The Professional CPA Review School

Main: 3F C. Villaroman Bldg. 873 P. Campa St. cor Espana, Sampaloc, Manila
 (02) 735 8901 / 0917-1332365
email add: crc_ace@yahoo.com
Baguio Davao
2nd Flr. #12 CURAMED Bldg. Marcos Highway, Baguio City 3/F GCAM Bldg. Monteverde St. Davao City
 (074) 6200710/0967-3847348  0917-1332365
TAXATION MAY 2023 BATCH
FIRST PRE-BOARD EXAMINATION FEB 11, 2023; 330-630PM

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer
for each item by Shading the corresponding letter of your choice on the answer sheet provided.
STRICTLY NO ERASURES ALLOWED. Use Pencil No. 2 only.

1. Generally, dividend income received by a domestic corporation from a foreign corporation is

includible as gross income of the recipient domestic corporation and subject to corporate
income tax. However, said foreign corporation dividend is exempt from income tax provided the
following requisites are met, except:
A. The dividends actually received or remitted into the Philippines are reinvested in the
business operations of the domestic corporation within the next taxable year from the time
the foreign-source dividends were received or remitted.
B. The dividends received shall only be used to fund the working capital requirements, capital
expenditures, dividend payments, investment in domestic subsidiaries, and infrastructure
project.
C. The domestic corporation holds directly or indirectly at least 20% in value of the
outstanding shares of the foreign corporation.
D. The domestic corporation has held the shareholdings uninterruptedly for a minimum of 2
years at the time of the dividends distribution. In case the foreign corporation has been in
existence for less than 2 years at the time of dividends distribution, then the domestic
corporation must have continuously held directly at least 20% in value of the foreign
corporation's outstanding shares during the entire existence of the corporation.

2. For value-added tax purposes, which of the following transactions of VAT-registered taxpayer
may not be zero-rated?
A. Export sales
B. Foreign currency denominated sales
C. Sale of goods to the Asian Development Bank
D. Sale of goods to an export oriented enterprise

3. Who are allowed to withhold vat from its vat suppliers?

A. Nonresident individual and corporations
B. Resident foreign corporation doing business in the Philippines
C. Government or any of its instrumentalities including government owned and controlled
corporation
D. Entities, organization, business or corporation duly registered with Philippine Economic
Zone Authority (PEZA).

4. Statement 1: Upon the effectivity of the TRAIN Law, payment of stock transaction tax of 6/10 of
1% is within five (5) banking days from the date withheld by the broker.
Statement 2: Payment of stock transaction tax of 4%, 2% and 1% on primary offering should be
within thirty (30) days from the date of listing in the local stock exchange.
A. Both statements are correct
B. Both statements are incorrect
C. Only the first statement is correct
D. Only the second statement is correct

5. The following are taxable on income derived from sources within the Philippines only, except
A. A resident and citizen of Canada who went for a 9 month holiday in Boracay,
Aklan
B. A Citizen of the Philippines who has permanently migrated into the United States
of America
C. A Filipino who is a resident of Batanes Island
D. A British Racecar driver, residing in Switzerland and on a weeklong beach holiday
in Amanpulo Island.
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 2

6. Dr. Poster, an expert American Virologist was hired by a Philippine Pharmaceutical company to
assist the development of a vaccine, for which he had to stay in the Philippines for an indefinite
period. His coming to the Philippines was for a definite purpose which in its nature would require
an extended stay and to that end makes his home temporarily in the Philippines. The American
virologist intends to leave the Philippines as soon as his Philippine assignment is completed.
For income tax purposes, the American virologist shall be classified as:
A. Resident alien
B. Resident citizen.
C. Nonresident alien engaged in trade or business
D. Nonresident alien not engaged in trade or business

7. First Statement – An Overseas Filipino Worker is taxable on income derived from

sources within the Philippines only.

Second Statement – Seafarers, who are Filipino Citizens, who receive compensation
as a complement for services rendered abroad as a member and complement of a
vessel engaged exclusively in international trade, shall be exempt from Philippine
income tax from the aforesaid compensation income. Provided has a valid overseas
employment certificate (OEC), valid Seafarers Identification Record Book (SIRB) or
Seaman’s Book duly issued by the Maritime Industry Authority (MARINA)
A. True, True
B. True, False
C. False, False
D. False, True

8. For purposes of income taxation, the following are considered “Corporation”, except:
A. Joint Venture
B. Ordinary Partnership
C. One person corporation
D. General Professional Partnership

9. Which of the following is subject to the income tax?

A. A non-stock and non-profit educational institution
B. Public educational institution
C. Civic league or organization not organized for profit and operated exclusively for the
promotion of social welfare
D. Mutual savings bank and cooperative bank having a capital stock represented by shares
organized and operated for mutual purposes and profit

10. First Statement - When an estate, under administration, has income-producing properties, the
annual income of the estate becomes part of the taxable gross estate.
Second Statement - When an estate, under administration, has income-producing properties
and its income during the year is distributed to the heirs, the income so distributed is taxable
to the heirs as part of their gross income for the year.
A. True, True
B. True, False
C. False, False
D. False, True

11. First Statement - A “fringe benefit” is defined as being any good, service or other benefit furnished
or granted in cash or in kind by an employer to an individual employee.

Second Statement – It is the employer who is required to pay the income tax on the fringe benefit.
A. True, True
B. True, False
C. False, False
D. False, True

12. Share based payments, e.g., stock options, restricted stock units and alike, given by the employer
to his/her/its employees, are:
A. Exempt income of the employee
B. Subject to the fringe benefits tax in all cases
C. Reportable as compensation income of the employee in all cases
D. Subject to the Fringe Benefits tax in case of an employee holding a managerial position
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 3

13. Which among the following is a taxable “de minimis” benefit

A. Rice allowance not exceeding Php2,000 per month.
B. Gifts given during Christmas and major anniversary celebrations not exceeding
Php5,000 per year
C. Employees achievement award for length of service or safety achievement in the
form of cash or gift certificate in an amount not exceeding Php10,000.
D. Medical cash allowance to cover medical and healthcare need, annual
medical/executive check-up, maternity assistance and routine consultations not
exceeding Php10,000/year

14. The following are the mandated information in a VAT invoice or VAT official receipt, except:
A. TIN of the seller and a statement he is VAT registered
B. Total amount that the purchaser pays or is obligated to pay with the indication that such
amount includes the VAT
C. If the same is VAT exempt of VAT Zero-rated, it shall be printed or written prominently in
the invoice or receipt
D. In case of mixed sale in the same invoice or receipt, it shall indicate the breakdown, which
is vatable, zero-rated and/or exempt. Seller should not issue separate invoices for
aforementioned components of the sale.

15. The following are the consequences of issuing a VAT invoice/receipt by a non-VAT registered
person, except:
A. Shall be liable to the percentage tax thereon, if any
B. Shall be liable to the 12% VAT
C. Shall be liable to 25% surcharge
D. The purchaser in whose favor the VAT invoice/receipt was issued, shall be allowed to
claim input VAT thereon.

16. The following are the usual method of avoiding or at least minimizing the effect
of double taxation, except. Allowing reciprocal exemption either by law or by
treaty;
A. Allowance of tax credit for foreign taxes paid;
B. Allowance of deduction for foreign taxes paid; and
C. Reduction of the Philippine tax rate by applying double tax treaty rates
D. Petitioning the foreign government for a reduction of the tax rate

17. In case of a resident international sea carrier, the following are subject to regular
corporate income tax rate of 25%, except
A. Demurrage fees
B. Detention fees
C. Other charges relating to outbound and inbound cargoes
D. Gross Philippine billings

18. A law was passed by Congress which granted estate tax amnesty to those who have not estate tax
due on or before January 1, 2020. The same law does not provide for refund of taxes to those who
have properly paid estate tax covered by the amnesty.
Those who have paid their estate tax complained and asked that the law be declared
unconstitutional on the ground of being violative of the equal protection clause and
discriminatory. The law is:
A. Valid because there is a valid classification.
B. Not valid because those who did not pay their taxes are favored over those who have paid
their taxes.
C. Valid because it was Congress that passed the law and it did not improperly
delegate the power to tax.
D. Not valid because only the President with the approval of Congress may grant
amnesty.

19. The constitutional limitation declaring churches, parsonages, mosques are exempt
from taxation applies only to what kind of tax.
A. Real estate tax
B. Income tax
C. Value-added tax
D. Donor’s tax
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 4

20. The payor of passive income subject to final tax is require to withhold the final
tax from the payment due to the recipient. The withholding of the tax, has the effect of
A. A final settlement of the tax liability on the income
B. …/A credit from the recipient’s taxable income
C. Consummating the transaction resulting in an income
D. A deduction in the recipient’s income tax return

21. What is the rule on the taxability of income that a government educational institution derives from
its school operations? Such income is
A. Subject to 10% tax on its net taxable income as if it is a propriety educational institution.
B. Exempt from income taxation if it is actually, directly and exclusively used for educational
purposes.
C. Subject to the ordinary income tax rates with respect to incomes derived from
educationalactivities.
D. Exempt from income taxation in the same manner as government-owned and
controlledcorporations.

22. A corporation may change its taxable year to calendar or fiscal year in filing its annual income tax
return, provided
A. It seeks prior BIR approval of its proposed change in the accounting period.
B. It simultaneously seeks BIR approval of its new account period.
C. It should change its accounting period two years prior to changing its taxable year.
D. Its constitution and by-laws authorizes the change.

23. 1st Statement - The BIR is authorized to collect estate tax deficiency through the summary remedy
of levying upon and sale of real properties of a decedent, without the cognition and authority of the
court.
2nd Statement - The CIR may examine the bank records of the deceased in order to
determine the latter's taxable net estate.
A. True; False C. False; True
B. True; True D. False; False

24. Taxation, just like other fields of human learning is dynamic, not static, keeps on changing; so we
must all study, otherwise we might be facing the battles of today with the antiquated weapons of
yesterday.
Regardless of economic and business conditions, a sound tax system should provide
for the collection of sufficient revenue to run the government.
A. True, true C. False, false
B. True, false D. False, true

25. A non-resident foreign corporation (NRFC) shall generally be subject to a 25% final tax on gross
income received from all sources within the Philippines. However, a NRFC shall be exempt from
tax on:
A. Philippine Charity and Sweepstakes Office (PCSO) winnings less than ₱10,000.
B. De minimis prizes of less than ₱10,000.
C. Interest income paid by a depositary bank under the foreign currency deposit system.
D. Interest income from a long-term deposit or investment certificate issued by a bank
in thePhilippines, and held for a period exceeding 5 years.

26. One of the following represents taxable income:

A. Refund of 3% OPT paid in a prior year.
B. Refund of donors’ tax paid in prior year
C. Refund of income tax in prior year
D. Refund of special assessment paid in prior year

27. Which of the following individual taxpayers is NOT entitled to claim the P250,000 tax exemption
from their gross business income?
A. A Japanese residing in his home country, who stayed in the Philippines for two (2) months for
vacation
B. A Filipino citizen who stayed in the Philippines for 183 days during the taxable year
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 5

C. An American citizen not doing business in the Philippines who stayed in the Philippines for
more than 180 days during the taxable year
D. An Arab businessman who stayed in the Philippines for more than one (1) year

28. Under the TRAIN Law, who among the following alien individual/s, is/are entitled to an exemption of
P250,000 for purposes of computing their income tax?
I. Resident alien
II. Non-resident alien engaged in trade or business in the Philippines
III. Non-resident alien not engaged in trade or business in the Philippines
A. I only C. I and III
B. I and II D. I, II, and III

29. Which of the following statement/s is/are CORRECT?

I. Excise tax on domestic goods shall be paid by the manufacturer or producer before the
removal of such goods from the place of production.
II. Excise tax for indigenous petroleum, locally extracted natural gas and liquefied natural
gas shall be paid by the manufacturer or producer.
III. Excise tax on exported products shall be paid the owner, lessee, concessionaire or
operator of the mining claim.
A. Statements II and I are correct.
B. Only Statement I is correct.
C. Statements I, II and III are correct.
D. Only Statement II is correct.

30. Who is liable to pay the excise tax on indigenous petroleum?

A. Taxpayer processing the petroleum
B. First buyer or purchaser of petroleum
C. End user of petroleum
D. Taxpayer extracting the petroleum

31. Persons liable to excise tax on Imported Articles are the following except:
A. Person who is found in possession of articles which are exempt from excise taxes other than
those legally entitled to exemption
B. Producer
C. Owner
D. Importer

32. Mr. RJ established a private hospital and a private educational institution. Are the two entities
subject to value added tax (VAT) on their primary course of business?
A. Both entities are not exempt from VAT
B. Both entities are not subject to VAT
C. Only the hospital is subject to VAT
D. Both entities are exempt from VAT

33. One of the following franchise grantees is not subject to VAT. Which is it?
A. Franchise grantees of gas and water utilities whose annual gross receipts of the preceding
year exceed P10,000,000
B. Franchise grantees of telephone and telegraph businesses
C. Franchise grantees on toll road operations
D. VAT-registered franchise grantees of radio and television broadcasting businesses whose
annual gross receipts of the preceding year do not exceed P10,000,000

34. Which of the following benefits received by an employee may be subject to the regular income tax
rates in the ITR?
(1) Use of employer’s bus for its drivers’ summer outing
(2) Uniform and clothing allowance of ₱6,000 per year
(3) Payment of tuition fee of eldest child of a rank-and-file employee
(4) Housing provided to a rank-and-file employee
A. All except (1)
B. All except (3)
C. All except (2)
D. None of the above
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 6

35. Statement 1: Property dividend received by a resident foreign corporation from a non-residentforeign
corporation is not subject to final tax but is includible in the income tax return of the resident foreign
corporation.
Statement 2: Dividends received by individuals from domestic corporations are
subject tocreditable withholding taxes.
A. Statement 1 is true. C. Both statements are false.
B. Statement 2 is true. D. Both statements are true.

36. The following are the requirements for retirement benefits under R.A. No. 7641 to be exempt from
income tax, except:
A. There must be a reasonable private benefit plan approved by the BIR.
B. The employee must be at least 60 but not more than 65.
C. The retiree must have served the same employer for at least 5 years.
D. None of the above.

37. Iris, married to Santiago had the following during the taxable year:
Gross Income
From the practice of profession P 700,000
Rental income from their conjugal property 300,000
Allowable deductions
For the practice of profession 520,000
For the property rented to tenants 140,000

The taxable income of Iris is

A. P340,000
B. P180,000
C. P260,000
D. P170,000

38. Ms. Amaya Martin, an employee received the following compensation from Mr. Eduardo, his
employer for the year 2022:
• Basic salary (net of government contributions) - Php600,000
• 13th month pay, P50,000
• Mid-year bonus, P10,000
• Year-end bonus, P20,000
• Uniform allowance, P10,000
• Rice subsidy, P36,000
How much should be reflected as the taxable income from the said employee?
A. P606,000
B. P696,000
C. P616,000
D. P636,000

39. Mr. CHAPARRO, is a practicing lawyer, who is engaged in providing legal services to his clients.
He is also a licensed real estate broker. Both businesses were registered with the BIR and had
the following data made available for year 2018 (amounts are gross of withholding tax):
➢ Revenues from his profession as a lawyer amounting to P3,000,000;
➢ Commission received as a real estate broker amounts to P600,000;
➢ Cost of services and business related expenses amounted to P700,000 and P400,000,
respectively;
➢ Gain on sale of real property held for investment amounts to P500,000 (selling price is
P2,000,000);
➢ Wage ring gain amounting to P50,000 (net of wage ring losses of P100,000);
➢ Royalties from books published and sold amounting to P150,000; and
➢ Interest income from banks amounting to P30,000.
How much is the final withholding income tax of Mr. CHAPARRO, assuming 2/3 of interest
income from banks were realized from time deposits with maturity of 5years?
A. P 17,000
B. P 21,000
C. P 47,000
D. P 137,000
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 7

40. On July 1, 2020, a ALVARO sold directly to a buyer shares of stock of a domestic corporation
held as capital asset, as follows:
Cost P500,000
Holding period 12 months
Selling price at prevailing market value of P900,000, paid as
follows:
Cash:
7/1/2020 Down payment 50,000
12/1/2020 Installment 75,000
7/1/2021 Installment 75,000
12/1/2021 Installment 100,000
Assumption by the buyer of an indebtedness of the shares 600,000

The total final gain tax paid on the payments received in 2020 was:
A. P19,687.50
B. P33,750.00
C. P30,625.00
D. P39,375.00

41. David Austria sold his principal residence for P16,000,000 when the cost to him of the same was
P5,000,000. At the time of the sale the zonal and assessed value are Php20,000,000 and
P15,000,000, respectively.

The capital gains tax on the sale is.

A. P 0
B. P 300,000
C. P 900,000
D. P 1,200,000

42. Situational 2 (TRAIN LAW) - LUQUE, married to ANNA, died leaving the following:
Car acquired before marriage by LUQUE P 3,000,000
Car acquired before marriage by ANNA 4,500,000
House and lot acquired during marriage 15,000,000
Jewelries of ANNA (received as gift during the marriage) 1,000,000
Personal properties inherited by LUQUE during marriage 2,500,000
Land inherited by ANNA during marriage 10,000,000
Rental income on land inherited by ANNA (25% of which was earned
after LUQUE’s death) 2,000,000
Benefits from SSS 3,500,000
Proceeds of group insurance taken by LUQUE’s employer 1,750,000

How much is the correct gross estate if the property relationship is absolute community of
property?
A. 19,500,000
B. 25,000,000
C. 26,500,000
D. 36,000,000

43. Bryan Lopez sold his principal residence for P16,000,000 when the cost to him of the same was
P5,000,000. At the time of the sale the zonal and assessed value are P20,000,000 and
P15,000,000, respectively. Ten months after the sale, Bryan acquired another principal residence
for P12,000,000.

The capital gains tax on the sale is

A. P 0
B. P 300,000
C. P 900,000
D. P 1,200,000
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 8

44. Cecilia, is employed and paid a monthly salary equivalent to the statutory minimum wage. The
following are his employment income during the year:

Statutory minimum wage P 150,000

13th month pay 15,000
Overtime pay earned during the year 25,000
Night shift differential pay 20,000
Hazard pay 75,000
Holiday pay 15,000
Total P300,000

The taxable income of Cecilia during the year is

A. P 0
B. P 35,000
C. P 90,000
D. P 300,000

45. Robert is an MWE receiving salary equal to the statutory minimum wage (SMW). He got
promoted and beginning July 1, 2020 his salary exceeds the SMW. Choose the correct statement
from the following:
A. His income for the entire year ended 2020 is subject to compensation withholding tax.
B. Considering that income tax period is one calendar year, Robert will be subjected to
compensation withholding beginning January 1, 2021.
C. Only his earnings beginning July 1, 2020 is subjected to compensation withholding tax.
D. Holiday, overtime, nightshift and hazard pay is exempt from withholding tax.

46. Anna Santiago, the Chief Financial Officer of SAVEMORE, INC., earned annual compensation
income in 2020 of P2,500,000, inclusive of 13th month and other benefits in the amount of
P220,000 but net of mandatory contributions to SSS and Philhealth. Aside from employment
income, she owns a convenience store, with gross sales of P800,000. Her Cost of Sales and
operating expenses are P500,000 and P150,000, respectively, and with non-operating income of
P100,000.

How much is the total income tax of Anna?

A. P 52,000
B. P621,200
C. P693,200
D. P701,200

47. Corporation A, a retailer, has a gross sales of P1,400,000,000 with a cost of sales of P560,000,000
and allowable deductions of 150,000,000 for the calendar year 2021. Its total assets of
P180,000,000 as of December 31, 2021 per Audited Financial Statements includes the land costing
P50,000,000 and the building of P25,000,000 in which the business entity is situated, with an
aggregate amount of P75,000,000 as Fixed Assets. Assuming CY 2021 is the 5th year of operation
of Corporation A.

Corporation A’s regular corporate income tax for CY 2021 is: (CREATE LAW)
A. P 0
B. P 8,400,000
C. P 138,000,000
D. P 172,500,000

48. The Black Corporation provided the following data for the calendar year ending December 31,
2021 ($1=P50):
Philippines USA
Gross Income P4,000,000 $40,000
Deductions 2,500,000 15,000
Income Tax Paid 3,000

If it is a domestic corporation, its income tax after tax credit is: (CREATE LAW)
A. P 400,000
B. P 537,500
C. P 812,500
D. P 962,500
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 9

49. A taxpayer married, with three minor children, provided the following data for 2018:
Compensation income (10% represents SSS, Pag-IBIG, Philhealth & Union dues
contributions) P 275,000
Income from merchandising 3,500,000
Other income (20% represents income from bank deposits abroad) 250,000
Expenses (15% represents personal expenses) 2,400,000
Income from treasury bills 100,000
Additional information:
¼ of business income and deductible business expenses is from outside the Philippines.
Assuming that the taxpayer is a non-resident citizen, is he qualified to avail of the 8% income tax
rate based on gross sales and/or gross receipts and other non-operating income?
A. Yes, because he is a mixed income earner (compensation and self-employment income).
B. No, because his 2018 gross sales and/or gross receipts exceeded the P3 Million threshold as
a compulsory VAT taxpayer, registered or not.
C. No, because there is no indication at all of his signifying his intention to be taxed at the 8%
income tax rate in his 1st quarter of 2018 income tax return.
D. Yes, if he opts to be taxed at the 8% income tax rate duly signified in his 1st quarter income
tax return, due to his actually failing to meet the over P3 Million gross sales and/or gross
receipts threshold as compulsory VAT taxpayer in 2018.

50. A taxpayer married, with three minor children, provided the following data for 2018:
Compensation income (10% represents SSS, Pag-IBIG, Philhealth & Union dues
contributions) P 275,000
Income from merchandising 3,500,000
Other income (20% represents income from bank deposits abroad) 250,000
Expenses (15% represents personal expenses) 2,400,000
Income from treasury bills 100,000

Additional information:
¼ of business income and deductible business expenses is from outside the Philippines.

If the taxpayer opts to be taxed at 8% income tax (duly signified), the income tax is due and
payable for 2018 is:
A. P 225,800
B. P 226,000
C. P 231,000
D. P 352,700

51. A taxpayer married, with three minor children, provided the following data for 2018:
Compensation income (10% represents SSS, Pag-IBIG, Philhealth & Union dues
contributions) P 275,000
Income from merchandising 3,500,000
Other income (20% represents income from bank deposits abroad) 250,000
Expenses (15% represents personal expenses) 2,400,000
Income from treasury bills 100,000

Additional information:
¼ of business income and deductible business expenses is from outside the Philippines.

If the taxpayer opts to be taxed at 8% income tax (duly signified), how much is the total final taxes?
A. Exempt
B. P 10,000
C. P 20,000
D. P 30,000

52. Dalisay has 30% interest in Wagas Corporation. He transferred a personal property he bought in
2017 for P3,000,000 to the corporation and gained control to the extent of 80% percent. He
received in 2019, for his property transfer, shares of Wagas Corporation with a fair market value of
P2,900,000; cash of P1,500,000 and an idle lot with a fair market value of P1,600,000. Right after,
he simultaneously sold the Wagas Corporation shares and the lot he received for P3,500,000 and
P1,700,000, respectively.

As a result of the transaction, the taxable gain to be recognized is :

A. Capital gain of P1,500,000.
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 10

B. Ordinary gain of P3,100,000.

C. Capital or ordinary gain of P3,000,000.
D. None, being a transfer of property to a controlled corporation.

53. Dalisay has 30% interest in Wagas Corporation. He transferred a personal property he bought in
2017 for P3,000,000 to the corporation and gained control to the extent of 80% percent. He
received in 2019, for his property transfer, shares of Wagas Corporation with a fair market value of
P2,900,000; cash of P1,500,000 and an idle lot with a fair market value of P1,600,000. Right after,
he simultaneously sold the Wagas Corporation shares and the lot he received for P3,500,000 and
P1,700,000, respectively.

The NIRC (as amended) tax due on the subsequent sale of the shares in Wagas Corporation is:
A. P 3,500 other percentage tax.
B. P 55,000 final capital gains tax.
C. P 90,000 final capital gains tax.
D. Include whatever gain recognized in the 2019 income tax return and tax the arising globalized
taxable income using the 0%-35% graduated rates under Sec. 24 (A)(2)(a) of the tax code as
amended.

54. Dalisay has 30% interest in Wagas Corporation. He transferred a personal property he bought in
2017 for P3,000,000 to the corporation and gained control to the extent of 80% percent. He
received in 2019, for his property transfer, shares of Wagas Corporation with a fair market value of
P2,900,000; cash of P1,500,000 and an idle lot with a fair market value of P1,600,000. Right after,
he simultaneously sold the Wagas Corporation shares and the lot he received for P3,500,000 and
P1,700,000, respectively.

The income tax due on the subsequent sale also of the idle lot is:
A. P 96,000 final capital gains tax.
B. P 102,000 final capital gains tax.
C. Any arising gain (100%) shall be taxed the graduated income tax rates of 0%-35% under Sec.
24 (A)(2)(a) of the tax code as amended.
D. Any arising gain (50% only) shall be taxed the graduated income tax rates of 0%-35% under
Sec. 24 (A)(2)(a) of the tax code, as amended.

55. The taxpayer is a resident citizen who is married. For 2019, which is under investigation by the BIR,
he had the following data:

Net worth, December 31, 2019 P 1,700,000

Net worth, December 31, 2018 1,000,000
Interest received on money market placement in bank preterminated in year 4,
from an original term of 6 years 95,000
Dividend on shares of stock of domestic corporation 75,000
Amount withdrawn from a P157,500 share in the net income after tax of a business
partnership 50,000
Compensation received as the Managing Partner of a General Professional
Partnership that earned P400,000 in 2019. The taxpayer has a 25% profit share 108,000
Rent income per books (out of an advance rental by tenants of P120,000) 20,000
Income tax paid for 2018 130,000
Interest paid on money borrowed for use in acquiring long term bond investments 25,000
Personal, living and family expenditures 150,000
Cost to repair residential house partially destroyed by typhoon 120,000
Premiums paid on family health and hospitalization insurance 7,500
Capital gain on bonds of a domestic corporation held for 10 months 40,000
Capital loss on bonds of a domestic corporation held for 18 months 70,000

In the event of conflict between the Philippine Accounting Standards (PAS) or the Philippine
Financial Reporting Standards (PFRS) and the National Internal Revenue Code (as amended) and
you are resolving on taxation issues:
A. PAS/PFRS shall prevail over the Tax Code.
B. The Tax Code shall prevail over the PAS/PFRS.
C. Both the Tax Code and the PAS/PFRS shall be disregarded.
D. The taxpayer at his/her/its option may choose either the PAS/PFRS or the Tax Code.
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 11

56. The taxpayer is a resident citizen who is married. For 2019, which is under investigation by the BIR,
he had the following data:

Net worth, December 31, 2019 P 1,700,000

Net worth, December 31, 2018 1,000,000
Interest received on money market placement in bank preterminated in year 4,
from an original term of 6 years 95,000
Dividend on shares of stock of domestic corporation 75,000
Amount withdrawn from a P157,500 share in the net income after tax of a business
partnership 50,000
Compensation received as the Managing Partner of a General Professional
Partnership that earned P400,000 in 2019. The taxpayer has a 25% profit share 108,000
Rent income per books (out of an advance rental by tenants of P120,000) 20,000
Income tax paid for 2018 130,000
Interest paid on money borrowed for use in acquiring long term bond investments 25,000
Personal, living and family expenditures 150,000
Cost to repair residential house partially destroyed by typhoon 120,000
Premiums paid on family health and hospitalization insurance 7,500
Capital gain on bonds of a domestic corporation held for 10 months 40,000
Capital loss on bonds of a domestic corporation held for 18 months 70,000

The taxable income per investigation by the BIR Examiners is:

A. P 985,000
B. P 990,000
C. P 995,000
D. P 1,098,000

57. Decedent was married at the time of death and was survived by his wife and their five legitimate
children when he was still alive. He died on November 1, 2018, leaving the following:

Real and personal properties in the Philippines P 11,000,000

Proceeds of life insurance:
Receivable by the estate as revocable beneficiary 5,000,000
Receivable by the spouse as irrevocable beneficiary 3,900,000
Medical expenses within one year prior to death:
Paid by the time of death 500,000
Unpaid as at the time of death 400,000
Funeral expenses:
Paid by the time of death 200,000
Unpaid at the time of death 300,000
Other obligations of the decedent 1,500,000

The net taxable estate is:

A. P 1,250,000
B. P 1,900,000
C. P 2,250,000
D. P 3,700,000

58. Decedent was married at the time of death and was survived by his wife and their five legitimate
children when he was still alive. He died on November 1, 2018, leaving the following:

Real and personal properties in the Philippines P 11,000,000

Proceeds of life insurance:
Receivable by the estate as revocable beneficiary 5,000,000
Receivable by the spouse as irrevocable beneficiary 3,900,000
Medical expenses within one year prior to death:
Paid by the time of death 500,000
Unpaid as at the time of death 400,000

Funeral expenses:
Paid by the time of death 200,000
Unpaid at the time of death 300,000
Other obligations of the decedent 1,500,000
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 12

The net distributable estate to the compulsory heirs is:

A. P 13,575,000
B. P 13,665,000
C. P 13,686,000
D. P 13,725,000

59. On July 1, 2019, Jose Buenaventura sold his idle residential lot to his close friend for only
P800,000 when the prevailing fair market value was P1,200,000. The cost to him though was only
P500,000. He gave a commission of P20,000 and spent for documentary stamp taxes and transfer
fees of P60,000. Choose the correct answer:
A. The amount by which the fair market value of the property sold exceeded the value of the
consideration shall be deemed a gift and shall be included in computing the amount of gifts
made during the calendar year.
B. The sale being a bona fide arm’s length transaction and free from any donative intent shall
still be considered as made for an adequate and full consideration in money or money’s
worth, hence, not subject to donor’s tax.
C. While there is a perceived gift in the transaction (as cited in letter a. choice above), the
appropriate internal revenue tax to apply is the Final Capital Gains Tax in income taxation,
rather than the Donor’s Tax in transfer taxes.
D. None of the choices is correct.

60. On July 1, 2019, Jose Buenaventura sold his idle residential lot to his close friend for only
P800,000 when the prevailing fair market value was P1,200,000. The cost to him though was only
P500,000. He gave a commission of P20,000 and spent for documentary stamp taxes and transfer
fees of P60,000.
Real and personal properties, Philippines P 6,000,000
Proceeds of life insurance:
Receivable by mother as irrevocable beneficiary 500,000
Receivable by estate as revocable beneficiary 1,000,000
Medical expenses within one year before death:
Paid by the time of death 300,000
Unpaid as at the time of death 400,000
Funeral expenses:
Paid by the time of death 100,000
Unpaid as at the time of death 150,000
Other obligations at the time of death 1,000,000

The decedent died single on February 14, 2019.

The taxable net estate is:
A. P 1,000,000
B. P 1,500,000
C. P 1,300,000
D. P 1,400,000

61. GLOBE INC. has the following data for the first month of the second calendar quarter of 2022:
• Gross receipts, domestic calls - P5,000,000
• Payments received, overseas calls (originating from the Philippines) - P3,000,000
• Purchases of supplies used in connection with domestic calls, net of Value Added Tax
(VAT) - P300,000
• Purchases of equipment used in connection with both domestic calls and overseas calls, net
of VAT - P800,000
• Business expenses - P1,000,000.
How much is the VAT payable, if any?
A. P504,000
B. P468,000
C. P828,000
D. None, not subject to VAT
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 13

62. ABC, is a domestic corporation engaged in merchandising business. For the calendar year 2022, it
had a net income per books of P500,000, after considering, among others, the following:

a. Dividend received from a domestic corporation P 30,000

b. Provision for doubtful accounts 10,000
c. Dividend received from a foreign corporation 20,000
d. Portion of P150,000 advance rental already earned 100,000
e. Recovery of receivables previously written off (included as part of net income
above):
Allowed by the BIR as deduction 10,000
Disallowed by the BIR as deduction 30,000
f. Refund of taxes (included as part of net income above):
Allowed by the BIR as deduction 25,000
Disallowed by the BIR as deduction 15,000
g. Bank interest income:
Philippine Bank 80,000
USA Bank 100,000

The taxable
income is
A. P485,000
B. P365,000
C. P 375,000
D. P405,000

63. MIREN, a VAT registered taxpayer has the following data taken from its books for the month of
December 2022 (assume all amounts are exclusive of VAT:
• Revenues on credit for the month of December 2022 – P500,000
• Cash revenues for the month of December 2022 – P800,000
• Increase on outstanding balance of trade receivables from December 1 to 31, 2022 –
P100,000.
How much is the output tax due for the month of December 2022 assuming the taxpayer is
engaged in sale of services?
A. P144,000
B. P156,000
C. P168,000
D. P 96,000

64. Dolores is the winning bidder to exclusively supply face shield and equipment required by their city.
During the month it had the following (amount given are exclusive of the VAT):
Sales Php400,000
Purchases of merchandise 80,000
Purchases of delivery equipment 5 years life 1,200,000
Purchases of utilities (paid to Paleco) 30,000

How much VAT payable for the month:

A. 36,000
B. 32,400
C. 13,600
D. 10,000
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 14

65. The following information was gathered pertaining to the business of Linda, a VAT-registered
person for a taxable period:
Taxable sales P800,000
Zero-rated sales 400,000
Exempt sales 300,000
Input tax – taxable sales 45,000
Input tax – zero-rated sales 10,000
Input tax – exempt sales 15,000
Input tax that cannot be attributed to any 20,000
transaction

Assuming all applicable input taxes are to be claimed as credits against output taxes, the VAT
payable is:
A. P51,000
B. P35,000
C. P25,000
D. P6,000

66. VILLAR REALTY is a VAT-registered real estate lessor. It owned a building which is leased for
residential and commercial use. During the month of April 2021, the following information was
made available (all amounts are VAT exclusive):

Gross receipts from lease of commercial spaces P450,000

Gross receipts from lease of residential spaces at P15,000 per unit 150,000
Uncollected rentals for the month of April 2021:
➢ Commercial spaces 300,000
➢ Residential spaces 100,000
Purchases from VAT suppliers:
➢ Final payment made to contractor of the building for lease 1,200,000
(20 years)
➢ Purchase of generator set for the whole building (10 years 1,000,000
life)
➢ Purchase of furniture and equipment (3 years life) 300,000
➢ Purchase for office supplies 50,000

How much is the deferred input VAT as of May 1, 2021?

A. P294,600
B. P118,000
C. P159,000
D. P153,000

67. Guiron, a VAT taxpayer made a P100,000 sales to the government invoiced at P112,000 inclusive
of output vat. He purchased the same for P90,000, net of P10,800 input vat from Leopold
Corporation. The government effected payment, net of the 5% final tax. The actual input vat that
will be charged to cost or expense is
A. 2,000
B. 3,800
C. 5,000
D. 7,000
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 15

68. VILLAR REALTY is a VAT-registered real estate lessor. It owned a building which is leased for
residential and commercial use. During the month of April 2021, the following information was
made available (all amounts are VAT exclusive):
Gross receipts from lease of commercial spaces P450,000

Gross receipts from lease of residential spaces at P15,000 per unit 150,000

Uncollected rentals for the month of April 2021:

➢ Commercial spaces 300,000

➢ Residential spaces 100,000

Purchases from VAT suppliers:

➢ Final payment made to contractor of the building for lease 1,200,000

(20 years)
➢ Purchase of generator set for the whole building (10 years 1,000,000
life)
➢ Purchase of furniture and equipment (3 years life) 300,000

➢ Purchase for office supplies 50,000

Until when shall the deferred input VAT from purchase of capital goods be applied in full?
A. December 31, 2023
B. December 31, 2024
C. January 1, 2024
D. January 1, 2025

69. Rosana Singson, resident citizen, is a real estate lessor in the Philippine.
She has the following financial information in the current taxable year 2021:
(a) Interest income on receivable from her mother ₱ 25,000
(b) Interest expense on loan owed to cousin 15,000
(c) Royalty income from book, net of FT 75,000
(d) Loss on sale of rental property to grandfather 350,000
(e) Gain on sale of personal car bought in 2018 90,000
(f) Rental receipts from real property, gross of 5% CWT 600,000
(g) Cost of revenues related real property leasing 100,000
(h) Liquidating dividend paid by X Corporation 187,000
Cost of investment made in January 2021 in X Corporation 200,000
(i) Dividend received from Microsoft Corporation with
headquarters in Seattle, Washington, USA 75,000
(j) Dividend from Jollibee Corporation, net of FT 5,000
(k) Expenses for boxing lessons taught by Senator Pacquiao 50,000
(l) OPT paid 18,000
(m) Taxes paid in her first 3 quarterly ITRs for 2021 16,700

Which of the following expenses may she deduct in her ITR?

A. Interest expense on loan owed to cousin in the amount of ₱15,000
B. Loss on sale of rental property to grandfather in the amount of ₱350,000
C. Expenses for boxing lessons taught by Sen. Pacquiao in the amount of ₱50,000
D. None of the above.
CRC-ACE/TAX: First Pre-board Examinations May 2023 batch Page 16

70. Rosana Singson, resident citizen, is a real estate lessor in the Philippines.
She has the following financial information in the current taxable year 2021:
(a) Interest income on receivable from her mother ₱ 25,000
(b) Interest expense on loan owed to cousin 15,000
(c) Royalty income from book, net of FT 75,000
(d) Loss on sale of rental property to grandfather 350,000
(e) Gain on sale of personal car bought in 2018 90,000
(f) Rental receipts from real property, gross of 5% CWT 600,000
(g) Cost of revenues related real property leasing 100,000
(h) Liquidating dividend paid by X Corporation 187,000
Cost of investment made in January 2021 in X Corporation 200,000
(i) Dividend received from Microsoft Corporation with
headquarters in Seattle, Washington, USA 75,000
(j) Dividend from Jollibee Corporation, net of FT 5,000
(k) Expenses for boxing lessons taught by Senator Pacquiao 50,000
(l) OPT paid 18,000
(m) Taxes paid in her first 3 quarterly ITRs for 2021 16,700

If Rosana chose to be taxed under the graduated rates with OSD in her 1st Quarterly ITR, what BIR
form shall she file for her annual return?
A. BIR Form No. 1700 – Individuals Earning Purely Compensation Income
(including Non Business/Non-Profession Related Income)
B. BIR Form No. 1701 – Individuals (including Mixed Income Earners),
Estates, and Trusts
C. BIR Form No. 1701A – Individuals Earning Purely From
Business/Profession [Those under the graduated income tax rates with
OSD as mode of deduction OR those who optedto avail of the 8% flat
income tax rate].
D. None of the above.

reh/cde