9/20/2012 

1 

1. Al Christian was hit by a wayward bus while on his way home. He survived but had to pay P150, 000 for his hospitalization. He was unable to work for six (6) months which meant he did not receive his usual monthly salary of P 10, 000 or a total amount of P60, 000. He sued the bus company and was able to obtain a final judgment awarding his P150, 000 reimbursement for his hospitalization, P60, 000 for the salaries he failed to receive while being hospitalized, and P250, 000 as moral damages for his pain and suffering. He was able to collect in full from the judgment. How much income he realize when he collected the judgment?

A) 460,000 B) 250,000

C) 60,000 D) 400,000

Answer >>>

ANSWER: C Solution: Payment of salaries 60,000

Joe Anne, an accountant, had the following data from her employment in 2012: Monthly salary P 12, 000 Taxes withheld 8, 000 Pag-ibig fund contributions 1, 500 Union dues 2, 400 PhilHealth contributions 720 SSS premiums 480 13th month pay 12, 000 Mid-year bonus 12, 000 Loyalty award 5, 000 The gross compensation income of Joe Anne in 2012 is

A) 144,000 B) 150,000

C) 109,900 D) 138,900

Answer >>>

ANSWER: D Solution: Salary (P 12, 000 x 12) P 144, 000 Less: Pag-ibig fund contributions P 1, 500 Union dues 2, 400 Philhealth 720 SSS contribution 480 5, 100 Gross compensation income P 138, 900

9/20/2012 

2 

Nard Hartney Molina and Catherine Soliva formed a business namely Molina, Soliva and Associates, a partnership of Certified Public Accountants. They had a gross income of P 220, 000 and expenses of P 85, 000 during the year: Hartney Molina Catherine Soliva Share in profit and loss ratio 75% 25% Income from other business P 125, 000 P 325, 000 Expenses 80, 000 190, 000 Amount withdrawn from partnership 30, 000 12, 500 Filing status Married Unmarried Dependent children None 2 The income tax payable by the partnership is

A) None B) 72,600

C) 44,500 D) 45,900

Answer >>>

ANSWER: A General Professional Partnerships are exempt from income tax

Statement I: No person shall be imprisoned for debt or nonpayment of poll tax. Statement II: Provisions in the Philippine Constitution on Taxation are grants of power. Statement III: The salaries of the President of the Philippines and of the justices of the Supreme Court are exempt from Income Tax.

Answer >>>

A) True, False, False B) True, True, False

C) True, True, True D) False, False, False

ANSWER: A

9/20/2012 

3 

JPIA Corporation has the following data: 2011 2012 Sales P 1, 700, 000 P 2, 300, 000 Cost of Sales P 1, 050, 000 P 1, 425, 000 Operating Expenses P 615, 000 P 480, 000 The income tax payable in 2011 is

A) 13,000 B) 12,250

C) 35,000 D) 10,500

Answer >>>

ANSWER: A Solution: Gross Income (P 1, 700, 000 – P 1, 050, 000) P 650, 000 Less: Operating Expenses P 615, 000 Taxable Income P 35, 000 Rate of Tax x 30% Normal Income Tax P 10, 500 Minimum Corporate Income Tax (P 650, 000 x 2%) P 13, 000 Tax payable (whichever is higher) P 13, 000

In 2011, Moises, an employee of Clamor Corporation, is indebted to De Ocampo Corporation in the amount of P 50, 000. He has also a liability with Gregory of P 25, 000. During the year, the Board of Directors of De Ocampo Corporation decided to condone his liability, he being a stockholder of said corporation. To be relieved of his liability, Moises was required by Gregory to work in his restaurant for two (2) months as waiter. As a consequence, Moises filed his vacation leave from Clamor Corporation for the same period thereby receiving the monetized value of his leave credits in the amount of P 6, 000. While working as a waiter in the restaurant, he received tips from the customers totaling P 5, 000. Said amount was not accounted anymore by Gregory. How much was taxable income of Moises in 2011?

A) 36,000 B) 25,000

C) 30,000 D) 86,000

Answer >>>

ANSWER: C Solution: Tips 5,000 Liability condoned after rendering service 25,000 Taxable income 30,000

9/20/2012 

4 

Gomez Company owns a fleet of motor vehicles. In 2011, one of the cars which was acquired at a cost of P 800, 000 was allowed to be used by the marketing manager. During the year, its book value amount to P 775, 000. How much will be the fringe benefit tax due thereon? (Round off to the nearest peso)

A) 96,969 B) 18,824

C) 36,471 D) 37,647

Answer >>>

ANSWER: D Solution: Monetary value (P800,000/5) x 50% 80,000 Divide by ÷ 68% Grossed-up monetary value 117,647 Rate of tax x 32% Fringe benefit tax 37,647

An heir who inherits personal property by will is called

A) Devisee B) Legatee

C) Trustor D) Beneficiary

Answer >>>

ANSWER: B

9/20/2012 

5 

Mr. Romeo Galvez, an Italian residing in the Philippines, purchased a house and lot on March 19, 2005 for P 1, 000, 000. He sold the same property on March 19, 2011 for P 5, 000, 000 when the fair market value was P 4, 500, 000. How much capital gains tax on this particular asset transaction should be reported by Galvez if the P 2, 500, 000 is to be used in the construction of a new residence during the year?

A) 150,000 B) 300,000

C) 270,000 D) None

Answer >>>

ANSWER: A Solution: Gross selling price 5,000,000 Less: Utilized portion 2,500,000 Unutilized portion 2,500,000 Taxable portion (2,500,000/5,000,000 x P 5,000,000) 2,500,000 Rate of tax 6% Final tax 150,000

Paul Tan, a Chinese taxpayer who is a married non-resident alien engaged in business in the Philippines with two qualified dependent children. His country gives a non-resident Filipino with income therefrom a basic personal exemption of P 35, 000 and additional exemption of P 5, 000. He is entitled to a personal exemption of

A) 45,000 B) 35,000

C) 42,000 D) 40,000

Answer >>>

ANSWER: B A nonresident alien engaged in trade or business is allowed to claim basic personal exemptions as deduction from gross income. They are not, however, allowed to claim additional exemption. The personal exemptions allowed shall be the lesser amount between that allowed in his country and the amount fixed as exemption for citizens or residents in the Philippines.

9/20/2012 

6 

MATHSSOC Corporation has the following data during the year 2012: Gross Sales P 1, 540, 000 Cost of Sales P 645, 000 Expenses P 460, 460 If MATHSSOC Corporation availed the Optional Standard Deduction, the taxable income shall be

A) 537,000 B) 434,540

C) 741,000 D) 279,000

Answer >>>

ANSWER: A Solution: Gross Sales P 1, 540, 000 Cost of Sales P 645, 000 Gross Income P 895, 000 Less: Optional Deduction (P 895, 000 x 40%) P 358, 000 Taxable Income P 537, 000

KC and Michiko formed a business partnership sharing profits and losses in the ratio of 50:50. The following are the data of income and expenses during the year: Sales P 1, 000, 000 Inventory, January 1 120, 000 Purchases 450, 000 Inventory, December 31 60, 000 Selling and administrative expenses 210, 000 Interest on time deposit, gross of tax 5, 000 Dividend from domestic corporation 25, 000 Dividend from resident foreign corporation 50, 000 The income tax payable by the partnership is: A) 105,600 B) 115,500

C) 113,600 D) 99,000

Answer >>>

ANSWER: B Solution: Sales 1,000,000 Less: Cost of sales Inventory, January 1 120,000 Add: Purchases 450,000 Goods available for sale 570,000 Less: Inventory, December 31 60,000 510,000 Gross profit 490,000 Less: Selling and administrative expenses 210,000 Net income 280,000 Add: Dividend from resident foreign corporation 50,000 Taxable income 330,000 Rate of tax 30% Income tax due 115,500

9/20/2012 

7 

Bermal Corporation purchased a residential house for P2,000,000. The zonal value is P2,500,000. The title to the property was transferred in the name of Mary May, the company’s Vice President for Finance. How much is the fringe benefit tax due? (Round off to the nearest peso.)

A) 1,176,471 B) 1,035,294

C) 941,176 D) None

Answer >>>

ANSWER: A Solution: Fair market value (higher) 2,500,000 Divide by 68% Grossed-up monetary value 3,676,471 Rate of tax 32% Fringe benefit tax 1,176,471

Nandy Valenzuela, an amateur boxer, represented the Philippine team in London Olympics. He received the following income: P500,000 cash award donated by Rubberworld Philippines; P400,000 talent fee as model of Nike Shoes and shirts, P 1,000,000 professional fee as an actor. On the other hand, Chris Danoso, a professional boxer won in a rematch between him and El Terrible held at Mandalay Bay, Las Vegas, Nevada. Chris Danoso received the following: P25,000,000 as cash prize in the fight; P30,000,000 from Pay Per View; P12,000,000 talent fee as commercial model of San Miguel Beer. How much is the taxable income to Nandy Valenzuela and Chris Danoso respectively?

A) Nandy – 2,100,000 Chris – 42,000,000

B) Nandy – 1,400,000 Chris – 42,000,000

C) Nandy – 1,400,000 Chris – 67,000,000

D) Nandy – 1,000,000 Chris – 12,000,000

Answer >>>

ANSWER: C Solution: Talent fee 400,000 Professional fee 1,000,000 Taxable Income, Nandy Valenzuela 1,400,000 Cash prize 25,000,000 Pay per view 30,000,000 Talent fee 12,000,000 Taxable Income, Chris Danoso 67,000,000

9/20/2012 

8 

Mariz Joy has the following data in 2011: Sale of Property Holding period Gain/Loss 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 form the sale of the residential house shall be used in acquiring a new residence. During the year, Mariz Joy had a net income from business (other than the sale of properties above) in the amount of P 5, 000. The taxable income before personal exemption of Mariz Joy in 2011 is A) 32,200 B) 38,000

C) 22,200 D) 42,200

Answer >>>

ANSWER: B Solution: Net income P 5,000 Sale of ordinary assets: Apartment house P 35,000 Jewelry in a jewelry store 8,000 Transportation equipment (10,000) 33,000 Sale of capital asset: Jewelry for personal use (4,200 x 100%) P 4,200 Personal car (20,000 x 50%) (10,000) Net capital loss ( 5,800) - 0 - Net income before personal exemption 38,000

The following statements are true, except:

A) Fringe benefit tax shall be treated as a final income tax on the employee withheld and paid by the employer on a quarterly basis.

B) 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.

C) The grossed-up monetary value of the fringe benefit is the actual amount received by the employee.

D) The person liable for fringe benefit tax is the employer, whether he is an individual, professional partnership or a corporation regardless of whether the corporation is taxable or not or the government and its instrumentalities.

Answer >>>

ANSWER: C

9/20/2012 

9 

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 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.

C) Real properties acquired in the course of trade or business by a taxpayer habitually engaged in the sale of real estate.

D) d. 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 subsequently use such property in trade or business.

Answer >>>

ANSWER: D

ATLAS Corporation, a corporation engaged in business in the Philippines and abroad has the following data during the year: Gross Income, Philippines P 740, 000 Expenses, Philippines 425, 000 Gross Income, USA 690, 000 Expenses, USA 450, 000 Interest on Bank Deposit with BDO 10, 000 Royalties, USA 50, 000 How much is the income tax payable if the taxpayer is a domestic corporation?

A) 211,750 B) 181,500

C) 236,800 D) 193,600

Answer >>>

ANSWER: A Solution: Gross income, Philippines P 740,000 Less: Expenses, Philippines 425,000 P 315,000 Gross income, U.S.A. 690,000 Less: Expenses, USA 450,000 240,000 Royalties, USA 50,000 Taxable income 605,000 Rate of tax (2008) x 35% Income tax 211,750

9/20/2012 

10 

Ronnel and Marjorie, husband and wife, have the following data in 2012: Ronnel Marjorie Compensation income P 300, 000 P 260, 000 Rent Income 76, 000 Royalties on books 70, 000 Dependent children 6 Withholding tax on compensation 10, 000 During the year, the spouses had an income of P 120, 000and expenses of P 80, 000 which cannot be entitled as solely earned by the wife or the husband. The taxable income of Marjorie is? A) 130,000 B) 230,000

C) 280,000 D) None

Answer >>>

ANSWER: B Solution: Compensation income P 260, 000 Share of Marjorie (P 120, 000 – P 80, 000)/2 P 20,000 Total P 280, 000 Less: Basic exemption P 50, 000 Taxable Income P 230, 000

Alfredo Bolo died on January 1, 2010. He left a gross estate with a cost of P 4, 000, 000 but valued at P 3, 500, 000 under an administrator. During the year, the gross income derived from the business of the estate was P 400, 000 while the related expenses amounted to P 150, 000. Beneficiaries Pepe and Jose were given P 100, 000 each. The income tax due on the estate of Alfredo Bolo is

A) 30,000 B) 2,500

C) 5,500 D) 50,000

Answer >>>

ANSWER: B Solution: Gross Income P 400,000 Less: Expenses P 150, 000 Distribution to beneficiaries (P 100T x 2) 200, 000 350,000 Net Income 50,000 Less: Personal Exemption 20,000 Taxable Income P 30,000 Tax on P 30, 000 = 50 P 2, 500

9/20/2012 

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Statement I: A tax is generally unlimited because it is based on the needs of the State. Statement II: The rule of Taxation shall be uniform and equitable. Statement III: The theory of Taxation is based on the lifeblood doctrine.

A) True, False, True B) True, True, False

C) True, True, True D) False, False, False

Answer >>>

ANSWER: C

Mark Chua, single, supporting his 86-year old father, is a business manager. During the year, his net income was P 150, 000. He also paid a total premium of P 3, 000 to an insurance company for his health insurance. How much is his taxable income?

A) 97,600 B) 97,000

C) 100,000 D) 147,000

Answer >>>

ANSWER: A Solution: Gross compensation income P 150, 000 Less: Health insurance (maximum) P 2, 400 Basic personal exemption 50, 000 52, 400 Taxable Income P 97, 600

9/20/2012 

12 

Statement I: The term “Net Operating Loss” shall mean the excess of allowable deduction over gross income of the business in a taxable year. Statement II: Nonresident foreign corporations are not entitled to deduct NOLCO from their gross income. Statement III: The NOLCO which had not been offset as deduction from gross income shall be carried over as deduction from gross income for the next taxable year immediately following the year of such loss. Which of the following statements is false?

Answer >>>

A) Statement 1 B) Statement 2

C) Statement 3 D) Non of the above

ANSWER: C

Russel saved the life of Arianne and three others who met a car accident. Unintentionally, it was found out that Arianne is a kidnap victim of the three men. Because of the assistance of Russel, Arianne was saved and the kidnappers were arrested by police authorities. Consequently, Arianne gave Russel P 50, 000. The remuneration received by Russel is:

A) Exempt from tax B) Subject to Income Tax

C) Subject to Donor’s Tax D) Subject to 20% Final Tax

Answer >>>

ANSWER: B The money given to Russel is a remuneratory donation. It is deemed an income, subject to income tax.

9/20/2012 

13 

Micah, Toni and Sharmaine, together with Rose Marie, Sarah, Irish and Monica are the incorporators of Gorgeous Corporation. Their company owned a building with a cost of P 500, 000 that was partially destroyed by fire in 2011. At the time of the occurrence, it had a n accumulated depreciation of P 300, 000. If the company spent P 300, 000 for the renovation or repair of the portion destroyed, how much is the deductible loss to Gorgeous Corporation?

A) 500,000 B) 300,000

C) 200,000 D) 100,000

Answer >>>

ANSWER: C Solution: Cost 500,000 Less: Accumulated depreciation 300,000 Book value 200,000 Replacement cost 300,000 Deductible loss (whichever is lower) 200,000