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TEST BANK-INCOME TAXATION

CHAPTER 1-GENERAL PRINCIPLES AND CONCEPTS OF TAXATION


A.MULTIPLE CHOICE: 1. THE PROCESS BY WHICH THE SOVEREIGN RAISES INCOME TO DEFRAY THE EXPENSES OF THE GOVERNMENT IS CALLED- (RPCPA) A. B. C. D. SUBSIDY TARIFF TAXATION TRIBUTE

2. ONE OF THE CHARACTERISTICS OF INTERNAL REVENUE TAX IS THAT THEY ARE-(RPCPA) A) B) C) D) CRIMINAL IN NATURE PENAL IN NATURE POLITICAL IN NATURE GENERALLY PROSPECTIVE IN APPLICATION

3. IN CASE OF CONFLICT BETWEEN THE TAX LAWS AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)-(RPCPA) A) B) C) D) BOTH TAX LAWS AND GAAP SHALL BE ENFORCED GAAP SHALL PREVAIL OVER TAX LAWS TAX LAWS SHALL PREVAIL OVER GAAP THE ISSUE SHALL BE RESOLVED BY THE COURT

4. WHICH OF THE FOLLOWING HAS NO POWER OF TAXATION (RPCPA) A) B) C) D) PROVINCES CITIES BARANGAYS BARRIOS

!. "SCHEDULAR SYSTEM OF INCOME TAXATION# MEANS(RPCPA) A) ALL TYPES OF INCOME ARE ADDED TOGETHER TO ARRIVE AT GROSS INCOME B) SEPARATE GRADUATED RATES ARE IMPOSED ON DIFFERENT TYPES OF INCOME C) CAPITAL GAINS ARE EXCLUDED IN DETERMINING GROSS INCOME

D) COMPENSATION INCOME AND BUSINESS$PROFESSIONAL INCOME ARE ADDED TOGETHER IN ARRIVING AT GROSS INCOME %. ONE OF THE FOLLOWING IS A PRIMARY PURPOSE OF TAXATION A)PROTECTION OF LOCAL INDUSTRIES AGAINST FOREIGN COMPETITION THROUGH IMPOSITION OF HIGH CUSTOMS DUTIES ON IMPORTED GOODS B)REDUCTION OF INE&UALITIES IN WEALTH AND INCOME BY IMPOSING PROGRESSIVELY HIGHER TAX RATES C) TO SECURE REVENUE FOR THE SUPPORT OF THE GOVERNMENT D) STRENGTHENING OF ANEMIC ENTERPRISES BY GIVING TAX EXEMPTION '. WHICH OF THE FOLLOWING IS NOT A SECONDARY PURPOSE OF TAXATION A) TO SERVE AS (EY INSTRUMENT OF SOCIAL CONTROL B) TO EFFECT A MORE E&UITABLE DISTRIB UTION OF WEALTH AMONG PEOPLE C) TO ACHIEVE SOCIAL AND ECONOMIC STABILITY D) TO RAISE REVENUE TO DEFRAY THE NECESSARY EXPENSE OF THE GOVERNMENT ). WHICH IS THE BEST ANSWER A TAX REFORM AT ANY GIVEN TIME UNDERSCORES THE FACT THAT-(RPCPA) A) B) C) D) TAXATION IS AN INHERENT POWER OF THE STATE TAXATION IS ESSENTIALLY A LEGISLATIVE POWER TAXATION IS A POWER THAT IS VERY BROAD THE STATE CAN AND SHOULD ADOPT PROGRESSIVE TAXATION

*. THE LEGISLATIVE BODY CAN IMPOSE A TAX AT ANY AMOUNT UNDERSCORES THE LEGAL DICTUM THAT TAXATION IS + (RPCPA) A) B) C) D) AN INHERENT POWER OF THE TAX A VERY BROAD POWER OF THE STATE ESSENTIALLY A LEGISLATIVE POWER FOR PUBLIC PURPOSE

1,. ALL OF THE FOLLOWING- EXCEPT ONE- ARE BASIC PRINCIPLES OF THE SOUND TAX SYSTEM A) FISCAL ADE&UACY

B) THEORETICAL .USTICE C) ADMINISTRATIVE FEASIBILITY D) INHERENT IN SOVEREIGNTY 11. UNDER THIS BASIC PRINCIPLE OF SOUND TAX SYSTEM- THE GOVERNMENT SHOULD NOT INCUR A DEFICIT-(RPCPA) A) B) C) D) THEORETICAL .USTICE ADMINISTRATIVE FEASIBILITY FISCAL ADE&UACY NONE OF THE ABOVE

12. THE FOLLOWING- EXCEPT ONE- ARE BASIC PRINCIPLES OF A SOUND TAX SYSTEM A) IT SHOULD BE CAPABLE OF BEING EFFECTIVELY ENFORCED B) IT MUST BE PROGRESSIVE C) SOURCES OF REVENUE MUST BE SUFFICIENT TO GOVERNMENT EXPENDITURES AND OTHER PUBLIC NEEDS D) IT SHOULD BE EXERCISED TO PROMOTE PUBLIC WELFARE

MEET

13. WHICH OF THE FOLLOWING IS NOT ONE OF THE CANONS OF A SOUND TAX SYSTEM A) B) C) D) 14. &UANTIFIABILITY E&UALITY CERTAINTY CONVENIENCE

THE POWER OF TAXATION CAN ONLY BE EXERCISED BY THE LAWMA(ING BODY A) B) C) D) SUB.ECT TO CONSTITUTIONAL AND INHERENT LIMITATIONS E&UALITY OR THEORETICAL .USTICE LEGISLATIVE IN CHARACTER INHERENT IN SOVEREIGNTY

1!. THE PRESIDENT OF THE PHILIPPINES AND THE PRIME MINISTER OF .APAN ENTERED INTO AN EXECUTIVE AGREEMENTIN RESPECT OF A LOAN FACILITY TO THE PHILIPPINES FROM .APAN WHEREBY IT WAS STIPULATED THAT INTEREST ON LOANS GRANTED BY PRIVATE .APANESE FINANCIAL INSTITUTIONS IN THE PHILIPPINES SHALL NOT BE SUB.ECT TO PHILIPPINE INCOME TAXES. WHAT BASIC CHARACTERISTIC OF TAXATION HAS BEEN VIOLATED BY THIS AGREEMENT

A) B) C) D)

INHERENT LIMITATION THEORETICAL .USTICE LEGISLATIVE IN CHARACTER ADMINISTRATIVE FEASIBILITY

1%. WHICH STATEMENT GIVES THE CORRECT ANSWER THAT A FEASIBILITY STUDY NEEDS OR NEED TO LOO( INTO THE TAXES OF DIFFERENT POLITICAL SUBDIVISIONS OF GOVERNMENT WHICH MAY BE ALTERNATIVE SITES OF BUSINESS BECAUSE-(RPCPA) A) PROVINCES- CITIES AND MUNICIPALITIES MUST HAVE UNIFORM TAXES BETWEEN AND AMONG THEMSELVES B) THE LOCAL TAXES OF A POLITICAL SUBDIVISION NEED NOT BE UNIFORM WITH THE LOCAL TAXES OF ANOTHER POLITICAL SUBDIVISION C) BUSINESSES THAT ARE SUB.ECT TO NATIONAL TAXES ARE EXEMPTED FROM LOCAL BUSINESS TAXES D) LOCAL BUSINESS TAXES MAY BE CREDITED AGAINST NATIONAL BUSINESS TAXES 1'. STATE-MENT 1/THE POWER OF TAXATION IS INHERENT IN SOVEREIGNTY BEING ESSENTIAL TO THE EXISTENCE OF EVERY GOVERNMENT. HENCE- EVEN IF NOT MENTIONED IN THE CONSTITUTION- THE STATE CAN STILL EXERCISE THE POWER. STATEMENT 2/IT IS ESSENTIALLY A LEGISLATIVE FUNCTION. EVEN IN THE ABSENCE OF ANY CONSTITUTIONAL PROVISION- TAXATION POWER FALLS TO CONGRESS AS PART OF THE GENERAL POWER OF LAWMA(ING.-(RPCPA) A) B) C) D) FALSE- FALSE FALSE- TRUE TRUE- TRUE TRUE- FALSE

1). THOSE RESTRICTIONS ON THE EXERCISE OF THE POWER OF TAXATION THAT AREW FOUND IN THE CONSTITUTION OR IMPLIED FROM ITS PROVISIONS A) B) C) D) THEORETICAL .USTICE LEGISLATIVE IN CHARACTER INHERENT LIMITATIONS CONSTITUTIONAL LIMITATIONS

1*. WHICH OF THE FOLLOWING STATEMENTS IS NOT CORRECT -(RPCPA) A) TAXES MAY BE IMPOSED TO RAISE REVENUE OR TO PROVIDE DISINCENTIVES TO CERTAIN ACTIVITIES WITHIN THE STATE B) THE STATE CAN HAVE THE POWER OF TAXATION EVEN IF THE CONSTITUTION DOES NOT NECESSARILY GIVE IT THE POWER TO TAX C) FOR THE EXERCISE OF THE POWER OF TAXATION- THE STATE CAN. TAX ANYTHING AT ANY TIME D) THE POWER OF TAXATION IN THE PHILIPPINE CONSTITUTION ARE GRANTS OF POWER AND NOT LIMITATIONS ON TAXING POWERS 2,. ONE OF THE FOLLOWING IS NOT AN INHERENT LIMITATION ON THE EXERCISE OF THE POWER OF TAXATIONA) B) C) D) INTERNATIONAL COMITY DOUBLE TAXATION NON-DELEGATION OF THE LEGISLATIVE POWER TO TAX TERRITORIALITY

21. THE CITY COUNCIL PASSED AN ORDINANCE IMPOSING AN OCCUPATION TAX ON AN AIRCONDITIONING TECHNICIAN. CONDE IS THE ONLY PERSON WITH SUCH OCCUPATION IN THE CITY. HE CHALLENGED THE VALIDITY OF THE ORDINANCE AS BEING DISCRIMINATORY SINCE HE IS THE ONLY ONE ADVERSELY AFFECTED. A) THE CONTENTION OF CONDE IS TENABLE B) THE ORDINANCE IS UNCONSTITUTIONAL BECAUSE CONDE IS DENIED OF HIS RIGHT TO E&UAL PROTECTION OF LAW C) THE CONTENTION OF CONDE IS NOT .USTIFIED BECAUSE THE RULE ON UNIFORMITY IS NOT VIOLATED CONSIDERING THAT THE ORDINANCE WOULD ALSO IMPOSE ON ALL AIRCONDITIONING TECHNICIAN WHO MAY COME WITHIN THE .URISDICTION OF THE CITY D) THE ISSUE ON VALIDITY OR INVALIDITY OF THE ORDINANCE SHOULD BE SET ASIDE 22. TREATING PERSONS WHO ARE SIMILARLY SITUATED IN THE SAME MANNERA) B) C) D) UNIFORMITY OF TAXATION E&UALITY OF TAXATION DUE PROCESS OF LAW NON-DELEGATION OF LEGISLATIVE POWER

23. WHICH OF THE FOLLOWING IS VIOLATIVE OF THE UNIFORMITY RULE IN TAXATION A) DIFFERENT TAX RATES ON BOARDING STABLES FOR RACEHORSES AND BOARDING HORSES THAT ARE NOT FOR RACING B) WHOLESALE DEALERS IN OIL ARE SUB.ECT TO OCCUPATION TAX WHILE WHOLESALE DEALERS IN OTHER ARTICLES SCU AS SUGAR- BACON- COAL- IRON AND OTHER THINGS ARE NOT SO SUB.ECT C) A ROAD USERS0 TAX IMPOSED ON ALL MOTOR VEHICLES REGISTERED AND OPERATING IN THE CITY OF MANILA BUT DOES NOT SUB.ECT VEHICLES NOT REGISTERED THEREIN BUT ALSO OPERATING TEMPORARILY IN SAID CITY D) A TAX OF P2 PER S&M OR FRACTION THEREOF IS IMPSED ON EVERY BILLBOARD OR SIGN ANYWHERE IN THE COUNTRY 24. THE LUNG CENTER OF THE PHILIPPINES- A CHARITABLE INSTITUTION- IS ERECTED IN THE MIDDLE OF A 12-HECTARE LOT/ I. A BIG SPACE AT ITS GROUND FLOOR IS BEING LEASED TO PRIVATE PARTIES- FOR CANTEEN AND SMALL STORE SPACESAND TO MEDICAL OR PROFESSIONAL PRACTITIONERS WHO USE THE SAME AS THEIR PRIVATE CLINICS FOR THEIR PATIENTS WHOM THEY CHARGE FOR THEIR PROFESSIONAL FEES. THE REST OF THE PORTIONS OF THE BUILDING ARE USED FOR ITS PATIENTS- WHETHER PAYING OR NON-PAYING ALMOST 1 OF THE ENTIRE AREA OF THE LOT ON THE LEFT SIDE OF THE BUILDING IS VACANT AND IDLE A BIG PORTION ON THE RIGHT SIDE IS BEING LEASED FOR COMMERCIAL PURPOSES TO A PRIVATE ENTERPRISE (NOWN AS THE ELLIPTICAL ORCHIDS 2 GARDEN CENTER

II. III. IV.

WHICH PORTION IS SUB.ECT TO REAL PROPERTY TAX A) B) C) D) I ONLY I AND II III AND IV I- III AND IV

2!. STATEMENT 1/THE CONSTITUTIONAL EXEMPTION ON INCOME TAXES- PROPERTY TAXES AND CUSTOMS DUTIES IS ALLOWED ON NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTIONS ONLY. STATEMENT 2/ A BUILDING BEING LEASED BY ITS OWNER TO A PRIVATE EDUCATIONAL INSTITUTION FOR USE AS CLASSROOMS IS EXEMPT FROM PROPERTY YAX STATEMENT 3/ INCOME OF A NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTION RUN BY THE ARCHDIOCESE IS EXMEPT FROM TAX PROVIDED THAT INCOMES ARE ACTUALLY- DIRECTLY AND EXCLUSIVELY USED FOR EDUCATIONAL PURPOSES WHICH OF THE STATEMENTS ARE CORRECT A) B) C) D) STATEMENT 1 ONLY STATEMENTS 1 AND 2 STATEMENT 2 ONLY ALL OF THEM

2%. WHICH OF THE FOLLOWING STATEMENTS IS NOT CORRECT -(RPCPA) A) AN INHERENT LIMITATION OF TAXATION MAY BE DISREGARDED BY THE APPLICATION OF A CONSTITUTIONAL LIMITATION B) THE PROPERTY OF AN EDUCATIONAL INSTITUTION OPERATED BY A RELIGIOUS ORDER IS EXEMPT FROM PROPERTY TAX- BUT ITS INCOME IS SUB.ECT TO INCOME TAX C) THE PROHIBITION OF DELEGATION BY THE STATE OF THE POWER OF TAXATION WILL STILL ALLOW THE BIR TO MODIFY THE RULES ON TIME FOR FILING OF RETURNS AND PAYMENT OF TAXES D) THE POWER OF TAXATION IS SHARED BY THE LEGISLATIVE AND EXECUTIVE DEPARTMENTS OF GOVERNMENT 2'. ST. BARNABAS COLLEGE (SBC) IS A NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTION. IT OWNS A !-HECTARE LOT 1 OF WHICH IS BEING USED AS ITS SCHOOL CAMPUS WHILE THE OTHER HALF IS VACANT. TO COPE WITH THE INCREASING OPERATING COSTS AND TO UPGRADE ITS FACILITIES- SBC PLANS TO DO THE FOLLOWING EFFECTIVE .ANUARY 1- 2,,%3 1). RENT OUT TO A MAR(ETING FIRM THE VACANT PORTION OF THE LAND3 2) IN.CREASE TUITION FEES BY 1,4 IN ACCORDANCE WITH GOVERNMENT REGULATIONS3.3)IMPORT 2, SETS OF COMPUTERS FOR USE IN ITS COMPUTER COURSES.

WHICH OF THE FOLLOWING &UESTIONS IS ANSWERABLE BY "YES.# A) IS SBC SUB.ECT TO REAL ESTATE TAX ON THE 1 PORTION TO BE RENTED OUT TO A BUSINESS ESTABLISHMENT B) WILL IT BE EXEMPT FROM INCOME TAX ON ITS RENTAL TO THE MAR(ETING FIRM C) WILL THE INCREASE IN TUITION FEES BE SUB.ECT TO INCOME TAX IF IT RESULTS TO NET INCOME FROM SCHOOL OPERATIONS D) WILL IT BE SUB.ECT TO CUSTOMS DUTIES ON THE IMPORTATION OF THE COMPUTERS 2). THE &UE5ON SCHOOL OF BUSINESS AND ARTS- A PROPRIETARY EDUCATIONAL INSTITUTION WHICH IS OFFERING PRIMARYSECONDARY AND TERTIARY EDUCATIONB- IS REGISTERED AND ACCREDITED BY DEPED AND CHED. WHICH OF THE FOLLOWING IS EXEMPT FROM TAX WHAT (IND OF TAX A) THE IMPORTATION OF LABORATORY E&UIPMENTS-FROM CUSTOMS DUTIES B) THE SCHOOL BEING RENTED BY THE SCHOOL-FROM REAL PROPERTY TAX C) A PORTION OF THE SCHOOL BUILDING BEING LEASED TO A FASTFOOD CHAIN-FROM REAL PROPERTY TAX D) THE INCOME FROM OPERATION-FROM INCOME TAX 2*. IN RELATION TO NO. 2) ABOVE- ASSUMING THAT THE SCHOOL IS A NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTION- WHICH OF THE FOLLOWING IS SUB.ECT TO TAX WHAT (IND OF TAX A) THE SCHOOL BUILDING OWNED BY THE SCHOOL-FROM REAL ESTATE TAX B) THE SCHOOL BUILDING BEING RENTED BY THE SCHOOLFROM REAL ESTATE TAX C) A PORTION OF THE SCHOOL BUILDING BEING LEASED TO A FASTFOOD CHAIN-FROM REAL PROPERTY TAX D) THE INCOME FROM OPERATION-FROM INCOME TAX 3,. THE MUNICIPALITY OF SAN FRANCISCO HAS A 1,HECTARE CEMETERY OF 4 DIFFRRENT CEMETERIES WHICH ARE OWNED BY DIFFERENT ENTITIES. WHICH OF THE FOLLOWING IS SUB.ECT TO REAL ESTATE TAX

A) CEMENTERIO MUNICIPAL DEL SAN FRANCISCO-A GOV0T CEMETERY OWNED BY THE MUNICIPALITY WHICH WAS ESTABLISHED FOR THE PURPOSE OF USING IT AS BURIAL GROUND OF THE PAUPERS OF SAN FRANCISCO B) SAN FRANCISCO CATHOLIC CEMETERY-OWNED BY THE CATHOLIC CHURCH3 PAYMENTS ARE REMITTED TO THE CATHOLIC CHURCH AND FOR THE IMPROVEMENT OF THE CEMETERY C) LAST TRIP MEMORIAL PAR(-OWNED BY A CORPOR!ATION WHERE DIVIDENDS ARE DISTRIBUTED TO THE SHAREHOLDERS AT THE END OF THE YEAR D) &UITA-&UITA MEMORIAL PAR(-OWNED BY AN ASSOCIATION CONSISTING OF 1,, DIFFERENT FAMILIES3 EACH FAMILY OWNS SEVERAL S&UARE METERS OF LOT3 NOT A SINGLE PORTION IS HELD FOR SALE TO EITHER MEMBER OR NON-MEMBERS OF THE ASSOCIATION 31.ALL APPROPRIATIONS- REVENUE OR TARIFF BILLS- BILLS AUTHORI5ING INCREASE OF PUBLIC DEBT- BILLS OF LOCAL APPLICATION- AND BILLS SHALL ORIGINATE EXCLUSIVELY IN THE(RPCPA) A) B) C) D) OFFICE OF THE PRESIDENT HOUSE OF REPRESENTATIVES SENATE SUPREME COURT

32 WHICH STATEMENT IS WRONG TAX LAWS-(RPCPA) A) MUST ORIGINATE FROM THE HOUSE OF REPRESENTATIVES AND ON WHICH SAME BILL THE SENATE MAY PROPOSE AMENDMENTS B) MAY ORIGINATE FROM THE SENATE AND ON WHICH SAME BILL THE HOUSE OF REPRESENTATIVES MAY PROPOSE AMENDMENTS C) MAY HAVE A HOUSE VERSION AND SENATE VERSION APPROVED SEPARATELY D) MAY BE RECOMMENDED BY THE PRESIDENT TO CONGFRESS 33.CONGRESSMAN ERIN TANADA OF &UE5ON AND SENATOR .UAN PONCE ENRILE SPONSORED A BILL IN THE HOUSE OF REPRESENTATIVES AND THE SENATE- RESPECTIVELY- INCREASING THE PERSONAL EXEMPTIONS OF INDIVIDUAL TAXPAYERS AS WELL AS GRANTING TAX EXEMPTION TO MINIMUM WAGE EARNERS. WHICH OF THE FOLLOWING IS CORRECT

A) THE SENATE BILL SHOULD BE DISCUSSED AHEAD OF THE HOUSE BILL B) THE SENATE AND HOUSE BILLS MAY BE DISCUSSED AT THE SAME TIME IN BOTH HOUSES C) THE HOUSE BILL SHOULD BE DISCUSSED AHEAD NOF THE SENATE BILL D) NO PRIORITY3 EACH BILL CAN BE DISCUSSED AHEAD OF THE OTHER 34.NO LAW GRANTING ANY TAX EXEMPTION SHALL BE PASSED WITHOUT THE CONCURRENCE OF-(RPCPA) A) B) C) D) MA.ORITY OF ALL MEMBERS OF THE CONGRESS 2$3 VOTE OF ALL MEMBERS OF THE CONGRESS 6 VOTE OF ALL MEMBERS OF THE CONGRESS UNANIMOUS VOTE OF ALL MEMBERS OF THE CONGRESS

3!.WHICH OF THE FOLLOWING STATEMENTS IS INCORRECT A) NO PERSON SHALL BE IMPRISONED FOR NON-PAYMENT OF DEBT OR NON-PAYMENT OF TAXES B) THE PASSAGE OF LAWS GRANTING TAX EXEMPTIONS RE&UIRES THE CONCURRENCE BY A MA.ORITY OF ALL THE MEMBERS OF CONGRESS C) THE SUPREME COURT0S .URISDICTION OVER TAX CASES CAN NOT BE IMPAIRED D) THE REVENUES AND ASSETS OF NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTIONS AND DONATIONS FFOR EDUCATIONAL PURPOSES ARE EXEMPTED FROM TAXES AND DUTIES 3%.THEY RESTRICT THE EXERCISE OF THE POWER OF TAXATION ALTHOUGH THEY ARE NOT EMBODIED IN THE CONSTITUTION A) B) C) D) THEORETICAL .USTICE LEGISLATIVE IN CHARACTER INHERENT LIMITATIONS CONSTUTIONAL LIMITATIONS

3'. A TAX MUST BE IMPOSED FOR PUBLIC PURPOSE. WHICH OF THE FOLLOWING IS NOT A PUBLIC PURPOSE -(RPCPA) A) B) C) D) NATIONAL DEFENSE PUBLIC EDUCATION IMPROVEMENT OF SUGAR INDUSTRY NONE OF THE ABOVE

3). A FUNDAMENTAL RULE IN TAXATION IS THAT "THE PROPERTY OF ONE COUNTRY MAY NOT BE TAXED BY ANOTHER COUNTRY#. THIS IS (NOWN AS-(RPCPA) A) B) C) D) INTERNATIONAL LAW INTERNATIONAL COMITY RECIPROCITY INTERNATIONAL INHIBITION

3*.&UESTION 1/ CAN THE STATE TAX THE ARMED FORCES OF THE PHILIPPINES &UESTION 2/ ARE GOVERNMENT-OWNED CORPORATIONS SUB.ECT TO TAX A)YES- NO B)YES- YES C)NO- YES D)NO- NO 4, DIPLOMATIC OFFICIALS SUCH AS HEADS OF STATES AND AMBASSADORS ARE EXEMPT FROM TAXES AND DUTIES BECAUSE OF A) B) C) D) INTERNATIONAL COMITY RECIPROCITY PROVISIONS PRINCIPLE OF TERRITORIALITY EXEMPTION IN THE TAX CODE AND CONTROLLED

41. DEALS WITH THE PROVISION OF THE LAW WHICH DETERMINES THE PERSON OR PROPERTY TO BE TAXED- THE SUM OR SUMS TO BE RAISEDTHE RATE THEREOF- AND THE TIME AND MANNER OF LEVYINGM RECEIVING AND COLLECTING OF TAXES A) B) C) D) COLLECTION PAYMENT ENFORCED CONTRIBUTION LEVY

42. CONSTITUTED OF THE PROVISIONS OF LAW WHICH PRESCRIBE THE MANNER OF ENFORCING THE OBLIGATION ON THE PART OF THOSE TAXED TO PAY THE DEMAND THUS CREATED A) B) C) D) COLLECTION PROPORTIONATE IN CHARACTER ENFORCED CONTRIBUTION LEVY

43.THE AMOUNT RE&UIRED IS DICTATED BY THE NEEDS OF THE GOVERNMENT-(RPCPA) A) B) C) D) LICENSE FEE TAX TOLL TARIFF

44. ONE OF THE CHARACTERISTICS OF A TAX IS A) A TAX IS A PECUNIARY BURDEN AND THE LAW MAY NOT ALLOW PAYMENT IN (IND B) IT IS DEPENDENT UPON THE WILL OR CONTRACTUAL ASSENTEXPRESS OR IMPLIED- OF THE PERSON TAXED C) IT IS LEVIED BY THE STATE BY VIRTUE OF ITS SOVEREIGNTY D) IT IS COLLECTED FOR PUBLIC AND PRIV ATE PURPOSE 4!. ONE OF THE CHARACTERISTICS OF A TAX IS THAT-(RPCPA) A) B) C) D) IT IS GENERALLY BASED ON CONTRACT IT IS GENERALLY PAYABLE IN MONEY IT IS GENERALLY ASSIGNABLE OPTIONAL

4%. WHICH IS NOT AN ESSENTIAL CHARACTERISTIC OF TAX -(RPCPA) A) B) C) D) UNLIMITED AS TO AMOUNT PAYABLE IN MONEY PROPORTIONATE IN CHARACTER REGULAR IN PAYMENT

4'. NO PERSON SHALL BE IMPRISONED FOR NON-PAYMENT OF-(RPCPA) A) B) C) D) PROPERTY TAX EXCISE TAX POLL TAX INCOME TAX

4). AN EXAMPLE OF A PROPERTY TAX IS A) ADDITIONAL COMMUNITY TAX ON INCOME OF REAL PROPERTIES B) REAL ESTATE TAX ON REAL PROPERTIES C) ESTATE TAX ON INHERITED PERSONAL AS WELL AS REAL PROPERTIES D) DONOR0S TAX ON DONATION OF PROPERTY

4*. WHICH OF THE FOLLOWING IS NOT AN EXAMPLE OF EXCISE TAX A) B) C) D) TRANSFER TAX SALES TAX REAL PROPERTY TAX INCOME TAX

!,. SHARON- A CPA HAS .UST OBTAINED HER CPA LICENSE. BEFORE SHE CAN LAWFULLY PURSUE HER OCCUPATION- SHE SHOULD PAY(RPCPA) A) B) C) D) PRIVILEGE TAX(PTR) PERCENTAGE TAX CPA0S INCOME TAX VALUE-ADDED TAX

!1. A TAX THAT IS IMPOSED UPON A PERSON WHO IS DIRECTLY BOUND TO PAY ITA) B) C) D) DIRECT TAX INDIRECT TAX EXCISE TAX POLL TAX

!2. ONE IS NOT A DIRECT TAX-(RPCPA) A) B) C) D) IMMIGRATION TAX TRANSFER TAX INCOME TAX CONTRACTOR0S TAX

!3.THE BASIC COMMUNITY TAX OF P!.,, OF AN INDIVIDUAL IS A(AN)7 A) PROPERTY TAX B) DIRECT TAX C) NATIONAL TAX D) AD VALOREM TAX !4. STATEMENT 1/ THE VALUE-ADDED TAX IS A PROPERTRY TAX STATEMENT 2/ THE ESTATE TAX IS A DIRECT TAX-(RPCPA) A) B) C) D) THE 2 STATEMENTS ARE CORRECT THE 2 STATEMENTS ARE WRONG STATEMENT 1 IS CORRECT3 STATEMENT 2 IS WRONG STATEMENT 1 IS WRONG3 STATEMENT 2 IS CORRECT

!!.FORMS PART OF THE PURCHASE PRICE OF THE COMMODITY OR SERVICE AND PASSED ON TO CUSTOMERS A) B) C) D) DIRECT TAX INDIRECT TAX PROPERTY TAX NONE OF THE ABOVE

!%. A TAX ON BUSINESS IS-(RPCPA) A) B) C) D) DIRECT TAX INDIRECT TAX PROPERTY TAX NONE OF THE ABOVE

!'. FELIX IS A MINING OPERATOR. HIS MINERAL LANDS ARE NOT COVERED BY ANY LEASE CONTRACT. THE TAX FELIX HAS TO PAY BASED ON THE ACTUAL VALUE OF THE GROSS OUTPUT OR MINERAL PRODUCTS EXTRACTED IS-(RPCPA) A) B) C) D) MINING TAX ROYALTIES RENTAL AD VALOREM TAX

!).TAX THAT IS IMPOSED SOLELY TO RAISE REVENUE FOR GOV0T EXPENDITURES A) B) C) D) REVENUE TAX REGULATORY TAX SPECIFIC TAX AD VALOREM TAX

!*.TAX LEVIED FOR PARTICULAR OR SPECIFIC PURPOSE IRRESPECTIVE OF WHETHER REVENUE IS ACTUALLY RAISED OR NOT A) B) C) D) REVENUE TAX REGULATORY TAX SPECIFIC TAX AD VALOREM TAX

%,..TAX IMPOSED BY THE NATIONAL GOVERNMENT AND IS EFFECTIVE WITHIN THE ENTIRE .URISDICTION THEREOF A) NATIONAL TAX B) LOCAL TAX

C) PROPORTIONAL TAX D) GENERAL TAX %1. TAXES IMPOSED BY A POLITICAL SUBDIVISION OF THE STATE AND IS EFFECTIVE ONLY WITHIN THE TERRITORIAL BOUNDARIES THEREOF A) B) C) D) NATIONAL TAX LOCAL TAX PROGRESSIVE TAX REGRESSIVE TAX

%2.THE FOLLOWING ARE (INDS OF TAXES AS TO GRDUATION. WHICH ONE IS NOT -(RPCPA) A) B) C) D) DIGRESSIVE UNIFORM REGRESSIVE PROGRESSIVE

%3.THE POWER OF THE STATE OR THOSE TO WHOM THE POWER HAS BEEN DELEGATED TO TA(E PRIVATE PROPERTY FOR PUBLIC USE UPON PAYING TO THE OWNER A .UST COMPENSATION A) B) C) D) POWER OF EMINENT DOMAIN POLICE POWER POWER OF TAXATION PEOPLE POWER

%4.THERE CAN BE CLASSIFICATION OF THE SUB.ECT MATTER BEING RE&UIRED TO SHOULDER THE BURDEN. WHICH IS THE EXCEPTION (RPCPA) A) B) C) D) TAX LICENSE FEE TOLL EMINENT DOMAIN

%!.THE POWER OF THE STATE TO ENACT SUCH LAWS IN RELATION TO PERSONS AND PROPERTY AS MAY PROMOTE PUBLIC HEALTH- PUBLIC MORALS- PUBLIC SAFETY- AND THE GENERAL WELFARE OF THE PEOPLE7 A) B) C) D) POWER OF EMINENT DOMAIN POLICE POWER POWER OF TAXATION PEOPLE POWER

%%. THE FOLLOWING ARE SIMILARITIES OF THE INHERENT POWER OF TAXATION- EMINENT DOMAIN AND POLICE POWER EXCEPT ONE-(RPCPA) A) B) C) D) ARE NECESSARY ATTRIBUTES OF SOVEREIGNTY INTERFERES WITH PRIVATE RIGHTS AND PROPERTY AFFECTS ALL PERSONS OR THE PUBLIC ARE LEGISLATIVE IN THEIR IMPLEMENTATION

%'. WHICH STATEMENT REFERS TO POLICE POWER AS DISTINGUISHED FROM TAXATION -(RPCPA) A) IT CAN ONLY BE IMPOSED ON SPECIFIC PROPERTY OR PROPERTIES B) THE AMOUNT IMPOSED DEPENDS ON WHETHER THE ACTIVITY IS USEFUL OR NOT C) IT INVOLVES THE TA(ING OF PROPERTY BY THE GOVERNMENT D) THE AMOUNT IMPOSED HAS NO LIMIT %).POLICE POWER AS DISTINGUISHED FROM TAXATION A) .UST COMPENSATION IS RECEIVED BY THE OWNER OF THE PROPERTY B) MAYBE EXERCISED BY PRIVATE INDIVIDUALS C) SUPERIOR TO THE NON-IMPAIRMENT CLAUSE OF THE CONSTITUTION D) PROPERTY IS TA(EN BY THE GOV0T FOR PUBLIC PURPOSE %* AFTER HAVING BEEN INFORMED THAT SOME MASSAGE PARLORS ARE BEING USED AS FRONTS FOR PROSTITUTION- THE SANGGUNIANG PANLUNGSOD OF MANILA PASSED A TAX ORDINANCE SUB.ECTING MASSAGE PARLORS WITHIN ITS .URISDICTION TO SUCH ONEROUS TAXES THAT LEAVE THEM NO OTHER ALTERNATIVE BUT TO STOP OPERATING. THE PASSAGE OF THE ORDINANCE IS A VALID EXERCISE OFA) B) C) D) TAXATION EMINENT DOMAIN POLICE POWER POLICE POWER AND POWER OF TAXATION

',. STATEMENT 1/ THE CONGRESS CAN ENACT TAX LAWS EVEN IN THE ABSENCE OF A CONSTITUTIONAL PROVISION GRANTING SAID BODY THE POWER TO TAX. STATEMENT 2/ A TAX MAY BE VALIDLY IMPOSED IN THE EXERCISE OF POLICE POWER AND NOT THE POWER TO TAX.

A) B) C) D)

FALSE- FALSE FALSE- TRUE TRUE- TRUE TRUE- FALSE

'1. WHICH OF THE FOLLOWING MAY NOT RAISE MONEY FOR THE GOVERNMENT-(RPCPA) A) B) C) D) POWER OF TAXATION POLICE POWER POWER OF EMINENT DOMAIN PRIVATI5ATION OF GOVERNMENT0S CAPITAL ASSETS

'2. IN THIS POWER OF THE STATE- THE PERSON WHO IS PARTING WITH HIS MONEY OR PROPERTY IS PRESUMED TO RECEIVE A BENEFIT-(RPCPA) A) B) C) D) TAXATION POLICE POWER EMINENT DOMAIN FORFEITURE POWER

'3. WHICH OF THE INHERENT POWERS OF THE GOVERNMENT IS INFERIOR TO THE NON-IMPAIRMENT CLAUSE OF THE CONSTITUTION A) B) C) D) TAXATION POLICE POWER EMINENT DOMAIN NONE

'4. TAX IS DISTINGUISHED FROM LICENSE FEE-(RPCPA) A) NON-PAYMENT DOES NOT NECESSARILY RENDER THE BUSINESS ILLEGAL B) A REGULATORY MEASURE C) IMPOSED IN THE EXERCISE OF POLICE POWER D) LIMITED TO COVER COST OF OBLIGATION '!. THE DISTINCTION OF A TAX FROM PERMIT OR LICENSE FEE IS THAT A TAX IS-(RPCPA) A) IMPOSED FOR REGULATION B) ONE WHICH INVOLVES EXERCISE OF POLICE POWER C) ONE IN WHICH THERE IS GENERALLY NO LIMIT ON THE AMOUNT THAT MAY BE IMPOSED D) ANSWER IS NOT GIVEN

'%. WHICH OF THE FOLLOWING TERMS DESCRIBES THIS STATEMENT "THAT THE STATE HAS COMPLETE DISCRETION ON THE AMOUNT TO BE IMPOSED AFTER DISTINGUISHING BETWEEN A USEFUL AND NON-USEFUL ACTIVITY #-(RPCPA) A) B) C) D) TAX LICENSE FEE TOLL CUSTOMS DUTY

''. WHICH OF THE FOLLOWING IS NOT A DISTINCTION OR SIMILARITY OF LICENSE FEE FROM TAX -(RPCPA) A) B) C) D) IMPOSED NFOR REGULATION INVOLVES EXERCISE OF POLICE POWER NON-PAYMENT MA(ES THE BUSINESS ILLEGAL LEGAL COMPENSATION OR REWARD OF AN OFFICER FOR SERVICES

'). ALL OF THE FOLLOWING- EXCEPT ONE- ARE CHARACTERISTICS OF A TOLL A) B) C) D) DEMAND OF PROPRIETORSHIP COMPENSATION FOR THE USE OF ANOTHER0S PROPERTY MAY BE IMPOSED BY PRIVATE INDIVIDUALS LEVIED FOR THE SUPPORT OF THE GOVERNMENT

'*. THIS IS A DEMAND OF OWNERSHIP-(RPCPA) A) B) C) D) LICENSE FEE TAX TOLL FRANCHISE

),. ONE OF THE FOLLOWING IS NOT A CHARACTERISTIC OF A SPECIAL ASSESSMENT A) IT HAS SPECIAL APPLICATION ONLY TO A PARTICULAR TIME AND PLACE B) IT IS LEVIED ONLY ON LAND C) MAY BE LEVIED ON BUSINESS D) BASED WHOLLY ON BENEFITS )1. WHICH STATEMENT IS WRONG -(RPCPA) A) A TAX IS A DEMAND OF SOVEREIGNTY B) A TOLL IS A DEMAND OF OWNERSHIP

C) A SPECIAL ASSESSMENT IS A TAX D) CUSTOMS DUTY IS A TAX )2.WHICH OF THE FOLLOWING IS NOT A CHARACTERISTIC OF DEBT A) B) C) D) GENERALLY ARISES FROM CONTRACT PAYABLE ONLY IN MONEY ASSIGNABLE IMPRISONMENT IS NOT A SANCTION FOR NON-PAYMENT

)3. ALL FUNDS OR INCOME DERIVED BY THE GOVERNMENT FROM ANY OTHER SOURC E A) B) C) D) TAX CUSTOMS DUTY REVENUE ORDINARY INCOME

)4. IT COMPRISES ALL (INDS OF FUNDS INCLUDING TAXES-(RPCPA) A) B) C) D) LICENSE FEE INCOME CUSTOMS DUTY REVENUE

)!.WHICH OF THE FOLLOWING CONSTITUTE OB.ECTIONABLE DOUBLE TAXATION -(RPCPA) A) A LICENSE FEE AND A TAX IMPOSED ON THE SAME BUSINESS OR OCCUPATION FOR SELLING THE SAME ARTICLES B) A TAX IMPOSED BOTH ON THE OCCUPATION OF FISHING AND ON FISHPOND OPERATION C) PERSONS ENGAGED IN LEASING OR SELLING REAL PROPERTY ARE SUB.ECT TO REAL ESTATE DEALERS TAX AND THEIR SALES ARE ALSO SUB.ECT TO 124 VAT D) A TAX OF 14 IS IMPOSED FOR BAN( RESERVE DEFICIENCY WHILE A PENALTY OF 1$1, OF 14 IS ALSO IMPOSED AS A CONSE&UENCE OF SUCH RESERVE DEFICIENCY )%. WHICH OF THE FOLLOWING IS NOT AN ELEMENT OF DIRECT DUPLICATE TAXATION WHICH IS VIOLATIVE OF THE E&UAL PROTECTIONAND UNIFORMITY CLAUSES IN THE CONSTITUTION A) SAME PROPERTY IS TAXED TWICE B) SAME TAXING AUTHORITY C) SAME AMOUNT

D) SAME PURPOSE )'. THE FOLLOWING CONSTITUTE DOUBLE TAXATION EXCEPT ONE(RPCPA) A) B) C) D) BOTH TAXES ARE IMPOSED IN THE SAME AMOUNT BOTH TAXES ARE LEVIED FOR THE SAME PURPOSE BOTH TAXES ARE IMPOSED BY THE SAME TAXING AUTHORITY BOTH TAXES ARE IMPOSED UPON THE SAME PERSON

)). STATEMENT 1/ OUR CONSTITUTION DOES NOT PROHIBIT DOUBLE TAXATION STATEMENT 2/ IF DOUBLE TAXATION OCCURS- THE TAXPAYER MAY SEE( RELIEF UNDER THE UNIFORMITY CLAUSE OR THE E&UAL PROTECTION GUARANTEE-(RPCPA) A) B) C) D) CORRECT- WRONG WRONG- CORRECT WRONG- WRONG CORRECT- CORRECT

)*. YOUR CLIENT OWNS A ROW OF APARTMENTS. HE COMPLAINS TO YOU THAT HE IS BEING RE&UIRED TO PAY FOUR (4) (INDS OF TAXES ON THIS LINE OF BUSINESS ALONE. FROM THE LIST GIVEN BY YOUR CLIENTWHICH OF THE FOLLOWING TAXES HAS BEEN WRONGLY IMPOSED ON HIM A) REAL ESTATE TAX ON THE LAND AND BUILDING B) VALUE-ADDED TAX ON THE GROSS RECEIPTS FROM RENT C) COMMUNITY TAX BASED ON THE ASSESSED VALUE OF THE APARTMENT HOUSE D) INCOME TAX ON INCOME FROM RENT *,. ONE OF THE FOLLOWING IS A FALSE STATEMENT ABOUT DOUBLE TAXATION. WHICH IS IT A) THERE IS NO CONSTITUTIONAL PROHIBITION ON DOUBLE TAXATION B) DIRECT DUPLICATE TAXATION IS A VALID DEFENSE AGAINST A TAX MEASURE IF IT IS VIOLATIVE OF THE E&UAL PROTECTION CLAUSE C) ABSENCE OF ANY OF THE ELEMENTS OF DIRECT DOUBLE TAXATION MA(ES IT INDIRECT DUPLICATE TAXATION D) A 2,4 FINAL WITHHOLDING TAX ON INTEREST INCOME ON BAN( DEPOSITS AND A !4 GROSS RECEIPTS TAX ON BAN(S IS A DIRECT DUPLICATE TAXATION

*1. TRANSFER OF THE TAX BURDEN BY ONE ON WHOM THE TAX IS ASSESSED TO ANOTHER A) B) C) D) SHIFTING CAPITALI5ATION TRANSFORMATION TAX EXEMPTION

*2. WHICH OF THE FOLLOWING IS NOT A SCHEME OF SHIFTING THE INCIDENCE OF TAX BURDEN -(RPCPA) A) THE MANUFACTURER TRANSFERS THE TAX TO THE CONSUMER BY ADDING THE TAX TO THE SELLING PRICE OF THE GOODS SOLD B) THE PURCHASER AS(S FOR A DISCOUNT OR REFUSE TO BUY AT REGULAR PRICE UNLESS IT IS REDUCED BY AN AMOUNT E&UAL TO THE TAX HE WILL PAY C) CHANGING THE TERMS OF THE SALE LI(E FOB SHIPPING POINT IN THE PHILIPPINES TO FOB DESTINATION ABROAD- SO THAT THE TITLE PASSES ABROAD INSTEAD OF IN THE PHILIPPINES D) THE MANUFACTURER TRANSFERS THE SALES TAX TO THE DISTRIBUTOR- THEN IN TURN TO THE WHOLESALER- TO THE RETAILER AND FINALLY TO THE CONSUMER *3. THE REDUCTION IN THE SELLING PRICE OF INCOME-PRODUCING PROPERTY BY AN AMOUNT E&UAL TO THE CAPITALI5ED VALUE OF FUTURE TAXES THAT MAY BE PAID BY THE PURCHASER A) B) C) D) SHIFTING CAPITALI5ATION TRANSFORMATION TAX EXEMPTION

*4. THE METHOD BY WHICH THE MANUFACTURER OR PRODUCER UPON WHOM THE TAX IS IMPOSED PAYS THE TAX AND STRIVES TO RECOVER SUCH EXPENSE THROUGH LOWER PRODUCTION COST WITHOUT SACRIFICING THE &UALITY OF HIS PRODUCT A) B) C) D) SHIFTING CAPITALI5ATION TRANSFORMATION TAX EXEMPTION

*!. THE GRANT OF IMMUNITY TO PARTICULAR PERSONS OR CORPORATION OR TO PERSONS OR CORPORATIONS OF A PARTICULAR CLASS FROM A TAX WHICH PERSONS AND CORPORATIONS GENERALLY WITHIN THE SAME TAXING DISTRICT ARE OBLIGED TO PAY

A) B) C) D)

TAX EXEMPTION TAX EVASION TAX AVOIDANCE TAX AMNESTY

*%. STATEMENT 1/ A BIR RULING ISSUED BY A COMMISSIONER OF INTERNAL REVENUE WHICH GRANTS TAX EXEMPTION WOULD CREATEA PERPETUAL EXEMPTION IN FAVOR OF THE TAXPAYER STATEMENT 2/ A TAX EXEMPTION MAY BE WITHDRAWN ANYTIME AT THE PLEASURE OF THE TAXING AUTHORITY WHICH OF THE ABOVE STATEMENTS IS TRUE A) B) C) D) STATEMENT 1 ONLY STATEMENTS 1 AND 2 STATEMENT 2 ONLY NEITHER OF THEM

*'. IT IS ALSO (NOWN AS TAX DODGING A) B) C) D) TAX EXEMPTION TAX EVASION TAX AVOIDANCE TRANSFORMATION

*). IT IS ALSO (NOWN AS TAX MINIMI5ATION A) B) C) D) TAX EXEMPTION TAX EVASION TAX AVOIDANCE TRANSFORMATION THE FOLLOWING STATEMENTS CONSTITUTE TAX

**. WHICH OF AVOIDANCE

A) DELIBERATE FAILURE OF A TAXPAYER TO PAY THE TAXES DUE TO THE GOVERNMENT B) CONNOTES FRAUD THROUGH THE USE OF PRETENSES AND FORBIDDEN DEVICES TO LESSEN OR DEFEAT TAXES C) PUNISHABLE BY LAW D) MAYBE CONTRARY TO THE INTENT OF THE LEGISLATURE BUT NEVERTHELESS DO NOT VIOLATE THE LAW

1,,. WHICH OF THE FOLLOWING FACTS PERTAIN$S TO TAX AVOIDANCE I.AFTER STUDYING HIS TAX PROBLEMS- MATALINO DECIDED TO WITHDRAW HIS BAN( DEPOSITS AND TO BUY TAX-EXEMPT SECURITIES II.TUSO WHO WISHES TO AVOID THE PAYMENT OF TAXES ASSESSABLE ON THE TRANSACTION MADE IT APPEAR ON THE DEED OF SALE THAT THE SELLING PRICE WAS ONLY P2,,-,,, ALTHOUGH IT WAS ACTUALLY P3,,-,,, III.REFRAINING FROM ENGAGING IN ACTIVITES SUB.ECT TO TAX IV.ABUSADO INSURANCE CORPORATION SOLD ITS OFFICE BUILDING TO ADAN FOR P1,, MILLION- WHO IN TURN- SOLD THE SAME PROPERTY TO DUGONG-BUGHAW- INC. FOR P2,, MILLION. THESE 2 TRANSACTIONS WERE EVIDENCED BTY DEEDS OF ABSOLUTE SALE NOTARI5ED ON THE SAME DAY BY THE SAME NOTARY PUBLIC. A) B) C) D) I ONLY I AND III ONLY I AND IV I- III AND IV

1,1. IN CASE OF AMBIGUITY- TAX LAWS SHALL BE INTERPRETED A) B) C) D) STRICTLY AGAINST THE TAXPAYER LIBERALLY AGAINST THE POWER LIBERALLY IN FAVOR OF THE TAXPAYER LIBERALLY IN FAVOR OF THE GOVERNMENT

1,2. IN CASES OF DEDUCTIONS AND EXEMPTIONS ON INCOME TAX RETURNS- DOUBTS SHALL BE RESOLVED-(RPCPA) A) B) C) D) STRICTLY AGAINST THE TAXPAYER STRICTLY AGAINST THE GOVERNMENT LIBERALLY IN FAVOR OF THE TAXPAYER LIBERALLY AGAINST THE GOVERNMENT

1,3. THE FOLLOWING- EXCEPT ONE- ARE EXCEPTIONS TO THE RULE THAT TAX EXEMPTIONS MUST BE STRICTLY CONSTRUED AGAINST THE TAXPAYER A) WHERE THE STATUTE GRANTING THE EXEMPTION PROVIDES FOR LIBERAL INTERPRETATION THEREOF B) IF THE TAXPAYER DOES NOT FALL WITHIN THE PURVIEW OF THE EXCEPTION BY CLEAR LEGISLATIVE INTENT C) IN CASE OF SPECIAL TAXES RELATING TO SPECIAL CASES AND AFFECTING ONLY SPECIAL CLASSES OF PERSONS D) IF EXMPTIONS REFER TO PUBLIC PROPERTY

1,4. A FRANCHISE CAN BE AMENDED BY-(RPCPA) A) AN AMENDMENT OF SPECIAL LAW- WHICH GRANTED FRANCHISE B) AN AMENDMENT OF A LAW OF GENERAL APPLICATION C) AN AMENDMENT OF A REVENUE REGULATION D) AN AMENDMENT OF TAX LAWS THE

1,!. SOME FRANCHISE HOLDERS WHO ARE PAYING THE FRANCHISE TAX ARE BEING RE&UIRED BY AN AMENDATORY LAW TO PAY THE VALUEADDED TAX- WHILE OTHERS REMAIN SUB.ECT TO FRANCHISE TAX. WHICH OF THE FOLLOWING CONSTITUTIONAL PROVISION MA(ES THE LAW UNCONSTITUTIONAL -(RPCPA) A) NO LAW SHALL BE PASSED IMPAIRING THE OBLIGATION OF CONTRACT B) THE RULE OF TAXATION SHALL BE UNIFORM C) NO PERSON SHALL BE DEPRIVED OF PROPERTY WITHOUT DUE PROCESS OF LAW D) NONE OF THE ABOVE 1,%. STATEMENT 1/ THE POINT ON WHICH A TAX IS ORIGINALLY IMPOSED IS IMPACT OF TAXATION STATEMENT 2/ AS A RULE- TAXES ARE SUB.ECT TO SET-OFF OR COMPENSATION A) B) C) D) TRUE- TRUE FALSE- TRUE FALSE- FALSE TRUE- FALSE

1,'. WHICH OF THE FOLLOWING IS NOT CONSIDERED AS A STEP IN MA(ING A REVENUE REGULATION EFFECTIVE A) RECOMMENDATION BY THE COMMISSIONER OF INTERNAL REVENUE TO THE SECRETARY OF FINANCE B) APPROVAL BY THE SECRETARY OF FINANCE C) LEGISLATION BY CONGRESS D) PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION 1,). STATEMENT 1/ IN CASE OF CONFLICT BETWEEN A REVENUE REGULATION AND THE PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE- THE LATTER SHALL PREVAIL

STATEMENT 2/ THE REVOCATION OF A REVENUE REGULATION CAN NOT BE MADE RETROACTIVE EVEN IF THE REASON FOR ITS REVOCATION IS THAT IT IS ERRONEOUS OR CONTRARY TO LAW A) B) C) D) CORRECT- WRONG CORRECT- CORRECT WRONG- CORRECT WRONG- WRONG

1,*. ALL OF THE FOLLOWING- EXCEPT ONE- ARE SOURCES OF TAX LAWSA) B) C) D) LEGISLATIONS- TAX TREATIES AND TAX ORDINANCES .UDICIAL DECISIONS OPINIONS OF AUTHORS ADMINISTRATIVE RULES AND REGULATIONS

11,. THE LEAST SOURCE OF TAX LAW ISA) B) C) D) STATUTES COURT DECISIONS CONSTITUTION BIR RULINGS

111. 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 CASES MAY BE SET-OFF WITH EACH OTHER. THIS DOCTRINE IS CALLED A) B) C) D) SET-OFF DOCTRINE DOCTRINE OF RECIPROCITY TAX SPARING DOCTRINE E&UITAB LE RECOUPMENT

112. STATEMENT 1/ THE DOCTRINE OF E&UITABLE IS APPLICABLE IN THE PHILIPPINES STATEMENT 2/ WHERE TAXES AND THE CLAIM OF THE TAXPAYER ARE FULLY LI&UIDATED- DUE AND DEMANDABLE- SET-OFF OR LEGAL COMPENSATION MAY TA(E PLACE BY OPERATION OF LAW A) B) C) D) CORRECT- WRONG CORRECT- CORRECT WRONG- CORRECT WRONG- WRONG

113. THE PLACE OR AUTHORITY THAT HAS THE RIGHT TO IMPOSE AND COLLECT TAXESA) B) C) D) TERRITORIALITY INTERNATIONAL COMITY SITUS OF TAXATION TRANSFORMATION

114. DOMICILE OR RESIDENCE OF THE OWNER IS NOT THE SITUS OF TAXATION IN A) B) C) D) INCOME TAX COMMUNITY TAX ESTATE TAX BUSINESS TAX

11!. WHICH OF THE FOLLOWING IS NOT CORRECT WITH RESPECT TO A TAXPAYER0S SUIT A) IT MUST PERTAIN TO ILLEGAL DISBURSEMENT OF PUBLIC FUNDS B) IT PERTAINS TO THE PASSAGE OF A SEEMINGLY UNCONSTITUTIONAL MEASURE C) THE FUNDS SOUGHT TO BE DISBURSED MUSTB HAVE BEEN RAISED THROUGH TAXATION D) IT MUST NOT REFER TO AN ENACTMENT OF A TAX LAW

B. TRUE OR FALSE
1. NO PERSON SHALL BE IMPRISONED FOR DEBT OR NON-PAYMENT OF POLL TAX 2. CONGRESS MAY AUTHORI5E THE PRESIDENT TO FIX WITHIN SPECIFIED LIMITS TARIFF RATES- IMPORT AND EXPORT DUTIESTONNAGE AND WHARFAGE DUES- AND OTHER DUTIES OR IMPOSTS WITHIN THE FRAMEWOR( OF THE NATIONAL DEVELOPMENT PROGRAM OF THE GOVERNMENT. 3. A LAW GRANTING TAX EXEMPTION SHOULD BE CONCURRED IN BY A MA.ORITY OF ALL MEMBERS OF THE CONGRESS PRESENT. 4. THE PRESIDENT CAN VETO ANY PARTICULAR ITEM IN A REVENUE OR TARIFF BILL- BUT THE VETO SHALL NOT AFFECT THE ITEMS OR ITEMS TO WHICH HE DOES NOT OB.ECT !. THE POWER TO TAX CAN BE DELEGATED TO LOCAL GOVERNMENT UNITS- SUB.ECT TO LIMITATIONS THAT MAY BE SET BY LAW.

%. THE POWER OF TAXATION CAN BE DELEGATED TO THE PRESIDENT OF THE PHILIPPINES. '. THE PRESIDENT OF THE PHILIPPINES IS EMPOWERED TO GRANT TAX EXEMPTION ON CERTAIN CLASS OF TAXPAYERS. ). NON-PAYMENT OF TAX AND DEBT IS GROUND FOR IMPRISONMENT. *. THE POWER TO TAX MAY INCLUDE THE POWER TO DESTROY. 1,. PROVISIONS IN THE PHILIPPINE CONSTITUTION ARE GRANTS OF POWER. 11. LANDS AND BUILDINGS BEING USED ACTUALLY- DIRECTLY AND EXCLUSIVELY FOR RELIGIOUS AND CHARITABLE PURPOSES BY CHURCHES AND CHARITABLE INSTITUTIONS ARE EXEMPT FROM INCOME AND PROPERTY TAXES. 12. A PORTION OF A SCHOOL BUILDING WHICH IS BEING LEASED TO A MAR(ETING FIRM FOR COMMERCIAL PURPOSES IS EXEMPT FROM PROPERTY TAX. 13. A NON-STOC(- NON-PROFIT EDUCATIONAL INSTITUTION IS EXEMPT FROM INCOME TAX ON ITS REVENUES AND FROM REAL PROPERTY TAX ON ASSETS USED ACTUALLY- DIRECTLY AND EXCLUSIVELY FOR EDUCATIONAL PURPOSES. 14. TAX LAWS CAN NEVER HAVE A RETROACTIVE EFFECT. 1!. THE GOVERNMENT INSTRUMENTALITIES. CAN NOT TAX ITS AGENCIES AND

1%. A TAXPAYER0S SUIT CAN BE FILED BY ANY TAXPAYER IN ANY INSTANCE AGAINST THE GOVERNMENT. 1'. IN THE PHILIPPINES- THERE MAY BE DOUBLE TAXATION. 1). A TAX IS GENERALLY UNLIMITED BECAUSE IT IS BASED ON THE NEEDS OF THE STATE. 1*. AS A RULE- TAXES ARE SUB.ECT TO SET-OFF OR COMPENSATION. 2,. RECIPROCITY RULE APPLIES TO CITI5ENS OF THE PHILIPPINES AND RESIDENT ALIEN ONLY.

21. THE INHERENT POWERS ARE EXERCISED PRIMARILY BY THE LEGISLATURE. 22. THE RULE OF TAXATION SHALL BE UNIFORM AND E&UITABLE. 23. TAXATION MAY BE USED TO IMPLEMENT THE POLICE POWER OF THE STATE. 24. POLICE POWER IS SUPERIOR TO THE NON-IMPAIRMENT CLAUSE OF THE CONSTITUTION. 2!. THE THREE INHERENT POWERS ARE METHODS BY WHICH THE STATE INTERFERES WITH PRIVATE RIGHT. 2%. THE SALARY OF THE PRESIDENT OF THE PHILIPPINES AND OF THE .USTICES OF THE SUPREME COURT IS EXEMPT FROM INCOME TAX. 2'. OPINIONS OF LEGAL LUMINARIES ARE SOURCES OF TAX LAWS. 2). THE CONSTITUTION GRANTS EXEMPTION FROM ALL (INDS OF TAXES TO RELIGIOUS AND CHARITABLE ORGANI5ATIONS. 2*. BECAUSE THE POWER TO TAX IS UNLIMITED- COMPREHENSIVEPLENARY AND SUPREME- THE POWER TO TAX CAN REACH OVER INTO ANY .URISDICTION TO SEI5E UPON PERSON OR PROPERTY. 3,. A PERSON CAN OB.ECT OR RESIST THE PAYMENT OF TAXES SOLELY BECAUSE NO PERSONAL BENEFIT TO HIM CAN BE POINTED AS ARISING FROM THE TAX. 31. THE "BENEFIT-PROTECTION THEORY# IS THE SOURCE OF THE "DOCTRINE OF SYMBIOTIC RELATIONSHIP#. 32. A TAXPAYER COMMITS TAX AVOIDANCE WHEN HE DELIBERATELY OMITS TO DECLARE ALL HIS TAXABLE INCOME. 33. THE THEORY OF TAXATION IS BASED ON THE LIFEBLOOD DOCTRINE. 34. A DIRECT TAX CAN BE SHIFTED DIRECTLY TO THE CONSUMERS. 3!. A TAX IS A VOLUNTARY PAYMENT OR DONATION TO THE GOVERNMENT. 3%. TAXES ARE CONTRACTUAL DEBTS- HENCE A TAXPAYER CANNOT BE IMPRISONED FOR NON-PAYMENT THEREOF.

3'. AS A POWER- TAXATION REFERS TO THE INHERENT POWER OF THE STATE TO DEMAND ENFORCED CONTRIBUTION FOR PUBLIC PURPOSE OR PURPOSES. 3). THE GOVERNMENT CANNOT SURVIVE WITHOUT TAXATION. 3*. INCOME TAX IS A PROGRESSIVE TAX. 4,. TAX LAW CANNOT BE IMPOSED FOR A SPECIAL PURPOSE FOR IT SHOULD ALWAYS BE AIMED AT REVENUE COLLECTION. 41. THE POWER OF THE STATE TO TAX EXISTS BY VIRTUE OF AN EXPRESS PROVISION OF THE CONSTITUTION. 42. AN EXEMPTION FROM TAXATION IS TRANSFERABLE. 43. ADMINISTRATIVE FEASIBILITY MEANS ALSO THAT THE TAX MUST NOT BE DISCOURAGING TO BUSINESS ACTIVITY. 44. FISCAL ADE&UACY MEANS THAT REVENUE SHOULD ALWAYS MEET THE DEMANDS OF PUBLIC EXPENDITURE EVEN DURING ADVERSE ECONOMIC CONDITION. 4!. STATUTORY TAX EXEMPTIONS MAY BE REVO(ED BY THE CONGRESS. 4%. TAX EVASION IN ONE YEAR CAN BE OFFSET BY PAYING MORE TAXES THE FOLLOWING YEAR. 4'. NON-PAYMENT OF ADDITIONAL COMMUNITY TAX IS A GROUND FOR IMPRISONMENT. 4). IN CASE OF CONFLICT BETWEEN A TAX LAW AND A REVENUE REGULATION- THE LATTER SHALL PREVAIL. 4*. A REVENUE REGULATION CAN EXPAND THE PROVISION OF LAW BY IMPOSING A PENALTY EVEN IF THE LAW THAT IT IMPLEMENTS DOES NOT IMPOSE A PENALTY. !,. REVENUE BILLS SHALL ORIGINATE EXCLUSIVELY FROM THE SENATE.

CHAPTER 11-INCOME TAX OF INDIVIDUALS


1.WHO AMONG THE FOLLOWING IS A NON-RESIDENT ALIEN -(RPCPA) A) AN ALIEN WHO COMES TO THE PHILIPPINES FOR A DEFINITE PURPOSE WHICH IN ITS NATURE MAY BE PROMPTLY ACCOMPLISHED B) AN ALIEN WHO COMES TO THE PHILIPPINES FOR A DEFINITE PURPOSE WHICH IN ITS NATURE WOULD RE&UIRE AN EXTENDED STAY C) AN ALIEN WHO HAS AC&UIRED RESIDENCE IN THE PHILIPPINES D) AN ALIEN WHO LIVES IN THE PHILIPPINES WITH NO DEFINITE INTENTION AS TO HIS STAY 2. ARCHIE- A STAFF AUDITOR OF SGV 2 CO.- TOO( AND PASSED THE EXAMINATION FOR CERTIFIED INTERNAL AUDITOR (CIA). THE FOLLOWING YEAR- HE RESIGNED FROM HIS .OB AND LEFT THE PHILIPPINES ON APRIL 1,- 2,,% TO WOR( AS AN INTERNAL AUDITOR IN A BIG ESTABLISHMENT IN MELBOURNE- AUSTRALIA. FOR INCOME TAX PURPOSES- WHICH OF THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO ARCHIE0S CLASSIFICATION A) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITI5EN FOR THE WHOLE YEAR OF 2,,% B) HIS CLASSIFICATION AS A NON-RESIDENT CITI5EN WILL START IN 2,,' C) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITI5EN FOR THE YEAR 2,,% WITH RESPECT TO HIS INCOME DERIVED FROM SOURCES WITHOUT FROM APRIL 1,- 2,,% D) HE SHALL BE CLASSIFIED AS NON-RESIDENT CITI5EN FOR THE YEAR 2,,% WITH RESPECT TO HIS INCOME DERIVED FROM SOURCES WITHOUT FROM APRIL 11-2,,% 3. WHO AMONG THE FOLLOWING INDIVIDUAL TAXPAYERS IS TAXABLE ON INCOME WITHIN AND WITHOUT THE PHILIPPINES A) ALEX- A NATIVE OF GENERAL SANTOS CITY- WOR(ING AS OVERSEAS CONTRACT WOR(ER IN IRA& B) PHILANDER RODOLFO- NATURALI5ED FILIPINO CITI5EN AND MARRIED TO A FILIPINA. HE HAD BEEN LIVING IN OLONGAPO CITY SINCE 1*', C) ALDREDO DE LA HOYA- SPANISH CITI5EN- A RESIDENT OF MADRIDSPAIN- SPENT A ONE WEE( VACATION TRIP IN BORACAY D) MING HONG- TAIWANESE SINGER- HELD A 3-DAY CONCERT IN MANILA

4. WHICH OF THE FOLLOWING TAXPAYERS WHOSE PERSONAL EXEMPTION IS SUB.ECT TO THE LAW ON RECIPROCITY UNDER THE TAX CODE -(RPCPA) A) NON-RESIDENT CITI5EN WITH RESPECT TO HIS INCOME DERIVED FROM OUTSIDE THE PHILIPPINES B) NON-RESIDENT ALIEN WHO SHALL COME TO THE PHILIPPINES AND STAY HEREIN FOR AN AGGREGATE PERIOD OF MORE THAN 1), DAYS DURING ANY CALENDAR YEAR C) RESIDENT ALIEN DERIVING INCOME FROM A FOREIGN COUNTRY D) NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPINES WHOSE COUNTRY ALLOWS PERSONAL EXEMPTION TO FILIPINOS WHO ARE NOT RESIDING BUT ARE DERIVING INCOME FROM SAID COUNTRY !. THE PERSONAL EXEMPTION OF THE NON-RESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES IS E&UAL TO THAT ALLOWED BY-(RPCPA) A) THE INCOME TAX LAW OF HIS COUNTRY TO A RESIDENT CITI5EN OF THE PHILIPPINES NOT RESIDING THERE B) THE INCOME TAX LAW OF HIS COUNTRY TO A CITI5EN OF THE PHILIPPINES NOT RESIDING THERE OR THE AMOUNT PROVIDED BY THE NIRC TO A CITI5EN OR RESIDENT- WHICHEVER IS LOWER C) THE NATIONAL INTERNAL REVENUE CODE TO A CITI5EN OR RESIDENT D) THE INCOME TAX LAW OF HIS COUNTRY ALLOWS TO A CITI5EN OF THE PHILIPPINES NOT RESIDING THERE OR THE AMOUNT PROVIDED BY THE NIRC TO A CITI5EN OR RESIDENT ALIEN- WHICHEVER IS HIGHER %. THE TAXPAYER IS A MARRIED NON-RESIDENT ALIEN ENGAGED IN BUSINESS IN THE PHILIPPINES WITH TWO &UALIFIED DEPENDENT CHILDREN. HIS COUNTRY GIVES A NON-RESIDENT FILIPINO WITH INCOME FROM THEREFROM A BASIC PERSONAL EXEMPTION (IF MARRIED) OF P2,-,,, AND ADDITIONAL EXEMPTION OF P4-,,,. HE IS ENTITLED TO A PERSONAL EXEMPTION OF-(RPCPA) A) B) C) D) P2)-,,, P2%-,,, P24-,,, P2,-,,,

'. THE FOLLOWING- EXCEPT ONE- MAY CLAIM PERSONAL EXEMPTIONS(RPCPA) A) NONRESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES B) NONRESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES C) RESIDENT ALIEN D) CITI5EN ). AN EXEMPTION PROVIDED BY LAW TO TA(E CARE OF PERSONALLIVING AND FAMILY EXPENSES OF THE TAXPAYER AND THE AMOUNT OF WHICH IS DETERMINED ACCORDING TO THE STATUS OF THE TAXPAYERS ARE/-(RPCPA) A) B) C) D) OPTIONAL STANDARD DEDUCTION PERSONAL EXEMPTION ADDITIONAL EXEMPTION SPECIAL ADDITIONAL EXEMPTION

*. AN EXEMPTION ALLOWED TO A TAXPAYER WHO HAS &UALIFIED LEGITIMATE- ILLEGITIMATE- OR LEGALLY ADOPTED CHILDFREN-(RPCPA) A) B) C) D) ADDITIONAL EXEMPTION SPECIAL ADDITIONAL PERSONAL EXEMPTION OPTIONAL STANDARD DEDUCTION PERSONAL EXEMPTION

1,.A MAN HAS THREE WIVES UNDER HIS TRIBAL CUSTOMS AND PRACTICE. HE IS ENTITLED TO PERSONAL EXEMPTION APPERTAINING TO-(RPCPA) A) A SINGLE INDIVIDUAL B) A MARRIED INDIVIDUAL C) A MARRIED INDIVIDUAL PLUS ADDITIONAL EXEMPTION FOR DEPENDENTS PERTAINING TO EACH OF THE 2 EXTRA WIVES D) A HEAD OF THE FAMILY PLUS ADDITIONAL EXEMPTION FOR DEPENDENTS PERTAINING TO EACH OF HIS THREE WIVES 11. AS A RULE- WHO OF THE SPOUSES IS THE PROPER CLAIMANT OF THE ADDITIONAL EXEMPTION WITH RESPECT TO ANY OF THE DEPENDENT CHILDREN A) THE HUSBAND IF HIS INCOME IS HIGHER THAN THE INCOME OF THE WIFE B) THE SPOUSE WHO HAS A HIGHER INCOME C) THE HUSBAND

D) THE WIFE 12. THE WIFE CAN CLAIM ADDITIONAL EXEMPTION IF-(RPCPA) A) THE HUSBAND0S INCOME IS LOWER THAN HER INCOME B) THE HUSBAND IS A NONRESIDENT CITI5EN WITH INCOME FROM WITHIN AND WITHOUT THE PHILIPPINES C) THE HUSBAND IS A PURE BUSINESS INCOME EARNER D) THE HUSBAND HAS NO INCOME OF HIS OWN 13. THE HUSBAND CAN WAIVE HIS RIGHT TO CLAIM THE ADDITIONAL EXEMPTION IN FAVOR OF HIS WIFE IFA) HE IS A NONRESIDENT CITI5EN WHOSE INCOME IS PURELY WITHOUT THE PHILIPPINES B) HE HAS NO INCOME OF HIS OWN C) HE IS A COMPENSATION INCOME EARNER IN THE PHILIPPINES D) HIS INCOME IS PURELY SUB.ECT TO FINAL WITHHOLDING TAX 14. WHO AMONG THE FOLLOWING &UALIFIES AS A DEPENDENT FOR PURPOSES OF ADDITIONAL EXEMPTION A) B) C) D) SISTER-IN-LAW STEPMOTHER GRANDFATHER ILLEGITIMATE DAUGHTER

1!. NENA- AGED ', YEARS OLD- WHO LIVES WITH HER UNMARRIED SON MARIO- RECEIVED P%,-,,, WHICH WAS USED FOR HER SUPPORT DURING THE YEAR. THE SOURCES OF HER SUPPORT WERE AS FOLLOWS/ SOCIAL SECURITY BENEFITS MARIO CAROLINE- UNRELATED FRIEND DOUGLAS- SON OF NENA LALAINE- NENA0S SISTER TOTAL P24-,,, 2,-,,, 4-,,, !-,,, '-,,, %,-,,,

WHO CAN CLAIM HEAD OF FAMILY STATUS BASED ON NENA0S DEPENDENCY EXEMPTION A) B) C) D) MARIO DOUGLAS LALAINE NONE

1%. WHO OF THE FOLLOWING IS NOT A &UALIFIED DEPENDENT FOR PURPOSES OF CLAIMING ADDITIONAL EXEMPTION A) B) C) D) ILLEGITIMATE CHILD LEGALLY ADOPTED CHILD LEGITIMATE CHILD CHILD BY NATURAL ADOPTION

1'. MR. MAASI(ASO- SINGLE- HAS THE FOLLOWING DEPENDENTS WHO ARE LIVING WITH AND ENTIRELY DEPENDENT UPON HIM FOR CHIEF SUPPORT/ ANDREA- CHILD WITH HIS EX-GIRLFRIEND BARBARA- LEGITIMATE CHILD OF HIS SISTER- LEGALLY ADOPTED BY MR. MAASI(ASO CARIDAD- MOTHER- )! YEARS OLD- WIDOW- BEDRIDDEN DONATA- GODMOTHER- ), YEARS OLD MR. MAASI(ASO CAN CLAIM ADDITIONAL PERSONAL EXEMPTION ONA) B) C) D) ANDREA ONLY ANDREA AND BARBARA ANDREA- BARBARA AND CARIDAD ANDREA- BARBARA- CARIDAD AND DONATA

1). A NATIVE OF LUCENA CITY- SUPPORTING HIS BROTHER- 1) YEARS OLDUNMARRIED- NOT GAINFULLY EMPLOYED- STUDYING BS ACCOUNTANCY AT ASIA PACIFIC COLLEGE AT MA(ATI CITY- IS ENTITLED TO BASIC PERSONAL EXEMPTION OFA) B) C) D) P2,-,,, 2!-,,, !,-,,, '!-,,,

1*. THE ADDITIONAL PERSONAL EXEMPTION ON EVERY &UALIFIED DEPENDENT CHILD ISA) B) C) D) P)-,,, 32-,,, 2!-,,, !,-,,,

2,. REMY MARTIN- SINGLE- SUPPORTING THE FOLLOWING/ .OHNNY WAL(ER- ILLEGITIMATE SON- 1% YEARS OLD- STUDYING IN THE UNIVERSIDAD DE .ERE5- CADI5- SPAIN- LIVING WITH REMY MARTIN0S DIPLOMATIC BROTHER IN ANDALUCIA- SPAIN. TORRES- FATHER- LIVING WITH HIM. REMY MARTIN IS GIVING %,4 OF THE ENTIRE SUPPORT NEEDED- THE OTHER 4,4 IS BEING FURNISHED BY HIS SISTER- CHEVAS REGAL. REMY MARTIN CAN CLAIM A TOTAL EXEMPTION OFA) B) C) D) P2,-,,, '!-,,, 33-,,, 41-,,,

21. TAXPAYERS ARE HUSBAND AND WIFE. THE GROSS COMPENSATION OF THE WIFE IS P2%,-,,, WHILE THE GROSS BUSINESS INCOME OF THE HUSBAND IS P2,,-,,,. THEY HAVE SIX &UALIFIED DEPENDENT CHILDREN BUT WITHIN THE YEAR ONE CHILD DIED. THEIR TOTAL EXEMPTIONS IS(RPCPA) A) B) C) D) P2,,-,,, *%-,,, %4-,,, NONE

22. LI5A0S HUSBAND DIED IN APRIL 2,,* HAVING SEVEN(') UNMARRIED CHILDREN LIVING WITH AND WHOLLY DEPENDENT ON LI5A FOR SUPPORT. THE AGES OF THE CHILDREN ARE AS FOLLOWS/ CHILDREN A B C D E F G AGES 24 22 1* 1, ) % 3 STATUS .OBLESS MENTALLY RETARDED STUDYING IN MANILA STUDYING IN THEIR HOMETOWN STUDYING IN THEIR HOMETOWN STUDYING IN THEIR HOMETOWN TA(EN BY THE GRANDPARENTS AFTER THE DEATH OF THE FATHER

FOR PURPOSES OF TAXABLE YEAR 2,,*- HOW MUCH EXEMPTION WOULD LI5A BE ENTITLED TO -(RPCPA)

A) B) C) D)

P1!,-,,, !'-,,, %4-,,, '3-,,,

NUMBERS 23 AND 24 ARE BASED ON THE FOLLOWING INFORMATION: 23. IN 2,,*- PIDOL0S WIFE DIED OF A CAR ACCIDENT. HIS DEPENDENTS ARE AS FOLLOWS/ CHILDREN A B C D E F G STATUS 22 Y$O- EMPLOYED ON .ULY 12- 2,,* 21 Y$O ON .ANUARY 2- 2,,* 1) Y$O- MARRIED ON .ANUARY 31- 2,,* 1' Y$O- GAINFULLY EMPLOYED ON OCTOBER 1- 2,,* 1! Y$O- AFFLICTED WITH SORE EYES ON MAY %- 2,,* 13 DIED OF AN ACCIDENT IN 2,,* BROTHER- 2) Y$O PARALYTIC

FOR TAXABLE YEAR 2,,*- PIDOL CAN CLAIM ADDITIONAL EXEMPTIONS OFA) B) C) D) P'!-,,, 12!-,,, 1,,-,,, 32-,,,

24. FOR THE YEAR 2,1,- PIDOL CAN CLAIM ADDITIONAL EXEMPTIONS OFA) B) C) D) P)-,,, 1%-,,, 2!-,,, 1,,-,,,

2!. ANGIE- WIDOW- EARNING AN ANNUAL GROSS COMPENSATION INCOME OF P3,,-,,, HAS THE FOLLOWING DEPENDENT CHILDREN IN 2,,*/ AUBREYBARBARACRISTETADIANAELI5ABABY- BORN ON .ANUARY 313 CELEBRATED HER 21ST BIRTHDAY LAST .UNE 123 MARRIED ON .ANUARY 13 GAINFULLY EMPLOYED EFFECTIVE .ULY 13 DIED OF DENGUE FEVER ON SEPTEMBER 3,3

ASSUMING ANGIE HAS TWO EMPLOYERS- HER TAXABLE INCOME IN 2,,* IS-

A) B) C) D)

P32-,,, %3-,,, 1!,-,,, 1,,-,,,

2%. THE TAXABLE INCOME OF ANGIE IN 2,1, ISA) B) C) D) P12,-,,, 22!-,,, *!-,,, )'-,,,

2'. WHICH OF THE FOLLOWING INCOME DERIVED FROM WITHIN THE PHILIPPINES BY A RESIDENT ALIEN IS NOT SUB.ECT TO THE RATES IN SECTION 24(A) OF THE NIRC -(RPCPA) A) SALARY RECEIVED BY A MANAGING PARTNER OF A GENERAL PROFESSIONAL PARTNERSHIP B) A PASSIVE INCOME IN THE FORM OF A PRI5E WON IN A RAFFLE AMOUNTING TO P4-,,, C) A GAIN FROM SALE OF A MOTOR VEHICLE AS ANOTHER INCOME OF A TAXPAYER WHO IS A COMPENSATION INCOME EARNER D) A GAIN ON SALE OF A REAL PROPERTY FOR PRIVATE USE OF THE FAMILY OF THE TAXPAYER 2). WHICH OF THE FOLLOWING INCOME IS SUB.ECT TO FINAL TAX IF RECEIVED BY AN INDIVIDUAL TAXPAYER I. II. III. IV. A) B) C) D) SHARE OF A PARTNER IN THE NET INCOME OF A BUSINESS PARTNERSHIP CASH DIVIDEND RECEIVED BY A STOC(BRO(ER FROM A DOMESTIC CORPORATION WINNINGS IN LOTTO RAFFLE PRI5ES AMOUNTING TO P%-,,, I AND II III AND IV I- II AND IV I- II- III AND IV

2*. WHICH OF THE FOLLOWING IS NOT A RE&UISITE FOR DEDUCTIBILITY OF HEALTH INSURANCE

A) THE TOTAL FAMILY INCOME IS NOT MORE THAN P2!,-,,, B) THE MAXIMUM AMOUNT OF PREMIUM DEDUCTIBLE DURING THE YEAR IS P2-4,, PER FAMILY OR P2,, A MONTH C) IN THE CASE OF MARRIED INDIVIDUAL- THE SPOUSE CLAIMING THE ADDITIONAL EXEMPTION SHALL BE ENTITLED TO CLAIM THE INSURANCE PREMIUMS PAID D) THE TAXPAYER MUST BE A HEAD OF FAMILY 3,.STATEMENT 1/ HEALTH AND$OR HOSPITALI5ATION INSURANCE PREMIUMS PAID BY AN INDIVIDUAL IS DEDUCTIBLE ONLY IF THE TAXPAYER IS A PURE COMPENSATION INCOME EARNER STATEMENT 2/ A TAXPAYER WHO HAS PAID A MONTHLY HEALTH INSURANCE OF P4,, FOR SIX MONTHS IN A YEAR CAN CLAIM TOTAL DEDUCTIBLE AMOUNT OF P2-4,, A) B) C) D) TRUE- FALSE TRUE- TRUE FALSE- TRUE FALSE- FALSE

31. MAX- SINGLE- SUPPORTING HIS !)-YEAR OLD MOTHER- IS A COMPENSATION INCOME EARNER. DURING THE YEAR- HIS NET INCOME WAS P1!,-,,,. HE ALSO PAID A TOTAL PREMIUM OF P3-,,, TO AN INSURANCE COMPANY FOR HIS HEALTH INSURANCE. HOW MUCH IS HIS TAXABLE INCOME A) B) C) D) P*'-%,, *'-,,, 122-,,, 122-%,,

32. ALL OF THE FOLLOWING- EXCEPT ONE- ARE TAXABLE ON INCOME WITHIN ONLY/ A) B) C) D) RESIDENT ONLY NON-RESIDENT CITI5EN RESIDENT CITI5EN NON-RESIDENT ALIEN

33. IN 2,,*- RUSTOM- FILIPINO- LEGALLY SEPARATED FROM HIS WIFEMINA- LEFT FOR THE UNITED STATES WITH HIS DAUGHTERROBINA- TO PERMANENTLY RESIDE THEREIN. IN 2,,*- HE EARNED P2 MILLION AS INCOME FROM HIS BEAUTY APRLON IN THAT COUNTRY.

WHICH OF THE FOLLOWING STATEMENTS IS CORRECT A) FOR PHILIPPINE INCOME TAX PURPOSES- RUSTOM MAY DEDUCT FROM HIS GROSS INCOME HIS PERSONAL EXEMPTION OF P!,-,,, OR THE AMOUNT ALLOWED IN THAT COUNTRYWHICHEVER IS LOWER B) FOR PHILIPPINE INCOME TAX PURPOSES- RUSTOM0S GROSS INCOME IS SUB.ECT TO A CREDITABLE WITHHOLDING TAX OF 1,4 C) RUSTOM0S GROSS INCOME OF P2 MILLION IS NOT TAXABLE IN THE PHILIPPINES D) FOR PHILIPPINE INCOME TAX PURPOSES- HE IS NO LONGER ENTITLED TO CLAIM ADDITIONAL EXEMPTION ON ROBINA BECAUSE HE IS ALREADY CLASSIFIED AS A NON-RESIDENT ALIEN ENGAGED IN BUSINESS IN FOREIGN COUNTRY 34. CASE 1/ PEPE- A CPA- HAD SIGNED A LEGALLY ENFORCEABLE AGREEMENT WITH HIS WIFE- PILAR- THAT THE EARNINGS FROM THE EXERCISE OF HIS PROFESSION WOULD BE SHARED E&UALLY BETWEEN THEM FOR PURPOSES OF COMPUTING THE INCOME TO BE REPORTED IN THEIR RESPECTIVE INDIVIDUAL INCOME TAX RETURN. IS THE AGREEMENT VALID CASE 2/ LOREN5O ADVISED HIS DAUGHTER- LORENA THAT THE RENT INCOME ON THE DORMITORY OWNED BY LOREN5O WILL ACCRUE TO THE LATTER. LORENA COLLECTED THE INCOME AND REPORTED IT ON HER OWN RETURN. WERE THE ACTIONS TA(EN BY LOREN5O AND LORENA VALID A) B) C) D) YES- NO YES- YES NO- YES NO- NO

ITEMS 35 TO 3 ARE BASED ON THE FOLLOWING INFORMATION: BUSINESS INCOME- PHILIPPINES BUSINESS INCOME- UNITED STATES EXPENSES- PHILIPPINES EXPENSES- UNITED STATES INTEREST ON DEPOSIT WITH METROBAN( INTEREST ON DEPOSIT IN U.S.(819P4,) CASH PRI5E WON IN A LOCAL CONTEST CASH PRI5E WON IN A CONTEST IN U.S. WINNINGS IN LOTTO P3,,-,,, 2!,-,,, 2,,-,,, 12!-,,, 3-,,, 8!,, P%-,,, 1,-,,, 2,-,,,

WINNINGS IN LOTTO IN U.S. DIVIDENDS FROM SMC- A DOMESTIC COMPANY

!,-,,, 2!-,,,

3!. THE TAXABLE INCOME IF SHARON IS A RESIDENT CITI5EN- SINGLE ISA) B) C) D) P2%1-,,, 334-,,, 2*1-,,, 3,%-,,,

3%.THE TAXABLE INCOME IF SHARON IS A NON-RESIDENT ALIEN ETBMARRIED WITH FIVE(!) DEPENDENT CHILDRENA) B) C) D) P243-,,, !%-,,, '4-,,, NONE

3'. THE INCOME TAX DUE ON SHARON ASSUMING SHE IS A NONRESIDENT ALIEN NETB- SINGLE- ISA) B) C) D) P)3-!,, %3-!,, 1)-!,, 334-,,,

NUMBERS 3! TO 4" ARE BASED ON THE FOLLOWING INFORMATION: ELVIS AND MADONNA- HUSBAND AND WIFE- HAVE THE FOLLOWING DATA IN 2,,*/ COMPENSATION INCOME RENT INCOME(NET OF !4 WHT) ROYALTIES ON BOO(S DEPENDENT CHILDREN WHT ON COMPENSATION ELVIS P12!-,,, '%-,,, % 1,-,,, MADONNA P%,-,,, ',-,,,

DURING THE YEAR- THE SPOUSES HAD AN INCOME OF P12,-,,, AND EXPENSES OF P%!-,,,- WHICH CANNOT BE IDENTIFIED AS SOLELY ESRNED BY THE WIFE OR THE HUSBAND. 3). THE INCOME TAX PAYABLE$OVERPAYMENT OF ELVIS IS-

A) B) C) D)

P3-,,, 1,-2,, (P!-!,,) )-',,

3*. THE TAXABLE INCOME OF MADONNA ISA) P2'-!,, B) 3'-!,, C) 11-%,, D) NONE 4,. THE FINAL TAX ON THE PASSIVE INCOME ISA) B) C) D) P14-,,, '-,,, NONE NO ANSWER

41. THE OPTIONAL STANDARD DEDUCTION ON INDIVIDUAL ISA) 4,4 OF TAXABLE INCOME B) 4,4 OF BUSINESS AND$OR PROFESSIONAL COMPENSATION INCOME C) 4,4 OF BUSINESS AND$OR PROFESSIONAL INCOME D) 1,4 OF BUSINESS AND$OR PROFESSIONAL COMPENSATION INCOME 42.OPTIONAL STANDARD DEDUCTION IS ALLOWED TO A) B) C) D) RESIDENT ALIEN NON-RESIDENT ALIEN ENGAGED IN TRADE OR BUSINESS NON-RESIDENT ALIEN NOT ENGAGED IN TRADE OR BUSINESS NON-RESIDENT FOREIGN CORPORATION INCLUDING EXCLUDING

NUMBERS 43 AND 44 ARE BASED ON THE FOLLOWING INFORMATION: ROD- MARRIED- WITH TWO DEPENDENT CHILDREN- HAD THE FOLLOWING INCOME AND EXPENSES IN 2,,*/ SALARY- NET OF WHT OF P!-,,, 13TH MONTH PAY GROSS RECEIPTS FROM PROFESSION- NET OF WHT OF P'-,,, RENT INCOME- NET OF !4 WHT GROSS RECEIPTS FROM BUSINESS P!!-,,, !-,,, )3-,,, !'-,,, 12!-,,,

PROFESSIONAL AND BUSINESS EXPENSES PREMIUMS ON HEALTH INSURANCE

!%-!,, %-,,,

43. THE INCOME TAX PAYABLE BY ROD IF HE AVAILED OF THE ITEMI5ED DEDUCTIONSA) B) C) D) P2)-12! 1'-12! 44-!,, 41-3%,

44. THE INCOME TAX PAYABLE BY ROD IF HE AVAILED OF THE OPTIONAL STANDARD DEDUCTIONSA) B) C) D) P4-!,, !,-22! !1-,!, !1-%!,

NUMBERS 45 TO 4# ARE BASED ON THE FOLLOWING INFORMATION: SPOUSES CARLOS AND IRENE- GOVERNMENT EMPLOYEES- HAD THE FOLLOWING DATA IN 2,,*/ CARLOS IRENE TH 13 MONTH PAY AND OTHER BENEFITS 1)-*4*.,, )-%,!.,, SSS- PHIC AND PAG-IBIG 14-!4*.'% 4-!!*.'! BASIC SALARY 21,-43).24 %)-4%!.2! REPRESENTATION AND TRAVEL ALLOWANCE *%-,,,.,, PERSONNEL ECONOMIC RELIEF ALLOWANCE %-,,,.,, OVERTIME PAY 2-4!,.3! 4-4!'.,4 HOLIDAY PAY 1-')3.2! HA5ARD PAY %-,,,.,, ADDITIONAL EXEMPTIONS !,-,,,.,, TOTAL AMOUNT OF TAXES WITHHELD 1'-,4%.4, 4!. THE INCOME TAX PAYABLE BY CARLOS ISA) B) C) D) P31.32 1)-2''.'2 3%3.1% )-%)'.)!

4%. THE INCOME TAX PAYABLE ON IRENE ISA) P44).2*

B) 1-431.4! C) (P*)3.1*) D) NONE 4'. MRS. EVAN OWNS A PARCEL OF LAND WORTH P!,,-,,, WHICH SHE INHERITED FROM HER FATHER IN 2,,% WHEN IT WAS WORTH P3,,-,,,. HER FATHER PURCHASED IT IN 1*)% FOR P1,,-,,,. IF MRS. EVAN TRANSFERS THIS PARCEL OF LAND FOR HER WHOLLY OWNED CORPORATION IN EXCHANGE FOR SHARES OF STOC(S OF SAID CORPORATION WORTH P4!,-,,,. MRS. EVAN0S TAXABLE GAIN IS-(RPCPA) A) B) C) D) 5ERO P!,-,,, 1!,-,,, 3!,-,,,

4). MR. .OHNNY DELA CRU5 TRANSFERRED HIS COMMERCIAL LAND WITH A COST OF P!,,-,,, BUT WITH A FAIR MAR(ET VALUE OF P'!,-,,, TO .DC CORPORATION IN EXCHANGE OF THE STOC(S OF THE CORPORATION WITH PAR VALUE OF P1-,,,-,,,. AS A RESULT OF THE TRANSFER- HE BECAME THE MA.OR STOC(HOLDER OF THE CORPORATION.-(RPCPA) AS A RESULT OF THE TRANSFER/ A) THE RECOGNI5ED GAIN IS THE DIFFERENCE BETWEEN THE FAIR MAR(ET VALUE OF THE SHARES OF STOC(S AND THE COST OF THE LAND B) THE RECOGNI5ED GAIN IS THE DIFFERENCE BETWEEN THE PAR VALUE OF THE STOC(S AND THE FAIR MAR(ET VALUE OF THE LAND C) NO RECOGNI5ED GAIN BECAUSE THE LAND WAS IN EXCHANGE OF PURELY STOC(S AND MR. .OHNNY DELA CRU5 BECAME THE MA.ORITY STOC(HOLDER D) NO RECOGNI5ED GAIN BECAUSE THE LAND WAS IN EXCHANGE OF STOC(S OF THE CORPORATION. 4*. MR. SANTOS PURCHASED A LIFE ANNUITY FOR P1,,-,,, WHICH WILL PAY HIM P1,-,,, A YEAR. THE LIFE EXPECTANCY OF MR. SANTOS IS 12 YEARS. WHICH OF THE FOLLOWING WILL MR. SANTOS BE ABLE TO EXCLUDE FROM HIS GROSS INCOME -(RPCPA) A) B) C) D) P1,,-,,, 1,-,,, 2,-,,, 12,-,,,

!,.IF AN INDIVIDUAL PERFORMS SERVICES FOR A CREDITOR WHO IN CONSIDERATION THEREOF CANCELS THE DEBT- THE CANCELLATION OF INDEBTEDNESS MAY AMOUNT-(RPCPA) A) B) C) D) TO A GIFT TO A CAPITAL CONTRIBUTION TO A DONATION INTER VIVOS TO A PAYMENT OF INCOME

!1. MR. AGUILA- AN EMPLOYEE OF FUERTE CORPORATION IS RECEIVING A MONTHLY SALARY (NET OF 1,4 WHT) OF P1)-,,,. DUE TO AN OUTSTANDING ACCOMPLISHMENT IN .ULY 2,,)- THE CORPORATION GAVE HIM 2,, SHARES OF STOC( OF THE CORPORATION WITH A PAR VALUE OF P1,, PER SHARE AND A FAIR MAR(ET VALUE OF P1!,. THE FAIR VALUE AT THE TIME OF RECEIPT IS P1!2 PER SHARE. HOW MUCH IS THE INCOME OF MR. AGUILA IN 2,,) A) B) C) D) P!,-,,, 2',-4,, 2',-,,, 24,-,,,

!2. CARANCHO IS INDEBTED TO DACUYCUY. DUE TO HIS INABILITY TO PAY THE DEBT- HE WAS AS(ED TO CLEAN THE PIGGERY OF THE LATTER FOR THREE MONTHS. THEREAFTER- DACUYCUY GAVE HIM P!-,,, AND CONDONED THE DEBT AMOUNTING TO P1,-,,,. HOW MUCH INCOME SHOULD BE DECLARED BY CARANCHO A) B) C) D) P!-,,, 1,-,,, 1!-,,, NONE

!3. REWARDS GIVEN TO PERSONS INSTRUMENTAL IN THE DISCOVERY OF VIOLATION OF THE NATIONAL INTERNAL REVENUE CODE ARE SUB.ECT TOA) FINAL TAX OF 1,4 ON REWARDS COLLECTED B) FINAL TAX OF 1,4 OF P1-,,,-,,, C) FINAL TAX OF 1,4 OF REWARDS COLLECTED OR P1-,,,-,,,WHICHEVER IS HIGHER D) FINAL TAX OF 1,4 OF REWARDS COLLECTED OR P1-,,,-,,,WHICHEVER IS LOWER

!4. IN 2,,)- ALMONTE RECEIVED FROM HIS EMPLOYER A PROMISSORY NOTE WITH A FACE VALUE OF P!,-,,, FOR SERVICES RENDERED. THE NOTE WILL MATURE IN 2,,*. HOWEVER- IT CAN BE SOLD TO A BAN( AT A DISCOUNT OF 2!4. THE EMPLOYER PAID THE PROMISSORY NOTE IN 2,,*. HOW MUCH TAXABLE INCOME IS TO BE DECLARED BY ALMONTE ON THE PROMISSORY NOTE IN 2,,) AND 2,,*RESPECTIVELY A) B) C) D) P!,-,,,- !,-,,, 12-!,,- 3'-!,, 3'-!,,- 12-!,, NONE- !,-,,,

!!. USING THE SAME DATA IN NUMBER !4 ABOVE- EXCEPT THAT !,4 OF THE FACE VALUE OF THE NOTE IS PAYABLE IN 2,,* WHILE THE REMAINING !,4 IS PAYABLE IN 2,1, HOW MUCH INCOME IS TAXABLE TO ALMONTE IN 2,,)- 2,,* AND IN 2,1,- RESPECTIVELY A) B) C) D) !%. 2,,) NET INCOME BEFORE WRITE-OFF OF BAD DEBT LESS/ BAD DEBT WRITTEN OFF NET INCOME AFTER BAD DEBT 2,,* AMOUNT RECOVERED CASE1 ',-,,, 4,-,,, 4,-,,, 4,-,,, CASE2 ',-,,, ),-,,, (1,-,,,) 3,-,,, CASE3 ',-,,, !!-,,, 1!-,,, 4,-,,, CASE4 ',-,,, )!-,,, (1!-,,,) )!-,,, P!,-,,,- NONE- NONE 3'-!,,- %-2!,- %-2!, 12-!,,- 1)-'!,- 1)-'!, ,- 2!-,,,- 2!-,,,

THE TAXABLE AMOUNT ON THE RECOVERY OF BAD DEBT PREVIOUSLY DEDUCTED- RESPECTIVELY- IS + A) B) C) D) 4,-,,,- 3,-,,,- 4,-,,,- )!-,,, 4,-,,,- 2,-,,,- 4,-,,,- ',-,,, 3,-,,,- 3,-,,,- !!-,,,- )!-,,, 3,-,,,- %,-,,,- 2!-,,,- ',-,,,

!'.WHICH OF THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO A LEASEHOLD CONTRACT STATEMENT I/ SECURITY DEPOSITS ARE REPORTABLE AS INCOME OF THE LESSOR IN THE YEAR OF RECEIPT STATEMENT II/ THE DEPRECIATION ON THE IMPROVEMENT IS TO BE COMPUTED BY DIVIDING THE COST BY THE LIFE OF THE ASSET OR THE REMAINING TERM OF THE LEASE- WHICHEVER IS LONGER STATEMENT III/ PREPAYMENT OF RENTALS BY THE LESSEE ARE TO BE RECORDED BY THE LESSOR USING CASH METHOD EVEN IF IT IS ORDINARILY USING ACCRUAL METHOD OF ACCOUNTING A) B) C) D) I ONLY I AND II II AND III III ONLY

NUMBERS 5! TO #2 ARE BASED ON THE FOLLOWING INFORMATION: BRYAN LEASED A LAND TO .OSE FOR A PERIOD OF 11 YEARS STARTING .ANUARY 1- 2,,% AT AN ANNUAL RENTAL OF P12-,,,. OBSERVING THE PROVISIONS OF THE CONTRACT- .OSE CONSTRUCTED A BUILDING WHICH SHALL BECOME THE PROPERTY OF BRYAN AT THE EXPIRATION OF THE LEASE. THE CONSTRUCTION WAS COMPLETED ON .ANUARY 1- 2,,* AT A COST OF P1-,,,-,,, WITH AN ESTIMATED USEFUL LIFE OF 2, YEARS. IT IS ALSO STIPULATED IN THE CONTRACT THAT THE LESSEE WILL PAY THE P1-!,, ANNUAL REAL PROPERTY TAX ON THE LAND. !). ASSUMING THAT ON .ANUARY 1- 2,,%- .OSE PAID P24-,,, TO BRYAN COVERING THE LEASE CONTRACT FOR 2 YEARS- HOW MUCH INCOME IS TO BE REPORTED BY BRYAN IN 2,,% A) B) C) D) P12-,,, 13-!,, 24-,,, 2!-!,,

!*. HOW MUCH INCOME IS TO BE REPORTED BY BRYAN IN 2,,* UNDER THE OUTRIGHT METHOD A) P13-!,,

B) 1-!,, C) 1-,13-!,, D) 1-,,,-,,, %,. HOW MUCH INCOME IS TO BE REPORTED BY BRYAN IN 2,,* UNDER THE SPREAD-OUT METHOD A) B) C) D) P13-!,, 1-!,, 1-,13-!,, ))-!,,

%1. HOW MUCH IS THE DEDUCTIBLE EXPENSE OF THE LESSEE IN 2,,* A) B) C) D) P13)-!,, %3-!,, 12!-,,, 13-!,,

%2. ASSUMING THAT DUE TO THE FAULT OF THE LESSEE- THE LEASE CONTRACT WAS TERMINATED ON .ANUARY 1- 2,11- HOW MUCH INCOME IS TO BE REPORTED BY THE LESSOR IN 2,11 A) B) C) D) P'%3-!,, '!,-,,, ))-!,, 1-,13-!,,

NUMBERS #3 TO #$ ARE BASED ON THE FOLLOWING INFORMATION: ARTURO LEASED A 21%-S&UARE METER OF IDLE LAND TO LEI55IE COLLEGE OF BUSINESS (LCB)- A PROPRIETARY EDUCATIONAL INSTITUTION- FOR A PERIOD OF 2, YEARS EFFECTIVE .ANUARY 1- 2,,%. THE LEASE CONTRACT PROVIDES THAT LCB WILL ERECT A BUILDING THEREON TO BE USED AS A CLASSROOM - WHICH IT DID ON THE LOT OF ARTURO. THE AGREEMENT PROVIDES ALSO THAT THE BUILDING SHALL BECOME THE PROPERTY OF THE LESSOR AT THE END OF THE LEASE. THE BUILDING WAS COMPLETED ON .UNE 3,- 2,,) AT A COST OF P1-),,-,,,. THE ESTIMATED LIFE OF THE LEASEHOLD IMPROVEMENT IS 3, YEARS. IT WAS FURTHER AGREED THAT LCB WILL PAY THE REAL ESTATE TAX ON THE LAND ASSESSED AT P3-,,, ANNUALLY. ON .ANUARY 2- 2,,%- LCB PAID ARTURO P12,-,,, CONSISTING OF RENTAL COVERING THE 2 YEARS PERIOD(24 MONTHS) FROM 2,,% TO 2,,'.

%3. THE RENT INCOME TO BE REPORTED BY ARTURO IN 2,,%A) B) C) D) P%,-,,, 123-,,, 12,-,,, %3-,,,

%4. THE RENT INCOME TO BE REPORTED BY ARTURO IN 2,,) UNDER OUTRIGHT METHODA) P%,-,,, B) %3-,,, C) 1-)%,-,,, D) 1-)%3-,,, %!. THE INCOME TO BE REPORTED BY ARTURO UNDER SPREAD-OUT METHODA) B) C) D) P)4-42* 1,!-)!' )1-42* 21-42*

%%. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT A) EFFECTIVE .ANUARY 1- 2,,%- THE LAND SHALL BE EXEMPT FROM REAL ESTATE TAX B) EFFECTIVE .UNE 3,- 2,,)- THE LAND SHALL BE EXEMPT FROM REAL ESTATE TAX C) EFFECTIVE .ANUARY 1- 2,,*- THE LAND AND THE BUILDING SHALL BE EXEMPT FROM REAL ESTATE TAX D) EFFECTIVE .UNE 3,- 2,,) THE LAND AND THE BUILDING SHALL BE EXEMPT FROM REAL ESTATE TAX %'. THE DEDUCTIBLE EXPENSE OF LCB IN 2,,*A) B) C) D) P1%!-)!' 1%2-)!' 114- 42* )4-42*

%). THE INCOME TO BE REPORTED BY ARTURO IN 2,,* UNDER SPREADOUT METHOD ISA) P1,!-)!' B) 1,2-)!' C) 114-42*

D) )4-42* %*. SUPPOSE THE LEASE CONTRACT WAS TERMINATED ON APRIL 1- 2,12 DUE TO THE FAULT OF THE LESSEE- THE INCOME TO BE REPORTED BY ARTURO UNDER SPREAD-OUT METHOD ON 2,12 ISA) B) C) D) P1-443-,,, 1-4)!-)!' 1-44,-,,, 1-4)2-)!'

',. ON .ANUARY 1- 2,,%- ATO LEASED A LOT TO BENGBENG WITH A BUILDING ERECTED THEREON FOR A PERIOD OF 1, YEARS. THE LEASE CONTRACT PROVIDED THAT BENGBENG WILL PAY THE FOLLOWING/ I. II. III. MONTHLY RENTAL OF P1,-,,, FIRE INSURANCE PREMIUM OF P1!-,,, PER YEAR REAL PROPERTY TAX OF P!-,,, PER YEAR

THE LESSEE WILL CONSTRUCT A CONCRETE FENCE SURROUNDING THE LOT AT A COST OF P1-2,,-,,, WITH A USEFUL LIFE OF 2, YEARS WHICH SHALL BELONG TO THE LESSOR AT THE EXPIRATION OF THE LEASE. THE FENCING WAS FINISHED ON .UNE 3,- 2,,). IN 2,,)- ATO SHALL REPORT AS INCOME FROM LEASE (SPREAD-OUT METHOD) AN AMOUNT OFA) B) C) D) P'!-,,, '4,-,,, 14,-,,, 1*,-,,,

'1. IN NUMBER ', ABOVE- THE LESSEE CAN CLAIM A DEDUCTIBLE EXPENSE IN 2,,) OFA) B) C) D) P21!-,,, 22,-,,, 22!-,,, 1*,-,,,

'2. PROCEEDS OF INSURANCE TA(EN BY A CORPORATION ON THE LIFE OF AN EXECUTIVE TO INDEMNIFY IT AGAINST LOSS IN CASE OF HIS DEATH IS-(RPCPA)

A) B) C) D)

EXEMPT FROM INCOME TAX PART OF TAXABLE INCOME SUB.ECT TO FINAL TAX PARTLY EXEMPT- PARTLY TAXABLE

'3. CORCOR CORPORATION TOO( TWO LIFE INSURANCE POLICIES ON THE LIFE OF ITS EVP- MRS. LOPE5. IN ONE POLICY- THE BENEFICIARY IS THE CORPORATION AND THE OTHER- DESIGNATES HER HUSBAND AS THE REVOCABLE BENEFICIARY. THE INSURANCE PREMIUM PAID BY CORCOR CORPORATION IS-(RPCPA) A) B) C) D) TAX DEDUCTIBLE INSOFAR AS THE FIRST POLICY IS CONCERNED TAX DEDUCTIBLE FOR BOTH POLICIES NOT DEDUCTIBLE FOR BOTH POLICIES FIRST POLICY IS NOT DEDUCTIBLE3 SECOND POLICY IS DEDUCTIBLE

'4. MRS. LUCAS WAS INSURED UNDER AN ENDOWMENT POLICY WITH A VALUE OF P!,,-,,,. TOTAL PREMIUMS PAID BY HER DURING THE TERM OF PREMIUM PAYMENTS ON THE POLICY WAS P4*,-,,, FROM THERE WAS A RETURN OF PREMIUMS OF P4,-,,,.AT THE MATURITY OF THE POLICY- MRS. LUCAS RECEIVED P!,,-,,,. THE INCOME OF MRS. LUCAS UNDER THE POLICY IS-(RPCPA) A) B) C) D) 5ERO P!,,-,,, 1,-,,, !,-,,,

NUMBERS 5 AND # ARE BASED ON THE FOLLOWING INFORMATION: SOFIA TOO( A LIFE INSURANCE FROM SUNSTAR INSURANCE COMPANYWITH HER HUSBAND NOLI AS THE BENEFICIARY. UNDER THE POLICYSUNSTAR WILL PAY SOFIA THE AMOUNT OF P!,,-,,, WHEN THE POLICY MATURES- OR TO HER BENEFICIARY HUSBAND IN CASE SHE DIES BEFORE THE MATURITY. SOFIA WILL PAY P1,-,,, ANNUALLY FOR 2, YEARS. '!. ASSUMING THAT THE POLICY MATURED WHEN SOFIA REACHED !, YEARS OLD AND SHE RECEIVED THE ENTIRE P!,,-,,, FROM THE INSURER- HOW MUCH INCOME SHOULD SHE REPORT A) B) C) D) P!,,-,,, 2,,-,,, 3,,-,,, NONE

'%. ASSUME THAT SOFIA DIED AFTER 1, YEARS OF PAYING PREMIUM. HOW MUCH INCOME SHOULD BE REPORTED TO THE BIR A) B) C) D) P!,,-,,, 1,,-,,, 4,,-,,, NONE TO $ ARE BASED ON THE FOLLOWING INFORMATION:

NUMBERS

PAUL INSURED HIS LIFE WITH AN INSURANCE COMPANY . UNDER THE CONTRACT- HE WILL PAY A MONTHLY PREMIUM OF P2-,,, FOR 1, YEARS. IN CASE OF DEATH BEFORE THE 1, TH YEAR- HIS BENEFICIARY WILL RECEIVE AN INDEMNIFICATION IN THE AMOUNT OF P1!,-,,,. IF HE IS STILL LIVING ON THE 1,TH YEAR- HE WILL RECEIVE THE FACE VALUE OF P!,,-,,,. ''. IF PAUL DIES ON THE !TH YEAR- HIS BENEFICIARY WILL REPORT AN INCOME OFA) B) C) D) P!,,-,,, 1!,-,,, 2%,-,,, EXEMPT

'). SUPPOSE PAUL DIES ON THE !TH YEAR AND HIS BENEFICIARY WAS OFFERED TO RECEIVE P1!,-,,, IN LUMP SUM OR TO RECEIVE IT AT P2,-,,, A MONTH FOR TEN(1,) MONTHS AND THE BENEFICIARY CHOSE THE 2ND OPTION- HE WILL REPORT AN INCOME OFA) B) C) D) P!,,-,,, 1!,-,,, !,-,,, EXEMPT

'*. SUPPOSE PAUL SURVIVED THE POLICY AND WAS ABLE TO RECEIVE P!,,-,,,- HE WILL REPORT AN INCOME OFA) B) C) D) P!,,-,,, 2%,-,,, 1!,-,,, NONE

),. ANDRES IS THE OWNER AND BENEFICIARY OF A P!,,-,,, POLICY ON THE LIFE OF HIS FATHER. ANDRES SELLS THE POLICY TO HIS

BROTHER ROLLY FOR P1!,-,,,. ROLLY SUBSE&UENTLY PAYS PREMIUMS OF P!,-,,,. UPON HIS FATHER0S DEATH- ROLLY MUST A) B) C) D) INCLUDE P!,,-,,, IN HIS GROSS INCOME EXCLUDE THE ENTIRE PROCEEDS IN HIS GROSS INCOME INCLUDE P3,,-,,, IN HIS GROSS INCOME INCLUDE P3!,-,,, IN HIS GROSS INCOME

)1. MR. BASIL INSURED HIS LIFE WITH HIS ESTATE AS BENEFICIARY.IN 2,,)- AFTER MR. BASIL HAD PAID P%!-,,, IN PREMIUM- HE ASSIGNED THE POLICY TO MR. .OSE LLAMADO FOR P%,-,,,- AND MR. LLAMADO CONTINUED PAYING THE PREMIUMS. MR. BASIL DIED AND MR. LLAMADO COLLECTED THE TOTAL PROCEEDS OF P2,,-,,,. MR. LLAMADO- AFTER THE ASSIGNMENT AND BEFORE MR. BASIL0S DEATH- PAID TOTAL PREMIUMS OF P),-,,,. AS A RESULT OF THE ABOBE TRANSACTION- MR. LLAMADO-(RPCPA) A) B) C) D) MAY CONSIDER THE PROCEEDS OF P2,,-,,, AS EXEMPT FROM TAX DERIVED A TAXABLE INCOME OF P!!-,,, DERIVED A TAXABLE INCOME OF P%,-,,, ANSWER NOT GIVEN

)2. BINATA REYES WON THE INTERNATIONAL BILLIARD CHAMPIONSHIP HELD IN MADRID- SPAIN. THE TOURNAMENT WAS SANCTIONED BY A NATIONAL SPORTS ASSOCIATION WHICH IS RECOGNI5ED BY THE PHILIPPINE OLYMPIC COMMITTEE. HE WAS AWARDED U.S.8%,-,,, BY THE SPONSOR OF THE TOURNAMENT. HE WAS ALSO GIVEN P2!,-,,, CASH BY SAN MIGUEL CORPORATION AS PRI5E OR AWARD. IN THE SAME YEAR- HE ENTERED INTO A CONTRACT WITH THE SAME COMPANY TO ADVERTISE THEIR PRODUCT FOR P1-!,,-,,,. IF THE EXCHANGE RATE OF EVERY U.S. 81 IS P4!- BINATA REYES SHOULD REPORT AN INCOME OF + A) B) C) D) P4-'!,-,,, 1-!,,-,,, 1-'!,-,,, 3-2!,-,,,

)3. WHILE CROSSING ALONG THE INTERSECTION OF LEGARDA AND RECTO AVENUE- MISS MINA MALAS WAS BUMPED BY A PASSENGER .EEPNEY. AS A CONSE&UENCE OF THE ACCIDENT- SHE WAS HOSPITALI5ED FOR 2, DAYS. THE DRIVER AND THE OPERATOR OF

THE PASSENGER .EEPNEY PAID HER A TOTAL AMOUNT OF P13!-,,, FOR THE FOLLOWING EXPENSES THAT SHE INCURRED/ HOSPITAL BILLS COST OF MEDICINES MORAL DAMAGES FOR MENTAL ANGUISH AND OTHERS P%,-,,, 1!-,,, %,-,,,

SHE ALSO RECEIVED P2,-,,, AS SETTLEMENT OF A LIBEL CASE THAT SHE FILED AGAINST A TV STATION WHICH ANNOUNCED THAT SHE WAS PREGNANT AT THE TIME OF THE ACCIDENT AND THAT THE FETUS WAS ABORTED. THE INCOME TO BE REPORTED BY MINA ISA) B) C) D) 5ERO P2,-,,, %,-,,, 1!!-,,,

)4. MR. MONTES WAS IN.URED IN A VEHICULAR ACCIDENT IN 2,,). HE INCURRED AND PAID MEDICAL EXPENSES OF P2,-,,, AND LEGAL FEES OF P1,-,,, DURING THE YEAR. IN 2,,*- HE RECEIVED P',-,,, 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 OF MR. MONTES IN 2,,) IS-(RPCPA) A) B) C) D) 5ERO P4,-,,, ',-,,, !,-,,,

)!. AN ACCIDENT ATTRIBUTED TO THE NEGLIGENCE OF THE DRIVER OF SUPERMAN LINES RESULTED IN THE DEATH OF RICHARD0S WIFEPHYSICAL IN.URIES TO RICHARD THAT PREVENTED HIM FROM WOR(ING FOR TWO(2) MONTHS AND THE TOTAL WREC( OF HIS BRAND NEW CAR WHICH HE HAD BOUGHT FOR P4!,-,,,. IN AN ACTION FOR DAMAGES- THE COURT AWARDED TO RICHARD THE FOLLOWING/ P4,-,,,4,-,,,),-,,,IN.URIES TO RICHARD CONSISTING MAINLY IN THE LOSS OF THE LEFT LEG TWO MONTHS SALARY OF RICHARD FOR THE DEATH OF HIS WIFE

1,,-,,,%,,-,,,-

MORAL DAMAGES FOR THE PHYSICAL SUFFERING AND MENTAL ANGUISH FOR THE LOSS OF HIS CAR- THE VALUE OF WHICH HAD INCREASED

BASED ON THE FOREGOING- RICHARD SHOULD REPORT INCOME OFA) B) C) D) P1*,-,,, %),-,,, )3,-,,, 24,-,,,

)%. LYDIA WAS HIT BY A WAYWARD BUS WHILE ON HER WAY HOME. SHE SURVIVED BUT HAD TO PAY P1!,-,,, FOR HER HOSPITALI5ATION. SHE WAS UNABLE TO WOR( FOR SIX(%) MONTHS WHICH MEANT THAT SHE DID NOT RECEIVE HER USUAL SALARY OF P1,-,,, A MONTH OR A TOTAL OF P%,-,,,. SHE SUED THE BUS COMPANY AND WAS ABLE TO OBTAIN A FINAL .UDGMENT AWARDING HER P1!,-,,, AS REIMBURSEMENT FOR HER HOSPITALI5ATION- P%,-,,, FOR THE SALARIES SHE FAILED TO RECEIVE WHILE HOSPITALI5ED- AND P2!,-,,, AS MORAL DAMAGES FOR HER PAIN AND SUFFERING. SHE WAS ABLE TO COLLECT IN FULL FROM THE .UDGMENT. HOW MUCH INCOME DID SHE REALI5E WHEN SHE COLLECTED FROM THE .UDGMENT A) B) C) D) P4%,-,,, 2!,-,,, %,-,,, 4,,-,,,

)'. SAMSONA WAS IN.URED IN A VEHICULAR ACCIDENT IN 2,,'. SHE INCURRED AND PAID HOSPITAL EXPENSES OF P3,-,,, AND LEGAL FEES OF P1!-,,, DURING THAT YEAR. IN 2,,)- SHE RECEIVED P4,-,,, AS SETTLEMENT FROM THE INSURANCE COMPANY WHICH INSURED THE CAR OWNED BY DIMAR- THE OTHER PARTY INVOLVED IN THE ACCIDENT. FROM THE ABOVE PAYMENTS AND TRANSACTIONS- THE AMOUNT OF INCOME TAXABLE TO SAMSONA ISA) B) C) D) P4,-,,, IN 2,,) !-,,, IN 2,,) !-,,, IN 2,,' NONE

)). WHICH OF THE FOLLOWING IS A TAXABLE INCOME -(RPCPA) A) B) C) D) INCOME FROM &UALIFIED PENSION PLAN COM3PENSATION FOR PERSONAL IN.URIES MORAL DAMAGES INTEREST ON MORAL DAMAGES

)*. MISS TUA5ON HAD RECENTLY .OINED MMC AS SALES EXECUTIVE. SHE WAS ADVISED TO BE RETRENCHED BECAUSE THE COMPANY WAS LOSING HEAVILY- BUT THAT SHE WOULD BE GIVEN A SUBSTANTIAL SEPARATION PAY. THE GENERAL MANAGERHOWEVER- SUGGESTED TO MISS TUA5ON TO FILE A LETTER OF RESIGNATION FROM THE COMPANY- INSTEAD OF HAVING BEEN INVOLUNTARILY SEPARATED AS THE LATTER WOULD HAVE IMPLICATIONS OF INEFFICIENCY ON HER PART. MISS TUA5ON CHOSE TO RESIGN FROM THE COMPANY AND RECEIVED THE SUM OF P1,,-,,, AS SEPARATION PAY. THE ABOVE AMOUNT IS-(RPCPA) A) B) C) D) EXEMPT FROM INCOME TAX TAXABLE IN FULL NON-DEDUCTIBLE EXPENSE ON THE PART OF THE COMPANY PARTIALLY TAXABLE

*,. LETTY- AN OFFICIAL OF SAMPAGUITA CORPORATION AS(ED FOR AN EARLIER RETIREMENT BECAUSE SHE WAS EMIGRATING TO CANADA. SHE WAS PAID P1 MILLION AS A SEPARATION PAY IN RECOGNITION OF HER VALUABLE SERVICES TO THE CORPORATION. SHANE- ANOTHER OFFICIAL OF THE SAME COMPANY WAS SEPARATED FOR OCCUPYING A REDUNDANT POSITION. SHE WAS GIVEN P!,,-,,, AS SEPARATION PAY. SHEILA WAS SEPARATED DUE TO HER FAILING EYESIGHT. SHE WAS GIVEN P2!,-,,, AS SEPARATION PAY. ALL OF THE THREE(3) WERE NOT &UALIFIED TO RETIRE UNDER THE BIRAPPROVED PENSION PLAN OF THE CORPORATION. &1/ IS THE SEPARATION PAY GIVEN TO LETTY SUB.ECT TO INCOME TAX &2/ HOW ABOUT THE SEPARATION PAY RECEIVED BY SHANE &3/ HOW ABOUT THE SEPARATION PAY RECEIVED BY SHEILA A) YES TO ALL &UESTIONS B) YES TO 2ND &UESTION

C) NO TO ALL &UESTIONS D) NO TO 2ND AND 3RD &UESTIONS *1. DURING THE YEAR- BEN RECEIVED A COCONUT LAND FROM HIS MOTHER BY WAY OF AN INTER-VIVOS DONATION. THE LAND HAD A MAR(ET VALUE OF P',,-,,, AND EARNING AN AVERAGE ANNUAL INCOME OF P!,-,,,. IN THE SAME YEAR- HIS MOTHER DIED. HE INHERITED A PASSENGER BUS VALUED AT P4,,-,,, AND A RESIDENTIAL HOUSE WORTH P2-,,,-,,,. THE BUS EARNED A TOTAL INCOME OF P3,-,,, IN THE HANDS OF BEN. AS A CONSE&UENCE OF HIS MOTHER0S DEATH- HE RECEIVED P4,,-,,, FROM AN INSURANCE COMPANY AS PROCEEDS OF AN INSURANCE POLICY TA(EN BY HIS MOTHER WHO APPOINTED HIM AS THE BENEFICIARY. THE TOTAL PREMIUMS PAID WAS P1!,-,,,. THE INCOME SUB.ECT TO TAX ISA) B) C) D) P3-!,,-,,, 3-3!,-,,, 33,-,,, ),-,,,

*2. AFTER WOR(ING FOR 3, YEARS AT STO. DOMINGO CORPORATIONMISS TAPIA RETIRED FROM EMPLOYMENT AT THE AGE OF %,. SHE RECEIVED P%,,-,,, AS RETIREMENT PAY FROM THE PRIVATE RETIREMENT PLAN MAINTAINED BY THE EMPLOYER. OTHER THAN HER RETIREMENT BENEFITS- SHE ALSO RECEIVED HER ENDOWMENT INSURANCE POLICY IN THE AMOUNT OF P4,,-,,, WHICH SHE WAS PAYING FOR 2, YEARS AT AN ANNUAL PREMIUM OF P!-,,,. HOW MUCH INCOME MUST BE REPORTED BY MISS TAPIA A) B) C) D) P3,,-,,, 4,,-,,, %,,-,,, NONE

*3. ANTONY WAS HIRED AS STAFF AUDITOR OF RGF AND COMPANY IN 1**1. IN DECEMBER 1**) HE TRANSFERRED TO BAYAN AND ASSOCIATES. IN 2,,,- HE RETURNED BAC( TO RGF AND COMPANY UNTIL HIS RETIREMENT IN 2,,% AT THE AGE OF !!.

&UESTION 1/ ARE THE RETIREMENT BENEFITS TAXAB LE TO ANTONY &UESTION 2/ SUPPOSE HE WAS TERMINATED FROM EMPLOYMENT DUE TO DISHONESTY. IS THE SEPARATION PAY TAXABLE TO ANTONY &UESTION 3/ SUPPOSE HE WAS TERMINATED FROM EMPLOYMENT DUE TO THE MERGER OF THE TWO AUDIT FIRMS. WILL THE SEPARATION PAY TAXABLE TO ANTONY A) B) C) D) NO- YES- NO NO- YES- YES YES- NO- NO YES- NO- YES

*4. ON OCTOBER 1- 2,,*- GILDA INHERITED PROPERTIES WORTH P3-,,,-,,, FROM HER MOTHER. THE PROPERTIES ARE EARNING INCOME OF P*,-,,, A MONTH. HOW MUCH INCOME IS TO BE REPORTED BY GILDA IN 2,,* A) B) C) D) P3-,*,-,,, 3-,,,-,,, 3-2',-,,, 2',-,,,

*!. VILLAMOR- AN EMPLOYEE OF A COOPERATIVE WAS REGULARLY RECEIVING A MONTHLY SALARY AND ALLOWANCE OF P3-!,, AND P1-,,,- RESPECTIVELY. ON .UNE 1- 2,,)- HE WAS RETRENCHED BY THE COOPERATIVE PAYING HIM A SEPARATION PAY OF P12!-,,,. HE DECIDED TO USE THIS MONEY IN BUYING TRIMOBILE. FOR SIX(%) MONTHS- HE EARNED A NET INCOME OF P24-,,,. HOW MUCH INCOME SHOULD VILLAMOR DECLARE IN 2,,) FOR INCOME TAX PURPOSES A) B) C) D) P4)-'!, 4%-!,, 1'3-'!, 1'1-,,,

*%. RAMONA MONTERO WAS RETIRED BY HER EMPLOYERCORPORATION IN 2,,) AND PAID P2-,,,-,,, AS A RETIREMENT GRATUITY WITHOUT ANY DEDUCTION OF WITHHOLDING TAX. THE CORPORATION BECAME BAN(RUPT IN 2,,'. CAN THE BIR SUB.ECT THE P2-,,,-,,, RETIREMENT GRATUITY TO INCOME TAX -(RPCPA) 1ST ANSWER/ NO- IF THE RETIREMENT GRATUITY WAS PAID BASED ON A REASONABLE PENSION PLAN WHERE MONTERO WAS %, YEARS OLD

AND HAS SERVED THE CORPORATION FOR * YEARS. 2ND ANSWER/ YES- IF MONTERO WAS FORCED BY THE CORPORATION TO RESIGN DUE TO RETRENCHMENT. A) B) C) D) BOTH ANSWERS ARE WRONG BOTH ANSWERS ARE CORRECT FIRST ANSWER IS CORRECT- THE SECOND IS WRONG FIRST ANSWER IS WRONG- THE SECOND IS CORRECT.

*'. WHICH OF THE CEILINGS ON THE FOLLOWING DE MINIMIS BENEFITS IS CORRECT A) B) C) D) RICE SUBSIDY P1-,,, 1-,,, 1-!,, 1-!,, UNIFORM ALLOWANCE P3-,,, 4-,,, 3-!,, 4-,,,

*). 1ST STATEMENT// LAUNDRY ALLOWANCE NOT EXCEEDING P3,, PER MONTH IS NOT EXEMPT DE MINIMIS BENEFIT IF GIVEN TO RAN(-AND-FILE EMPLOYEES 2ND STATEMENT/ RICE SUBSIDY OF P1-!,, PER MONTH IS AN EXEMPT DE MINIMIS BENEFIT REGARDLESS OF WHETHER THE RECIPIENT EMPLOYEE IS OCCUPYING A MANAGERIAL POSITION OR NOT A) BOTH STATEMENTS ARE WRONG B) BOTH STATEMENTS ARE CORRECT C) THE FIRST STATEMENT IS CORRECT3 THE SECOND STATEMENT IS WRONG D) THE FIRST STATEMENT IS WRONG3 SECOND STATEMENT IS CORRECT **. AFTER WOR(ING FOR 3O YEARS AND DUE TO OLD AGE- RAFFY RETIRED FROM HIS EMPLOYMENT ON DECEMBER 31- 2,,) AS A RAN(-AND-FILE EMPLOYEE OF TUMAGAY CORPORATION. AS A CONSE&UENCE OF HIS RETIREMENT- HE RECEIVED THE FOLLOWING FROM HIS EMPLOYER/ SALARY FOR 2,,) CHRISTMAS GIFT ANNIVERSARY BONUS LOYALTY AWARD RETIREMENT PAY P2!,-,,, 2!-,,, 2-!,, 1,-,,, '!,-,,,

BASED ON THE ABOVE DATA- THE AMOUNT SUB.ECT TO TAX OF RAFFY ISA) B) C) D) P2!,-,,, 2!'-!,, 2!2-!,, 1-,3'-!,,

NUMBERS 1"" AND 1"1 ARE BASED ON THE FOLLOWING INFORMATION: RIC(Y HAD THE FOLLOWING DATA FROM HIS EMPLOYMENT IN 2,,)/ MONTHLY SALARY TAXES WITHHELD PAG-IBIG CONTRIBUTIONS UNION DUES PHILHEALTH CONTRIBUTIONS SSS PREMIUMS 13TH MONTH PAY MID-YEAR BONUS 3LOYALTY AWARD P12-,,, )-,,, 1-!,, 2-4,, '2, 4), 12-,,, 12-,,, !-,,,

1,,. THE PORTION OF COMPENSATION WHICH IS EXCLUDED FROM THE GROSS COMPENSATION INCOME IF RIC(Y IS A RAN(-AND-FILE EMPLOYEE ISA) B) C) D) P!-1,, 34-1,, 2*-,,, NONE THE GROSS COMPENSATION INCOME OF RIC(Y IN 2,,) IS-

1,1. A) B) C) D)

P144-,,, 1!,-,,, 1,*-*,, 13)-*,,

1,2. WHICH OF THE FOLLOWING COMPENSATION PAYMENTS TO A MINIMUM WAGE EARNER IS SUB.ECT TO INCOME TAX A) B) C) D) HOLIDAY PAY OVERTIME PAY NIGHT SHIFT DIFFERENTIAL PAY NONE OF THE ABOVE

1,3.

THREE(3) TAXPAYERS HAVE THE FOLLOWING DATA/ ALCAN5O P**-,4) )-2!4 43! 1-2!% *-*4! BARRIENTOS P1,1-1'2 )-431 1-4!* 1-%)% 11-!'% CORPORAL P)4-3%) 1,-!4% 2-!43 1-,,, 14-,)*

2,,* BASIC PAY MONTHLY BASIC PAY HOLIDAY PAY OVERTIME PAY HA5ARD PAY NIGHT SHIFT DIFF PAY TOTAL PAY FOR THE MONTH

WHO OF THE ABOVE TAXPAYER(S) IS$ARE EXEMPT FROM INCOME TAX A) B) C) D) ALCAN5O ONLY ALCAN5O AND BARRIENTOS ALCAN5O- BARRIENTOS AND CORPORAL BARRIENTOS AND CORPORAL

CHAPTER 12- INCOME TAX OF CORPORATIONS


MULTIPLE CHOICE 1,4. FOR PURPOSES OF INCOME TAXATION- WHICH OF THE FOLLOWING IS NOT CONSIDERED AS A CORPORATION A) B) C) D) GENERAL PROFESSIONAL PARTNERSHIP BUSINESS PARTNERSHIP UNREGISTERED PARTNERSHIP .OINT STOC( COMPANIES

1,!. WHICH OF THE FOLOWING BUSINESSES IS NOT TAXABLE AS A CORPORATION A) ANDREA- BARBIE AND CRISSY CONTRIBUTED P!,,-,,, EACH AND OPENED UP A DEPARTMENT STORE IN THE DOWNTOWN. THEY AGREED THAT WHATEVER NET PROFIT IS EARNED WILL BE DISTRIBUTED E&UALLY TO THEM. THEY DID NOT BOTHER TO REGISTER THE BUSINESS WITH THE SECURITIES AND EXCHANGE COMMISSION B) GIGI AND .AY.AY- TWO SENIOR STAFF AUDITORS OF A BIG ACCOUNTING AND AUDITING FIRM- RESIGNED FROM THEIR .OB AND ORGANI5ED A NEW FIRM WHICH THEY NAMED AS GIGI- .AY.AY AND COMPANY- CPA:.

C) LAVINIA- DORINA- ROSA MIA AND CAPICAT FORMED A BUSINESS ORGANI5ATION WITH THE FOLLOWING AGREED FEATURES/ 1) THEY ARE DEPRIVED OF THEIR GENERAL AGENCY TO ACT ON BEHALF OF THEIR VENTURES3 2) THE POWERS OF MANAGEMENT ARE VESTED ON THE BOARD OF TRUESTEES3 3) THE OWNERSHIP IS REPRESENTED IN TRANSFERABLE CERTIFICATES3 4) THE BUSINESS CONTINUES FOR A FIXED TERM NOTWITHSTANDING THE DEATH OR DISABILITY OF ONE OF THEM AND 3 !) THE LIABILITY OF THE PARTNERS IS NOT LIMITED TO THEIR CONTRIBUTIONS D) A GROUP OF FIVE(!) ENTREPRENEURS HAD ORGANI5ED- FILED AND REGISTERED THE ARTICLES OF INCORPORATION OF CO.ANG(UHA CORPORATION. IT HAS AN AUTHORI5ED CAPITAL STOC( OF P1, MILLION DIVIDED INTO 1,,-,,, SHARES EACH SHARE HAVING A PAR VALUE OF P1,, 1,%. A) B) C) D) WHICH OF THE FOLLOWING IS SUB.ECT TO INCOME TAX

SSS AND GSIS PHILIPPINE HEALTH INSURANCE CORPORATION(PHIC) PROFESSIONAL REGULATION COMMISSION(PRC) PHILIPPINE AMUSEMENT AND GAMING CORPORATION(PAGCOR)

1,'. "TAXABLE NET INCOME RECEIVED DURING EACH YEAR FROM ALL SOURCES# IS THE TAX BASE FOR INCOME PURPOSES OF THIS CLASS OF TAXPAYERS-(RPCPA) A) DOMESTIC CORPORATIONS B) RESIDENT CORPORATIONS C) RESIDENT FOREIGN CORPORATIONS ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES D) RESIDENT FOREIGN CORPORATION NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES 1,). A) B) C) D) ONE OF THE FOLLOWING IS TAXED ON GROSS INCOME-

DOMESTIC CORPORATION RESIDENT FOREIGN CORPORATION NON-PROFIT CEMETERY NON-RESIDENT FOREIGN CORPORATION

1,*. RGF CORPORATION- A DOMESTIC CORPORATION HAS THE FOLLOWING RECORDS OF INCOME AND EXPENSES IN 2,,*/ GROSS INCOME- NET OF 14 WHT EXPENSES RENT INCOME- NET OF !4 WHT P1-43!-!,, '!%-,,, 13%-),,

EXPENSES ON RENT DIVIDEND FROM DOMESTIC CORPORATION ROYALTY INTEREST FROM BAN( DEPOSIT WITH PNB- GROSS OF TAX THE INCOME TAX PAYABLE BY RGF CORPORATION ISA) B) C) D) P241-,2, 21*-32, ),3-4,, 2!*-4*,

34-%,, 2!-,,, ),-,,, 1!-,,,

11,. BASED ON THE DATA IN NUMBER 1,* ABOVE- THE TOTAL FINAL TAXES PAYABLE ON RGF CORPORATION ISA) B) C) D) P1*-,,, 21-!,, 33-2!, 3-,,,

111. LCY CORPORATION- A CORPORATION ENGAGED IN BUSINESS IN THE PHILIPPINES AND ABROAD- HAS THE FOLLOWING DATA IN 2,,*/ GROSS INCOME- PHILIPPINES EXPENSES- PHILIPPINES GROSS INCOME- USA EXPENSES- USA INTEREST ON BAN( DEPOSIT THE INCOME TAX DUE IF THE CORPORATION ISDOMESTIC A) B) C) D) P11%-),, 12'-'!, 312-,,, 1,*.!,, RESIDENT FOREIGN P'2-,,, ')-'!, !1!-)!, %'-!,, NON-RESIDENT FOREIGN P32,-,,, 3!,-,,, 11%-),, 3,,-,,, P*'!-,,, '!,-,,, '',-,,, %3,-,,, 2!-,,,

112. FLT CORPORATION- A DOMESTIC CORPORATION HAS THE FOLLOWING RECORD OF INCOME AND EXPENSES DURING THE YEAR/

GROSS INCOME EXPENSES DIVIDEND FROM A RESIDENT FOREIGN CORPORATION ROYALTIES- PHILIPPINES ROYALTIES- USA INTEREST ON TIME DEPOSIT WITH METROBAN( INTEREST ON MONEY MAR(ET PLACEMENT THE TAXABLE INCOME ON FLT CORPORATION ISA) B) C) D) P))%-,,, 1-1!%-,,, %41-,,, %1%-,,,

P1-!4,-,,, %!4-,,, *!-,,, 23,-,,, 1'!-,,, 1)-,,, 2!-,,,

113. ISA) B) C) D)

THE TOTAL FINAL WITHHOLDING TAX ON FLT CORPORATION

P!1-4'! '2-%,, 1,3-12, 14)-1,,

NUMBERS 114 TO 11 ARE BASED ON THE FOLLOWING INFORMATION: GCF CORPORATION WHICH STARTED WITH ITS OPERATIONS IN 1**, HAS THE FOLLOWING RECORDS IN 2,,*/ GROSS PROFIT EXPENSES DIVIDENDDOMESTIC COMPANY 1!-,,, INCOME TAX WITHHELD !-,,, RENT INCOME- GROSS OF !4 WHT 3%-,,, IST &TR P!,,-,,, 4,,-,,, 2ND &TR P)!,-,,, '',-,,, 1!-,,, '-,,, 3%-,,, 3RD &TR P),,-,,, %4,-,,, 2,-,,, )-,,, 4)-,,, 4TH &TR P'',-,,, !'!-,,, 2,-,,, %-'!, 4)-,,,

THE COMPANY HAD AN EXCESS PAYMENT OF P12-!,, IN 2,,) FROM WHICH IT HAD DECIDED TO CLAIM TAX CREDIT 114. THE INCOME TAX PAYABLE AT THE END OF THE FIRST &UARTER ISA) P4,-),, B) 3%-'2,

C) 2)-3,, D) 21-!,, 11!. THE INCOME TAX PAYABLE AT THE END OF THE SECOND &UARTER ISA) B) C) D) P1*-2,, 2)-32, 31-),, 2%-,,,

11%. THE INCOME TAX PAYABLE AT THE END OF THE THIRD &UARTER ISA) B) C) D) P!2-,,, %2-4,, 12-%4, NONE

11'. THE INCOME TAX PAYABLE$REFUND AT THE END OF THE YEAR ISA) B) C) D) P2!-,*, %3-'!, '!-*,, %)-%1,

11). ABC COMPANY- A DOMESTIC CORPORATION HAS THE FOLLOWING DATA-(RPCPA) INCOME TAX FOR 2,,) LESS/ TAX CREDITS EXCESS TAX CREDITS 2,,* INCOME NET OF 14 WHT DEDUCTIONS P11,-,,, 12!-,,, 1!-,,, 1ST &TR P4*!-,,, 4%,-,,,

FOR THE 1ST &UARTER OF 2,,*- THE CORPORATION WILL REPORT/ A) B) C) D) EXCESS TAX CREDIT OF P%-,,, TAX PAYABLE OF P'-,,, EXCESS TAX CREDIT OF P)-,,, TAX PAYABLE OF P2-,,,

11*.

A DOMESTIC CORPORATION HAS THE FOLLOWING DATA/ P1!-,,, 1ST &TR P4*!-,,, 4%,-,,, 2ND &TR P'*2-,,, ',,-,,,

EXCESS TAX CREDITS FROM 2,,) FOR THE YEAR 2,,*/ INCOME- NET OF 14 WHT DEDUCTIONS

HOW MUCH IS THE INCOME TAX STILL DUE AND PAYABLE IN THE SECOND &UARTER -(RPCPA) A) B) C) D) P21-,,, 14-,,, 1,-4,, 2*-44,

12,. IF THE GROSS INCOME FROM UNRELATED ACTIVITY EXCEEDS !,4 OF THE TOTAL GROSS INCOME DERIVED BY ANY PRIVATE EDUCATIONAL INSTITUTION- THE RATE SHALL BE 3,4 BASED ON THE ENTIRE TAXABLE INCOME. THIS PRINCIPLE IS (NOWN AS A) B) C) D) CONSTRUCTIVE RECEIPT TAX BENEFIT RULE END RESULT DOCTRINE PREDOMINANCE TEST

121. IN 2,,*- RGF UNIVERSITY- A PROPRIETARY EDUCATIONAL INSTITUTION REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND COMMISSION ON HIGHER EDUCATION(CHED)- SPENT P1!-,,,-,,, FOR THE CONSTRUCTION OF A NEW BUILDING. FOR INCOME TAX PURPOSES- THE AMOUNT MAYBE/ A) CLAIMED ENTIRELY AS DEDUCTION FROM ITS 2,,' GROSS INCOME B) CLASSIFIED AS AN ASSET OR EXPENSED OUTRIGHT- AT THE OPTION OF THE GOVERNMENT C) CLASSIFIED AS AN ASSET OR EXPENSED OUTRIGHT- AT THE OPTION OF THE TAXPAYER D) CLASSIFIED AS AN ASSET AND CLAIM AN ANNUAL DEPRECIATION OVER THE LIFE OF THE BUILDING

NUMBERS 122 AND 123 ARE BASED ON THE FOLLOWING INFORMATION: THE &UE5ON SCHOOL OF BUSINESS AND ARTS (&SBA) IS A PRIVATE EDUCATIONAL INSTITUTION RECOGNI5ED BY THE GOVERNMENT. THE FOLLOWING ARE THE FINANCIAL DATA FOR THE ITS FISCAL YEAR ENDING .UNE 3,- 2,,*/ TUITION FEES MISCELLANEOUS FEES INTEREST ON BAN( DEPOSITS RENT INCOME OF SCHOOL FACILITIES TO OUTSIDERS SALARY AND BONUSES- ALL PERSONNEL OTHER OPERATING EXPENSES REPAYMENT OF LOAN &UARTERLY (THREE &UARTERS) INCOME TAX PAID P12-),,-,,, 1-),,-,,, 12-3,, 3!,-,,, '-!,,-,,, 3-!,,-,,, 4,,-,,, 4)-,,,

A BUILDING WAS CONSTRUCTED ON APRIL 2- 2,,* AT A COST OF P2-,,,-,,, WITH A DEPRECIABLE LIFE OF !, YEARS. 122. ASSUMING THE COST OF CONSTRUCTION IS TREATED AS AN EXPENSE- THE INCOME TAX PAYABLE BY THE SCHOOL FOR THE YEAR ENDED .UNE 3,- 2,,* ISA) B) C) D) P343-,,, 14'-,,, !'%-,,, 1%,-,,,

123. THE INCOME TAX PAYABLE IF THE COST OF BUILDING CONSTRUCTION IS CAPITALI5ED/ A) B) C) D) P34%-,,, 14'-,,, 1-2,3-2,, 34!-%%'

124. IN 2,,*- PROSPEROUS CORPORATION- A DOMESTIC CORPORATION- HAD A NET INCOME OF P2-,,,-,,,. IT PAID A CORPORATE TAX OF 3,4 LEAVING A DISTRIBUTABLE INCOME OF P1-4,,-,,,. IF A DIVIDEND IS DECLARED BY THE CORPORATION AND RECEIVED BY THE FOLLOWING STOC(HOLDERS- WHICH OF THE FOLLOWING STATEMENTS IS FALSE A) NON-RESIDENT ALIENS ENGAGED IN TRADE OR BUSINESS ARE LIABLE TO PAY 3,4 DIVIDEND TAX

B) NON-RESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS ARE LIABLE TO PAY 2!4 DIVIDEND TAX C) RESIDENT CITI5ENS ARE LIABLE TO PAY 1,4 DIVIDEND TAX D) RESIDENT FOREIGN CORPORATIONS ARE EXEMPT FROM THE PAYMENT OF DIVIDEND TAX 12!. DIVIDENDS FROM A DOMESTIC CORPORATION AND$OR SHARE IN THE NET INCOME OF A TAXABLE PARTNERSHIP RECEIVED BY A CITI5EN DURING THE YEAR 2,,* IS SUB.ECT TO A FINAL TAX OF(RPCPA) A) B) C) D) 5ERO 3,4 2,4 1,4

12%. THE TY CORPORATION IS AN INTERNATIONAL CARRIER DOING BUSINESS IN THE PHILIPPINES. ITS TAXABLE BASE FOR INCOME TAX PURPOSES IS-(RPCPA) A) B) C) D) GROSS PHILIPPINE BILLINGS GROSS PHILIPPINE BILLINGS MINUS DEDUCTIBLE EXPENSES REGULAR RATES OF 324 OF ITS NET TAXABLE INCOME ALLOCATION OF INCOME FROM SOURCES WITHIN AND WITHOUT THE PHILIPPINES- AS WELL AS EXPENSES

12'. A RESIDENT INTERNATIONAL CARRIER HAS THE FOLLOWING DATA FOR THE CURRENT YEAR/ GROSS INCOME OF P',,-,,, AND EXPENSES OF P2,,-,,, FROM THE PHILIPPINES3 GROSS INCOME OF P!,,-,,, AND EXPENSES OF P1,,-,,, FROM HONG(ONG. HOW MUCH IS THE TAX PAYABLE OF THE CORPORATION -(RPCPA) A) B) C) D) P2))-,,, 1'-!,, 1%,-,,, 3,-,,, ONE OF THE FOLLOWING IS EXEMPT FROM INCOME TAX

12). A) B) C) D)

PROPRIETARY EDUCATIONAL INSTITUTION PRIVATE CEMETERIES GOVERNMENT EDUCATIONAL INSTITUTIONS MUTUAL SAVINGS BAN(

12*. ON FEBRUARY !- 2,,*- 5ORRO CORPORATION DECLARES 2,4 STOC( DIVIDEND AND ISSUED SHARES OF STOC(S AMOUNTING TO

P1,,-,,,. ON MARCH 2,- 2,,*- THE CORPORATION REDEEMED THE STOC( DIVIDEND BY VIRTUE OF WHICH THE STOC(HOLDERS SURRENDERED THEIR STOC( CERTIFICATES IN RETURN FOR THE CASH PAID TO THEM BY 5ORRO CORPORATION IN THE AMOUNT OF P1,,-,,,. A) THE STOC( DIVIDENDS DECLARED ARE TAXABLE BECAUSE GENERALLY- STOC( DIVIDENDS ARE SUB.ECT TO INCOME TAX B) THE DIVIDENDS ARE TAXABLE TO THE STOC(HOLDERS BECAUSE THEY ARE ACTUALLY PROPERTY DIVIDENDS. C) THE REDEMPTION OF THE STOC( DIVIDEND IS ESSENTIALLY E&UIVALENT TO THE DISTRIBUTION OF A TAXABLE DIVIDEND. HENCE- THE AMOUNT SO DISTRIBUTED IN REDEMPTION SHALL BE CONSIDERED AS TAXABLE INCOME D) THE DISTRIBUTION AND THE REDEMPTION OF THE STOC(S ARE NOT TAXABLE BECAUSE STOC( DIVIDENDS ARE EXEMPT FROM INCOME TAX 13,. IF A CORPORATION DISTRIBUTES ITS ASSETS TO ITS STOC(HOLDERS UPON DISSOLUTION- THIS (IND OF CORPORATE DISTRIBUTION WILL RESULT IN-(RPCPA) A) B) C) D) STOC( DIVIDENDS PROPERTY DIVIDENDS CASH DIVIDENDS LI&UIDATING DIVIDENDS

131. IF A CORPORATION TO WHICH THE STOC(HOLDER IS INDEBTED FORGIVES THE DEBT- THE TRANSACTION HAS THE EFFECT OF A PAYMENT OF WHAT (IND OF DIVIDEND -(RPCPA) A) B) C) D) STOC( DIVIDEND CASH DIVIDEND LI&UIDATING DIVIDEND INDIRECT DIVIDEND

SPECIAL TOPIC-MINIMUM CORPORATE INCOME TAX


132. ONTHE MINIMUM CORPORATE INCOME TAX (MCIT) IS IMPOSED

A) 24 OF GROSS INCOME B) 1,4 OF GROSS INCOME C) !4 OF GROSS INCOME

D) 1!4 OF GROSS INCOME 133. ONTHE MINIMUM CORPORATE INCOME TAX (MCIT) IS IMPOSED

A) PROPRIETARY EDUCATIONAL CORPORATIONS TAXABLE AT 1,4 OF GROSS INCOME B) DEPOSITARY BAN(S UNDER THE EXPANDED FOREIGN CURRENCY DEPOSIT SYSTEM C) BUSINESS PARTNERSHIPS D) OFFSHORE BAN(ING UNITS SUB.ECT TO FINAL TAX OF 1,4 134. THE IMPOSITION OF MINIMUM CORPORATE INCOME TAX SHALL NOT BE SUSPENDED WHENEVER THE CORPORATION SUFFERS LOSSES DUE TO A) B) C) D) PROLONGED LABOR DISPUTE FORCE MA.EURE LEGITIMATE BUSINESS REVERSES MISMANAGEMENT

13!. A CORPORATION WHICH WAS REGISTERED WITH THE BUREAU OF INTERNAL REVENUE IN MAY- 2,,2 SHALL BE COVERED BY MCIT IN A) B) C) D) 2,,! 2,,% 2,,) 2,,*

13%. WATCHOUT CORPORATION WHICH COMMENCED BUSINESS OPERATIONS IN 2,,, HAS A GROSS INCOME OF P%32-,,, AND ALLOWABLE DEDUCTIONS OF P%1,-,,, IN 2,,*. ITS INCOME TAX PAYABLE DURING THE YEAR ISA) B) C) D) P'-',, '-,4, %-%%, 12-%4, MAE(IS CORPORATION HAS THE FOLLOWING DATA/ 2,,* 1-',,-,,, 1-,!,-,,, %1!-,,, 2,1, 2-3,,-,,, 1-42!-,,, 4),-,,,

13'.

SALES COST OF SALES OPERATING EXPENSES

THE INCOME TAX PAYAB LE IN 2,,* ISA) B) C) D) P13-,,, 12- 2!, 3!-,,, 1,-!,,

13). IN NUMBER 13'- THE INCOME TAX PAYABLE BY MAE(IS CORPORATION IN 2,1, ISA) B) C) D) P11'-'!, 1'-!,, 11%-,,, 13'-!,,

13*. IN NUMBER 13' ABOVE- THE .OURNAL ENTRY IN 2,,* TO RECORD EXCESS MCIT ISA) DEFERRED CHARGES-MCIT-(13-,,,-1,-!,,) INCOME TAX PAYABLE B) DEFERRED CHARGES-MCIT INCOME TAX PAYABLE C) PROVISION FOR INCOME TAX INCOME TAX D) INCOME TAX PAYABLE CASH 2-!,, 2-!,, 13-,,, 13-,,, 11-2,, 11-2,, 13-,,, 13-,,,

14,. IN NUMBER 13' ABOVE- THE ACCOUNTING ENTRY IN 2,1, TO RECORD THE CARRY FORWARD OF EXCESS MCIT AGAINST NORMAL INCOME TAX LIABILITY IN 2,,* ISA) DEFERRED CHARGES-MCIT INCOME TAX PAYABLE B) PROVISION FOR INCOME TAX INCOME TAX PAYABLE C) INCOME TAX PAYABLE DEFERRED CHARGES-MCIT D) RETAINED EARNINGS DEFERRED CHARGES-MCIT 1-),, 1-),, 124-!,, 124-!,, 2-!,, 2-!,, 1-),, 1-),,

141. STATEMENT 1/IF THE &UARTERLY INCOME TAX IS BASED ON MCIT- THE EXCESS MCIT FROM THE PREVIOUS TAXABLE YEAR$S SHALL NOT BE ALLOWED TO BE CREDITED

STATEMENT 2/ EXPANDED WITHHOLDING TAX- &UARTERLY CORPORATE INCOME TAX PAYMENTS UNDER THE NORMAL INCOME TAX- AND THE MCIT PAID IN THE PREVIOUS TAXABLE &UARTERS ARE ALLOWED TO BE APPLIED AGAINST THE &UARTERLY MCIT DUE. A) B) C) D) FALSE- FALSE FALSE- TRUE TRUE- FALSE TRUE- TRUE DATA DURING THE 2ND &TR 12-,,, 2!-,,, 3-,,,

142. ADY CORPORATION HAS THE FOLLOWING YEAR/ 1ST &TR NORMAL INCOME TAX P1,-,,, MCIT )-,,, TAXES WITHHELD DURING THE &TR 2-,,, EXCESS WHT PRIOR YEAR 1-,,,

THE INCOME TAX PAYABLE BY ADY CORPORATION FOR THE 1 ST &UARTER ISA) B) C) D) P'-,,, 4-,,, 3-,,, 2-,,,

143. IN NUMBER 142- THE INCOME TAX PAYABLE FOR THE 2 ND &UARTER ISA) B) C) D) P1!-,,, 2,-,,, 2'-,,, 23-,,,

144. RELLY CORPORATION HAD THE FOLLOWING ITEMS OF INCOME AND EXPENSES DURING THE YEAR/ GROSS RECEIPTS COST OF SERVICES DIVIDENDS FROM A DOMESTIC CO. GENERAL AND ADMINISTRATIVE EXPENSES P1-,,,-,,, )!,-,,, 3!-,,, 12,-,,,

THE INCOME TAX DUE ON RELLY CORPORATION ISA) P1,-!,, B) 3-,,,

C) *-,,, D) 3,-,,, 14!. MASAGANA CORPORATION- A DOMESTIC CORPORATION ORGANI5ED IN 2,,4 HAS THE FOLLOWING RECORDS OF COMPUTATION OF ITS INCOME TAX DURING THE THREE(3) CONSECUTIVE TAXABLE YEARS/ SALES LESS/ COST OF SALES ADD/ NET CAPITAL GAIN GROSS INCOME LESS/ DEDUCTIONS TAXABLE INCOME TAX RATE NORMAL INCOME TAX MCIT/ 2,,'-NONE 2,,)-(1-1!,-,,, X 24) 2,,*-(2-,%,-,,, X 24) TAX PAYABLE 2,,' P3-,,,-,,, (1-),,-,,,) ),-,,, 1-2),-,,, ),,-,,, 4),-,,, 3!4 1%)-,,, 2,,) P3-%,,-,,, (2-4!,-,,,) 1-1!,-,,, *2!-,,, 22!-,,, 3!4 ')-'!, 23-,,, 1%)-,,, ')-'!, 41-2,, 41-2,, 2,,* P4-3,,-,,, (2-2!,-,,,) 1,-,,, 2-,%,-,,, 1-*4!-,,, 11!-,,, 3,4 34-!,,

BASED ON THE ABOVE DATA- WHICH OF THE FOLLOWING STATEMENTS IS FALSE A) THE MCIT SHALL NOT BE APPLIED ON MASAGANA CORPORATION UNTIL 2,,'. IT SHALL BE APPLIED EFFECTIVE IN 2,,). B) THE EXCESS MCIT IN 2,,* CAN BE CARRIED TO THE SUCCEEDING YEAR EVEN IF THE CORPORATION SUFFERS A LOSS IN 2,1, C) THE TERM "GROSS INCOME# INCLUDES OTHER INCOME D) THE EXCESS MCIT OF P%-',, IN 2,,* CAN BE CARRIED OVER UNTIL 2,12 ONLY NUMBERS 14# INFORMATION: AND 14 ARE BASED ON THE FOLLLOWING

14%. I5A CORPORATION- A DOMESTIC CORPORATION- HAS THE FOLLOWING DATA/ 2,,) 2,,* GROSS INCOME P3-!,,-,,, 2-4,,-,,, TAXABLE INCOME 12!-,,, !,,-,,,

THE INCOME TAX DUE ON I5A CORPORATION FOR 2,,) IS/ A) B) C) D) P43-'!, ',-,,, 2%-2!, 4,-,,, THE INCOME TAX PAYABLE BY I5A CORPORATION FOR 2,,*

14'. IS/ A) B) C) D)

P1!,-,,, 4)-,,, 14)-'!, 123-'!,

SPECIAL TOPIC-IMPROPERL% EARNINGS TAX

ACCUMULATED

14). A PENALTY AND A FORM OF DETERRENT TO THE AVOIDANCE OF TAX UPON SHAREHOLDERS WHO ARE SUPPOSED TO PAY DIVIDENDS TAX ON THE EARNINGS DISTRIBUTED TO THEM BY THE STOC(HOLDERS A) B) C) D) MINIMUM CORPORATE INCOME TAX FRINGE BENEFIT TAX IMPROPERLY ACCUMULATED EARNINGS TAX GROSS INCOME TAX IMPROPERLY ACCUMULATED EARNINGS TAX IS-

14*. A) B) C) D)

1,4 OF TAXABLE INCOME 1,4 OF NET INCOME 1,4 OF IMPROPERLY ACCUMULATED TAXABLE INCOME 1,4 OF GROSS INCOME

1!,. WHICH OF THE FOLLOWING IS SUB.ECT TO IMPROPERLY ACCUMULATED EARNINGS TAX A) B) C) D) INSURANCE COMPANIES BUSINESS PARTNERSHIPS BAN(S CLOSELY-HELD COMPANIES

1!1. ALL OF THE FOLLOWING- EXCEPT ONE- ARE ADDITIONS TO TAXABLE INCOME FOR PURPOSES OF COMPUTING IMPROPERLY ACCUMULATED TAXABLE INCOMEA) B) C) D) INCOME SUB.ECT TO FINAL TAXES RESERVED FOR REASONABLE NEEDS OF THE BUSINESS INCOME EXCLUDED FROM GROSS INCOME NOLCO DEDUCTED IN COMPUTING TAXABLE INCOME

NUMBERS 152 AND 153 ARE BASED ON THE FOLLOWING INFORMATION: LABATIBA CORPORATIONFOLLOWING DATA IN 2,,*/ A DOMESTIC CORPORATIONHAS THE

GROSS INCOME (GROSS OF WHT OF 14) BUSINESS EXPENSES GAIN ON SALE OF BUSINESS ASSET INTEREST OF DEPOSIT WITH METROBAN(- NET OF TAX SALE OF SHARES OF STOC(S- NOT LISTED AND TRADED/ SELLING PRICE P1!,-,,, COST 11!-,,, DIVIDENDS FROM CASTOR OIL CORP.- DOMESTIC CORP. DIVIDENDS PAID DURING THE YEAR RESERVED FOR BUILDING AC&UISITION

P1-!,,-,,, %,,-,,, %,-,,, !-,,,

3!-,,, 12,-,,, 3,,-,,,

IN 2,,)- THE CORPORATION SUFFERED AN OPERATING LOSS OF P13,-,,,. THIS AMOUNT WAS CARRIED FORWARD AND CLAIMED AS DEDUCTION FROM GROSS INCOME IN 2,,*. 1!2. A) B) C) D) THE INCOME TAX PAYABLE IN 2,,* IS-

P234-,,, 2%!-%,, 2'!-!,, 24*-,,,

1!3. THE IMPROPERLY ACCUMULATED EARNINGS TAX ISA) P%4-41! B) 34-'%! C) 3%-42! D) 32-2'!

NUMBERS 154 TO 155 ARE BASED ON THE FOLLOWING INFORMATION/ SARADO CORPORATION- A CLOSELY HELD CORPORATION- REVEALS THE FOLLOWING DATA/ 2,,)/ GROSS INCOME EXPENSES 2,,*/ GROSS INCOME EXPENSES ROYALTY DIVIDENDS PAYABLE 1!4. A) B) C) D) P3-4,,-,,, 3-),,-,,, 3-*%,-,,, 3-1,,-,,, 34,-,,, !%-,,,

THE INCOME TAX PAYABLE IN 2,,* IS-

P)1-),, *3-,,, 3,1-,,, ',-,,,

1!!. HOW MUCH IS THE IMPROPERLY ACCUMULATED EARNINGS TAX IN 2,,* A) B) C) D) P)1-!,, *3-),, *1-!,, NONE

1!%. CORPORATIONS CAN CLAIM OPTIONAL STANDARD DEDUCTION IN AN AMOUNT NOT EXCEEDING A) 1,4 OF GROSS INCOME B) 1,4 OF GROSS SALES OR GROSS RECEIPTS- AS THE CASE MAYBE C) 4,4 OF GROSS INCOME D) 4,4 OF THE GROSS INCOME OR GROSS RECEIPTS- AS THE CASE MAYBE 1!'. ANA CORPORATION HAS THE FOLLOWING DATA DURING THE YEAR/ GROSS SALES COST OF SALES EXPENSES P1-!4,-,,, %4!-,,, 4%,-4%, OPTIONAL STANDARD

IF ANA CORPORATION AVAILED OF THE DEDUCTION- THE TAXABLE INCOME SHALL BE-

A) B) C) D)

P!3'-,,, 434-!4, '41-,,, 2'*-,,,

CHAPTER 13-INCOME TAX OF PARTNERSHIPS& 'OINT VENTURE& ESTATES AND TRUSTS


1!). WHEN NINA MATHAY DIED- SHE LEFT REAL PROPERTIES TO HER HUSBAND AND THREE(3) SMALL CHILDREN. THE HUSBAND ADMINISTERED THE PROPERTY- THE RENTAL INCOME OF WHICH HE ACCUMULATED AND LATER USED IN BUYING A PASSENGER BUS. ARE THE INCOME OF THE INHERITED PROPERTIES AND THE BUS SUB.ECT TO TAX A) B) C) D) INHERITED PROPERTIES YES YES NO NO BUS YES NO YES NO

1!*. MAX AND CHOO( CONTRIBUTED MONEY AND PURCHASED FIVE(!) HECTARES OF LAND IN 2,,). IN THE SAME YEAR- THEY SOLD THE LAND AT A HIGHER PRICE. IN 2,,*- THEY BOUGHT A BIGGER PARCEL AND SOLD IT AFTER THREE(3) MONTHS AT DOUBLE THE PRICE. THEY PAID THE CORRESPONDING CAPITAL GAINS TAXES. &UESTION 1/ HAVE THEY FORMED AN UNREGISTERED PARTNERSHIP SUB.ECT TO TAX &UESTION 2/ ARE THEIR RESPECTIVE SHARES IN THE INCOME TAXABLE TO THEM &;1 &;2 A) YES YES B) NO YES C) YES NO D) NO NO 1%,. WHEN THEIR PARENTS DIEDCHERRY AND GERRY INHERITED FIVE(!) HECTARES OF LAND IN ANTIPOLO CITY. THEY DECIDED TO INVEST CAPITAL AND DEVELOPED THE LAND INTO A SUBDIVISION WHICH THEY NAMED AS CHERRY-GIL SUBDIVISION.WITH SMALL LOTS BEING SOLD EITHER ON INSTALLMENT OR IN CASH BASIS.

&UESTION 1/ IS A PARTNERSHIP CREATED BY CHERRY AND GERRY &UESTION 2/ ARE THEY SUB.ECT TO FINAL TAX ON THEIR RESPECTIVE SHARE IN THE INCOME &;1 &;2 A) YES NO B) NO YES C) YES YES D) NO NO 1%1. &;1/ IS A CO-PARTNERSHIP TAXABLE NO- BECAUSE THE ACTIVITIES OF THE CO-OWNERS ARE LIMITED TO THE PRESERVATION OF THE PROPERTY AND THE COLLECTION OF INCOME THEREFROM. &;2/ IS THE SHARE OF A CO-OWNER IN THE NET INCOME OF A COOWNERSHIP TAXABLE YES- BECAUSE EACH CO-OWNER IS TAXED INDIVIDUALLY ON HIS DISTRIBUTIVE SHARE IN THE INCOME OF THE COOWNERSHIP. A) B) C) D) ANSWERS TO BOTH &UESTIONS ARE CORRECT ANSWER TO &;1 IS WRONG- ANSWER TO &;2 IS CORRECT ANSWER TO &31 IS CORRECT- ANSWER TO &;2 IS WRONG ANSWER TO BOTH &UESTIONS ARE WRONG

1%2. THE MEMBERS OF THIS FORM OF BUSINESS ORGANI5ATION SHALL BE LIABLE FOR INCOME TAX ONLY ON THEIR INDIVIDUAL CAPACITY- AND THEIR SHARE IN THE PROFITS- WHETHER DISTRIBUTED OR OTHERWISE- SHALL BE RETURNED FOR TAXATION. THIS APPLIES TO-(RPCPA) A) B) C) D) DULY REGISTERED GENERAL CO-PARTNERSHIP UNREGISTERED GENERAL CO-PARTNERSHIP GENERAL PROFESSIONAL PARTNERSHIP .OINT-STOC( COMPANIES

1%3. THE SHARE OF A PARTNER IN THE PROFITS OF A GENERAL PROFESSIONAL PARTNERSHIP IS REGARDED AS RECEIVED BY HIM AND THUS TAXABLE ALTHOUGH NOT YET DISTRIBUTED. THIS PRINCIPLE IS (NOWN ASA) B) C) D) ADVANCE REPORTING OF INCOME ACTUAL RECEIPT OF INCOME ACCRUAL METHOD OF ACCOUNTING CONSTRUCTIVE RECEIPT OF INCOME

1%4. UNDER THE NIRC- INCOME IS RECEIVED NOT ONLY WHEN IT IS AC TUALLY OR PHYSICALLY TRANSFERRED TO A PERSON BUT EVEN WHEN IT IS CONSTRUCTIVELY RECEIVED BY HIM. AN EXAMPLE OF INCOME CONSTRUCTIVELY RECEIVED IS-(RPCPA) A) RENTAL PAYMENTS REFUSED BY THE LESSOR- WHEN THE LESSEE TENDERED PAYMENT AND THE LATTER MADE A .UDICIAL DEPOSIT OF THE RENTAL DUE B) INTEREST COUPONS NOT YET DUE AND PAYABLE C) INTEREST ON SAVINGS DEPOSIT NOT YET CREDITED TO THE ACCOUNT OF THE DEPOSITOR D) ADVANCE DEPOSIT MADE BY THE LESSEE 1%!.WHICH OF THE FOLLOWING IS CONSIDERED OR CONSTRUED AS AN EXAMPLE OF CONSTRUCTIVE RECEIPT -(RPCPA) A) RETIREMENT BENEFITS- PENSIONS- GRATUITIES B) FEES PAID TO A PUBLIC OFFICIAL C) INTEREST COUPONS THAT HAVE MATURED AND ARE PAYABLE BUT HAVE NOT BEEN CASHED D) DEPOSITS FOR RENTALS TO ANSWER FOR DAMAGES- RESTRICTED AS TO USE NUMBERS 1## AND 1# ARE BASED ON THE FOLLOWING INFORMATION: BINGBONG AND COMPANY - A BUSINESS PARTNERSHIP- HAD THE FOLLOWING DATA OF INCOME AND EXPENSES/ GROSS INCOME EXPENSES DIVIDEND FROM A DOMERTIC CORP. INTEREST ON BAN( DEPOSIT(GROSS OF TAX) P'!,-,,, 2,,-,,, '!-,,, 1,-,,,

PARTNERS BING AND BONG SHARE PROFITS AND LOSSES IN THE RATIO OF !!4 AND 4!4- RESPECTIVELY. 1%%.THE INCOME TAX PAYABLE BY BINGBONG AND COMPANY + A) B) C) D) P21)-'!, 1)'-!,, 1%!-,,, 1*2-!,,

1%'. THE FINAL TAXES ON THE RESPECTIVE SHARE OF BING AND BONG IN THE PARTNERSHIP INCOMEA) B) C) D) BING P2!-'4,.,, 31-1!'.!, 24-22'.!, 3,-2!,.,, BONG 21-,%,.,, 2!-4*2.!, 1*-)22.!, !!.,4!.,,

NUMBERS 1#! AND 1#$ ARE BASED ON THE FOLLOWING INFORMATION: PING- PONG AND COMPANY- A PARTNERSHIP OF CPA:- HAD A GROSS INCOME OF P22,-,,, AND EXPENSES OF P)!-,,, DURING THE YEAR/ SHARE IN PROFIT AND LOSS RATIO INCOME FROM OTHER BUSINESSES EXPENSES AMOUNT WITHDRAWN FROM PARTNERSHIP FILING STATUS DEPENDENT CHILDREN PING '!4 P12!-,,, ),-,,, 3,-,,, MARRIED NONE PONG 2!4 P32!-,,, 1*,-,,, 12-!,, UNMARRIED 2

1%). THE INCOME TAX PAYABLE BY THE PARTNERSHIP ISA) B) C) D) P'2-%,, NONE 44-!!, 4!-*,,

1%*. THE TAXABLE INCOME OF PING AND PONG ISA) B) C) D) P%*-2!, AND P,- RESPECTIVELY 114-2!, AND 12'-'!,- RESPECTIVELY 1,1-2!, AND 33-'!,- RESPECTIVELY *%-2!, AND %)-'!,- RESPECTIVELY

NUMBERS 1 " AND 1 1 ARE BASED ON THE FOLLOWING INFORMATION: PANDAY- SINGLE- AND PANDA(- MARRIED WITH TWO DEPENDENT CHILDREN- ARE PARTNERS IN THE FOLLOWING PARTNERSHIPS/ PANDAY HOLDS A %,4 INTEREST WHILE 4,4 INTEREST BELONGS TO PANDA(.

THE PARTNERSHIP0S INCOME AND EXPENSES ARE GIVEN BELOW/ PARTNERSHIP PROF. PART. A PROF. PART. B BUS.PART. C BUS. PART. D GROSS INCOME P4,,-,,, 3,,-,,, !,,-,,, 2,,-,,, EXPENSES 2!,-,,, !,,-,,, 2,,-,,, 3,,-,,, W$DRAWALPANDAY %,-,,, 4,-,,, W$DRAWALPANDA( 4,-,,, 2,-,,, -

THE PARTNERSHIPS REMITTED TO THE BIR THE CORRESPPONDING WITHHOLDING TAXES ON THE WITHDRAWALS OF PANDAY AND PANDA(. THE PARTNERS0 PERSONAL INCOME AND EXPENSES ARE SHOWN BELOW/ PANDAY PANDA( GROSS INCOME FROM SOLE PROPRIETORSHIP P4,,-,,, %,,-,,, BUSINESS EXPENSES 2!,-,,, 3',-,,, OTHER INCOME/ RENT - NET OF !4 WHT !'-,,, ROYALTY !,-,,, DIVIDEND FROM DOMESTIC CO. 3,-,,, !,-,,, 1',. THE INCOME TAX PAYABLE BY PANDAY ISA) B) C) D) P2,-!,, 1)-!,, 11-!,, !*-,,,

1'1. THE INCOME TAX PAYAB LE B Y PANDA( ISA) B) C) D) P12-!,, 4)-,,, 1%-!,, 24-,,,

1'2. THE TOTAL FINAL TAXES DUE ON PANDAY ISA) B) C) D) P3-,,, 4-,,, '-,,, 22-,,,

1'3. THE TOTAL FINAL TAXES DUE ON PANDA( ISA) B) C) D) P1'-,,, 14-%,, 22-2,, 1!-2,,

1'4. THE PROPERTY- RIGHTS AND OBLIGATIONS OF A PERSON WHICH ARE NOT EXTINGUISHED BY HIS DEATH AND ALSO THOSE WHICH HAVE ACCRUED THERETO SINCE THE OPENING OF THE SUCCESSIONA) B) C) D) ESTATE LEGACY TRUST WILL

1'!. AN HEIR WHO INHERITS PERSONAL PROPERTY BY WILL IS CALLEDA) B) C) D) LEGATEE DEVISEE TRUSTOR BENEFICIARY

1'%. AN HEIR WHO INHERITS REAL PROPERTY BY WILL IS CALLEDA) B) C) D) LEGATEE DEVISEE TRUSTOR BENEFICIARY

1''. TONYING DIED ON .ANUARY 1- 2,,'. HE LEFT A GROSS ESTATE WITH A COST OF P4-,,,-,,, BUT VALUED AT P3-!,,-,,, UNDER AN ADMINISTRATOR. DURING THE YEAR- THE GROSS INCOME DERIVED FROM THE BUSINESS OF THE ESTATE WAS P4,,-,,, WHILE THE RELATED EXPENSES AMOUNTED TO P1!,-,,,. BENEFICIARIES FELIPE AND (HADAFI WERE GIVEN P1,,-,,, EACH. THE INCOME TAX DUE ON THE ESTATE OF TONYING ISA) B) C) D) P3,-,,, 2-!,, !-!,, !,-,,,

1'). AN ARRANGEMENT UNDER WHICH TITLE TO PROPERTY IS PASSED TO ANOTHER FOR INVESTMENT- WITH THE INCOME AND ULTIMATELY THE

PRINCIPAL TO BE DISTRIBUTED IN ACCORDANCE WITH THE DIRECTION OF THE CREATOR ISA) B) C) D) A WILL A TRUST AN INHERITANCE PACTO DE RETRO

1'*. WHICH OF THE FOLLOWING IS NOT SUB.ECT TO TAX A) B) C) D) ESTATES UNDER .UDICIAL SETTLEMENT IRREVOCABLE TRUST UNREGISTERED PARTNERSHIPS REVOCABLE TRUST

NUMBERS 1!" AND 1!1 ARE BASED ON THE FOLLOWING INFORMATION: DURING THE YEAR- LUCAS CREATED TWO SEPARATE FUNDS FOR HIS SON BARABAS- AND APPOINTED CAIPAS AND .UDAS AS TRUSTEES- THE BUSINESS INCOME OF THE TRUSTS ARE AS FOLLOWS/ TRUSTEE CAIPAS NET INCOME INCOME FROM TRUSTS DISTRIBUTED DURING THE YEAR P12,-,,, !,-,,, TRUSTEE .UDAS 2,,-,,, '!-,,,

1),. THE CONSOLIDATED TAXABLE INCOME OF TRUSTS ISA) B) C) D) P143-,,, 23-2!, 1'!-,,, 3,,-,,,

1)1. THE INCOME TAXES PAYABLE BY TRUSTEE CAIPAS AND TRUSTEE .UDAS AREA) B) C) D) CAIPAS 24-3'! 24-3'! 2%-,,, %!-,,, .UDAS 24-3'! 4,-%2! 3*-,,, 23-2!,

CHAPTER '-DEALINGS IN PROPERTY


1)2. THE TERM "CAPITAL ASSETS# INCLUDES-(RPCPA) E) STOC( IN TRADE OR OTHER PROPERTY INCLUDED IN THE TAXPAYER0S INVENTORY F) REAL PROPERTY NOT USED IN THE TRADE OR BUSINESS OF TAXPAYER G) PROPERTY PRIMARILY FOR SALE TO CUSTOMERS IN THE ORDINARY COURSE OF TRADE OR BUSINESS H) PROPERTY USED IN THE TRADE OR BUSINESS OF THE TAXPAYER AND SUB.ECT TO DEPRECIATION 1)3. WHICH OF THE FOLLOWING REAL PROPERTIES IS CLASSIFIED AS A CAPITAL ASSET A) REAL PROPERTY INITIALLY AC&UIRED BY A TAXPAYER ENGAGED IN REAL ESTATE BUSINESS BUT SUBSE&UENTLY ABANDONED OR BECOME IDLE B) REAL PROPERTY TRANSFERRED THROUGH SUCCESSION OR DONATION TO THE HEIR OR DONEE WHO IS NOT ENGAGED IN THE REAL ESTATE BUSINESS WITH RESPECT TO THE REAL PROPERTY INHERITED OR DONATED- AND WHO DOES NOT SUBSE&UENTLY USE SUCH PROPERTY IN TRADE OR BUSINESS C) REAL PROPERTIES OF THE REAL ESTATE LESSOR- WHETHER LAND AND$OR IMPROVEMENTS- WHICH ARE FOR LEASE OR BEING OFFERED FOR LEASE- OR OTHERWISE FOR USE OR BEING USED IN THE TRADE OR BUSINESS D) REAL PROPERTIES AC&UIRED IN THE COURSE OF TRADE OR BUSINESS BY A TAXPAYER HABITUALLY ENGAGED IN THE SALE OF REAL ESTATE 1)4. UNDER SECTION 3*(B) OF THE TAX CODE- HOW MUCH SHALL BE TA(EN INTO ACCOUNT IN COMPUTING NET INCOME- IF A GAIN IS REALI5ED BY AN INDIVIDUAL TAXPAYER FROM THE SALE OR EXCHANGE OF CAPITAL ASSETS( OTHER THAN REAL PROPERTIES AND SHARES OF STOC(S) HELD FOR MORE THAN 12 MONTHS -(RPCPA) A) B) C) D) !,4 OF NET CAPITAL GAIN !4 OF THE CAPITAL ASSETS SOLD P!,-,,, !-,,,

1)!. LOTS BEING RENTED WHEN SUBSE&UENTLY SOLD ARE CLASSIFIED AS-(RPCPA) A) B) C) D) CAPITAL ASSETS LI&UID ASSETS ORDINARY ASSETS FIXED ASSETS

1)%. A FEATURE OF ORDINARY GAINS AS DISTINGUISHED FROM CAPITAL GAINS-(RPCPA) A) GAIN FROM SALE OF ASSETS NOT STOC( IN TRADE B) MAY OR MAY NOT BE TAXABLE IN FULL C) SOURCES ARE CAPITAL ASSETS D) NO HOLDING PERIOD 1)'. WHICH OF THE FOLLOWING TAXPAYERS IS ALLOWED TO OBSERVE "NO HOLDING PERIOD AND NO CARRY OVER OF NET CAPITAL LOSS# A) B) C) D) INDIVIDUAL ESTATES CORPORATION TRUSTS

1)). RULES ON CAPITAL GAINS AND LOSSES OF CORPORATIONS- EXCEPT/(RPCPA) A) CAPITAL GAINS AND LOSSES ARE RECOGNI5ED TO THE EXTENT OF 1,,4 REGARDLESS OF THE HOLDING PERIOD B) THE NET CAPITAL LOSS CARRY OVER IS NOT APPLICABLE C) CAPITAL LOSSES ARE DEDUCTIBLE ONLY TO THE EXTENT OF CAPITAL GAINS D) THERE IS A FINAL TAX OF !4 ON REAL PROPERTY SOLD 1)*. STATEMENT 1/ CAPITAL LOSSES ARE DEDUCTIBLE ONLY FROM ORDINARY GAINS STATEMENT 2/ CORPORATIONS ARE NOT ALLOWED TO OBSERVE THE HOLDING PERIOD AND TO CARRY OVER NET CAPITAL LOSS A) B) C) D) ONLY THE FIRST STATEMENT IS CORRECT ONLY THE SECOND STATEMENT IS CORRECT BOTH STATEMENTS ARE CORRECT BOTH STATEMENTS ARE INCORRECT

1*,. .OAHNA CORPORATION REALI5ED AN ORDINARY GAIN OF P4,,-,,,. ITS CAPITAL ASSET TRANSACTIONS DURING THE YEAR ARE AS FOLLOWS/

CAPITAL GAIN CAPITAL GAIN CAPITAL LOSS CAPITAL LOSS

HOLDING PERIOD % MONTHS 2 YEARS 12 MONTHS 1, YEARS

AMOUNT P!,-,,, 4!-,,, 23-,,, 2)-,,,

WHAT IS .OAHNA CORPORATION0S TAXABLE INCOME A) B) C) D) P4)4-,,, 444-,,, 43!-!,, 44'-,,, ON INCOME AND 2,,* P%,-),, 3-,,, )-!,, !-2,, 2-*,, -

1*1. .OSE SIO- SINGLE- HAD THE FOLLOWING DATA LOSSES/ 2,,) ORDINARY BUSINESS INCOME P!%-',, INTEREST ON TIME DEPOSIT WITH PNB 2-,,, SHORT-TERM CAPITAL GAIN !-,,, LONG-TERM CAPITAL GAIN 3-%,, SHORT-TERM CAPITAL LOSS )-,,, LONG-TERM CAPITAL LOSS 4-4,,

IN 2,,)- THE TAXABLE INCOME BEFORE PERSONAL EXEMPTION OF .OSE SIOA) B) C) D) P!)-',, !3-3,, 3%-',, !%-',,

1*2. IN 2,,*- THE TAXABLE INCOME OF .OSE SIO ISA) B) C) D) P1!-%,, %*-,,, 3%-,,, 4!-%,,

1*3. SANTINO &UALIFIED AS HEAD OF A HOUSEHOLD FOR 2,,) TAX PURPOSES. SANTOS0 2,,* TAXABLE INCOME WAS P2,,-,,, EXCLUSIVE OF CAPITAL GAINS AND LOSSES. SANTINO HAD A NET LONG-TERM LOSS OF P)-,,, IN 2,,*. WHAT AMOUNT OF THIS CAPITAL LOSS CAN SANTINO OFFSET AGAINST 2,,* ORDINARY INCOME -(RPCPA)

A) B) C) D)

5ERO 3-,,, 4-,,, )-,,,

NUMBERS 1$4 AND 1$5 ARE BASED ON THE FOLLOWING INFORMATION: 1*4. ROSE- SINGLE- HAD THE FOLLOWING DATA ON INCOME AND LOSSES/ NET INCOME CAPITAL GAINS CAPITAL LOSSES THE TAXABLE INCOME IN 2,,) ISA) B) C) D) P!-,,, 5ERO P(2!-,,,) (!'-,,,) 2,,) P2!-,,, )-,,, 4,-,,, 2,,* P*!-,,, 4,-,,, !-,,,

1*!. THE TAXABLE INCOME IN 2,,* ISA) B) C) D) P')-,,, !!-,,, 11!-,,, 1,-,,,

1*%. ALL OF THE FOLLOWING- EXCEPT ONE- RESULTS TO A CAPITAL GAIN OR LOSS A) B) C) D) GAIN ON SHORT SALES OPTION LOSS WORTHLESS SECURITIES ORDINARY GAINS

1*'. A TRANSACTION IN WHICH THE SPECULATOR SELLS SECURITIES WHICH HE DOES NOT OWN (HE MERELY BORROWS THE STOC( CERTIFICATES THROUGH OR FROM HIS STOC( BRO(ER) IN ANTICIPATION OF A DECLINE IN ITS PRICE- AND WITHIN A REASONABLY SHORT PERIOD OF TIME BUYS OR COVERS THE STOC( TO COMPLETE THE TRANSACTION A) WASH SALE B) SHORT SALE C) AUCTION SALE

D) RESCISSIBLE SALE 1*). ABC BOUGHT FROM XY5 CORPORATION TEN SHARES OF STOC(. SIXTY DAYS THEREAFTER- THE CORPORATION WAS AD.UDGED BAN(RUPT AND ITS STOC( AS WORTHLESS. THE LOSS OF ABC TO BE REPORTED FOR INCOME TAX PURPOSES IS CLASSIFIED AS/-(RPCPA) A) B) C) D) A WAGERING LOSS NON-DEDUCTIBLE LOSS FOR INCOME TAX PURPOSES SHORT-TERM CAPITAL LOSS CASUALTY LOSS

1**. ON CAPITAL GAINS TAX ON REAL PROPERTY- WHICH OF THE FOLLOWING STATEMENTS IS NOT CORRECT -(RPCPA) A) THE TAX SHOULD BE PAID- IF IN ONE LUMP SUM- WITHIN 3, DAYS FROM THE DATE OF SALE B) THE TERM "INITIAL PAYMENT# IS SYNONYMOUS TO "DOWNPAYMENT# C) THE INSTALLMENT PAYMENT OF THE TAX SHOULD BE MADE WITHIN 3, DAYS FROM RECEIPT OF EACH INSTALLMENT PAYMENT ON THE SELLING PRICE D) THE TAX MAY BE PAID IN INSTALLMENT IF THE INITIAL PAYMENTS DO NOT EXCEED 2!4 OF THE SELLING PRICE 2,,. VIOLETA SOLD HER PRINCIPAL RESIDENCE FOR P!-,,,-,,, WHEN ITS FAIR MAR(ET VALUE WAS P%-,,,-,,,. THE HOUSE WAS PURCHASED FIVE(!) YEARS AGO FOR P3-,,,-,,,. OUT OF THE PROCEEDS OF P!-,,,-,,,VIOLETA UTILI5ED THE P4-,,,-,,, FOR THE PURCHASE OF A NEW RESIDENTIAL HOUSE. THE CAPITAL GAINS TAX ON THE SALE ISA) B) C) D) P3%,-,,, 3,,-,,, '2-,,, %,-,,,

2,1. BASED ON THE PROBLEM IN NUMBER 2,, ABOVE- WHAT IS THE COST BASIS OF THE NEW RESIDENCE A) B) C) D) P3-,,,-,,, 2-4,,-,,, 4-,,,-,,, !-,,,-,,,

NUMBERS 2"2 AND 2"3 ARE BASED ON THE FOLLOWING INFORMATION: 2,2. MARIA HAS THE FOLLOWING DATA IN 2,,)/ SALE OF PROPERTY APARTMENT HOUSE RESIDENTIAL HOUSE VACANT LOT .EWELRY FOR PERSONAL USE .EWELRY IN A .EWELRY STORE CAR FOR PERSONAL USE TRANSPORTATION E&UIPMENT HOLDING PERIOD 1, YEARS % YEARS 12 YEARS % MONTHS 2 MONTHS 4 YEARS 12 MONTHS GAIN$LOSS P3!-,,, 12,-,,, '2-!,, 4-2,, )-,,, (2,-,,,) (1,-,,,)

DURING THE YEAR- MARIA HAD A NET INCOME FROM BUSINESS (OTHER THAN THE SALE OF THE PROPERTIES ABOVE) IN THE AMOUNT OF P!-,,,. THE TAXABLE INCOME BEFORE PERSONAL EXEMPTION OF MARIA IN 2,,) ISA) B) C) D) P32-,,, 3)-,,, 22-2,, 42-2,,

2,3. ASSUMING THAT THE NET INCOME OF MARIA IN 2,,* WAS P13,-,,, WHICH INCLUDES A CAPITAL GAIN OF P%-,,,. THE TAXABLE INCOME BEFORE PERSONAL EXEMPTION IN 2,,* ISA) B) C) D) P12!-,,, 13,-,,, 124-2,, 12,-,,,

NUMBERS 2"4 TO 2"5 ARE BASED ON THE FOLLOWING INFORMATION: ON AUGUST 1!- 2,,*- MR. CRU5 SOLD A !,, S&UARE METER RESIDENTIAL HOUSE FOR P3-,,,-,,,. THE HOUSE WAS AC&UIRED IN 2,,, FOR P2-,,,-,,,. ON THE DATE OF SALE- THE FAIR MAR(ET VALUE OF THE HOUSE AS SHOWN IN THE REAL PROPERTY DECLARATION WAS P2-!,,-,,, AND THE ASSESSED VALUE AMOUNTED TO P2-2,,-,,,. THE 5ONAL VALUE WAS P'-,,, PER S&UARE METER.

2,4. THE CAPITAL GAINS TAX ISA) B) C) D) P1),-,,, 12,-,,, 1!,-,,, 21,-,,,

2,!. THE CAPITAL GAINS TAX OF MR. CRU5 IF THE PROCEEDS OF SALE WAS UTILI5ED IN AC&UIRING A NEW RESIDENCEA) B) C) D) P21,-,,, 1!,-,,, 1),-,,, 5ERO

2,%. THE AMOUNT TO BE DEPOSITED IN ESCROW IF THE PROCEEDS OF THE SALE SHALL BE UTILI5ED IN AC&UIRING A NEW RESIDENCEA) B) C) D) P21,-,,, 1!,-,,, 1),-,,, 5ERO

2,'. THE CAPITAL GAINS TAX PAYABLE ASSUMING THAT MR. CRU5 WILL UTILI5E ONLY P1-!,,-,,, OF THE PROCEEDS IN AC&UIRING A NEW RESIDENCE A) B) C) D) P*,-,,, 21,-,,, 5ERO 1,!-,,,

2,). MR. LEX CANLAS IS NOT ENGAGED IN REAL ESTATE BUSINESS. HE SOLD A 1-,,, S&UARE METER RESIDENTIAL LAND FOR P3,,-,,, ON MARCH 1!- 2,,*. THE LAND WAS AC&UIRED BY PURCHASE ON MARCH !- 2,,% FOR P12,-,,,. AFTER AC&UISITION- THE LAND WAS FENCED AT A COST OF P3,-,,,. A COMMISSION OF !4 OF THE SALES PRICE WAS PAID TO THE SALES AGENT.-(RPCPA) HOW MUCH IS THE CAPITAL GAINS TAX DUE A) B) C) D) P1)-,,, 1)-*,, '-2,, *-,,,

2,*. LITO HAS THE FOLLOWING RECORDS OF TRANSACTIONS/ CAPITAL GAINS(SHORT TERM) ON SALE OFDOMESTIC SHARES LISTED AND TRADED7 IN THE STOC( EXCHANGE VACANT LOT- THRU A BRO(ER- LOCATED IN MANILA(MAR(ET VALUE-P',,-,,,) RESIDENTIAL HOUSE IN NEW YOR( CITY CAPITAL LOSS(LONG-TERM) ON SALE OFLAND IN VANCOUVER- CANADA FAMILY CAR THE NET CAPITAL GAIN$(LOSS) OF LITO ISA) B) C) D) P12-!,, ('!-,,,) 14)-!,, (2!-,,,)

P22-4,, 1!,-,,, 1,,-,,, 12!-,,, !,-,,,

21,. ATTY. MOISES PADILLA SOLD TO .ESS ABALUYAN NOT TRADED SHARES OF STOC(S FOR A CONSIDERATION OF P2,,-,,,. AT THE TIME OF SALE- ITS FAIR MAR(ET VALUE IS P!,,-,,,. ATTY. PADILLA SHOULD PAYA) B) C) D) CAPITAL GAINS TAX DONOR0S TAX DOCUMENTARY STAMP TAX ALL OF THE ABOVE

211. IN THE PRECEDING PROBLEM- IF LATER ON .ESS ABALUYAN SELLS THE SAME SHARES OF STOC(S TO ED DEL ROSARIO FOR P4,,-,,,- THE GAIN SUB.ECT TO TAX SHALL BE DETERMINED BY DEDUCTING THEA) B) C) D) P2,,-,,, FROM THE P!,,-,,, 2,,-,,, FROM THE 4,,-,,, 4,,-,,, FROM THE !,,-,,, 4,,-,,, FROM THE 2,,-,,,

212. ROC(Y SOLD 1-!,, SHARES OF STOC(S OF ACHIEVERS CORPORATION. THE PAR VALUE PER SHARE WAS P)! BUT WERE AC&UIRED BY HIM AT P*,. ON THE DATE OF SALE- THE SHARES HAD A SELLING PRICE OF P12, PER SHARE. THE CAPITAL GAINS TAX ON THE SALE IF THE SHARES ARE NOT LISTED AND TRADED IN THE PHILIPPINES STOC( EXCHANGE ISA) P2-2!, B) 2-%2! C) 14-,,,

D) 11-3'! 213. ROLLY SOLD 1-,,, NOT LISTED AND TRADED SHARES OF STOC(S. THE DATA OF WHICH ARE AS FOLLOWS/ SELLING PRICE FAIR MAR(ET VALUE EXPENSES ON THE SALE PURCHASE PRICE EXPENSES UPON AC&UISITION THE CAPITAL GAINS TAX DUE ISA) B) C) D) P13-,,, 14-,,, *-',, 12-)!, P%,,-,,, %2,-,,, 1,-,,, 44,-,,, 3-,,,

214. NARDA SOLD THE FOLLOWING SHARES OF STOC(S DURING THE YEAR/ LISTED 2 TRADED P1-!,,-,,, 1-23,-,,, ,1-,2-,2 NOT LISTED 2 TRADED %3,-,,, !',-,,, ,3-1%-,2 LISTED 2 2 TRADED 21,-,,, 1',-,,, 11-14-,2

SELLING PRICE COST DATE SOLD

THE CAPITAL GAINS TAX PAYABLE ISA) B) C) D) P3-,,, 32-,,, 11-!!, 3-1!, THRU 21! ARE BASED COST P),-,,, 2!%-,,, 1'!-,,, 144-!,, ON THE FOLLOWING

NUMBERS 215 INFORMATION: DATE OF SALE FEB 13- 2,,* APRIL !- 2,,* .ULY 2,- 2,,* OCT 13- 2,,*

DATE OF AC&UISITION .AN 1)- 2,,' NOV 3,- 2,,) SEPT 3- 2,,' AUG '- 2,,*

SELLING PRICE P13!-,,, 3%,-,,, 11!-,,, 1!,-,,,

21!. THE CAPITAL GAINS TAX ON THE FEB. 13- 2,,* SALE ISA) B) C) D) P2-'!, 1-3'! %'! !!-,,,

21%. THE CAPITAL GAINS TAX ON THE APRIL !- 2,,* SALE ISA) B) C) D) P1,-4,, !-4,, !-2,, 5ERO

21'. THE CAPITAL GAINS TAX$REFUND ON THE .ULY 2,- 2,,* SALE ISA) B) C) D) P3-,,, (3-,,,) 1-!,, 5ERO

21).THE FINAL CAPITAL GAINS TAX$REFUND IN THE 2,,* TRANSACTIONS ISA) B) C) D) TAX PAYABLE OF P1-3!, TAX REFUND OF P1-3!, TAX PAYABLE OF P2-'2! TAX REFUND OF P2-'2!

21*. ON DECEMBER 1- 2,,'- MAT OBESE WHOSE TAXABLE YEAR IS THE CALENDAR YEAR- PURCHASED 1,, SHARES OF COMMON STOC( OF MICHELLE COMPANY FOR P1,-,,,. ON DECEMBER 1%- 2,,'- HE PURCHASED 1,, ADDITIONAL SHARES FOR P*-,,,. ON .ANUARY 3- 2,,)- HE SOLD THE 1,, SHARES PURCHASED ON DECEMBER 1- 2,,' FOR P*-,,,. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT ON MAT OBESE A) B) C) D) HE CAN CLAIM A DEDUCTIBLE LOSS OF P1-,,, IN 2,,) HE MUST REPORT A TAXABLE CAPITAL GAIN OF P1-,,, IN 2,,) HE MUST REPORT A TAXABLE CAPITAL GAIN OF P*-,,, IN 2,,) HE IS NOT ALLOWED TO CLAIM A DEDUCTIBLE LOSS ON THE LOSS ON SALE IN 2,,)

22,. MISS BEAUTY- WHOSE TAXABLE YEAR IS THE CALENDAR YEAR- HAD THE FOLLOWING STOC( TRANSACTIONS/

ON SEPTEMBER 2,- 2,,) PURCHASED 1,, SHARES OF THE COMMON STOC( OF UGLY COMPANY FOR P!-,,, OR AT P!, PER SHARE ON DECEMBER 11- 2,,)- SHE PURCHASED !, SHARES OF SUBSTANTIALLY IDENTICAL STOC( FOR P2-'!, OR AT P!! PER SHARE ON DECEMBER 2%-2,,)- SHE PURCHASED 2! ADDITIONAL SHARES OF SUCH STOC( FOR P1-12! OR AT P4! PER SHARE ON .ANUARY 2- 2,,*- SHE SOLD FOR P4-,,, THE SHARES PURCHASED ON SEPTEMBER 2, OR AT P4, PER SHARE

HOW MUCH IS THE DEDUCTIBLE LOSS AND NON-DEDUCTIBLE LOSS ON .ANUARY 2- 2,,* SALES A) B) C) D) DEDUCTIBLE P1-,,, , 12! 2!, NON-DEDUCTIBLE P, 1-,,, , '!,

NUMBERS 221 AND 222 ARE BASED ON THE FOLLOWING INFORMATION: MAUI HAS THE FOLLOWING DATA IN 2,,*/ CAPITAL LOSS ON 2 WEE(S OPTION CONTRACT<<<<<< CAPITAL GAIN ON SALE OF BONDS(HOLDING PERIOD/ % MOS.)<<<<< LOSS ON SALE OF DELIVERY TRUC( HELD FOR 3 1 YEARS<<<< GAIN ON SALE OF PERSONAL CAR HELD FOR ! YEARS<<<<<< CAPITAL GAIN ON DIRECT SALE TO BUYERS OF SHARES OF STOC(S<<< SALE OF 2-YEAR OLD RESIDENTIAL HOUSE (COST/P!4,-,,,)<<<< P!-,,, %-,,, 4,-,,, 1%-,,, 4-,,, !!,-,,,

IN 2,,)- MAUI HAD A NET INCOME OF P!-,,, AND A CAPITAL LOSS OF P'-!,, 221. THE NET CAPITAL GAIN$CAPITAL LOSS (BEFORE CARRY-OVER) IN 2,,* ISA) B) C) D) P1'-,,, *-,,, 2-,,, ('-,,,)

222. THE NET CAPITAL LOSS CARRY-OVER FROM 2,,) ISA) B) C) D) P'-!,, 5ERO *-,,, !-,,,

223. IN COMPUTING GAIN OR LOSS FROM THE SALE OR OTHER DISPOSITION OF PROPERTY AC&UIRED AS GIFT OR DONATION- THE BASIS OF COST SHALL BE-(RPCPA) A) B) C) D) THE FAIR MAR(ET VALUE AS OF THE DATE OF AC&UISITION THE PURCHASE PRICE PLUS EXPENSES OF AC&UISITION THE LATEST INVENTORY VALUE THE SAME AS IT WOULD BE IN THE HANDS OF THE DONOR

224. PAULO RECEIVED A RESIDENTIAL HOUSE VALUED AT P2-!,,-,,, FROM HIS PARENTS AS A GIFT. AFTER A MONTH- HE SOLD IT TO RUDY FOR P2-,,,-,,, ONLY. HOW MUCH IS THE TAX LIABILITY ON THE SALE A) B) C) D) P1!,-,,, 12,-,,, 1,,-,,, 5ERO

22!. IT IS IMPORTANT TO (NOW THE SOURCE OF INCOME FOR TAX PURPOSES (I.E. FROM WITHIN OR WITHOUT THE PHILIPPINES) BECAUSE(RPCPA) A) SOME INDIVIDUALS AND CORPORATE TAXPAYERS ARE TAXED ON THEIR WORLDWIDE INCOME WHILE OTHERS ARE TAXABLE ONLY UPON INCOME FROM SOURCES WITHIN THE PHILIPPINES B) THE PHILIPPINES IMPOSES INCOME TAX ONLY ON INCOME FROM SOURCES WITHIN C) SOME INDIVIDUAL TAXPAYERS ARE CITI5ENS WHILE OTHERS ARE ALIENS D) EXPORT SALES ARE NOT SUB.ECT TO INCOME TAX 22%. MR. SHOLI- A NON-RESIDENT ALIEN STOC(HOLDER- RECEIVED A DIVIDEND INCOME OF P3,,-,,, IN 2,,* FROM A FOREIGN CORPORATION DOING BUSINESS IN THE PHILIPPINES. THE GROSS INCOME OF THE FOREIGN CORPORATION FROM WITHIN AND WITHOUT THE PHILIPPINES FOR THREE YEARS PRECEDING 2,,* ARE AS FOLLOWS(RPCPA) 7

SOURCES OF INCOME FROM W$IN THE PHIL. FROM W$OUT THE PHIL.

2,,% 1%-,,,-,,, )-,,,-,,,

2,,' 12-,,,-,,, 14-,,,-,,,

2,,) 14-,,,-,,, 1%-,,,-,,,

HOW MUCH OF THE DIVIDEND INCOME RECEIVED BY MR. SHOLI IS CONSIDERED INCOME FROM SOURCES WITHIN THE PHIL. A) B) C) D) 5ERO P1!'-!,, 1!,-,,, 3,,-,,,

22'. THE WIDOW OF YOUR BEST FRIEND HAS .UST BEEN PAID P1-,,,-,,, ON ACCOUNT OF THE LIFE INSURANCE POLICY OF THE DECEASED HUSBAND. SHE AS(S YOU WHETHER SHE SHOULD DECLARE THE AMOUNT FOR INCOME TAX PURPOSES OR FOR ESTATE TAX PURPOSES-(RPCPA) 1ST ADVICE/ THE PROCEEDS OF LIFE INSURANCE PAID TO THE BENEFICIARY UPON THE DEATH OF THE INSURED ARE EXEMPT FROM INCOME TAX AND NEED NOT BE DECLARED FOR INCOME TAX PURPOSES 2ND ADVICE/ THE PROCEEDS OF LIFE INSURANCE WOULD HAVE TO BE DECLARED FOR ESTATE TAX PURPOSES IF THE DESIGNATION OF THE BENEFICIARY WAS IRREVOCABLE- OTHERWISE IT NEED NOT BE DECLARED A) B) C) D) BOTH ADVICE ARE CORRECT 1ST ADVICE IS CORRECT- 2ND ADVICE IS WRONG BOTH ADVICE ARE WRONG 1ST IS WRONG- 2ND ADVICE IS CORRECT

CHAPTER !-DEDUCTIONS FROM GROSS INCOME


22). AN ORDINARY AND NECESSARY EXPENSE WHICH IS FULLY DOCUMENTED AND SUPPORTED BY RECEIPTS MAY BE FULLY DEDUCTED FOR INCOME TAX PURPOSES OVER AND ABOVE THE LIMIT SET BY LAW(RPCPA) A)MEDICAL EXPENSES B)CONTRIBUTION C)REPRESENTATION D)HIGH SCHOOL FEE

22*. LANGHAP CORPORATION INCURRED THE FOLLOWING EXPENSES. WHICH OF THESE EXPENSES IS NON-DEDUCTIBLE A) B) C) D) INSURANCE PREMIUMS ON THE BUILDING SALARIES OF THE OFFICIALS AND EMPLOYEES ENTERTAINING PROSPECTIVE CUSTOMERS GIFTS GIVEN TO PUBLIC OFFICIALS WHO FAVORED LANGHAP CORPORATION0S CONTRACT WITH THE GOVERNMENT

23,. WHICH OF THE FOLLOWING IS A DEDUCTIBLE EXPENSE FOR INCOME TAX PURPOSES -(RPCPA) A) SALARIES OF DOMESTIC SERVANTS B) ORDINARY REPAIR OF THE PERSONAL CAR C) PROVISION FOR DOUBTFUL ACCOUNTS D) NONE OF THE ABOVE 231. ONE OF THE FOLLOWING EXPENSES IS DEDUCTIBLE FROM GROSS INCOME A) PERSONAL- LIVING AND FAMILY EXPENSES B) AMOUNT PAID OUT FOR NEW BUILDING OR FOR PERMANENT IMPROVEMENT OR BETTERMENT- MADE TO INCREASE THE VALUE OF ANY PROPERTY OR ESTATE C) PREMIUMS PAID ON A LIFE INSURANCE POLICY COVERING THE LIFE OF THE EMPLOYEE WHEN THE MEMBERS OF THE FAMILY OF THE EMPLOYEE ARE THE DIRECT BENEFICIARY UNDER SUCH POLICY D) ANY AMOUNT EXPENDED IN RESTORING PROPERTY OR IN MA(ING GOOD EXHAUSTION THEREOF FOR WHICH AN ALLOWANCE IS OR HAS BEEN MADE 232. ALL OF THE FOLLOWING- EXCEPT ONE- ARE NOT DEDUCTIBLE FROM GROSS INCOME A) TUITION FEES AND OTHER EXPENSES OF THE TAXPAYER0S CHILDREN B) REPLACEMENT OF THE ROOF OF THE OFFICE BUILDING C) PREMIUMS PAID IN INSURING THE LIFE OF THE CORPORATE PRESIDENT- APPOINTING THE CORPORATION AS THE BENEFICIARY OF THE POLICY D) PREMIUMS PAID ON A LIFE INSURANCE OF A RAN(-AND-FILE EMPLOYEE WITH THE LATTER0S CHILDREN AS THE APPOINTED BENEFICIARY .

233. IN 2,,*- A5(AL CORPORATION PAID THE FOLLOWING PREMIUMS TO AN INSURANCE COMPANY IN INSURING THE LIFE OF ITS OFFICIALS AND EMPLOYEES/ OFFICIAL$EMPLOYEE RAN(-AND-FILE PERSONNEL MANAGER TREASURER GENERAL MANAGER BOARD CHAIRMAN BENEFICIARY CHILDREN PARENTS CORPORATION CORPORATION CORPORATION PREMIUMS PAID P!-,,, 1,-,,, 1!-,,, 1!-,,, 1!-,,,

THE DEDUCTIBLE EXPENSE ON THE INSIURANCE PREMIUMS PAID BY THE CORPORATION ISA) B) C) D) P%,-,,, 4!-,,, !-,,, 1!-,,,

234. THE FOLLOWING ARE EXAMPLES OF CORPORATE EXPENSES DEDUCTIBLE FROM GROSS INCOME- EXCEPT ONE(-RPCPA) A)REPRESENTATION EXPENSES DESIGNED TO PROMOTE BUSINESS B) CONTRIBUTIONS TO DRUM UP BUSINESS LI(E CONTRIBUTION OF SOFT DRIN(S TO BARRIO FIESTAS C) EXPENSES PAID TO AN ADVERTISING FIRM IN ORDER TO CREATE A FAVORABLE IMAGE FOR THE CORPORATION D) PREMIUMS ON LIFE INSURANCE COVERING THE LIFE OF AN EMPLOYEE IF THE BENEFICIARY IS HIS HEIRS 23!. FLOR CORPORATION TOO( TWO (EYMEN INSURANCE ON THE LIFE OF ITS PRESIDENT- MR. CHAN. IN ONE POLICY- THE BENEFICIARY IS THE CORPORATION TO COMPENSATE IT FOR ITS EXPECTED LOSS IN CASE OF DEATH OF ITS PRESIDENT. THE OTHER POLICY DESIGNATES MR. CHAN0S WIFE AS ITS IRREVOCABLE BENEFICIARY.-(RPCPA) &;1/ ARE THE INSURANCE PREMIUMS PAID BY FLOR CORPORATION IN BOTH POLICIES DEDUCTIBLE &;2/ WILL THE INSURANCE PROCEEDS BE TREATED AS INCOME SUB.ECT TO TAX BY THE CORPORATION AND BY THE WIFE A) YES TO &;1 AND NO TO &;2 B) YES TO BOTH &UESTIONS C) NO TO &;1 AND YES TO &;2

D) NO TO BOTH &UESTIONS NUMBERS 23# INFORMATION: THRU 23! ARE BASED ON THE FOLLOWING

IN 2,,*- LEXUS CORPORATION MADE SOME REPAIRS ON A BUILDING BEING LEASED TO LESLIE- TO WIT/ MINOR REPAIRS(EXPENSED) MA.OR REPAIRS P3,-,,, %,-,,,

THE MA.OR OR EXTRAORDINARY REPAIR DID NOT ADD VALUE TO THE PROPERTY BUT APPRECIABLY PROLONGED ITS USEFUL LIFE BY FIVE(!) YEARS. 23%. THE ENTRY IN THE BOO(S OF LEXUS TO RECORD THE EXPENSES INCURRED FOR MINOR REPAIRS ISA) BUILDING P3,-,,, CASH B) LEASE EXPENSE-LESLIE 3,-,,, CASH C) REPAIRS EXPENSE 3,-,,, CASH D) NO ENTRY P3,-,,, 3,-,,, 3,-,,,

23'. THE ENTRY IN THE BOO(S OF LEXUS TO RECORD THE EXPENSES INCURRED FOR MA.OR REPAIR ISA) BUILDING CASH B) REPAIRS EXPENSES CASH C) ALLOWANCE FOR DEP0N CASH D) NO ENTRY P%,-,,, P%,-,,, %,-,,, %,-,,, %,-,,, %,-,,,

23). SUPPOSE THE MA.OR REPAIR INCREASED THE VALUE NBY P4,-,,, AND IT ALSO PROLONGED THE LIFE OF THE ASSET- THE ACCOUNTING ENTRY TO RECORD THE REPAIR IN THE BOO(S OF LEXUS CORPORATION ISA) ALLOWANCE FOR DEPRECIATION CASH B) BUILDING CASH P%,-,,, P%,-,,, 4,-,,, 4,-,,,

C) BUILDING ALLOWANCE FOR DEPRECIATION CASH D) NONE OF THE ABOVE

4,-,,, 2,-,,, %,-,,,

23*. CHOOSE THE BEST ANSWER/ RGF COLLEGE- INC. A PROPRIETARY EDUCATIONAL INSTITUTION- SPENT P1, MILLION FOR THE CONSTRUCTION OF A NEW SCHOOL BUILDING. THE AMOUNT SPENT FOR THE CONSTRUCTIONA) MUST BE CLAIMED AS EXPENSE IN THE YEAR OF COMPLETION B) CAPITALI5ED AND CLAIM ANNUAL DEPRECIATION OVER THE LIFE OF THE BUILDING C) CAPITALI5ED OR EXPENSE OUTRIGHT AT THE OPTION OF THE SCHOOL D) CAPITALI5ED OR EXPENSE OUTRIGHT AT THE OPTION OF THE BIR 24,. RELAX CORPORATION IS ENGAGED IN SALE OF GOODS AND SERVICES WITH NET SALES$NET REVENUE OF P4,,-,,, AND P2,,-,,,- RESPECTIVELY. THE ACTUAL ENTERTAINMENT- AMUSEMENT AND RECREATION EXPENSE FOR THE TAXABLE &UARTER AMOUNTED TO P%-,,,. RELAX CORPORATION CAN CLAIM AN ENTERTAINMENT- AMUSEMENT AND RECREATION EXPENSE ON THE SALE OF GOODS AND SERVICESRESPECTIVELY OFA) B) C) D) P4-,,, AND P4-,,, 4-,,, AND 2-,,, 2-,,, AND 4-,,, 2-,,, AND 2-,,,

INTEREST EXPENSE PROBLEMS:


241. WHICH OF THE FOLLOWING ITEM IS CORRECT A) INTEREST INCURRED ON LOAN FROM A BROTHER IS DEDUCTIBLE B) INTEREST EXPENSE INCURRED ON UNPAID VALUE-ADDED TAX IS REDUCED BY 424 OF INTEREST INCOME SUB.ECTED TO FINAL TAX C) INTEREST PAYABLE WHICH HAD ALREADY PRESCRIBED IS DEDUCTIBLE IF PAID VOLUNTARILY BY THE TAXPAYER D) INTEREST INCURRED TO AC&UIRE A BUSINESS ASSET MAY BE ADDED TO THE COST OF THE PROPERTY

242. INTEREST ON BUSINESS IS DEDUCTIBLE FOR INCOME TAX PURPOSES. HOWEVER- ONE OF THE FOLLOWING IS NOT DEDUCTIBLE-(RPCPA) A) INTEREST ON DELIN&UENCY TAX B) INTEREST ON INDEBTEDNESS INCURRED TO PURCHASE DELIVERY E&UIPMENT C) INTEREST ON INDEBTEDNESS SECURED TO PURCHASE A TAXEXEMPT SECURITY D) NONE OF THE ABOVE 243. WHICH INTEREST IS DEDUCTIBLE A) INTEREST INCURRED ON UNPAID VALUE-ADDED TAX B) INTEREST ON LOAN BY AN INDIVIDUAL FROM A CORPORATION IF %,4 OF THE OUTSTANDING STOC( OF THE LATTER IS OWNED INDIRECTLY BY SUCH INDIVIDUAL C) INTEREST ON LOAN BETWEEN MEMBERS OF A FAMILY D) INTEREST ONN LOAN BY A FIDUCIARY OF A TRUST AND A BENEFICIARY OF SUCH TRUST 244. A DEDUCTIBLE INTEREST EXPENSEA) INTEREST ON LOAN BETWEEN MEMBERS OF A FAMILY B) INTEREST ON LOAN THAT WAS USED TO FINANCE THE CONSTRUCTION OF THE TAXPAYER0S RESIDENTIAL HOUSE C) INTEREST ON TAX DELIN&UENCY D) INTEREST ON INDEBTEDNESS TO FINANCE PETROLEUM OPERATIONS 24!. ON .ANUARY 2- 2,,*- MANG OTANG CONTRACTED A 1-YEAR P1,,-,,, LOAN FROM METROBAN( FOR THE PURCHASE OF COMPUTERS. THE E&UIPMENTS WHICH HAD A DEPRECIABLE LIFE OF EIGHT()) YEARS WERE AC&UIRED ON APRIL 1- 2,,*. THE INTEREST EXPENSE FOR ONE(1) YEAR AMOUNTED TO P1!-,,,. IN THE SAME YEAR- HIS BAN( DEPOSIT WITH PNB EARNED AN INTEREST INCOME OF P2-,,,. DURING THE YEAR- HE INCURRED AN INTEREST EXPENSE ON UNPAID BUSINESS TAX OF P%,,. THE DEDUCTIBLE INTEREST EXPENSE OF MANG OTANG IN 2,,* ISA) B) C) D) P14-24, 14-'%, 13-%,, 14-*4,

24%. IN NUMBER 24!- THE DEDUCTION OF MANG OTANG IN 2,,) ASSUMING THAT THE INTEREST ON LOAN WAS CAPITALI5EDA) B) C) D) P14-3'! 1!-,,, 1,-')1.2! NONE

24'. IN DECEMBER 2,,%- A TAXPAYER DONATED TO HIS SON 3-,,, SHARES OF STOC( OF SAN MIGUEL CORPORATION. FOR FAILURE TO FILE A DONOR0S TAX RETURN ON THE DONATION WITHIN THE STATUTORY PERIOD- THE TAXPAYER WAS ASSESSED THE SUM OF P1,,-,,,- AS DONOR0S TAX PLUS 2!4 SURCHARGE OR P2!-,,, AND 2,4 INTEREST OR P2,-,,, WHICH HE PAID .ANUARY 2,,*. ON .UNE 2,- 2,,*- HE FILED HIS INCOME TAX RETURN FOR 2,,) CLAIMINGAMONG OTHERS- A DEDUCTION FOR INTEREST AMOUNTING TO P1-!,,. ON .UNE !- 2,,*- THE TAXPAYER FILED AN AMENDED INCOME TAX RETURN FOR THE SAME CALENDAR YEAR 2,,)- CLAIMING THEREIN AN ADDITIONAL DEDUCTION IN THE AMOUNT OF P2,-,,, REPRESENTING INTEREST PAID ON THE DONOR0S TAX. A CLAIM FOR REFUND OF ALLEGED OVERPAID INCOME TAX FOR TAXABLE YEAR 2,,) WAS FILED WITH THE CIR WHICH WAS SUBSE&UENTLY DENIED. THE CIR POINTED OUT THAT A TAX IS NOT INDEBTEDNESS AND THAT THERE IS A FUNDAMENTAL DISTINCTION BETWEEN A "TAX# AND A "DEBT#. ACCORDING TO THE CIR- THE DEDUCTIBILITY OF INTEREST ON INDEBTEDNESS FROM A PERSON0S INCOME TAX CANNOT EXTEND TO INTEREST ON TAXES. &;1/ IS THE INTEREST ON THE DONOR0S TAX DEDUCTIBLE &;2/ IS THE INTEREST ON THE INCOME TAX DEDUCTIBLE A) B) C) D) YES- YES NO- YES YES- NO NO-NO

24). IF A STOC(HOLDER RECEIVES A TAXABLE STOC( DIVIDEND- WHAT IS THE MEASURE OF INCOME APPLICABLE TO HIM -(RPCPA) A) PAR VALUE OF THE SHARES ON THE DATE HE RECEIVES THEM B) FAIR MAR(ET VALUE OF THE SHARES ON THE DATE OF DECLARATION

C) THE AD.USTED COST OF THE OLD SHARES AND THE NEW SHARES OF THE CORPORATION D) THE BOO( VALUE OF THE SHARES OF THE PRECEDING CALENDAR YEAR 24*. GENERALLY- SALES OF REAL PROPERTY ARE SUB.ECT TO TAX. WHICH OF THE FOLLOWING SALES OF LAND IS NOT ALLOWED BY THE LAW TO BE SUB.ECTED TO TAX -(RPCPA) A) B) C) D) LAND SOLD BY THE CHURCH LAND FORECLOSED BY THE BAN( LAND SOLD TO GOVERNMENT CORPORATIONS NONE OF THE ABOVE

TAX EXPENSE(TAX CREDIT PROBLEMS:


2!,. ONE IS NOT A DEDUCTIBLE TAX-(RPCPA) A) B) C) D) BUSINESS TAX VALUE-ADDED TAX PRIVILEGE TAX OCCUPATION TAX

2!1. ONE IS A DEDUCTIBLE TAX-(RPCPA) A) B) C) D) ESTATE TAX FRANCHISE TAX DONOR0S TAX SPECIAL ASSESSMENT

2!2. ONE IS ENTITLED TO TAX CREDIT FOR TAXES PAID TO FOREIGN COUNTRY-(RPCPA) A) RESIDENT ALIENS B) DOMESTIC CORPORATION C) NON-RESIDENT ALIENS WITH RECIPROCITY D) NON-RESIDENT CITI5ENS 2!3. ONE IS ENTITLED TO TAX CREDIT FOR TAXES PAID TO FOREIGN COUNTRY-(RPCPA) A) NON-RESIDENT ALIENS B) FOREIGN CORPORATIONS C) RESIDENT ALIENS WITH INCOME DERIVED SOLELY FROM SOURCES WITHIN THE PHILIPPINES D) BENEFICIARIES OF THE ESTATES AND TRUSTS

2!4.THE FOLLOWING TAXPAYERS CAN CLAIM TAX CREDIT EXCEPT ONE(RPCPA) A) B) C) D) DOMESTIC CORPORATIONS MEMBERS OR BENEFICIARIES OF PARTNERSHIP OR TRUST RESIDENT FILIPINO CITI5ENS NON-RESIDENT ALIENS

2!!. IN 2,,*- VICTOR CO.- A DOMESTIC CORPORATION HAS NET INCOME FROM WITHIN THE PHILIPPINES- P2,,-,,, AND FROM THE U.S.A.- P3,,-,,,. INCOME TAX PAID ON INCOME FROM THE U.S.A. IS P*!-,,,. THE TAX CREDIT ON INCOME TAX PAID TO U.S. GOVERNMENT IS-(RPCPA) A) B) C) D) P1,!-,,, %,-,,, *,-,,, 11,-,,,

2!%. GLOBAL CORPORATION- A DOMESTIC CORPORATION - HAS THE FOLLOWING DATA FOR THE CALENDAR YEAR. THE CORPORATION SIGNIFIED ITS INTENTION TO CLAIM TAX CREDITS ON INCOME TAXES PAID TO THE FOREIGN COUNTRIES/ COUNTRY PHIL. U.S.A. .APAN GROSS INCOME 1-,,,-,,, 4,,-,,, 3,,-,,, ALLOWABLE DEDUCTIONS ),,-,,, 2,,-,,, 2,,-,,, TAX PAID P),-,,, 2!-,,,

THE INCOME TAX PAYABLE BY GLOBAL CORPORATION IS/ A) B) C) D) P'!-,,, %!-,,, %,-,,, '2-,,,

2!'. PENNY GARCIA - SINGLE HAS THE FOLLOWING DATA DURING THE YEAR/ GROSS INCOME- PHIL. GROSS INCOME- USA EXPENSES- PHIL. EXPENSES- USA TAX PAID IN THE STATE OF CALIFORNIA FEDERAL INCOME TAX PAID P12,-,,, 2,,-,,, ),-,,, 1%,-,,, 4,-,,, )-!,,

IF THE FOREIGN TAX PAID IS CLAIMED AS DEDUCTION- THE INCOME TAX DUE ISA) B) C) D) P!1-!,, !-'2! 12-),, 1-%!,

2!). IN NUMBER 2!'- IF YOU ARE THE TAXPAYER- WILL YOU OPT TO CLAIM THE FOREIGN TAX PAID AS TAX CREDIT OR AS A DEDUCTION A) TAX CREDIT BECAUSE THE TAX LIABILITY WOULD BE P1-2!, ONLY B) TAX CREDIT BECAUSE THE TAX LIABILITY WOULD BE P2-!,, ONLY C) DEDUCTION BECAUSE THE TAX LIABILITY WOULD BE P2-1!, ONLY D) DEDUCTION BECAUSE THE TAX LIABILITY WOULD BE P'-,,, ONLY

CHAPTER $-LOSSES
2!*. ONE IS NOT A DEDUCTIBLE LOSS-(RPCPA) A) LOSS DUE TO REMOVAL OR DEMOLITION OF OLD BUILDING- THE SCRAPPING OF OLD MACHINERY OR E&UIPMENT INCIDENT TO RENEWAL OR REPLACEMENT B) LOSS DUE TO REMOVAL OF BUILDING OR REAL ESTATE PURCHASED WHEN THE PURCHASE WAS FOR THE AC&UISITION OF THE LAND AND WITHOUT INTENDING TO USE THE BUILDING C) LOSS IN VALUE OF SECURITIES OF SUCH EXTENT THAT THE SECURITIES HAVE BECOME WORTHLESS AND ARE WRITTEN OFF D) LOSS IN USEFULNESS IN BUSINESS OF AN ASSET SO THAT THE BUSINESS IS DISCONTINUED OR THE ASSET IS DISCARDED 2%,.MAX AND .ESS ARE BUSINESS COMPETITORS. MAX PURCHASED A LAND BESIDE THE BUSINESS PREMISES OF .ESS WITH THE INTENTION OF ERECTING A NEW 4-STOREY BUILDING. THE LAND WHICH WAS VALUED AT P1-,,,-,,, HAD AN ALMOST DILAPIDATED BUILDING THEREON ASSESSED AT P1!,-,,,. HE SPENT P4,-,,, FOR ITS DEMOLITION AND SOLD ITS SCRAP FOR P2!-,,,. THE CONSTRUCTION OF THE NEW BUILDING COST HIM P1,-,,,-,,,. WHEN .ESS (NEW THE INTENTION OF MAX- HE DECIDED ALSO TO DEMOLISH HIS 2,-YEAR OLD BUILDING AND TO PUT UP A NEW ONE. THE DEMOLITION COST HIM P),-,,, BUT RAISED P3!-,,, FROM THE SCRAP- AND THE CONSTRUCTION COST OF THE NEW %-STOREY BUILDING WAS P1!-,,,-,,,.

AS BETWEEN MAX AND .ESS- WHO IS ENTITLED TO CLAIM LOSS AS DEDUCTION FROM GROSS INCOME A) B) C) D) MAX ONLY .ESS ONLY BOTH OF THEM NEITHER OF THEM

2%1. DELTA COMPANY PURCHASED A PIECE OF LAND WITH A BUILDING THEREON FOR P1-!,,-,,, ALLOCATED UNDER A CONTEACT OF SALE AT P1-,,,-,,, FOR THE LAND AND P!,,-,,, FOR THE BUILDING. IT HAD NO USE FOR THE BUILDING AT THE TIME OF PURCHASE AND IT WAS ITS INTENTION TO REMOVE THE BUILDING IN ORDER TO BUILD ITS FACTORY. IT INCURRED DEMOLITION COST OF P!,-,,,. IT SOLD ITS SCRAP FOR P1!-,,,. THE CONSTRUCTION OF THE NEW BUILDING COST THE COMPANY P2-!,,-,,,. THE TOTAL VALUE OF THE LAND ISA) B) C) D) P1-,,,-,,, 2-%1!-,,, 1-%1!-,,, 1-!3!-,,,

2%2. DINA COMPANY HAD AN OLD WAREHOUSE WHICH HAD A COST OF P1-2,,-,,,. THE COMPANY DEMOLISHED THE WAREHOUSE WHEN IT HAD A BOO( VALUE OF P2,,-,,, IN ORDER TO CONSTRUCT A NEW AND BIGGER WAREHOUSE. THE DEMOLITION COST AMOUNTED TO P2!-,,, WHILE THE SCRAP VALUE WERE SOLD FOR P1,-,,,. IN ITS ACCOUNTING ENTRY- DINA COMPANY SHOULD DEBIT A LOSS ON RETIREMENT OF OLD BUILDING OF A) B) C) D) NONE P2,,-,,, 1)!-,,, 21!-,,,

2%3. A BUILDING WAS PARTIALLY DESTROYED BY FIRE IN 2,,). IT HAD A BOO( VALUE OF P4-,,,-,,,. THE INSURANCE COMPANY WAS WILLING TO PAY P3-,,,-,,, WHICH WAS REFUSED BY THE OWNER OF THE BUILDING. FINALLY- THE CLAIM WAS SETTLED IN 2,,* FOR P3-!,,-,,,. THE P3-!,,-,,, PROCEEDS IS-(RPCPA) A) B) C) D) EXEMPT FROM INCOME TAX TAXABLE IN FULL SUB.ECT TO FINAL TAX PARTLY TAXABLE- PARTLY EXEMPT

2%4. REFER TO ITEM 2%3 DATA. THE TAXPAYER CAN CLAIM S DEDUCTIBLE LOSS OF-(RPCPA) A) B) C) D) P1-,,,-,,, IN 2,,) 1-,,,-,,, IN 2,,* !,,-,,, IN 2,,) !,,-,,, IN 2,,*

2%!. IN 2,,)- POPOY0S RESIDENCE WAS TOTALLY DESTROYED BY FIRE. THE PROPERTY HAD AN AD.USTED BASIS AND A FAIR MAR(ET VALUE OF P13,-,,, BEFORE THE FIRE. DURING 2,,)- POY RECEIVED INSURANCE REIMBURSEMENT OF P12,-,,, FOR THE DESTRUCTION OF HIS HOME. POPOY0S 2,,) AD.USTED GROSS INCOME WAS P',-,,,. POPOY HAD NO CASUALTY GAINS DURING THE YEAR.. WHAT AMOUNT OF THE FIRE LOSS WAS POPOY ENTITLED TO CLAIM AS AN ITEMI5ED DEDUCTION ON HIS 2,,* TAX RETURN -(RPCPA) A) B) C) D) 5ERO )-!,, )-%,, 1,-,,,

2%%. IN 2,,'- VIOLETA CONSTRUCTED AN OFFICE BUILDING WORTH P2-,,,-,,,. IN 2,,* WHEN IT HAD AN ACCUMULATED DEPRECIATION OF P'2-,,, THE BUILDING WAS TOTALLY DESTROYED BY FIRE. ASSUMING THAT THE AMOUNT RECOVERABLE FROM STAN INSURANCE COMPANY IS P!,,-,,,- THE DEDUCTIBLE LOSS OF VIOLETA ISA) B) C) D) P1-*2)-,,, 2-,,,-,,, 5ERO 1-42)-,,,

2%'.BASED ON THE DATA IN NO. 2%% ABOVE- THE ACCOUNTING ENTRY IN THE BOO(S OF VIOLETA A) FIRE LOSS BUILDING B) FIRE LOSS ALLOWANCE FOR DEPRECIATION BUILDING C) FIRE LOSS RECEIVABLE FROM INS. CO. 2-,,,-,,, 2-,,,-,,, 1-42)-,,, '2-,,, 1-!,,-,,, !,,-,,, !,,-,,,

D) RECEIVABLE FROM INS. CO. ALLOWANCE FOR DEPRECIATION FIRE LOSS BUILDING

!,,-,,, '2-,,, 1-42)-,,, 2-,,,-,,,

2%). THE FOLLOWING PROPERTIES WERE BURNED IN A FIRE WHICH BRO(E OUT IN THE COMPANY PREMISES/ TYPE OF LOSS COST ACCUM. DEP0N INSURANC RECOVERY REPLACEMENT COST OF DAMAGED PORTION PROPERTY A TOTAL ),,-,,, !!,-,,, 2,,-,,, PROPERTY B PARTIAL 1-2,,-,,, %,,-,,, 1!,-,,, !,,-,,,

THE DEDUCTIBLE LOSS ON PROPERTY A ISA) B) C) D) P2!,-,,, ),,-,,, !,-,,, %,,-,,,

2%*. BASED ON THE DATA IN NUMBER 2%) ABOVE- THE DEDUCTIBLE LOSS ON PROPERTY B ISA) B) C) D) P%,,-,,, 3!,-,,, !,,-,,, 1-2,,-,,,

2',. (ATRINA CONSTRUCTION CORPORATION- A DOMESTIC CORPORATION HAD THE FOLLOWING DATA/ YEAR 2,,)/ GROSS INCOME FROM SERVICES P3-2,,-,,, OPERATING EXPENSES 3-4!,-,,, RENT INCOME OF HEAVY E&UIPMENTS ',-,,, DIVIDEND RECEIVED FROM .OHNA CORP. 3%-!,, CAPITAL GAIN ON SALE OF SHARES OF STOC(S (NOT LISTED) 12-2!, YEAR 2,,*/ GROSS INCOME FROM SERVICES OPERATING EXPENSES 3-!%,-,,, 1-2!,-,,,

IN 2,,*- (ATRINA CORPORATION INCURRED THE FOLLOWING LOSSES/

FIRE LOSS OF A COMPANY BUILDING/ TOTAL LOSS COST P!-,,,-,,, ACCUM. DEP0N 3-,,,-,,, AMOUNT RECOVERED FROM INSURANCE CO. '!,-,,, SCRAP(TA(EN AWAY BY THE INS. CO.) !-,,, ACCIDENT LOSS OF A COMPANY DUMP TRUC(/ PARTIAL LOSS COST OF DUMP TRUC( P!,,-,,, ACCUM. DEP0N 2!,-,,, RESTORATION COST 1!,-,,, AMOUNT RECOVERED FROM INS. CO. %!-,,, 2'1. HOW MUCH IS THE NET OPERATING LOSS CARRY-OVER TO 2,,* A) B) C) D) (P131-2!,) (11*-,,,) (1),-,,,) (2!,-,,,)

2'2. HOW MUCH IS THE CASUALTY LOSS IN 2,,* A) B) C) D) P1-33!-,,, 2-1!,-,,, 1-4,,-,,, 1-43!-,,,

2'3. HOW MUCH IS THE INCOME TAX DUE IN 2,,* A) B) C) D) P23)-!,, 2')-2!, 13,-4%2.!, *'-3)'.!,

2'4. .OE- A SALES AGENT ON COMMISSION BASIS OF CONTRADE ENTERPRISES WHICH IS ENGAGED IN THE SALE OF PAPER AND PAPER PRODUCTS- WHILE IN THE COURSE OF HIS TRAVEL TOWARDS BICOL REGION WAS APPREHENDED BY MEMBERS OF THE NEW PEOPLE0S ARMY (NPA) UNDER MELITO GLOR COMMAND ALONG &UE5ON PROVINCE. HIS SERVICE CAR OWNED BY CONTRADE ENTERPRISES WAS SEI5ED. THE NEXT DAY- HE LEARNED THAT THE NPAS AND THE MEMBERS OF THE PHIL. ARMY UNDER !1ST BRIGADE HAD A CHANCE ENCOUNTER. USING HEAVY WEAPONS- THE MILITARY FIRED AT THE NPAS THAT TRIED TO ESCAPE WITH THE USE OF HIS CAR. ALL THE MEMBERS OF THE NPA WERE (ILLED AND THE CAR WAS A TOTAL WREC(. IS THE VALUE OF THE CAR DEDUCTIBLE AS CASUALTY LOSS

A) YES. IT IS DEDUCTIBLE TO .OE BEING IN POSSESSION OF THE CAR AT THE TIME IT WAS SEI5ED B) YES. IT IS DEDUCTIBLE TO CONTRADE ENTERPRISES PROVIDED THAT THE OTHER RE&UISITES FOR DEDUCTIBILITY MUST BE SATISFIED C) NO. CASUALTY LOSS REFERS ONLY TO FIRE- EARTH&UA(EVOLCANIC ERUPTION AND OTHER NON-MAN MADE CALAMITIES D) NO- BECAUSE IT WAS INTENTIONALLY WREC(ED BY THE MEMBERS OF THE PHIL. ARMY 2'!. &UENNIE COMPANY AC&UIRED MACHINERY AT A PURCHASE PRICE OF P!,,-,,,. FREIGHT AND INSTALLATION COST AMOUNTED TO P2,-,,,. AT A DATE IN A TAXABLE YEAR WHEN THE ACCUMULATED DEPRECIATION WAS P3,,-,,,- &UENNIE COMPANY RETIRED THE MACHINERY FROM THE BUSINESS BECAUSE THE INCREASE IN THE COST OF PRODUCTION AND THE CHANGE OF MANUFACTURE OF THE PRODUCT TO WHICH THE MACHINERY IS EXCLUSIVELY DEVOTED MADE ITS CONTINUED PROFITABLE USE IMPOSSIBLE. THE SCRAP VALUE OF THE MACHINERY WAS P1,-,,,. THE LOSS ON THE RETIREMENT OF THE MACHINERY ISA) B) C) D) P22,-,,, 2),-,,, 2,,-,,, 21,-,,,

2'%. FLORENCIO HAD THE FOLLOWING RECORDS OF INCOME- EXPENSES AND LOSSES DURING THE YEAR/ WAGERING GAINS(WAGERING LOSSES- P!,-,,,) TEMPORARY DECLINE IN VALUE OF STOC(S OF TY CORP SALE OF TYPEWRITERS WHICH WERE RENDERED OBSOLETE BTY COMPUTERS(BOO( VALUE/P11!-,,,) HOW MUCH WAS THE LOSS IS DEDUCTIBLE BY FLORENCIO A) B) C) D) P*'-!,, 3!-,,, !!-,,, 11,-,,, P3,-,,, 12-!,, ),-,,,

2''. ALL OF THE FOLLOWING- EXCEPT ONE- ARE RE&UISITES IN THE CARRY-OVER OF NET OPERATING LOSS

A) THERE MUST BE NO SUBSTANTIAL CHANGE IN THE OWNERSHIP OF THE BUSINESS B) CARRY-OVER IS NOT ALLOWED IF THE CORPORATION IS SUB.ECT TO MCIT DURING THE TAXABLE YEAR C) EVEN IF THE CORPORATION PAID TAX BASED ON MCIT- THE RUNNING OF THE PRESCRIPTION PERIOD IS NOT INTERRUPTED D) THE CARRY-OVER IS GOOD ONLY FOR ONE(1) YEAR 2'). STATEMENT 1/ THE TERM "NET OPERATING LOSS# SHALL MEAN THE EXCESS OF ALLOWABLE DEDUCTION OVER GROSS INCOME OF THE BUSINESS IN A TAXABLE YEAR. STATEMENT 2/ NON-RESIDENT FOREIGN CORPORATIONS ARE NOT ENTITLED TO DEDUCT NOLCO FROM THEIR GROSS INCOME STATE-MENT 3/ THE NOLCO WHICH HAD NOT BEEN OFFSET AS DEDUCTION FROM GROSS INCOME SHALL BE CARRIED OVER AS A DEDUCTION FROM GROSS INCOME FOR THE NEXT TAXABLE YEAR IMMEDIATELY FOLLOWING THE YEAR OF SUCH LOSS WHICH OF THE ABOVE STATEMENTS IS$ARE FALSE A) B) C) D) STATEMENT 1 ONLY STATEMENTS 1 AND 2 STATEMENT 3 ONLY NONE

NUMBERS 2 $ TO 2!1 ARE BASED ON THE FOLLOWING INFORMATION: THE FOLLOWING ARE THE RECORDS OF BRIDGET COMPANY/ GROSS SALES COST OF SALES DIVIDEND-RESIDENT FOREIGN CORP. INTEREST INCOME ON NOTES RECEIVABLE CAPITAL GAIN CAPITAL LOSS 2,,' P3-3,,-,,, 2-4,,-,,, 14,-,,, 2)-,,, 2,-,,, 2,,) 2-34,-,,, 1-,',-,,, 1%-4,, 13-,,, 2,,* )2!-,,, 3),-,,, 32-,,, 1)-!,, 22-,,,

2'*. THE TAXABLE INCOME$OPERATING LOSS IN 2,,' ISA) (P!'!-,,,) B) (4,'-,,,)

C) (42'-,,,) D) 1-,%)-,,, 2),. IN &UESTION 2'*- THE TAXABLE INCOME$OPERATING LOSS IN 2,,) ISA) B) C) D) 5ERO 2'4-4,, (132-%,,) 2!4-4,,

2)1. THE NET OPERATING LOSS CARRY-OVER IN 2,,* ISA) B) C) D) P1)-,,, 5ERO 1',-%,, 1)-,,,

NUMBERS 2!2 AND 2!3 ARE BASED ON THE FOLLOWING INFORMATION: THE FOLLOWING ARE THE RECORDS OF BETTY- SINGLE- RESIDENT CITI5EN/ 2,,) 2,,* GROSS SALES P2-!%,-,,, 1-*2,-,,, COST OF SALES 1-3%,-,,, )*!-,,, DIVIDEND FROM7 7 RESIDENT FOREIGN CORP. 41-2,, INTEREST INCOME ON NOTES REC0BLE 12-!,, INTEREST FROM DEPOSIT WITH CHINABAN( 2-3!, 1-%), CAPITAL GAIN 11-4!, 13-%!, CAPITAL LOSS 1'-),, DEDUCTIONS 1-1%,-,,, 4!)-3!, ADDITIONAL INFORMATION/ A. IN 2,,'- THE TAXPAYER HAD AN OPERATING LOSS OF P3,,-,,, B. IN 2,,*- THE TAXPAYER AVAILED OF OPTIONAL STANDARD DEDUCTION 2)2. THE TAXABLE INCOME$OPERATING LOSS IN 2,,) ISA) B) C) D) P2%1-4,, 5ERO 2'4-4,, 1-2)%-4,,

2)3. THE TAXABLE INCOME$OPERATING LOSS IN 2,,* OF BETTY ISA) B) C) D) P1*,-',, *3*-!), 24)-2,, 232-!,,

2)4. HOLY WORD COMPANY PURCHASED SHARES OF STOC( OF NUEVA CACERES COMPANY FOR P%,-,,, AND OF ATENEO COMPANY FOR P3,-,,,. AT THE END OF THE TAXABLE YEAR- IT ASCERTAINED THAT ITS NUEVA CACERES COMPANY STOC( WAS WORTHLESS BECAUSE OF THE COMPLETE INSOLVENCY OF THE CORPORATION- AND ITS ATENEO COMPANY HAD DECLINED OIN VALUE OF P2)-,,,. HOLY WORD COMPANY SHOULD RECOGNI5E A LOSS ON ITS INVESTMENT IN NUEVA CACERES AND ATENEO COMPANY SHARES OFA) B) C) D) 5ERO P%2-,,, %,-,,, *,-,,,

2)!. NINI COMPANY WAS MERGED INTO OTOY COMPANY. NINI COMPANY TRANSFERRED ALL ITS PROPERTIES WITH A BOO( VALUE OF P4-,,,-,,, TO OTOY COMPANY FOR WHICH IT RECEIVED SHARES OF THE LATTER WITH A FAIR MAR(ET VALUE OF P3-%,,-,,,. SAN(O WAS A STOC.HOLDER OF NINI COMPANY (WHICH HE AC&UIRED AT A COST OF P!,,-,,,) WHEN THE MERGER WAS EFFECTED AND RECEIVED SHARES OF OTOY COMPANY WITH A FAIR MAR(ET VALUE OF P3%,-,,,. THE AMOUNT OF LOSS DEDUCTIBLE BY NINI COMPANY ISA) B) C) D) P4,,-,,, 4-,,,-,,, 14,-,,, 5ERO

2)%. IN NUMBER 2)! ABOVE- THE AMOUNT OF LOSS DEDUCTIBLE BY OTOY ISA) B) C) D) P4,,-,,, 14,-,,, !,,-,,, 5ERO

2)'. (IRING-(ING COMPANY TRANSFERRED PROPERTY TO RAYRAY COMPANY. AS A RESULT OF THE TRANSFER- (IRING-(ING COMPANY AC&UIRED CONTROL OVER RAYRAY COMPANY. THE PROPERTY HAD A

BOO( VALUE OF P1-,,,-,,, TO (( COMPANY. AS A CONSIDERATION- IT RECEIVED SHARES OF STOC( OF RR WITH A FAIR MAR(ET VALUE OF P*%,-,,,. AS A CONSE&UENCE OF THE TRANSACTION- (( COMPANY SHALL CLAIM A DEDUCTIBLE LOSS OFA) B) C) D) P1-,,,-,,, *%,-,,, 4,-,,, 5ERO

2)). SHASHA- SINGLE- HAS THE FOLLOWING DATA IN 2,,) AND 2,,*/ 2,,) NET INCOME BEFORE PERSONAL EXEMPTION AND BAD DEBT LESS/ BAD DEBT WRITTEN OFF NET INCOME AFTER BAD DEBT 2,,* BAD DEBT RECOVERED CASE1 !,-,,, ',-,,, (2,-,,,) CASE2 !,-,,, %)-,,, (1)-,,,) CASE3 !,-,,, 3,-,,, 2,-,,,

',-,,,

%,-,,,

3,-,,,

IN 2,,*- THE TAXABLE AMOUNTS BEFOREW PERSONAL EXEMPTION ARE/ CASE1 CASE2 CASE3 A) !,-,,, !,-,,, !,-,,, B) !,-,,, 42-,,, 3,-,,, C) ',-,,, %)-,,, 3,-,,, D) (2,-,,,) ()-,,,) 2,-,,, 2)*. THE FOLLOWING WERE TA(EN FROM THE INCOME STATEMENT OF ABC CORPORATION FOR THE TAXABLE YEAR 2,,*/-((RPCPA) GROSS PROFIT ON SALES LESS/ DEDUCTIBLE EXPENSES PROVISION FOR BAD DEBTS NET INCOME BEFORE INCOME TAX ADDITIONAL INFORMATION/ A. ACCOUNTS WRITTEN OFF DURING THE YEAR AND CHARGED TO ALLOWANCE FOR BAD DEBTS-P!,-,,, B. RECOVERIES ON ACCOUNTS RECEIVABLE PREVIOUSLY WRITTEN OFF IN 2,,) AND CREDITED TO ALLOWANCE FOR BAD DEBTS P),,-,,, 44,-,,, ),-,,, !2,-,,, 2),-,,,

ALLOWED AS DEDUCTION BY BIR9P3,-,,, DISALLOWED BY BIR AS DEDUCTION9P2,-,,, THE NET INCOME BEFORE INCOME TAX OF ABC CORPORATION ISA) B) C) D) P2),-,,, 2%,-,,, 33,-,,, 34,-,,,

2*,. WHICH OF THE FOLLOWING METHODS OF DEPRECIATION IS NOT EXPRESSLY ALLOWED UNDER THE LAW A) B) C) D) OUTPUT OR PRODUCTION METHOD SUM-OF-YEARS DIGITS METHOD STRAIGHT LINE METHOD DECLINING BALANCE METHOD

2*1. WHICH OF THE FOLLOWING ASSETS IS SUB.ECT TO DEPRECIATION FOR INCOME TAX PURPOSES -(RPCPA) A) B) C) D) INVENTORIES OR STOC( IN TRADE GOODWILL E&UIPMENT USED IN BUSINESS RESIDENTIAL HOUSE

2*2. A STORE BUILDING WAS CONSTRUCTED ON .ANUARY 2- 2,,4 WITH A COST OF P!',-,,,. ITS ESTIMATED USEFUL LIFE IS 1% YEARS WITH SCRAP VALUE OF P',-,,, AFTER 1% YEARS. IN .ANUARY 2,,*- REPLACEMENT OF SOME WORN-OUT PARTS OF THE BUILDING COSTING P!,-,,, WAS SPENT. AFTER THE RAPAIRS- THE BUILDING WAS APPRAISED WITH A FAIR MAR(ET VALUE OF P'',-,,,. THE ALLOWABLE DEDUCTION FOR DEPRECIATION FOR THE YEAR 2,,* IS-(RPCPA) A) B) C) D) P3!-'*!.4! 43-'!, 4*-431.)2 31-2!,

CHARITABLE CONTRIBUTION PROBLEMS:


2*3.WHICH OF THE FOLLOWING IS DEDUCTIBLE FROM GROSS INCOME EVEN IF THE PAYMENT IS NOT CONNECTED WITH BUSINESS

A) CONTRIBUTION OF THE EMPLOYER TO THE PENSION TRUST OF THE EMPLOYEE B) CHARITABLE CONTRIBUTIONS C) INCOME TAX PAID IN FOREIGN COUNTRY D) TRAVELLING EXPENSES 2*4. THE AMOUNT OF CHARITABLE CONTRIBUTION OF PROPERTY OTHER THAN MONEY SHALL BE BASED ON A) B) C) D) FAIR MAR(ET VALUE BOO( VALUE LOWER OF COST OR MAR(ET AC&UISITION COST

2*!. ANGELO IS A CASH BASIS- SELF-EMPLOYED AIR-CONDITIONING REPAIRMAN WITH 2,,* GROSS BUSINESS RECEIPTS OF P2,,-,,,. ANGELO0S CASH DISBURSEMENT WERE AS FOLLOWS/-(RPCPA) AIR CONDITIONING PARTS YELLOW PAGES LISTING ESTIMATED NATIONAL INCOME TAXES ON SELF-EMPLOYMENT INCOME BUSINESS LONG-DISTANCE TELEPHONE CALLS CHARITABLE CONTRIBUTIONS P2!-,,, 2,-,,, 1,-,,, 4-,,, 2-,,,

WHAT AMOUNT SHOULD ANGELO REPORT AS SELF-EMPLOYMENT INCOME BEFORE PERSONAL EXEMPTION A) B) C) D) P1!1-,,, 14*-,,, 141-,,, 13*-,,,

2*%. WHAT WOULD BE THE ALLOWABLE DEDUCTION FOR P1,-,,, CONTRIBUTION MADE BY A RESIDENT CITI5EN TO A CHARITABLE INSTITUTION- FROM HIS P%,-,,, NET INCOME BEFORE CONTRIBUTION A) B) C) D) P%-,,, '-,,, 3-,,, 1,-,,,

2*'.NOTRADAMUS CORPORATION HAD THE FOLLOWING DATA IN 2,,*/ GROSS INCOME DEDUCTIONS(EXCEPT CONTRIBUTIONS) P!,,-,,, 4,,-,,,

DONATIONS TO CULTURAL CENTER OF THE PHIL. DONATIONS TO REHABILITATION OF VETERANS- INC. DONATION TO ROMAN CATHOLIC CHURCH DONATIONS TO VICTIMS OF PAYATAS TRAGEDY THE TAXABLE INCOME OF THE CORPORATION ISA) B) C) D) P*2-,,, *3-!,, ))-!,, 1,,-,,,

3-,,, 2-,,, 1-!,, !-,,,

2*). DOMINGO HAD THE FOLLOWING DATA DURING THE YEAR/ GROSS INCOME FROM BUSINESS P1-,,,-,,, CAPITAL GAIN !,-,,, CAPITAL LOSS 2,-,,, DEDUCTIONS 4,,-,,, DONATION TO ACCREDITED NGO 3,-,,, DONATION TO CHURCH 2,-,,, THE TAXABLE INCOME OF DOMINGO IF HE IS AN INDIVIDUAL TAXPAYERSINGLE- WITH A COMPENSATION INCOME DURING THE YEAR OF P4,-,,,A) B) C) D) P!!,-,,, %,,-,,, !%,-,,, !',-,,,

2**. IN NUMBER 2** DATA- HOW MUCH IS THE TAXABLE INCOME IF DOMINGO IS A CORPORATION (DISREGARD COMPENSATION INCOME)A) B) C) D) P%',-,,, %4,-,,, !),-,,, !',-,,,

3,,. SANDY MADE A CONTRIBUTION OF P1!-,,, TO ST. .UDE PARISH CHURCH. HE HAD A GROSS INCOME FROM BUSINESS OF P!,,-,,, AND DEDUCTIONS (EXCLUDING CONTRIBUTION) OF P4,,-,,,. FROM THIS CONTRIBUTION- HOW MUCH WILL HE BE ALLOWED AS DEDUCTION FROM HIS GROSS INCOME A) B) C) D) P1!-,,, 5ERO 1,-,,, 1,,-,,,

3,1. AN INDIVIDUAL TAXPAYER MADE THE FOLLOWING CONTRIBUTIONS/ TO FATIMA CATHOLIC CHURCH TO BEGGARS TO POLYTEHCNIC UNIVERSITY OF THE PHIL. TO BGY TI(APO P2,-,,, !,, 2!-,,, 1,-,,,

THE AMOUNT OF CONTRIBUTIONS DEDUCTIBLE SUB.ECT TO 1,4 LIMITATION ISA) B) C) D) P2,-,,, 3,-,,, !!-,,, !!-!,,

3,2. THE CANCER HOSPITAL OF THE PHILIPPINES IS A CHARITABLE INSTITUTION. MR. BIGLANG-AWA VISITED THE HOSPITAL ON HIS %, TH BIRTHDAY. HE DONATED P!,,-,,, TO THE HOSPITAL AND P1,-,,, TO A CANCER VICTIM WHO IS ONLT TEN(1,)YEARS. HE ALSO BROUGHT WITH HIM A CHAIN RESTAURANT MASCOT THAT PLAYED WITH THE CHILDREN PATIENTS WHILE EATING THE POPULAR PRODUCT OF THE RESTAURANT. IT HAD COST HIM P1!-,,,. WHICH OF THE ABOVE CONTRIBUTIONS IS &UALIFIED AS DEDUCTION FROM THE GROSS COMPENSATION INCOME OF BIGLANG-AWA IF HE IS A NEWLY RETIRED GOVERNMENT OFFICIAL WHO IS NOT ENGAGED IN BUSINESS A) B) C) D) ONLY THE P!,,-,,, THE P!,,-,,, AND THE P1,-,,, THE P!,,-,,,- P1,-,,, AND P1!-,,, NONE OF THEM

OPTIONAL STANDARD DEDUCTION PROBLEMS:


3,3. THE TAXPAYER HAD THE FOLLOWING DATA IN 2,,*/ GROSS RECEIPTS COST OF SERVICES DEDUCTIONS CAPITAL GAIN CAPITAL LOSS P1-4!,-,,, !%!-3,, 32!-),, 2!-!,, %-,,,

IF THE TAXPAYER IS SINGLE- WITH ONE DEPENDENT CHILD- THE TAXABLE INCOME IF HE AVAILED OF THE OPTIONAL STANDARD DEDUCTION IS-

A) B) C) D)

P)',-,,, )14-!,, 4'!-32, !,3-4,,

3,!. IN NUMBER 3,4- THE TAXABLE INCOME IF THE TAXPAYER IS A CORPORATION ISA) B) C) D) P!!,-32, )14-!,, !42-!2, ))*-!,,

ACCOUNTING METHODS PROBLEMS:


3,%. A HYBRID METHOD OF ACCOUNTING ISA)THE METHOD UNDER WHICH EXPENSES IN THE PRODUCTION OF CROPS ARE DEDUCTED IN THE YEAR IN WHICH THE GROSS INCOME FROM THE CROP HAS BEEN REALI5ED B)A METHOD UNDER WHICH THE TAXPAYER REPORTS HIS INCOME AND EXPENSES BY EMPLOYING THE COMBINATION OF CASH AND ACCRUAL METHOD C)ALSO (NOWN AS CASH RECEIPTS AND DISBURSEMENTS METHOD D)A METHOD IN WHICH THE TAXPAYER REPORTS INCOME IN THE YEAR IT IS EARNED 3,'. TAXPAYER IS RE&UIRED TO REPORT INCOME FOR THE TAX YEAR IN WHICH PAYMENTS ARE ACTUALLY OR CONSTRUCTIVELY RECEIVED WHILE EXPENSES ARE DEDUCTED IN THE YEAR PAID A) B) C) D) ACCRUAL BASIS CASH BASIS OR CASH RECEIPTS AND DISBURSEMENTS METHOD HYBRID METHOD CROP YEAR BASIS

3,). UNDER THIS METHOD OF ACCOUNTING- INCOME IS REPORTED IN THE YEAR IT IS EARNED A) B) C) D) CASH BASIS CROP YEAR BASIS CONSTRUCTIVE RECEIPT OF INCOME ACCRUAL METHOD

3,*. ESTRELLA USES ACCRUAL METHOD OF ACCOUNTING. SHE OWNS A LAND WHICH SHE LEASED TO GORDON FOR 2 YEARS AT AN ANNUAL RENTAL OF P1,,-,,,. ON .ULY 1- 2,,'- SHE RECEIVED P2,,-,,, FROM GORDON REPRESENTING THE RENTAL COVERING THE PERIOD .ULY 1- 2,,' TO .UNE 3,- 2,,*. IN 2,,'- ESTRELLA WILL REPORT AN INCOME SUB.ECT TO TAX OF + A) B) C) D) P!,-,,, 2,,-,,, 1,,-,,, 1!,-,,,

31,. BASED ON THE DATA IN NO. 3,* ABOVE- GORDON- USING CASH METHOD CAN DEDUCT AN EXPENSE OFA) B) C) D) P!,-,,, 2,,-,,, 1,,-,,, 1!,-,,,

311. ALL OF THE FOLLOWING- EXCEPT ONE- ARE CONSIDERED AS "CONSTRUCTIVE RECEIPTS# FOR INCOME TAX PURPOSES. WHICH IS THE EXCEPTION A) THE SHARE OF THE PROFITS OF THE PARTNER IN A GENERAL PROFESSIONAL PARTNERSHIP B) INTEREST CREDITED ON BAN( SAVINGS DEPOSIT C) BOND INTEREST COUPONS WHICH HAVE MATURED BUT WHICH HAVE NOT BEEN REDEEMED D) PROPERTY BORROWED BY THE TAXPAYER 312. UNDER THIS METHOD OF REPORTING INCOME- THE TAXPAYER REPORTS A PERCENTAGE OF THE GROSS INCOME FROM A LONG-TERM CONTRACT BASED ON THE PORTION OF WOR( THAT HAS BEEN COMPLETED A) B) C) D) ACCRUAL BASIS CASH BASIS PERCENTAGE OF COMPLETION METHOD HYBRID METHOD

313. GROSSS INCOME IS REPORTEDLY PARTIALLY IN EACH TAXABLE YEAR IN PROPORTION TO COLLECTIONS MADE IN SUCH PERIOD AS IT BEARS TO THE TOTAL CONTRACT PRICE REFER TO-(RPCPA)

A) B) C) D)

CROP YEAR BASIS METHOD PERCENTAGE OF COMPLETION BASIS METHOD ACCRUAL METHOD INSTALLMENT SALES METHOD

314. ALL OF THE FOLLOWING- EXCEPT ONE- ARE NOT TA(EN INTO ACCOUNT IN DETERMINING THE CORRECT AMOUNT OF INITIAL PAYMENTS A) B) C) D) COMMISSIONS OTHER SELLING EXPENSES INSTALLMENT PAYMENTS IN THE YEAR OF SALE GROSS PROFIT

31!. UNDER INSTALLMENT METHOD OF REPORTING INCOME TAX- THE AMOUNT OF TAX PAYABLE IN THE YEAR OF SALE OF A VACANT LOT IS COMPUTED BY APPLYING THE FOLLOWING FORMULA/ A) B) C) D) (DOWNPAYMENT$CONTRACT PRICE) X FINAL TAX DUE (INITIAL PAYMENT$SELLING PRICE) X FINAL TAX DUE (FINAL TAX DUE$SELLING PRICE) X COLLECTION (INITIAL PAYMENT$CONTRACT PRICE) X FINAL TAX DUE

NUMBERS 31# TO 31! ARE BASED ON THE FOLLOWING INFORMATION: ALONSO OWNS A PERSONAL CAR WHICH HE SOLD IN INSTALLMENT ON NOVEMBER 1- 2,,) AS FOLLOWS/ DATE OF AC&UISITIONAC&UISITION COSTTERMS OF PAYMENT/ DOWNPAYMENTDUE ON DUE ONDUE ONMARCH 2,- 2,,% P3,,-,,, NOVEMBER 1- 2,,) DECEMBER 1- 2,,).ANUARY 1- 2,,*FEBRUARY 1- 2,,*P!,-,,, !,-,,, 1!,-,,, 1!,-,,,

31%. THE INITIAL PAYMENT IN 2,,) ISA) B) C) D) P!,-,,, 1,,-,,, 3,,-,,, 4,,-,,,

31'. THE AMOUNT OF GAIN TO BE REPORTED IN 2,,) ISA) B) C) D) P!,-,,, 2!-,,, 3'-!,, 12-!,,

31). THE AMOUNT OF GAIN TO BE REPORTED IN 2,,* ISA) B) C) D) P!,-,,, 2!-,,, 3'-!,, 12-!,,

NUMBERS 31$ TO 323 ARE BASED ON THE FOLLOWING INFORMATION: MARLYN SOLD A VACANT LOT TO HER SISTER MICA. THE DETAILS OF WHICH ARE AS FOLLOWS/ AC&UISITION COST OF LAND- MARCH !- 2,,% CASH PAYMENTS/ DATE OF SALE- DEC. 1!- 2,,) P1,,-,,, PAYMENT- .ANUARY 1!- 2,,* 1,,-,,, MORTGAGE ASSUMED BY MICA !,,-,,, 31*. THE INITIAL PAYMENT ISA) B) C) D) P1,,-,,, 2!,-,,, 1!,-,,, 2,,-,,, P4!,-,,,

32,. THE SELLING PRICE OF THE PROPERTY ISA) B) C) D) P1!,-,,, !!,-,,, ',,-,,, 2!,-,,,

321. THE CONTRACT PRICE ISA) B) C) D) P1!,-,,, !!,-,,, ',,-,,, 2!,-,,,

322. THE FINAL TAX PAYABLE IN 2,,) ISA) B) C) D) P42-,,, 2!-2,, *-,,, NONE

323. THE FINAL TAX PAYABLE IN 2,,* ISA) B) C) D) P42-,,, 2!-2,, 1%-),, NONE

NUMBERS 324 AND 325 ARE BASED ON THE FOLLOWING INFORMATION: ABUNDA SOLD HIS WAREHOUSE BUILDING TO ABELINDE. THE PROPERTY WAS AC&UIRED BY HIM IN 2,,1 FOR P2!,-,,,. AT THE TIME OF SALE- ITS ACCUMULATED DEPRECIATION AMOUNT TO P!,-,,,. THE TERMS OF THE SALE ARE AS FOLLOWS/ CASH PAID- .UNE 1- 2,,) INSTALLMENT- SEPT 1- 2,,) INSTALLMENT- DEC 1- 2,,) INSTALLMENT- MARCH 1- 2,,* INSTALLMENT- .UNE 1- 2,,* P!,-,,, 2,-,,, 2,-,,, 1!!-,,, 1!!-,,,

324. THE INCOME TO BE REPORTED BY ABUNDA IN 2,,) ISA) B) C) D) P4!-,,, *,-,,, 2,,-,,, NONE

32!. THE INCOME TO BE REPORTED BY ABUNDA IN 2,,* ISA) B) C) D) P2,,-,,, 1!!-,,, 4!-,,, NONE

32%. .OSEPH SAN .OSE SOLD A COMMERCIAL BUILDING ON OCTOBER 1!2,,) FOR P2-,,,-,,,. THE COST OF THE PROPERTY WAS P1-2,,-,,, WHILE THE ACCUMULATED DEPRECIATION WAS P4,,-,,,. THE TERMS OF THE SALE WERE/

DOWN PAYMENT P3,,-,,, BALANCE IS PAYABLE IN MONTHLY INSTALLMENTS OF P1,,-,,, BEGINNING NOVEMBER 1!- 2,,) UNTIL FULLY PAID. THE INCOME TO BE REPORTED IN 2,,) + A) B) C) D) P'!-,,, 3,,-,,, 4!-,,, 3,-,,,

SPECIAL TOPIC-FRINGE BENEFIT TAX


32'. THE FRINGE BENEFIT TAX IS NOT IMPOSED ONI) .) () L) RAN( AND FILE EMPLOYEE SUPERVISORY EMPLOYEE MANAGERIAL EMPLOYEE ALL EMPLOYEES

32).FRINGE BENEFIT TAX IS IMPOSED ONA) B) C) D) RAN( AND FILE EMPLOYEE DE MINIMIS BENEFITS SUPERVISORY AND MANAGERIAL EMPLOYEES FRINGE BENEFITS GRANTED FOR THE CONVENIENCE OF THE EMPLOYER

32*. WHICH OF THE FOLLOWING IS SUB.ECT TO FRINGE BENEFIT TAX (RPCPA) A) COMPENSATION OF THE RAN( AND FILE EMPLOYEE B) COMPENSATION OF THE SUPERVISORY AND EMPLOYEE C) FRINGE BENEFIT OF THE RAN( AND FILE EMPLOYEE D) FRINGE BENEFIT OF THE SUPERVISORY OF EMPLOYEES MANAGERIAL MANAGERIAL

33,. THE FOLLOWING EARNINGS ARE SUB.ECT TO FRINGE BENEFIT TAXEXCEPT/-(RPCPA) A) SALARY OF RAN( AND FILE EMPLOYEE B) HOUSING NECESSARY FOR THE TRADE AND FOR THE CONVENIENCE OF THE EMPLOYER

C) FOOD ALLOWANCE FOR THE CONVENIENCE OF THE EMPLOYER AND NECESSARY IN THE CONDUCT OF THE BUSINESS D) ALL OF THE ABOVE ITEMS 331 AND 332 ARE BASED ON THE FOLLOWING INFORMATION: 331. DITSO IS EMPLOYED BY HOLY CROSS HOSPITAL AS AN AMBULANCE DRIVER WITH A SALARY OF P4-,,, A MONTH. IN ADDITION- HE IS GIVEN MEALS WITH A MONTHLY VALUE OF P1-!,, AND LIVING &UARTERS WITHIN THE HOSPITAL COMPOUND WITH AN E&UIVALENT VALUE OF P1-,,, A MONTH THE MONTHLY COMPENSATION INCOME OF DITSO ISA) B) C) D) P%-!,, 4-,,, !-,,, !-!,,

332. IF THE BENEFITS GIVEN TO DITSO IN NUMBER 331 ABOVE IS FURNISHED BY HIS EMPLOYER SO THAT HIS SERVICES COULD EASILY BE AVAILED OF WHENEVER SOME PATIENTS WILL NEED THE URGENT SERVICES OF AN AMBULANCE- HIS MONTHLY COMOENSATION INCOME ISA) B) C) D) P%-!,, 4-,,, !-,,, !-!,,

333. THE FOLLOWING STATEMENTS ARE TRUE- EXCEPT/-(RPCPA) A) FRINGE BENEFIT TAX SHALL BE TREATED AS A FINAL INCOME TAX ON THE EMPLOYEE WITHHELD AND PAID BY THE EMPLOYER ON A &UATERLY BASIS B) THE GROSSED-UP MONETARYVALUE OF THE FRINGE BENEFIT IS THE ACTUAL AMOUNT RECEIVED BY THE EMPLOYEE C) THE GROSSED-UP MONETARY VALUE OF THE FRINGE BENEFIT SHALL BE DETERMINED BY DIVIDING THE MONETARY VALUE OF THE FRINGE BENEFIT BY THE GROSS MONETARY VALUE FACTOR D) THE PERSON LIABLE FOR FRINGE BENEFIT TAX IS THE EMPLOYERWHETHER HE IS INDIVIDUAL- PROFESSIONAL PARTNERSHIP OR A CORPORATION REGARDLESS OF WHETHER THE CORPORATION IS TAXABLE OR NOT OR THE GOVERNMENT AND ITS INSTRUMENTALITIES

334. STATEMENT 1/ A FRINGE BENEFIT THAT IS EXEMPT FROM BENEFIT TAX IS LI(EWISE EXEMPT FROM ANY OTHER FORM OF INCOME TAX STATEMENT 2/ ANY AMOUNT GIVEN BY THE EMPLOYER AS DEMINIMIS BENEFITS TO ITS EMPLOYEES- SHALL NOT CONSTITUTE AS DEDUCTION UPON SUCH EMPLOYER A) B) C) D) STATEMENT 2 STATEMENT 1 STATEMENTS 1 AND 2 NEITHER STATEMENTS

33!.SARAH BU(AS- MARRIED WITH THREE(3) &UALIFIED DEPENDENT CHILDREN- A REGULAR EMPLOYEE OF CONFEDERATE- INC.- RECEIVES ON .ULY %- 2,,* P3,-,,, AS REGULAR MONTHLY SALARY AND HALF OF HIS 13 TH MONTH PAY AMOUNTING TO P1!-,,, PLUS OTHER BENEFITS SUCH AS RICE ALLOWANCE FOR .ULY OF P2-,,,- INCENTIVE PAY OF P2,-,,,- HA5ARD PAY OF P1-,,,- OVETRTIME PAY OF P4-,,, AND NIGHT SHIFT DIFFERENTIAL OF P2-,,,. COMPUTE THE INCOME SUB.ECT TO WITHHOLDING TAX IN .ULY A) B) C) D) P!'-,,, 3,-,,, 4!-!,, '2-!,,

33%. MAYAMAN COMPANY OWNS A FLEET OF MOTOR VEHICLES. IN 2,,)ONE OF THE CARS WHICH WAS AC&UIRED AT A COST OF P4,,-,,, WAS ALLOWED AS SERVICE VEHICLE BY ONE OF ITS OFFICIALS. DURING THE YEAR- ITS BOO( VALUE AMOUNTED TO P3'!-,,,. HOW MUCH WAS THE FRINGE BENEFIT TAX DUE THEREON A) B) C) D) P*%-*%* 1)-)23 1'-'%' ))-23!

33'. BASED ON THE DATA IN NUMBER 33% ABOVE- SUPPOSE MAYAMAN COMPANY IS .UST LEASING THE CAR THAT IS BEING USED PARTLY FOR PERSONAL AND FOR BUSINESS PURPOSES AND IS PAYINH AN ANNUAL RENTAL OF P1,,-,,,. THE ANNUAL FRINGE BENEFIT TAX ISA) P2)-22* B) 23-!2* C) '3-!2*

D) 2!-'%, 33). IN MAY 2,,)- A NON-STOC(- NON-PROFIT UNIVERSITY PROVIDED A 3DAY VACATION TRIP TO BORACAY ISLAND TO THE UNIVERSITY0S EVP. THE TOTAL EXPENSES INCURRED BY THE SCHOOL WAS P2,-,,,. THE FRINGE BENEFIT TAX ISA) B) C) D) P%-4,, *-412 1,-3,3 NONE

ITEMS 33$ AND 34" ARE BASED ON THE FOLLOWING DATA: 33*. XY5 CORPORATION ASSIGNED MR. PASSO ONE OF THE EMPLOYEES IN THE HEAD OFFICE IN MANILA TO MANAGE THEIR BRANCH OFFICE IN DAGUPAN. THE COMPANY PROVIDED FOR THE RESIDENTIAL HOUSE OF THE MANAGER PAYING A MONTHLY RENTAL OF P34-,,,. THE MONTHLY FRINGE BENEFIT TAX THEREON ISA) P1%-,,, B) 1,-)), C) 2!-,,, D) )-,,, 34,. BASED ON THE SAME DATA IN NO. 33* ABOVE- THE DEDUCTIBLE EXPENSE FROM THE GROSS INCOME OF XY5 CORPORATION ISA) B) C) D) P)-,,, 2!-,,, 42-,,, 34-,,,

NUMBERS 341 AND 342 ARE BASED ON THE FOLLOWING INFORMATION: 341. EXTRA CORPORATION FURNISHED AND GRANTED THE USE OF ITS CONDOMINIUM UNIT TO ITS EVP. THE FAIR MAR(ET VALUE OF THE PROPERTY IS P4-),,-,,, WHILE THE AC&UISITION COST IS P3-,,,-,,,. THE MONTHLY FRINGE BENEFIT TAX DUE ISA) P2-*41.1) B) 4-',!.)) C) ))-23!

D) !)-)23.!3 342. BASED ON NUMBER 341 ABOVE- THE DEDUCTIBLE EXPENSE FROM THE GROSS INCOME OF EXTRA COPORATION ISA) B) C) D) P14-',!.)) 4-',!.)) 12-132.3! 2-*41.1)

343. BRAVO COMPANY PROVIDED FRINGE BENEFIT TO ITS MANAGERIAL EMPLOYEES IN THE AMOUNT OF P13%-,,, AND TO ITS RAN( AND FILE EMPLOYEES AMOUNTING TO P!,-,,,. THE DEDUCTIBLE EXPENSE BY BRAVO COMPANY ISA) B) C) D) P1)%-,,, 13%-,,, !,-,,, 2!,-,,,

344. THE CORPORATION GAVE A BRAND NEW CAR TO ITS SALES MANAGER. THE FRINGE BENEFIT GIVEN ISA) SUB.ECT TO FRINGE BENEFIT TAX BASED ON THE PROVISIONS OF THE TAX CODE B) SUB.ECT TO FRINGE BENEFIT TAX BECAUSE IT WAS GIVEN TO A RAN(-AND-FILE EMPLOYEE C) EXEMPT FROM THE FRINGE BENEFIT TAX BECAUSE IT IS RE&UIRED BY THE NATURE OF OR NECESSARY TO THE TRADE OR BUSINESS OF THE EMPLOYER D) EXEMPT FROM THE FRINGE BENEFIT TAX BECAUSE IT WAS GIVEN FOR THE CONVENIENCE OF THE EMPLOYER 34!. FRANCINE CORPORATION GAVE THE FOLLOWING FRINGE BENEFITS TO ITS EMPLOYEES/ TO SUPERVISORY EMPLOYEES TO MANAGERIAL EMPLOYEES TO RAN(-AND-FILE EMPLOYEES P22,-,,, 12,-,,, %,-,,,

THE ENTRY TO RECORD THE ABOVE TRANSACTION ISA) FRINGE BENEFITS TAX FRINGE BENEFIT EXPENSE CASH FRINGE BENEFIT TAX PAYABLE !%-4'1 4,,-,,, 4,,-,,, !%-4'1

B) FRINGE BENEFIT TAX FRINGE BENEFIT TAX PAYABLE

4,,-,,, 4,,-,,,

C) FRINGE BENEFITS TAX !%,-,,, FRINGE BENEFIT TAX PAYABLE !%,-,,, D) FRINGE BENEFIT TAX EXPENSE 1%,-,,, FRINGE BENEFIT EXPENSE 4,,-,,, CASH 4,,-,,, FRINGE BENEFIT TAX PAYABLE 1%,-,,, 34%. IVY CORPORATION HAS THE FOLLOWING .OURNAL ENTRY ON FRINGE BENEFITS/ FRINGE BENEFITS EXPENSE P1)%-,,, FRINGE BENEFIT TAX EXPENSE %4-,,, CASH FRINGE BENEFIT TAX PAYABLE

1)%-,,, %4-,,,

BASED ON THE ABOVE ACCOUNTING ENTRY- THE AMOUNT OF FRINGE BENEFIT GIVEN TO RAN( AND FILE EMPLOYEESA) B) C) D) P%4-,,, !,-,,, 1)%-,,, 2!,-,,,

34'. ADRIAN- A SUPERVISORY EMPLOYEE OF BOGBOG CORPORATION BORROWED P!,-,,, FROM THE COMPANY PAYABLE IN FOUR MONTHS THRU SALARY DEDUCTION. IF THE CORPORATION IS CHARGING 44 INTEREST PER ANNUM ON THE LOAN- THE FRINGE BENEFIT TAX EXPENSE ISA) P2-,,, B) %%%.%' C) %2'.4! D) 313.'3

CHAPTER 2-TAX ADMINISTRATION- TAX RETURNSFILING AND PAYMENT


34). WHICH OF THE FOLLOWING STATEMENTS IS FALSE A) INDIVIDUAL TAXPAYERS SHALL FILE THEIR INCOME TAX RETURNS ON OR BEFORE APRIL 1! OF EACH YEAR

B) EXTENSION OF TIME FOR FILING INCOME TAX RETURNS MAY BE GRANTED BY THE COMMISSIONER OF INTERNAL REVENUE(CIR) C) SECOND INSTALLMENT IN THE PAYMENT OF INCOME TAX MUST BE PAID ON OR BEFORE .ULY 1! OF THE SAME YEAR D) IN PLACES WHERE THERE ARE NO ACCREDITED BAN(S- THE RETURN CAN BE FILED WITH THE MUNICIPAL TREASURER WHERE THE PLACE OF BUSINESS IS LOCATED 34*. THE INCOME TAX RETURN MUST BE FILED IN-(RPCPA) A) B) C) D) DUPLICATE TRIPLICATE &UADRUPLICATE &UINTUPLICATE

3!,. ONE OF THE FOLLOWING IS NOT AN ATTACHMENT TO THE INCOME TAX RETURN OF A COMPANY WHOSE GROSS &UARTERLY SALES IS P1-!,,-,,,. A) B) C) D) CERTIFIED BALANCE SHEETS PROFIT AND LOSS STATEMENTS SCHEDULE OF INCOME PRODUCING PROPERTIES SUMMARY OF TAXES PAID DURING THE TAXABLE YEAR

3!1. THE INCOME SUB.ECT TO THIS WITHHOLDING TAX IS NOT INCLUDIBLE IN THE COMPUTATION OF TAXABLE INCOMEA) B) C) D) WITHHOLDING TAX ON COMPENSATIONN INCOME CREDITABLE WITHHOLDING TAX FINAL WTHHOLDING TAX ALL OF THE ABOVE

3!2. WHICH OF THE FOLLOWING INDIVIDUAL TAXPAYERS IS NOT RE&UIRED TO FILE AN INCOME TAX RETURN A) A CITI5EN RECEIVING COMPENSATION AND BUSINESS INCOME B) AN EMPLOYEE WHOSE SALARY GRADE IN THE GOVERNMENT IS 2 C) AN EMPLOYEE RECEIVING PURELY COMPENSATION INCOME FROM TWO EMPLOYERS D) AN INDIVIDUAL RECEIVING PURELY COMPENSATION INCOME FROM ONE EMPLOYER- THE INCOME TAX OF WHICH HAS BEEN WITHHELD CORRECTLY- BUT WHOSE SPOUSE IS RE&UIRED TO FILE AN INCOME TAX RETURN 3!3. ONE OF THE FOLLOWING INDIVIDUALS IS NOT SUB.ECT TO WITHHOLDING TAX ON COMPENSATION

A) AN INDIVIDUAL WHO DERIVES COMPENSATION FROM TWO OR MORE EMPLOYERS AT ANY TIME DURING THE TAXABLE YEAR B) AN INDIVIDUAL WHO HAS COMPENSATION AND BUSINESS INCOME C) AN INDIVIDUAL WHOSE GROSS INCOME IN A YEAR IS MORE THAN P22,-,,, D) AN INDIVIDUAL WHOSE MONTHLY GROSS COMPENSATION INCOME IS P)-,,, 3!4. THE SIGNATURE OF THE FOLLOWING PERSONS MUST APPEAR IN THE INCOME TAX RETURN OF A CORPORATION- EXCEPT/-(RPCPA) A) B) C) D) PRESIDENT GENERAL MANAGER TREASURER INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

3!!. THE BOO(S OF ACCOUNTS OR RECORDS OF THE TAXPAYER MUST NOT BE (EPT IN THE FOLLOWING LANGUAGEA) B) C) D) FILIPINO CHINESE ENGLISH SPANISH

3!%. ONE OF THE FOLLOWING IS RE&UIRED TO ISSUE RECEIPTS A) THOSE WHOSE SALES ARE VALUED AT P2! OR MORE B) MAR(ET VENDORS SELLING ECLIUSIVELY VEGETABLES- DOMESTIC MEAT- FRUITS AND OTHER FOOD PRODUCTS C) WHEN THE VALUE OF THE MERCHANDISE SOLD IS P! D) VENDORS GIVEN EXEMPTION BY THE COMMISSIONER OF INTERNAL REVENUE 3!'. STATEMENT 1/ WHERE DONOR0 S TAX HAS BEEN PAID ON PROPERTY RECEIVED BY A MINOR FROM A LIVING PARENT- INCOME ON SUCH PROPERTY SHALL BE INCLUDED IN THE INCOME TAX RETURN OF THE PARENT STATEMENT 2/ THE INCOME TAX RETURN OF A DISABLE PERSON MAY BE MADE BY A PERSON CHARGED WITH THE CARE OF HIS PROPERTY STATEMENT 1 A) TRUE B) FALSE C) FALSE STATEMENT 2 TRUE FALSE TRUE

D) TRUE

FALSE

3!). HOW LONG MUST THE BOO(S OF ACCOUNT BE (EPT A) UNTIL THE DEADLINE FOR FILING INCOME TAX RETURN B) FROM THE CURRENT TO THE LAST DAY OF THE NEXT TAXABLE YEAR C) FOR A PERIOD BEGINNING FROM THE LAST ENTRY IN EACH BOO( UNTIL THREE YEARS D) FOR A PERIOD BEGINNING FROM THE LAST ENTRY IN EACH BOO( UNTIL THE LAST DAY PRESCRIBED WITHIN WHICH THE COMMISSIONER IS AUTHORI5ED TO MA(E AN ASSESSMENT 3!*. BEAUTY CORPORATION HAD A NET INCOME PER BOO(S ON DECEMBER 31- 2,,) OF P22,-,,,. INCLUDED IN THE NET INCOME ARE THE FOLLOWING ITEMS/ -DIVIDEND INCOME FROM A DOMESTIC CORPORATION- P!,-,,, -INTEREST ON BAN( DEPOSIT (NET OF TAX)- P!-,,, AND -PROVISION FOR BAD DEBTS- P3!-,,, THE TAXABLE INCOME OF THE CORPORATION FOR THE YEAR ENDED DECEMBER 31- 2,,)A) B) C) D) P13,-,,, 2,,-,,, 22,-,,, 1%!-,,,

3%,. THE FOLLLOWING 2,,* DATA PERTAINS TO ANALYN COMPANY- A DOMESTIC CORPORATION/ NET SALES COST OF GOODS SOLD GROSS PROFIT SUNDRY INCOME GROSS INCOME OPERATING EXPENSES AND OTHER CHARGES NET INCOME PER BOO(S ADDITIONAL INFORMATION/ 1.INCLUDED IN THE SUNDRY INCOME ARE THE FOLLOWING/ -DIVIDENDS FROM DOMESTIC CORPORATION -DIVIDENDS RECEIVED FROM RESIDENT FOREIGN CORP -PROCEEDS FROM SALE OF COMPANY ASSETS P42-!,, 1!-,,, 4-'!, P1-)!,-,,, 1-,2!-,,, )2!-,,, ',-2!, )*!-2!, 2%,-,,, %3!-2!,

2.INCLUDED UNDER OPERATING AND OTHER CHARGES/ -DONATION TO TYPHOOIN VICTIMS -PROVISION FOR DOUBTFUL ACCOUNTS -LOCAL TAXES AND LICENSES -PREMIUMS PAID ON INSURANCE OF BUILDINGS

P12-,,, 1'-!,, )-%2, 4-!,,

3.THE COMPANY WROTE OFF IN 2,,) AGAINST ALLOWANCE FOR BAD DEBTS UNCOLLECTIBLE RECEIVABLES AMOUNTING TO P1!-,,, WHICH WAS ALLOWED AS DEDUCTION FROM GROSS INCOME. THIS AMOUNT WAS RECOVERED IN 2,,*. 4. IN OCTOBER 2,,)- ONE OF THE COMNPANY0S BUILDINGS WAS TOTALLLY DESTROYED BY FIRE WHEN THE BOO(.VALUE WAS P2%,-,,,. THE LIABILITY OF THE INSURANCE COMPANY WAS SETTLED IN 2,,* AND ANALY5E COMPANY WAS PAID P1!,-,,,. THE INCOME TAX PAYABLE IN 2,,* BY ANALYN CORPORATION ISA) B) C) D) P1!)-32, 1)4-!3'.!, 3!-'%3.!, 1!)-1'!

3%1. THE INCOME TAX RETURN(ITR) OF .ANET- SINGLE- FOR TAXABLE YEAR 2,,*- REPORTED A TAXABLE INCOME OF P!2,-24,. A CAREFUL SCRUTINY REVEALED THAT SOME ITEMS INCLUDED AS INCOME AND EXPENSES ARE THE FOLLOWING/ INCOME/ COMPENSATION INCOME CASH DIVIDEND STOC( DIVIDENDS PROPERTY DIVIDENDS GAMBLING WINNINGS DONATION RECEIVED GAIN ON SALE OF CAPITAL ASSETS-1! MONTHS GAIN ON SALE OF HIS VACANT LOT INCOME ON RICE LAND TOTAL EXPENSES/ REAL ESTATE TAX COMMUNITY TAX SURCHARGE FOR LATE FILING OF 2,,) ITR P3-!,, *4! 12-,,, P1),-,,, 122-),, '3-!,, 2'-,,, 23-1,, 1%-,,, )-,,, 12,-,,, %,-,,, %3,-4,,

INTEREST ON PERSONAL LOAN GAMBLING LOSSES PERSONAL AND LIVING EXPENSES LOSS ON SALE OF CAPITAL ASSETS-).! MONTHS LOSS ON CROPS DUE TO FLOOD TOTAL

24-,,, 32-,,, !,-,,, !-,,, 2'-2!, 1!4-%*!

THE CORRECT AMOUNT OF .ANET0S TAXABLE INCOME ISA) B) C) D) P24%-*4, 23%-)4, %%-,4, 2!%-)4,

TRUE OR FALSE )UESTIONS


1.THE BASIC PERSONAL EXEMPTION IS P!,-,,, REGARDLESS OF WHETHER THE INDIVIDUAL TAXPAYER IS SINGLE- MARRIED OR HEAD OF THE FAMILY. 2.A BENEFACTOR OF A SENIOR CITI5EN CAN CLAIM A BASIC PERSONAL EXEMPTION OF P2!-,,,. 3.CORPORATIONS ARE ALLOWED TO CLAIM OPTIONAL STANDARD DEDUCTION. 4.THE OPTIONAL STANDARD DEDUCTION ON INDIVIDUAL IS 4,4 OF GROSS INCOME. !. THE MINIMUM CORPORATE INCOME TAX (MCIT) IS 24 OF GROSS INCOME ON SALES. %. A SALE OF SHARES WHICH ARE LISTED AND TRADED THROUGH THE LOCAL STOC( EXCHANGE IS SUB.ECT TO INCOME TAX. '. IN COMPUTING THE CAPITAL GAINS OR LOSSES ON A SALE OF SHARES OF STOC( WHICH WERE AC&UIRED THROUGH PURCHASE- THE COST BASIS SHALL BE THE ACTUAL PURCHASE PRICE PLUS ALL COSTS OF AC&UISITION SUCH AS COMMISSIONS- DOCUMENTARY STAMP TAXESTRANSFER TAXES- ETC. ). THE WASH SALE PROHIBITION DOES NOT APPLY IN THE CASE OF A DEALER IN STOC( IF THE SALE OR OTHER DISPOSITION OF STOC( IS MADE IN THE ORDINARY COURSE OF THE BUSINESS OF SUCH DEALER.

*. PERSONS DERIVING CAPITAL GAINS FROM THE SALE OR EXCHANGE OF LISTED SHARES OF STOC( NOT TRADED THROUGH THE LOCAL STOC( EXCHANGE SHALL FILE A RETURN WITHIN 3, DAYS AFTER EACH TRANSACTION 1,. THE CEILING OF DE MINIMIS BENEFITS ON RICE ALLOWANCE IS ONE SAC( OF !, (ILOGRAMS RICE OR CASH OF P1-2,, PER MONTH. 11. AN EMPLOYEE IN THE PUBLIC SECTOR RECEIVING COMPENSATION INCOME E&UIVALENT TO SALARY GRADE ! AND BELOW ARE EXEMPT FROM WITHHOLDING TAX ON WAGES. 12. MINIMUM WAGE EARNERS ARE NOT RE&UIRED TO FILE AN INCOME TAX RETURN. 13. HOLIDAY PAY- OVERTIME PAY- NIGHT SHIFT DIFFERENTIAL PAY AND HA5ARD PAY RECEIVED BY AN EMPLOYEE WHO IS RECEIVING A MONTHLY BASIC PAY OF P2,-,,, ARE EXEMPT FROM INCOME TAX. 14. THE COST OF CONSTRUCTION OF ADDITIONAL FACILITIES MAY BE CAPITALI5ED OR DEDUCTED AS AN EXPENSE BY A PROPRIETARY EDUCATIONAL INSTITUTION- AT THE OPTION OF THE BIR. 1!. FOR PURPOSES OF HEALTH AND$OR HOSPITALI5ATION INSURANCETHE TERM "TOTAL FAMILY INCOME# INCLUDES PRIMARY INCOME AND OTHER INCOME FROM SOURCES RECEIVED ALL MEMBERS OF THE NUCLEAR FAMILY- I.E. FATHER- MOTHER- UNMARRIED CHILDREN LIVING TOGETHER AS ONE HOUSEHOLD OR A SINGLE PARENT WITH CHILDREN. A SINGLE PERSON LIVING ALONE IS CONSIDERED AS A NUCLEAR FAMILY. 1%. OTHER BENEFITS SUCH AS 13TH MONTH PAY AND PRODUCTIVITY INCENTIVE PAY ARE NOT INCLUDED IN THE COMPUTATION OF MINIMUM WAGE. 1'. FRINGE BENEFITS RECEIVED BY MANAGERIAL EMPLOYEES ARE NOT SUB.ECT TO INCOME TAX BUT THEY ARE SUB.ECT TO FRINGE BENEFIT TAX. 1). THERE IS AN INCOME TAX ON A SALE OF A VACANT LOT (CAPITAL ASSET) EVEN IF THERE IS A LOSS ON THE SALE OF THE PROPERTY. 1*. AS A RULE- STOC( DIVIDENDS ARE SUB.ECT TO INCOME TAX. 2,. EXPENSES FOR THE ORGANI5ATION OF CORPORATION SUCH AS INCORPORATION FEES- ATTORNEY0S FEES- AND ACCOUNTANT0S FEES ARE DEDUCTIBLE FROM GROSS INCOME.

21. COMPENSATION INCOME EARNERS ARE ALLOWED TO USE FISCAL YEAR AS ACCOUNTING PERIOD. 22. VALUE-ADDED TAX IS DEDUCTIBLE FROM GROSS INCOME. 23. DEFERRED PAYMENT METHOD OF REPORTING INCOME IN INSTALLMENT IS AVAILABLE TO A TAXPAYER IF THE INITIAL PAYMENTS DO NOT EXCEED 2!4 OF THE SELLING PRICE. 24. PROCEEDS OF LIFE INSURANCE ARE EXEMPT FROM INCOME TAX IF THE DESIGNATED BENEFICIARY IS IRREVOCABLE. 2!. TAX SPARING CREDIT APPLIES ONLY TO RESIDENT FOREIGN CORPORATIONS.