ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 42  Oct 2021 CPA Licensure Exam  Preweek Lecture

TAXATION A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen

TAX PREWEEK LECTURE

PRINCIPLES OF TAXATION
1. Among the nature of taxation is that it is an inherent power being an attribute of sovereignty.
Which among the following is not among its manifestation as such inherent power?
B a. Courts cannot issue an injunction to enjoin the collection of taxes.
b. There should be no improper delegation of the power to tax.
c. Taxes may be imposed even without a constitutional grant.
d. The State has the right to select the subjects and objects of taxation.
2. The President of the Philippines and the Prime Minister of Japan entered into an executive
agreement in respect of a loan facility to the Philippines from Japan whereby it was stipulated
that interest on loans granted by private Japanese financial institutions in the Philippines shall
not be subject to Philippine income tax laws. What basic characteristic of taxation has been
violated by this agreement?
C a. Inherent limitation c. Legislative in character
b. Theoretical justice d. Administrative feasibility
3. A fundamental rule in taxation is that, the property of one country may not be taxed by
another country. This is known as:
B a. international law. c. reciprocity.
b. international comity. d. international inhibition.
4. A law was passed by Congress which granted tax amnesty to those who have not paid income
taxes for a certain year without at the same time providing for the refund of taxes to those
who have already paid them. The law is:
A a. valid because there is a proper classification.
b. not valid because those who did not pay their taxes are favored over those who have
paid their taxes.
c. valid because it was Congress which passed the law and it did not improperly delegate
the power to tax.
d. not valid because only the President with the approval of Congress may grant
amnesty.
Classification is allowed. It is valid when:
a) There is substantial distinction;
b) The classification is germane (relevant) to the issue;
c) The classification applies not only to existing conditions but future conditions as well;
d) The classification is applicable to all members of the same class.
5. The least source of our tax laws.
D a. Statutes c. Constitution
b. Court decisions d. BIR rulings
6. An annual tax of P1,000 was imposed upon all residents of the Philippines, who are above
21 years of age, with a gross income of P250,000, whether or not they send their children
to public schools, for the purpose of raising funds in order to improve public school buildings.
The tax is:
C a. violative of the equal protection clause of the Constitution.
b. confiscatory.
c. for public purpose.
d. contradicts the inherent limitations.
The best test of rightful taxation is that proceeds of the tax must be used:
a) for the support of the government, or
b) for any of the recognized objects of government, or
c) to promote the welfare of the community
Instances of public purpose
a) Financing of educational activities and programs;
b) Promotion of science;
c) Erection and maintenance of roads, bridges and piers;
d) Aid for victims of a public calamity;
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e) Relief of the poor and unemployed and to provide for unemployment benefits;
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f) Payment of pensions and bonuses for services rendered by public officers and employees;
g) The construction of experimental stations to seek increases of efficiency in sugar
production and the improvement of living and working conditions in sugar mills or
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ReSA Batch 42 – October 2021 CPA Licensure Examination

7. Public money or property may be appropriated:

C a. for the use, benefit or support of any sect, church, denomination, sectarian institution,
or system of religion.
b. for the use, benefit or support of any priest, preacher, minister, or other religious
teachers, or dignitary as such.
c. for the use, benefit or support of any priest, preacher, minister or dignitary assigned
to the armed forces, or to any penal institution, or government orphanage or
leprosarium.
d. none of the choices.
No public money or property shall be appropriated, applied, paid or employed, directly or
indirectly, for the use, benefit or support of any sect, church, denomination, sectarian
institution, or system of religion, or of any priest, preacher, minister, or other religious
teachers, or dignitary as such, except when such priest, preacher, minister or dignitary is
assigned to the armed forces, or to any penal institution, or government orphanage or
leprosarium [Art. VI, Sec. 29 (2)].
8. A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not
acceptable for legally refusing to pay the tax?
D a. That he has been deprived of due process of law.
b. That there is lack of territorial jurisdiction.
c. That the prescriptive period for the tax has elapsed.
d. That he will derive no benefit from the tax.
9. In case of ambiguity, tax laws shall be interpreted:
C a. strictly against the taxpayer.
b. liberally against the government.
c. liberally in favor of the taxpayer.
d. liberally in favor of the government.
10. The City of Masbate passed an ordinance imposing a license fee on all motor vehicles entering
the city between the hours of 9:00 a.m. and 5:00 p.m. Owners of motor vehicles assailed
the validity of the law. Is the law valid?
B a. Yes, because it was issued as a source of revenue.
b. Yes, because it is a legitimate exercise of police power.
c. No, because it discriminates against those who are not able to pay the license fee,
particularly, the low-salaried employees, and is, therefore, class legislation.
d. No, because it is not imposed by any other municipality,

TAX REMEDIES

11. First statement: In civil tax cases involving collection of internal revenue taxes, prescription
is construed strictly against the government and liberally in favor of the taxpayer.
Second statement: In criminal tax cases involving tax offenses punishable under the Tax
Code, prescription is construed strictly against the government.
C a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
In criminal tax cases involving tax offenses punishable under the Tax Code, prescription
is construed strictly against the taxpayer.
12. Which of the following prescriptive period of assessment and collection falls under normal or
regular prescriptive period?
A a. Taxpayer filed a return and the return filed is not false of fraudulent
b. Taxpayer failed to file a return
c. Taxpayer filed a false return with intent to evade tax
d. Taxpayer filed a fraudulent return with intent to evade tax

The following cases fall under exceptional prescriptive period of assessment and
collection:
a. The taxpayer failed to file a return;
b. The taxpayer filed a false return with intent to evade tax;
c. The taxpayer filed a fraudulent return with intent to evade tax; or
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d. The taxpayer and the Commissioner agreed in writing to waive the prescriptive
period of assessment of tax. 0

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13. What is the prescribed minimum percentage of compromise in case of doubtful validity of the
assessment?
A a. 40% of the basic assessed tax
b. 30% of the basic assessed tax
c. 20% of the basic assessed tax
d. 10% of the basic assessed tax
14. A written notice informing a Taxpayer that the findings of the audit conducted on his books
of accounts and accounting records indicate that additional taxes or deficiency assessments
have to be paid.
A a. Notice of Informal Conference
b. Preliminary Assessment Notice
c. Letter of Authority
d. Formal Assessment Notice
In order the to expedite the processing of Letter Notice (LN) cases, the issuance of
Notice for Informal Conference may immediately commence, even without prior
issuance of Letters of Authority, as required in certain situations, as prescribed in the
existing RMOs on the LN system.
15. An Internal Revenue Officer is allowed only how many days from the date of receipt of an LA
by the taxpayer to conduct the audit and submit the required report of investigation?
C a. 30 days c. 120 days
b. 60 days d. 180 days
If the Revenue Officer is unable to submit his final report of investigation within 120-day
period, he must then submit a Progress Report to his Head of Office, and surrender the
LA for revalidation.
16. Which tax cases need not be covered by an LA?
I – Cases involving civil or criminal tax fraud which fall under the jurisdiction of the National
Investigation Division (NID) under the Enforcement and Advocacy Service (EAS) of the
BIR
II – Policy cases under audit by the special teams in the National Office
A a. Both I and II c. I only
b. Neither I nor II d. II only
17. If the protest is denied, in whole or in part, by the Commissioner’s duly authorized
representative, the taxpayer may:
I - Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of
the said decision
II - Elevate his protest through request for reconsideration to the Commissioner within thirty
(30) days from date of receipt of the said decision
A a. Either I or II c. I only
b. Neither I nor II d. II only
If the protest is denied, in whole or in part, by the Commissioner’s duly authorized
representative, the taxpayer may either:
1) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt
of the said decision; or
2) elevate his protest through request for reconsideration to the Commissioner within
thirty (30) days from date of receipt of the said decision.

No request for reinvestigation shall be allowed in administrative appeal and only issues
raised in the decision of the Commissioner’s duly authorized representative shall be
entertained by the Commissioner.
18. If the protest is not acted upon by the Commissioner’s duly authorized representative within
one hundred eighty (180) days counted from the date of filing of the protest in case of a
request for reconsideration; or from date of submission by the taxpayer of the required
documents within sixty (60) days from the date of filing of the protest in case of a request
for reinvestigation, the taxpayer may:

I - Appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty
(180) -day period
II - Await the final decision of the Commissioner’s duly authorized representative on the
disputed assessment
A a. Either I or II 0 c. I only
b. Neither I nor II 0
d. II only

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If the protest is not acted upon by the Commissioner’s duly authorized representative within
one hundred eighty (180) days counted from the date of filing of the protest in case of a
request for reconsideration; or from date of submission by the taxpayer of the required
documents within sixty (60) days from the date of filing of the protest in case of a request
for reinvestigation, the taxpayer may either:
1) appeal to the CTA within thirty (30) days after the expiration of the one hundred
eighty (180) -day period; or
2) await the final decision of the Commissioner’s duly authorized representative on the
disputed assessment.
If the protest or administrative appeal, as the case may be, is denied, in whole or in part,
by the Commissioner, the taxpayer may appeal to the CTA within thirty (30) days from date
of receipt of the said decision. Otherwise, the assessment shall become final, executory and
demandable.
A motion for reconsideration of the Commissioner’s denial of the protest or administrative
appeal, as the case may be, shall not toll the thirty (30)-day period to appeal to the CTA.
It must be emphasized, however, that in case of inaction on protested assessment within
the 180-day period, the option of the taxpayer to either file a petition for review with the
CTA within 30 days after the expiration of the 180-day period; or await the final decision of
the Commissioner or his duly authorized representative on the disputed assessment and
appeal such final decision to the CTA within 30 days after the receipt of a copy of such
decision, are mutually exclusive and the resort to one bars the application of the other
19. For requests for reconsideration, the taxpayer shall submit all relevant supporting documents
in support of his protest within how many days from date of filing of his letter of protest,
other-wise, the assessment shall become final?
D a. Sixty (60) days c. Twenty (20) days
b. Thirty (30) days d. None of the choices
The term “relevant supporting documents” refer to those documents necessary to support
the legal and factual bases in disputing a tax assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting documents shall not
apply to requests for reconsideration.
Furthermore, the term “the assessment shall become final” shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be denied.
20. A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001, she filed a written
claim for refund. Her claim was denied by the BIR and she received the denial on March 2002.
She filed a motion for reconsideration with the BIR on March 31, 2002. On April 18, 2002,
she received the final denial of the BIR. What will be the taxpayer’s remedy?
D a. File another motion for reconsideration with the BIR within 30 days after the receipt
of the final denial
b. File an appeal with the Court of Tax Appeals within 30 days after the receipt of the
final denial
c. File an appeal with the Court of Tax Appeals within 15 days after the receipt of the
final denial
d. The taxpayer has no more remedy against the final denial
The last day to appeal to the Court of Tax Appeals is April 15, 2002 which is within two (2)
yeas from the date of payment of tax.
Claims for refund must be elevated to the CTA before the expiration of the two-year period
because the prescriptive period will not be suspended regardless of any supervening event.

21. First statement: Within three (3) years from the date of filing of any return, statement or
declaration, the same may be modified, changed, or amended.
Second statement: The modification, change or amendment to any return, statement of
declaration filed is allowed if no notice for audit or investigation of such return, statement or
declaration has in the meantime been actually served upon the taxpayer.
A a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
22. First statement: The CTA may sit en banc or in three (3) Divisions, each Division consisting
of three (3) Justices. 0
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Second statement: Five (5) Justices shall constitute a quorum for sessions en banc and two
(2) Justices for session of a Division.
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A a. Both statements are correct c. Only the first statement is correct

b. Both statements are incorrect d. Only the second statement is correct
23. The seizure by the Government of personal property to be sold in a public sale to enforce
payment of taxes that are not voluntarily paid is called:
A a. distraint. c. forfeiture.
b. levy. d. lien.

INCOME TAX

Ms. Queenie Matusalem signified her intention to be taxed at 8% income tax rate on gross
sales in her first quarter return. However, her gross sales during the taxable year has
exceeded the VAT threshold.
First Second Third Fourth
quarter quarter quarter quarter
Total sales P500,000 P1,000,000 P1,500,000 P4,000,000
Cost of sales 300,000 500,000 700,000 1,500,000
Operating expenses 100,000 200,000 250,000 500,000
24. How much is income tax payable for the final return?
A a. P574,000 c. P340,000
b. P560,000 d. None of the choices
Total gross sales P7,000,000
Less: Cost of sales 3,000,000
Gross income 4,000,000
Less: Operating expenses 1,050,000
Taxable income 2,950,000
Tax due Sec. 24 (A) 2,000,000 490,000
950,000 x 32% 304,000 P 794,000
Less: 8% income tax payments, first 3 quarters 220,000
Tax payable P 574,000
25 to 28 are based on the following: Mr. Mark Tang is a partner of Tang Dayag Caiga Company,
a business partnership. He owns 25% interest. The gross sales of Tang Dayag Caiga Company
amounted to P10,000,000.00 for taxable year 2021. The recorded cost of sales and operating
expenses of the partnership were P2,750,000.00 and P1,500,000.00, respectively. It had also
incurred an interest expense of P200,000 in connection with asset acquisition and interest
income from bank deposit amounting to P100,000. The total assets of the partnership is
P110,000,000.
25. How much is the taxable income of the partnership?
B a. P5,750,000 c. P5,550,000
b. P5,570,000 d. None of the choices
Gross sales P10,000,000
Less: Cost of sales 2,750,000
Gross income 7,250,000
Less: Interest expense 200,000
Reduction (20% x 100,000) (20,000) (180,000)
Other operating expenses (1,500,000)
Taxable income P5,570,000
26. How much is the income tax liability of the partnership?
B a. P1,725,000 c. P1,665,000
b. P1,392,500 d. None of the choices
Taxable income P5,570,000
Tax rate 25%
Tax due P1,392,500

For domestic corporation, effective July 1, 2020, the corporate income tax rate is 25%,
However, it is 20% if the net taxable income does not exceed P5,000,000 AND total assets
does not exceed P100,000,000)
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27. How much is the share in the partnership income of partner mark Tang?
B a. P1,068,750
b. P1,087,625
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c. P 978,775
d. None of the choices

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Taxable income of the partnership P5,583,000

Less: Income tax 1,392,500
Net income after tax 4,190,500
Add: Interest income, net of final tax (200,000 – (200,000 x 20%) 160,000
Distributable net income 4,350,500
Mark Tang’s interest in the partnership 25%
Partner’s interest in the partnership’s distributable income P1,087,625
28. Assuming the partnership avails of the Optional Standard deduction, how much is the
tax liability of the partnership?
B a. P1,725,000 c. Zero
b. P1,087,500 d. None of the choices
Gross sales P10,000,000
Less: Cost of sales 2,750,000
Gross income 7,250,000
Less: Optional standard deduction (40% x 7,250,000) 2,900,000
Taxable income 4,350,000
Tax rate 25%
Tax due and payable P1,087,500
29. Starting July 1, 2020, resident foreign corporations the taxable income and total assets of
which do not exceed P5,000,0000 and P100,000,000 respectively shall be taxed at:
B a. 30% c. 20%
b. 25% d. 10%
For Non-Resident Foreign Corporation the income tax rate is 25% effective January 1, 2021.
30. An international carrier doing business in the Philippines shall pay an income tax of:
B a. three percent (3%) on its gross receipts.
b. two and one-half percent (2½%) on its ‘Gross Philippine Billings.’
c. two percent (2%) on its ‘Gross Philippine Billings.’
d. one and one-half percent (1½%) on its gross receipts.
In computing for “Gross Philippine Billings” of international air carriers, there shall be included
the total amount of gross revenue derived from passage of persons, excess baggage, cargo
and/or mail, originating from the Philippines in a continuous and uninterrupted flight,
irrespective of the place of sale or issue and the place of payment of the passage documents.
31. Which of the following statements is incorrect?
D a. Resident foreign corporations are subject to income tax based on net income from
sources within the Philippines.
b. Domestic corporations are subject to income tax based on net income from all
sources.
c. Nonresident foreign corporations are subject to income tax based on gross income
from sources within the Philippines.
d. Private educational corporations are subject to income tax based on the net income
from sources within the Philippines at the tax rate of 1%.
It will be back to 10% starting July 1, 2023. If income from unrelated business exceeds 50%,
the tax rate shall be 20% or 25%
32. For income tax purposes, the term “corporation” shall include all the following except:
D a. One person corporation
b. Partnerships no matter how created or organized
c. Joint-stock companies
d. General professional partnerships
The term “corporation” shall include one-person corporations, partnerships, no matter how
created or organized, joint stock companies, joint accounts (cuentas en participacion),
associations, or insurance companies, but does not include general professional partnerships
and a joint venture or consortium formed for the purpose of undertaking construction projects
or engaging in petroleum, coal, geothermal and other energy operations pursuant to an
operating or consortium agreement under a service contract with the Government.

33. Which of the following will constitute a taxable income?

A a. Prize won in an essay contest the recipient joined
b. The Nobel Peace Prize
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c. Prize won as most valuable amateur player in an international sports competition
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d. Award not exceeding the amount set by law for being a model employee

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34. During an unusually strong typhoon in 2012, a warehouse was destroyed. The owner filed a
claim of P1,000,000, the book value of the warehouse, against the insurance company. The
insurance company was willing to pay P600,000. Finally, the claim was settled in 2014 for
P750,000, the insurance company paying that amount in the same year.
When would the loss of P250,000 be deductible?
C a. 2012 c. 2014
b. 2013 d. None of the choices
The loss could not be deducted in 2012 inasmuch as there was still a controversy as to the
amount of the damage to be paid by the insurance company. It was only in 2014 that the
transaction was closed and completed and the actual loss finally ascertained and fixed.
35. In 2018, Mr. Kenneth Lim owns a nightclub and videoke bar, with gross
sales/receipts of P2,500,000.00. His cost of sales and operating expenses are
P1.000,000.00 and P600,000.00, respectively, and with non-operating income
of P100,000.00.
Question 1 – Can Mr. Lim have an option to avail of the 8% income tax rate?
B a. Yes, because his gross sales/receipts do not exceed the VAT threshold.
b. No, because his business income is subject to Other Percentage Tax under
Section 125 of the Tax Code, as amended.
c. Yes, because individual taxpayers are always given the option to be taxed at
8% income tax rate.
d. No, because he is not VAT-registered.
The taxpayer is subject to 18% amusement tax under Section 125 of the Tax Code
based on gross receipts (2,500,000 x 18% = P 450,000)
Question 2 – How much is the income tax due?
B a. P200,000 c. P120,000
b. P190,000 d. None of the choices
Gross sales/receipts P 2,500,000
Less: Cost of sales 1,000,000
Gross income 1,500,000
Less: Operating expenses 600,000
Net income from operation 900,000
Add: Non-operating income 100,000
Taxable business income P 1,000,000
Total taxable income
Tax due 800,000 130,000
200,000 x 30% 60,000 P 190,000
36 to 38 are based on the following: In 2018, Ms. Glai Espenilla Bangug, a financial
comptroller of EB Company, earns annual compensation of P1,500,000, inclusive of 13 th month
and other benefits in the amount of P80,000 and mandatory SSS contribution of P3,500 and
Philhealth contribution of P2,000. Aside from her employment income, she owns a convenience
store, VAT-registered, with gross sales of P3,000,000. Sales discount amounts to P300,000;
sales returns and allowances amount to P150,000. Her cost of sales and operating expenses are
P1,000,000 and P600,000 respectively and with non-operating income of P100,000. Payments
for the first three (3) quarters amount to P300,000.
36. Can she avail of the 8% income tax rate?
B a. Yes, because her gross sales do not exceed the VAT threshold.
b. No, because she is VAT-registered.
c. Yes, because she is a mixed income earner.
d. No, because her total income including compensation income exceed the VAT
threshold.

Unless the taxpayer signifies in the 1st Quarter Return of the taxable year the intention to elect
the 8% income tax, the taxpayer shall be considered as having availed of the graduated rates
under Section 24(A) of the Tax Code, as amended, and such election shall be irrevocable. He
shall also be liable to business tax.
The following cannot avail of the 8% income tax rate option:
a. A VAT-registered taxpayer, regardless of the gross sales/receipts
b. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code,
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as amended, except those subject under Section 116 of the same Title
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c. Partners of a General Professional Partnership (GPP) by virtue of their distributive share
from GPP which is already net of cost and expenses

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The taxpayer is subject to 12% VAT based on her gross sales (P3,000,000 - 300,000 -
150,000 = 2,550,000 x 12% = P306,000)
37. How much is her total taxable income?
C a. P2,913,500 c. P2,464,500
b. P2,550,000 d. None of the choices

Total compensation income P1,500,000

Less: Non-taxable 13th month and other
benefits 80,000
Mandatory SSS contribution 3,500
Mandatory Philhealth contribution 2,000 85,500
Taxable compensation income 1,414,500
Gross sales 3,000,000
Less: Sales discount ( 300,000)
Sales returns and allowances ( 150,000)
Net sales 2,550,000
Less: Cost of sales (1,000,000)
Gross income 1,550,000
Less: Operating expenses 600,000
Net income from operation 950,000
Add: Non-operating income 100,000 1,050,000
Total taxable income P2,464,500
38. How much is her tax due when she files her final tax return?
A a. P338,640 c. P482,320
b. P366,000 d. None of the choices

Total taxable income P2,464,500

Tax due Sec. 24 (A) 2,000,000 490,000
464,500 x 32% 148,640 P 638,640
Less: Payments, first 3 quarters 300,000
Tax payable P 338,640
39. A purely self-employed individual’s gross sales/receipts and other non-operating income do
not exceed the VAT threshold.
Case 1 – He signified his intention to avail of the 8% income tax rate on his first quarter
return, he will pay:
B a. income tax on gross sales/receipts and other non-operating income in excess of P250,000
and the percentage tax under Section 116
b. income tax on gross sales/receipts and other non-operating income in excess of P250,000
in lieu of graduated tax rates and percentage under Section 116
c. income tax on gross sales/receipts excluding non-operating income in excess of P250,000
in lieu of graduated tax rates and percentage under Section 116
d. percentage tax under Section 116 only in lieu of income tax.
Case 2 – He failed to signify his intention to avail of the 8% income tax rate on his first quarter
return, he will pay:
A a. income tax based on graduated income tax rates and percentage tax under Section 116
if not VAT-registered
b. income tax on based on graduated income tax rates only.
c. income tax on gross sales/receipts excluding non-operating income in excess of
P250,000 in lieu of graduated tax rates and percentage under Section 116
d. Percentage tax under Section 116 only in lieu of income tax.
40. Under the TRAIN, the income tax due from compensation income is:
A a. based on graduated income tax rates under Section 24 (A)
b. 8% income tax rate on gross sales/receipts and other non-operating income in excess
of P250,000.
c. either graduated income tax rate or 8% income tax rate on gross sales/receipts and
other non-operating income in excess of P250,000.
d. Based on taxable income after deducting expenses and exemptions.

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41. Under the TRAIN, Philippine Charity Sweepstakes and Lotto winnings received by residents or
citizens shall be:
B a. exempt from income tax.
b. subject to 20% final tax except Ten thousand pesos (P10,000) or less from Philippine
Charity Sweepstakes and Lotto which shall be exempt.
c. subject to 20% final tax without exception.
d. subject to 20% final tax if less than Ten thousand pesos (P10,000).
42. Under the TRAIN, the books of accounts shall be audited and examined yearly by
independent Certified Public Accountants and their income tax returns accompanied with
a duly accomplished Account Information Form (AIF) which shall contain, among others,
information lifted from certified balance sheets, profit and loss statements, schedules
listing income-producing properties and the corresponding income therefrom and other
relevant statements if the:
A a. gross annual sales, earnings, receipts or output exceed Three million pesos
(P3,000,000).
b. gross quarterly sales, earnings, receipts or output exceed Three million pesos
(P3,000,000).
c. gross annual sales, earnings, receipts or output amount to Three million pesos
(P3,000,000) or more.
d. gross quarterly sales, earnings, receipts or output exceed One Hundred Fifty
Thousand (P150,000).
43. First statement: On or before the end of the calendar year but prior to the payment of the
compensation for the last payroll period, the employer shall determine the tax due from each
employee on taxable compensation income for the entire taxable year in accordance with
Section 24(A).
Second statement: The difference between the tax due from the employee for the entire year
and the sum of taxes withheld from January to November shall either be withheld from his
salary in December of the current calendar year or refunded to the employee not later than
January 25 of the succeeding year.
A a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
44. Which of the following statements is incorrect?
C a. Considering that taxes withheld by the withholding agents are held in trust for the
government and its availability is an imperious necessity to ensure sufficient cash inflow to
the National Treasury, withholding agents shall file BIR Monthly Remittance Form (BIR Form
No. 0619E and/or 0619F) every tenth (10th) day of the following month when the
withholding is made, regardless of the amount withheld.
b. For withholding agents using EFPS facility, the due date is on the fifteenth (15th) day of the
following month.
c. Withholding agents with zero remittance are not required to use and file the same Monthly
Remittance Form.
d. None of the choices
Withholding agents with zero remittance are still required to use and file the same Monthly
Remittance Form.
For purposes of withholding tax remittance, the quarter shall follow the calendar quarter,
e.g., for taxes withheld during the quarter ending March 31, the same shall be remitted
by the withholding agent on or before April 30.

45. The books of account are required to be audited and examined yearly by an independent CPA
if the gross quarterly sales, earnings, receipts or output exceed:
B a. P5,000,000 c. P2,500,000
b. P3,000,000 d. P1,500,000

46. For income tax purposes, the examination and inspection of the books of account and records
shall be made only once in a taxable year except when:
D a. Fraud, irregularity or mistakes, as determined by the Commissioner
b. The taxpayer requests reinvestigation
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c. Verification of compliance with withholding tax laws and regulations
d. All of the choices 0

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47. Receipt or invoice is issued, at least in duplicate, at the time the transaction is affected for
each sale or transfer of merchandise or for services rendered valued at:
B a. P50 or more. c. P200 or more.
b. P100 or more. d. P250 or more.
48. Mr. Emilio Nario contributed campaign fund money to a political party. The political party
duly reported to the COMELEC the campaign contributions and were fully utilized during the
campaign.
First statement: The campaign contribution of the donor is not subject to donor’s tax.
Second statement: The campaign contribution is not taxable to the political party.
A a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
As a general rule, campaign contributions are not included in the taxable income of the
candidate to whom they were given, the reason being that such contributions were given
not for personal expenditure or enrichment of the concerned candidate b u for the purpose
of utilizing such contributions for his or her campaign.

Thus, to be considered as exempt from income tax, these campaign contributions must
have been utilized to cover a candidate’s expenditures for his/her electoral campaign.

Unutilized or excess campaign funds, net of the candidate’s campaign expenditures, shall
be subject to income tax, and as such, must be included in the candidate’s taxable income
in his/her Income Tax Return (ITR) filed for the subject taxable year.

Any candidate, winning or losing who fails to file with the COMELEC the appropriated
Statement of Expenditures required under the Omnibus Election Code shall be
automatically precluded from claiming such expenditures as deductions from his/her
campaign contributions. As such, the entire amount of such campaign contributions shall
be considered as directly subject to income tax.

TRANSFER TAXES

49. Mr. X died. He was survived by his wife and children. The couple had exclusive and common
properties. The gross estate of Mr. X would include:
A a. common and capital properties.
b. common and paraphernal properties.
c. common, capital and paraphernal properties.
d. common properties only.
The capital of the surviving spouse of a decedent shall not, for the purpose of estate tax,
be deemed part of his or her gross estate.
50. In the absence of a marriage settlement, or when the regime agreed upon is void, the
property relations of the spouses who married before August 3, 1988 shall be governed by:
A a. conjugal partnership of gains.
b. absolute community of properties.
c. complete separation of properties.
d. none of the choices.
51. A resident citizen had a family home in the Philippines. He worked abroad and was
temporarily absent from his family home when he died in 2018. The executor of the estate
inquired from you whether or not to claim family home deduction from the gross estate for
Philippine estate tax purposes. What would you tell him?
C a. The estate would not be allowed family home deduction because he was abroad when he
died.
b. The estate would not be allowed family home deduction because he was a non-resident
citizen when he died.
c. The estate would be allowed family home deduction of P10,000,000 because actual
occupancy of the family home was not interrupted or abandoned because of his temporary
absence.
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d. The estate would be allowed family home deduction of P1,000,000 because all decedents
were allowed family home deduction.

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Exclusive Common Total

Gross estate P5,000,000 P23,000,000 P28,000,000
Less: Deductions - (2,000,000) (2,000,000)
Net estate before special deductions 5,000,000 21,000,000* 26,000,000
Less: Special deductions
Family home (1/2) 4,500,000
Maximum 10,000,000 (4,500,000)
Standard deduction (5,000,000)
Net estate after special deductions 16,500,000
Less: Share of surviving spouse
(1/2 x 21,000,000*) (10,500,000)
Net taxable estate P 6,000,000
64. Jose made the following gifts:
a. On June 1, 2017, P150,000 to Anton, his son, on account of his marriage celebrated
May 1, 2017;
b. On July 10, 2017, a parcel of land worth P180,000 to his father, subject to the condition
that his father would assume the mortgage indebtedness of Jose in the amount of
P40,000;
c. On September 30, 2018, P250,000 dowry to his daughter Dana, on account of her
scheduled marriage on October 25, 2018, and another wedding gift worth P120,000 on
November 23, 2018.
How much were the total net gifts subject to tax as of November 23, 2018?
C a. P370,000 c. P120,000
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b. P250,000 0 d. None of the choices
Gross gift, November 23, 2018 P 120,000
Add: Prior gift, September 30, 2018 250,000
 Total taxable gifts, November 23, 2018 P 370,000
Less: Exempt gift 250,000
Total net gift subject to tax P 120,000

BUSINESS TAXES
65. Beginning January 1, 2021, the VAT exemption shall apply to the following, EXCEPT:
D a. sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business
b. sale of real property utilized for socialized housing
c. sale of house and lot, and other residential dwellings with selling price of not more
than Two million pesos (P2,000,000)
d. sale of residential lot valued at Two million five hundred thousand pesos
(P2,500,000) and below
66. This refers to any person who is required to register under the provisions of the Tax Code but
failed to register.
B a. VAT-registered person c. VAT-exempt person
b. VAT-registrable person d. None of the choices
67. This refers to transactions in certain goods, properties, or services which are not subject to
value-added tax, even if such goods, properties or services are sold by a VAT-registered
person, and regardless of the annual gross sales or receipts derived therefrom.
A a. Transaction-specific exemption
b. Entity-specific exemption
c. Implied exemption
d. Exemption by tokenism
68. Kris Company, service provider, presented to you the following income statement in line with
the same company’s audit of the financial statements:
KRIS COMPANY
INCOME STATEMENT
For the Year Ended December 31, 201
Sales P10,350,000
Cost of Goods Sold 7,050,000
Gross profit P3,300,000
Operating expenses:
Selling P675,000
Administrative 1,050,000 1,725,000
Net income P1,575,000

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Your audit disclosed the following information:

• Accounts receivable decreased P540,000 during the year.
• Prepaid expenses increased P255,000 during the year.
• Accounts payable to suppliers of merchandise decreased P412,500 during the year.
• Accrued expenses payable decreased P150,000 during the year.
• Administrative expenses include depreciation expense of P90,000.
• Inventories decreased by P450,000.
Question 1 - What is the total amount of cash received from customers during the year?
A a. P10,980,000 c. P10,350,000
b. P10,477,500 d. None of the choices
Sales, accrual basis P10,350,000.00
Add: Decrease in accounts receivable 540,000.00
Amount of cash received P10,890,000.00
Question 2 – How much is output tax?
A a. P1,306,800 c. P1,242,000
b. P1,257,300 d. P1,177,200
Amount of cash received P10,890,000.00
Tax rate 12%
Output tax P 1,306,800.00
Question 3 – What is the total basis of input tax on supplies and operating expenses (purchase
of services) during the year?
B a. P9,052,500 c. P7,012,500
b. P8,640,000 d. None of the choices
Cost of sales P7,050,000.00
Less: Decrease in inventory 450,000.00
Purchases of goods, accrual basis P6,600,000.00

Total operating expenses, accrual basis P1,725,000.00

Add (Deduct):
Increase in prepaid expenses 255,000.00
Decrease in accrued expense 150,000.00
Depreciation expense (non-cash expense) (90,000.00)
Cash payments for purchase of services 2,040,000.00
Total P8,640,000.00
Question 4 - What is the input tax during the year?
B a. P1,086,300 c. P841,500
b. P1,036,800 d. None of the choices
Total P8,640,000.00
Tax rate 0 12%
0
Input taxes P1,036,800.00
Question 5 – Assuming the taxpayer is seller of goods, how much is the output tax for the year?
C a. P1,306,800 c. P1,242,000
b. P1,257,300 d. None of the choices
Sales, accrual basis P10,350,000
Tax rate 12%
Output tax P 1,242,000
69. Ms. Consuelo Dimagulo receives a package of goods from her sister who lives in California,
United States of America. Ms. Consuelo will use the goods for personal purposes. She is not
VAT-registered. Which of the following statements is correct in connection with the receipt
of a package?
A a. Ms. Consuelo shall be subject to VAT on importation.
b. Ms. Consuelo shall not be subject to VAT on importation because she is not VAT-
registered.
c. Ms. Consuelo shall not be subject to VAT on importation but shall be subject to VAT
on sales.
d. None of the choices.

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