TAXATION

Question 1
The 30% corporate income tax is decreased to 25% by the Congress for the purpose of raising
revenue to be used for national road expansion project near Bonifacio Global City, a private
corporation which seems to be illogical since it should be increased instead of decrease. Is the
exercised of the taxing power unconstitutional?
a) Yes, because taxing power must be exercised exclusively for public purpose without any
incidental benefit to any private entity.
b) Yes, because the increase in tax rate constitutes deprivation of right to property of corporation
without due process of law for being excessive and unreasonable.
c) No, because the constitution does not expressly state that the power of taxation must be used
only for public purpose, thus, it may be used to benefit a private entity.
d) No, because it is exercised directly for public purpose and the benefit to a private entity is only
incidental.
Question 2
Use the following data for the next (two) questions:
The Constitution requires that all revenue bills shall originate “exclusively” from the house of
Representatives. Assume that in 2021, Albay 2nd District Representative Joey Sarte Salceda proposed
an act to grant tax relief for companies in financial need, provide transparent tax provisions, and
further increase the competitiveness of the Philippines. The proposed bill was approved by the House
of Representative later that year. However, the CREATE version of the Senate became the CREATE
law.
Both I and I Which of the following statements will justify the enacted CREATE law?
I. The Constitution simply means that the initiative for filing revenue, tariff or tax bills must come from
the House of Representatives on the theory that, elected as they are from the districts, the Members
of the House can be expected to be more sensitive to the local needs and problems.
II. It is not the law but the revenue bill which is required by the Constitution to “originate exclusively”
in the House of Representatives because a bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole, and a distinct bill may be
produced.
I, II and III Assuming Senator Angara filed in the Senate a substitute CREATE bill “in anticipation” of its
receipt of the bill from the House. The proposal is totally different from the version of the lower
house. Which of the following statements will justify the filing of a substitute bill by Honorable
Senator Angara?
I. To insist that a revenue statute not only the bill which initiated the legislative process culminating in
the enactment of the law- must substantially be the same as the House Bill would be to deny the
Senate’s power not only to “concur with amendments” but also to “propose amendment”.
II. It would be to violate the coequality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate. Given the power of the Senate to propose amendments, it can
propose its own version even with respect to bills which are required by the Constitution to originate
in the House.
III. Filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House is not
prohibited under the Constitution, so long as the action by the Senate as a body is withheld pending
receipt of the House Bill.

Answer 1:
Correct!
Both I and I

Answer 2:
Correct!
I, II and III
Question 3
If a BOI-registered enterprise has a “registered” and an “unregistered” activity, the Minimum
Corporate Income Tax (MCIT) shall apply to:
a) registered activity only
b) both registered and unregistered activities
c) unregistered activity only
d) neither registered nor unregistered activity
Question 4
Statement 1: Tax exemption is an immunity from civil liability only. It is retrospective in application.
Statement 2: Tax amnesty is an immunity from all criminal civil and administrative liabilities arising
from non-payment of taxes. It is prospective application.
a) Both statements are correct.
b) Only statement 1 is correct.
c) Both statements are incorrect.
d) Only statement 2 is correct.
Question 5
Milagros donated a piece of farm land to son Mauricio, 19 years old, and single. The donor’s tax on the
donated property was not paid but Mauricio just the same took the possession of the property and
operated it himself. After a year after donation, an assessment on the income derived from the land
was issued against Mauricio. The assessment against Mauricio is:
a) Valid, because Mauricio owns the farm land.
b) Invalid, because Milagros was the one who earned the income.
c) Invalid, because Milagros owns the farm land.
d) Valid, because Mauricio was the one who earned the income.
Question 6
The income of a resident alien is subject to the basic tax.
a) Prizes from SM (P10,000), Rustan’s (P10,000), and Robinsons (P10,000) or a total of P30,000.
b) Interest income from Philippine currency deposit in PNB.
c) Winnings from PCSO and Philippine lotto.
d) Fringe benefits given to managerial employees.
Question 7
The improperly accumulated earnings tax imposed on corporation is:
a) Based on the net income per books before tax.
b) Based on the net income per books after tax.
c) Calculated to encourage corporations to pay dividends.
d) 10% of excess retained earnings over the paid in capital.
Question 8
Which of the following statement is not correct?
a) Holiday pay, overtime pay, night shift differential pay and hazard pay received by individuals
shall be exempt from income tax.
b) Minimum wage earners who are receiving only the statutory minimum wage are not subject to
withholding tax and consequently to income tax.
c) Compensation income of individuals that do not exceed the statutory minimum wage is exempt
from the requirement of withholding tax on compensation.
d) Compensation income of individuals that do not exceed ten thousand pesos per month is
exempt from the requirement of withholding tax on compensation
Question 9
One of the following is not a fiscal incentive to PEZA-registered economic zone enterprises.
a) exemption from wharfage dues, export tax, impost or fee
b) tax credit for import substitution
c) exemption from national taxes only
d) exemption from duties and taxes on importation of merchandise
Question 10
One of the following does not qualify as Senior Citizen for the Philippine Income tax purposes.
a) resident Filipino citizen aged 60 years old and above.
b) Filipino citizen aged 60 years old and above with “dual citizenship” status provided they prove
their Filipino citizenship and have at least 6 months residency in the Philippines.
c) None of the choices.
d) resident alien aged 60 years old and above.
Question 11
Genoe Corporation filed its income tax return and paid the tax due for calendar year 2021 showing a
tax liability of P175,000. However, upon audit, it was discovered that its income tax return was false
or fraudulent because it did not report other taxable income. Per investigation the correct income tax
due is P350,000. The corporation was duly informed of this finding through a preliminary assessment
notice. Failing to protest on time against the preliminary assessment notice, a formal letter demand
and assessment notice was issued on May 31, 2023 calling for payment of the deficiency income tax
on or before July 15, 2023.
The amount due on July 15, 2023 is:
a) P306,250
b) P341,250
c) P218,750
d) P288,750
Question 12
Aseana College, a private educational institution in 2020 had the following data in 2022:

Tuition fees P4.80M

Rental income (net of 5% of W/T) 4.94M
Total school expenses 9.45M

The income still due (excess W/T) for 2022 is:

a) P200,000
b) (P60,000)
c) (P122,500)
d) (P95,000)
Question 13
The income is subject to final tax:
a) Cash dividend received by a non-resident alien from a domestic corporation.
b) Share of a partner from the undistributed net income of general professional partnership.
c) Marriage fees, baptismal offerings received by a clergyman, evangelist or religious worker for
services rendered.
d) Fringe benefits received by rank and file employees
Question 14
2 / 4 pts
The next 4 questions are based on the following information:
The following data pertain to taxable year 2022

PHIL USA
Sales 500,000 600,000
Sales discounts, returns & allowances 20,000 50,000
Cost of sales 230,000 250,000
Rent expense 50,000 80,000
Salaries & wages 50,000 60,000
Interest expense 10,000
Entertainment & representation 10,000
Contribution to charitable institution 10,000
Interest on bank deposit 10,000 20,000
Royalties – musical 20,000 20,000
Dividends from domestic corporation 10,000
d The taxable income if the taxpayer is a MSME domestic corporation, and resident citizen:
MSME Domestic Resident Citizen
a. 320,000 320,000
b. 324,850 326,850
c. 280,000 280,000
d. 288,150 288,150

["", "", "", ""] The taxable income if the taxpayer claim optional standard deduction
MSME Domestic Resident Citizen
a. 354,000 642,000
b. 330,000 330,000
c. 378,000 378,000
d. 330,000 618,000

["", "", "", ""] The taxable income if the taxpayer is a resident foreign corporation &
resident citizen:
Corporation Resident Citizen
a. 160,000 160,000
b. 130,900 130,900
c. 133,855 130,900
d. 120,000 120,000

["", "", "", ""] The total final tax if the taxpayer is
Domestic Corporation Resident Citizen
a. 8,000 12,000
b. 14,000 14,000
c. 18,000 4,000
d. 6,000 4,000
Question 15
Which of the following is not true about the waiver of statute of limitations under the tax code.
a) It must be accepted by the Commissioner of Internal Revenue or his duly authorized
representative, and the date of acceptance must be duly indicated.
b) It is derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations.
c) It is a waiver of the right to invoke the defense of prescription.
d) It is a bilateral act by the Bureau of Internal Revenue and the taxpayer.
Question 16
Which of the following is incorrect?
All BMBEs shall be exempt from income tax for income arising from the operations of the enterprise.
The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to
exempt the BMBEs from local taxes, fees and charges
All employees of BMBEs shall not be entitled to the same benefits given to any regular employee such
as social security and healthcare benefits
all BMBEs shall be exempt from the coverage of Minimum Wage Law
Question 17
0 / 1 pts
Marissa, a compensation income earner, filed her income tax return for the taxable year 2018 on
March 30, 2019. On May 20, 2022, Marissa received an assessment notice and letter of demand
covering the taxable year 2018 but the postmark on the envelope shows April 10, 2022. Her return is
not a false and fraudulent return. Can Marissa raise defense of prescription?
a) Yes, the 3 year prescriptive period started to run on April 15, 2018, hence, it has not yet
expired on May 20, 2022.
b) No, the prescriptive period started to run on March 30, 2018, hence, the 3 year period expired
on April 10, 2022.
c) No, the 3 year prescriptive period started to run on April 15, 2019, hence, it has not yet expired
on April 10, 2022.
d) Yes, since the 3 year prescriptive period started to run on March 30, 2018, it already expired by
May 20, 2022.
Question 18
Which statement is false? Under Oplan Kandado, the closure order shall only be lifted by the BIR
when there has been:
a) sufficient evidence against the taxpayer to file charges under the RATE Program.
b) subsequent filing or amendment of returns with the payment of the tax inclusive of statutory
penalties.
c) payment of deficiency taxes inclusive of penalties corresponding to the sales where no
invoices/ receipts have been issued.
d) subsequent registration with the payment of the corresponding compromise penalties.
Question 19
May the Philippine government require tax withholding on the salaries of Filipino employees working
in the American Embassy in the Philippines?
a. No, because this will violate the rule on international comity.
b. No, because if the Philippine government would impose the requirement of tax withholding on the
salaries of Filipino employees working in the Philippine Embassy in the Philippines, this would in effect
require that the American government be constituted as the government withholding agent of the
Philippine government insofar as the taxes on the salaries of the Filipino employees are concerned.
c. Both a and b
d. None of the above

Question 20
Mapagbigay Aral School, a non-stock non-profit educational institution, bought from Pedrito, a
resident citizen, his residential house and lot. Pedrito would be using the proceeds of the sale to buy
his new residential house and lot. On the other hand, the school will use the parcel of land to construct
a new building for its dormitory for its medical students. Which of the following statements regarding
liability for the payment of capital gains tax is correct?
i. Pedrito is liable to capital gains tax. However, if what was sold was his principal residence, he may
apply for tax exemption, provided that he complies with the requirements laid down in the Tax Code.
ii. Pedrito is not liable to capital gains tax because the sale was made in favor of a non-stock, non profit
educational institution and that the property will be used for educationally-related functions.
iii. Pedrito is liable to capital gains tax because the tax is imposed on the seller; thus, notwithstanding
any exemption enjoyed by the buyer, the tax shall still be imposed.
a) ii only
b) i only
c) i and ii only
d) i and iii only
Question 21
0 / 1 pts
Urduja Hospital is a 100 bed hospital organized for patients. However, out of 100-bed capacity, 40
beds are allotted for paying patients, while the rest are intended for charity patients. The revenues
generated from these paying patients, however, are being used to improve the facilities of the
hospital. Can said hospital claim exemption from income tax as well as real property tax?

a. Urduja Hospital can claim exemption from real property tax. As a general principle, a charitable
institution does not lose its character as such and its exemption from taxes simply because it derives
income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies
from the government, so long as the money received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures to the private benefit of the persons
managing or operating the institution.
b. Urduja Hospital is subject to 10% on its net income, subject to compliance with the “predominance
test”.
c. Both a and b are correct
d. Neither a nor b is correct

Question 22
0 / 1 pts
Peter sold a parcel of land classified as capital asset to John. The parties agreed that the capital gains
tax shall be shouldered by John. Is this form of Shifting? Is the stipulation valid?
SHIFTING STIPULATION
a. YES YES
b. NO NO
c. YES NO
d. NO YES
Question 23
Statement 1: The Constitution cannot take away the inherent powers of the State but may only
prescribe its limitations.
Statement 2: No laws are necessary to confer the inherent powers of the State upon the government
exercising sovereignty.
a) Both statements are correct
b) Only statement 2 is correct
c) Both statements are incorrect
d) Only statement 1 is correct
Question 24
Which of the following is/are the purpose of donor’s tax?
i. To supplement and prevent circumvention of estate tax.
ii. To prevent avoidance of income tax through a devise of splitting income to numerous donees to
escape the effect of progressive rates of income taxation.
iii. To tax the act of receiving a gift.
iv. To subject properties wherever situated to donor’s tax.
a) all of the foregoing
b) i and ii only
c) ii only
d) i only
Question 25
Statement 1: The right to succession is effected at the time of transfer of the decedent’s property or
rights to the heir.
Statement 2: Ana is the surviving spouse of Jose. Her share in their community property is classified as
her exclusive property and shall form part of the decedent’s distributable estate.
a) Only statement 2 is correct.
b) Both statements are correct.
c) Only statement 1 is correct.
d) Both statements are incorrect.
Question 26
What is the tax implication if a corporation condones the debt of a shareholders because of a good
thing done by the latter to the corporation?
a) It is tantamount to a declaration of dividend. Therefore, it is an income which is subject to 10%
final withholding tax on the shareholder. However, it is not subject to donor’s tax on the
corporation.
b) The condonation is subject to donor’s tax on the corporation because it is based on its liberality.
Moreover, it is equivalent to a payment of dividend income on the shareholder, which is
therefore, subject to a final withholding tax on income of 10%.
c) It is just a simple case of extinguishment of an obligation which is neither subject to income tax
on the part of the shareholder nor a donor’s tax on the corporation.
d) The condonation is based on the liberality of the corporation, therefore, it is subject to donor’s
tax.
Question 27
Miakil went to Azcona Hotel and Resort and was given a prize of P25,000 for being its 10 th guest. The
P50,000 prize is:

A B C D

Subject to donor’s tax YES YES NO NO

Subject to income tax YES NO NO YES

Question 28
On February 5, Bimbo wrote a letter to Letty donating his laptop worth P75,000. The letter was
received by Letty on February 10 who immediately accepted the donation. The letter of acceptance
was received by Bimbo on February 14. The donor’s tax was not paid until February 25. The donation
was consummated on:
a) February 14
b) February 25
c) February 10
d) February 5
Question 29
Which of the following is not a factor in determining the taxable gift?
a) Application of exempt transfers.
b) Identification of transfers included in the gross gifts.
c) Subtraction of allowed deductions.
d) Multiplying net gift by the applicable rates.
Question 30
Mr. CSO, a minimum wage earner, works for G.O.D. Inc. He is not engaged in business nor has any
other source of income other than his employment. For 2022, Mr. CSO earned a total compensation
income of P185,000. Mr. CSO earned, aside from his basic wage, additional pay of P160,000 which
consists of the overtime pay of P80,000, night shift differential pay of P30,000, hazard pay of P15,000
and holiday pay of P15,000.
None
["", "", "", ""] How much is his tax liability?

["", "", "",

""]
No, because he is not a self-employed and professional

Using the same data above, does Mr. CSO has the option to be taxed at 8%?
Question 31
0 / 1 pts
On February 5, 2022, Emong Corporation declares 20% stock dividend and issued shares of stocks
amounting to P100,000. On March 20, 2022, the corporation redeemed the stock dividend by virtue
of which the stockholders surrendered their certificates in return for the cash paid to them by Emong
Corporation in the amount of P100,000.
a) The distribution and the redemption of the stocks are not taxable because stock dividends are
exempt from the income tax.
b) The redemption of the stock dividend is essentially equivalent to the distribution of a taxable
dividend. Hence, the amount to be distributed in redemption shall be considered as taxable
income.
c) The dividends are taxable to the stockholders because they are actually property dividends.
d) The stock dividends declared are taxable because generally, stock dividends are subject to
income tax.
Question 32
Ocampo Corporation which commenced business operations in 2019 has a gross income of P650,000
and allowable deductions of P615,000 in 2019. The journal entry in 2024 to record excess MCIT is-

a. Deferred charges-MCIT 2,500

Income tax payable 2,500
b. Deferred charges-MCIT 13,000
Income tax payable 13,000
c. Provision for income tax 10,500
Income tax 10,500
d. Income tax payable 13,000
Cash 13,000

Question 33
One of the following expenses is deductible from gross income
a) Any amount expended in restoring property or in making good exhaustion thereof for which an
allowance is or has been made
b) Personal, living and family expenses
c) Premiums paid on a life insurance policy covering the life of the employee when the members
of the family of the employee is the direct beneficiary under such policy
d) Amount paid out for new building or for permanent, made to increase the value of any property
or estate
Question 34
The following are examples of corporate expenses deductible from gross income, except one:
a) Representation expenses designed to promote business.
b) Contributions to drum up business like contribution of soft drinks to barrio fiestas.
c) Premiums on life insurance covering the life of an employee if the beneficiary is his heirs
d) Expenses paid to an advertising firm in order to create a favorable image for the corporation.
Question 35
Generally, sales of real property are subject to tax. Which of the following sales of land is not allowed
a) Land sold to government corporation
b) Land foreclosed by the bank
c) None of the above
d) Land sold by the church
Question 36
When the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and
the said taxpayer is assessed with a tax at present, the two taxes may be set-off with each other. This
doctrine is called
a) Doctrine of reciprocity
b) Set-off doctrine
c) Tax sparing doctrine
d) Equitable recoupment
Question 37
Your client owns a row of apartments. He complains to you that he is being required to pay four (4)
kinds of taxes on this line of business alone. From the list given by your client, which of the following
taxes has been wrongly imposed on him?
a) Income tax on income from rent
b) Community tax based on the assessed value of the apartment house
c) Real estate tax on the land and building
d) Value-added on the gross receipts from rent
Question 38
Which of the following constitute objectionable double taxation?
a) A tax imposed both on the occupation of fishing and on fishpond operation
b) A license fee and a tax imposed on the same business or occupation for selling the same articles
c) Persons engaged in leasing or selling real property are subject to real estate dealer tax and their
sales are also subject to 12% VAT
d) A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% is also
imposed as a consequence of such reserve deficiency.
Question 39
Which of the following is not true about the waiver of statute of limitations under the tax code
a) It is a waiver of the right to invoke the defense of prescription
b) It must be accepted by the Commissioner of Internal Revenue or his duly authorized
representative, and the date of acceptance must be duly indicated
c) It is a bilateral act by the Bureau of Internal Revenue and the taxpayer
d) It is a derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations
Question 40
1st statement: In case tax-exempt products are sold domestically to a VAT registered person, the VAT
otherwise due on such product shall be considered as input tax creditable against his output tax
payable.
2nd statement: Export sales by a VAT registered person are subject to zero-rating and so he can claim
and enjoy a credit for the tax invoiced to him on his purchases. If he is not VAT registered, his export
sales are exempt, but he is not entitled to tax credit for inputs.
a) Both statements are true.
b) 1st statement is false, 2nd statement is true.
c) 1st statement is true, 2nd statement is false.
d) Both statements are false.
Question 41
Carrier 1: Domestic sea or carrier for passengers or cargoes.
Carrier 2: International air or sea carrier for cargoes.
What is the respective business tax and tax rates on the common carriers identified above assuming
they travel from Philippines to Canada?

A B C D

Carrier 1 0% VAT 0% VAT 3% OPT 3% OPT

Carrier 2 0% VAT 3% OPT 3% OPT 0% VAT

Question 42
In which of the following cases may refund of input tax be allowed?
1st case: For input tax on purchases of capital goods.
2nd case: For input tax on purchases of goods and services by an exporter.
a) In both cases.
b) Only in the 2nd case
c) Only in the 1st case
d) Neither in the 1st nor in 2nd case
Question 43
1st Statement: Courts can review or inquire into the wisdom or advisability of a tax law and Power in
Judicial Review in Taxation.
2nd Statement: Our constitution does not contain any provisions granting tax exemption to the
government.
a) True, False
b) False, True
c) True, True
d) False, False
Question 44
1st Statement: A taxpayer’s tax-exempt status justifies the non-keeping of books accounts and other
accounting records.
2nd Statement: The salaries of the Chief Justice and associate justice of the Supreme Court are tax-
exempt.
a) False, True
b) True, False
c) True, True
d) False, False
Question 45
In 2021, Valdez gave a cash of P80,000 as a birthday gift to his son, John. Valdez has not given any
other gifts or donation in 2021 but made a donation to his daughter in the same amount in 2022.
Based on the above information in 2021. Valdez is
a) Exempted from paying donor’s tax
b) Liable to pay donor’s tax
c) Exempted from paying donee’s tax
d) Liable to pay donee’s tax
Question 46
For taxable year 2022, Mr. JMLH signified his intention to be taxed at 8% income tax rate on gross
sales and other non-operating income in his 1st quarter income tax return. He has no other source of
income. His total sales for the first three quarters amounted to P3,000,000 and with 4 th quarter sales
of P3,500,000.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Total sales P 500,000 P 500,000 P 2,000,000 P 3,500,000
Less: COS 300,000 300,000 1,200,000 1,200,000
Gross Income 200,000 200,000 800,000 2,300,000
Less: Op. Expense 120,000 120,000 480,000 720,000
Taxable Income 80,000 80,000 320,000 1,580,000

How much is his income tax liability at the end of the taxable year?
a) P126,400
b) P364,000
c) P289,200
d) P260,000
Question 47
ABC corporation located at Quezon City had the following selected data in the preceding year:
Cash sales P 3,390,000
Cost of sales 1,400,000
Operating expenses 900,000
Dividend received from domestic corporation 50,000
Original cost of land 800,000
Original cost of building 12,280,000
Accumulated depreciation – building 3,200,000
Original cost of machinery 3,800,000
Accumulated depreciation – machinery 1,450,000
Fair market value of land 4,500,000
Fair market value of building 8,650,000
Fair market value of machinery 2,370,000

The approved ordinance of real property rates of assessment levels in Quezon City is as follows:
(a) On lands:
Class Assessment Levels
Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%

(b) On buildings and other structures:

1. Residential Buildings

Fair Market Values

Assessment Levels
Over Not Over
- P 175,000 0%
P 175,000 300,000 10%
300,000 500,000 20%
500,000 750,000 25%
750,000 1,000,000 30%
1,000,000 2,000,000 35%
2,000,000 5,000,000 40%
5,000,000 10,000,000 50%
10,000,000 - 60%

1. Agricultural Buildings

Fair Market Values

Assessment Levels
Over Not Over
P 300,000 25%
P 300,000 500,000 30%
500,000 750,000 35%
750,000 1,000,000 40%
1,000,000 2,000,000 45%
2,000,000 50%

Commercial/Industrial Buildings

Fair Market Values

Assessment Levels
Over Not Over
P 300,000 30%
P 300,000 500,000 35%
500,000 750,000 40%
750,000 1,000,000 50%
1,000,000 2,000,000 60%
2,000,000 5,000,000 70%
5,000,000 10,000,000 75%
10,000,000 - 80%
(c ) On machineries:
Class Assessment levels
Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%

(d) On special classes: The assessment levels for lands, buildings, machineries and other improvements:
Actual use Assessment Levels
Cultural 15%
Scientific 15%
Hospital 15%
Local water districts 10%
Government owned and controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power. 10%

The tax rate is 2.5% if properly is classified as residential and 3% if classified as commercial/industrial.
How much would be the quarterly real property tax due?
a) P254,130
b) P211,775
c) P52,943.75
d) P63,532.50
Question 48
Which of the following losses is deductible?
a) Total wreckage of a car in an accident but was fully compensated by a comprehensive
insurance.
b) Shipwreck, which occurred before the death of the decedent but was only discovered after his
burial.
c) Destruction of a house by an earthquake, which killed the decedent
d) Theft, which occurred during burial of the decedent.
Question 49
Which of the following properties of Cardo Dalisay who died December 4, 2022 is subject to
Vanishing deduction?
Property 1 – Car purchased 3 years ago from Honda Motors, Laguna City.
Property 2 – Land inherited from her mother in 2019 the estate tax thereon have not been paid.
Property 3 – Donation from a friend 2017
Property 4 – Community property inherited December 2, 2016 or five (5) days before marriage

Property 1 Property 2 Property 3 Property 4

a. No No Yes Yes

b. No No Yes No

c. Yes No No Yes

d. Yes Yes No No
Question 50
Domingo Namayapa died on November 20, 2022. Some of the properties he left are the following:

Market Value Death

Market Value Date
Assets Mode of Acquisition Date of Acquisition of Domingo
Acquired
Namayapa
Land Donation 7-3-18 P500,000 P350,000
Car Purchase 10-2-21 800,000 980,000

Other information:

• The gross estate of the decedent amounts to P3,000,000.

• The land was mortgaged for P50,000, which was deducted in prior estate and Domingo
Namayapa paid the same before he died.
• The allowable deductions total P125,000, which includes medical expenses of P30,000. It
excludes bequest to a charitable institution in the amount of P50,000.

The vanishing deduction is

a) P67,083
b) P57,500
c) P67,783
d) P58,100
Question 51
Lola Pesyang, a senior citizen, purchased medicines for hypertension, tuberculosis, and skin rashes.
Which of the following purchases are VAT exempt?
a) Purchase of medicines for both hypertension and tuberculosis only
b) Purchase of medicines for tuberculosis only.
c) Purchase of medicines for hypertension, tuberculosis, and skin rashes
d) Purchase of medicines for hypertension only.
Question 52
For taxable year 2019, A corporation paid P40,000 stock transaction tax on initial public offering of
P500, 000 shares. After the IPO, there were 800, 000 shares outstanding. IPO selling price per share
was
a) P8
b) P10
c) P5
d) P15
Question 53
A race track bettor won on the following bets:
On forecast, a bet of P1,000 and dividend of P100 per P20-ticket
On ordinary, a bet of P500 and dividend of P1,000 per P50-ticket
On double, a bet of P200 and dividend of P200 per P20-ticket
Total percentage tax due from the winnings was
a) P1,182
b) P1,530
c) P682
d) P1,280
Question 54
Frank is a real estate dealer. During the month of November, 2022, he sold three lots under the
following terms (VAT exclusive):
Lot 1 Lot 2 Lot 3
Selling price P250,000 P200,000 P300,000
Cost 150,000 130,000 175,000
Gain/Loss 100,000 70,000 25,000
Terms:
Down payment, Nov. 5 25,000 50,000 40,000
Due- Dec. 5 25,000 20,000 20,000
Jan. to Dec., 2023 200,000 130,000 240,000

P31, 800 The value-added tax in November is-

P5, 400 Based on the information given above, the value-added tax for the month of December is-
Answer 1:
Correct!
P31, 800

Answer 2:
Correct!
P5, 400
Question 55
Robert Construction Corporation, is a VAT registered general construction company. Its data for the
month of May, 2022 are revealed below (VAT exclusive):
Contract 1- Residential house
Contract price P1,200,000
Collections during the month P605,000
Contract 2- Warehouse
Contract price P1,000,000
Percentage of completion 70%
Collections during the month 275,000

Importation of construction equipments from Japan:

Invoice cost, Japan ($1 : Php 50) $7,500
Value per Bureau of Customs P340,000
Customs duties 35,000
Freight and insurance 17,000
Brokerage fee 5,000
Processing fee 3,500

Purchase of materials from VAT registered persons 264,000

Purchases of materials from non-VAT registered persons 126,500
Revenue from rent of equipment to another contractor 22,000
P48,060 The value-added tax on importation is- P52,260

P24,720 The value-added tax payable for the month of May, 2022 by Robert Construction Company
is P24,720

You Answered
Question 56
Roy, a newly VAT registered taxpayer is a lessor of poles to telephone and cable companies. During
the month of January, 2022 Roy had the following receipts from customers (VAT inclusive):
Security deposit from Customer C P112,000
Rent income for January from various customers 89,600
Prepaid rentals received from Customer C (February to June) 134,400
Loan to Roy from Customer B 84,000

During the month, a portion of the security deposit for the faithful compliance by Customer A of its
obligations to the lessor was applied to rental for January in the amount of P11,200.
At the beginning of the year, Roy had P52,000 worth of inventory of supplies and materials for use in
the business. VAT paid on the beginning inventory is P3,500.

P25,200
["", "", "", ""] The output tax of Roy in January is-

P21,700
["", "", "", ""] the VAT payable of Roy is-

Question 57
Mongolia Company, a VAT registered business has the following data on July, 2022 (VAT exclusive):
Domestic sales P709,500
Sales returns 26,400

Goods shipped on consignment:

Units Unit Price
July 5 25 P22,000
June 5 20 22,000
May 5 12 22,000

Goods withdrawn for use by the company 38,500

Goods taken as payment to creditor 26,950
Freight and insurance of goods 4,675
Purchases, exclusive of VAT:
Raw materials 484,000
Supplies 61,600
Capital goods 60,500
Salaries of employees 235,000

During the month, one consignee remitted cash net of 20% commission representing the payment for
five (5) units delivered on June 5.
Another consignee remitted cash of P220,000, gross of 20% commission, representing payment for
10 units sold from June 5 – July 5. Other than the commission, Magnolia company gave 5%
discount/rebate to the consignee for selling ten (10) units in a one month period.
The output tax in July is-
a) P120,186
b) P151,866
c) P161,106
d) P129,426
Question 58
Bernard Company provided fringe benefit to its managerial employee in the amount of P130,000 and
to its rank and file employee amounting to P50,000.
The deductible expense by Bernard Company is –
P180,000
P50,000
P130,000
P250,000
Question 59
Allowance Corporation is engaged in sales of goods and services with net sales/ net revenue of
P400,000 and P200,000 respectively. The actual entertainment, amusement and recreation expense
for the taxable quarter amounted to P6,000. Allowance Corporation can claim an entertainment,
amusement and recreation expense on the sale of goods and services, respectively, of-
a) P4,000 and P4,000
b) P2,000 and P2,000
c) P4,000 and P2,000
d) P2,000 and P4,000
Question 60
Eugene had the following data during the year:
Gross income from business P1,000,000
Capital gain 50,000
Capital loss 20,000
Deductions 400,000
Donation to an accredited NG 30,000
Donation to church 20,000

The taxable income of Eugene if he is an individual taxpayer, single, with a compensation income
during the year of P40,000-
a) P620,000
b) P600,000
c) P610,000
d) P650,000
Question 61
Kabisa operates a cockpit. Inside the cockpit, he also operates a restaurant. Data for the particular
quarter follow:
Gross receipts (cockpit operation) P500,000

Restaurant operation:

Sale of food 100,000

Sale of liquor 150,000

How much is the amusement tax due?

a) P122,500
b) P75,000
c) P90,000
d) P135,000
Question 62
The Income Tax Return (ITR) of Jessie, single, for taxable year 2022, reported a taxable income of
P520,240. A careful scrutiny revealed that some items included as income and expenses are the
following:
Income:
Compensation income P180,000
Cash dividend 122,000
Stock dividends 73,500
Property dividends 27,000
Gambling winnings 23,100
Donation received 16,000
Gain on sale of capital assets – 15 months 8,000
Gain on sale of his vacant lot 120,000
Income on rice land 60,000
Total 630,400

Expenses:
Real estate tax P3,500
Community tax 945
Surcharge for late filling of 2016 income tax return 12,000
Interest on personal loan 24,000
Gambling losses 32,000
Personal and living expenses 50,000
Loss on sale of capital assets – 8 ½ months 5,000
Loss on crops due to flood 27,250
Total 154,695

The correct amount of Jessie’s taxable income is-

a) P296,940
b) P306,840
c) P303,740
d) P286,840