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Income Tax Banggawan 2019 Ch6 1

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Financial Accounting (AE 111)

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Academic year: 2019/2020
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TRUE OR FALSE 1

  1. A vacant and unused lot is an ordinary asset to a real estate dealer.
  2. For taxpayers not engaged in business, assets shall cease to be ordinary assets when they are discontinued from active use for more than two years.
  3. Real and other properties acquired are ordinary assets to banks even if they are not engaged in the realty business.
  4. Capital assets will not become ordinary assets to banks even if they are not engaged in the realty business.
  5. An ordinary asset becomes automatically become a capital asset when it is withdrawn from active use.
  6. The sale of real property capital assets will never be subject to regular income tax.
  7. Donated assets become ordinary assets even if the done do not employ the same in business.
  8. An ordinary asset continues to be an ordinary asset even if idled for more than two years if the taxpayer is engaged in realty business.
  9. The real properties used by exempt corporations in their exempt operations are capital assets.
  10. Dealers in realties are subject to the regular tax on their sale of properties.
  11. Capital gains from assets other than domestic stocks and real properties are subject to regular income tax.
  12. Dealers in securities are not subject to the stock transaction tax but are subject to the regular income tax on gains realized upon the sale of stocks through the Philippine Stock Exchange.
  13. Unit of participations in golf, polo, and similar clubs are considered domestic stock.
  14. The excess premium on the re-issuance of treasury stock is subject to capital gains tax.
  15. The issuance of shares of stock for property is subject to capital gains tax.
  16. The sale of foreign stocks directly to a buyer is subject to capital gains tax.
  17. The two-tiered final tax cannot apply unless and until there is a gain on the sale, exchange, and other disposition of stocks directly to a buyer.
  18. The stock transaction tax on the sale of stocks through the PSE cannot apply unless there is a gain on the transaction.
  19. The 6% capital gain tax cannot apply unless there is a gain on the sale of real property.
  20. The sale of real properties located abroad is subject to the 6% capital gains tax.

TRUE OR FALSE 2

  1. The annual capital gains tax return is simultaneously due with the annual regular income tax return.

  2. The basis of properties received by way of inheritance is the basis in the hands of the last owner who did not acquire the same by donation.

  3. When specific identification is impossible, the cost of the stocks sold is determined by the weighted average method.

  4. The basis of the stocks received in tax-free exchanges is the basis of the shares given.

  5. The transactional capital gains tax return is required to be filed within 30 days from the date of sale.

  6. The gain on the sale of stocks for stocks pursuant to a plan of merger and consolidation is exempt if it is resulted in the transferor acquiring corporate control over the absorbed corporation.

  7. Installment payment of capital gains is allowed if the ratio of downpayment over the selling price of the sale does not exceed 25%.

  8. The spelling price is used to determine the propriety of using the installment method but the contract price is used to determine the capital gains tax payable in installment.

  9. The excess of mortage over the basis assumed by the buyer constitutes an indirect receipt which is part of the initial payment and the selling price.

  10. Wash sales occurs when there is a repurchase of shares within 30 days before and 30 days after the date of disposal of securities at a loss.

  11. Control means more than 50% ownership in the voting power of a corporation.

  12. The sale of delisted stock is subject to stock transaction tax and not to capital received.

  13. Gain and loss in a share-for-share swap pursuant to a plan of merger or consolidation shall be recognized up to the extent of the cash and other properties received.

  14. The sale by the National Housing Authority of commercial lots is subject to capital gains tax.

  15. If the assesor’s fair value is lower than the selling price, then the fair value of the property is the zonal value.

  16. Title to a property shall not be registered by the Registry of Deeds unless the Commissioner or his representatives has certified that the tax on the transfer has been paid.

  17. Domestic corporations are exempt from the capital gains tax on the sale, exchange, and other disposition of real properties.

  18. The sale of land pursuant to the Agrarian Reform Program is exempt from capital gains tax.

  19. Foreign corporations are required to pay capital gains tax on the sale of domestic stocks and on the sale of property capital assets.

  20. The alternative taxation on an expropriation sale is not applicable to corporate taxpayers.

MULTIPLE CHOICE-THEORY: PART 1

  1. Which is an ordinary asset? a. Personal car c. Principal residence of the taxpayer b. Delivery truck d. Wedding ring of the tax payer

  2. Which is not an ordinary asset? a. Personal laptop of the taxpayer c. Real property held for sale b. Machineries and equipment d. leasehold improvements

  3. Which is a capital asset to a realty developer? a. Constructive equipment

Which of the following correct? a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is true

  1. Which of the following properties when sold may be subject to capital gains tax? a. Domestic stock b. Foreign stock

c. Patent d. Office Buildings

  1. Statement 1: Only depreciable assets of business qualifies as ordinary assets. Statement 2 : Land used in business is a capital asset since it is not subject to depreciation.

Which of the following correct? a. Statement 1 is false b. Statement 2 is false c. Both statements are false d. A, B and C

  1. Statement 1: Ordinary gains may arises from sale, exchange, and other dispositions of real properties in business. Statement 2 : Capital gain may arise from sale, exchange, and other dispositions of real properties not used in business.

Which is false? a. Statement 1 is correct b. Statement 2 is correct c. Both statements are false d. Both statements are correct

MULTIPLE CHOICE- THEORY: PART 2

  1. Which is the following properties, when sold, may be covered by regular income tax? a. Share options b. Preferred stocks

c. Share warrants d. Promissory notes

  1. Which is the following assets may be subject to capital gain tax upon disposal? a. Parking lot b. Dormitory

c. Farm lot d. Office Supplies

  1. The sale of an office building will be subject to a. 60% of 1% percentage tax. b. 6% capital gains tax. c. 15% capital gains tax b. Regular tax.

  2. The term "other disposition" covers a. Foreclosure sales b. Auction sale c. Expropriation by the government d. Any of these

  3. Which of the following sales of domestic stocks is subject to capital gains tax? a. Sale of domestic stocks through the PSE b. Issue of domestic stocks to subscribers C. Sale of domestic stocks directly to a buyer d. Exchange of stocks for stocks in a corporate merger

  4. The sale of listed shares will never be subjected to be a. 6% capital gains tax only b. 60% of 1% percentage tax c. 15%capital gains tax d. Any of these

  5. The sale of non-listed shares may be subjected to a. 6% capital gains tax only. b. 60% of 1% percentage tax only. c. 15% capital gains tax only. d. Any of these

  6. Which of the following when sold may be exempted from the 6% capital gains tax? a. Unused land to the government b. Residential lot c. Developed residential properties for sale d. Principal residence

  7. Statement 1 : The sale or exchange must result to an actual gain before the 15% capital gains tax is imposed. Statement 2: The sale or exchange must result to an actual gain before the 6% capital gains tax is imposed. a. Both statements are correct c. Only statement 1 is correct b. Both statements are incorrect d. Only statement 2 is correct

  8. When the annualized capital gains tax exceeds the transactional capital gains tax, the excess is a a. Tax credit c. Tax refundable b. Tax payable d. A or B

  9. 1 st statement : Properties acquired by real estate dealers are ordinary assets. 2 nd statement: Properties of real estate dealers continue to be classified as ordinary assets even if they change the nature of their business. a. First statement is correct

b. Second statement is correct

c. Neither statement is correct d. Both statements are correct

  1. 1 st statement: When realty businesses discontinue use of assets for more than two years, the same shall be reclassified as capital assets. 2 nd statement: When realty businesses discontinue use of assets for more than two years, the same shall be reclassified as capital assets.

d. on or before the 15th day of the fourth month following the close of the quarter when the sale was made

  1. Capital gains tax that is not payable on installment basis is due a. within 30 days from the date of sale or exchange. b. within 30 days from the end of month of sale. c. on or before the 15th day of the fourth month following the close of the quarter when the sale was made. d. on or before the 15th day of the fourth month following the taxpayer's year- end.

  2. Installment payments of the 6% capital gains tax is due a. Within 10 days from the date of each installment payment. b. Within 30 days from the date of each installment payment. c. Within 15 days from the date of each installment payment. d. Within 20 days from the date of each installment payment.

  3. The installment payment of capital gains tax is applicable to the a. 15% capital gains tax only b. 6% capital gains tax only c. Both A and B d. Neither A nor B

  4. The installment payment of capital gains tax is applicable to a. Individual taxpayers only c. Dealers in properties only b. Corporate taxpayers only d. A or B

  5. Which of these capital gains is subject to capital gains tax? a. Gain on the sale of stock rights b. Gain on sale of interest in a professional partnership c. Gain on the sale of derivative financial instruments linked to commodity prices d. Gain on sale of bonds

  6. Paulo indicated in his return his intent to avail of the exemption from the 6% capital gains tax. Under what condition will he be exempted? a. When the proceeds of the sale exceeds the cost basis of the property sold b. When the proceeds of the sale exceeds the acquisition price of the new residence c. When the cost basis of the property sold exceeds its selling price d. When the acquisition price of the new property exceeds the proceeds of the old property sold

  7. Partial taxation under the 6% capital gains tax will result when a. The proceeds from the sale of the old property exceeds both its cost and the acquisition price of the new property. b. The proceeds of the sale exceeds its zonal value and Assessor's fair value. c. The proceeds of the old property exceeds the acquisition price of the new property regardless of the tax basis, zonal value, and Assessor's fair value of the old property. d. The zonal value is greater than the sales proceeds of the old property

  8. The transactional capital gains tax on domestic stocks is a. not a final tax. b. included in the income tax return c. creditable to the regular income tax d. creditable to the annual capital gains tax due.

  9. The 15% capital gains tax does not apply to a. Resident citizen dealers of stocks b. Non-resident citizen dealers of cars c. Resident alien dealers of computer parts d. Domestic corporations dealing in real properties

  10. The documentary stamp tax on the sale of domestic stocks directly to a buyer is based on a. Selling price b. Fair Value

c. Par value d. Cost

  1. The documentary stamp tax on the sale of property is based on a. Selling price b. Fair value c. Cost d. A or B, whichever is higher

  2. The 6% capital gains tax does not apply to a. Domestic corporations b. Resident aliens

c. Non-resident citizens d. Foreign corporations

  1. Who shall file the capital gains tax return for the sale, exchange, and other disposition of real property? a. Seller b. Buyer

c. Transfer agent d. The registry of deeds

Multiple Choice – Problem: Part 1

  1. Mr. Dionisio sold domestic stocks directly to a buyer at a mark-up on cost of P200,000. He paid P5,000 broker’s commission and P8, documentary stamp tax on the sale. Compute the capital gains tax. a. P28,050 c. P14, b. P14,500 d. P13,

  2. Mr. Abdul, a non-resident alien, sold domestic stocks directly to a buyer at a net gain of P70,000. Compute the capital gains tax. a. P10,500 c. P4, b. P6,000 d. P3,

  3. Mr. Panay, a non-resident citizen, sold domestic stock rights directly to a buyer at a net gain of P320,000. Compute the capital gains tax. a. P30,000 c. P27, b. P25,000 d. P48,

  4. On January 5, 2020, Mercy, a stock dealer, diposed the following shares directly to a buyer:

Shares Selling Price Cost

Stock rights P200,000 P170,

Common stocks 100,000 110,

Ignoring the documentary stamp tax, the capital gains tax payable on the sale is

a. P0 c. P1, b. P1,000 d. P3,

  1. Kidapawan, Inc., a domestic service company, has the following transactions on the sale of another domestic corporation:

Transaction Quantity Net price

Purchase 20,000 P40,

Purchase 30,000 63,

Sale 40,000 92,

Assuming the first-in, first-out method, compute the capital gains tax on the sale.

a. P0 c. P b. P480 d. P4,

  1. Assuming the moving method, compute the capita; gains on tax on the sale. a. P0 c. P b. P400 d. P1,

11 Company, a trading company, made the following transactions during the year involving the stocks of Xurpas, a domestic corporation:

Date Transaction Shares Net price

6/15/2020 Purchase 10,000 P

9/30/2020 Sale 8,000 28

10/3/2020 Purchase 15,000 25

12/7/2020 Sale 10,000 32

Koron uses the FIFO method in costing the Xurpas stocks.

Compute the deductible loss on the September 30 sale.

a. P20,000 c. P12, b. P16,000 d. P

  1. Compute the taxable gain on the December 7 sale. a. P64,118 c. P51, b. P60,000 d. P44,

  2. Mr. Trinidad has the following transactions during the year on the common stocks of Philippine Pines, a domestic non-listed company:

Date Transaction Gain (Loss)

5/8/2020 Sale P120,

8/5/2020 Sale (10,000)

9/8/2020 Sale 250,

Multiple Choice – Problems: Part 2

  1. A certain taxpayer shows the following over-the-counter transactions in the shares of a domestic corporation:

Date Transaction Quantity Net price

2/8/2020 Purchase 10,000 P112,

4/5/2020 Sale 10,000 110,

5/1/2020 Purchase 8,000 80,

6/7/2020 Sale 5,000 60,

Compute the capital gain on June 7,2020 that is subject to capital gains tax.

a. P4,000 c. P10, b. P5,000 d. P12,

  1. An investor sold domestic stocks directly to a buyer on October 1,2019 under the following terms:

Selling price P 500,

Cost 200,

Downpayment 10%

Installment in 2019 50,

Compute the total capital gains tax in 2019.

a. P45,000 c. P9, b. P25,000 d. P6,

  1. ABC realized the following gains or losses in selling various securities:

Gain on sale of domestic stocks P300,

Par value of domestic stocks sold 200,

Gain on the sale of interest in a partnership 200,

Gain on the sale of stocks of foreign corporations 150,

Compute the capital gains tax.

a. P45,000 c. P35, b. P44,775 d. P25,

  1. Compute the documentary stamp tax in the preceding problem. a. P1,500 c. P562. b. P1,125 d. P

  2. A wash sale of domestic shares wherein 20,000 shares where disposed at a loss of P40,000 were subsequently covered up within the 30-day period by a purchased of 15,000 shares for P12/share.

The deductible loss against capital gain on the wash sale is

a. P0 c. P10, b. P13,333 d. P20,

  1. What is the cost of 15,000 shares acquired in the preceding problem? a. P150,000 c. P180, b. P160,000 d. P190,

  2. Isidro sold 1,500 shares of stocks of Achievers Corporation directly to a buyer. The share’s par value per shares was P85. Isidro purchased the shares for P90 each. On the date of sale, the shares had a selling price of P120 per share.

  3. Assuming the same data in the preceding number except that the property was not disposed of but the same was used as a sales after which it became vacant for more than two years. What is the classification of the property?

c. Ordinary asset, regardless of the taxpayer d. Capital asset, regardless of the taxpayer e. Ordinary asset, if taxpayer is not engage in real estate business f. Capital asset, if the taxpayer is not engaged in real estate business

  1. Anderson disposes a vacant lot for P3,000,000. The lot has an Assessor’s fair value of P2,800,000, a zonal value of P3,200,000, and an appraisal value P3,500,000.

What is the capital gains tax?

a. P0 c. P192, b. P180,000 d. P210,

  1. Puerto Princesa Company sold its parking lot for P2,000,000. The lot has a zonal value of P2,500,000 and appraisal value of P1,800,000. The capital gains tax on the sale of the lot is a. P0 c. P120, b. P108,000 d. P150,

  2. Mr. Antonio disposed his principal residence for P2,000,000 and immediately acquired a new one for P1,800,000. The old residence cost Mr. Antonio of P1,000,000 and had a fair market value of P2,500,000 on the date of sale.

Compute the capital gains tax to be deposited in escrow.

a. P0 c. P120, b. P60,000 d. P150,

  1. What would be the tax basis of Mr. Antonio’s new residence? a. P1,800,000 c. P900, b. P1,000,000 d. P800,

  2. How much is the capital gains tax will be released to the taxpayer? a. P150,000 c. P120, b. P135,000 d. P15,

  3. On August 15,2020, Ms. Mones sold a 500-square meter residential house and lot for P3,000,000. The house was acquired in 2005 at P2,000,000. The Assessor’s fair market values of the house and lot, respectively, were P1,500,000 and P1,000,000. The zonal value of the lot was P5,000 per square meter.

What is the capital gains tax?

a. P180,000 c. P150, b. P120,000 d. P240,

  1. Manny, a resident Filipino citizen, sold his principal residence (house and lot) at its original purchase price of P11,000,000. The property had a P13,000,000 fair value at that time.

If the proceeds of the sale were not invested in the new principal residence but, instead, new funds of P15,000,000 were used to construct it, the capital gains tax is

a. P0 c. P750, b. P660,000 d. P780,

Numbers 10 through 12 are based on the following information:

Mr. Pepito sold his residential land in Manila with fair market value of P12,000,000 for P10,000,000.

  1. If Mr. Pepito utilized all of the P10,000,000 in buying a house and lot to be used as his new principal residence, the final tax due from him is a. P720,000 c. P120, b. P600,000 d. P

  2. If Mr. Pepito utilized only P7,000,000 from the proceeds of the sale in acquiring a new residence, the final tax due from him is a. P720,000 c. P180, b. P216,000 d. P

  3. The documentary stamp tax due on the sale is

  4. What is the basis of the DEF shares received be EFG Company? a. P0 c. P1,200, b. P1,000,000 d. P1,300,

  5. Raymund exchanged his A Company shares pursuant to a plan of consolidation where A Company will be integrated with B Company. The following relates to the exchange.

Basis of A Company shares given P1,200,

Fair value of A Company shares given 1,300,

Fair value of B Company shares received 1,100,

Fair value of other properties received 250,

Compute the capital gains tax.

a. P0 c. P20, b. P10,000 d. P22,

  1. What is the tax basis of the B Company received by Raymund? a. P0 c. P1,200, b. P1,100,000 d. P1,350,

  2. What is the basis of the “boot” or the other properties received by Raymund? a. P0 c. P250, b. P150,000 d. P400,

  3. What is the basis of the A Company shares received by B Company? a. P0 c. P1,200, b. P1,100,000 d. P1,350,

  4. Mrs. Joson sold a residential lot in June 1,2019 for P2,000,000. The property had a zonal value of P2,500,000 and a Assessor’s market value of P1,000,000.

On July 1, 2020, Mrs. Joson was compelled to pay the capital gains upon the request of the buyer. The compromise penalty was determined to be P20,000.

Compute the total tax due.

a. P150,000 c. P217, b. P180,000 d. P237,

  1. Basic Company paid P9,000 documentary stamp tax on the sale of a real property capital asset. Compute the capital gains tax on the sale. a. P9,000 c. P36, b. P16,000 d. P42,

  2. Mr. Bassit Unay sold a residential land P4,000,000. The land had a fair value of P3,500,000 and an Assessor’s fair value of P2,000,000. What is the total income tax and documentary stamp tax due? a. P0 c. P400, b. P300,000 d. P450,

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Income Tax Banggawan 2019 Ch6 1

Course: Financial Accounting (AE 111)

199 Documents
Students shared 199 documents in this course

University: University of San Agustin

Was this document helpful?
TRUE OR FALSE 1
1. A vacant and unused lot is an ordinary asset to a real estate
dealer.
2. For taxpayers not engaged in business, assets shall cease to be
ordinary assets when they are discontinued from active use for
more than two years.
3. Real and other properties acquired are ordinary assets to banks
even if they are not engaged in the realty business.
4. Capital assets will not become ordinary assets to banks even if
they are not engaged in the realty business.
5. An ordinary asset becomes automatically become a capital asset
when it is withdrawn from active use.
6. The sale of real property capital assets will never be subject to
regular income tax.
7. Donated assets become ordinary assets even if the done do not
employ the same in business.
8. An ordinary asset continues to be an ordinary asset even if idled
for more than two years if the taxpayer is engaged in realty
business.
9. The real properties used by exempt corporations in their exempt
operations are capital assets.
10. Dealers in realties are subject to the regular tax on their sale
of properties.
11. Capital gains from assets other than domestic stocks and real
properties are subject to regular income tax.
12. Dealers in securities are not subject to the stock transaction
tax but are subject to the regular income tax on gains realized
upon the sale of stocks through the Philippine Stock Exchange.
13. Unit of participations in golf, polo, and similar clubs are
considered domestic stock.
14. The excess premium on the re-issuance of treasury stock is subject
to capital gains tax.
15. The issuance of shares of stock for property is subject to capital
gains tax.
16. The sale of foreign stocks directly to a buyer is subject to
capital gains tax.
17. The two-tiered final tax cannot apply unless and until there is a
gain on the sale, exchange, and other disposition of stocks
directly to a buyer.
18. The stock transaction tax on the sale of stocks through the PSE
cannot apply unless there is a gain on the transaction.
19. The 6% capital gain tax cannot apply unless there is a gain on the
sale of real property.
20. The sale of real properties located abroad is subject to the 6%
capital gains tax.
TRUE OR FALSE 2
1. The annual capital gains tax return is simultaneously due with the
annual regular income tax return.
2. The basis of properties received by way of inheritance is the
basis in the hands of the last owner who did not acquire the same
by donation.
3. When specific identification is impossible, the cost of the stocks
sold is determined by the weighted average method.

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