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CRC-ACE REVIEW SCHOOL

The Professional CPA Review School


735-9031 735-8901

BUSINESS LAW & TAXATION


OCTOBER 2007 BATCH
2nd PRE-BOARD EXAMS AUGUST 18,
2007 (Sat) 7:30-9:00
INSTRUCTIONS: Select the correct answer for each of the following questions. Mark
only one answer for each item by writing a VERTICAL LINE corresponding to the
letter of your choice on the answer sheet provided. STRICTLY NO ERASURES
ALLOWED. Use Pencil No. 1 or No. 2 only.

1. The following contracts are not perfected until the delivery of the object of the
obligations except:
A. Pledge B. Deposit C. Commodatum
D. Sale
2. Petra transferred to Pedro a parcel of land for the price of P200,000; P130,000 to
be paid in cash and for the difference, he will convey his car worth P70,000. What
kind of contract is this?
A. Contract to Sell B. Contract of sale C. Obligation to sell
D. Barter
3. The receipt of the principal loan by the creditor, without reservation with respect to
the interest, shall give rise to the presumption that:
A. Debtor is, indeed, indebted to the creditor
B. Creditor is, therefore, paid as to the principal amount
C. Said interest has been paid
D. Said principal has been paid
4. Mr. Chua sold his horse for P100,000 to Mr. Ng. There was no fixed date for the
performance of the obligations of both parties. The obligation of Mr. Chua as
vendor is:
A. To rescind the contract because no time or date is fixed for the performance of
their respective obligations.
B. To deliver the horse as this is a perfected contract.
C. To deliver the horse after demand.
D. To wait for Mr. Ng to pay P100,000 and deliver the horse.
5. Rescission of contracts can take place in this case:
A. When the things which are the object of the contract are legally in the possession
of third persons who acted in bad faith;
B. When he who demands rescission can return whatever he may be obliged to
restore;
C. When the party seeking rescission can perform only as to part and rescind to
remainder;
D. When the seller cannot return the installment paid to him by buyer.
6. A stipulation in favor of a third person conferring a clear and deliberate favor upon
him and which stipulation is merely a part of a contract entered into by the parties,
neither of whom acted as an agent of a third person, and which favor can be
demanded by third person if duly accepted by him before it could be revoked.
A. Stipulation pour autrui C. Caveat emptor
B. In pari delicto D. Pactum commissorium
7. Juan sold his parcel of land to Maria for only P1M although its value is P3M. He
therefore suffered lesion due to the inadequacy of the price. The contract is
A. Voidable B. Unenforceable C. Rescissible
D. Valid
8. It is an act or means by virtue of which efficacy is given to a contract which suffers
from vice of curable nullity.
A. rescission B. ratification. C. prescription
D. annulment
9. Dacion en pago as distinguished from sale:
CRC-ACE/BLT_2nd Pre-board Exams (October 2007 Batch) Page 2 of 14

A. the object is always existing and specific


B. there is a greater degree of freedom in fixing the price
C. there is no pre-existing obligation
D. the cause is the price
10. Caloy offered to sell his house and lot for P2M to Buboy. Buboy could not make up
his mind so he asked that he be given 30 days to decide. Caloy agreed. After 15
days, Caloy raised the price to P2.5M. Assume that Buboy decided to buy the house
and lot the following day, can he compel Caloy to accept the P2M price and deliver
the house and lot?
A. No, there was no acceptance of the original offer.
B. Yes, Caloy cannot change his offer without the consent of Buboy.
C. Yes, there was already a perfected contract of sale.
D. No, because Buboy agreed that Caloy may change his mind later on.
11. Case 1 X hired Y for P100,000 to kidnap Z, and he paid Y P50,000 in advance.
Before Y could kidnap Z, X relented and stopped Y from performing the contract.
The court may not allow X to recover from Y the P50,000 paid in advance.
Case 2 X, at gun point, compels Y to marry him. Since the contract of marriage is
voidable, either X or Y has the right to file the action for annulment. Determine
whether:
A. Both cases are false.
B. First case is false, second case is true.
C. Both cases are true.
D. First case is true, second case is false.
12. If the area was specified in the contract of sale and there is a difference between
the area and the boundary:
A boundary prevails C. there must be another
survey
B. area prevails D. contract is void
13. 1st Statement Option money is recoverable if the offeree will choose not to
purchase the thing being offered for sale.
2nd Statement - The vendor is bound to deliver the thing sold but not its
accessions.
A. Both statements are wrong. C. 1st statement is correct, 2nd
statement is wrong.
B. Both statements are correct. D. 1st statement is wrong, 2nd
statement is correct

14. 1st Statement Guardians and agents, holding fiduciary positions cannot purchase
the property of the ward or the principal.
2nd Statement - Delivery is necessary to transfer ownership in a contract of sale
and ownership is transferred to the buyer upon delivery.
A. Both statements are wrong. C. 1st statement is correct, 2nd
statement is wrong.
B. Both statements are correct. D. 1st statement is wrong, 2nd
statement is correct

15. 1st Statement Contracts entered into in the name of another person by one who
has no authority to do so is rescissible if the owner suffered lesion of more than
one-fourth of the value of the property sold.
2nd Statement - Where the goods are delivered to the buyer "on sale or return" the
buyer does not become the owner of the goods.
A. Both statements are wrong. C. 1st statement is correct, 2nd
statement is wrong.
B. Both statements are correct. D. 1st statement is wrong, 2nd
statement is correct

16. The redhibitory action based on the faults or defects of animals must be brought
within
A. 30 days from delivery to the vendee
B. 40 days from delivery to the vendee
C. 45 days from delivery to the vendee
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D. 6 months from delivery to the vendee

17. Ownership of the thing sold is transferred/acquired/retained:


A. Retained by the seller in sale or return
B. Transferred to the buyer upon constructive or actual delivery of the thing sold.
C. Acquired by the buyer upon perfection of the contract.
D. Transferred to the buyer upon acceptance of the price.

18. A ground for the exercise of the right of stoppage in transitu by the unpaid seller:
A. Failure of the buyer to insure the goods
B. Insolvency of the buyer
C. Refusal of the buyer to accept the goods
D. Filing of a case by the buyer against the seller

19. A contract by which one person transfers to another his rights and actions against
a third person in consideration of a price certain in money or its equivalent is:
A. Sale B. Barter C. Lease D.
Assignment of Credit
20. A stipulation stating that despite delivery, the ownership of the thing shall remain
with the seller until the buyer has fully paid the price:
A. pactum commissorium C. fraud in factum
B. pactum reservati dominii D. constitutum
possessorium
21. By specific provisions of law, which of the following need not appear in a public
instrument?
A. A contract of donation involving an immovable.
B. A pledge, describing the thing pledged and the date of the pledge, in order to be
effective against third persons.
C. A contract of agency, for the sale of a piece of land or any interest therein, in
order to consider the sale by the agent as valid.
D. A contribution to the partnership of immovable property or real rights.
22. George secured and Randy granted a loan of P1M due on December 31, 2007.
George executed a first mortgage of his residential house in favor of Randy to
guarantee the loan. On August 18, 2007 the house was totally destroyed by an
accidental fire. On August 31, 2007, Randy demanded payment of the loan. Is the
demand valid?
A. No. The obligation is one with a definite date for payment.
B. No. The object of the obligation was lost through a fortuitous event and the
obligation was extinguished.
C. Yes. The obligation became due at once because the guaranty was lost through
a fortuitous event.
D. Yes. The obligation became due at once because from the tenor benefit, the
creditor is given the right to demand performance even before the due date
stipulated.
23. An example of an aleatory contract is
A. Sale B. Pledge C. Insurance D.
Partnership
24. Vilma, guardian of Nora sold Noras house and lot worth P2M for P1M. As a result:
A. The contract can be rescinded because of inadequacy of price.
B. The contract cannot be rescinded because there is no fraud, mistake or undue
influence.
C. The contract cannot be rescinded because all the elements of a contract are
present.
D. The contract cannot be rescinded because it is expressly provided by law as one
of the contracts that cannot be rescinded.
25. Which of the following would be an example of an executory contract?
A. A customer places an order for merchandise to be picked up and paid for in one
week.

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B. A company sold a one-year subscriptions to its publication and received the


subscription price in cash.
C. A company sold an appliance and gave a warranty to replace defective parts
within one year after sale.
D. A company borrowed money from a bank to purchase a delivery truck.
26. A juridical relation known as negotiorum gestio takes place.
A. When a person voluntarily takes charge of anothers abandoned business or
property without the owners consent.
B. When something is received and there is now right to demand it and it was
delivered through mistake.
C. When a person is appointed by a court to make the property or business of
another.
D. When a person is appointed agent of another.
27. A sold to B 1000 baskets of lanzones at P600 a basket. Thereafter, A can only
deliver 900 baskets and offered this number to B and no more, but at P700 each.
Decide
A. B can refuse to accept delivery of the 900 baskets without liability.
B. B must pay for 1000 baskets but at P500 each.
C. B can accept 900 baskets but pay P550 for each.
D. A can require B to accept 900 at P700 each.
28. On June 16, 2007, A obliged himself to give to B his motorcycle. There was no
delivery until July 15, 2007 when the garage of the motorcycle collapsed due to a
strong typhoon and the motorcycle was totally destroyed. Is A still liable?
A. No, even if A was already in default, he could plead impossibility of
performance.
B. Yes, the obligation to deliver the motorcycle is changed to pay the equivalent
value because Jose
C. No, because there was no demand by B to deliver the motorcycle and the specific
object was lost due to fortuitous event. The obligation is extinguished.
D. Yes, because the contract is perfected.
29. The creditor shall have a right to indemnity for damages when, through the fault of
the debtor, all the things which are alternatively the object of the obligation have
been lost or compliance of the obligation has become impossible. The indemnity
shall be fixed taking as a basis the value of the
A. Least expensive thing. C. Last thing which disappeared.
B. Most expensive thing. D. Any of the things which
disappeared.
30. A solidary obligation is one in which each of the debtors is liable for the entire
obligation or debt, and each of the creditors is entitled to the entire credit.
Obligations shall also be considered solidary under the three following exceptions.
Which does not belong to the exception?
A. When solidarity is expressly stipulated in the obligation.
B. When the prestation is indivisible and there are two or more debtors and
creditors.
C. When the law expressly provides solidarity.
D. When solidarity is required from the nature of the obligation.
31. As a general rule, in assignment of credit, the assignor in good faith:
a. Warrants the existence of the credit at the time of assignment
b. Warrants the legality of the credit at the time of assignment
c. Warrants the solvency of the debtor at the time of assignment.
A. a and c C. b and c
B. a and b D. a, b and c
st
32. 1 STATEMENT If the same car should have been sold to different buyers, the
ownership shall be transferred to the person who may first taken possession thereof
in good faith.
2nd STATEMENT The seller is responsible to the buyer for any hidden defects or
faults in the thing sold only if he was aware thereof.
A. The 1st statement is true, 2nd B. Both statements are false
statement false

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C. 1st statement false, 2nd statement D. Both statements are true


true
33. Gross inadequacy of the purchase price does not invalidate the contract of sale;
unsually inadequate purchase price in a sale with right of repurchase shall give rise
to the presumption that:
A. It is a vitiated sale C. It is not a sale
B. It is an equitable mortgage D. It is an invalid sale
34. In sale of personal property by installment, if the seller forecloses the chattel
mortgage on the thing sold:
A. He cannot recover the balance of the purchase price
B. He can recover the balance of the price if there is a stipulation to that effect
C. He can compel the buyer to redeem the property
D. He can ask for a security from the buyer
35. Angie owns 50 mango trees bearing fruits, ready for harvest. She sold all the fruits
of all the trees to Bambi who paid P100,000.00. Angie told to Bambi that she can
harvest all the fruits anytime she likes and pointing at the mango trees. For legal
purposes, Angie has fulfilled her obligation to deliver the mango fruits to Bambi by:
A. Traditio longa manu C. Traditio constitum
possessorium
B. Traditio brevi manu D. Traditio symbolica
36. Cindy needs a size 9 rubber shoes for her boyfriend Dodong, but the same is not
available so she placed an order for one. On the other hand, Dodong placed an
order for size 6 , colored maroon (something not ordinarily made by the
company), to be given to Cindy. Which is correct:
A. Both are contracts of sale.
B. Both are contracts for a piece of work.
C. First is a contract of sale, second is a contract for a piece of work.
D. First is a contract for a piece of work, second is a contract of sale.
37. This contract is without effect unless ratified
A. Contract of sale between a guardian and his ward
B. Donation between husband and wife
C. Contract of marriage between brother and sister
D. Contract of sale between two insane persons
38. Which of the following contracts is valid?
A. Oral contracts of agency giving authority to an agent to sell the land belonging
to the principal.
B. Oral partnership agreement where immovable property is contributed.
C. Oral contract of sale of an immovable property entered into by an agent who
was given authority orally by the principal
D. Oral agreement to answer all expenses for the wedding reception if Melanie
marries Noel.
39. Simulation of a contract may be absolute or relative. It is relative when:
A. The parties do not intend to be bound at all.
B. The contract is valid.
C. The parties conceal their true agreement.
D. The parties conceal their true intentions.
40. Which of the following is not an element of legal compensation:
A. Debts to be compensated are due and demandable.
B. There is no controversy or adverse claim over any debts to be compensated.
C. There are two or more debts of the same kind.
D. The creditors and debtors are one and the same person.
41. Three (3) of the following contracts are void. Which is not?
A. Contract in writing contemplating and asking for impossible service.
B. Oral authority given to an agent in sale of land.
C. Oral partnership agreement where immovable property is contributed.
D. Oral contract of loan more than P5,000.00
42. Contracts are effective and binding only between the parties, their assigns and
their heirs. Three of the
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following enumeration are exceptions as provided by law. Which does not belong
to the exceptions?
A. Where there is a stipulation in favor of a third party.
B. Where one of the parties to the contract dies and thereafter a suit is filed on the
basis of the contract.
C. Where the obligations arising from the contract are not transmissible by their
nature.
D. Where the obligations arising from the contract are not transmissible by
stipulation or by provision of law.

43. A creditor, through a contractual arrangement made with Mr. P, is to receive the
rentals of the Ps apartment buildings in Singalong Manila with the obligation to
apply them to the payment of the interest and thereafter to the principal of his
credit. This contract is a valid:
A. Pledge. B. Mortgage. C. Antichresis.
D. Guaranty.
44. Which of the following statements is not correct?
A. The vendor is bound to deliver the thing sold and its accessions and accessories
in the condition in which they were upon the perfection of the contract
B. All the fruits of the thing sold shall pertain to the vendor from the day on which
the contract was perfected
C. The vendor shall not be bound to deliver the thing sold, if the vendee has not
paid him the price, or if no period for the payment has been fixed in the
contract.
D. Sale is perfected from the moment of the meeting of the minds.
45. The following are cases when delivery does not transfer ownership over the thing
sold, except:
A. In case of express reservation by the seller until certain conditions have been
fulfilled, particularly the full payment of the purchase price
B. In case of implied reservation of title as when goods are deliverable to the order
of the seller or his agent
C. In sale on approval, or on trial or on satisfaction
D. In sale or return within seven days.
46. It is the process of enforcing the State's right to take away property for public use
upon payment of just compensation which is governed by special laws:
A. Eminent Domain B. Escheat C. Police Power
D. Expropriation
47. Mr. Arrovo, a former government employee, suffered from severe paranoia and was
confined in the mental hospital in 2000. After his release he was placed under the
guardianship of his wife to enable him to get his retirement pay. In 2004 he
became a mining prospector and sold some mining claims. In 2005 he sued to
annul the sale claiming that he was not mentally capacitated at the time of sale.
The sale in question was
A. Illegal. B. Void. C. Voidable. D. Valid.
48. On July 7, 2007 Maria orally sold to Nena a certain radio for Php500. This kind of
contract is:
A. Rescissible B. Voidable C. Unenforceable D.Valid
49. What mode of extinguishing a contract of sale is effected when a person is
subrogated upon the same terms and condition stipulated in the contract in the
place of one who acquires a thing by onerous title?
A. Compensation B. Conventional redemption C. Novation
D. Legal redemption
50. A unilateral promise to buy or to sell which was not accepted by the offeree. This
produces no juridical effect and creates no legal bond.
A. solicitation B. policitacion C. expromission D.
delegacion
51. A closely-held domestic corporation registered with the BIR in 2003 had the following data for
taxable year 2007:
Sales P5,000,00
0
Cost of sales 1,500,000

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Business expenses 800,000
Dividend from a domestic corporation 50,000
Selling price of land (capital asset) costing 4,000,000
P3,500,000
Interest on Philippine currency bank deposit 40,000
Dividends declared and paid 500,000
Tax paid for the first three quarters 150,000
The BIR upon investigation found out that there was improper accumulation of
earnings. The corporation did not contest the findings of the BIR.
The tax on improperly accumulated earnings is:
a. P154,700 b. P159,700 c. P160,500 d. P174,700
52. First statement: In computing the taxable share of partners in a general
professional partnership, the accounting method used (accrual or cash method) is
an important factor to consider.
Second statement: Only the share in the net income actually withdrawn by a partner
in a general professional partnership is taxable to him.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
53. Which of the following statements is incorrect?
a. A general professional partnership is not required to file a return
of its income because it is tax-exempt.
b. Each partner shall report as gross income his distributive share,
actually or constructively received, in the net income of the general professional
partnership.
c. For purposes of computing the distributive share of the partners,
the net income of the general professional partnership shall be computed in the
same manner as a corporation.
d. Partners engaging in business as partners in a general
professional partnership shall be liable for income tax only in their separate and
individual capacities.
54. First statement: Taxable partnerships are required to file cumulative quarterly
declarations and a final income tax return because they are taxed as corporations.
Second statement: The distributable net income of a taxable partnership shall
include incomes which are subjected to final tax as well as those that are exempted
from income tax.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
55. First statement: Salaries received by a partner from a general professional
partnership is not considered gross compensation income but as part of his share in
the distributable net income after tax of the partnership.
Second statement: Salaries received by a partner from a business partnership is
considered gross compensation income.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
56. First statement: Estates and trusts can deduct from their gross income the same
items of deductions authorized under the Tax Code as those allowed to individual
taxpayers.
Second statement: The schedular tax rates under Section 24 (A), which are
prescribed for individuals, will be used in computing the income tax of estates and
trusts.
a. True, true b. False, false c. True, false d. False, true
57. First statement: The amount of income of the estate for the taxable year, which is
properly paid or credited during such year to any legatee, heir or beneficiary, is a
special item of deduction from the gross income of the estate.
Second statement: An allowance paid a widow or heir out of the corpus of the estate
is not deductible from the gross income of the estate.
a. True, true b. False, false c. True, false d. False, true
58. Which of the following test of source of income is incorrect?
a. Interest income residence of the c. Royalties place of use of intangible

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debtor
b. Income from services place of d. Gain on sale of real property place of
performance sale
59. Which of the following is not considered an income purely from sources within the
Philippines?
a. Gain on sale of domestic shares
b. Dividends from domestic corporation
c. Rent on property located in the Philippines
d. Income from sale of personal property produced in the Philippines
and sold outside the Philippines
60. In 2007, a non-resident alien not engaged in trade or business receives a P100,000
dividend from a resident foreign corporation. The resident foreign corporations
gross income for the years 2005 and 2006 follows:
Philippines Foreign
2005 P5,000,000 P2,000,000
2006 3,000,000 6,000,000
For Philippine income taxation, the final tax due on the dividend is:
a. P25,000 b. P15,000 c. P12,500 d. Not subject to
final tax
61. Which of the following dividends will be subject to final tax in the Philippines?
a. Dividends received from foreign corporation, the gross income of
which from Philippine sources is 45%, by resident citizen.
b. Dividend received from a domestic corporation by a domestic
corporation.
c. Dividend received from non-resident foreign corporation by a
resident alien.
d. Dividend received from a domestic corporation by a non-resident
foreign corporation.
62. A married resident citizen with two qualified dependent children has the following data for 2007:
Gross income, Philippines P7,000,000
Gross income, USA 3,000,000
Expenses, Philippines 2,000,000
Expenses, USA 1,000,000
Unallocated expenses 1,500,000
Dividend received from a resident foreign
corporation, the gross income of which from 100,000
Philippine sources is 30%
Gain from sale of real property located in USA 500,000
For Philippine income tax purposes, the taxable income is:
a. P6,100,000 b. P6,052,000 c. P5,982,000 d. P5,952,000
63. One of the following is subject to income tax:
a. Income from a donated property derived from its investment or
sale
b. Alimony
c. Amount of principal paid under a marriage settlement
d. Value of property received as gift, or under a will or testament, or
through legal succession
64. In 1995, Pretty purchased a life insurance paying P500,000 as premiums. The
insurance contract stipulated that Pretty would receive P600,000 as annuity to be
paid in three (3) years as follows: P200,000 in 2005; P200,000 in 2006 and P200,000
in 2007.
How much would Pretty report as income in 2007 (if any)?
a. P200,000 b. P100,000 c. P50,000 d. None

Questions 65 to 67 are based on the following information:


A resident citizen, widower, with a dependent minor brother, had the following data
on income and expenses: Gross business income, P500,000; Business expenses,
P200,000; Interest from savings deposit, BDO Bank, Philippines, P50,000; Prize in a
literary contest he joined, P100,000; Prize received for achievement in religion (did
not join contest), P10,000; Gain from sale of bonds (maturity is 6 years), P5,000;

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Separation pay from his former job (resigned), P250,000; Cash he inherited from his
uncle, P300,000; Proceeds of his wifes life insurance (irrevocable beneficiary),
P1,000,000; Amount received as return of premium (premium paid, P150,000),
P200,000; Tax informers reward, P500,000.
65. How much was the total amount of excluded or exempted income?
a. P1,465,000 b. P1,365,000 c. P1,360,000 d. P465,000
66. How much was the total final tax from certain income?
a. P80,000 b. P30,000 c. P20,000 d. None
67. How much was the taxable income subject to Section 24 (A) of the tax code?
a. P580,000 b. P575,000 c. P325,000 d. P275,000
68. The fringe benefits tax is:
I. A final tax imposed on all employees which shall be withheld and paid by the
employer.
II. Based on grossed-up monetary value.
a. Yes to both I and b. No to both I and c. Yes to I only d. Yes to II only
II II
69. The grossed-up monetary value of fringe benefits will include:
I. The net amount of money or net monetary value of the property received by a
managerial or supervisory employee; and
II. The amount of fringe benefit tax.
a. Yes to both I and b. No to both I and c. Yes to I only d. Yes to II only
II II
70. Which of the following fringe benefits given to a managerial or supervisory
employee shall not be subject to fringe benefits tax?
I. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans.
II. Benefits granted to employees which are required by the nature of, or necessary
to the trade, business or profession of the employer.
III. Benefits granted for the convenience or advantage of the employer.
IV. Personal expenses of the employee paid for or reimbursed by employer whether
or not receipted in the name of the employer.
a. I, II, III and IV b. I, II and III only c. II and III only d. IV only
71. The monetary value of the following fringe benefits is 50% of the value of the
benefits:
I. Employer leases residential property for the use of an officer.
II. Employer owns residential property which was assigned to an officer for his use
as residence.
III. Employer purchases residential property on instalment basis and allows an
officer to use the same as his residence.
IV. Employer purchases a residential property and transfers ownership in the name
of an officer.
IV. Employer purchases a residential property and transfers ownership to an officer
for the latters residential use at a price less than the employers acquisition cost.
a. All of the above b. None of the c. I, II and III only d. IV and V only
above
72. A house and lot were owned by Piltel Corporation. The ownership of the said house and lot was
transferred to its President in 2007. The following data were made available:
Cost P5,950,00
0
Fair market value per BIR 4,760,000
Fair market value per Assessors Office 3,570,000
The fringe benefits tax was:
a. P1,523,200 b. P1,680,000 c. P2,240,000 d. P2,800,000
73. Using the same information in the preceding number except that there was no
transfer of ownership. The President was only allowed to use it as his residence. The
quarterly fringe benefits tax is:
a. P56,000 b. P14,000 c. P42,000 d. P10,500

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74. In 2007, Pacman, a single resident citizen realized a P150,000 short-term capital
gain, and a long term capital loss of P300,000. He had no other capital transactions
for the year. The net effect would be:

a. No gain, nor loss for tax purposes c. A capital loss of P300,000


b. A capital gain of P150,000 d. A capital loss of P150,000
75. Urduja qualified as head of a household for 2007 tax purposes. Urdujas 2007
taxable income was P200,000 exclusive of capital gains and losses. Urduja had a net
long-term capital loss of P8,000 in 2007. What amount of this capital loss could
Urduja offset against the 2007 ordinary income?
a. Zero b. P3,000 c. P4,000 d. P8,000
76. First statement: Net capital loss carry-over is allowed to taxpayers other than
corporations, and this is carried over to the succeeding year as a short-term loss.
Second statement: The amount of net capital loss carry over is the net capital loss or
the net income in the year the net capital loss was sustained, whichever is lower.
a. True, true b. False, false c. True, false d. False, true
77. First statement: Corporations are allowed to observe the holding period and to
carry over net capital loss.
Second statement: Capital gains and loses of a general professional partnership will
be accounted for separately by the partners in proportion to their interest in the
partnership.
a. True, true b. False, false c. True, false d. False, true

Questions 78 and 79 are based on the following information:


A taxpayer has the following data for the years 2006 and 2007:
200 Gross income P200,000
6:
Business expenses 180,000
Capital loss (capital asset was acquired on January
15, 2006 50,000
and was sold on March 15, 2006)
Capital gain (capital asset was acquired on
January 15, 2005 30,000
and was sold on March 31, 2006)

200 Gross income 500,000


7:
Business expenses 400,000
Capital gain (capital asset held for 12 months) 60,000
Capital loss (capital asset held for more than 12 20,000
months)
78. Assuming the taxpayer is an individual, single, how much is the taxable income?
2006 2007 2006 2007
a. None P110,000 c. P5,000 P130,000
b. P20,000 P130,000 d. None P100,000
79. Assuming the taxpayer is a domestic corporation, how much is the taxable income?
2006 2007 2006 2007
a. None P140,000 c. P40,000 P100,000
b. P20,000 P140,000 d. P20,000 P100,000
80. The following were taken from the income statement of Kapuso Corporation for the
taxable year 2007:
Gross profits from sales P800,000
Business expenses P440,00
0
Provision for bad debts 80,00 520,000
0
Net income before tax P280,000
Additional information:

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CRC-ACE/BLT_2nd Pre-board Exams (October 2007 Batch) Page 11 of 14

a. Accounts written off during the year and charged to allowance for
bad debts, P50,000.
b. Recoveries on accounts receivable previously written off in 2006
and credited to allowance for bad debts:
Allowed as deduction by BIR, P30,000
Disallowed as deduction by BIR, P20,000.
How much was the taxable income for taxable year 2007?
a. P340,000 b. P330,000 c. P280,000 d. P360,000
81. Boljak, married, resident citizen with two qualified dependent children, has the
following data for the preceding year:
Salaries, net of P50,000 withholding tax P200,000
Tuition of children 10,000
Rent of apartment 24,000
Household expenses 60,000
Health and hospitalization insurance 3,400
premium paid
How much is the taxable income?
a. P202,000 b. P199,600 c. P149,600 d. P104,600
82. Using the same data in the preceding number, assuming Boljak chooses optional
standard deduction, how much is the amount of optional standard deduction?
a. P30,000 b. P25,000 c. P20,000 d. None
83. A certified public accountant used cash basis in computing his taxable income. In
2006, he performed a professional service for a client who was unable to pay him.
The unpaid professional fee of the client became worthless in 2007. When could the
taxpayer deduct the worthless professional fee as bad debt?
a. 2006 c. 2006 or 2007 depending on his choice
b. 2007 d. Cannot be deducted in any year

Questions 84 to 86 are based on the following information:


A domestic company under calendar year has the following selected transactions:
09/09/ Purchased 100 shares of Kalibo Company common
06 for P5,000.
12/21/ Purchased 50 shares of Kalibo Company common
07 for P2,750.
12/26/ Sold the 100 shares purchased on 09/09/06 for
07 P4,000.
01/02/ Purchased 25 shares of Kalibo Company common
08 for P1,125.
84. How many shares are sold at a loss without covering acquisition?
a. 100 shares b. 75 shares c. 50 shares d. 25 shares

85. How much is the loss on wash sale and the capital loss?
Loss on wash Capital loss Loss on wash sale Capital loss
sale
a. P750 P125 c. P1,000 None
b. P750 P250 d. None None

86. How much is the adjusted cost of the shares bought on 12/21/07 and 01/02/08?
12/21/07 01/02/08 12/21/07 01/02/08
a. P3,250 P1,375 c. P750 P250
b. P2,750 P1,125 d. P500 P250

87. A leasehold is acquired for business purposes for P500,000. The lease contract is
for 10 years. How much is the deductible amount from the gross income?
a. P500,000 b. P100,000 c. P50,000 d. None

88. Lessor received from Lessee the amount of P800,000 for the lease of a lot for a
period of 10 years, starting July 1, 2007. Lessee also assumed payment of real estate
tax on the land, which was P14,000 a year.
How much was the deductible rental expense of Lessee in 2007?
a. P94,000 b. P80,000 c. P54,000 d. P47,000

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CRC-ACE/BLT_2nd Pre-board Exams (October 2007 Batch) Page 12 of 14

89. First statement: All royalties from Philippine sources are subject to final tax.
Second statement: Income from sale of books is subject to 10% final tax.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct

90. During 2007, Philip, a resident citizen, received the following income:
Interest from Philippine treasury P4,000
certificates
Refund pertaining to 2006 income tax 500
The total amount of income subject to tax in Philips 2007 income tax return was:
a. P4,500 b. P4,000 c. P500 d. Zero
91. Zubiri filed his annual income tax return for the taxable year. In July 2007, he
received an income tax refund of P9,000, plus interest of P100, for overpayment of
2006 income tax. What amount of the tax refund and interest were taxable in
Zubiris 2007 income tax return?
a. Zero b. P100 c. P9,000 d. P9,100
***Eva Padilla, widow has two (2) sons, Robin, 27 years old; Rommel, 25 years old and
one (1) daughter, Rustomina, 23 years old. On August 15, 2007, she donated two (2)
lots, each with fair market value of P150,000, one (1) each to her sons Robin and
Rommel. On November 15, 2007, she gave cash of P150,000 to her daughter
Rustomina as dowry on account of Rustominas forthcoming marriage on December
22, 2007.
92. The donors taxes due on the donation on August 15, 2007 is
a. Tax exempt b. P5,200 c. P6,000 d. P12,000
93. The donors taxes due on the donation on November 15, 2007 is
a. P11,600 b. P6,000 c. P9,600 d. P5,600
94. Mr. and Mrs. Gibbs donated the following community properties to their children on
May 30, 2007:
Amount Donee
P125,000 Janno For graduating Cum Laude in Haybol University of
Somewhere City.
200,000 Melissa On account of marriage celebrated April 30, 2007.
? Bing For placing No. 3 in the May 2007 CPA Board
Examinations.
If the donors tax payable by Mr. Gibbs is P10,500, the amount of the donation given by
the spouses to Bing is:
a. P250,000 b. P200,000 c. P500,000 d. P520,000
95. A, made the following donations:
a.) February 14, 07 Cash of P500,000 to B, his legitimate daughter on
account of Bs marriage celebrated on February 10, 2006.
b.) April 14, 07 Land with a FMV of P700,000 to C, a son of As father by a
former marriage
c.) June 14, 07 Automobile worth P600,000 to D, the favorite granddaughter
of the sister of As mother.
d.) Oct. 14, 07 Jewelry worth P300,000 to E, the legitimate daughter of As
sister, on account of Es marriage scheduled on December 31, 2007.
e.) December 14, 07 Cash of P400,000 to F, the grandson of the daughter of
As granddaughter
f.) January 14, 08 Fish pond with FMV of P800,000 to G, the widowed
mother of A, on account of Gs marriage on January 14, 2008.
The donors tax due on the December 14, 2007 donations is:
a. P84,000 b. P24,000 c. P90,000 d. other amount

*** A married decedent who was under absolute community of properties died on
October 15, 2007. His estate provided the following information:
Real properties inherited during the marriage from his father
who died 3 years before the present decedents death P 500,000
Real property given during the marriage by his uncle as gift
4 years before the present decedents death 1,500,000
Land inherited before the marriage from an aunt who died

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CRC-ACE/BLT_2nd Pre-board Exams (October 2007 Batch) Page 13 of 14

6 years before the present decedents death 500,000


House built on the land inherited from the aunt (family home) 900,000
Cash income from the real property received as gift 100,000
Real properties received by the surviving wife spouse before the marriage
1,800,000
Real properties acquired by the spouses during the marriage 1,500,000
Personal properties acquired during the marriage 1,000,000
The following were considered as deductions from the gross estate:
Actual funeral expenses P 100,000
Judicial expenses 150,000
Medical expenses 200,000
Obligations incurred before marriage that benefited
the community properties 250,000
Claims against and insolvent debtor 50,000
Unpaid mortgage on inherited land 100,000
Loss of car through theft on December 31, 2007 (part
of personal properties acquired during marriage) 300,000
Unpaid realty tax on real property received as gift from his uncle 30,000
The value of the real properties at the time of inheritance was P300,000. The
value of the real property received as gift from an uncle was P1,000.000.

The inherited land and the house built on it were certified as the family home of
the decedent and his family by the Barangay Captain in the locality where they
were situated.
96. The gross estate is
a. P7,800,000 b. P7,850,000 c. P7,700,000 d. other amount
97. The vanishing deduction is
a. P525,096 b. P527,388 c. P550,000 d. other amount
98. The taxable estate is
a. P2,047,196 b. P2,044,904 c. P2,150,000 d. other amount

*** The following data were provided by the estate of Juan Palad, head of the family, a
resident of Pasay City. Mr. Palad died intestate on September 30, 2007.
Land and house (family home) P3,000,000
Agriculture land inherited from his father who died
2 years before his death 800,000
Other real properties 1,000,000
Other tangible personal properties 200,000
Bank, deposit, Landbank-Manila 500,000

Obligations of and changes against certain properties follow:


Medical expenses of last illness (paid as of the time of
death, supported by bills and statements from hospital) P 600,000
Actual funeral expenses (30% paid for from the estate,
70% paid for by relatives) 500,000
Judicial expenses incurred within six (6) months after death 100,000
Claims against the estate other than unpaid mortgage 250,000
Unpaid mortgage on inherited agricultural land 30,000
Claims against insolvent persons 100,000
Unpaid real estate tax for the 4th quarter of 2004 20,000

The agricultural land was inherited by the present decedent. Its value at the time
of inheritances was P610,000. It had an unpaid mortgage of P80,000.
99. The gross estate is:
a. P5,600,000 b. P5,500,000 c. P5,000,000 d. other amount

100. The taxable estate is:

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CRC-ACE/BLT_2nd Pre-board Exams (October 2007 Batch) Page 14 of 14

a. P2,500,000 b. P2,250,000 c. P2,171,000 d. other amount

Tax Table for Citizens, Resident Alien and Nonresident Alien Engaged in Trade or Business
Not over P10,000 5%
Over P10,000 but not over P30,000 P500+10% of the excess over P10,000
Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000
Over P70,000 but not over P140,000 P8,500+20% of the excess over P70,000
Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000
Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000
Over P500,000 P125,000+32% of the excess over P500,000

Estate Tax Table


Over But not over The tax shall be Plus over Of the excess
-0- 200,000 Exempt -0- -0-
200,000 500,000 -0- 5% 200,000
500,000 2,000,000 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And over 1,215,000 20% 10,000,000

Donors Tax Table


Over But not over The tax shall be Plus Of the Excess Over
- P100,000 Exempt
P100,000 200,000 0 2% P 100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000

mrs/reh

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