 b. P 570,500 c. P 589,000 d. P 509,000 16. Amando, a resident citizen, is employed as a manager of a Regional Operating Headquarters of a multinational company in the Philippines. His annual taxable compensation income in 2016 is P 1,000,000. He is married but estranged from his wife. He has, living with him and fully dependent for support, his five (5) minor children, who are all unmarried and not gainfully employed. What amount could Armando claim as his total personal exemptions assuming he opted to be taxed using the graduated tax rate? a. P.0 b. P 50,000 c. P 100,000 d. P 150,000 17. The following data were taken from Emman (single), holding managerial position for 2018 taxable year: Gross salaries @ P 50,000 per month P 600,000 SSS contributions 12,000 Philhealth contributions 7,200 Pag-ibig contributions 4,800 Union dues 3,000 Withholding tax on compensation income 73,250 Allowances, not subject to liquidation 100,000 Gasoline allowances, subject to liquidation 17,000 13th month pay 50,000 De minimis benefits 12,000 The fringe benefit tax due is a. P 0 b. P 8,000 c. P 47,059 d. P 53,846 18. The total income tax expense is Juan is a. P 127,096 b. P 141,000 c. P 170,760 d. P 179,400 19. Albie died leaving an estate worth P 10,000,000. The estate is under administration. In 2017, the properties in the estate earned a gross income of P 600,000 and the estate incurred expenses of P 150,000. Reyn, one of the heirs, received P 100,000 and P 120,000 from the 2016 and 2017 income of the estate, respectively.

The income tax payable of estate in 2017 is

a. b. c. d.

P 59,000 P 68,000 P 110,000 P 119,000

20. In 2018, a domestic corporation declared and paid dividends to its shareholders as follows: To Apol, a resident citizen To Alex, a nonresident citizen To George, a resident alien To LJ, a nonresident alien engaged in trade in the Philippines To Francis, a nonresident alien not engaged in trade in the Philippines To Chen, a domestic corporation To a resident foreign corporation To a nonresident foreign corporation (with tax sparing) How much final tax shall be withheld by the corporation? a. P 80,000 b. P 90,000 c. P 85,000 d. P 95,000 Analysis

P 100,000 100,000 50,000 100,000 80,000 100,000 100,000 100,000

21. Which of the following is wrong? a. A joint venture for undertaking construction projects is not taxable as a corporation. b. A consortium for energy operations pursuant to an operating consortium agreement under a service contract with the government is not taxable as a corporation. c. A general partnership in trade is not taxable as a corporation. d. A co-ownership where the activities of the co-owners are limited to the preservation of property and collection of income from the property is not taxable as a corporation. 22. Andres inherited a piece of land from his father (purchased by the father at P 5,000,000) with a fair market value of P 3,000,000 when inherited. He transferred this property to a corporation where he is the majority stockholder, Omega Corporation, and received for it newly issued shares of stocks with a par value of P 4,500,000 and fair market value of P 5,000,000. Which of the following is wrong? a. The gain to Andres on the transfer is P 2,000,000. b. The gain to Omega Corporation on the transfer is P 0. c. The basis of the shares in the hands of Omega is P 5,000,000. d. There is no gain from any and all transactions. 23. Which of the following is true? a. The final tax on compensation income of special aliens is 25% of the gross income. b. Interest income from a foreign currency depository unit in the Philippines of a non-resident alien is not subject to final tax. c. Prizes exceeding P 10,000 derived by non-resident alien not engaged in trade or business here in the Philippines is subject to a final tax of 20%. d. Share in earnings received by non-resident alien from a domestic partnership is subject to basic tax. Evaluation

24. Which of the following is taxable? a. Separation pay received by a 50-year old employee due to the retrenchment program of the employer b. Retirement pay received from a benefit plan registered with the BIR where at the time the employee retired, he was 57 years of age, retiring from employment for the first time in his life, and was employed with the employer for 8 years. c. Social security benefit received by a balikbayan from employer abroad at age 30. d. None of the above 25. Romer was selected as the most outstanding “barrio teacher” in San Pedro town of Region VI. His name was submitted by the school principal without his knowledge. He received a trophy and a cash award of P 50,000. The amount he received is

a. Partly taxable, partly exempt

b. Exempt from income tax c. Subject to basic income tax d. Subject to final tax 26. A domestic corporation has the following data on income and expenses Gross business income Deductions including SSS and Philhealth contributions of P 150,000 Contributions to the Government for priority project in education Contribution to foreign private foundation Contribution to domestic charitable organization How much is the deductible charitable and other contributions? a. P 390,000 b. P 290,000 c. P 285,000 d. P211,000

P 6,200,000 2,500,000 100,000 100,000 190,000

Understanding 27. The following are causes for disinheriting a child. Which one is not? a. When a child has been found guilty of an attempt against the life of the testator. b. When a child has been convicted of adultery or concubinage with the spouse of the testator c. When a child marries a person other than the testator’s choice. d. When a child leads a dishonorable or disgraceful life 28. One of the following is not a valid donation. a. An oral donation of watch valued at P 5,000. b. A donation in writing of a television set valued at P 40,000. c. An oral donation of a parcel of land valued at P 5,000. d. A donation of commercial land in a deed of donation valued at P 100,000 Application 29. Following are the properties in the gross estate with their fair market value: House and lot, family home in Quezon City P 1,500,000 Deposit in the foreign branch of a domestic bank 500,000 Shares of stock issued by a domestic corporation, certificate kept in the US 1,000,000 Pieces of jewelry 800,000 Receivable, debtor in Cebu 200,000 If decedent was non-resident alien and there is reciprocity, property excluded from gross estate is valued at a. P 4,000,000 b. P 1,700,000 c. P 700,000 d. P 200,000 30. Aling Nena, administrator, claims the following funeral expenses for a decedent who died in 2017: Expenses of interment (paid by friend) P 60,000 Cost of burial & tombstone (1/2 paid by relatives) 42,000 Other funeral parlor expenses 36,000 Expenses during the wake 13,000 Obituary notice 7,500 Card of thanks 3,500 Mourning clothing of friends 15,000 Mourning clothing of unmarried minor children 5,000 If the gross estate is P 2,500,000, the allowable funeral expenses is a. P 75,000 b. P 82,500 c. P 93,500 d. P 174,500

31. A citizen-decedent died in 2018 with the following data: Philippines USA Gross estate P 14,200,000 P 4,400,000 Allowable Deductions 6,400,000 2,200,000 (excluding standard deduction) Estate tax paid 150,000 How much is the estate tax payable in the Philippines assuming the decedent is a non-resident citizen? a. P 132,000 b. P 150,000 c. P 168,000 d. P 300,000 32. Arnie made donations to Railey and Crisel, son and daughter-in-law, on account of marriage, of real property with a fair market value of P 2,000,000, but subject to a mortgage of P 300,000 that was assumed by the done. The donor’s tax is a. P 283,300 b. P 289,400 c. P 278,140 d. P 199,400 33. Manalo, a resident of Dagupan City donated to Arturo a property in Laoag City. The donor’s tax is P 40,000. The deed of donation was signed in the resident of Arturo in Baguio City. The donor’s tax return must be filed in a. Dagupan City b. Laoag City c. Baguio City d. Quezon City Analysis 34. Which of the following events is not subject to donor’s tax? a. A Filipino citizen donated a parcel of land located in the United States to B, non-resident alien. b. A resident alien made a gift of P 200,000 to his daughter on account marriage. c. A non-resident citizen gives his girlfriend a diamond ring worth P 100,000 as a birthday gift. d. A and B are the only heir of C. A renounces his share of inheritance in favor of B. 35. Which of the following life insurance proceeds shall not be included in the computation of gross estate? a. Beneficiary is the estate, executor or administrator and the designation of the beneficiary is revocable. b. Beneficiary is the estate, executor or administrator and the designation of the beneficiary is irrevoacable. c. Beneficiary is other than the estate, executor or administrator and the designation of the beneficiary is revocable. d. Beneficiary is other than the estate, executor or administrator and the designation of the beneficiary is irrevocable. Evaluation 36. Pedro, an individual, donated to his friend Ana, his residential lot with a market value of P 1,000,000. Pedro’s cost in the lot is P 100,000. Ana is financially capable of buying the lot. What tax should be imposed and collected from Pedro as a result of the transaction? a. Capital gains tax b. Donor’s tax c. Real property tax d. Capital gains tax and donor’s tax Remembering 37. Which of the following is not a business tax? a. Excise tax b. Value-added tax c. Other percentage tax d. Income tax...