Elimination round questionnaires

1. Gain on sale of personal property purchased in

Philippines and sold in HongKong 400 000
Compensation received for personal services in the Philippines 200 000
Rent Income from real property in Malaysia 300 000
Gain from sale in the Philippines of shares of a foreign corporation 100 000
Deduction identified with:
Philippine income 80 000
Foreign income 120 000
Deductions unidentified with any particular income 30 000

The Philippines net income is :

A. 220 000 B. 211 000 C. 190 000 D. 111 000

2. Which of the following is not required to pay community taxes

A. A domestic corporation engaged or doing business in the Philippines
B. A resident foreign corporation engaged or doing business in the Philippines
C. General professional partnership in the Philippines
D. An estate or trust with income from the Philippines

3. The following are similarities of the inherent power of taxation, eminent domain, and police power, except one:
A. Are necessary attributes of sovereignty
B. Interfere with private rights and property
C. Affect all persons or the public
D. Are legislative in implementation

4. Mr Monte. Was injured in a vehicular accident in 2018. He incurred and paid medical expense of P20 000 and
legal fees of P10 000 during the year. In 2019, he received P70 000 as settlement from the insurance company
which insured the car owned by the other party involved in the accident. From the above payments and
transactions, the amount of taxable income to Mr. Monte in 2019 is:

A. Zero B. 40 000 C. 70 000 D. 50 000

Explanation : All the amounts received were only compensatory. There were no gains.

5. A corporation incurred the following expenses in a taxable year :

A. An amount paid to an advertising firm to create a favorable image of the corporation
B. An amount paid in a litigation in defense of a title to corporate property
Statement 1. The amount A is deductible from gross income
Statement 2. The amount B is not deductible from gross income because it is a capital expenditure that shall
become part of the cost of the asset.

A. True, true B. false, false C. true, false D. false, true

6. Which of the following statements is correct?

a. The distributive share of a partner in the net income of a taxable partnership is equal to each
partner’s distributive share of the net income declared by the partnership for a taxable year before
deducting the corresponding corporate tax.
b. If a taxable partnership sustains net operating loss, the partners shall be entitled to deduct their
respective shares in the net operating loss from their individual gross income
c. Both a and b
d. Neither a nor b

7. Statement 1: Monetized value of unused sick leave credits not exceeding 10 days to private employees is a
tax exempt benefit.
Statement 2: Monetized value of unused sick leave credits not exceeding 10 days to government
employees is a tax exempt benefit.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
8. Moon Telecom Inc. has the following collections for the month of April 2018:
Overseas call originating abroad P1,120,000
Overseas call originating in the Philippines 880,000
Local calls 2,240,000
How much is the overseas communications tax to be remitted by Moon for the month?
a. P220,000 c. P200,000
b. P88,000 d. P80,000

9. The term “capital assets” includes

a. Stock in trade or other property included in the taxpayer’s inventory.
b. Real property not used in the trade or business of taxpayer.
c. Property primarily for sale to customers in the ordinary course of trade or business.
d. Property used in the trade or business of the taxpayer and subject to depreciation.
10. The following taxpayers consider holding period in determining the taxable capital gain or deductible capital
loss and carry-over net capital loss the following year, except
a. Individual c. Corporation
b. Estates d. Trusts

AVERAGE
1. Mrs. Evangelista owns a parcel of land worth P500 000 which was inherited from her father in 2019when it was
worth P300 000. Her father purchased it in 2017 for P100 000. If Mrs. Evangelista transfers the parcel of land to
her wholly owned corporation in exchange for shares of stock of the said corporation worth P450 000, Mrs.
Evangelista’s taxable gain is?
A. 0 B. 50 000 C. 150 000 D. 350 000

2. Which statement is wrong? Transactions considered “in the course of trade or business”, and therefore subject
to business taxes include:
A. Regular conduct or pursuit of commercial or an economic activity by a stock private corporation
B. Regular conduct or pursuit of commercial or an economic activity by a non-stock private corporation.
C. Isolated services in the Philippines by non-resident foreign persons
D. Isolated sale of goods or services for a gross selling price or receipts of P800 000

3. Sales, VAT business 600 000

Sales, non VAT business 300 000
Purchases of goods to be sold, VAT business 200 000
Purchases of goods to be sold, non VAT 100 000
Purchases of supplies for VAT and non VAT business 30 000
How much is VAT payable ?
A. 45 600 B. 50 600 C. 46 500 D. 55 000

4.
5. For death of a father in an airplane crash, the children received insurance proceeds of P350 000 by the insurer
and airline.
Statement 1. The P350 000 shall be included in the gross estate because it was a receivable at the time of death
Statement 2. The P350 000 shall not be included in the gross estate because the life insurance was not taken out
by the decedent himself on his own life

A. True, true b. False, false C. True, False D. false, True

6. Pacman imported brand new Jaguar, 2018 model from the USA for personal use of Jinkee. Total landed costs
is P15,000,000 exclusive of customs duties of P3,000,000, excise tax of P2,000,000 and facilitation cost of
P1,000,000. VAT payable is:
a. P240,000 b. P360,000 c. P1,800,000 d. P2,400,000
7. During 2018 taxable year, First Metro Pacific was able to persuade Francis to join the company as its Asst.
Vice President for Finance which included a car plan worth P3M on its compensation package. First Metro
purchased the vehicle and registered the same in favor of Francis. Assuming further that Francis is a non-resident
alien not engage in trade or business, how much is the fringe benefit tax?
a. P529,412 b. P1,411,765 c. P 1,615,385 d. P1,000,000

8. In 2018, Omega Corp. purchased a motor vehicle for the use of its executive. It was registered under the name
of the executive although it was agreed that it shall be used partly for the benefit of the company. The cost of the
vehicle was P1,400,000. The amount of fringe benefit tax is:
a. P658,824 b. P753,846 c. P329,411 d. nil

9. Mabuhay, Inc., a Philippine corporation, sold through the local stock exchange 10,000 PLDT shares that it
bought 2years ago. In 2018, Mabuhay sold the shares for P2 million and realized a net gain P200,000. How shall
it pay tax on the transaction?
a. It shall declare a P2 million gross income in its income tax return, deducting its cost of acquisition as
an expense.
b. It shall report the P200,000 in its corporate income tax return adjusted by the holding period.
c. It shall pay a tax of ½ of 1% of the P2 million gross sales.
d. It shall pay a tax of 6/10 of 1% of the P2 million gross sales.\

10. In case of conflict between tax laws and generally accepted accounting principles :
A. Both tax laws and GAAP shall be enforced
B. GAAP shall prevail over tax laws
C. Tax laws shall prevail over GAAP
D. The issue shall be resolved by the court

DIFFICULT

1. Pedro, vat-registered, made the following purchases during the month of January, 2018:
Goods for sale, inclusive of VAT P246,400
Supplies, exclusive of VAT 20,000
Packaging materials, total invoice amount 56,000
Home appliances for residence, gross of VAT 17,920
Office machines (5pcs), 8 years useful life, net of VAT 2,000,000
Creditable input tax is:
A. 38 800 b. 35 800 C. 40 000 D. 46 200

2. A sold a personal property held as capital asset he acquired 9 years ago with an acquisition cost of
P150,000 for P270,000. The payment shall be made in the following terms. Cash down payment of
P40,000 and additional P10,000 at the end of the year of sale. The property sold has been mortgaged for
P160,000 which is assumed by the buyer. The buyer issued a note payable for the balance which is to be
paid equally in two years following the year of sale. The taxable profit for the year is:
a. P120,000 b. P60,000 c. P30,000 d. P15,000
3. X, Y and Co., a general partnership has the following data of income and expenses for 2018:
Gross income P2,400,000
Expenses 1,000,000
Dividend received from a domestic corporation 90,000
Interest on bank deposit (net) 10,000
Partners X and Y share profits and losses in the ratio of 80% and 20% respectively. The income tax
payable by the partnership is:
A. P420,000 b. P450,000 c. P447,000 d. P423,000

4. Pedro generated net income from trade amounting to P400,000. His capital asset transactions during
2018 are summarized as follows:
Holding Period Amount
Capital gain 6 months P50,000
Capital gain 2 years P45,000
Capital loss 12 months P23,000
Capital loss 10 years P28,000
How much is Pedro’s taxable income ?

a. P484,000 c. P435,500
b. P444,000 d. P385,500

5. An offshore banking unit, already in its 8th year in the Philippines, has the following data in its income and
expenses for the year 2018:
Foreign currency transaction with:
Non-residents 1,800,000
Local banks 1,200,000
Branches of foreign banks 1,000,000
Another OBU 500,000
Other residents 800,000
OTHER INCOME:
Rent income 1,000,000
Miscellaneous income 500,000
Operating expenses 2,380,000
How much is the total income tax for the year?
a. P0 c. P292,500
b. P80,000 d. P372,500

6. Na Dhale Corporation, a domestic corporation, had the following selected data:

YEAR GROSS INCOME EXPENSES
2014 P1,000,000 P1,200,000
2015 2,000,000 1,900,000
2016 3,000,000 2,950,000
2017 1,000,000 1,100,000
2018 980,000 500
The taxable income in 2018 was:
a. P380,000 c. P100,000
b. P0 d. P50,000
7. Pacific Airlines, an international air carrier showed the following gross receipts for 2018:
Point of Origin Destination Gross receipts
Philippines U.S.A P8,000,000
U.S.A U.K 4,000,000
U.S.A Philippines 3,750,000
U.K Philippines 2,100,000
Additional information:
 Forty percent (40%) of the shipments from the Philippines to the United States were later shipped
to the United Kingdom.
 25% of all its revenues were from transport of cargoes and goods.
The Income tax payable for 2018 is

a. P127,500 c. P170,000
b. P150,000 d. P200,000

8. Le Bron Corporation has the following information for the taxable year 2018:
QUARTER RCIT MCIT CWT
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional Information:
 MCIT carry-over from prior year amounts to P60,000;
 Excess tax credits from prior year amounts to P20,000.
How much was the income tax payable for the first quarter?

a. P200,000 c. P120,000
b. P160,000 d. P80,000

9. Bahala Na College, a proprietary educational institution provided the following data for 2018:
Income from tuition fees P3,000,000
School miscellaneous fees 250,000
Income from canteen operations 750,000
Dividend income:
Domestic corporation 100,000
Foreign corporation 50,000
Rent income (net) 5,700,000
Operating expenses 4,125,000
Quarterly income tax payments 250,000
The income tax payable of the school is:
a. P37,500 c. P1,212,500
b. P337,500 d. P1,227,500

10. H Hospital is a 100-bed hospital organized mainly for non-paying 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. Which of the following statement is correct?
I. H 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 together to the private benefit of the
persons managing or operating the institution.
II. H Hospital is subject to 10% on its net income, subject to compliance with the “predominance test”.
a. I only c. I and II
b. II only d. Neither I nor II