TAXATION -- 10%

13.) Under the tax code, the following are income taxpayers, except:
1.) Fringe Benefit Tax is payable by the
A. Employee
B. Donor
C. Employer
D. Beneficiary

a. GOCC
b. Estate and Trust
c. Min wage income earners
d. non-resident foreign corp.

2.) The following can claim for a tax credit, except

A. Citizen
B. Beneficiary of an estate or trust
C. Member of a General Professional Partnership
D. Foreign corporation

Answers: 1.) C 2.) D 3.) B 4.) C 5.) D 6.) D 7.) C 8.) C 9.) B 10.) D 11.) B 12.) B 13.) c

3.) Optional Standard Deduction is applicable to all individuals except

A. Resident Aliens
B. Non-resident aliens
C. Resident Citizens
D. Non-resident Citizen

1.) The bank deposit secrecy law bars all inquiries into a bank deposit. A deposit may,
however, be looked into

4.) A fringe benefit may be subject to fringe benefit tax if received by

A. any employee
B. rank and file employees
C. managerial employees
D. Stockholders
5.) A laundry allowance of P300 per month is an example of
A. fringe benefit
B. allowance
C. tax benefit
D. de minimis benefit
6.) Which of the following forms part of the stages of taxation?
A. payment and filing
B. filing and collection
C. withholding and levying
D. assessment and payment
7.) Any good, service or other benefit furnished or granted in cash or in kind by an
employer to an individual employee refers to
A. de minimis benefit
B. company benefit
C. fringe benefit
D. annuity
8.) Fringe benefit tax is imposed on the fringe benefit's
A. fair market value
B. actual monetary value
C. grossed-up monetary value
D. assessed value
9.) The following fringe benefits are not taxable except
A. fringe benefits which are authorized and exempted from tax under special laws
B. life or health insurance and other non-life insurance premiums or similar amounts in excess of
what the law allows
C. benefits given to the rank and file employees, whether granted under a collective bargaining
agreement or not
D. de minimis benefits
10.) Deductions from gross income are not allowed to taxpayers earning compensation income
arising from personal services rendered under an employer-employee relationship, except
A. bad debts
B. ordinary and necessary trade, business or professional expenses
C. charitable and other contributions
D. premium payments on health and/or hospitalization insurance of an individual taxpayer
11.) X is a Brazilian citizen working as a host and model in a local television show
here in the Philippines. X is therefore taxable as a
A. non resident alien engaged in trade or business
B. resident alien
C. foreign citizen
D. resident citizen
12.) The following dividends are taxable except
A. property dividends
B. liquidating dividends
C. cash dividends
D. stock dividends

MERCANTILE LAW (COMMERCIAL LAW) -- 15%

A. after prior notice to the depositor.

B. upon court order in annulment of marriage cases.
C. in cases of impeachment.
D. on motion in a bribery case.
2.) A draws a bill payable to B or order with X, as the drawee. The bill was
successively endorsed to C, D, E and F, holder. X does not pay and F has duly
protested non-payment. Y pays for the honor of C. Which of the following statement
is wrong?
A. D is discharged.
B. E is discharged.
C. C is discharged.
D. Y can ask reimbursement from A.
3.) When an endorser waives presentment and notice of dishonor, he increases his
liability. His endorsement is:
A. Facultative endorsement
B. Qualified endorsement
C. Alternative endorsement
D. Restrictive endorsement
4.) Ariel issued a note to Brando. There was a total failure of consideration. Brando
issued the note for consideration to Cecil who is a holder in due course. Cecil
indorsed the note to David who knew of the failure of consideration. Can David
successfully collect from Ariel?
A. No, because David knew the failure of consideration.
B. No, although David acquired the rights of Cecil, a holder in due course and he was
not a party to any illegality.
C. Yes, because David acquired the note for consideration.
D. No, because David is not a holder in due course.
5.) The SEC, after notice and hearing, may dissolve a corporation upon filing of a
verified petition for the dissolution, on grounds provided by law. Which of the
following statement is not correct?
a. In case of deadlock in the management of the affairs and business of a close
corporation, the SEC, upon written petition by any stockholder, shall have the power
to make such order as it deems appropriate, including an order dissolving the
corporation.
b. Any stockholder of a corporation may, by written petition to the SEC, compel the
dissolution of the corporation whenever any acts of its directors, officers or those in
control of the corporation is illegal, fraudulent or dishonest.
c. The SEC can automatically issue a certificate of dissolution in case a corporation
filed for its dissolution and there are creditors affected provided that majority of the
board of directors or trustee consented to such action.
d. The SEC, after notice and hearing, may dissolve a corporation in case there are
violations of the provisions of the Corporation Code not specially penalized therein.
6.) Which of the following will cause the automatic dissolution of a corporation?
a. Commission by the corporation of an ultra vires act
b. Continuous non-operation for a period of at least 5 years
c. Refusal to comply with or defiance of any lawful order of the SEC restraining
commission of acts which would amount to grave violation of its franchise
d. None of the above
7.) SUJU Corporation, through its Board of Directors and with the unanimous approval

of the stockholders declared to grant stock dividends to its stockholders for the year
2008 amounting to 79 Billion Pesos. After examining the books and other records of
the corporation, Sungmin Lee, Vice President for Finance, discovered that the
authorized capital stock of the Corporation is almost depleted, that is almost all
were already issued and the remaining cannot accommodate the needed stocks for
stock dividend distribution. The Corporation though was liquid in cash and has
retained earnings amounting to 365 Billion Pesos. How should the Board of Directors
of SUJU Corporation best act on it?
a. Issue a Board Resolution deferring the distribution of dividends for the said year.
b. Increase the authorized capital stock and amend the Articles of Incorporation of
SUJU Corporation to cater to the needed stocks for stock dividend distribution.
c. Divide the remaining unissued stocks pro rata to the stockholders as stock
dividends.
d. Recall its previous Resolution declaring stock dividends and in its stead, issue
another Resolution declaring cash dividends for year 2008.
8.) FYI Corporation has increased its capital stock and new shares of stock are issued.
The stockholders of FYI Corp wish to exercise their pre-emptive right regarding the
shares to be issued. Which of the following shares does a pre-emptive right of
stockholders extends?
a. to shares to be issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public
b. to shares to be issued in good faith with the approval of stockholders representing
2/3 of the outstanding capital stock in exchange for property needed for corporate
purposes
c. to shares to be issued in good faith with the approval of the stockholders
representing 2/3 of the outstanding capital stock in payment of previously contracted
debt
d. treasury shares reacquired using the funds from the surplus profits of the
corporation which could have been declared as dividends
9.) The following instances are considered as indicators that a foreign corporation
is transacting business in the Philippines, even without securing a license, except
a. Soliciting orders, purchases and service contracts
b. Subscribing shares of stock from a domestic corporation
c. Engaging into continuous business acts or transactions
d. Participating in the management, supervision or control of any domestic business
firm, entity or corporation in the Philippines
10.) Which among the following is not a necessary result or consequence when a
foreign corporation secures a license and/or registers?
A. the foreign corporation can do regular business in the Philippines
B. the foreign corporation can avail the aid of the Philippine courts and sue
C. the foreign corporation may be sued in any regular court for any valid cause of
action recognized under Philippine laws.
D. the foreign corporation can intervene in any action, suit or proceeding in any court
or administrative agency
11.)Assuming all the other requisites of negotiability are present, which of the
following instruments is NOT payable to bearer?
a. "Pay to the order of Cash."
b "Pay to the order of Jose Rizal, national hero."
c. "Pay to Pedro Padernal, bearer."
d. "Pay to Pedro Padernal or bearer."
12.) Unless the by-laws provide otherwise, written notice of regular meetings shall be
sent to all stock holders of record:
a. at least one day prior to the meeting
b. at least two days prior to the meeting
c. at least one week prior to the meeting
d. at least two weeks prior to the meeting
Answers: 1.) c 2.) c 3.) a 4.) c 5.) d 6.) d 7.) b 8.) d 9.) b 10.) b 11.) c 12.) d

2010

2015
TAXATION BAR EXAM QUESTIONS
ON
DONORS
TAX
Mr. L owned several parcels of land and he donated a parcel each to his two
children. Mr. L acquired both parcels of land in 1975 for ll200,000.00. At the
time of donation, the fair market value of the two parcels of land, as determined
by the CIR, was 112,300,000.00; while the fair market value of the same
properties as shown in the schedule of values prepared by the City Assessors
was 112,500,000.00. What is the proper valuation of Mr. L's gifts to his children
for purposes of computing donor's tax?
(2015 Bar Question)
SUGGESTED ANSWER:
The valuation of Mr. Ls gift to his children is the fair market value (FMV) of the property
at the time of donation. It is the higher of the
FMV as determined by the Commissioner or the FMV as shown in
the schedule of values fixed by the provincial or city assessors. In this case, for the
purpose of computing donors tax, the proper valuation is the value prepared by the City
Assessors amounting to P2,500,00.00 because it is higher than the FMV determined by
the CIR.
In May 2010, Mr. And Mrs. Melencio Antonio donated a house and lot with a fair market
value of P10 Million to their sob, Roberto, who is to be married during the same year to
Josefina Angeles. Which statement below is INCORRECT?
(2012 Bar Question)
a) There are four (4) donations made two (2) donations are made by Mr. Melencio
Antonio to Roberto and Josefina, and two (2) donations are made by Mrs. Antonio;
b) The four (4) donations are made by the Spouses Antonio to members of the
family, hence, subject to the graduated donors tax rates (2%-15%);
c) Two (2) donations are made by the spouses to members of the family, while
two (2) other donations are made to strangers;
d) Two (2)donations made by the spouses to Roberto are entitled to deduction from the
gross gift as donationproper nuptias.
SUGGESTED ANSWER:
d) Two (2) donations made by the spouses to Roberto are entitled to deduction from the
gross gift as donationproper nuptias.

The spouses Helena and Federico wanted to donate a parcel of land to their
son Dondon who is getting married in December, 2011. The parcel of land has a zonal
valuation of P420,000.00. What is the most efficient mode of donating the property?
(2011 Bar Question)
(A) The spouses should first donate in 2011 a portion of the property valued at
P20,000.00 then spread the P400,000.00 equally for 2012, 2013, 2014 and 2015.
(B) Spread the donation over a period of 5 years by the spouses donating P100,000.00
each year from 2011 to 2015.
(C)The spouses should each donate a P110,000.00 portion of the value of the property
in 2011 then each should donate P100,000.00 in 2012.
(D) The spouses should each donate a P100,000.00 portion of the value of the property
in 2011,and another P100,000.00 each in 2012. Then, in 2013, Helena should
donate the remaining P20,000.00.
SUGGESTED ANSWER:
(C)The spouses should each donate a P110,000.00 portion of the value of the property
in 2011 then each should donate P100,000.00 in
2012.
Exempted from donors taxation are gifts made:
(2011 Bar Question)
(A)for the use of the barangay.
(B) in consideration of marriage.
(C) to a school which is a stock corporation.
(D) to a for-profit government corporation.
SUGGESTED ANSWER:
(A)for the use of the barangay.

Levox Corporation wanted to donate P5 million as prize money for the world
professional billiard championship to be held in the Philippines. Since the Billiard
Sports Confederation of the Philippines does not recognize the event, it was held
under the auspices of the International Professional Billiards Association, Inc. Is
Levox subject to the donor's tax on its donation? (2011 Bar Question)
(A) No, so long as the donated money goes directly to the winners and not
through the association.
(B)Yes, since the national sports association for billiards does not sanction the event.
(C) No, because it is donated as prize for an international competition under the
billiards association.

(D) Yes, but only that part that exceeds the f

irst P100,000.00 of total Levox donations for the
calendar year.
SUGGESTED ANSWER:
(B)Yes, since the national sports association for billiards does not sanction the event.
A non-stock, non-profit school always had cash flow problems, resulting in failure to
recruit well-trained administrative personnel to effectively manage the school.
In 2010,Don Leon donated P100 million pesos to the school, provided the money shall
be used solely for paying the salaries, wages, and benefits of administrative
personnel. The donation represents less than 10% of Don Leon's taxable income
for the year. Is he subject to donor's taxes?
(2011 Bar Question)
(A) No, since the donation is actually, directly, and exclusively used for educational
purposes.
(B)Yes, because the donation is to be wholly used for administration purposes.
(C) Yes, since he did not obtain the requisite NGO certification before he made the
donation.
(D) No, because the donation does not exceed 10% of his taxable income for 2010.
SUGGESTED ANSWER:
(B)Yes, because the donation is to be wholly used for administration purposes.
On January 10, 2011, Maria Reyes, single-mother, donated cash in the amount of
P50,000.00 to her daughter Cristina, and on December 20, 2011, she donated another
P50,000.00 to Cristina. Which statement is correct?
(2012 Bar Question)
a) Maria Reyes is subject to donors tax in 2011 because gross gift is P100,000.00;
b) Maria Reyes is exempt from
donors tax in 2011 because gross gift is P100,000.00;
c) Maria Reyes is exempt from donors tax in 2011 only to the extent of P50,000.00;
d) Maria Reyes is exempt from donors tax in 2011 because the donee is minor.
SUGGESTED ANSWER:b
Maria Reyes is exempt from donors tax in 2011 because gross gift is P100,000.00
Section 99(A), NIRC.
Mr. De Sarapen is a candidate in the upcoming Senatorial elections. Mr. De Almacen,
believing in the sincerity and ability of Mr. De Sarapen to introduce much needed
reforms in the country, contributed P500,000.00 in cash to the campaign chest of
Mr. De Sarapen. In addition, Mr. De Almacen purchased tarpaulins, tshirts,umbrellas, caps and other campaign materials that he also donated to Mr. De
Sarapen for use in his campaign. Is the contribution of cash and campaign
materials subject to donors tax?
(2014 Bar Question)
SUGGESTED ANSWER :
The answer must be qualified. Section 99(C) of the NIRC explicitly
provides that any contribution in cash or in kind to any candidate, political party
or coalition of parties for campaign purposes shall be governed by the Election
Code, as amended. On the other hand, Section 13 of the Republic Act No. 7166
specifically states that any provision of law to the contrary notwithstanding, any
contribution in cash or kind to any candidate or political party or coalition of
parties for campaign purposes, duly reports to the Commission on Elections
(COMELEC) shall not be subject to the payment
of any gift tax.
Thus, if
Mr. De Almacen
reported his campaign contributions of Php 500,000.00 in cash,
tarpaulins, t
shirts, umbrellas, caps, and other campaign materials to the COMELEC, then the BIR
cannot
impose donors tax on such contributions. Conversely, if
Mr. De Almacen
fa
iled to report these campaign
contributions to the COMELEC, such contributions would be subject to donors tax.

The spouses Jun and Elvira Sandoval purchased a piece of land for
P
5,000,000 and included their
two (2) minor children as co
purchasers in the
Deed of Absolute Sale. The Commissioner of
Internal Revenue (CIR) ruled that there was an implied donation and assessed
donors' taxes
against the spouses.
Rule on the CIR's action. (1%)
(2013 Bar Question)
(A) The CIR is wrong; a donation must be express
.
(B) The CIR is wrong; financial capacity is not a requirement for a valid sale.
(C) The CIR is correct; the amount involved is huge and ultimately ends up with the
children.
(D) The CIR is correct; there was animus donandi since the children had no finan
cial capacity to
be co
purchasers.
SUGGESTED ANSWER:
(D)
The CIR is correct; there was animus donandi since the children had no financial
capacity to be co-purchasers
.
The present case is similar to the case of
Sps. Hordon H. Evono and Maribel C. Evono v. CIR, et
al.,
[
CTA EB No. 705, (CTA Case No. 7573),June 4, 2012
]. The CTA held that the inclusion of
the minor childrens names in the transfer of the titles/properties shall be
deemed a donation or
gift from the
ir parents. This is so because the minor children, at an early age, have no source of
income. There is a clear
animus donandi
. Therefore, the imposition of donors tax is in
accordance with Section 98 of the NIRC.
(
Note:
Although the cited case was only de
cided by the CTA, it provides an authoritative insight
on the answer to the given problem, considering that there is no exact
applicable law and
jurisprudence on the matter.)
Celia donated P110,000.00 to her friend Victoria who was getting married. Celia gave
no other gift
during the calendar year. What is the donor's tax implication on Celias
donation?
(2011 Bar
Question)
(A) The P100,000.00 portion of the donation is exempt
since given in consideration of marriage.
(B) A P10,000.00 portion of the donation is exempt being a donation in
consideration of
marriage.
(C)
Celia shall pay a 30% donor's tax on the P110,000.00 donation.
(D) The P100,000.00 portion of the donation is e
xempt under the rate schedule for donor's tax.
SUGGESTED ANSWER:
(C)
Celia shall pay a 30% donor's tax on the P110,000.00 donation.