CAPITAL ASSETS 1. Lots for rent when subsequently sold are classified as a. Liquid assets c. ordinary assets b. Capital assets d. fixed assets 2. A feature of ordinary gains as distinguished from capital gains a. No holding period c. Sources are capital assets b. May or may not be taxable in full d. gains from sale of assets not included as inventory 3. The term capital assets includes a. Real property not used in the trade or business of the taxpayer b. Stock in trade or other property included in the taxpayer’s inventory c. Property primarily for sale to customers in the ordinary course of his trade or business d. Property used in the trade or business of the taxpayer and subject to depreciation 4. 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 units owned by a retired government employee d. A residential land owned by a practicing CPA 5. Holding period is the duration for which the taxpayer held the capital asset. A capital asset held by the taxpayer for not more than 12 months is said to be a. Short-term b. medium-term c. long-term d. no-term 6. An individual taxpayer owns an eight-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 7. Basic rule on sale of capital assets, except a. Sale of real property located in the Philippines by a foreign corporation is subject to 6% CGT based on selling price or FMV, whichever is higher b. Sale of shares Of stock of a domestic corporation through the local stock exchange or initial public offering is exempt from income tax c. Sale of shares of stock of a domestic corporation through the local stock exchange is subject to a final tax of 5% for the first P100,000 capital gain and 10% for the excess d. Sale of personal property located in the Philippines by a resident citizen is subject to the rules on holding period 8. S1: Capital losses are deductible from ordinary gains but net capital loss is not deductible from ordinary gains. S2: 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, False d. False, True
9. S1: As a general rule, the entire amount of the gain or loss arising from dealings in property is a taxable gain or a deductible loss. S2: An individual is qualified to account for his gain on instalment basis if the initial payment exceeds 25% of the selling price. a. True, True b. True, False c. False, False d. False, True 10.S1: Ordinary gain includes capital gains such as those derived from the performance of services, whether personal or professional, and those accruing from business. S2: Stocks held by dealers in securities are classified as capital assets. a. True, True b. True, False c. False, False d. False, True 11.Where the taxpayer is a corporation, which of the following statement is true? a. The holding period does not apply to corporation, 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 to the extent of ordinary gains d. Ordinary loss is deductible from capital gains 12.Where the taxpayer is a corporation, the following rules as to 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 corporation, hence, capital gains and losses are recognized at 1000% b. Net capital loss carry should not exceed the net income in the year the loss was incurred. c. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain. d. Capital losses are deductible only to the extent of capital gains 13.The following rules as to 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. Net capital loss carry over in a taxable year should not exceed the capital gain in the year the loss was incurred. b. Depending on the holding period, the percentages of gain or loss is 100% if the capital asset has been held for 12 months or less and 50% if the capital asset has been held for more than 12 months. c. Capital losses are deductible only to the extent of the capital gains; hence, the net capital loss is not deductible d. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain. 14.M sold his principal residence at a selling price of P5M but with FMV of P6M. The property sold was acquired for P3M. He purchased his new principal residence at a cost of P7M. The capital gains tax is a. P360,000 b. P300,000 c. P240,000 d. P0 15.Using the above information, how much is the basis of the new principal residence? a. P7M b. P6M c. P5M d. P4M 16.If only P4M out of P5M was utilized in acquiring his new principal residence, the capital gain tax is
a. P60,000 P360,000
b. P72,000
c. P300,000
d.
17.Using the preceding number, the basis of the new principal residence is a. P3.2M b. P4M c. P2.4M d. P3M 18.Which of the following statements is true? a. The sale by a corporation of its office building shall not result to a capital gain even if it derived a gain of P240,000 on the sale. b. A corporation which sold for P120,000 in 2015 an equipment which it acquired in 2008 for P180,000 shall report only a capital gain of P30,000 in 2016. c. A corporation with a net capital loss of P50,000 and a net income of P40,000 in 2015 can carry over only a maximum amount of P40,000 in 2016. d. A corporation with a net capital loss of P50,000 in 2015 can carry over such amount only until 2016. 19.Rules on capital gains and losses of corporations, except a. There is a final tax of 5% on real property sold b. Capital gains and losses are recognized to the extent of 100% regardless of the holding period. c. The net capital loss carry over is not applicable. d. Capital losses are deductible only to the extent of capital gains. 20.Jane has a taxable income of P200,000 for 2015 excluding capital gains and losses. For 2015, Jane, incurred a net long-term loss of P8,000. What amount of the capital loss can Jane offset against 2015 ordinary income? a. P0 b. P3,000 c. P4,000 d. P8,000 21.A bought from B Corporation 10 shares of stock. Sixty days thereafter, the corporation was adjudged bankrupt and its stock as worthless. The loss of A to be reported for income tax purposes is classified as a. A wagering loss c. Non-deductible loss for income tax purposes b. Short-term capital loss d. casualty loss 22.On August 15, 2015, Mr. Cruz sold a 500-square meter residential house for P3,000,000. The house was acquired in 2002 of P2M. On the date of sale, the FMV of the house as shown in the real property declaration was P2.5M and the assessor’s value amounted to P2.2M. The zonal value was P7,000 per square meter. The capital gains tax is a. P120,000 b. P150,000 c. P180,000 d. P210,000 23.The capital gains tax of Mr. Cruz if the proceeds of sale was utilized in acquiring a new residence. a. P210,000 b. P150,000 c. P180,000 d. none 24.The amount to be deposited in escrow if the proceeds of the sale shall be utilized in acquiring a new residence a. P210,000 b. P150,000 c. P180,000 d. none
25.ABC Corp. realized an ordinary gain of P400,000. Its capital asset transactions during the year are as follows: Holding period Amount Capital gain 6 months P 50,000 Capital gain 2 years 45,000 Capital loss 12 months 23,000 Capital loss 10 years 28,000 What is ABC’s taxable income? a. P484,000 b. P444,000 c. P435,500 d. P44,000 26.Mrs. Sy owns a parcel of land worth P500,000 which she inherited from her father in 2012 when it was worth P300,000. Her father purchased it in 2000 for P100,000. If Mrs. Sy transfers this parcel of land to her wholly owned corporation in exchange for shares of stock of said corporation worth P450,000, her taxable gain is a. P0 b. P50,000 c. P150,000 d. P350,000 27.Jon had the following data on income and losses: 2014 2015 Ordinary business income P56,700 P60,800 Interest on time deposit with BDO 2,000 3,000 Short-term CG 5,000 8,500 Long-term CG 3,600 5,200 Short-term CL 8,000 2,900 Long-term CL 4,400 In 2014, the taxable income before personal exemption of Jon is a. P58,700 b. P53,300 c. P66,700 d. P56,700 28.Using the preceding information, taxable income of Jon for 2015 is a. P15,600 b. P36,000 c. P69,000 d. P45,600 29.Beauty Corp., a domestic corporation, has the following data for 2014, its first year of operations: Gross profit from sales P2,000,000 Dividend from domestic corporation 20,000 Capital gain on land in the Philippines held for 2 yrs. sold at P1M 200,000 Capital gain on shares of domestic corp held for 2 months sold directly to a buyer 120,000 Business expenses 1,100,000 Capital loss on bonds of domestic corporation Held for 6 months 30,000 The total capital gains tax for the year is a. P270,000 b. P64,000 c. P67,000 d. P54,000 30.The income tax due of Beauty Corp. at the end of the year is a. P270,000 b. P315,000 c. P306,000 d. P357,000 31.On different dates as listed below, Mr. Bening purchased ordinary shares of ABC Corporation. On May 31, 2016, he received a 50% stock dividend.
Lot No. 1
Date # of Cost per Total Purchased shares share Cost Oct. 31, 400 P100 P40,000 2015 2 Jan. 15, 300 120 36,000 2016 3 Mar. 15, 200 140 28,000 2016 4 May 15, 100 150 15,000 2016 On June 30, 2016, Mr. Bening sold 1,400 shares at P100 per share. Using FIFO method, the gain (loss) of Mr. Bening is a. P31,000 b. P(26,600) c. P28,938 d. P21,000 32.Using the same information but assuming weighted average was used, the gain (loss) of Mr. Bening is a. P31,000 b. P(26,600) c. P28,938 d. P21,000
