REMEDIES OF THE TAX PAYER

4. The letter of Authority will not be issued by a

a. Regional Director
b. Assistant commissioner- LTS
c. Commisioner of Internal Revenue
d. Revenue District Officer
answer: D
Letter of Authority- is an official document that authorizes a BIR Revenue Officer to
examine a taxpayer’s books and accounts and other accounting records in order to determine
his correct internal revenue tax liabilities.
*Who issues and approves LA’s?

Investigating Office Approving Official

Revenue District Office Regional Director
Large taxpayer Service Audit Divisions Assistant Commisioner-LTS
National Investigation Divisions and Special Investigation Commisioner of Internal
Divisions Revenue

43. Which is true regarding a compromise?

a. taxpayers requesting for a compromise must settle at least 40% of the tax
b. It is entered into when a reasonable doubt as to the validity of the claim against the
taxpayer exist
c. compromise is a coercive way to enforce collection of tax
d. all of these
answer: B
AUTHORITY TO COMPROMISE
*Conditions for compromise:
The CIR may compromise the payment of internal revenue tax when:
a. a reasonable doubt exist as to the validity of the claim against the taxpayer exist.
b. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
*Minimum of compromise settlements
a. 10% of the basic assessed tax- incase of financial incapacity
b. 40% of the basic assessed tax- for other cases
*Compromise is generally considered as the remedy of last resort or the last ditch remedies. In
some cases, compromise can be a win-win solution for both the gov’t and taxpayer.

19. Upon receipt of a preliminary assessment notice, the taxpayer must respond within
a. 10 days c. 30 days
b. 15 days d. 60 days
answer: B
PAN is a written communication issued by the Regional Assessment Division or any other
concerned BIR office informing taxpayer of his obligation for deficiency tax based on the audit
findings of a revenue officer.
The taxpayer has up to 15 days from the receipt of the PAN to reply to the proposed
assessment.

50. Mr. Taba filed his 2015 income tax return on March 1, 2016. On October 15, 2017, the BIR
discovered in audit that the return was filed was fraudulent. When is the last day to send the
assessment.
a. April 15, 2020 c. April 15, 2026
b. March 1, 2026 d. October 15, 2027
answer: D
54. The Bir discovered that no estate tax was paid on the estate of a certain decedent who died
Nov. 2, 2010. The estate tax return should have been filed April 1, 2011.
To avoid prescription, the BIR should send an assessment letter not later than
a. Nov. 2, 2020 c. Nov 2, 2013
b. april 1, 2021 d. April 1, 2013
answer: B
PRESCRIPTIVE PERIOD OF ASSESSMENT
The law requires that assessment must be made within 3 years from the date of actual filing of
the return or the deadline required by law, whichever is later.
Exception to the 3 year rule:
a. fraudulent returns
b. No return was filed by the taxpayer
in such cases, the BIR has up to 10 years from the discovery of fraud or non-filing of returns to
make assessments.

E S T A T E T A X
NET TAXABLE ESTATE
40. a single resident citizen died leaving the following estate and deductions.

a. 4,731,250; 1,818,750; 2,450,000

b. 4,650,000; 1,830,000; 2,520,000
c. 4,850,000; 1,870,500; 2,279,500
d. 4,750,250; 1,825,750; 2,424,000
answer: A

GROSS ESTATE
15. The proceeds of life insurance designated by the decedent to his/her estate is included in
gross estate
a. if designation is revocable
b. if designation is irrevocable
c. without regard to the designation as revocable or iirrevocable
d. in all circumstances
answer: C
summary of rules: proceeds of life insurance

Designation Beneficiary
of Estate, Administrator, or other
beneficiary executor parties
revocable Include include
irrevocable Include exclude
19. which is not included in gross estate
a. revocable transfers
b. transfers in contemplation of death
c. transfer under special power of appointment
d. all of these
answer: C
TAXABLE TRANSFERS –are mortis causa transfers of properties in the guise and form of
inter-vivos transfer
Types of Taxable Transfers
1. transfer in contemplation of death
2. revocable transfers, including conditional transfers
3. property passing under general power of appointment
conjugal
partnership
44. the gross estate of lovely Particulars of gains
property acquired before
a. 3,130,000 c. 3,830,000 marriage X
b. 3,330,000 d. 7,880,000
property acquired DURING marriage
answer: C a. gratuitous X
solution: 400 + 200 + 2000 + 80 + 700 + 450 = 3830 b. onerous C
c. income from exclusive
property C
d. income from conjugal
porperty C

DEDUCTIONS FROM GROSS ESTATE

33. A decedent died leaving a P2,500,000 gross estate after deducting his funeral expenses
totaling 180,000. Compute the deductible funeral expense
a. 125,000 c. 180,000
b. 134,000 d. 200,000
answer: B (lowest) actual funeral expense = 180,000; 5% of G.E.= (2,5000,000 + 180,000) *
5% = 134,000; fixed P200,000
Funeral expense
Whichever is lowest of actual funeral expense, 5% of gross estate, or 200,000.
63. Mr. Y, single, died leaving …….
a. 210 600 c. 117 000
b. 180 600 d. 107 611
answer: C
solution:

GROSS GIFTS
51. Mr. Alfonso donated a brewery with a value of P24M to Mr. Ginebra, Mr. Ginebra assumed
the mortgage on the property valuing P18M. What is the amount to include in net gift?
a. 24M c. 6M
b. 18M d. 0
answer: C (24M less 18M mortgaged = 6M)

55. Henrie donated 20,000 common stocks of Quickie birds Corp. At the date of donation,
Quickie Birds Corp had the following;
Net Assets P 2,000,000
Outstanding Common share 100,000
Per financial statements disclosure, Quickie had certain assets with fair value exceeding book
values by a total of P 1,200,000.
Compute the amount to be reported in gross gift
a. 200 000 c. 400 000
b. 540 000 d. 640 000
answer: D
solution: 2,000,000 + 1,200,000 = 3,200,000 * ( 20,000/100,000) = 640,000

DEDUCTIONS FROM GROSS GIFTS

13. Obligations if assumed by the donor are
a. deductible by residents or citizens
b. deductible by non-resident aliens
c. deductible by any donor
d. never deductible
answer: D (assumed by donor kasi)

21. Counted from the date of donation, the donor’s tax is paid within
a. 10 days c. 30 days
b. 15 days d. 60 days
answer: C
Filing date- the return is filed within 30 days after the donation is made. A separate return is
required for donations made at different dates during the year reflecting therein any previous net
gift made in the same year

V A L U E A D D E D TA X

VAT EXEMPT
2. WHICH IS NOT VAT EXEMPT
a. importation of agricultural or marine food products
b. gross receipts from professional practitioners
c. receipts from taxicabs
d. Gross receipts of hospital
answer: B
Regular sales
36. A vat-registered seller sold various merchandise at wholesale price exclusive of vat:
What is the output vat???
a. 0 c. 32,400
b. 30,780 d. 36,000
answer: C
solution: 270,000 * 12% = 32400

Zero-rated sales
8. Which is subject to a zero-rated vat?
a. sales of fruits and vegetable to an embassy personel with veic
b. sales of fruits and vegetable to senior citizens
c. sales of fruits and vegetable to persons with disability
d. sales of any goods to the gov’t.
answer: A
THE VAT reciprocity exemption on embassies and their personnel
Qualified foreign embassies and their qualified personnel and qualified dependents of the latter
are issued Vat Exemption Certificate (VEC) or VAT Exemption Identification Card (VEIC). Vat
taxpayers selling to foreign embassies, personnel, or their dependents with VEC or VEIC
SHALL be entitled to the benefit of ZERO RATING.

20. The presumptive input Vat is

a. 2% of primary agricultural input
b. 2% of primary marine input
c. 4% of primary agricultural or marine input
d. 4% of primary agricultural input.
Answer: D
Persons engaged in the processing of SArdines, MAckerel, MIlk, COoking oil, PAcked noodles
and REfined sugar (SA MA MI CO PA RE), shall be allowed of a presumptive input vat of 4% of
the gros value in money of their purchases of primary agricultural products.
VAT PAYABLE
45. Polaris company, a VAT seller, had the following sales and purchases during the month as
recorded….
a. 71,000 c. 144,000
b. 96,000 d. 189,000
answer: A

46. A vat taxpayer made the following sales…..

a. 0 c. 56,500
b. 54,000 d. 78,000
answer: C

10. What is the effectivity of request for the cancellation of the vat registration?
a. on the day of the request is approved.
b. on the day following the date the request was approved.
c. on the month following the month the cancellation was approved
d. on the quarter following the quarter when the cancellation was approved.
Answer: C
The approval of a request for cancellation of VAT registration shall be effective on the first day
of the month following the month of approval of the cancellation

OTHER PERCENTAGE TAX

21. The overseas communication tax is
a. 10% of revenue
b. 10% of gross receipts
c. 3% of revenue
d. 3% of gross receipts
answer: B
23. Which of the following franchisees is subject to the franchise tax
a. electricity
b. transportation
c. water utility
d. telephone
answer: C
Two types of franchises that are specifically subject to percentage tax:
1. radio or television
2. gas and WATER utilities

29. The gross receipt tax on long-term interest income is

a. 7% b. 3%
c. 5% d. 1%
answer: D (maturity of more than 5 years)

43. Which winning is subject to percentage tax?

a. winnings from lotto
b. winnings from derby
c. winning from horse race
d. winnings from gamblings
answer: C

74. Lavezares Ferries transport passengers and land vehicles between Samar and Sorsogon.
Lavezares usually had an average annual receipts of 5,000,000. During the month, it earned a
total of 400,000 from customers.
The percentage tax is
a. 0 c. 138,000
b. 12,000 d.150,000
answer: D
93. Assuming further that Mr. Magno sold his remaining 300,000 shareholdings after the IPO for
P90 per share, compute the IPO tax
a. 135,000 c. 540,000
b. 270,000 d. 1,080,0000
answer: A ( 300,000 * P90 * ½ * 1%) = 135,000
(92. answer is 1,400,000 computed as 1,000,000/.40= 2,500,000. IPO % is 700,000/2,500,000 = 28%-
equivalent to 2% tax. Hence, 700,000 * P100 * 2% = 1,400,000)

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