TAXATION CPA Review School of the Philippines Pre-week Quizzer

INCOME TAXATION Christmas bonus 15,000

Basic Principles of Taxation Service Incentive leave for 5 days (4 days are unearned) 10,000
1. 1st Statement: The reciprocity rule on estate taxation shall only apply to all non-resident alien The taxable compensation income of Jose is:
decedent. A. P40,000 C. P25,000
2nd Statement: The reciprocity rule on income taxation shall only apply to all non-resident alien B. P10,000 D. P20,000
income taxpayers
A. B. C. D. 4-B
1st Statement True True False False
2nd Statement True False True False 5. Mr. and Mrs. A had gross income from business and compensation amounting to P250,000
and P120,000 respectively. Their daughter who is in high school is a crew member of a food
1-B chain at a nearby mall every summer vacation. What is the taxable income to be reported
respectively by Mr. and Mrs. A?
2. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and private A. P210,000 and P88,000 C. P218,000 and P88,000
international banks (as lenders), it is stipulated that all payments of interest by the Central B. P218,000 and P80,000 D. P193,000 and P80,000
Bank to the lenders shall be made free and clear from all Philippine taxes which may be
imposed thereon. Is the stipulation valid? 5-D
A. Yes, based on international comity.
B. Yes, based on the doctrine of non-taxability of the government. 6. Jessica is a 21 year-old student with earned income of P30,000 from a summer job and
C. No, violative of the inherent limitations. dividend income of P950. Her parents claim her as a dependent on their tax return. What's
D. No, violative of the constitutional limitations. Jessica's taxable income?
A. P 950 C. P30,950
2-B B. P30,000 D. P10,950

3. The following are the authorities of the Commissioner to reduce revenue taxes, except one: 6-A
A. Compromise the payment of any internal revenue tax when a reasonable doubts as to the
validity of claim against the taxpayer exist. Income Tax on Corporation
B. Compromise the payment of any internal revenue when the financial condition of the 7. Income derived by a depository bank under the expanded foreign currency deposit system
taxpayer demonstrates a clear ability to pay the assessed tax. from foreign currency transactions with local commercial banks, shall be subject to a final tax
C. Abate tax liability when a portion thereon appears to be unjustly or excessively assessed. rate of:
D. Credit or refund taxes erroneously or illegally received or penalties imposed without A. Seven and one-half percent (7 ½ %) C. Ten percent (10%)
authority. B. Twenty percent (20%) D. Five percent (5%)

3-B 7-C

Income Tax Patterns 8. For purposes of computing minimum corporate income tax of a corporation engaged in the
Income Tax on Individuals sale of services, cost of services means:
4. Jose received the following in December 2003: A. Salaries and employees' benefits of personnel directly rendering the service.
Thirteenth month pay 15,000 B. Cost of facilities directly utilized in providing the services
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TAXATION CPA Review School of the Philippines Pre-week Quizzer

C. Cost of supplies Capital gain tax on sale of shares of stock of domestic corporation not listed and traded thru a local
D. All of the above stock exchange
10. Losses from wash sales of stock or securities shall not be deductible if, except:
8-D A. The taxpayer is a dealer of securities or stock and made in the course of business of such
dealer.
9. For the year ended December 31, 2003, Kelly Corp. had net income per books of P300,000 B. The shares of stock sold and then reacquired or repurchased are identical stock or
before taxes. Included in the net income were the following items: securities.
Dividend income from an unaffiliated domestic taxable corporation P50,000 C. The shares of stock sold and then reacquired within a period beginning thirty (30) days
Bad debts expense (represents the increase in the before the date of such sale or disposition.
allowance for doubtful account) P80,000 D. The shares of stock sold and then reacquired within a period ending thirty (30) days after
What was Kelly's taxable income for the year ended December 31, 2003? such sale or disposition.
A. P170,000 C. P345,000
B. P330,000 D. P380,000 11. Smith, an individual calendar-year taxpayer purchased 100 shares of Core Co. common stock
for P15,000 on December 15, 2002 and an additional 100 shares for P13,000 on December
30, 2002. On January 3, 2003, Smith sold the shares purchased on December 15, 2002 for
P13,000. What amount of loss from the sale of Core's stock is deductible on Smith 2002 and
2003 income tax returns?
A. B. C. D.
2002 P0 P0 P1,000 P2,000
2003 P0 P2,000 P1,000 P0

Gross Income
12. One of the following income is not excluded from gross income.
A. Amounts received by insured as return of premium
B. Life insurance proceeds
C. Compensation for injuries as sickness
D. Share in the net income of a general professional partnership.

13. Nare, an accrual-basis taxpayer, owns a building which was rented to Mott under a 10 - year
lease expiring August 31, 2006. On January 2, 2003, Mott paid P30,000 as consideration for
canceling the lease. On November 7, 2003, Nare leased the building to Pine under a 5 - year
lease. Pine paid Nare P10,000 rent for 2 months November and December, and an additional
P5,000 for the last month's rent. What amount of rent income should Nare report in its 2003
income tax return?
A. P10,000 C. P40,000
B. P15,000 D. P45,000

May 2004 Page 2 of 4

TAXATION CPA Review School of the Philippines Pre-week Quizzer

14. One of the following does not form part of gross income, 18. 1st Statement: Failure of any person to register as a VAT-entity shall be temporarily closed for
A. Interest C. Annuities the duration of not less than five (5) days and shall be lifted only upon compliance with
B. Royalties D. All of the above whatever requirements prescribed by the Commissioner in the closure order.
2nd Statement: The period to register as a VAT-entity with the appropriate Revenue District
Deductions from Gross Income Officer shall be within ten (10) days from date of employment.
15. In computing allowable deduction for purposes of income taxation: A. B. C. D.
1st Statement: Interest expense in connection with taxpayer's business shall be reduced by an 1st Statement True True False False
amount equal to thirty-eight percent (38%) beginning the year 2000 thereafter interest income 2nd Statement True False True False
subject to final tax.
2nd Statement: Interest incurred to acquire property used in trade shall only be allowed to be Remedies of the State & the Taxpayer
treated as a capital expenditure. 19. 1st Statement - Any internal revenue taxes shall be assessed within three (3) years after the
A. B. C. D. last day of filing as prescribed by law or when the return is filed which ever is later.
1st Statement True True False False 2nd Statement - Any internal revenue taxes shall be collected within five (5) years following the
2nd Statement True False True False assessment of the tax.
A. B. C. D.
16. Health and hospitalization insurance shall be allowed as a deduction if: 1st Statement True True False False
A. The maximum amount claimed does not exceed two thousand five hundred pesos 2nd Statement True False True False
(P2,500).
B. Must be claimed by each spouse separately. 20. The minimum compromise rate for cases other than financial incapacity, of the taxpayer is
C. Gross income of the family does not exceed two hundred fifty thousand pesos (P250,000) equivalent to:
D. The amounts of premium payment must not exceed two hundred fifty pesos (P250) a A. Ten percent (10%) of the basic assessed tax
month. B. Twenty percent (20%) of the basic assessed tax.
C. Thirty percent (30%) of the basic assessed tax.
BUSINESS & TRANSFER TAXES D. Forty percent (40%) of the basic assessed tax.
Value-added Tax
17. Which of the following statements is incorrect with regard to large taxpayers? 21. Pre-assessment notice shall not be required except:
A. Business establishment with VAT paid or payable of at least one million (P1,000,000) for A. When the finding for any deficiency tax is the result of mathematical error.
the preceding taxable year. B. When the finding of discrepancy has been determined between the tax withheld and the
B. Business establishment with excise tax paid or payable of at least one million amount actually remitted by the withholding agent.
(P1,000,000) for the preceding taxable year. C. When the excise tax due on imported articles has not been paid.
C. Business with annual income tax paid or payable of at least one million (P1,000,000) for D. When the value added tax due on imported articles has not been paid.
the preceding taxable year.
D. Business establishment with withholding tax payment of at least one million (P1,000,000) 22. The prescription of check or warrant refund or tax credit shall be within:
for the preceding taxable year. A. 4 years from the date of issue
B. 5 years from the date of issue
C. 10 years from the date of issue
D. 12 years from the date of issue

May 2004 Page 3 of 4

TAXATION CPA Review School of the Philippines Pre-week Quizzer

23. 1st Statement: All violations of any provision of the NIRC shall prescribe after four (4) years.
2nd Statement: Prescription shall begin to run from the day of the commission of the violation of
the law, even if the offender is outside the Philippines.
A. B. C. D.
st
1 Statement True True False False
2nd Statement True False True False

24. An internal revenue officer, having been reliably informed from unimpeachable source, that
articles subject to excise taxes were kept in the house of Y, entered said house to look for and
to seize the aforementioned articles over the objection of Y. Since said officer was not armed
with a search warrant, Y invoked the sanctity of his home. Is the internal revenue officer's
actuation described above, sanctioned by law or not?
A. Yes, because of primary jurisdiction of the BIR over excisable goods pursuant to the
lifeblood doctrine.
B. Yes, the IRO is exempted from obtaining a search and seizure warrant
C. No, violative of search and seizure clause of the Constitution.
D. No, violative of the right to privacy and abode.

25. A store in the Cartimar market in Pasay City was discovered by the BIR agents selling luxury
items worth P500,000.00 suspected to have been smuggled into the country by the
storeowner. May the Commissioner of Internal Revenue put under "preventive embargo" said
luxury items?
A. Yes, it is like constructive distraint.
B. Yes, because of anti-smuggling law.
C. No, violative of search and seizure clause of the Constitution.
D. No, violative of the due process clause of the Constitution

Answer Key
1. B 6. A 11. A 16. C 21. D
2. B 7. C 12. D 17. A 22. B
3. B 8. D 13. D 18. A 23. D
4. B 9. B 14. D 19. C 24. A
5. D 10. A 15. B 20. D 25. A

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