CPA Review School of the Philippines

Manila

FIRST PRE-BOARD SOLUTIONS

TAXATION

11. A
2019 2020 2021 2022
Gross Income 1,000,000 2,000,000 1,500,000
Allowable 950,000 2,100,000 1,300,000
Deduction
Taxable Income 50,000 0 200,000
NIT 30% 15,000 27.5% 0 25% 50,000
MCIT 2% 20,000 1.5% 30,000 1% 15,000
Tax Due 20,000 30,000 50,000
Tax Credit 35,000
Tax Still Due 20,000 30,000 15,000
Excess MCIT 5,000 30,000
12. C
13. D
14. D

2019 2020 2021 2022

Gross Income 1,000,000 2,000,000 1,500,000 2,500,000
Allowable 950,000 1,900,000 1,600,000 1,300,000
Deduction
Taxable Income 50,000 100,000 0 1,200,000
NIT 30% 15,000 27.5% 27,500 25% 0 25% 300,000
MCIT 2% 20,000 1.5% 30,000 1% 15,000 1% 25,000
Tax Due 20,000 30,000 15,000
Tax Credit (22,500)
Tax Still Due 20,000 30,000 15,000 277,500
Excess MCIT 5,000 2,500 15,000
15. B
16. A
Gross Receipts 500,000
Cost of services (250,000)
Cost of utilized facilities (25,000)
Cost of Supplies (15,000)
Gross Income for MCIT 210,000

17. B
Net Income 820,000
Add: Contribution 80,000
Taxable Income before Contribution 900,000
Ceiling 5%
Allowed deduction 45,000

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18. B
Net Income 300,000
Dividend 50,000
Bad Debts (80,000)
Taxable Income 330,000

19. A 20. A 21. A 22. B 23. B 24. B 25. C 26. A 27. A 28. C 29. B
30. C
Capital Gain on Bonds 45,000
Capital Loss on Car (40,000)
Net Capital Loss carry-over (20,000)
Net Capital Gain zero

31. C 36. B
32. B 37. C
33. C 38. C
34. A 39. C
35. C 40. C

41. A

1st Quarter 2nd Quarter 3rd Quarter

Gross receipts 900,000 900,000 900,000

Less: Cost of services - 0 if OSD 0 0 0
Gross income from operations 900,000 900,000 900,000
Less: OSD (40%) (360,000) (360,000) (360,000)
Net income from operations 540,000 540,000 540,000
Add: Taxable income/(loss) from previous
quarter - 1,040,000 1,580,000
Share in GPP net income - - -
Non-operating income 500,000 - -
Net taxable income 1,040,000 1,580,000 2,120,000
Tax (table) 202,000 364,000 528,400
Less Credits:
(1) Excess tax credits (25,500) (25,500) (25,500)
(2) Tax payments for previous quarters - (86,500) (158,500)
(3) CWT for previous quarters (Form 2307) - (90,000) (180,000)
(4) CWT for this quarter (Form 2307) (90,000) (90,000) (90,000)
Tax Payable 86,500 72,000 74,400

Note: Only ½ of the gain from the sale of the toy collection is recognized. It is a LT other capital asset.
Such gain shall be included as non-operating income in the ITR.

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ANNUAL
Gross receipts 3,600,000
Less: Cost of services (0 if OSD) 0
Gross income from operations 3,600,000
Less: OSD (40%) (1,440,000)
Net income from operations 2,160,000
Add: Non-operating income 500,000
Share in GPP net income 0
Total taxable income 2,660,000
Tax (table) 701,200
Less Credits:
(1) Excess tax credits (25,500)
(2) Tax payments for previous quarters (232,900)
(3) CWT for previous quarters (Form 2307) (270,000)
(4) CWT for this quarter: Form 2307 (90,000)
Tax Payable 82,800

Note: Only ½ of the gain from the sale of the toy collection is recognized. It is a
LT other capital asset. Such gain shall be included as non-operating income in the
ITR.
capital asset.

42. A

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43. B
44. A

45. C
46. B
47. A
48. A
49. D
50. C
51. A

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Solution: 45-51
Annual
Gross compensation income 920,800
Less: Exempt compensation:
SSS premiums, and union dues 6,000
13th month pay and other benefits 70,800 (76,800)
Taxable Compensation income 844,000
Add: Income from business:
Gross rental receipts 600,000
Less: Cost of services (0 if OSD) (100,000)
Gross income from operations 500,000
Less: Interest expense (10,000)
Net income from operations 490,000
Add: Non-operating income 145,000
Share in GPP net income 220,000 855,000
Total taxable income 1,699,000
Tax (table) 327,250
Less Credits:
CWT compensation income 60,000
CWT rental income 30,000
CWT share in GPP net income 33,000 (123,000)
Tax Payable 204,250

Notes:
No OSD because the problem is silent and therefore the taxpayer is deemed to choose IDs.
There is only one itemized deduction: the interest expense paid to the fiancé. The loss on
the sale of the rental property is disallowed under Section 36(B) of the Tax Code.
The non-operating income consists of the following: (a) interest income paid by taxpayer’s
mother; (b) ½ gain on the sale of personal car; and (c) the foreign dividends.

52. B
53. B

54. B

55. C

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56. C

Gross receipts (gross of 5% CWT) 2,400,000

Cost of revenues -
Gross income 2,400,000
Less: Deductible expenses (980,000)
Net income before special deduction 1,420,000
Special deduction - 30% of NI (gross of CWT) (426,000)
Net income 994,000
Add: Non-operating income -
Taxable net income 994,000
Tax due (table) 151,000
Credit: 5% CWT (₱2.4 Million x 5%) (120,000)
Tax Payable 31,000

57. D
Since the trust is a revocable trust, the income earned shall be taxable to the
grantor/trustor, and not to the trust.
58. A
JV
Gross income 80,000,000
Deductions (60,000,000)
Net taxable income 20,000,000
Tax due (blended rate of 27.5%) 5,500,000
MCIT (blended rate of 1.5%) 1,200,000

Note: The JV is not an exempt entity as it is not licensed by the PCAB.

59. A

Gross income 2,000,000

Deductions (1,200,000)
Net taxable income 800,000
Tax due (blended rate of 25%) 200,000
MCIT (blended rate of 1.5%) 30,000

60. A

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61. A
Gross income from operations 5,195,000
Add Other taxable income not subject to FTs:
Dividend income from a FC 30,000
Interest income, Citibank New York 25,000
Raffle draw winnings 60,000
Total Gross Income 5,310,000
Less: Itemized Deductions (1,218,000)
Taxable net income 4,092,000
RCIT (25%) 1,023,000
MCIT (1%) 53,100
Tax due 1,023,000
Less: Tax Credits:
CWT per Form 2307s (194,750)
Tax payable 828,250

Note: RCIT of 25% was used because the facts in the problem do not indicate
if the taxpayer DC qualifies for the lower 20% RCIT.

62. A

63. A
Gross income from operations 3,895,000
Add Other taxable income not subject to FTs:
Foreign dividend - part within 20,000
Raffle draw winnings 60,000
Total Gross Income 3,975,000
Less: 40% OSD (1,590,000)
Taxable net income 2,385,000
RCIT (25%) 596,250
MCIT (1%) 39,750

Tax due 596,250

Less: Tax Credits:
CWT per Form 2307s (194,750)
Tax payable 401,500

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64. A

65. A
66. A
67. A
68. A

Taxable compensation income

Gross salary from university 313,000
Excess of 13th month pay over ₱90,000 5,000
318,000

69. A

Gross taxable income

Gross salary from university ₱ 313,000
Excess of 13th month pay over ₱90,000 5,000
Per diem received as director, gross of 10% CWT 80,000
Gross professional fees, gross of 15% CWT 1,000,000
½ of the capital gains from sale of jewelry 50,000
₱ 1,448,000

70. B

Net income, net of the charitable contributions 1,500,000

Add back: All charitable contributions 600,000
Taxable income before charitable contributions 2,100,000
Less: Charitable contributions
a) Deductible in full 300,000
b) Subject to limit:
Actual - 200,000
Limit 5% - 105,000 105,000 (405,000)
Net taxable income 1,695,000

Note: The ₱100,000 given to typhoon victims is not allowed as a deduction because the recipient
is not one of those specified by the tax laws.

END

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