ReSA -The Review School of Accountancy Taxation

October 2023 Batch

TAX Quiz 3
COVERAGE - Week 10 to Week 14 Lecture
 Fringe Benefits
 Capital Gains
 Deductions
 Additions to Tax

1. AST Corporation paid the bills of its Senior Vice-President during the latter’s vacation
stay at a beach resort in the amount of P34,000. How much is the fringe benefits tax?
a. P18,308 c. 11,900
b. P16,000 d. Not subject to fringe benefits tax

P34,000 divided by 65% x 35% P18,308

2. CPL, Inc. purchased a residential house and lot in the name of its CFO for the latter’s
residence in the amount of P1,800,000. The property has a zonal value of P2,550,000 and
an assessed value of P1,500,000. How much is the fringe benefits tax?
a. P1,373,077 c. P892,500
b. P1,200,000 d. Not subject to fringe benefits tax

P2,550,000 divided by 65% x 35% P1,373,077

3. Using the same data in the preceding number, assuming CPL, Inc. sold the house and lot to
the CFO for P2,000,000. How much is the fringe benefits tax?
a. P892,500 c. P296,154
b. P700,000 d. Not subject to fringe benefits tax

Not subject to fringe benefits tax. The selling price (P2,000,000) is not at a price
less than the employer’s acquisition cost (P1,800,000).

4. An employee received the following during the year:

Medical benefits P12,000
Employee achievement awards (tangible personal property 10,000
Benefits received by an employee by virtue of a collective bargaining
(CBA) and productivity incentive schemes 15,000
Uniforms and clothing allowance given to employees by the employer 10,000
Rice subsidy 30,000

How much shall be included as other benefits?

a. P60,000 c. P27,000
b. P28,000 d. P17,000
Given Excess
Medical benefits (10,000) P12,000 P2,000
Employee achievement awards (tangible personal property)
(P10,000) 10,000 -
Benefits received by an employee by virtue of a collective
bargaining (CBA) and productivity incentive schemes
(P10,000) if over P10,000 full amount is other benefits 15,000 15,000
Uniforms and clothing allowance given to employees by the
employer (P6,000) 10,000 4,000
Rice subsidy (2,000 x 12 = 24,000) 30,000 6,000
Total P27,000

5. First statement: The fringe benefit tax shall be treated as a final income tax on the
employee which shall be withheld and paid by the employer on a calendar quarterly basis as
provided under the Tax Code.

Second statement: The grossed-up monetary value of the fringe benefit represents the whole
amount of income realized by the employee which includes the net amount of money or monetary
value of property which has been received plus the amount of fringe benefit tax thereon
otherwise due from the employee but paid by the employer for and in behalf of his employee.

a. Only the first statement is correct

b. Only the second statement is correct
c. Both statements are correct
d. Both statements are incorrect

Reference: Section 2.33 (A), Revenue Regulations No. 3-98

Page 1 of 4 pages
ReSA - The Review School of Accountancy TAX Quiz 3
Coverage: TAX – 1001 - 1601 (ReSA Batch 46 – October 2023 Batch)
6. (Phil. CPA) The term “capital asset” 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 his trade or
business.
d. property used in the trade or business of the taxpayer and subject to depreciation.

Reference: Section 39 (A) (1), NIRC, as amended

7. (Phil. CPA) A feature of ordinary gains as distinguished from capital gains.

a. Gains from sales of assets not stock in trade
b. May or may not be taxable in full
c. Sources are capital assets
d. No holding period

8. (Phil. CPA Modified) Under the Tax Code, how much shall be taken into account in computing
the P100,000 net income, if a gain is realized by a corporate taxpayer from the sale or
exchange of capital assets (other than real properties and shares of stock) held for more
than twelve months?
a. P100,000 c. P 5,000
b. P 50,000 d. None, there is no capital loss

9. First statement: Net capital loss carry-over is allowed to taxpayers other than
corporations, and this is carried over to the succeeding year as a short-term loss.
Second statement: The amount of net capital loss carry-over is the
net capital loss or the net income in the year the net capital loss is sustained, whichever
is lower.
a. True, True c. True, False
b. False, False d. False, True

Reference: Section 39 (D), NIRC, as amended

10. (Phil. CPA) Jose Josue qualified as head of a household for 2021 tax purposes. Mr. Josue’s
2022 taxable income was P200,000 exclusive of capital gains and losses. Mr. Josue had a
net long-term loss of P8,000 in 2022. What amount of this capital loss could Mr. Josue
offset against the 2022 ordinary income?
a. Zero c. P4,000
b. P3,000 d. P8,000

11. First statement: A taxpayer can deduct an item or amount from the gross income only if
there is a law authorizing such a deduction.
Second statement: For income tax purposes, a taxpayer is free to deduct from the gross
income the full amount or a lesser amount of the deduction allowed or not claim any
deduction at all.
a. True, True c. True, False
b. False, False d. False, True

12. (Phil. CPA) In cases of deductions and exemptions on income tax returns, doubts shall be
resolved:
a. strictly against the taxpayer.
b. strictly against the government.
c. liberally in favor of the taxpayer.
d. liberally in favor of the employer.

13. One of the following is not deductible from the gross income.
a. Amounts paid as pensions to retired employees or their families or others dependent
upon them, or on account of injuries received by employees and lump-sum amounts paid
or accrued as compensation for injuries, not compensated for by insurance or otherwise
b. Amount of the salary of an officer or employee paid to his widow or heirs for a limited
period after his death, in recognition of the services rendered by the officer or
employee
c. Salaries paid by employers to employees who are absent because they are in the military,
naval or other service in the government, but who intend to return at the conclusion
of such service
d. Ostensible salary paid by a corporation which is actually a distribution of dividends
or part payment for a property

14. A business partnership leased a condominium unit in Makati for use as its office. The
contract was properly classified as a capital lease. It paid P50,000 monthly to the
condominium owner. For income taxation, the monthly payment was:
a. deductible as rent expense.
b. deductible as payment of amortization.
c. not deductible because the taxpayer was taking title and would become the owner of
the condominium unit.
d. not deductible because the payment was not reasonable.

Page 2 of 4 pages
ReSA - The Review School of Accountancy TAX Quiz 3
Coverage: TAX – 1001 - 1601 (ReSA Batch 46 – October 2023 Batch)
15. A private educational institution had capital outlays of depreciable assets for expansion
of school facilities. For income taxation, the private educational institution may:
a. deduct the capital outlays as expenses during the year.
b. depreciate the cost over the estimated useful life.
c. deduct the capital outlays as expense during the year or depreciate them over the
estimated useful life at its option.
d. deduct the capital outlays as expense during the year or depreciate them over the
estimated useful life at the option of the BIR.
Reference: Section 34 (A) (2), NIRC, as amended

16. The following data is relative to office equipment partially destroyed by fire:
Acquisition cost P500,000
Accumulated depreciation 100,000
Insurance recovered 200,000
Replacement cost 550,000

a. P400,000 c. P200,000
b. P300,000 d. Not deductible
Book value (500,000 – 100,000) P400,000
Restoration cost P550,000
Book value (lower) P400,000
Less: Insurance recovery 200,000
Deductible casualty loss P200,000

17. One of the following is not a requisite in order that a bad debt may be claimed as a
deductible expense?
a. The debt must be connected with the taxpayer’s trade, business or profession.
b. The debt must be ascertained to be worthless.
c. The debt must be written off during the taxable year.
d. The debt must be past due for at least one year.

18. Which of the following asset shall be subject to depletion?

a. Machinery c. Commercial land
b. Land with ore deposit d. Patent

19. Which of the following losses is deductible for income tax purposes?
a. Loss from illegal transactions
b. Loss incurred in selling used delivery truck to an uncle
c. Loss from a business receivable from a customer which is doubtful in collection
d. Loss from “wash sale”

20. Which of these losses dur to demolition of an old building is deductible from gross income?
a. The old building is demolished because it became unsafe.
b. The land with an existing old building was bought with the intention of demolishing
the old building in order to construct a new one.
c. Both a and b
d. Neither a nor b

21. First statement: The additions to the tax or deficiency tax prescribed shall apply to
all taxes, fees and charges imposed under the Tax Code.
Second statement: The amounts so added to the tax shall be collected at the same
time, in the same manner and as part of the tax.
a. True, True c. True, False
b. False, False d. False, True
References: Section 247 (a), NIRC, as amended
Section 2, Revenue Regulations No. 12-99

22. (Phil. CPA) For filing false and fraudulent return, a surcharge is imposed. Which of
the following is correct?
a. 50% administrative penalty
b. 50% criminal penalty
c. 25% plus 50%
d. 25% criminal penalty

23. In one of the following cases, a return filed is not false or fraudulent.
a. There is intentional substantial under declaration of income or overstatement of
deduction.
b. There is intentional under declaration of selling price and overvaluation of cost of
property sold.
c. Recurrence of the understatement of income or overstatement of deductions for more
than one taxable year.
d. Filing of return has been delayed for a considerable length of time.

Reference: Section 248 (B), NIRC, as amended

Page 3 of 4 pages
ReSA - The Review School of Accountancy TAX Quiz 3
Coverage: TAX – 1001 - 1601 (ReSA Batch 46 – October 2023 Batch)
24. Which of the following interests is incorrect?
a. Interest on deficiency
b. Interest on delinquency
c. Interest on extended payment
d. Interest on surcharge
Reference: Section 249 (B), (C) and (D), NIRC, as amended
25. Phil. CPA) Which of the following violations cannot be subject to compromise?
a. Failure to keep or preserve books of accounts and accounting records.
b. Failure to keep books of accounts or records in a native language or English.
c. Failure to have books of accounts audited and have financial statements attached to
income tax return certified by an independent CPA.
d. Keeping of two sets of books of accounts or records.
26. On September 1, 2021, X Corporation invested P1,000,000 in Y Corporation common shares.
The X Corporation common shares became worthless on August 1, 2022. For income tax purposes,
how much loss shall be recognized?
a. P1,000,000 ordinary loss
b. P1,000,000 capital loss
c. P500,000 capital loss
d. Neither ordinary loss nor capital loss
Long-term capital loss. September 1, 2021 to December 31, 2022 is more than 12 months.
If shares of stock become worthless during the taxable year and are capital assets, the
loss shall be considered as a loss from the sale or exchange of capital assets on the
last day of such taxable year.
Holding period does not apply to corporations.

27. Using the same data in the preceding number, instead of X Corporation it was Mr. X, an
individual taxpayer, who invested the P1,000,000 in Y Corporation common shares, how much
loss shall be recognized for income tax purposes?
a. P1,000,000 ordinary loss
b. P1,000,000 capital loss
c. P500,000 capital loss
d. Neither ordinary loss nor capital loss

Long-term capital loss (50% x 1,000,000 = 500,000)

If shares of stock become worthless during the taxable year and are capital assets, the
loss shall be considered as a loss from the sale or exchange of capital assets on the
last day of such taxable year.

SITUATIONAL
LAB Corporation, a domestic manufacturing corporation, had a gross sales of P100,000,000.00 for
fiscal year ending June 30, 2021. It incurred cost of sales of P60,000,000.00 which includes
Direct Labor Wage of P20,000,000.00 and operating
expenses of P17,500,000.00 which include training expenses amounting to P3,000,000.00. The
corporation complied with all the prescribed requirements (e.g., Apprenticeship Agreement,
Certification from DepED or TESDA or CHED, whichever is applicable).
28. How much is the additional deductions?
a. P19,000,000 c. P2,000,000
b. P17,500,000 d. P1,500,000

29. How much is the total deductions?

a. P19,000,000 c. P2,000,000
b. P17,500,000 d. P1,500,000

30. How much is the corporation’s net taxable income for the taxable year?
a. P22,500,000 c. P20,500,000
b. P21,000,000 d. P19,500,000
Answers:
Gross sales P100,000,000.00
Less: Cost of sales 60,000,000.00
Gross income 40,000,000.00
Less: Operating expenses (before the
additional deduction) 17,500,000.00
Additional deduction from training
expenses (1/2 x 3,000,000.00)
(lower) 1,500,000.00
10% of direct labor wages of
P20,000,000.00 2,000,000.00 1,500,000.00 19,000,000
Net taxable income P21,000,000.00

END OF QUIZ

Page 4 of 4 pages