Tax CPAR Final Pre Board2

TAXATION

CPA Review School of the Philippines

INCOME TAXATION Basic Principles of Taxation 1. One of the following is not a Constitutional limitation on the power of taxation? A. Exemption from taxes of revenues and assets of educational institutions, including grants, endowments, donations and contributions. B. Non-impairment of the jurisdiction of Supreme Court in tax case C. Exemption of the government from taxes. D. Non-infringement of religious freedom and worship. 2. One of the following is not within the scope of legislative taxing power? A. The person, property or occupation to be taxed. B. The amount or rate of tax. C. The enforcement and administration of tax. D. The purpose of the tax provided it is public. 3. Which phase of taxation falls within the exclusive jurisdiction of the legislature: A. Imposition C. Enforcement B. Administration D. Collection 4. Kind of tax where rates increase as the tax base increase: A. Proportional tax C. Progressive tax B. Regressive tax D. Retroactive tax 5

1st Statement: In cases of deductions and exemptions from taxes. Doubts as to its interpretation shall be resolved strictly against the taxpayer. 2nd Statement: Generally tax laws shall be interpreted liberally in favor of the government A. B. C. D. st 1 Statement True True False False 2nd Statement True False True False

6. The following taxes are imposed by Congress in the, 1997 National Internal Revenue Code, except: A. Real Estate Tax C. Donor's Tax B. Value Added Tax D. Income Tax

Final Pre-board Examination

Income Tax Patterns 7. 1st Statement: Income even if merely presumed shall be taxable. 2nd Statement: Income to be taxable must be coming from legal sources. A. True, True C. True, False B. False, False D. False, True 8. Which of the following is not an income taxpayer: A. Ordinary partnership C. General professional partnership B. Joint venture D. Corporation Income Tax on Individuals 9. Which of the following items would be included in the determination of gross compensation income: A. SSS Contribution B. Union dues C. 13th month pay amounting to P20,000 D. Productivity incentive pay amounting to P35,000 10. The total amount of exemption allowed to a taxpayer who is married with 5 qualified dependent children A. P72,000 C. P60,000 B. P64,000 D. P57,000 11. One of the following in a passive income subject to final tax rates of 20% A. Interest from any currency bank deposits and yield or any other monetary benefit from deposits substitute and from trust fund and similar arrangements derived from sources outside the Philippines. B. Royalties, including books, as well as other literary works and musical compositions. C. Other winning, except Philippine Charity Sweepstakes and Lotto winning D. Interest income received from expanded foreign currency deposit system. 12. Optional Standard Deduction shall not be allowed to a: A. Resident citizen C. Resident alien B. Non-resident citizen D. Non-resident alien 13. Refund of the following, taxes shall be considered taxable income, except: A. Municipal license fee C. Fringe benefit tax B. Real estate tax D. Capital gains tax

September 18, 2004

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TAXATION

CPA Review School of the Philippines

Income Tax on Corporation 14. Minimum corporate income tax shall not be imposed on: A. Domestic corporation C. Resident corporation B. Foreign corporation D. Non-resident corporation

B. P640,000

Final Pre-board Examination D. P320,000

15. For purposes of computing minimum corporate income tax of a corporation engaged in the sale of services, cost of services means: A. Salaries and employees' benefits of personnel directly rendering the service. B. Cost of facilities directly utilized in providing the services C. Cost of supplies D. All of the above 16. A corporation exempt from income tax is A. Labor, agricultural or horticultural organization organized for profit. B. Cemetery Company owned and operated exclusively for the benefit of its members. C. Non-profit and stock educational institution. D. Private education institution. 17. 1st Statement: Regional operating headquarters of a multinational company shall be taxed like an ordinary foreign corporation. 2nd Statement: Regional or area headquarters of a multinational, company shall pay a tax ten percent of their taxable income. A. B. C. D. 1st Statement True True False False 2nd Statement True False True False 18. 1st Statement: A domestic corporation is taxable on all income derived from sources within and outside the Philippines. 2nd Statement: A foreign corporation whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines. A. B. C. D. st 1 Statement True True False False 2nd Statement True False True False 19. Air Jordan is a resident international carrier. For the year 2003, its Gross Philippine Billings totaled P2,000,000. The company's income tax liability would amount to: A. P50,000 C. P200,000 September 18, 2004

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TAXATION

CPA Review School of the Philippines

20. A non-resident corporation received dividend from a domestic corporation. The income tax liability will be: A. Gross income tax of 32%. B. None, because it is an exempt income. C. 15% final tax on the dividend income received. D. 20% final tax on the dividend income received. 21. 1st Statement: All international carriers shall be subjected to a 2½% tax on their gross Philippines billings. 2nd Statement: Gross Philippine Billings in international shipping shall mean gross revenue whether for passenger, cargo or mail originating from the Philippines up to final destination, regardless of the place of sale or payments of the passage or freight documents. A. B. C. D. st 1 Statement True True False False 2nd Statement True False True False Questions 22 thru 24 are based on the following information. Ina Computer University is a private educational institution. It owns a 10-storey building where the first 5 floors are being used for its operations and the other 5 floors are being rented by other entities. During the year 2003, its income and expenses figures are as follows: Gross income Tuition fees P3,000,000 Rent Income 500,000 Operating Expenses 1,500,000

Final Pre-board Examination

Fringe Benefits Tax 25. Tax imposed on any goods, services or other benefits furnished or granted in cash or in kind by an employer to an individual employee is a A. Value added tax C. Creditable withholding tax B. Fringe benefit tax D. Final tax on certain income 26. The following are exempt fringe benefits, except for one: A. Fringe benefits given to rank and file employee. B. Fringe benefit given for the convenience of the employee. C. Fringe benefit required by the nature of or necessary to the business of the employer. D. Rice benefit amounting to P1,000 a month Capital Gains Tax on Sale of Real Property 27. Which of the following is not subject to capital gains tax on sale of real property? A. Sale by a corporation of its warehouse, located at Philippine Economic Zone Authority. B. Sale by natural persons, the proceeds of winch are fully utilized in acquiring a new principal residence C. Sale by a partnership of its condominium unit, being occupied by one of its partners. D. Sale of real property to the government or government owned or controlled corporations. Questions 28 & 29 are based on the following information. Mr. Vino Sabos, married and with two minor children, sold his principal residence in Cubao, the entire proceeds of which he immediately used to pay for another. Selling price of the house was at P10,000,000. The cost to him of the said house was P7,500,000.

22. The income tax due of Ina Computer University shall be: A. P640,000 C. P70,000 B. P200,000 D. P112,000

28. His capital gains tax due would be: A. P600,000 B. P0

23. The Minimum Corporate Income Tax will be: A. P70,000 B. P0

29. The cost basis of the new principal residence would be. A. P10,000,000 C. P2,500,000 B. P7,500,000 D. P600,000

C. P200,000 D. P1,120,000

C. P245,000 D. P100,000

24. Assuming rent income of P5s000,000 the income tax due of Ina Computer University will be: A. P640,000 C. P2,080,000 B. P200,000 D. P112,000

September 18, 2004

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TAXATION

CPA Review School of the Philippines

Capital gain tax on sale of shares of stock of domestic corporation not listed and traded thru a local stock exchange 30. Miss Tina Ranta is a shareholder of 1,000 shares of stock of a domestic corporation. The shares were acquired at cost of P100 per share. For the period, she sold 500 shares in the local stock market for P150 per share. The Capital Gains Tax on the sale is; A. P2,500 C. P3,750 B. P1,250 D. P 0 Gross Income 31. The following are excluded from gross income, except: A. Amount received by insured as return of premiums B. Amount received by insured as return on premiums C. Proceeds of life insurance D. Amount of damages received for injuries Deductions from Gross Income 32. In general, ordinary and necessary trade, business or professional expenses have the following requisites, except: A. Substantiated by receipts B. Must be ordinary and necessary expenses C. Incurred during the taxable year D. Directly attributable to the development, management, operation of the business. 33. In computing allowable deduction for purposes of income taxation: 1st Statement: Interest expense in connection with taxpayer's business shall be reduced by an amount equal to thirty-eight percent (38%), beginning the year 2000 & thereafter, of interest income subjected to final tax. 2nd statement: Interest incurred to acquire property used in trade shall only be allowed to be treated as a capital expenditure. A. B. C. D. 1st Statement True True False False 2nd Statement True False True False

September 18, 2004

Final Pre-board Examination

BUSINESS & TRANSFER TAXES Value-added Tax 34. Receipts of the following are subject to the VAT, except: A. Professional Basketball players C. Lawyers B. Film directors D. Stage actors 35. Refunds or Tax credits of Input tax are not allowed under: A. Purchases on zero-rated or effectively zero-rated sales. B. Purchases of capital goods C. Purchases of entities whose VAT registration was cancelled D. Put chases related to VAT exempt transaction. 36. A VAT-registered business reported the following: 2003 Gross sales P545,000 2004 Gross sales P650,000 Which of the following statements is correct? A. VAT for the year 2003 only. C. No VAT for both years. B. VAT for the year 2004 only. D. VAT for both years. 37. During the year 2003, Mr. Jose's gross receipts from lease of 30 apartment units is P2,200,000. How much would Mr. Jose's output tax for the year 2003? A. P220,000 C. P600,000 B. P200,000 D. None Percentage Taxes 38. Debbie Gote operates 5 taxis in Baguio City. She cannot determine her actual quarterly gross receipts. Her percentage tax for the quarter is: A. P540 C. P180 B. P400 D. P 0 Remedies of the State & the Taxpayer 39. Where a return was filed, under ordinary circumstances, the prescriptive period for the government to make its assessment would be: 1st Statement: If the return was filed before the deadline within 3 years from the deadline 2nd Statement: If the return was filed on the deadline, within 3 years from the day of filing. A. B. C. D. 1st Statement True True False False Page 4 of 5

TAXATION 2nd Statement

CPA Review School of the Philippines True

False

True

False

40. Pre-assessment notice shall not be required except: A. When the finding for any deficiency tax is the result of mathematical error. B. When the finding of-discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. C. When the excise tax due on excisable articles has not been paid. D. When the value added tax due on imported articles has not been paid. Answer Key 1. C 2. C 3. A 4. C 5. B 6. A 7. C 8. C 9. D 10. B

September 18, 2004

Final Pre-board Examination

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

C D D D D B D A A C

21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

B B B C B B B B B D

31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

B A B C D D D A A D

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