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Taxation review

Capital asset
192. the term “capital assets” includes
a. stock in trade or other property included in the
taxpayer’s inventory
b. real property not used in the trade or business of
taxpayer
c. property primarily for sale to customers in the
ordinary course of trade or business
d. property used in the trade or business of the
taxpayer and subject to depreciation
b. real property not used in the trade or business of taxpayer
193. Which of the following real properties is classified as a
capital asset?
a. real property initially acquired by a taxpayer engaged in
real estate business but subsequently abandoned or become
idle
b. real property transferred through succession or donation
to the heir or done who is not engaged in the real estate
business with respect to the real property inherited or
donated, and who does not subsequently 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 acquired in the course of trade or business
by a taxpayer habitually engaged in the sale of real estate
b. real property transferred through
succession or donation to the heir or done
who is not engaged in the real estate business
with respect to the real property inherited or
donated, and who does not subsequently use
such property in trade or business
194. under section 39(b) of the tax code, how much
shall be taken into account in computing net
income, if a gain is realized by an individual
taxpayer from the sale or exchange of capital assets
(other than real properties and shares of stocks)
held for more than 12 months?
a. 50% of the net capital gain
b. 5% of the capital assets sold
c. 50,000
d. 5,000
a. 50% of the net capital gain
195. lots being rented when subsequently sold are
classified as
a. capital assets
b. liquid assets
c. ordinary assets
d. fixed assets
c. ordinary assets
196. a feature of ordinary gains as distinguished from capital
gains
a. gain from sale of assets not stock in trade
b. may or may not be taxable in full
c. sources are capital assets
d. no holding period
d. no holding period
8. Which of the following is not a secondary
purpose of taxation

a. To serve as key instrument of social control


b. To effect a more equitable distribution of wealth
among people
c. To achieve social and economic stability
d. To raise revenue to defray the necessary expenses
of the government
197. which of the following taxpayers is allowed to
observe the “no holding period and no carry over of
net capital loss”
a. individual
b. estates
c. corporation
d. trusts
c. corporation
198. which of the following statements is true
a. the sale by a corporation of its office building shall not
result to a capital gain even if derived a gain on 240,000 on
the sale
b. a corporation with a net capital loss of 50,000 in 2011
can carry over such amount only until 2012.
c. a corporation with a net capital loss of 50,000 and a net
income of 40,000 in 2011 can carry over only a maximum
amount of 40,000 in 2012.
d. a corporation which sold for 120,000 in 2011 an
equipment which it acquired in 2008 for 180,000 shall
report only a capital gain of 30,000 in 2011.
A
If the taxpayer is a corporation, there is no holding
period and no carry-over
199. Rules on capital gains and losses of
corporations, except
a. Capital gains and losses are recognized to the
extent of 100% 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 5 on real property sold
d
the sale of real property (Capital asset) is subject to
final taxc of 6% and not 5%.Moreover, only a sale
of land and/or buildings are subject to this tax
200. statement 1: Capital losses are deductible only
from ordinary gains

Statement 2: corporations are not allowed to


observe the holding period ad to carry over net
capital loss

True or false
Only the second statement is correct
201. Joahna Corporation realized an ordinary gain
of 400,000. Its capital asset transactions during the
year are as follows:
Holding Amount
period
Capital gain 6 months 50,000
Capital gain 2 years 45,000
Capital loss 12 months 23,000
Capital loss 10 years 26,000
What is Joahna Corporations’ taxable income?
a. 484,000
b. 444,000
c. 435,500
d. 447,000
In a corporation, the holding bperiod of a capital
asset is not taken into account
Capital gain, 6 months 50,000
Capital gain, 2 years 45,000
Capital loss, 12 months (23,000)
Capital loss, 10 years (28,000)
Net capital gain 44,000
Add: Ordinary gain 400,000
Taxable income 444,000
202. Jose Sese, single, had the following data on
income and losses
2010 2011
Ordinary business income 56,700 60,800
Ineterst on time deposit 2,000 3,000
with PNB
Short-term capital gain 5,000 8,500
Long-term capital gain 3,600 5,200
Short-term capital loss 8,000 2,900
Long-term capital loss 4,400 -
In 2010, the taxable income before personal exemption of Jose Sese
a. 58,700
b. 53,300
c. 36,700
d. 56,700
Ordinary business income 56,700
Short term capital gain 5,000
(5,000 x 100%)
Long term capital gain 1,800
(3,600 x 50%)
Short term capital loss (8,000)
(8,000 x 100%)
Long-term capital loss (2,200)
(4,400 x 50%)
Net capital loss (3,400) -
Taxable income before 56,700
personal exemption
203. in 2011, the taxable income of Jose Sese is

a. 15,600
b. 69,000
c. 36,000
d. 45,600
Ordinary business income 60,800
Short term capital gain 8,500
(8,500 x 100%)
Long term capital gain 2,600
(5,200 x 50%)
Short term capital loss (2,900)
(2,900 x 100%)
Net capital gain 8,200
Less: Net capital loss carry 3,400 4,800
over from 2010
Taxable income before 65,600
personal exemption
Less: Personla exemption 50,000
Taxable income 15,600
204. santos qualified as head of a household for
2010 for tax purposes. Santos’ 2011 taxable income
was 200,000 exclusive of capital gains and losses.
Santos had a net long term loss of 8,000 in 2011.
What amount of this capital loss can Santos offset
against 2011 ordinary income?
a. 0
b. 3,000
c. 4,000
d. 8,000
a
the basic rule in capital asset transactions is that the
capital losses are deductible only from capital
gains. Therefore, the capital loss in 2011 cannot be
offset from the ordinary income
numbers 205-206

205. Rose, single, had the following data on


income and losses
2010 2011
Net incme 25,000 95,000
Capital gains 8,000 40,000
Capital losses 40,000 5,000

He taxable income in 2010 is


a. 5,000
b. 0
c. (25,000)
d. (57,000)
NI 25,000

Capital gains 8,000

Capital losses 40,000

Net capital loss (32,000) -

PE 50,000

TI -
206. the taxable income in 2011 is
a. 76,000
b. 55,000
c. 115,000
d. 10,000
NI 95,000

Capital gains 40,000

Capital losses (5,000)

Net Capital loss carry over (25,000) 10,000


from 2010

PE (50,000)

TI 55,000
The amount of carry over of the net capital losses
should not exceed the net income during the year in
which the loss was sustained
207. all of the following, except one, results to a
capital gain or loss
a. gain on short sales
b. option loss
c. worthless securities
d. ordinary gains
d. ordinary gains
208. a transaction in which the speculator sells
securities which he does not own (he merely
borrows the stock certificate through or from his
stock broker) in anticipation of a decline in its price
and within a reasonably short period of time buys
or covers the stock to complete the transaction
a. wash sale
b. short sale
c. auction sale
d. rescissible sale
b. short sale
209. A bought from B Corporation ten shares of
stock. Sixty days thereafter, the corporation was
adjudged bankrupt and its stock as worthless. The
loss of A to be reported for income tax purposes is
classified as
a. wagering loss
b. non deductible loss for income tax purposes
c. short term capital loss
d. casualty loss
c. short term capital
loss
210. on capital gains tax on real property, which of
the following statements is not correct?
a. the tax should be paid, if in one lump sum, within
30 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 30 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 25% of the selling price
b. the term “initial payment” is synonymous to
“downpayment”
211. Janet said her principal residence for 5,000,000
when its fair market value was 6,000,000. The
house was purchased five years ago for 3,000,000.
Out of the proceeds of 5,000,000, Janet utilized the
4,000,000 for the purchase of new residential house

The capital gains tax on the sale is


SP 5,000,000

Less: Utilized portion 4,000,000

Unutilized portion 1,000,000

Capital gains tax 72,000


(1M/5M x 6M) x 6%
212. based on the problem in Number 211 above,
what is the cost basis of the new residence?
a. 3,000,000
b. 2,400,000
c. 4,000,000
d. 5,000,000
Formula:

Unutilied portion
Selling price x Basis of old residence = basis of new residence

4M/ 5M x 3M = 2,400,000
213. Malou has the following data in 2010:
Sale of property Holding Gain/loss
period

Apartment house 10 years 35,000

Residential house 6 years 120,000

Vacant lot 12 years 72,500

Jewelry for personal use 6 months 4,200

Jewelry in a jewelry store 2 months 8,000

Car for personal use 4 years (20,000)

Transportation equipment 12 months (10,000)


The proceeds from sale of residential house shall be
used in acquiring a new residence

During the year, Malou had a net income from


business (other than the sale of the properties
above) in the amount of 5,000.

The taxable income before personal exemption of


Malou in 2010 is
a. 32,200
b. 38,000
c. 22,200
d. 42,200
Net income 5,000
Sale of ordinary assets:
Apartment house 35,000
Jewelry in a jewelry store 8,000
Transportation equipment (10,000) 33,000
Sale of capital assets
Jewelry for personal use 4,200
Car for personal use (20,000 x (10,000)
50%)
Net capital loss from 2010 (5,800) -
Taxable income before personal 38,000
exemption
214. assuming that the net income of Malou in 2011
is 130,000 which includes a capital gain of 6,000.
The taxable income before personal exemption in
2011
a. 125,000
b. 130,000
c. 124,200
d. 120,000
NI before capital gain 124,00
(130,000-6,000) 0
Net capital gain
Capital gain 6,000
Capital loss carry over (not (5,000) 1,000
exceeding net income in
2010)
Taxable income before 125,00
personal exemption 0
The capital loss to be carried over in the succeeding
year should not exceed the net income during the
year in which the loss was sustained
Numbers 215 to 216

On august 15, 2011, Mr Cruz sold a 500 square


meter residence house for 3,000,000. The house
was acquired in 2002 for 2,000,000. On the date of
sale, the fair market value of the house as shown in
the real property declaration was 2,500,000 and the
assessed value amounted to 2,200,000. The zonal
value was 7,000 per square meter.
215. the capital gains tax
a. 180,000
b. 120,000
c. 150,000
d. 210,000
Zonal value, higher (7,000 x 500) 3,500,000

Rate of tax 6%

Capital gains tax (final tax) 210,000


216. the capital gains tax of Mr. cruz if the proceeds
of sale was utilized in acquiring new residence
a. 210,000
b. 150,000
c. 180,000
d. none
d
when the proceeds of sale of a residential house shall be
utilized in acquiring new residence, the sale is exempt from
tax
however, the 6% capital gains tax due on the presumed
capital gains shall be deposited in an authorized bank under
Escrow Agreement which shall be released later on by the
RDO, upon showing that the proceeds of sale had already
been fully utilized in the acquisition of a new principal
residence
217. the amount to be deposited if the proceeds of
the sale shall be utilzlied in acquiring new residence
a. 210,000
b. 150,000
c. 180,000
d. none
a
the amount to be deposited in escrow shall be
210,000 the capital gains tax otherwise due on the
presumed capital gains
218. the capital gains tax payable assuming that Mr. cruz
will utilize any 1,500,000 of the proceeds in acquiring a
new residence
a. 90,000
b. 210,000
c. none
d. 105,000
d
A= (B or C)* x D/B x 6%

A= capital gains tax


B= selling price
C= Market value (Zonal or Assessed value)
D= unutilized portion of proceeds

*=whichever is higher

= 3.5M x (3M-1.5M)/3M x 6%
= (3.5M x 50%) x 6%
= 105,000
219. Mr julio Canlas is not engaged in real estate
business. He sold a 1,000 square meter residential
land for 300,000 on March 15, 2011. The land was
acquired by purchase on March 5, 008 for 120,000.
After acquisition, the land was fenced at a cost of
30,000. A commission of 5% of the sales price was
paid to the sales agent.

How much is the capital gains tax due?


18,000
18,900
7,200
9,000
SP 300,000

Rate of tax 6%

CGT 18,000
220. Cito has the following records of transactions:
Capital gains (short term on sale of-
Domestic shares listed and traded in the stock 22,400
exchange
Vacant lot, thru a broker, located in mabila (MV= 150,000
700,000)
Residential house in New York City 100,000
Capital loss-(long term) on sale of
Land in Vancouver, Canada 125,000
Family car 50,000

The net capital gain/loss of Cito is


a. 12,500
b. (75,000)
c. 148,500
d. (25,000)
House in new York (100,000 x 100%) 100,00
0
Less: capital losses
Land in Canada (125,000 x 62,500
50%)
Family car (50,000 x 50%) 25,000 87,500

Net capital gain 12,500


Sales of real properties situated abroad are not
subject to 6% capital gains tax even if they are
classified as capital assets. However, the gain or
loss derived from the sale shall be classified as
capital gain/ capital loss, as the case maybe
221. atty. Moises dondoyano sold to jess abaluyan
not traded shares of stocks for a consideration of
200,000. At the time of the sale, its fair market
value was 500,000. Atty. Moises dondoyano should
pay
a. capital gains tax
b. donor’s tax
c. DST
d. all of the above
d
Capital gains tax accrues on the sale of the shares of
stocks; the donor’s tax is on the sale for insufficient
consideration while the DST is imposed on the
transactions evidenced by the document
222. in the preceding problem, if later on Jess
aAbaluyan sells the same shares of stocks to Ed Del
Rosario for 400,000, the gain subject to tax shall be
determined by deducting the
a. 200k from 500k
b. 200k from 400k
c. 400k from 500k
d. 400k from 200k
b
if the buyer of shares of stocks later on sells this
property and he is taxable on his gain derived from
the sale, his gain from the sale shall be determined
by deducting from the amount of consideration
received his purchased price thereof
223. Rolly sold 1,500 shares of stocks of Achievers
Corpoeration. The par value per share was 85 but
were acquired by him at 90. On the dtae of sale, the
shares had a selling price of 120 per share

The capital gains tax on the sale if the shares are not
listed and traded in the PSE
a. 2,250
b. 2,625
c. 14,000
d. 11,375
Gross selling price (120x1,500) 180,000

Less: Cost (90 x 1,500) 135,000

Net capital gain 45,000

Rate ofg tax 5%

CGT 2,250
224. Ronald sold 1,000 shares of not listed and
traded shares of stocks. The data of which are as
follows:
SP 600,000
FMV 620,000
Expenses on the sale 10,000
Purchase price 440,000
Expenses upon acquisition 3,000

The capital gains tax due is


a. 13,000
b. 14,000
c. 9,700
d. 12,850
SP 600,000
Less: SE 10,000
Bal 590,000
Less: Cost
Purchase price 440,000
Expenses upon acquisition 3,000 443,000
Net capital gain 147,000

Tax on 100,000 x 5% 5,000

47,000 x 10% 4,700

CGT 9,700
225. Nada sold the following shares of stock during
the year:
Listed and Not listed and Listed and
traded traded traded
SP 1,500,000 630,000 210,000
Cost 1,230,000 570,000 170,000
Date sold 01-20-11 03-16-11 11-14-11

The capital gains tax payable is


a. 3,000
b. 32,000
c. 11,550
d. 3,150
Sale of shares of stocks which are listed and traded
in the PSE are not subject to income tax. They are
subject to percentage tax

Gross selling price (not listed and 630,000


traded shares)
Less: cost 570,000

Net capital gain 60,000

X rate of tax 5%

CGT 3,000
225-229
Francia, a resident citizen, had the following
transactions of not listed and traded shares of stocks
Date of sale Date of cost Selling price
acquisition
2.13.2011 1.18.2009 80,000 135,000
4.5.2011 11.30.2010 256,000 360,000
7.20.2011 9.3.2009 175,000 115,000
10.12.2011 8.7.2011 144,500 150,000
225. The capital gains tax on the February 13, 2011
sale
a. 2,750
b. 1,375
c. 675
d. 55,000
Selling price 135,000

Less: Cost 80,000

Net capital gain 55,000

Holding period (long-term) 50%

Base 27,500

Rate of tax 5%

CGT 1,375
227. the capital gains tax on April 5, 2011 sale is
a. 10,400
b. 5,400
c. 5,200
d. none
Gross selling price 360,000
Less: Cost 256,000
Net capital gain (short 104,000
term)

Tax on 100,000 x 5% 5,000

4,000 x 10% 400

CGT 5,400
228. the capital gains tax/refund on the July 20,
2011 sale is
a. 3,000
b. (3,000)
c. 1,500
d. none
If the sale of shares of stocks (not traded) results to a loss,
no capital gains tax shall be paid by the seller

SP 115,000
Less: cost 175,000
Net capital loss 60,000
229. the final capital gain tax/refund at the end of
the year is
a. tax payable of 1,350
b. tax refund of 1,350
c. tax payable of 2,725
d. tax refund of 2,725
Date of sale Selling price cost Capital gain Tax paid
2.13.2011 135,000 80,000 27,500 1,375
4.5.2011 360,000 256,000 104,000 5,400
7.20.2011 115,000 175,000 (30,000) -
10.12.2011 150,000 144,500 5,500 275
760,000 655,500 107,000 7,050

CGT paid 7,050


Less: CGT
On 100k x 5% 5,000
On 7,000 x 10% 700 5,700
Amount refundable 1,350
230. on December 1, 2010, Mat Obese whose taxable year is
the calendar year, purchased 100 shares of common stock of
Michael company for 10,000. On December 16,2010, he
purchased 100 additional shares for 9,000. On January 3,
2011, he sold the 100 shares purchased on December 1,
2010 for 9,000

Which of the following statements is correct on Mat Obese


a. he can claim a deductible loss of 1,000 in 2011
b. he must report a taxable capital gain of 1,000 in 2011
c. . he must report a taxable capital gain of 9,000 in 2011
d. he is not allowed to claim deductible loss on the loss on
sale in 2011
d
a taxpayer cannot deduct any loss claimed to have
been sustained from the sale or other disposition of
stock, if, within, a period beginning 30 days before
the date or such sale or disposition and ending 30
days after such date (61 day period), he has
acquired or has entered into a contract orn option as
to acquire, substantially identical stock
231. Miss Beauty, whose taxable year is the calendar year,
had the following stock transactions:

- On September 20, 2011 purchased 100 shares of the


common stock of Ugly Company for 5,000 or at a 50 per
share
- on December 11, 2011, she purchased 50 shares of
substantially identical stock for 2,750 or at 55 per share
-on December 26, 2011, she purchased 25 additional shares
of each stock for 1,125 or at 45 per share
-on January 2, 2012, she sold for 4,000 the shares purchased
on September 20 or at 40 per share

How much is the deductible loss and non-deductible loss on


January 2, 2012 sales
deductible Non deductible
A 1,000 0
B 0 1,000
C 125 0
d 250 750
234. in computing gain or loss from the sale or other
disposition of property acquired as gift or donation, the basis
of cost shall be
a. the fair market value as of the date of acquisition
b. the purchase price plus expense of acquisition
c. the latest inventory value
d. the same as it would be in the hands of the donor
d. the same as it would be in the hands of the donor
117. it is important to know the source of income
for tax purposes (from within or without) because

a. some individual 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 citizens while
others are aliens
d. export sales are not subject to income tax
a. some individual and corporate taxpayers are
taxed on their worldwide income while others are
taxable only upon income from sources within the
Philippines
118. Mr Shinn, a NRA stockholder, received a dividend
income of 300,000 in 2011 from a foreign corporation doing
business in the Philippines. The gross income of the foreign
corporation from within and without the Philippine for three
years preceding 2011 are as follows
Source of income 2008 2009 2010

From within the Ph 16,000,000 12,000,000 14,000,000

From without the Ph 8,000,000 14,000,000 16,000,000

How much of the dividend income received by Mr. Shinn is


considered income from sources within the Philipppines
a. zero
b. 157,500
c. 150,000
d. 300,000
Thank you