2020 National Mockboard Examinations

National Federation – Junior Philippine Institute of

Accountants

Taxation

1. Which of the following is a nature of taxation?

a. The power is granted by legislative action.
b. It is essentially an administrative function.
c. It is generally payable in money.
d. Without it the state can continue to exist.

2. Which of the following is not a determinant of the place of taxation?

a. Source of the income
b. Citizenship of the taxpayer
c. Residence of the taxpayer
d. Amount of tax to be imposed

3. Which of the following statements is not correct?

a. An inherent limitation of taxation may be disregarded by the application
of a constitutional limitation.
b. The property of an educational institution operated by a religious order
is exempt from property tax, but its income is subject to income tax.
c. The prohibition of delegation by the state of the power of taxation will
still allow the BIR to modify the rules in time for filing of returns and
payment of taxes.
d. The power of taxation is shared by the legislative and executive
departments of the government.

4. Which of the following may qualify as “de minimis” benefit for income tax
purposes?

a. Funeral wreath given by the Company amounting to PhP 500 and supported
by sales invoice named under the Company
b. Daily meal allowance not exceeding twenty five percent (25%) of the
basic minimum wage
c. Monetized unused sick leave credits of eight (8) days
d. Silver watch given to an employee for his 25th Anniversary in the
Company amounting to PhP 6,000

5. The capital gains tax/income tax/withholding tax on the sale, exchange, or

other disposition of real property shall be based on:

a. Gross selling price of the property or current fair market value (FMV)
as determined in accordance with Section 6 (E) of the 1997 Tax Code, as
amended, whichever is higher.
b. Gross selling price of the property or current FMV as determined in
accordance with Section 6 (E) of the 1997 Tax Code, as amended, whichever is
lower
c. FMV determined by the Commissioner or FMV as shown in the schedule of
values of the Provincial and City Assessors, whichever is higher
d. FMV determined by the Commissioner or FMV as shown in the schedule of
values of the provincial and city assessors, whichever is lower

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6. In relation to the due process requirement in the issuance of a deficiency
tax assessment, which of the following option/s available to a protesting
taxpayer is/are not incorrect?

I. If the protest is wholly or partially denied by the Commissioner of

Internal Revenue or his authorized representative, then the taxpayer may
appeal to the CTA within fifteen (15) days from receipt of the whole or
partial denial of the protest.
II. In order to afford the taxpayer with an opportunity to present his side
of the case, the taxpayer will be informed, in writing, by the Revenue
District Officer (RDO) or by the Special Investigation Division of the
discrepancies in the taxpayer’s payment of internal revenue taxes for purposes
of informal conference.
III. If the taxpayer requests for reinvestigation, the taxpayer shall submit
all relevant supporting documents in support of his protest within thirty (30)
days from the date of filing of his letter of protest, otherwise, the
assessment shall be final.
IV. Prior to the issuance of the Preliminary Assessment Notice (PAN), the
taxpayer may be allowed to make voluntary payments of probable deficiency
taxes and penalties.

a. I only. c. IV only.
b. I and IV. d. II, III and IV.

7. Effective January 1, 2022, excise tax on cigarettes packed by hand or

machine amounts to:

a. PhP 45 per pack

b. PhP 40 per pack
c. PhP 45 per pack
d. PhP 55 per pack

8. Which of the following statements is not correct?

a. Tax burdens shall neither be imposed nor presumed to be imposed beyond
what the statute expressly and clearly states because tax statutes
should be construed strictly against the government.
b. Tax exemptions, tax amnesty tax condonations and their equivalent
provisions are not presumed and, when granted are strictly construed
against the taxpayer because such provisions are highly disfavored by
the government.
c. Exemptions from taxation are highly disfavored in law and he who claims
tax exemption must be able to justify his claim or right.
d. The House of Representatives has the duty and the exclusive power of
constructing and interpreting tax laws.

9. Which of the following is not a scheme of shifting the incidence of

taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to
the selling price of the goods sold;
b. The purchaser asks for a discount or refuse to buy at regular prices
unless it is reduced
by the amount equal to the tax he will pay;
c. Changing the terms of the sale like FOB shipping point in the
Philippines to FOB destination abroad, so that the title passes abroad
instead of in the Philippines;

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d. The manufacturer transfers the sales tax to the distributor, then in
turn to the wholesaler, in turn to the retailer and finally to the
consumer.

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10. I. The power of taxation is inherent in sovereignty being essential to
the existence of every government. Hence, even if not mentioned in the
constitution the state can still exercise the power and is essentially a
legislative function.
II. Even in the absence of any constitutional provision, taxation power
falls to Congress as part of the general power of law-making.

a. True; True c. False; True

b. True; False d. False; False

11. Deliberate Pte. Ltd. (the Company) is a PEZA-registered manufacturer

entitled to the 5% Gross Income Tax (GIT) incentive in calendar year (CY)
2018. It is the Company’s fourth year of operations. The following information
pertain to the CY 2018 activities of the Company:

Registered Unregistered
Particulars
Activities Activities
Gross sales PhP121,700,000 PhP10,425,000
Cost of sales (103,400,000) (7,297,500)
Gross income PhP 18,300,000 PhP 3,127,500
Other Income (net gain on disposal of -
office PPE) 550,500
Total Gross Income PhP 18,300,000 PhP 3,678,000

Operating expenses* (use 90%-10% PhP 9,890,100

allocation between registered and
unregistered activities)
(Assume all the requisites for
deductibility were met.)

The Company had unutilized and excess input VAT amounting to PhP 545,000
attributable to its zero-rated sale of services. In this regard, the Company
filed a claim for the issuance of a tax credit certificate (TCC) with the
Department of Finance (DOF). However, the claim was denied on the sole ground
that the Company did not strictly comply with the invoicing requirements for
zero-rated sales. In view of the DOF’s denial of its claim, the Company wrote
off the claim in its books and is part of the above operating expenses.

Meanwhile, the creditable withholding taxes (CWTs) from the first three (3)
quarters amounted to PhP 98,000 (including PhP 10,000 CWTs dated 2019) while
CWTs for the 4th quarter totaled PhP 33,600 (including PhP 5,000 CWTs not in
the name of the Company).

Determine the income tax still due to the Bureau of Internal Revenue (BIR).

a. P1,605,097 c. P1,229,097
b. P1,239,097 d. P1,721,697

12. A married, earned P225, 000 (net of P40, 000 w/tax) compensation income
from employment from July to December 2018. He has a legally adopted child as
qualified dependent and paid P3,000 as health and hospitalization insurance
premiums. For 2010, he can deduct premiums
for health and hospitalization insurance of:
a. P3, 000 c. P2, 400
b. P1, 200 d. P0

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13. Senor C.T. Zen, 65 years old is a person with disability. He purchased
medicines from drugstore with a list price of P22,400. If the amount is gross
of discount and value-added tax, how much should Senor Zen pay to the
drugstore?
a. P22,400 c. P16,000
b. P20,000 d. P18,400

14. ABC Corporation took two keymen insurance on the life of its President,
Mr. X. In one policy, the beneficiary is the corporation to compensate it for
its expected loss in case of death of its president. The other policy
designates Mr. X’s wife as its irrevocable beneficiary.

Question 1 – Are the insurance premiums paid by X corporation in both policies

deductible?
Question 2 – Will the insurance proceeds be treated as income subject to tax
by the corporation ad by the wife?

a. Yes to 1st and No to 2nd questions;

b. Yes to both questions;
c. No to 1st question and Yes to 2nd question;
d. No to both questions

15. [Assume NIRC] Mr. X created a trust involving an income-producing

property, with Mr. Y as fiduciary and Mr. Z as beneficiary. Under the terms of
the trust, Mr. Y was to hold/use the income of the property, as follows:

To pay premiums on the life insurance of Mr. X, the grantor

P30,000
To be kept or paid to Mr. Z, the beneficiary, at the discretion
of the fiduciary, Mr. Y Balance
The property had a net income of 400,000
and
Income distribution to the beneficiary of 50,000

Which of the following statements is correct?

a. P 50,000 is the gross income of Mr. Z, the beneficiary;
b. P 30,000 is the gross income of Mr. X, the grantor;
c. P300,000 is taxable income of the trust;
d. P400,000 is taxable income of the trust.

16. A vacant commercial land located in a city measuring 2,000 square meters
has a market value of P1,100 in the tax declaration and a zonal value of P800.
If the city has maximized the assessment level and tax rate to that allowed by
law. how much is the total real property tax payable?
a. P36,300 c. P33,000
b. P17,600 d. P 9,900

17. First statement: Only VAT-registered taxpayers are required to pay Value-
Added Tax.
Second statement: Taxpayers whose gross annual sales or receipts exceed the
VAT threshold amount are required to pay Value-Added Tax in all cases.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct

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18. [Assume NIRC] Spouses Clark and Leah Medina, both Filipino citizens but
working in San Francisco, are the owners of a residential house and lot in
Tenement 1, Quezon City. Their son, Clark Jr., married Angela, on January 2,
2016. On the day of the marriage, the spouses said real property to their son
and daughter-in-law. At the time of the donation, the real property has a
zonal value of P2,000,000, an assessed value of P1,500,000 and an unpaid
mortgage of P200,000 assumed by Clark Jr. and Angela.

How much is the donor’s tax due of Leah Medina assuming this is her only
donation during 2016?
a. P164,000
b. P147,000
c. P146,600
d. None of the above

19. [Assume TRAIN] A domestic corporation, in its fourth year of operations,

had:

Gross profit from sales P3,000,000

Expenses of operations 1,000,000
Quarterly income taxes paid 500,000
Dividend from domestic corporation 200,000
Interest on bank deposit 100,000
Gain on sale of capital asset:
Land and building outside the Philippines, on a selling price of
P15,000,000 and cost of P10,000,000 5,000,000
Shares of stock of a domestic corporation, not listed and
traded in a local stock exchange, on a selling price
of P350,000 and cost of P100,000 250,000

How much is income tax still due?

a. P100,000
b. P500,000
c. P600,000
d. None of the above

20. Which of the following statements on Certificate Authorization

Registration (CAR) is incorrect?
a. The Revenue District Office shall sign the Certificate Authorizing
Registration (CAR) and Tax Clearance (TCL) for computerized districts
b. One (1) CAR per Register of Deeds shall be issued for real property/ies
covered by the transfer
c. CAR shall have a validity of three (3) years from the date of issue
d. Aside from the documentary stamp tax and capital gain tax (or creditable
withholding tax) on property sold, no other fees shall be collected
before the BIR issues a CAR

21. Mr. A. Pascual bought a 2,000 square meter land at a cost of P500,000. He
leased the land to Mr. B Franco at an annual rental of P40,000. The term of
the contract of lease is 15 years. The contract of lease provides that Mr.
Franco shall construct a building on the land and the building shall belong to
the lessor at the end of the term of the lease or at the termination of the
lease. The building was constructed at a total cost of P400,000 and has an
estimated useful life of 20 years which is the basis of a straight-line method
of depreciation.

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Assuming the contract of lease was terminated after the tenth (10th) year of
the beginning of the eleventh (11th) year due to the fault of the lessee, the
income of M. A. Pascual in the eleventh (11th) year is:
a. P173,333.34
b. P200,000
c. P133,333.34
d. P400,000

22. Caluag Inc. is a value-added tax (VAT)-registered seller of “SJMK”, a

well-known brand of high-quality materials used by manufacturers of
airplanes.

The following data are taken from the books of Caluag Inc. for the month of
May 2019:

Trade Receivables, May 1, 2019 PhP 660,000

Sales on account for the month of May 2,000,000
Cash sales for the month of May 600,000
Trade Receivables, May 31, 2019 840,000
Installment sales for the month of 700,000
May

During the month, Caluag Inc.has other sales, as follows:

► Sales to Huri Japan Inc., a PEZA-registered entity, amounting to PhP

540,000; and
► Sales to Akoda Manila, a licensee of PAGCOR, amounting to PhP 600,000.
SJMK is a component of a gaming machine.

In addition, Caluag Inc. has common current purchases of PhP 3,200,000.

Compute the VAT due of Caluag Inc. for the month.

a. P384,000 c. P532,800
b. P148,800 d. P136,800

23. All of the following are example of constructive receipt of income except:

a. Kamp Kawayan Inc. contingently credited stock bonus not available to

Carmelle until some future date
b. Vanjoss’ distributive share in the profit of a partnership
c. Interest credited to the account of Cyd which he may withdraw anytime
d. Interest coupons received by Sarah Salonga which have matured

24. Under Republic Act (RA) No.10963, otherwise known as the Tax Reform for
Acceleration and Inclusion (TRAIN) Law, individual taxpayers may avail
of the 8% income tax rate in lieu of the graduated income tax rates and
percentage tax.

Which of the following is/are not allowed to avail the 8% income tax rate
under the TRAIN Law?

I. Emma Buenaobra, an individual who is qualified to register as Barangay

Microbusiness Enterprise (BMBE) and availed such privilege
II. Juan Felipe and Luciano, partners of a General Professional Partnership
(GPP)

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III. Elias and Luna, purely compensation income earners of Las Espadas

a. I only. c. II and III.

b. I and II. d. I, II and III.

25. The following statements are presented to you for your evaluation:

I. Corn is considered a prime commodity.

II. Locally manufactured instant noodles are considered a basic necessity.
III. Basic necessities shall be considered in the 20% discounts of PWDs while
prime commodities are not.
IV. The sale of basic necessities and prime commodities to PWDs are subject
to VAT.

a. False, False, True, True

b. True, False, True, False
c. False, False, False, True
d. False, False, False, False

26. During 2019, Mr. Stock N. Yu, a non-dealer of securities had the following
transactions in the shares of Hagkut Corporation, a domestic
corporation:

Date Transaction Shares Price/share Value

June 20 Purchase 32,300 PhP 15.00 PhP 484,500
July 18 Purchase 6,300 14.50 91,350
August 15 Sale* 24,000 13.00 312,000
August 31 Purchase 11,700 13.50 157,950
November 10 Purchase 5,200 16.00 83,200
*The share sold in August 15, 2019 were the same share bought on June 20, 2019.

*The share sold in August 15, 2019 were the same share bought on June 20,
2019.
Considering the above transactions as involving identical shares, which of the
following is false:

a. Deferred loss of PhP 36,000 from August 15, 2018 sales will be added to
the tax basis of the replacement shares that occurs within 30 days
before and after the sale.
b. If all the shares from July 18, 2018 are sold at a total price of PhP
113,400. It will have a gain on sale of PhP 9,450.
c. The adjusted basis of replacement shares acquired on August 31, 2019 is
PhP 181,350.
d. Deductible loss of PhP 12,000 from August 15, 2018 sales is not a wash
sale loss but a realized loss deducted against ordinary gains.

27. Company S, a PEZA-registered entity, entered into a lease agreement with

Company B, another PEZA-registered entity for the year 2019. Company S was
organized for the purpose of engaging in the manufacture, production, and
export of electronic products; while Company B was organized for the purpose
of acquiring, owning, holding, and leasing real properties. Both Companies are
enjoying the 5% preferential tax on gross income.

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On the same year, the BIR discovered that the DST on the lease agreement was
not paid by any of the Companies and decided to impose such tax on the
transaction. Who is liable to pay the DST on the lease? agreement?

a. Company S
b. Company B
c. Both Company S and Company B
d. None of the above

28. KTG-PH, a regional operating headquarters (ROHQ) of KTG-US, which is a

multinational Company organized and existing under the laws of Washington,
D.C., is currently engaged in business of research and development services in
Makati City. Transactions with KTG-PH is paid for in US Dollars and accounted
for in accordance with rules of Bangko Sentral ng Pilipinas (BSP).

During 2018, KTG-PH, a VAT-registered tax payer, has unutilized input VAT of
30 Million for the year 2017. The unutilized input VAT is attributable to a
zero-rated sale transaction with KTG-US. Is KTG-PH allowed for refund or
request for the issuance of tax credit certificate (TCC) pursuant to Section
108(B)(2) of the tax code?

A. Yes, such services qualify for VAT zero-rating, because the same were
paid for in US Dollars and duly accounted for under the rules and
regulations of BSP.
B. Yes. KTG-USA, the recipient of such services is engaged in business
conducted entirely outside the Philippines.
C. No. KTG-USA, the recipient of such services is considered as doing
business in the Philippines through KTG-PH.
D. No. Pursuant to Section 108(B)(2), research and development services are
among those services that are treated as vatable transactions subject to
12%.

29. GSM Inc. was assessed deficiency Expanded Withholding Tax (EWT) and Final
Withholding Value-Added Tax (FVAT) for taxable year 2003. It filed a protest
against the deficiency tax assessments.

Almost three years later, or on 28 March 2011, GSM Inc. simultaneously

received an Amended Assessment Notice (AAN), reflecting an amended deficiency
EWT after reinvestigation and a Final Decision on Disputed Assessment (FDDA)
for both deficiency EWT and FVAT.

Other dates relevant to the assessment are as follows:

• April 8, 2011 – GSM Inc. filed a letter-reply to the AAN and FDDA, which
was received by the BIR on 11 April 2011.
• May 9, 2011 – The BIR sent a letter to GSM Inc., claiming that GSM
Inc.’s letter-reply produced no legal effect since it was the improper
remedy, as GSM Inc. should have appealed the final decision of the
Commissioner of Internal Revenue (CIR) to the Court of Tax Appeals (CTA)
within 30 days from receipt of the CIR’s decision; otherwise, the
assessment became final, executory and demandable.
• May 27, 2011 – GSM Inc. filed a Petition for Relief from Judgment with
the CIR arguing that it failed to file its proper appeal of the FDDA due
to its mistake and excusable negligence as it was not assisted by
counsel.
• June 29, 2011 – GSM Inc. received a Preliminary Collection Letter, which
was deemed a denial of GSM Inc.’s Petition for Relief from Judgment.

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• July 26, 2011 – GSM Inc. filed a Petition for Review with the CTA, which
dismissed the case for lack of jurisdiction due to the lapse of the
statutory period to appeal. GSM Inc. appealed to the Supreme Court.

Which is of the following is false?

a. GSM Inc.’s reply dated April 8, 2011 to the Regional Director was a
protest of both the AAN and the FDDA.
b. Since the deficiency EWT is a component of the aggregate tax due
reflected in the FDDA, the FDDA cannot be considered as the final
decision of the CIR as one of its components - the amended deficiency
EWT - is still under protest.
c. Only when the CIR has resolved the protest on the deficiency EWT could
there be a final decision on GSM Inc.’s liabilities. And only when there
is a final decision of the CIR would the prescriptive period to appeal
with the CTA begin to run.
d. None of the above.

30. Which of the following is/are correct in relation to the transfer pricing
(TP) audit guidelines?

I. The stages of TP audit are preparation, implementation and reporting.

II. During reporting stage, the Bureau of Internal Revenue (BIR) will
determine the characteristics of the taxpayer’s business, perform a
Function, Assets and Risks (FAR) analysis on the taxpayer, select the TP
method, the tested party and apply the arm’s length price (ALP).
III. The BIR may request for the submission of documents in a format
prescribed under Revenue Audit Memorandum Order (RAMO) No. 01-19 on the
related party transactions, segmented financial statements, among
others, within 10 days from receipt of the notice.
IV. Audits of intra-group loan transactions are conducted to test the arm’s
length nature of the taxpayer’s debt-to-equity ratio and to test the
reasonableness of the interest rate and/or expenses related to the
intragroup loan transaction that are charged to the taxpayer.

a. I and III only. C. I and IV only.

b. II and IV only. d. All of the above.

31. In addition to the disclosures mandated under the Philippine Financial

Reporting Standards (PFRS), and such other standards and/or conventions
as may be adopted, the Notes to Financial Statements (FS) shall include
information on taxes, duties and license fees paid or accrued during the
taxable year. Which of the following disclosure is not particularly
correct?

a. The amount of output tax declared during the year and the account title
and amount/s upon which the same was based.
b. Tax cases, and amounts involved, under preliminary investigation,
litigation and/or prosecution in courts or bodies outside the Bureau of
Internal Revenue (BIR).
c. The landed cost of imports and the amount of customs duties and tariff
fees paid or accrued thereon.
d. All other taxes, local and national, including real estate taxes,
license and permit fees lodged under the taxes and licenses account
under operating expense accounts.

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32. As a recently hired from an audit firm, your senior in charge asked you to
evaluate the propriety of the expanded withholding tax (EWT) treatment
of Pagalingan Corporation on the following income payments:

I. Payments for customized goods are subject to 2% EWT.

II. Payments for car rentals with driver are subject to 5% EWT.

Given the following information, what will be your initial assessment?

A. With issue, Not an issue

B. Not an issue, Not an issue
C. Not an issue, With issue
D. With issue, With issue

33. The Philippine Financial Reporting Standard (PFRS) 16 on Leases became

effective on January 1, 2019. This impacts the accounting recognition of
rentals especially on the lessee’s side. However, the same tax treatment of
lease/rentals are being used prior to the effectivity of the PFRS 16. For tax
purposes, a lease may either be classified as operating lease, finance lease
or a conditional sale.

For tax purposes, which of the following is not among the compelling
persuasive factors that must be present in order for a lease to be classified
as conditional sale:

A. There is an option to purchase the asset at any time.

B. The lease contract involves payment over an obligatory period which in
no case shall be less than 730 days (or two years).
C. Portions of the periodic rental payments are credited to the purchase
price.
D. Receipts/invoices of payments indicate that partial payments of the
assets were made.

34. To avoid penalty for late filing, V33nus Company filed its Annual ITR for
the calendar year 1999 on April 13, 2000. The fraudulent return was discovered
on June 10, 2004.

When would be the last day to send the valid assessment?

A. April 15, 2003

B. June 10, 2007
C. April 15, 2013
D. None of the choices.

35. In the case of secondary offering of the shares of stock of a closely-held

corporation, it shall be the duty of every stock broker who effected the sale
subject to the tax, to collect the tax and remit the same within:

A. Five (5) banking days from the date of collection.

B. Ten (10) working days following the end of the taxable quarter.
C. Twenty (20) days from the date of listing of the shares of stock in the
local stock exchange.
D. Thirty (30) days from the date of listing of the shares of stock in the
local stock exchange.

36. Which of the following real properties is subject to real property tax?

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A. Building owned by Kaja Coop., a duly registered cooperative.
B. A machinery owned by Angela Company, a PEZA-registered entity enjoying
an Income Tax Holiday (ITH) incentive on its second year of operation
C. A land owned by Estes Inc., a PEZA-registered entity developer enjoying
five percent (5%) gross income tax (GIT) incentive
D. Building owned by Government Service Insurance System (GSIS) leased out
to Philippine National Police (PNP)

37. Assume that the net loss before tax of Leo Balthazar Inc. (Leo) for the
second quarter of calendar year (CY) 2019 is PhP 15,854,448.

In addition, Leo has the following transactions in the same quarter:

a. The actual entertainment, amusement and representation (EAR) expense is

PhP 773,650 while the net sale of goods is PhP 103,132,709.
b. The creditable withholding taxes (CWTs) of Leo was erroneously recorded
in the books under the “Bank Charges” account amounting to PhP 11,947.
Due to backlog in operations, the Accounts Payable Division failed to
secure CWT certificates during the quarter.
c. There was a provision for doubtful debts set up amounting to PhP
5,723,212 during the quarter.
d. Leo earned interest income from local bank deposits properly supported
by BIR Form No. 2306 issued by the banks amounting to PhP 934,085. This
is recorded at net of corresponding final withholding tax (FWT).
e. Leo’s operating expenses and taxable income from previous quarter amount
to PhP 56,628,599 and
PhP 23,583,635, respectively.
f. During the first quarter, Leo has prior year’s excess tax credits and
CWTs amounting to PhP 425,893 and PhP 5,562,537, respectively.

For tax purposes, Leo has an option on whether to claim optional standard
deduction (OSD) in lieu of the itemized deductions. The OSD is computed
by multiplying the taxable gross income by 40%. The taxable gross income
is computed by deducting the deductible cost of sales/services against
the taxable revenues and other income. The itemized deductions pertain
to the deductible expenses other than cost of sales/services for tax
purposes. However, Leo failed to elect OSD in the first quarter.

Compute the income tax still due for the quarter.

a. P3,836,474.10 c. P3,863,454.00
b. P3,913,869.90 d. P 0

38. Vito Dela Torre, a person with disability (PWD), made the following
purchases of goods during the first week of November for his personal
consumption:

Particulars Amount (Retail Price)

Corn PhP 458.00
Fresh fruits 349.00
Dried, processed and canned beef 295.00
Sawali 199.00

In addition, he went to Killer Hotel for a staycation. He paid a total amount

of PhP 5,600. In order to reward himself, he also bought a ticket to Palawan
from Camila Airlines. The actual airfare is PhP 9,800. From the foregoing

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transactions, what is the total amount of discount that Vito Dela Torre can
avail?

a. P3,150 c. P2,940
b. P3,360 d. P 0

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39. Which of the following is/are true regarding the new procedures for
claiming tax treaty privileges of nonresident income earners:

I. Tax Treaty Relief Applications (TTRA) are no longer required to be filed

with the International Tax Affairs Division for dividends, interest, royalties
and business profits only.
II. The newly created Certificate of Residence for Tax Treaty Relief (CORRT)
shall be used in lieu of the 1901 Forms for TTRA. The non-resident income
recipient shall submit a duly accomplished CORRT Form to the Philippine income
payor/withholding agent before income is paid or credited. Among others, the
non-resident income recipient shall have Part I signed by the Competent
Authority (Tax Office) of his country of residence certifying that the income
recipient is a tax resident of said country. If there is a prescribed
certificate of tax residency in the home country, the same shall be attached
to the CORR form in lieu of signature required in Part I. The authorized
representative of the non-resident income recipient shall also sign both Part
I and II of the form.
III. The new form shall be valid for 2 years upon issuance or following the
date of validity indicated in the Certificate of Residency, if any, whichever
comes earlier.
IV. Withholding agents shall apply the reduced treaty rate or exemption upon
receipt of the CORRT form, remit the withholding tax using BIR Form No. 1601-F
and file 1604-CF at year-end. For failure to submit the form, regular
withholding tax rates will be applied.
V. The Philippine income payor/withholding agent shall submit an original
of the CORRT Form to the ITAD and RDO No. 39 within 30 days after payment of
withholding taxes due on the interest, dividend or royalties.
VI. In case there is another dividend payment within the period of validity
of the CORRT, and in case of staggered payment of interest and royalties, the
withholding agent only needs to submit an updated Part II within 30 days from
payment of withholding taxes.

a. I, II, and III only. c. II, III, and IV only.

b. II, IV, and VI only. d. All of the above.

40. Which of the following is/are correct regarding the eComplaint System?

I. Non-issuance of Official Receipt (NO-OR) covers complaints on the

nonissuance of ORs or Sales Invoices (SIs) and/or the use of ORs or SIs
not duly registered with the BIR, including but not limited to fake or
spurious receipts/invoices.
II. Run After Tax Evader (R.A.T.E.) covers complaints/denunciations against
erring revenue officials and employees.
III. The complainant shall be informed of the action taken on the complaint
within five (5) days.
IV. Disiplina covers complaints on individuals and/ or entities engaged in
tax fraud or evasion activities and other criminal violations under the
Tax Code of 1997, as amended.

a. I only. c. I and IV only.

b. III only. d. None of the above.

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41. In 2009, Z sold a piece of land which had a cost of P1M for a selling
price of P4M. The sale called for an assumption by the buyer of a mortgage on
the land of P1.5M, cash of P500,000 on the date of sale and installment
payments of P500,000 every year thereafter. The land is an ordinary asset. The
income to be reported in 2009 under the installment method of reporting income
is
A. P500,000 C. P375,000
B. P750,000 D. P1,000,000

42-44. A sold his principal residence at a selling price of P5M but with a FMV
of P6M. The property sold was acquired for P3M. He purchased his new
principal residence at a cost of P7M. The capital gains tax is
42.
A. P360,000 C. P240,000
B. P300,000 D. P 0

43. How much is the basis (cost) of the new principal residence?
A. P7,000,000 C. P5,000,000
B. P6,000,000 D. P4,000,000

44. If only P4M out of P5 M was utilized in acquiring his new principal
residence, the capital
gain tax is
A. P60,000 C. P300,000
B. P72,000 D. P360,000

45. In a protest letter address to the Commissioner of Internal Revenue, which

of the following is the best to make reference to your subject matter?
a. With regard to;
b. In regard to;
c. As regards;
d. Regarding.

46. Celia donated P110,000.00 to her friend Victoria who was getting married.
Celia gave no other gift during the calendar year. What is the donor’s tax
implication on Celia’s donation?

a. The P100,000.00 portion of the donation is exempt since given in

consideration of marriage.
b. A P10,000.00 portion of the donation is exempt being a donation in
consideration of marriage.
c. Celia shall pay 30% donor’s tax on the P110,000.00 donation.
d. The P100,000.00 portion of the donation is exempt under the rate schedule
for donor’s tax.

47. The widow of your best friend has just been paid P1,000.000 on account of
the life insurance policy of the deceased husband. She asks you whether
she should declare the amount for income tax purposes or for estate tax
purposes.

1st advice: The proceeds of life insurance paid to the beneficiary upon the
death of the insured are exempt from income tax and need not be declared
for income tax purposes.
2nd advice: The proceeds of life insurance would have to be declared for
estate tax purposes if the designation of the beneficiary was
irrevocable, otherwise it need not be declared.

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Choose the correct answer.
a. Both advices are correct.
b. 1st advice correct; 2nd advice wrong;
c. Both advices are wrong.
d. 1st advice wrong, 2nd advice correct

48. A domestic corporation had the following selected data in the preceding
year:
Cash sales P15,255,000
Cost of sales 6,102,000
Operating expenses 3,051,000
Dividend received from a 225,000
domestic corporation
Assessed value of land 2,250,000
Assessed value of building 3,150,000
Assessed value of 6,750,000
machinery
How much would be the total basic and additional community taxes in the
current year?
a. P10,000
b. P10,500
c. P11,052
d. P11,552

49.A married decedent died leaving the following:

Community property P5,000,000
Exclusive property 3,000,000
Community deductions 450,000
Exclusive deductions 850,000
Among those included in the exclusive property were the following:
 A piece of land inherited from the decedent’s father who predeceased him 3 ½
years ago, FMV at the time of inheritance is P800,000 (no mortgage
indebtedness); FMV at the time of present decedent’s death, P900,000.
This was mortgaged during the marriage for the benefit of the family for
P300,000 which was paid by the decedent before he died.
 Car which was received as gift 18 months before the present decedent’s
death, FMV date of donation, P500,000; FMV date of death, P400,000.
The vanishing deduction was:
a. P335,000
b. P435,500
c. P536,000
d. P636,500

50. A non-stock, non-profit school always had cash flow problems, resulting in
failure to recruit well-trained administrative personnel to effectively
manage the school. In 2018, Don Leon donated P 100 million pesos to the
school, provided the money shall be used solely for paying the salaries,
wages, and benefits of administrative personnel. The donation represents
less than 10% of Don Leon's taxable income for the year. Is he subject
to donor's taxes?
a. No, since the donation is actually, directly, and exclusively used for
educational purposes.
b. Yes, because the donation is to be wholly used for administration purposes.
c. Yes, since he did not obtain the requisite NGO certification before he made
the donation.

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d. No, because the donation does not exceed 10% of his taxable income for
2018.

51. A resident alien donor donated to a Philippine domestic corporation a

property located abroad valued at P 500,000. The foreign donor’s tax on
the donation was P 100,000. A donation earlier within the same calendar
year was made to a legitimate daughter, property valued at P 300,000.
The donor’s tax due on the last donation after credit for foreign
donor’s tax paid is:
A. P 50,000
B. P 52,500
C. P 56,000
D. P 58,500

52. What should the BIR do when the prescriptive period for the assessment of
a tax deficiency is about to prescribe but the taxpayer has not yet complied
with the BIR requirements for the production of books of accounts and other
records to substantiate the claimed deductions, exemptions or credits?
a. Call the taxpayer to a conference to explain the delay.
b. Immediately conduct an investigation of the taxpayer’s activities.
c. Issue a jeopardy assessment coupled with a letter of demand.
d. Issue a notice of constructive distraint to protect government interest.

53. Which among the following taxpayers is required to use only the calendar
year for tax purposes?
a. Partnership exclusively for the design of government infrastracture
projects considered as practice of civil engineering.
b. Joint-stock company formed for the purpose of undertaking construction
projects.
c. Business partnership engaged in energy operations under a service contract
with the government.
d. Joint account (cuentas en participacion) engaged in the trading of mineral
ores.

54. Which of the following is not an internal revenue tax?

a. Value Added Tax c. Income Tax
b. Real Estate Tax d. Documentary Stamp Tax

55. Winery is a manufacturer of wine. During a particular calendar quarter, it

had the following transactions (net of VAT):
Jan. 4, 2018 : Consigned wine to a retailer in Makati City amounting to
P 200 000.
Feb. 14, 2018 : Exported P 1 000 000 worth of wine to Spain.
Feb. 27, 2018 : President of Winery celebrated his birthday, consuming P
50 000 worth of wine given to him by the company as a birthday gift.
Mar. 20, 2018 : Declared property dividend of one case of wine for every
10 shares, amounting to P 150 000.

The output tax for the calendar quarter ended March 31, 2013 is:
A. P 48 000 C. P 140 000
B. P 168 000 D. P 40 000

56-58. Sale of services by a VAT-registered contractor:

Collections on total invoice price for contracts completed
(including P 448 000 for materials) P 1 120 000
Receivables on billings (VAT included) 336 000

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Advances on contracts (VAT not included) 200 000
Retentions on contracts made by clients out
of contract price already earned 90 000
Purchases of:
Materials (VAT included) 224 000
Services of sub-contractor (VAT not included) 448 000
Services of persons subject to percentage taxes 56 000
Salaries of employees 60 000
56. Output taxes are:
A. P 158 400 C. P 132 000
B. P 144 000 D. P 154 000

57. The input taxes are:

A. P 67 200 C. P 77 760
B. P 72 000 D. P 80 640

58. The value-added tax payable is:

A. P 64 800 C. P 86 400
B. P 86 400 D. P 66 240

59. A citizen and resident of the Philippines died on October 5, 2010. He was
a married and the property relationship during the marriage was absolute
community of property. He left behind properties with market values as
follows:
Agricultural land P 100,000
House and lot acquired by inheritance before the marriage 4- 500,000
1/2 yrs. ago, used as family home (with a FMV of P420,000and a
mortgage of P120,000 when acquired: P20,000 was paid by the
decedent before he died)
Jewelry of wife, acquired during the marriage with her income 50,000
Clothes acquired during the marriage , with income during the
marriage:
For use of the decedent 60,000
For us of the wife 70,000
Cash on hand and in banks:
Income from unidentified sources 300,000
From a sale at a loss of exclusive property 1,500,000
Received as gift six yrs. ago and before the marriage (current 40,000
account)
Other properties:
Owned before the marriage 90,000
Acquired during the marriage 20,000
The gross estate is:
a. P1,560,000 c. P2,660,000
b. P1,100,000 d. P3,660,000
60. Statement 1: As a rule , donations to candidates in local and/or national
elections are not subject to donor’s tax.
Statement 2: Donation to a political party is not subject to donor’s tax
if it is reported by the donor to the Comelec and by the candidate in
his Statement of Expenditures.
a. True; True c. False; False
b. True; False d. False; True

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61. One of the following statements is not true. Which is it? If on any one
date there is a donation by one donor to a donee who is not a stranger
together with a donation to a donee who is a stranger:

a. There will be two separate donor’s tax return because the donor’s tax
on the donation to a non-stranger is at graduated rates while the
donor’s tax on the donation to a stranger is at the flat rate of 30%.

b. There will be one donor’s tax return only, where the donor’s tax at
graduated rates on the donation to a non-stranger will be shown together
with the donor’s tax at the flat rate of 30% on the donation to a
stranger, the total being the donor’s tax to pay.

c. If there were previous donations to strangers during the year, the

prior net gifts to strangers need not be added anymore in the
computation of aggregate net gifts, donor’s tax on aggregate net gifts
and donor’s tax due on the donations to strangers.

d. A donation on account of marriage, before the marriage, by a parent

to a son and daughter-in-law shall be considered as donations to a non-
stranger and stranger.

62. The following income are subject to final tax, except?

A. Royalty income received by a domestic corporation from a domestic
corporation
B. Cash dividends received by a non-resident foreign corporation from a
domestic corp.
C. Cash dividends received by a domestic corporation from a domestic
corporation.
D. Interest income received by resident foreign corporation from a Phil.
bank.

63. Which of the following is not correct? The gross income tax
A. Is optional to qualified corporation
B. Is available if the ratio of costs of sales to gross sales or
receipts from all sources does not exceed 55%
C. Shall be irrevocable for three consecutive taxable years that the
corporation is qualified under the scheme
D. Is compared with the normal income tax and minimum corporate income
tax

64. Which of the following statements is correct?

A. Partners of a taxable partnership are considered as stockholders and
profits distributed to them by the partnership are considered as
dividends.
B. The share of each partner in net income of a taxable partnership shall be
based on their capital contribution .
C. The share of an individual partner in the net income of taxable partnership
shall be equal to the share of a capitalist partner with the least
capital contribution.
D. The industrial partner shall contribute money and or property but not
services.

65. Which of the following statements is correct?

A. The power of taxation reaches even the citizens abroad and his income
earned from sources outside the Philippines

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B. Priests and religious institutions are exempt from income and property
taxes.
C. Separation benefits received by terminated employees resulting from a
deadlock in their collective bargaining agreement are exempt from income
tax.
D. The value of a property received as a gift, or under a will or testament
or through legal succession is exempt from taxation.

66. Which of the following statements is not correct?

A. Proceeds of life insurance policies paid to beneficiaries upon the death
of the insured are excluded from gross income regardless of whether the
proceeds are received as a single sum or in installments.
B. In case of transfer for a valuable consideration by assignment or
otherwise of a life insurance, endowment or annuity contract or any
interest therein, only the actual value of such consideration and the
amount of the premium and the sums subsequently paid by the transferee
are exempt from income tax.
C. Marriage fees, baptismal offerings, sums paid for saying masses for the
dead and other contributions received by a clergyman, evangelist or
religious worker for services rendered is taxable income.
D. Monetization of leave credits of employees who were unable to go on
leave due to exigencies of the service constitute taxable income.

67. Where the taxpayer is a corporation, which of the following statements is

true?
A. The holding period does not apply to corporation, hence, capital gains
and losses are recognized at 50%.
B. The net capital loss can be carried over in the next succeeding year
C. Capital loss is deductible only up to the extent of ordinary gains
D. Ordinary loss is deductible from capital gains

68. During 2018, Juan Carlos Co. has the following transactions:

 It paid interest expense amounting to PhP 18,000,000 related to

its loan used to purchase fixed assets with a depreciable life of five
(5) years. The total depreciation expense reported in the Audited
Financial Statements (AFS) is PhP 23,750,970.
 It made contributions to various accredited organizations in 2018,
as follows:

Organization Amount Supporting Documentation

Department of PhP Official receipts (ORs)
Science and 25,500
Technology
Philippine Sports 48,750 OR and Acknowledgment
Commission Letter
National Council for 75,750 Certificate of Donation
Culture and Arts and Notice to the Revenue
District Office (RDO)
Bantay Kalikasan 50,500 Certificate of Donation

What is the expenses deductible for income tax purposes?

a. P20,300,970 c. P20,150,970
b. P20,252,220 d. P20,225,220

69. Taxation as distinguished from police power and power of eminent domain.

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A. Property is taken to promote the general welfare.
B. Maybe exercised only by the government.
C. Operates upon the whole citizenry.
D. There is generally no limit as to the amount that may be imposed.

70. Which of the following statements is correct?

A. The President is authorized to increase or decrease national internal
revenue tax rates.
B. One of the nature of taxation is the reciprocal duties of protection and
support between the state and subjects thereof.
C. Every sovereign government has the inherent power to tax.
D. Income tax in an indirect tax.

*end of examination*

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