TAX [REO CPA REVIEW]

Final Preboards - May 2025 Batch

All of the following are characteristics of taxation, except __.
A. it is essentially legislative in character
B. it is payable in money
C. compliance is voluntary and optional on the part of the taxpayers
D. constitutional grant or provision is not required for the exercise of power

C. compliance is voluntary and optional on the part of the taxpayersis not a characteristic of taxation; taxpayers are legally obligated to fulfill tax responsibilities.

Substituted filing of income tax returns is a manifestation of which principle of a sound tax system?
A. Equality
B. Theoretical justice
C. Fiscal adequacy
D. Administrative feasibility

D. Administrative feasibility. This principle ensures that tax systems are easy to administer, reducing compliance costs and making tax collection more efficient.

Which of the following inherent limitations of the power of taxation is violated by the imposition of tax on the importation of the head of state and other diplomatic or consular representatives of other countries?
A. Territoriality
B. International comity
C. Exemption of government from taxes
D. Non-delegation of power of taxation

B. International comity. This principle protects diplomatic agents from taxation by the host country, acknowledging their special status.

The grant of immunity to particular persons or sorporations of a particular class from a tax which persons and corporations generally within the same taxing district are obliged to pay
A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Tax amnesty

A. Tax exemption. This refers to the legal privilege that allows certain individuals or corporations to be free from tax obligations that apply to others in the same jurisdiction.

Domicile or residence of the owner is not the situs of taxation in
A. Income tax
B. Community tax
C. Estate tax
D. Business tax

D. Business tax. This refers to the location where a business operates and earns income, which may be subject to taxation regardless of the owner's domicile.

Which of the following is not a remedy against indirect double taxation?
A. Reciprocity provisions
B. Tax credit
C. Tax exemption
D. Vanishing deduction

C. Tax exemption. This is not a remedy against indirect double taxation, as it refers to a situation where certain individuals or entities are free from tax obligations that others must pay.

The legislative body can impose a tax at any amount underscores the legal truism that taxation is
A. An inherent power of the tax
B. A very broad power of the state
C. Essentially a legislative power
D. For public purpose

B. A very broad power of the state. To levy taxes without restriction, highlighting its comprehensive authority in generating revenue for governmental functions.

Identify a false FALSE statement
A. No matter where a legislative proposal originates, it can be introduced only by a member of Congress.
B. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives.
C. The Senate may not propose a revenue bill.
D. None of the above

C. The Senate may not propose a revenue bill. This is a false statement, as the Senate can propose revenue bills, although they must originate in the House of Representatives.

On March 5, 2024, the BIR discovered a deficiency value-added tax for the quarter ended September 2017. The deficiency did not arise from error or fraud. Which of the following statements is correct?
A. The BIR must send the assessment notice before March 5, 2027.
B. The BIR has no more remedies since the right of the government to file an action had already prescibed.
C. The BIR must send the assessment notice before October 25, 2027.
D. The BIR must send the assessment notice before March 5, 2034.

B. The BIR has no more remedies since the right of the government to file an action had already prescibed. Dapat naadress on or before Oct. 25, 2020

Quarterly VAT deadline: 25 days from the end of the taxable quarter
Oct 25, 2017 - deadline

Which of the following is not an extrajudicial remedy of the government against the taxpayer?
A. Distraint of personal property
B. Levy of real property
C. Garnishing of bank accounts
D. Filing of criminal case in court

D. Filing of criminal case in court. Judicial remedy

The seizure of the government of real property and interest on rights to property of the taxpayer to enforce the payment of taxes followed by its public sale.
A. Confiscation
B. Distraint
C. Forfeiture
D. Levy

D. Levy.

D - di lupa
L - lupa

When a BIR decision affirming an assessment is appealed to the CTA, the BIR’s power to garnish the taxpayer’s bank deposits -
A. is suspended to await the finality of such decision.
B. is suspended given that the CTA can reverse BIR decisions when prejudicial to the taxpayer.
C. is not suspended because only final decisions of the BIR are subject to appeal.
D. is not suspended since the continued existence of government depends on tax revenues.

D. is not suspended since the continued existence of government depends on tax revenues.This means the BIR can continue to collect taxes even during the appeal process. (Remember Lifeblood Doctrine)

The following are administrative remedies available to a taxpayer in connection with collection of taxes, except:

A. Filing of claim for tax refund or credit.
B. Filing a petition for reconsideration or reinvestigation.
C. Filing of criminal complaint against erring BIR officials or employees.
D. Entering into a compromise.

C. Filing of criminal complaint against erring BIR officials or employees.

Which kind of protest requires the submission of additional supporting documents?
A. Request for reconsideration
B. Request for reinvestigation
C. Request for reconveyance
D. Request for recognition

B. Request for reinvestigation

Within how many days must additional supporting documents be submitted by the protesting taxpayer?
A. Thirty (30) days from filing of a request for reconsideration.
B. Thirty (30) days from filing of a request for reinvestigation.
C. Sixty (60) days from filing of a request for reinvestigation.
D. Sixty (60) days from filing of a request for reconsideration.

C. Sixty (60) days from filing of a request for reinvestigation.

Upon notice of an adverse decision by the Court of Tax Appeals Division, the taxpayer may file__.
A. a Petition for Review within 15 days to the Court of Tax Appeals en banc.
B. a Petition for Review within 30 days to the Court of Tax Appeals en banc.
C. a Motion for Reconsideration or Motion for New Trial within 15 days to the Court of Tax Appeals Division.
D. a Motion for Reconsideration or Motion for New Trial within 30 days to the Court of Tax Appeals Division.

C. a Motion for Reconsideration or Motion for New Trial within 15 days to the Court of Tax Appeals Division.

Statement I: If an income is already subjected to creditable withholding tax, it is no longer reported as part of gross income subject to regular income tax.
Statement II: If an income is already subjected to final withholding tax, it is reported as part of gross income at an amount net of the amount of tax withheld.
A. Only statement I is true.
B. Only statement II is true
C. Both statements are true.
D. Coth statements are false.

D. Coth statements are false.

Luca Giovanni, Italian, arrived in the Philippines on January 1, 2023 and continued to live and engage in business in the Philippines. He went on a tour in Southeast Asia from August 1 to November 5, 2023. He returned to the Philippines on November 6, 2023 and stayed until April 15, 2024 when he returned to France. He earned during his stay in the Philippines a gross income of P3 million from his investments in the country. For the year 2023, Luca’s taxable status is that of -
A. a non-resident alien not engaged in trade or business in the Philippines.
B. a non-resident alien engaged in trade or business in the Philippines.
C. a resident alien not engaged in trade or business in the Philippines.
D. a resident alien engaged in trade or business in the Philippines.

B. a non-resident alien engaged in trade or business in the Philippines.

Doctor Tan is a professional consultant visiting many hospitals in a week. Due to a pandemic, he has been tirelessly seeing patients and their relatives, advising them on the proper management of the disease. Doctor Tan is being paid his professional fees, which the hospitals subject to ten percent (10&) creditable withholding tax. For taxable year 2024, Doctor Tan received P3,780,000, net of withholding tax, from the hospitals. One hospital is Baguio City Hospital. The accountant of Baguio City Hospital recorded a payable to Doctor Tan amounting to P140,000 on March 19, 2024. However, the check payable to Doctor Tan was only issued by the Treasury Department on May 4, 2024 and was encashed by Doctor Tan on July 20, 2024.

Which of the following statements is TRUE?
A. Doctor Tan is qualified under the substituted filing of tax.
B. Doctor Tan should declare P3,780,000 as part of his income in his income tax return at gross, and claim P420,000 as income tax credit."
C. The Treasury Department is the withholding agent.
D. To claim income tax credit, Doctor Tan will attach in his income tax return BIR Form 2316.

B. Doctor Tan should declare P3,780,000 as part of his income in his income tax return at gross, and claim P420,000 as income tax credit."

Mr. Juan de la Cruz transferred his commercial land with a cost of P500,000 but a fair market value of P750,000 to Velasco Corporation in exchange of the stocks of the corporation with a par value of P1,000,000. As a result of the transfer, he became the major stockholder of the corporation. As a result of the transfer —
A. The recognized gain is the difference between the fair market value of the shares of stocks and the cost of the land.
B. The recognized gain is the difference between the par value of the fair market vlaue of the land.
C. No recognized gain because the land was in exchange of stocks of the corporation.
D. No recognized gain because the land was in exchange of purely stocks and Mr. de la Cruz became the major stockholder.

D. No recognized gain because the land was in exchange of purely stocks and Mr. de la Cruz became the major stockholder.

Richard leased a 216 square meter of idle land to Suzanne College of Business (SCB), a proprietary educational institution, for a period of twenty (20) years effective January 1, 2023.

The lease contract provides that SCB will erect a building thereon to be used as classroom, which it did on the lot of Richard.

The agreement also provides that the building shall become the property of the lessor at the end of the lease. The building was completed in June 30, 2025 at a cost of P1,800,000. The estimated life of the leasehold improvement is thirty (30) years and will be occupied at the beginning of the 4th quarter of 2025.

If was further agreed that SCB will pay the real estate tax on the land assessed at P3,000 annually.

On January 2, 2023, SCB paid to Richard P120,000 consisting of the rental covering the two (2) year period from 2023 to 2024.

Which of the following is FALSE?
A. The rent income to be reported by Richard in 2023 is P123,000
B. The income to be reported by Richard in 2025 under outright method is P1,862,250.
C. The income to be reported by Richard in 2025 under spread-out method is P83,679.
D. Effective January 1, 2025 the land shall be exempt from real property tax.

D. Effective January 1, 2025 the land shall be exempt from real property tax.

If a fixed income earner avails of the 8% income tax option, then __.
A. He is entitled to deduct P250,000 from his compensation as exempt income, and another P250,000 as exempt income from trade or business.
B. He is entitled to deduct P250,000 from his compensation as exempt income, or P250,000 as exempt income from trade or business, at his option.
C. He is not entitled to any exemption.
D. He is entitled to deduct P250,000 as exempt compensation income.

D. He is entitled to deduct P250,000 as exempt compensation income.

Explorations Industries, a non—VAT registered sole proprietorship engaged in the transport of passengers, operates two liners: Northern Bus Lines is engaged in the domestic transport of passengers by land while Southern Ferries is engaged in the domestic transport of passengers by sea. During the taxable year 2024, the following revenues were presented to you:

Northern Southern
Gross receipts 4,000,000 4,000,000
Less: Cost of services (3,200,000) (1,400,000)
Gross income 800,000 2,600,000
Less: Allowable Deductions (500,000) (400,000)
Taxable Income 300,000 2,200,000

Select the correct statement below:
A. Exploration industries can avail of the 8% tax option.
B. The income tax due is P402,500.
C. The output VAT is 12% of the total gross receipts.
D. The percentage tax is P120,000.

D. The percentage tax is P120,000.

Ben sold to Gwen shares of stock of a foreign corporation at a selling price of P1,000,000 with an acquisition cost of P380,000. On the same date, Ben sold to Gwen shares of a domestic corporation at a selling price of P600,000, with an acquisition cost of P400,000.

If Ben is a resident cistizen and is not a dealer in securities, and the shares were sold directly to Gwen, how much is the capital gains tax due of Ben from the transaction?

A. 0
B. 30,000
C. 93,000
D. 123,000

B. 30,000

(600K - 400K) x 15% = 30K