NFJPIA NCR: Frontliners

Answer Section

MULTIPLE CHOICE

1. ANS: C TOP: Income Tax Individuals

2. ANS: B TOP: Income Tax Corporation
3. ANS: D TOP: Income Tax Corporation
4. ANS: C TOP: Income Tax Individuals
5. ANS: A TOP: Income Tax Individuals
6. ANS: B TOP: Income Tax Corporation
7. ANS: B TOP: Income Tax Individuals
8. ANS: D TOP: Income Tax Corporation
9. ANS: A TOP: Income Tax on Capital Assets, Sales or Exchange of Properties
10. ANS: A
SOL:
Any amount received by the insured as a return of premiums paid by her under life insurance, at maturity of
the term mentioned in the contract, are excluded from gross income.

TOP: Income Tax Individuals

11. ANS: B
SOL:
Total proceeds received 500,000
Less: Premiums paid 400,000
Taxable amount 100,000

Not all of the P500,000 is subject to tax. The amount of P400,000 is excluded from gross income, hence not
subject to tax because it is the amount received by Michael, as a return of the premiums paid by her under a
life insurance contract at the maturity of the term mentioned in the contract. The premiums returned are not
income but return of capital. They represent earnings which were previously taxed.

On the other hand, the amount of P100,000 is subject to tax because it represents income being interest or
earnings of the premium and not return of capital.

TOP: Income Tax Individuals

12. ANS: B
SOL:
The amount of P30,400 is excluded from gross income, hence not subject to tax because it is the amount
received by Paul, as a return of the premiums paid by him under a life insurance contract at the maturity of the
term mentioned in the contract. The premiums returned are not income but return of capital. They represent
earnings which were previously taxed.

On the other hand, the amount of P750,000 is subject to tax because it represents income being interest or
earnings of the premium and not return of capital.
 TOP: Income Tax Individuals
13. ANS: D
SOL:
Total insurance proceeds 500,000
Less: Total premiums paid 490,000
Income from insurance 10,000
Plus: Reimbursement of premiums 40,000
Total income on the policy 50,000

The P40,000 reimbursement of premiums paid would be considered as a reduction of the total premiums paid.
Thus, only the amount of P450,000 is considered the exclusion from gross income as return of premiums.

TOP: Income Tax Individuals

14. ANS: A
SOL:
The P100,000 represents a return of premiums paid by Adrian which is not income but return of capital. They
represent earnings which were previously taxed.

TOP: Income Tax Individuals

15. ANS: E
SOL:
All of the recovered amounts are not income because they are merely compensation for actual losses suffered.
They do not constitute taxable gain as they were not received as payment for services, interest or profit from
investment.

TOP: Income Tax Individuals

16. ANS: A
SOL:
Exclusive Conjugal
Family lot 500,000 -
Family house - 900,000
Mango orchard - 800,000
Bank deposit 2,150,000 -
Several pieces of jewelry 300,000 -
Claims against an insolvent debtor - 80,000
Total 2,950,000 1,780,000

TOP: Estate Tax

17. ANS: B
SOL:
Exclusive Conjugal
Funeral expenses
Actual (60% x 100,000) 60,000
Limit (5% x 3,780,000) 189,000 60,000
Judicial expenses (120,000 - 50,000) 70,000
Loss on jewelry through theft 50,000
 Gambling debts 70,000
Claims against an insolvent debtor - 60,000
Total 120,000 190,000
Total ordinary deductions 310,000

TOP: Estate Tax

18. ANS: B
SOL:
Exclusive Conjugal
Family lot 500,000 -
Family house - 900,000
Mango orchard - 800,000
Bank deposit 2,150,000 -
Several pieces of jewelry 300,000 -
Claims against an insolvent debtor - 80,000
Total 2,950,000 1,780,000

Family lot 500,000

Family home (1/2 x 900,000) 450,000
Total 950,000
Maximum 1,000,000
Allowed 950,000

Exclusive Conjugal
Funeral expenses
Actual (60% x 100,000) 60,000
Limit (5% x 3,780,000) 189,000 60,000
Judicial expenses (120,000 - 50,000) 70,000
Loss on jewelry through theft 50,000
Gambling debts 70,000
Claims against an insolvent debtor - 60,000
Total 120,000 190,000
Total ordinary deductions 310,000

Exclusive Conjugal Total

Gross estate 2,950,000 1,780,000 4,730,000
Less: Ordinary deductions 120,000 190,000 310,000
Net estate before share of SSS 2,830,000 1,590,000 4,420,000
Less: Share of surviving spouse - 795,000 795,000
Net estate before special deductions 2,830,000 795,000 3,625,000
Less: Special deductions
Family home (950,000)
Standard deduction (1,000,000)
Medical expenses (maximum) (500,000)
Taxable net estate 1,175,000

TOP: Estate Tax

19. ANS: D
SOL:
Gross receipts 500,000
Less: Rent expense (19,000/95%) 20,000
Salaries expense 100,000 120,000
Net income before exemption 380,000
Less: Basic personal exemption 50,000
Additional exemption 50,000
Taxable net income 280,000

TOP: Income Tax Individuals

20. ANS: C
SOL:
Salaries of personnel directly involved in the supply of services 300,000
Depreciation expense of equipment used in the supply of services
(300,000/5 years) 60,000
Fees of consultants directly involved in the supply of services 50,000
Rental of equipment directly used in the supply of services 70,000
Total 480,000

TOP: Income Tax Corporation

21. ANS: A
SOL:
Salaries of office personnel other than senior citizens 150,000
Salaries of senior citizens 100,000
Special allowable deduction on salaries of senior citizens
(15% x 100,000) 15,000
Depreciation expense, office equipment (250,000/5 years) 50,000
Assistance to a state university 100,000
Special allowable deduction on assistance to state
university (50% x 100,000) 50,000
Other operating expenses 120,000
Total 585,000

TOP: Income Tax Corporation

22. ANS: C
SOL:
Gross receipts 1,000,000
Less: Discounts 100,000
Returns and allowances 150,000 250,000
Net receipts 750,000
Less: Cost of services 480,000
Gross income 270,000
Less: Optional Standard Deduction (40% x 270,000) 108,000
Taxable net income 162,000
RCIT (30% x 162,000) 48,600
MCIT (2% x 270,000) 5,400
 Tax due (higher) 48,600

TOP: Income Tax Corporation

23. ANS: B
SOL:
Gross sales 2,000,000
Less: Sales discount 500,000
Net sales 1,500,000
Tax rate 12%
Output tax 180,000
Less: Input taxes
On purchases (400,000 x 12%) 48,000
On expenses (40% x 100,000 x 12%) 4,800 52,800
VAT due 127,200
Less: VAT paid first two months of the quarter 60,000
VAT payable 67,200

TOP: VAT
24. ANS: C
SOL:
Interest income from Peso bank deposit = 10,000 x 20% = 2,000

TOP: VAT
25. ANS: A
SOL:
Gross sales 2,000,000
Less: Sales discount (500,000 - 100,000) 400,000
Net sales 1,600,000
Less: Cost of sales
Beginning inventory 100,000
Add: Purchases 400,000
Goods available for sale 500,000
Less: Ending inventory 300,000 200,000
Gross income 1,400,000
Other income
Short tem capital gain 40,000
Long term capital loss (12,500) 27,500
Total gross income 1,427,500
Less: Operating expenses (100,000 + 200,000
100,000)
Taxable income, this quarter 1,227,500

TOP: VAT
26. ANS: A
SOL:
Personal properties (2,000,000 - 500,000 + 50,000) 1,550,000
Real properties 2,000,000
 Gross estate 3,550,000

Funeral expenses
Actual (200,000)
Limit (5% x 3,550,000) = 177,500 177,500
Claims against an insolvent person 50,000
Transfer mortis causa to Manila 20,000
Other deductions (900,000 - 200,000 - 50,000 - 600,000) 50,000
Total 297,500

Family home deduction (maximum) 1,000,000

Standard deduction 1,000,000
Medical expenses (maximum) 500,000
Total 2,500,000

Gross estate 3,550,000

Less: Ordinary deductions 297,500
Net estate before special deductions 3,252,500
Less: Special deductions 2,500,000
Taxable net estate 752,500

TOP: Estate Tax

27. ANS: D
SOL:
Memorial plan 50,000
Additional funeral expenses (500,000 - 400,000) 100,000
Total actual funeral expenses 150,000
Limit (5% x P10,050,000) 502,000
Allowed (lower) 150,000

Gross estate before memorial plan 10,000,000

Memorial plan 50,000
Total gross estate 10,050,000

TOP: Estate Tax

28. ANS: B
SOL:
Gross gift 500,000
Less: Deduction 150,000
Net gift 350,000
Tax due: 200,000 2,000
150,0000 x 4% 6,000 8,000

TOP: Donors Tax

29. ANS: B
SOL:
 Gross sales 5,000,000
Less: Sales return and allowances 100,000
Net sales 4,900,000

Net sales 4,900,000

Tax rate 12%
Output tax 588,000

TOP: VAT
30. ANS: C
SOL:
Gross sales 5,000,000
Less: Sales return and allowances 100,000
Net sales 4,900,000

Net sales 4,900,000

Tax rate 12%
Output tax 588,000

Passed-on VAT on office equipment (1,100,000 x 12 = 132,0000/60 x 3) 6,600

Passed on VAT, goods for sale (300,000 x 12%) 36,000
Passed-on VAT on operating expenses (500,000 x 40% = 200,000 x 12%) 24,000
Passed-on VAT on office supplies (90,000 x 12%) 10,800
Total 77,400

TOP: VAT
31. ANS: B
SOL:
Gross receipts from transport of passengers from Manila to Albay 1,000,000
Gross receipts from transport of goods from Manila to Cebu 1,500,000
Gross receipts 2,500,000
Tax rate 12%
VAT 300,000

TOP: VAT
32. ANS: B
SOL:
Gross receipts from transport of passengers from Manila to Albay 1,000,000
Tax rate 3%
VAT 30,000

TOP: Percentage and Other Taxes

33. ANS: B
SOL:
If VAT-registered If not VAT-registered
Gross receipts 10,000,000 10,000,000
 Tax rate 12% 3%
Output tax/franchise tax 1,200,000 300,000
Less: Input tax (5,000,000 x 12%) 600,000
VAT payable 600,000

TOP: Percentage and Other Taxes

34. ANS: D
SOL:
Gross selling price (100,000 shares x P12) 1,200,000
Tax rate 4%
Stock transactions tax 48,000
Ratio = 100,000 shares/1,000,000 shares 10%

TOP: Percentage and Other Taxes

35. ANS: B
SOL:
Gross income, Philippine sources, August 1 to December 31 300,000
Gross income, foreign sources, in (Philippine pesos), August 1 to December 31 400,000
Total 700,000

TOP: Income Tax Individuals

36. ANS: C
SOL:
Bella, wife’s aunt, senior citizen who is a PWD 25,000
Edgar, foster child, 12 years old 25,000
Total additional exemptions 50,000

TOP: Income Tax Individuals

37. ANS: D
SOL:
Gross compensation income 230,000
Less: Basic personal exemption 50,000
Additional exemption 50,000 100,000
Taxable compensation income 130,000

TOP: Income Tax Individuals

38. ANS: B
SOL:
Selling price 120,000
Less: cost 30,000
Ordinary gain 90,000
Gain to be recognized (90,000/120,000 x 40,000) 30,000

Income can be reported in installment because it involves a sale by a dealer of a personal property.

TOP: Income tax individuals

39. ANS: D
SOL:
Grossed up monetary value (5% x 2,500,000 =125,000 x
50%=62,500/68% 91,912
Tax rate 32%
Fringe benefits tax 29,412
Monthly fringe benefits tax (29,412/12) 2,451

TOP: Fringe benefits

40. ANS: B
SOL:
Gross income (Philippines and USA) 5,000,000
Other income: Gain from sale of vacant lot for rent 500,000
Total 5,500,000
Less: Business expenses (Philippines and USA) (800,000)
Total personal exemptions (50,000 + 50,000) (100,000)
Taxable net income 4,600,000

TOP: Income tax individuals

41. ANS: A
SOL:
Gross receipts 1,000,000
Discounts (100,000)
Returns and allowances (150,000)
Net receipts 750,000
Cost of services
Salaries of personnel (300,000)
Consultant fees (50,000)
Rental equipment (70,000)
Gross income 330,000
Less: Operating expenses (250,000 + 50,000 + 120,000) 420,000
Net operating loss (90,000)
RCIT (30% x 198,000) -
MCIT (330,000 x 2%) 6,600
Tax due and payable (higher) 6,600

TOP: Income tax corporation

42. ANS: B
SOL:
Gross receipts 1,000,000
Discounts (100,000)
Returns and allowances (150,000)
Net receipts 750,000
Cost of services
Salaries of personnel (300,000)
Consultant fees (50,000)
Rental equipment (70,000)
 Gross income 330,000
Less: Optional standard deduction (40% x 330,000) 132,000
Net operating income 198,000
RCIT (30% x 198,000) 59,400
MCIT (330,000 x 2%) 6,600
Tax due and payable (higher) 59,400

TOP: Income tax corporation

43. ANS: C
SOL:
Sales, held as inventory 4,000,000
Less: Cost of shares held as inventory (2,000,000)
Gross income 2,000,000
VAT rate 12%
Output tax 240,000
Input taxes - supplies (100,000 x 12%) (12,000)
Input taxes - rent (200,000 x 12%) (24,000)
VAT payable 204,000

TOP: VAT
44. ANS: A
SOL:
Claim against an insolvent person (fully uncollectible) 500,000
Claim against an insolvent person (20% collectible) (80% x 100,000) 80,000
Total 580,000

TOP: Estate tax

45. ANS: B
SOL:
Interest earned (5 years or less) 200,000 5% 10,000
Interest earned (more than 5 years) 55,000 1% 550
Total 10,550

TOP: Percentage and other taxes

46. ANS: A
SOL:
Basic personal exemption 50,000
Additional exemption 25,000
Total personal exemptions 75,000

TOP: Income tax individuals

47. ANS: C
SOL:
Sales, held as inventory 4,000,000
Less: Cost, shares held as inventory 2,000,000
Gross income 2,000,000
 VAT Rate 12%
Output tax 240,000
Less: Input taxes
On supplies (100,000 x 12%) 12,000
On rent (200,000 x 12%) 24,000 36,000
VAT payable 204,000

TOP: VAT
48. ANS: A
SOL:
Investments 4,000,000
Vehicle 6,000,000
Family home 10,000,000
Piece of Land 15,000,000
Gross estate 35,000,000

TOP: Estate tax

49. ANS: B
SOL:
Exclusive Common Total
Gross rate 35,000,000 35,000,000
Less: Funeral expenses (maximum) 200,000 200,000
Net estate before share of surviving spouse 34,800,000 34,800,000
Less: Share of surviving spouse 17,400,000 17,400,000
Net estate before special deductions 17,400,000 17,400,000
Less: Family income (maximum) (1,000,000)
Standard deduction (1,000,000)
Medical expenses(maximum paid or unpaid) (500,000)
Taxable net estate 14,900,000

TOP: Estate tax

50. ANS: C
SOL:
Output VAT
Sales price of one residential lot 2,000,000
Sales price of two parking lots 600,000
Total 2,600,000
Tax rate 12%
Output tax 312,000

Input taxes
VAT on supplies (100,000 x 12%) 12,000
VAT on office computers (150,000 x 12%) 18,000
VAT on rent (100,000 x 12%) 12,000
Total 42,000
 VAT payable
Output VAT 312,000
Less: Input taxes 42,000
Total ordinary deductions 270,000

TOP: VAT