TAX_PRTC 1stPB with answers PDF

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TAXATION SIA/TABAGFirst Preboard OCT 2020Choose the letter of the correct answer. The 30% corporate income tax is increased to 35% by the Congress for the purpose of raising revenue to be used for national road expansion project near Bonifacio Global City, a private corporation. Is the exercised of ...

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TAXATION First Preboard

SIA/TABAG OCT 2020

Choose the letter of the correct answer. 1.

The 30% corporate income tax is increased to 35% by the Congress for the purpose of raising revenue to be used for national road expansion project near Bonifacio Global City, a private corporation. Is the exercised of the taxing power unconstitutional? a. Yes, because taxing power must be exercised exclusively for public purpose without any incidental benefit to any private entity. b. No, because the it is exercised directly for public purpose and the benefit to a private entity is only incidental. c. Yes, because the increase in tax rate constitutes deprivation of right to property of corporation without due process of law for being excessive and unreasonable. d. No, because the constitution does not expressly state that the power of taxation must be used only for public purpose, thus, it may be used to benefit a private entity.

2.

Which of the following statements is correct? a. The amount of sales to PWDs and SCs to be reported by a private establishment shall be the gross selling price and the applicable discount. b. The amount of discount granted to PWDs and SCs must not be reflected as a deduction from gross income of the seller but as a deduction from gross sales to arrive at the correct amount of net sales. c. The input vat attributable to sales made to PWDs and SCs shall be reflected in the income statement of the seller as a deduction from gross income d. All of the above

3.

Which of the following are basic principles of a sound tax system? a. Fiscal Adequacy, economic Feasibility and Theoretical Justice. b. Fiscal Adequacy, Administrative Feasibility and Theoretical Justice. c. Progressive Taxation, Ability to Pay, Symbiotic Relationship. d. Fiscal, Deficit, administrative Feasibility and Ability to Pay.

4.

5.

6.

Donor’s tax return for a donation on January 15, 2020 was filed on January 31, 2018. Last day to file donor’s tax return shall be? a. Jan. 15, 2020 c. Feb. 14, 2020 b. Jan. 31, 2020 d. Feb. 28, 2020

7.

The Congress enacted RA7716 also known as Expanded Value Added Tax Law. An association of taxpayers questions the constitutionality of this law on the ground that RA7716 did not originate exclusively in the House of Representatives as required by the Constitution, because it is in fact the result of the consolidation of two distinct bills, one from the House of Representatives and the other from the Senate. Is the vat law unconstitutional? a. Yes, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local application, and private bills, shall originate exclusively in the House of Representatives. b. Yes, because the Senate has no authority to propose or concur any amendments with the revenue or tax bill proposed by House of Representatives. c. No, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local application, and private bills, shall be initiated by the Senate. d. No, because it is not the law but the revenue bill which is required by the constitution to originate exclusively in the House of Representatives and insisting otherwise would violate the coequality of legislative power of the two houses of Congress and in fact would make the House superior to the Senate.

The next three (3) questions are based on the following data: Mr. and Mrs. Pinagpala donated the following during 2020: March 30 ▪

The concept of “situs of taxation” is based on which limitation of taxation? a. Territoriality b. International comity c. Exemption of the government d. Public Purpose Statement 1: The inherent powers of the State can never be taken away. Statement 2: No laws are necessary to confer the inherent powers of the State upon any government exercising sovereignty. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are incorrect

▪ ▪

Land valued at P620,000 to Ana, legitimate daughter, on account of marriage. Cash of P100,000 to Juan, legitimate son, for successfully passing the CPA Licensure exam Second hand car (capital property) valued at P400,000 to Mr. Pinagpala’s long-time friend, Pedro

May 15 ▪ ▪

Cash of P200,000 to Melda, mother of Mrs. Pinagpala Jewelry (paraphernal property) worth P100,000 to Emma, Mrs. Pinagpala’s best friend

December 25 ▪ Cash of P250,000 to Quezon City government for public use 8.

The donor’s tax due on the March 30 donation should be: a. P0 for Mr. & Mrs.

b. P18,600 each for Mr. & Mrs.

c. d. 9.

P30,600 for Mr.; P6,600 for Mrs. P30,000 for Mr.; P6,000 for Mrs.

The donor’s tax due on the May 15 donation should be: a. P6,000 for Mr.; P6,600 for Mrs. b. P6,000 for Mr.; P12,000 for Mrs. c. P36,600 for Mr.; P18,600 for Mrs. d. P40,000 for Mr. and Mrs.

10. The donor’s tax due on the December 25 donation should be: a. P0 for Mr. and Mrs. b. P6,000 for Mr.; P12,000 for Mrs. c. P36,600 for Mr.; P18,600 for Mrs. d. P40,000 for Mr. and Mrs. 11. Statement 1: Resident alien would be subject to donor’s tax only on their donations of property located in the Philippines. Statement 2: A donation by a foreign corporation of its own shares of stock to resident employees is not subject to gift tax but may be subjected to income tax. a. Only the first statement is correct b. Only the second statement is correct. c. Both statements are correct. d. Both statements are incorrect. 12. There is reciprocity, when the donor and the donated property is: Donor Property Intangible Personal Property a. Non-resident alien Immovable b. Non-resident citizen Tangible Personal Property c. Non-resident alien Any kind of property d. Resident alien Use the following data for the next two (2) questions: On December 19, 2017, Pres. Rodrigo R. Duterte signed into law the Package 1 of the Comprehensive Tax Reform Program (CTRP), also known as the “Tax Reform for Acceleration and Inclusion (TRAIN) as RA 10963. The law took effect on January 1, 2018. Pedro died on November 1, 2017. His administrator and heirs filed the estate tax return on May 1, 2018. 13. For estate tax purposes, which law shall be applied in determining the estate tax liability on the estate of Pedro? a. The Tax Code prior to its amendment under RA 10963 b. The Tax Code as amended under RA 10963 (TRAIN Law) c. Either “a” or “b” at the option of the executor or administrator d. Either “a” or “b”, at the option of the heirs

c. d.

Land held in trust but in decedent’s possession before death. Rent income on property that accrued before death.

16. A donation which takes effect upon the death of the donor I. Donat ion mortis cau sa II. Partakes of the nature of an intestate disposition III. Sh all be govern ed by the law on succession a. I only c. I and III only b. I and II only d. I, II and III 17. A transfer subject to tax other than estate tax: a. Revocable transfer b. Transfer for insufficient consideration c. Transfer in contemplation of death d. Bonafide sale or transfer 18. Which is correct? a. A compulsory heir can question a donation and ask for its reduction if it impairs his legitime. b. Expenses primarily incurred by an heir intended to establish his interest in the estate are deductible judicial expenses from the gross estate. c. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not exceeding six (6 months for filing the return. d. All of the above 19. One of the properties left by a decedent was gutted by fire during the settlement of the estate. The executor decided to claim the losses in computing income tax of the estate. One of the heirs objected to the executor since even before deducting the said losses, the taxable income of the estate is already zero. However, the executor stood his ground and insisted on claiming the losses as deduction in computing income tax. Which of the following statements is correct? a. The losses can no longer be deducted in computing the estate tax. b. The losses can still be claimed as deduction in computing the estate tax since there is no prohibition against it under the tax laws, rules and regulations. c. The losses can still be claimed as deduction in computing the estate tax since there was no tax benefit resulted in the deduction in the computation of income tax. d. The losses cannot be claimed as deduction both in the computation of estate tax and income tax since it occurred during the settlement of the estate.

14. Using the same data in the preceding number but assuming Pedro died on January 25, 2018. Which law shall be applied in determining the estate tax liability on his estate? a. The Tax Code prior to its amendment under RA 10963 b. The Tax Code as amended under RA 10963 (TRAIN Law) c. Either “a” or “b” at the option of the executor or administrator d. Either “a” or “b”, at the option of the heirs

20. Who among the following transferors is not liable for estate tax on the property transferred during his lifetime? a. The testator who bequeaths property to his heirs in a last will and testament executed and probated during his lifetime. b. The donor who reserves his right to amend or revoke the donation of property in favor of the donee. c. The donee of an appointed property who is required under a power of appointment to transfer such property upon death to his eldest child. d. The transferor of personal property who sold it for insufficient consideration.

15. One of the following is not included in the gross estate of a decedent. a. Cash dividend that accrued before death. b. Shares of stock transferred in contemplation of death.

21. The following properties will be classified uniformly under Conjugal Partnership of Gains and Absolute Community of Property, except: a. Property inherited or received as donation during the marriage

b. c. d.

Property acquired from labor, industry, work or profession of spouses Fruits or income due or derived during the marriage coming from common properties Fruits or income due or derived during the marriage coming from exclusive properties

22. The following deductions are also part of the gross estate, except: a. Claims against the estate b. Claims against insolvent persons c. Transfer for public use d. Death benefits under Republic Act. 4917 23. Which of the following allowable deductions of a nonresident alien decedent should be prorated? a. Net share of the surviving spouse b. Transfers for public use c. Unpaid mortgage d. Property previously taxed 24. Decedent died on May 1, 2018. If the estate is settled judicially, the maximum allowable extension for filing is up to: a. November 1, 2018 b. December 1, 2018 c. April 30, 2019 d. May 30, 2019 Use the following data for the next four (4) questions: Mr. Bu Ang, single and a non-resident alien, died of a heart attack in 2020, leaving the following properties in favor of his heirs: Gross estate within the Philippines P30,000,000 Gross estate outside the Philippines 20,000,000 Funeral Expense 500,000 Judicial and administrative expenses 2,000,000 Claims against the estate 5,000,000 His gross estate includes family home valued at P8,000.000. 25. How much is the gross taxable estate of Mr. Ang? a. P45,000,000 c. P30,000,000 b. P35,000,000 d. P50,000,000 26. How much is the deductible ordinary deductions of Mr. Ang’s estate? a. P4,320,000 c. P5,000,000 b. P3,000,000 d. P4,200,000 27. How much is the deductible special deductions of Mr. Ang’s estate? a. P500,000 c. P5,500,000 b. P5,000,000 d. P1,518,000 28. How much is the estate tax due of Mr. Ang’s estate? a. P1,470,000 c. P1,590,000 b. P1,500,000 d. P1,620,000 Use the following data for the next four (4) questions: Mr. Pim Musay, Filipino and married, died in 2019, leaving his estate in favor of his surviving spouse. The following information were made available: Real property in Quezon City, acquired during marriage. Said property is supported by a barangay certification that the spouses resided in this property at the time of Mr. Musay’s death. The fair market value of this property as per latest tax declaration is P15,000,000 while the zonal valuation as of the time death is P 20,000,000. Said real property was held as a mortgage in a loan applied

by the spouses. As of the time of death, the outstanding balance of the mortgage payable amounted to P5,000,000. Real property in Batangas, inherited by Mr. Musay during marriage, two and half years ago, from his late father. The fair market value per tax declaration as of his death is P8,000,000 while the zonal valuation is P12,000,000. Said property was previously taxed at a value of P10,000,00 when Mr. Musay inherited the property from his father. Real property in Cavite, donated to Mrs. Musay, 10 years ago (before marriage) by his parents-in-law . The fair market value as per latest tax declaration as of the time of Mr. Musay’s death is P3,000,00 while the zonal valuation is P4,000,000. Other exclusive properties of Mr. Musay P1,000,000; Other properties of Mr. and Mrs. Musay- P3,000,000. Funeral expenses incurred by the estate during the wake and burial of Mr. Musay amounted to P1,900,000. 29. Compute item 34 (Gross Estate) of BIR form no. 1801 a. P28,500,000 c. P30,000,000 b. P32,500,000 d. P40,000,000 30. Compute Schedule V (Ordinary deductions) of BIR Form no. 0801 a. P5,000,000 c. P12,000,000 b. P10,250,000 d. P8,500,000 31. Compute item 40 (Net Taxable Estate) of BIR from no. 1801 a. P3,750,000 c. P29,750,000 b. P13,750,000 d. P0 32. Compute item 20 (Estate Tax Payable) of BIR from no. 1801. a. P225,000 c. P1,785,000 b. P825,000 d. P0 The next four (4) questions are based on the following: Pedro, head of the family, died intestate on August 20, 2019 leaving the following properties: Land and house (family home) P8,000,000 Agricultural land inherited from his father 800,000 who died 2 ½ years before his death Other real properties 11,000,000 Other tangible personal properties 200,000 Bank deposit, PNB-Manila representing 500,000 amount received by heirs under R.A. No. 4917 Obligations of and charges against certain properties follow: Medical expenses of last illness P 600,000 (supported by bills and statements from hospital) Actual funeral expenses (30% paid for 500,000 from the estate, 70% paid for by relatives) Judicial expenses incurred within six (6) 100,000 months after death Claims against the estate other than 270,000 unpaid mortgage Unpaid mortgage on inherited agricultural 30,000 land Claims against insolvent persons 100,000 The value of the agricultural land at the time of inheritance was P500,000. It had an unpaid mortgage of P80,000. 33. How much was the vanishing deduction? a. P264,757 c. P159,107 b. P253,443 d. P318,214 34. The total ordinary deduction shall be:...