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De La Salle Lipa - ACCOUNTING AC 231 1) A fundamental rule in taxation is that “the property of one country may not be taxed by another country

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De La Salle Lipa - ACCOUNTING AC 231

1) A fundamental rule in taxation is that “the property of one country may not be taxed by another country.” This is known as International comityh of the following is an incorrect description of taxation?

2. The existence of the government is the necessity and the state has the right to compel all individuals and property within its limits to contribute
3. S1: Tax avoidance is a scheme used outside of those lawful means to escape tax liability

S2: Tax avoidance is a tax saving device within the means sanctioned by law, and, when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities

4. The least source of tax laws:
5. The levying and imposition of tax and the collection of tax are processes which constitute the taxation system
6. The Commissioner of Internal Revenue is granted certain powers under the Tax Code.

Which of the following is not a power granted to the Commissioner under the Code?

10.When the power to tax is delegated to the local government

11.S1: A provision on taxation in the Philippine Constitution is a grant of power.

      S2: The power to tax includes the power to destroy.

S3: Sumptuary purpose of taxation is to raise funds for the government

12.The State, having sovereignty can enforce contributions (tax) upon its citizens even without a specific provision in the Constitution authorizing it. Which of the following will justify the foregoing statement?

S1: It is so because the State has the supreme power to command and enforce obedience to its will from the people within its jurisdiction.

S2: Any provision in the Constitution regarding taxation does not create rights for the sovereignty to have power to tax but it merely constitutes limitations upon the supremacy of tax power.

13.The Constitution requires that all revenue bills shall originate “exclusively” from the House of Representatives. Assume that in 2018, Congressman Santino Rice proposed an expansion of the coverage of the value added tax to be known as EVAT law. The proposed bill was approved by the House of Representatives later that year. However, the EVAT version of the Senate became the EVAT law.

 

Which of the following statements will justify the enacted EVAT law?

1. The Constitution simply means that the initiative for filing revenue, tariff, or tax bills must come from the House of Representatives on the theory that, elected as they are from the districts, the Members of the House can be expected to be more sensitive to the local needs and problems.
2. It is not the law but the revenue bill which is required by the Constitution to “originate exclusively” in the House of Representatives because a bill originating in the House may undergo such extensive changes in the Senate that that the result may be a rewriting of the whole, and a distinct bill may be produced.

14.Which of the following is an incorrect description of taxation?

15.The Commissioner of Internal Revenue is granted certain powers under the Tax Code.

Which of the following is not a power granted to the Commissioner under the Code?

16.Which statements below expresses the lifeblood theory?

17.Pedro started to operate his taxi business in 2018. He provided the following data for tax purposes:

Gross receipts                                     P2,500,000

Cost of direct services                             750,000

Operating expenses                                 400,000

 

Assuming instead that Pedro is engaged in the business of transporting goods or cargoes and he signified his intention to be taxed at 8% income tax rate on his initial quarterly income tax return. How much is his income tax for the year?

18.Individual taxpayers are subject to the following income tax:

1. Basic tax based on graduated tax table
2. Final withholding tax on passive income derived from sources within thePhilippines
3. Capital gains tax
4. Stock transaction tax of 6/10 of 1% of gross selling price

19.Namahinga Nah died leaving an estate worth P10,000,000. The estate is under administration. In 2020, the properties in the estate earned a gross income of P1,200,000 and the estate incurred expenses of P600,000. Felipe, the only heir, received P200,000 from the income of the estate.

 

How much is the income tax due of the estate?

20.Kardo owns a nightclub and a videoke bar, with gross receipts of P2.500,000. His cost of direct services and operating expenses are P1,000,000 and P600,000 respectively, and with non-operating income of P200,000.

 

Kardo’s total tax due for the year shall be:

21.Namahinga Nah died leaving an estate worth P10,000,000. The estate is under administration. In 2020, the properties in the estate earned a gross income of P1,200,000 and the estate incurred expenses of P600,000. Felipe, the only heir, received P200,000 from the income of the estate.

 

Assume that Felipe also earned net income of P500,000 from his trading business. What amount should Francis report as his taxable income for the year?

22.Taxable only on income from sources within the Philippines, except

23.It is important to know the source of income for income tax purposes (i.e. from within and without the Philippines) because:

24.Ana, a resident citizen, provided the following data for year current taxable year:

 

Gross income from business (gross of P12,000 CWT)         P700,000

Business Expenses                                                                   300,000

Royalty from books                                                                    40,000 Gain on direct sale to buyer of shares of stock of a

domestic corporation held as capital asset                                 70,000

Loss on sale of land in the Philippines held as capital asset with cost of P1,500,000

when the zonal value is P1,200,000                                         500,000

 

      How much is the income tax payable of Ana?

25.Maharlika Corporation, a Philippine corporation, has an executive (Pedro) who is a Filipino citizen. Maharlika has a subsidiary in Singapore (Singapore Corporation) and will assign Pedro for an indefinite period to work full time for Singapore Corporation. Pedro will bring his family to reside in Singapore and will lease out his residence in the Philippines. The salary of Pedro will be shouldered

50% by Maharlika while the other 50% and housing, cost of living and educational allowances of Pedro's dependents will be shouldered by Singapore Corporation. Maharlika will credit 50% of Pedro's salary to Pedro's Philippine bank account. Pedro will sign the contract of employment in the Philippines. Pedro will also be receiving rental income for the lease of his Philippine residence. Which of the following income by Pedro be subject to Philippine income tax?

 

1. Salaries
2. Allowances
3. Rental income

 

26.Pedro, Juan, and Antonio are heirs of Luna who died on November 1, 2018. The properties of Luna comprised solely of real property valued at P50,000,000 at the time of his death. The property is subject to lease earning rental income. During 2019, the property remained undivided and it derived a net rental income of P15,000,000.

What amount should be reported as taxable income of the co-ownership in2019?

 

27.Kardo owns a nightclub and a videoke bar, with gross receipts of P2.500,000. His cost of direct services and operating expenses are P1,000,000 and P600,000 respectively, and with non-operating income of P200,000.

 

Kardo’s income tax due for the year shall be:

28.Which of the following is correct?

 

1. A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines.
2. A non-resident citizen is taxable on income derived from sources within the Philippines only.
3. An alien individual, whether a resident or not of the Philippines, is taxable on income derived from sources within the Philippines only.
4. A seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged in international trade shall be treated as an overseas contract worker.

29.Rihanna, an American singer, was engaged to sing for one week at the Western Philippine Plaza after which she returned to USA. For income tax purposes, she shall be classified as:

30.Mr. Nag-aalangan created a trust naming his eldest son, Kadudaduda as beneficiary. If the eldest son could not abide with the terms provided in the trust instrument, Mr. Nag-aalangan has the power to cancel the trust agreement.

 

For the current taxable year, the trust earned a net income of P1,000,000. On the other hand, Mr. Nag-aalangan earned a compensation income of P1,500,000 and business income of P1,000,000.

 

The taxable income of the trust is:

31.Which of the following is included in the income of the estate of a decedent?

32.Pedro, Juan, and Antonio are heirs of Luna who died on November 1, 2018. The properties of Luna comprised solely of real property valued at P50,000,000 at the time of his death. The property is subject to lease earning rental income. During 2019, the property remained undivided and it derived a net rental income of P15,000,000.

 

What amount should each heir report in their individual returns as their share in the net rental income of the property they inherited in 2019?

33.Ana, a resident citizen, provided the following data for year current taxable year:

 

Gross income from business (gross of P12,000 CWT)         P700,000

Business Expenses                                                                   300,000

Royalty from books                                                                    40,000 Gain on direct sale to buyer of shares of stock of a

domestic corporation held as capital asset                                 70,000

Loss on sale of land in the Philippines held as capital asset with cost of P1,500,000

when the zonal value is P1,200,000                                         500,000

 

     How much is the income tax payable of Ana?

34.Mr. Nag-aalangan created a trust naming his eldest son, Kadudaduda as beneficiary. If the eldest son could not abide with the terms provided in the trust instrument, Mr. Nag-aalangan has the power to cancel the trust agreement.

 

For the current taxable year, the trust earned a net income of P1,000,000. On the other hand, Mr. Nag-aalangan earned a compensation income of P1,500,000 and business income of P1,000,000.

 

How much is the taxable income of Mr. Nag-aalangan?

35. Chris is a Filipino immigrant living in the United States for more than 15 years. He is retired and he came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays here about a month. He regularly receives a pension from his former employer in the United States, amounting to US$2,000 a month. While in the Philippines, with his pension pay from his former employer, he purchased three condominium units in Makati which he is renting out for P25,000 a month each. Does the US$2,000 pension become taxable because he is now in the Philippines?

36.Pedro Dela Cruz, nonresident citizen, arrived in the Philippines on July 1, 2020 to reside here permanently after working as a nurse in the United States for many years. Which of the following statements is correct with respect to his classification for income tax purposes?

37.On January1, 2020. Pedro established a trust fund for the benefit of his daughter, Ana. Pedro appointed Mr. Abugado as the trustee. The property transferred to the trust is a piece of land with a dormitory earning rental income. During the year, the trust earned P40,000,000 revenues and incurred expenses of

P10,000,000. Out of the trust's income, Mr. Abugado transferred P10,000,000 to Ana. During the year, Ana earned compensation income of P2,500,000.

 

How much is the taxable income of Ana?