PRTC - Final Preboard - Taxation - 2017
1. In our jurisdiction, which of the following statements may be erroneous? a. Taxes are pecuniary in nature. b. Taxes are assessed according to a reasonable rule of appointment. c. Taxes are levied by the executive branch of the government. d. Taxes are imposed on persons and property within the territorial jurisdiction of a State. 2. RRO Corp. secured an income tax holiday for five (5) years as pioneer industry. On the 4th year of tax holiday, RRO Corp. declared and cash dividends to its shareholders, all of whom are individuals. Are the dividends taxable? a. The dividends are taxable; the tax exemptions of RRO Corp. does not extend to its shareholders. b. The dividends are tax exempt because RRO’s tax holiday. c. The dividends are taxable if they exceed 50% of RRO’s retained earnings. d. The dividends are exempt if paid before the end of RRO’s fiscal year. 3. Brianne sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR and the municipal license tax based on the same sales to the City of Makati. He comes to you for advice because he thinks he is being subjected to double taxation. That advice will you give him? a. Yes, there is double taxation and it is oppressive. b. The City of Makati does not have this power. c. Yes, there is double taxation and it is illegal in the Philippines. d. Double taxation is allowed where the tax is imposed by the national government. 4. Congress passed a sin tax that increased the tax rates on cigarettes by 1,000%. The law was thought to be sufficient to drive many cigarette companies out of business, and was questioned in court by cigarette company that would go out of business because it would not be able to pay the increased tax. The company is: a. Wrong because taxes are the lifeblood of the government. b. Wrong because the law recognizes that the power tax has the power to destroy. c. Correct because no government can deprive a person of his lifeblood. d. Correct because Congress in this case exceeded its power to tax. 5. Ka Luis is engaged in retail business. He received a deficiency tax assessment from the BIR containing only the computation of the deficiency tax penalties, without any explanation of the factual and legal bases for the assessment. Is the assessment valid? a. The assessment is valid, all that Ka Luis has to know is the amount of the tax. b. The assessment is invalid, the law requires a statement of the facts and the law upon which the assessment is based. c. The assessment is valid but Ka Luis can still contest it. d. The assessment is invalid because Ka Luis has no way to determine if the computation is erroneous. 6. The BIR may compromise payment of the internal revenue taxes when: First ground: A reasonable doubt as to the validity of the claim against the taxpayer exists. Second ground: When collection costs do not justify the collection of the tax. a. Both grounds are correct. b. Only first ground is correct. c. Both grounds are incorrect. d. Only second ground is correct.
7. A Preliminary Assessment Notice (PAN) is not required to be issued by the BIR before issuing a Final Assessment Notice (FAN) in the following cases: a. When a taxpayer does not pay the 2015 deficiency income tax liability on or before July 15, 2016. b. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the return. c. When a discrepancy has been determined between the value added tax paid and the amount due for the year. d. All of the above. 8. 1st Statement: The Commissioner of Internal Revenue shall have the power to inquire into a taxpayers bank deposit in relation to all internal revenue taxes. 2nd Statement: The Commissioner of Internal Revenue shall have the power to divide the Philippines into zones for purposes of prescribing real property values. a. Only 1st statement is correct. b. Only 2nd statement is correct. c. Both statements are correct. d. Both statements are incorrect. 9. The following are the authorities of the Commissioner to reduce revenue taxes, except: a. Compromise the payment of any internal revenue tax when a reasonable doubt as to the validity of claim against the taxpayer exists. b. Compromise the payment of any internal revenue tax when the financial condition of the taxpayer demonstrates a clear ability to pay the assessed tax. c. Abate tax liability when a portion thereof appears to be unjustly or excessively assessed. d. Credit or refund taxes erroneously or illegally received or penalties imposed without authority. 10. 1st Statement: Ordinarily, Internal revenue taxes shall be assessed within three (3) years after the last day of filling as prescribed by law or when the return is filed whichever is later. 2nd Statement: Internal revenue taxes shall be administratively collected within five (5) years following the valid assessment of the tax. a. Only 1st statement is correct. b. Only 2nd statement is correct. c. Both statements are correct. d. Both statements are incorrect. 11. Spanflex Int’l Inc. received a notice of assessment from the BIR. It seasonably filed a protest with all the necessary supporting documents but the BIR failed to act on the protest. Thirty days from the lapse of 180 days from the filing of its protest, Spanflex still has not elevated the matter to the CTA. What remedy, if any, can Spanflex take? a. It may file a motion to admit appeal if it could prove that its failure to appeal was due to the negligence of counsel. b. It may no longer appeal since there is no BIR decision from which it could appeal. c. It may wait for the final decision of the BIR on his protest and appeal it to the CTA within 30 days from receipt of such decision. d. None. Its right to appeal to the CTA has prescribed. 12. Hermes received a final assessment notice (FAN) from the BIR on December 20, 2015. He submitted his protest and the supporting documents within the time prescribed by the Law. After 180 days, the subsequent step/s available to him shall be: I. Elevate the case on appeal to the CTA, alleging inaction of the CIR, within 30 days from the 180th day since he submitted the supporting documents on his protest.
II. Wait for the decision of the Commissioner of Internal Revenue (CIR) and if adverse, appeal the case before the CTA within thirty (30) days. a. I only c. I and II b. II only d. I or II Due to a system error in 2017, the P1,000 outstanding balance of Insi’s savings account in BPI Makati branch reflected a balance of P1,000,000 in which he promptly withdrew. The bank demanded the mistakenly credited excess, but Insi refused. The BIR entered the picture and investigated Insi. Would BIR be correct if it determines that Insi earned a taxable income under these facts? a. No, he had no income because he had no right to the mistakenly credited funds. b. Yes, income is income regardless of source. c. No, it was not his fault that the funds in excess of P1,000 were credited to him. d. No, the funds in excess of P1,000 were in effect donated to him. The following data pertain to installment sales of personal property made by Dina Bale, who regularly sells in installment, in his retail furniture store. Equal Collection in Year of Sale Installment Sale Profit 2016 2013 P50,000 15,000 10,000 2014 P100,000 40,000 20,000 2015 P150,000 75,000 40,000 These sales were regularly made in installment by Dina Bale to her customers. Under installment method, Dina should report gross profit for 2016 of a. P31,000 c. P86,000 b. P75,000 d. P130,000 Mr. Joe, an American redising in Hongkong came to the Philippines to sing the American national anthem on a professional boxing championship match held at the Araneta Coliseum. He was paid P1,000,000 as talent fee. His Philippine income tax would be: a. P320,000 c. P250,000 b. P285,000 d. P150,000 1st statement: To be exempt from income taxation, long term bank deposit or investment should not be terminated by the investor before the 5th year; otherwise, it shall be subjected to final tax rates of 5%, 12%, or 20% on interest income earnings. 2nd statement: For purposes of exemption from income taxation, the long term deposit or investment above refer to those investments issued by banks and other financial institutions. a. Only 1st statement is correct b. Only 2nd statement is correct c. Both statements are correct d. Both statements are incorrect Sinag Corporation secured the services of Panatag Security Agency. Based on the terms of the contract, Sinag is liable to pay Panatag P100,000 composed of P70,000 salaries for the Panatag’s security guards assigned to Sinag and P30,000 agency fee. Which of the following is correct? Panatag’s Gross Income Output VAT a. P100,000 P12,000 b. P100,000 P3,600 c. P30,000 P12,000 d. P30,000 P3,600
18. Mr. Parker, a French citizen permanently residing in the Philippines, received several items during the taxable year. Which among the following is not subject to Philippine income taxation? a. Consultancy fees received for designing a computer program and installing the same in Shanghai facility of a Chinese firm. b. Interest from his deposits in a local bank of foreign currency earned abroad converted to Philippine pesos. c. Dividends received from an American corporation which derived 60% of its annual gross receipts from Philippine sources for the past ten (10) years. d. Gains derived from the sale of his condominium unit located in Quezon City. 19. Income from dealings in property (real, personal, or mixed) is the gain or loss derived: a. Only from the cash sale property. b. From cash and gratuitous receipts of property. c. From sale and lease of property. d. Only from sale of property. 20. Those caring for and living with a PWD shall be granted the incentives of additional exemptions under the Tax Code under the following conditions, except: a. PWD is a relative within the fourth civil degree of consanguinity of affinity to the taxpayer. b. Not more than 21 years of age. c. Not gainfully employed. d. Chiefly dependent upon the taxpayer for support. 21. Jim, a Filipino citizen, migrated to the United States some eight (8) years ago and got a permanent resident status or green card. He should pay his Philippine income taxes on: a. The gains derived from the sale in California, U.S.A. of jewelry he purchased in the Philippines. b. The proceeds he received from a Philippine insurance company as the sole beneficiary of life insurance taken by his father who died recently. c. The gains derived from the sale in New York Stock Exchange of shares of stock in PLDT, a Philippine corporation. d. Dividends received from a two year old foreign corporation whose gross income was derived solely from Philippine sources. 22. One of the following is not correct for deductibility of casualty losses from gross income: a. It must arise from fire, storm, or other casualty, robbery, theft, or embezzlement. b. It must not be compensated by insurance or any form of indemnity. c. A declaration of loss by casualty should be filed with the BIR. d. It is of property owned by the taxpayer, whether used in business or not. 23. Nico, Vice-President of JJ Super Fit Corporation was given a car by his employer, Mr. JJ Trinidad. The cost of the car given to Nico was P900,000. The fringe benefits tax that Nico is required to pay is: a. P423,529 c. P900,000 b. P288,000 d. P0 24. The MCIT shall NOT apply to which of the following resident foreign corporations. I. International Carrier II. Offshore Banking Units (OBUs) on their income from foreign currency transactions with the local commercial banks. III. Regional operating headquarters a. I only c. All of the above b. I and II only d. None of the above
25. If the returnable income of a senior citizen or elderly is in the nature of compensation income and he qualifies as a minimum wage earner, he shall be exempt from income tax. This income tax exemption is/a(n) a. Tax privileged given to senior citizens or elderly. b. Exemption which will be lost if the senior citizens or elderly. c. Privilege that will now extend an elderly with dual citizenship status. d. General income tax exemption without regard to the status of the taxpayer.