08/02/08

FIRST PRE-BOARD EXAMINATION

August 2, 2008
1. On February 14, 1998, X orally sold to Y a certain mini-component for P25,000. It
was the agreement between the parties that delivery of said object and payment
of the price thereof shall be made on February 15, 1999. What kind of contract is
this?
a. Void Contract
b. Voidable Contract
c. Unenforceable Contract
d. Rescissible Contract
2. Thru some errors on the part of a bank personnel, A was mistakenly given
P10,000 instead of only P1,000. This situation will be governed by the provision of
the law on
a. Contracts
b. Delicts
c. Quasi-contract
d. Quasi-delicts
3. These are basic principles or characteristics of a contract. Which is the exception?
a. Freedom or liberty to stipulate
b. Obligatory force and compliance in good faith
c. Binding on third parties
d. Perfection by mere consent
4. Simulation of a contract maybe absolute or relative. It is relative when
a. The parties do not intend to be bound at all
b. The contract is void
c. The parties conceal their true agreement
d. The parties are related within the 4th degree of consanguity
5. As a rule, wills cannot be reformed except
a. By the heirs
b. By the testator himself
c. By the executor or administrator
d. By the surviving spouse
6. This executory contract is enforceable even if not in writing
a. Leasing of personal property for 2 years
b. A representation as to the credit of a 3rd person
c. Sale of goods or chattels for P500,000
d. Sale of immovable property
7. G was appointed as guardian of M, the latter being 17 years old. Later, without
authority from M, G sold Ms watch in writing to B valued at P100,000 for P70,000,
suffering lesion by more than of the value, the contract is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
8. Which of the following is capacitated to give consent?
a. A senior citizen who is insane
b. A person under civil interdiction
c. No read, no write deaf-mute
d. An emancipated minor
9. If the creditor to whom tender of payment has been validly made refuses without
just cause to accept it, payment may be made by
a. Cession
c. Dacion en pago
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b. Consignation

d. Application of payment

10.A, a deaf-mute who knows how to write and read, uses force and violence to get
Bs consent, to a contract where B suffered a lesion of more than of the value
of property. The contract is
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
11.Pedro, a passenger in a bus operated by ABC Trans Co. suffered serious injuries as
a result of an accident. An information was filed against Juan, the driver of the
bus, for serious physical injuries through reckless imprudence. Juan was, however
acquitted because according to the judgment of acquittal, Juan was not negligent.
Later, Pedro instituted an action against ABC to recover damages. Will the action
prosper?
Answer I Yes, because the action to recover damages as based on culpa
contractual and not on the act or omission complained of as felony.
Answer II No, the acquittal of the driver will result to the exoneration of the
operator from civil liability.
a. True, true
b. True, false
c. False, true
d. False, false
12.Paul borrowed P2,000 from Juan on January 23, 2008. He executed a promissory
note promising to pay the indebtedness on January 23, 2009. Upon arrival of the
designated date for payment, is demand necessary in order that Paul shall incur
delay?
Answer I Yes, because the law or obligation should expressly add that the
obligor shall incur in delay if he fails to fulfil the obligation upon the arrival of the
designated date.
Answer II No, there was a stipulation that the indebtedness shall be paid on a
designated date and therefore upon the arrival of such date, demand shall not be
necessary.
a. True, true
b. True, false
c. False, true
d. False, false
13.Dolo causante as distinguished from dolo incidente
a. Gives right to the innocent party to ask for the annulment of the contract
b. Gives right to recover damages
c. Present during the performance of a pre-existing obligation
d. Results in non-fulfilment or breach of the obligation
14.Which of the following is not correct, with regard to the effect of remission of a
solidary obligation effected by the solidary creditor upon the obligation itself?
a. If the remission covers the entire obligation, the obligation is totally
extinguished and the entire juridical relation among the debtors is
terminated altogether
b. If the remission is for the benefit of one of the debtors and it covers his
entire share in the obligation, he is completely released from the creditors,
but he is still bound to his co-debtors
c. The solidary creditor responsible for the remission shall be liable to the
other solidary creditors for the share in the obligation corresponding to
them
d. If the whole obligation is concerned through the efforts of a solidary debtor
or for his benefit, he is entitled to reimbursement from his co-debtors
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15.On January 23, 2008, A borrowed P10,000 from B. The debt is evidenced by a
promissory note signed by A, as principal debtor, and by C as guarantor, by virtue
of which it was promised that the entire debt shall be paid on January 23, 2009.
When the note matured, X, a third person paid the entire debt of P10,000 to B.
The payment was made with the consent of A. What are the rights of X as a result
of the payment?
Answer I X can demand reimbursement from either A or C of the entire amount
which he has paid to B
Answer II X is now subrogated to all the rights of B, not only against the debtor
but even against third person, such as those arising from a guaranty, mortgage or
penalty.
a. True, true
b. True, false
c. False, true
d. False, false
16.Using the above data, suppose on July 23, 2008, the creditor B had condoned
of the debt and subsequently on January 23, 2009, X, a third person paid the
entire amount of P10,000 to B, who accepted it. The payment was made without
the knowledge and consent of A, which of the following is not correct?
a. X can demand reimbursement of P5,000 from A
b. X can recover P5,000 from B
c. If X proceeds against A for reimbursement and A cannot pay by reason of
insolvency, X can proceed against the guarantor, C, for reimbursement
d. If payment of an obligation is made by a third person without the
knowledge or against the will of the debtor, the third person who paid can
demand reimbursement from the debtor only to the extent that the latter
had been benefited by the payment
17.A owes B P20,000 which became due and payable last July 15, 2008. On that
date, A offered B P10,000, the only money he then had, but B refused to accept
the payment. A, thereafter met C. Bs 22 year old son, to whom he gave the
P10,000 with the request that he turn the money to B. The money was stolen
while Cs possession
I.
Was B justified refusing to accept the payment of A?
II.
May B still recover the full amount of As debt of P20,000?
Answer I Yes, unless there is stipulation to the contrary, the creditor cannot be
compelled to accept partial payments, neither may the debtor be compelled to
make partial payments
Answer II No, only the remaining P10,000 may be collected because the loss
was through a fortuitous event.
a. True, true
b. True, false
c. False, true
d. False, false
18.Strictly speaking, by its very nature, is not a special form of payment.
a. Application of payment
b. Dation in payment
c. Payment by cession
d. Tender of payment and consignation
19.Statement 1 If the period for payment of an obligation is shortened, from 4
years to 2 years, is there novation of the obligation?
Statement 2 Suppose that, instead, there is an extension of two years for
payment is there a novation of the obligation?
Answer 1 Yes, because there is a clear case of incompatibility between two
obligations and also because there is an essential change or alteration of the
principal condition of the old obligation.
Answer 2 No, there is no incompatibility between the two obligations. They can
stand together, neither is there an essential change in the principal condition.
a. True, true
c. False, true
b. True, false
d. False, false
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20.I will give this ring provided that if I like to have it back, you will return the same
to me. The obligation is
a. Void, because the fulfillment depends upon the sole will of the debtor
b. Void, because the fulfillment depends upon the sole will of the creditor
c. Valid, because the condition merely causes the loss of rights previously
acquired
d. Valid, but the condition being potestative on the part of the debtor will be
disregarded
21.A, is indebted to B in the amount of P50,000, with C as guarantor. On due date, A
tendered payment to B but B refused. Because of Bs refusal A deposited the
amount in court. After the approval of the consignation, A withdraws the money
with the consent of B. Which is correct?
a. B lost the right to collect as As obligation is extinguished
b. B lost all the preference she might have over the amount deposited but C is
still liable as guarantor
c. B lost the right to collect from A and consequently lost also her right to
collect from C
d. B lost all the preference she might have over the amount deposited and C
as guarantor was likewise released from liability
22.Demand is necessary in order that delay may exist in one of the following. This is
a. When from the nature and circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service
to be rendered is the controlling motive of the contract
b. When demand would be useless, as when the obligor has rendered it
beyond his power to perform
c. When there is stipulation or the parties so agrees
d. When one of the parties in reciprocal obligation fulfils his obligation
23.A sold to B her necklace for P3,000. A delivered the necklace to B who is bound to
pay the price but failed to do so. Is B in delay in paying the purchase price?
a. Yes, if demand would be useless
b. Yes, this involves reciprocal obligations
c. No, unless there is stipulation
d. No, unless A makes a demand
24.What is the effect of the loss of the prestations in an alternative obligation where
the right of choice belongs to the debtor and loss is due to his fault?
a. If only one remains, the obligation still subsists, but it ceases to be alternative
as it becomes simple obligation
b. If two or more objects remain, the obligation still subsists retaining its
alternative character
c. If none remains, the obligation is extinguished because he chose not to give
anything
a. a and b
b. a and c
c. b and c
d. a, b and c
25.On March 1, 2008, A sold to B a specific car which A acquired from C last January
2, 2008. On May 2, 2008, the car was totally destroyed which was traced to crack
in the engine block already existing on January 2, 2008. A was not aware of the
defect. Is A liable to B?
a. No, because A was innocent and a seller in good faith
b. No, because B has all the opportunity to examine the car before buying it,
applying caveat emptor policy
c. Yes, A is liable to return the price and expenses incurred by B
d. Yes, A is liable to return the price, expenses and to pay interest and
damages to B
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26.An agreement where the pledger or mortgagor will execute a contract

transferring ownership of the property pledged or mortgaged to the pledgee or
mortgagee in case of default, such execution of the contract will result to
a. Pactum commissorium
b. Payment by cession
c. Dacion en pago
d. Tender of payment
27.The sale of the thing pledged
a. Absolutely extinguishes the obligation
b. Extinguishes only the pledge
c. Extinguishes the debt only to the extent of the proceeds
d. Deprives the pledge to get the excess
28.If the agent is authorized to borrow money for the principal, the agent can be the
lender
a. Only if there is no other willing lender
b. As long as he does not charge interest
c. If prior consent of the principal is obtained
d. At current rate of interest
29.The responsibility of two or more agents is
a. Joint, provided they have not been appointed simultaneously, if solidarity
has not been expressly stipulated
b. Joint, even though they have been appointed simultaneously if solidarity
has not been expressly stipulated
c. Solidary, provided they have been appointed simultaneously
d. Solidary, even though they have not been appointed simultaneously
30.Statement 1 If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the
necessary consequences of the agency
Statement 2 When two or more principals have granted a power of attorney
for a common transaction, anyone of them may revoke the same even without
the consent of the others
a. True, true
b. True, false
c. False, true
d. False, false
31.A obliges himself to give B his car if B tops the October 2008 CPA Examination.
Then B enters into a contract to sell to C the car which he hopes to acquire from
A. As a result
a. The obligation of A is valid but the contract to sell is void
b. The obligation of A and the contract to sell are void
c. If B does not top the examination, the contingency is not fulfilled and he
does not get the car, the sale is deemed extinguished
d. If B does not top the examination, the sale remains valid
32.A sells to B a Sony Colored TV for P12,000 payable in twelve equal monthly
instalments beginning May 5, 2008 and every 5th day of each month thereafter.
The contract provides that upon failure to pay any instalment due, the whole
balance becomes due and demandable. To secure the obligation, a chattel
mortgage over the TV set was executed. When B defaulted on the 7 th and 8th
instalments A sued B for the payment of the whole balance of P6,000. The TV set
was levied and subsequently sold at public sale for P5,000. Can A still recover the
deficiency of P1,000 from B?
a. Yes, if there was stipulation to that effect
b. Yes, even though there was no stipulation
c. No, any stipulation allowing recovery is void
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d. No, if there was no stipulation to that effect
33.The unilateral promise to sell or promise to buy
a. Option
b. Policitation
c. Cession
d. Dacion
34.Chattel mortgage as distinguished from pledge
a. Excess of the proceeds is returned to the debtor
b. Creditor cannot recover the deficiency
c. Debtor can sell the thing given as security
d. Delivery of the security is necessary
35.A contract where the creditor acquires the right to receive the fruits of an
immovable of his debtor with the obligation to apply them to the payment of
interest if owing, and thereafter to the principal of his credit is
a. Antichresis
c. Real estate mortgage
b. Pledge
d. Chattel mortgage
36.The debtor is not responsible to the vendee for any hidden faults or defects in the
thing sold, if
a. It is stipulated provided the vendee is not aware of the hidden faults or
defects
b. It is stipulated provided the vendor is not aware of the hidden faults or
defects
c. It is stipulated even if the debtor is aware of the hidden faults or defects
d. It is stipulated regardless of whatever the vendor is aware or not aware of
the hidden faults or defects
37.Which of the following is an implied warranty in a contract of sale?
a. Right to sell the thing at the time the contract is perfected
b. The thing exists at the time of sale
c. Free from charges and encumbrances not made known to the buyer
d. The seller is of legal age
38.H, an Olympic judo champion, with violence and intimidation forced his wife W to
sell Ws pieces of jewelry to B. The sale is
a. Valid and binding
b. Voidable, because the consent of W is vitiated
c. Rescissible, if W suffered lesion of at least of the value of the property
d. Void, except when a separation of property was agreed upon in the
marriage settlement or there has been a judicial separation of property
39.Chattel mortgage as distinguished from pacto de retro sale
a. A principal and independent contract
b. The title and the possession are transferred
c. Object is movable property
d. Ownership is not transferred
40.Real estate mortgage as distinguished from other security arrangements
a. There is a need of affidavit of good faith
b. To bind third person it must be constituted on a public instrument
c. The debtor can alienate the property even without the creditors consent
d. Redemption is made before sale at public auction

41.A sold his residential lot, a capital asset for P2,000,000. The said lot was acquired
in 2000 at a cost of P1,700,000. The fair market value of the property as
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determined by the BIR is P2,200,000 but the fair market value as shown in the
schedule of values of the City Assessors is P1,950,000. The entire proceeds were
utilized for the acquisition of As principal residence. The final tax due is
a. P120,000
b. P132,000
c. P117,000
d. P0
42.Using the above data, but only P1,600,000 was utilized for the acquisition of As
residence, the final tax due is
a. P24,000
b. P26,400
c. P120,000
d. P132,000
43.Which of the following items is an income of a resident citizen subject to the basic
tax (scheduler)?
a. Interest income from any bank deposit held abroad
b. Royalty income with situs in the Philippines
c. Prizes exceeding P10,000
d. Capital gains from sale of real property
44.Which of the following statements is wrong? The improperly accumulated
earnings tax imposed on corporation is
a. Based on the net income per books after income tax
b. Calculated to encourage corporation to pay dividends
c. Computed on the years improperly accumulated income
d. Based on the statutory formula for improperly accumulated income
45.This income is subject to basic tax
a. Compensation for personal injuries or sickness
b. Salaries or emoluments received during a leave of absence
c. Winnings from PCSO and Philippine lotto
d. Fringe benefits given to managerial employees
46.This income is subject to final tax
a. Fringe benefits given to rank and file employees
b. Marriage fees, baptismal offerings receive by clergyman, evangelists or
religious workers for services rendered
c. Dividend income from a domestic corporation by resident citizen
d. Share of an individual taxpayer from the distributable net income of a
general professional partnership
47.This is a non-deductible interest expense
a. Interest paid on indebtedness incurred to finance petroleum exploration
b. Interest paid by a corporation on scrip dividends
c. Interest paid by a corporate taxpayer who is liable on a mortgage upon real
property of which the said corporation is the legal or equitable owner
d. Interest paid on tax deficiency if the tax where the interest is in itself an
item that is deductible from gross income

48.This is a deductible interest expense

a. Interest on deposits paid by authorized banks of the BSP to depositors, if it
is shown that the tax on such interest was withheld and paid
b. Interest paid on indebtedness between related taxpayers
c. Interest paid on preferred stock
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d. Interest paid when there is no stipulation for the payment thereof
49.The monetary value of this fringe benefit is 50% of the value of the fringe benefit
a. The employer purchases the motor vehicle in the name of the employee
b. The employer provides the employee with cash for the purchase of a motor
vehicle in the name of the employee
c. The employer purchases the car on instalment in the name of the
employee
d. The employer owns and maintains a fleet of motor vehicles for the use of
the business and the employees
50.How broad is the power of the legislature to impose taxes
Answer I The legislature has limited discretion as to the persons, property or
occupations to be taxed, where there are no constitutional restrictions, provided
the property is within the territorial jurisdiction of the state.
Answer II The legislature has the right to finally determine the amount or rate
of tax, in the absence of any constitutional prohibitions and it may levy a tax of
any amount it sees fit.
a. True, true
c. False, true
b. True, false
d. False, false
51.The taxpayer is not allowed to claim additional exemptions
a. Recognized natural son who celebrated his 21 st birthday during the taxable
year
b. Legally adopted daughter, 25 years old but incapable of self-support due to
mental defect
c. Illegitimate son, minor who died January 1 of the taxable year
d. Legitimate daughter who got married on December 30 of the taxable year,
one day before she turned 22
52.Amounts receivable by the estate of the deceased, his executor or administrator
as an insurance under a policy taken by the decedent upon his own life is
a. Excluded from gross income
b. Part of gross income if the beneficiary is revocable
c. Part of gross income if the beneficiary is irrevocable
d. Part of gross income whether the beneficiary is revocable or irrevocable
53.The following, except one are the basic principles of a sound tax system. The
exception is
a. It should be capable of being effectively enforced
b. It should consider the taxpayers ability to pay
c. It is generally payable in money
d. The sources of revenue must be sufficient to meet government
expenditures and other public needs
54.This is not a requisite for business expense to be deductible
a. It must be reasonable
b. It must be paid during the taxable year
c. The withholding tax otherwise required have been deducted and remitted
to the BIR
d. It must be ordinary and necessary

55.A, married, died on January 1, 2007. She left an estate with a fair market value of
P4M. During the year, the estate had a gross income of P800,000 and related
expenses of P300,000. The administrator gave P200,000 to B and other P200,000
to C, As beneficiaries, 50% of the amounts given to B and C came from the
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income of the estate and the other 50% came from the estate. The net taxable
income of the estate is
a. P80,000
b. P68,000
c. P280,000
d. P268,000
56.Using the above data, assume that B is married, with gross income of P400,000
and business expenses of P250,000, his net taxable income is
a. P150,000
b. P118,000
c. P318,000
d. P218,000
57.Using the data in Nos. 55, assume that C is single, with compensation income of
P200,000 and personal and living expenses of P12,000, his net taxable income is
a. P60,000
b. P180,000
c. P280,000
d. P270,000
58.As a rule, which of the following is subject to 10% tax on net income
a. Dividend received by a resident citizen from a domestic corporation
b. Royalty income from musical composition received by a resident alien
c. Off-shore banking units
d. Proprietary educational institutions
59.In 2004, ABC Corporation provided a 3-day vacation in Tagaytay to all of its
employees of which 80% are rank and file. Total expenses incurred by the
company for the said vacation amounted to P1M. The fringe benefit tax expense
is
a. P470,588
b. P376,470
c. P94,118
d. P294,118
60.Using
a.
b.
c.
d.

the above data, the total deductible expense is

P1,294,118
P494,118
P1,000,000
P1,094,118

61.Which of the following statements on fringe benefits is correct?

a. Part of the taxable income of employees
b. Subject to fringe benefit tax
c. Not part of the taxable income of the employees
d. Maybe given to managerial and rank and file employees

62.ABC Corp. concluded its first year of operations. Its fiscal year ended May 31,
1999. The net income from June 1, 1998 to May 31, 1999 amounted to P1M. The
gross income for the same period is P20M. The income tax due for the taxable
period is
a. P330,000
b. P400,000
c. P335,833
d. P340,000

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63.Using the above data, but the second year of operations from June 1, 1999 to May
31, 1999 shows a net income of P1.2M and gross income of P15M. The tax due for
the period is
a. P391,000
b. P326,833
c. P396,000
d. P384,000
64.Acting on the information given by A, the government is seized and confiscated
smuggled goods with a fair market value of P30M. As reward will be subject to a
final tax of
a. P1M
b. P3M
c. P300,000
d. P100,000
65.There
a.
b.
c.
d.

shall be no recognition of gain or loss on

Sale of treasury stock above cost
Receipt of shares of stock for a property
Original sale of shares of stock above par value
Exchange of shares of stock for a bond investment

66.Mr. A, single received the following during the taxable year:

Proceeds of his life insurance paid at an annual premium of P15,000 within 25
years P2M
Proceeds of his mothers life insurance paid at an annual premium of P10,000
within
20 years
P1M
House and lot inherited from his mother
P4M
Rent income from inherited properties
P200,000
For income tax purposes, how much of the above items must be included in his
gross income?
a. P7,200,000
b. P1,200,000
c. P200,000
d. P1,825,000
67.Mr. B, a member of the Philippine boxing team received the following during the
taxable year:
Prize for winning the Asian games medal
P500,000
Athlete of the year award
100,000
Winnings from Philippine lotto
400,000
Prize Mc Donald raffle promo
10,000
Cash gift from his godfather
100,000
The amount not subject to income tax is
a. P1,000,000
b. P1,100,000
c. P1,110,000
d. P1,010,000

68.The inherent power of the sovereign state to legislate for the protection of the
health, welfare and morals of the community is
a. Power of eminent domain
b. Power of taxation
c. Police power
d. People power

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69.Mr. C, single presented to you the following items of income for the taxable year
2007:
Salary as part-time instructor (net of P1,400 w/tax)
P
18,600
Honorarium as member of the board of ABC Crop.
10,000
Rental income of apartment house he purchased using his
income from salary and professional fees
12,000
Interest income from PNB
On deposit maintained under the expanded foreign
currency deposit system (net)
$200
On savings deposit (net)
4,000
Compensation income received as a CPA
25,000
Royalty income from book publication
30,000
Prizes received from supermarket raffle
12,000
Winnings from PCSO
100,000
Compensation for injuries suffered in an accident
20,000
Bonus and 13th month pay
10,000
The taxable income after exemption of Mr. C is
a. P82,000
b. P47,000
c. P52,000
d. P62,000
70.Using
a.
b.
c.
d.

the data above, if Mr. C is married, his taxable income after exemption is
P40,000
P29,000
P35,000
P50,000

71.A, retired at the end of the first quarter of 2008 after rendering 25 years of
continuous service for ABC Corporation which employed her immediately after her
graduation from college. She was the 21 years old. She earned the following
income for 2008:
Salary for the first quarter
P
60,000
Honorarium as speaker
2,000
Retirement pay
100,000
Commissions
5,000
Fee as a member of the board of director
50,000
Terminal leave payments (vacation and sick leave)
12,000
Interest income from time deposit
3,000
th
13 month pay
15,000
The gross compensation income of A is
a. P167,000
b. P217,000
c. P117,000
d. P67,000

72.Interest income earned by a resident citizen from outside the Philippines is

a. Subject to scheduler tax
b. Not subject to income tax
c. Subject to final tax
d. Partly subject to scheduler and partly subject to final tax
73.The deduction allowed for the payment of premium on health insurance during
the taxable year by a resident citizen amounting to P3,000 for the months from
August to December is
a. P3,000
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b. P2,400
c. P1,000
d. P1,250
74.A non-profit domestic hospital has the following data during the year 2007:
Gross income from hospital operation
P
2,000,000
Expenses hospital operation
500,000
Rent income of commercial space, hospital ground
floor, net of 5% withholding taxes
190,000
Interest on bank deposit, net of 20% withholding tax
40,000
Dividend from a domestic corporation
100,000
The income tax still due and payable in 2007 is
a. P170,000
b. P561,000
c. P551,000
d. P160,000
75.Mrs. A took out a life insurance policy for P500,000 naming her son as beneficiary.
Under the terms of the policy, the insurer, Filipinas Insurance Corporation will pay
Mrs. A the amount of P500,000 after the 25 th year of the policy, or her beneficiary
should she die before that date. Mrs. A outlived the policy and received the
proceeds. The premium paid on the policy was P400,000. The proceeds from the
life insurance policy of Mrs. A is
a. Exempt from income tax
b. Taxable to the extent of P100,000
c. Taxable in full
d. Taxable to the extent of P400,000
76.Mr. B insured his life with his estate as his beneficiary. In 2006, after Mr. B had
paid P65,000 in premiums, he assigned the policy to Mr. C for P60,000, and Mr. C
continued paying the premiums. Mr. B died in 2007 and Mr. C collected the total
proceeds of P200,000. Mr. C, after the assignment and before Mr. Bs death, paid
total premiums of P80,000. As a result of the above transaction, Mr. C
a. May consider the proceeds of P200,00 as exempt from income tax
b. Derived a taxable income of P140,000
c. Derived a taxable income of P60,000
d. Derived a taxable income of P120,000
77.D Co. took two life insurance policies on the life of its Executive Vice-President,
Mrs. E. In one policy, the beneficiary is the corporation and the other, designates
Mr. F, the EVPs husband, as revocable beneficiary. The insurance premiums paid
by D Co. is
a. Deductible, only in so far as the first policy is concerned
b. Deductible for both policies
c. Not deductible for both policies
d. Deductible in so far as second policy is concerned
78.MP captured the WBC lightweight boxing title. By virtue of this single honor he
brought to the country, he was given brand new BMW car as a prize by a car
manufacturer.
Statement I The prize received by MP is exempt from tax
Statement II The car manufacturer can deduct in full the gift for income tax
purposes
a. True, true
b. True, false
c. False, true
d. False, false
79.C, married had the following transactions:
2006 Taxable income from her business
12

70,000

08/02/08
Dividends received from:
Resident corporation
Non-resident corporation
Interest from bank deposit
Interest from trade receivable
Capital gain on assets held for 6 months
34,000
Capital loss on assets held for 10 months
70,000

3,000
1,000
10,000
4,000

2007 Taxable income from her business

40,000
Capital gains on capital assets held for 18 months
46,000
Capital loss on assets held for 9 months
6,000
Amounts received as liquidating dividend (cost = P100,000)
held for 20 months
150,000
The taxable income before personal exemption in 2007 is
a. P62,000
b. P71,000
c. P72,000
d. P46,000
80.Using
a.
b.
c.
d.

the above data, if the taxpayer is a corporation, taxable income in 2007 is

P78,000
P130,000
P86,000
P49,000

13

08/02/08
ANSWERS (August 2, 2008)
1. C
21.D
2. C
22.C
3. C
23.B
4. C
24.A
5. B
25.C
6. A
26.C
7. A
27.A
8. D
28.D
9. B
29.B
10.B
30.A
11.B
31.C
12.B
32.B
13.A
33.B
14.D
34.A
15.C
35.A
16.C
36.B
17.B
37.C
18.A
38.A
19.A
39.D
20.A*
40.C

41.B
42.D
43.A
44.A
45.B
46.C
47.A
48.A
49.D
50.C
51.D
52.A
53.C
54.B
55.D
56.D
57.D
58.D
59.C
60.D

14

61.D
62.C
63.A
64.D*
65.B/C*
66.D
67.B
68.C
69.B
70.B
71.B
72.A
73.C
74.A
75.B
76.C
77.D
78.D
79.D
80.B

81.
82.