FINALS QUIZ 1: DEALINGS IN PROPERTIES

INSTRUCTOR: ALESSA JOY CRUZ, CPA

Name: ______________________________________________________
Course & Yr.: ______________________________________________________
Schedule: ______________________________________________________

I. MULTIPLE CHOICE: Select the option that best corresponds to your

answer. Encircle the letter of your choice. (25 points)

1. This is a capital asset

a. A residential land previously foreclosed by PNB and is now being
offered for sale to the public
b. A commercial building foreclosed by a lending institution
c. A 10-door apartment unit owned by a retired government employee
d. A residential land owned by a practicing CPA

2. An individual taxpayer owns a ten (10)-door apartment with a monthly

rental of P10,000 each residential unit. He sold this property to
another individual taxpayer. Which is not correct?
a. The seller is not liable to pay the capital gains tax.
b. The property sold is a capital asset.
c. The taxpayer is engaged in business.
d. The rental income is subject to income tax using the graduated
rates.

3. Statement 1: Capital losses are deductible from ordinary gains but

net capital loss is not deductible from ordinary gains.
Statement 2: Ordinary losses are deductible only to the extent of the
capital gains but the net capital loss is not deductible from
ordinary gain.
a. True, True
b. True, False
c. False, True
d. False, False

4. Where the taxpayer is a corporation, which of the following

statements is true?
a. The holding period does not apply to corporations, hence, capital
gains and losses are recognized at 50%
b. The net capital loss can be carried over in the next succeeding
year.
c. Capital loss is deductible only up to the extent of ordinary
gains.
d. Ordinary loss is deductible from capital gains.

5. Where the taxpayer is a corporation, the following rules as to the

recognition of capital gains or losses from the disposition of
property classified as capital asset shall apply. Which is the
exception?
a. The holding period does not apply to corporations, hence capital
gains and losses are recognized at 100%.
b. Capital losses are deductible from capital gains.
c. Ordinary losses are deductible from capital gains but net capital
loss cannot be deducted from ordinary gain.
d. Net capital loss carry-over should not exceed the net income in
the year the loss was incurred.
6. The following rules as to the recognition of capital gains or losses
from the disposition of personal property classified as capital asset
apply where the taxpayer is an individual. Which is the exception?
a. Depending on the holding period, the percentages of gain or loss
is 100% if the capital asset has been for 12 months or less, and
50% if the capital asset has been held for more than 12 months.
b. Capital losses are deductible only to the extent of the capital
gains; hence, the net capital loss is not deductible.
c. Ordinary losses are deductible from the capital gains but net
capital loss cannot be deducted from ordinary gain.
d. Net capital loss carry over in a taxable year should not exceed
the capital gain in the year the loss was incurred.

7. A transferred his commercial land with a cost of P600,000 and with a

FMV of P900,000 to ABC Corp. in exchange of the stock of the
corporation with a par value of P800,000. As a result of the
transfer, A gained control of the corporation. Thus,
a. The gain recognized is the difference between the par value of the
shares of stocks and the cost of the land
b. The loss recognized is the difference between the FMV of the land
and the par value of the stocks
c. No gain shall be recognized because the land was in exchange for
shares of stock of a corporation and A became the majority
stockholder thereof.
d. No loss shall be recognized because the par value of the shares is
greater than the cost of the land.

8. Statement 1: The issuance of shares of stock for property is subject

to capital gains tax.
Statement 2: The sale of real properties located abroad is subject to
6% capital gains tax.
a. True, True
b. True, False
c. False, True
d. False, False

9. On September 30, 2018, Juan sold a piece of land to Pedro who

correctly computed the applicable gains tax of P1,440,000 on the
transaction. The latter withheld the applicable capital gains tax and
remitted the same to the BIR before the statutory deadline. The
selling price of land is P20,000,000. Which of the following is not
correct?
a. The fair market value of the land is P24,000,000.
b. Juan received cash of P18,560,000 from Pedro.
c. Juan applied the tax rate to the fair market value of the land,
not to its selling price of P20,000,000.
d. The land sold by Juan is classified as an ordinary asset.

10. Which capital asset is not subject to regular tax?

a. Real property held for sale by a dealer.

b. Real property held as investment by a non-realty dealer.
c. Domestic stocks held by a security dealer
d. Foreign stocks

11. Josefa provided the following data on the sale of her personal
property sold in 2018 held by her for 15 months:

Cost P225,000
Mortgage assumed by buyer 270,000
Installment collection:
 2018 67,500
2019 67,500
2020 45,000

How much is the selling price?

a. P450,000 c. P180,000
b. P270,000 d. P225,000

11 Cash Received -
FMV of thte property received -
Installment obligations of the buyer 180,000.00
Mortgage Assumed by the Buyer 270,000.00
SELLING PRICE 450,000.00

12. How much is the contract price?

a. P450,000 c. P180,000
b. P270,000 d. P225,000

12 Selling Price 450,000.00

Less: Mortgage Assumed by Buyer 270,000.00
Balance 180,000.00
Add: Excess of Mortgage over Cost 45,000.00
CONTRACT PRICE 225,000.00

13. How much is the initial payments?

a. P67,500 c. P45,000
b. P112,500 d. P225,000

13 Downpayment -
Add: Installments received during the year 67,500.00
Add: Excess of Mortgage over Cost 45,000.00
INITIAL PAYMENTS 112,500.00

14. How much is the income subject to income tax in 2018, 2019 and 2020?
a. P56,250; P33,750 and P22,500 respectively
b. P112,500; P67,500 and P45,000 respectively
c. P225,000; P0 and P0 respectively
d. None of the above.

SP 450,000.00
CP 225,000.00
Gain 225,000.00

14 2018 2019 2020

Ins. Rate 112,500/450,000 67,500/450,000 45,000/450,000
Pro-rated Gain 56,250.00 33,750.00 22,500.00

15. A taxpayer had the following dealings in properties?

Short term capital gain P200,000
Long term capital gain 100,000
Short term ordinary gain 50,000
Long term ordinary gain 150,000
Short term capital loss 100,000
Long term capital loss 150,000
 Short term ordinary loss 200,000
Long term ordinary loss 120,000

Assuming the taxpayer is an individual, compute respectively the

total items of gross income and the total items deductible from
gross income.
a. P200,000; P260,000 c. P275,000; P320,000
b. P200,000; P320,000 d. P275,000; P260,000

16. Assuming that the taxpayer is a corporation, compute respectively

the total items of gross income and the total items of deductions
from gross income in regular income tax.
a. P500,000; P570,000 c. P250,000; P570,000
b. P500,000; P320,000 d. P250,000; P320,000

INDIVIDUAL CORPORATION
Ordinary Capital
ST Capital Gain 200,000.00 200,000.00
LT Capital Gain 50,000.00 100,000.00
ST Ordinary Gain 50,000.00 50,000.00
LT Ordinary Gain 150,000.00 150,000.00
ST Capital Loss - 100,000.00 - 100,000.00
LT Capital Loss - 75,000.00 - 150,000.00
ST Ordinary Loss - 200,000.00 - 200,000.00
LT Ordinary Loss - 120,000.00 - 120,000.00
200,000.00 75,000.00 200,000.00 50,000.00

Ordinary Gains 200,000.00 200,000.00

Net Capital Gain 75,000.00 50,000.00
Gross Income 275,000.00 250,000.00

ST Ordinary Loss - 200,000.00 - 200,000.00

LT Ordinary Loss - 120,000.00 - 120,000.00
Deductions - 320,000.00 - 320,000.00

17. Mateo sold his principal residence for P5,000,000. His principal
residence was acquired at P2,000,000 and has a fair market value of
P6,000,000 at the date of sale. Within 18 months, he reconstructed a
new principal residence for P4,500.000.

Compute the capital gains tax to be deposited in escrow.

a. P270,000
b. P300,000
c. P360,000
d. 0

17 Highest Amount (FMV) 6,000,000.00

CGT Rate 6%
Capital Gains Tax 360,000.00

18. The cost basis of the new residence is

a. P1,800,000
b. P1,500,000
c. P3,750,000
 d. P4,500,000

18 Selling Price 5,000,000.00

Cost of new principal residence 4,500,000.00
Unutilized Proceeds 500,000.00

Cost of New/Selling Price 90% 4,500,000/5,000,000

Cost of Old 2,000,000.00
Cost Basis of New 1,800,000.00

19. The amount of capital gains tax to be released to Mateo is

a. P240,000
b. P270,000
c. P300,000
d. P324,000

19 Cost of New/Selling Price 90% 4,500,000/5,000,000

Total Capital Gains Tax 360,000.00
Cost Basis of New 324,000.00

20. Compute the cost basis of the new residence if it was acquired for
P5,200,000.
a. P2,000,000
b. P2,200,000
c. P1,733,333
d. P4,333,333

20 Cost of Old 2,000,000.00

Excess of cost of new over selling price 200,000.00
Cost Basis of New 2,200,000.00

21. Sarah Geronimo is a stock broker and holds 10,000 ordinary stock of
San Miguel Corporation, a domestic corporation, acquired at P100 per
share. Her valuation for San Miguel Corporation indicates that San
Miguel’s stocks will decline in the near future. If Sarah sells her
stock investment directly to a buyer, Divine, at P115 per share, how
much is the capital gains tax payable on the transaction?
a. P5,000
b. 10,000
c. P5,750
d. 22,500

22. Ayala Malls Cebu 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 lot is
a. 0 c. 120,000
b. 108,000 d. 150,000

23. EDSA Inc., a domestic service company, has the following

transactions on the sale of another domestic corporation:

Transaction Quantity Net Price

Purchase 20,000 P 40,000
Purchase 30,000 63,000
Sale 40,000 92,000
 Assuming the first in, first out method, compute the capital gains
tax on the sale.
a. P0 c. P1,500
b. 480 d. P4,650

24. Assuming the moving average method, compute the capital gains tax on
the sale.
a. P0 c. P500
b. P400 d. P1,440

FIFO MOV. AVE.

Selling Price 92,000.00 92,000.00
Cost
1st Purchase 40,000.00 P103,000/50,000 total
82,400.00
2nd Purchase 42,000.00 shares*40,000 shares sold
Total Cost 82,000.00 82,400.00
Gain 10,000.00 9,600.00
Tax Rate 15% 15%
CGT 1,500.00 1,440.00

25. When the annualized capital gains tax exceeds the transactional
capital gains tax, the excess is a
a. Tax Credit
b. Tax Payable
c. Tax Refundable
d. A or B