TAXATION CPA Review School of the Philippines Final Preboad Examination

41. 1st Statement – An internal revenue taxes shall be assessed within three (3) years after the last 46. 1st Statement – All violations of any provision of the NIRC shall prescribe after four (4) years.
day of filing as prescribed by law or when the return is filed whichever is later. 2nd Statement – Prescription shall begin to run from the day of the commission of the violation
2nd Statement – Any internal revenue taxes shall be collected within five (5) years following the of the law, even if the offender is outside the Philippines.
assessment of the tax. A. True; False. C. False; True.
A. True; False. C. False; True. B. True; True. D. False; False.
B. True; True. D. False; False.
47. One of the following is not a special deduction for purposes of computing net estate of a
42. The minimum compromise rate for cases other than financial incapacity of the taxpayer is Citizen or a Resident.
equivalent to A. Property previously taxed. C. Family home.
A. Ten percent (10%) of the basic assessed tax. B. Claims against an insolvent person. D. Medical expenses.
B. Twenty percent (20%) of the basic assessed tax.
C. Thirty percent (30%) of the basic assessed tax. 48. 1st Statement – A Certified Public Accountant is necessary for the certification of the estate tax
D. Forty percent (40%) of the basic assessed tax. return with a gross value exceeding two hundred thousand pesos (P200,000).
2nd Statement – A notice of death shall be filed within one (1) month from the date of death to
43. Remedies of the government for the collection of delinquent taxes shall be by the Commissioner if the gross estate of decedent exceeds twenty thousand pesos (P20,000).
A. Levy and/or distraint. A. True; False. C. False; False.
B. Civil or criminal action. B. True; True. D. False; True.
C. Either of these remedies or both simultaneously.
D. None of the above. 49. 1st Statement – Extension of payment of estate tax maybe granted by the Commissioner for a
period exceeding five (5) years in cases of extra-judicial settlement.
44. 1st Statement – the BIR Commissioner upon the recommendation of the Secretary of Finance, 2nd Statement – Extension of payment of estate tax maybe granted by the Commissioner for a
shall promulgate all needful rules and regulations for the effective enforcement of the period exceeding two (2) years in cases of extra-judicial settlement.
provisions of NIRC. A. True; False. C. False; False.
2nd Statement – The rules and regulations of the BIR shall contain the conditions to be B. True; True. D. False; True.
observed by revenue officer respecting the institution and conduct of legal actions and
proceedings. 50. 1st Statement – Any contribution in cash or in kind to any candidate, political party or coalition
A. True; False. C. False; True. of parties for campaign purposes shall be governed by the Election Code and not the NIRC.
B. True; True. D. False; False. 2nd Statement – When the donee or beneficiary is a stranger, the tax payable by the donor
shall be thirty percent (30%) of the gross gifts.
45. Which of the following statements is incorrect with regard to large taxpayers? A. True; False. C. False; False.
A. Business establishment with VAT paid or payable of at least one million (P1,000,000) for B. True; True. D. False; True.
the preceding taxable year.
B. Business establishment with excise tax paid or payable of at least one million 51. Which of the following is a taxable gift or subject to donor’s tax?
(P1,000,000) for the preceding taxable year. A. Dowries or gifts made on account of marriage and before its celebration or within one year
C. Business establishment with annual income tax paid or payable of at least one million thereafter by parents to each of the legitimate, recognized natural or adopted children.
(P1,000,000) for the preceding taxable year. B. Gifts made to or for the use of the National Government.
D. Business establishment with withholding tax payment of at least one million (P1,000,000) C. Gifts made to or for the use of any entity created by any National Government agencies
for the preceding taxable year. which is not conducted for profit, or to any political subdivision of the said Government.
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TAXATION CPA Review School of the Philippines Final Preboad Examination

D. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare 56. International Air Carriers shall be taxed at
corporation, institution, foundation, trust or philanthropic organization or research A. Two and one-half percent (2½%) of Net Philippine Billings.
institution or organization. Provided, however, that not more than thirty percent (30%) of B. Two and one-half percent (2½%) of Gross Philippine Billings.
the said gifts shall be used by such donee for administrative purpose. C. Four and one-half percent (4Four and one-half percent (4½%) of Net Philippine Billings.
D. Four and one-half percent (4Four and one-half percent (4½%) of Gross Philippine Billings.
52. Refunds or Tax credits of Input tax are not allowed under
A. Purchases on zero-rate or effectively zero-rate sales. 57. In general, ordinary and necessary trade, business or professional expenses have the
B. Purchases of capital goods. following requisites, except
C. Purchases of entities whose VAT registration was cancelled. A. Substantiated by receipts.
D. Purchases of VAT-exempt transaction. B. Must be ordinary and necessary expenses.
C. Incurred during the taxable year.
53. Which of the following transactions is exempt from value-added tax. D. Directly attributable to the development, management, operation of the business.
A. Sale by an art gallery of literary works, musical composition, work of art and similar
creations, or devices performed for the production of such works. 58. Losses from wash sales of stock or securities shall not be deductible if, except:
B. Medical, dental hospital and veterinary services. A. The taxpayer is a dealer of securities or stock and made in the course of business of such
C. Sale of cotton and cotton seeds in their original state. dealer.
D. Sale of books and any newspaper, magazine, review or bulletin which appears at regular B. The shares of stock sold and then reacquired or repurchased are identical stock or
intervals with fixed prices for subscription and sale which is devoted principally to the securities.
publication of paid advertisements. C. The shares of stock sold and then reacquired within a period beginning thirty (30) days
before the date of such sale or disposition.
54. One of the following is subject to passive income final tax rate of 20% D. The shares of stock sold and then reacquired within a period ending thirty (30) days after
A. Interest from any currency bank deposits and yield or any other monetary benefit from such sale or disposition.
deposit substitute and from trust fund and similar arrangements derived from sources
without the Philippines. 59. CPAR Rentals, Inc., an accrual-basis taxpayer, reported rent receivable of P70,000 and
B. Royalties, including books, as well as other literary works and musical compositions. P50,000 in its 2003 and 2002 balance sheet, respectively. During 2003, CPAR received
C. Other winnings, except Philippine Charity Sweepstakes and Lotto winning. P100,000 in rent deposits. In CPAR’s 2003 income tax return, what amount should CPAR
D. Interest income received from expanded foreign currency deposit system. include as rent revenue?
A. P100,000 C. P120,000
55. Cash and/or property dividends subject to ten percent (10%) final tax on passive income B. P110,000 D. P130,000
include
A. Cash and/or property dividends received by an individual from an ordinary partnership of 60. Calvin Klein is 67 years old, retired. During 2003 he received a pension from his former
which he is a partner as share in the net income. employer for 8 years in the amount of P40,000. His gross income from business is P105,000
B. Cash and/or property dividends received by an individual from a general professional and received P5,000 social security benefits. What is Calvin Klein’s taxable income?
partnership of which he is a partner as share in the net income. A. P85,000 C. P130,000
C. Cash and/or property dividends received by an individual from a domestic corporation for B. P125,000 D. P145,000
profit earned in 1999.
D. Cash and/or property dividends received by an individual form a joint venture engaged in
construction project pursuant to a service contract with the government.
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TAXATION CPA Review School of the Philippines Final Preboad Examination

61. Lonely Edna adopted a 21-year old child during 2003. The adopted child got married in 66. 1st Statement – A substantial under-declaration of taxable sales, receipts or income, or a
December of the same year. What is Lonely Edna’s personal exemption? substantial overstatement of deductions shall constitute prima facie evidence of a false or
A. P20,000 C. P32,000 fraudulent return.
B. P25,000 D. P33,000 2nd Statement – A return, statement or declaration filed with the Bureau of Internal Revenue
may not anymore be modified, changed or amended.
62. Mother, Inc. had 2003 taxable income of P400,000 exclusive of the following: A. True; False. C. True; True.
Gain on sale of land used in business for 3 years P50,000 B. False; True. D. False; False.
Loss on sale of machinery used in business for 8 months (26,000)
Loss on sale of securities held for 3 years (8,000) 67. “Schedular system of income taxation” means
Loss on sale of securities held for 3 months (6,000) A. All type of income are added together to arrive at gross income.
On what amount of taxable income should Mother compute tax? B. Separate graduated rates are imposed on different types of income.
A. P389,500 C. P414,000 C. Capital gains are excluded in determining gross income.
B. P410,000 D. P424,000 D. Compensation income and business professional income are added together in arriving at
gross income.
63. The following data pertain to installment sales of personal property made by Fred Damian, a
cash method taxpayer, in his retail furniture store. 68. In cases of deductions and exemptions on income tax returns, doubts shall be resolved
Year of sale Installment sale Profit Equal collection in 2003 A. Strictly against the taxpayer. C. Liberally in favor of the taxpayer.
2001 P 50,000 15,000 10,000 B. Strictly against government. D. Liberally in favor of the employer.
2002 P100,000 40,000 20,000
2003 P150,000 75,000 40,000 69. Sale as shares of stock of a domestic corporation held as capital asset:
Thru a local stock exchange:
These sales were regularly made by Fred Damian to his customers. Under installment
Sale 1: Selling price of P300,000 and cost of P280,000
method, Fred Damian should report gross profit for 2003 of
Sale 2: Selling price of P600,000 and cost of P700,000
A. P31,000 C. P86,000
Directly to buyers:
B. P75,000 D. P130,000
Sale 3: Selling price of P300,000 and cost of P110,000.
Sale 4: Selling price of P250,000 and cost of P200,000.
64. Date of tax erroneously paid June 10, 2000
Sale 5: Selling price of P320,000 and cost of P35,000.
Date of claim for refund was filed with BIR March 3, 2001
Total of capital gain taxes on a per transaction basis:
Date of BIR decision of denial was received April 5, 2001
A. P33,000 C. P24,000
Last day to appeal to the Court of Tax Appeal is on
B. P32,000 D. P16,500
A. June 8, 2001 C. March 3, 2002
B. June 10, 2001 D. May 5, 2001
70. Calendar year is 2003:
65. The following are administrative remedies available to a taxpayer in connection with collection Taxpayer is a citizen of the Philippines who is single
of taxes, except one: Capital gain on sale of bonds held for 20 months P 50,000
A. Filing of tax refund or credit. Capital gain on sale directly to buyer of shares of domestic
B. Filing a petition for reconsideration or reinvestigation. corporation held for 6 months 120,000
C. Filing of criminal complaint against erring BIR officials or employees. Capital loss on sale of family car held for 11 months 80,000
D. Entering into a compromise. Capital loss on sale of land in the Philippines held for 3 years on a
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TAXATION CPA Review School of the Philippines Final Preboad Examination

selling price of P800,000 60,000 A, non-VAT taxpayer, sells to B, VAT taxpayer P66,000
Net capital loss in 2002 (net taxable income of the year was B, VAT taxpayer, sells to C, VAT taxpayer 99,000
P100,000) 20,000 C, VAT taxpayer, sells to D, VAT taxpayer, an exporter 165,000
Total capital gains to consider at the end of 2003 should be VAT taxpayer, exports 300,000
A. P55,000 C. P120,000 The value-added tax of C is
B. P25,000 D. P130,000 A. Payable of P6,000 C. Payable of P0
B. Carry-over of P6,600 D. Refundable of P15,000
71. Considering the data in No. 70, the net capital loss carry-over from 2002 should be
A. P40,000 C. P 0 76. Considering the information in No. 75, the value added tax of D is
B. P55,000 D. P10,000 A. Payable of P15,000. C. Payable of P0.
B. Carryover of P15,000. D. Refundable of P15,000.
72. 1st Statement – A net operating loss is the excess of allowable deductions over the gross
income from business for a taxable year. 77. 1st Statement – Where different enterprises or corporations are owned by the same taxpayer,
2nd Statement –A net operating loss which had not previously been deducted from gross the Commissioner of Internal Revenue may make an allocation of income and expenses
income shall be carried over as a deduction only in the next year immediately following the among them so as to clearly reflect the income of each enterprise or corporation.
year of such loss. 2nd Statement – In the interest of determining the correct taxable income, it is legal for the
A. True; True. C. True; False. Commissioner of Internal Revenue to determine the revenues and gross income of a taxpayer
B. False; False. D. False; True. based on industry standards developed by the Bureau of Internal Revenue from an industry
study.
73. A domestic corporation had A. B. C. D.
Year Gross Profit from Business Business Expenses 1st Statement True False True False
1999 P600,000 P700,000 2nd Statement True False False True
2000 P500,000 P470,000
2001 P900,000 P850,000 78. A choice by an individual of the Optional Standard Deduction means that
2002 P850,000 P900,000 A. His income tax return need not be accompanied by financial statement.
2003 P920,000 P620,000 B. He need not keep books of accounts.
What is the taxable income in 2002? C. He need not have records of gross income.
A. Loss – (P50,000) C. Loss – (P20,000) D. His choice can still be changed by filing an amended return.
B. P0 D. Loss – (P70,000)
79. Which statement is not correct?
74. Mr. Apple sold property which had a cost of P110,000 for a selling price of P200,000. The sale A. The excess input taxes of a taxable month arising from domestic sales may be carried
was on July 1, 2003, and under the terms of the sale, the buyer was to assume a mortgage of over to the succeeding month.
P50,000 on the property, pay P50,000 on the date of sale and P50,000 every July thereafter. B. The excess input taxes of a taxable quarter arising from domestic sales may be carried
The income in 2003 reported under the installment method was over to the succeeding quarter.
A. P22,500 C. P90,000 C. The excess input taxes of a taxable period arising from domestic sales may be refunded.
B. P30,000 D. P28,000 D. The excess input taxes of a taxable period arising from exports sales may be refunded.

75. All amounts given are total invoice costs/price: 80. Under the value-added tax law, which of the following sales may not be zero-rated?
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TAXATION CPA Review School of the Philippines Final Preboad Examination

A. Export sales. Answer Key

B. Foreign currency denominated sales. 41. C 51. A 61. D 71. C
C. Sales of goods to the Asian Development Bank. 42. D 52. D 62. D 72. C
D. Sale of goods to an export-oriented enterprise. 43. C 53. C 63. A 73. B
44. C 54. C 64. D 74. B
45. A 55. A 65. C 75. A
46. C 56. B 66. A 76. D
47. B 57. A 67. B 77. A
48. C 58. A 68. A 78. A
49. C 59. A 69. D 79. C
50. A 60. B 70. B 80. D

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