CPA Review School of the Philippines

Manila

ESTATES AND TRUSTS Dela Cruz / De Vera / Lopez

a. The property, rights and obligations of a person which are not extinguished by his death and those which
accrued thereto since the opening of a succession.
a. Assets b. Capital c. Estate d. Income

b. The term applied to the person whose property is transmitted through succession, whether or not he left a
will
a. Decedent b. Transferor c. Transferee d. Grantor

c. The term applied to the answer in No. 2 if he left a will

a. Heir b. Grantor c. Donor d. Testator

d. The person called to the succession either by the provision of a will or by operation of law
a. Heir b. Devisee c. Legatee d. Trustor

e. The person to whom a gift of real property is given by virtue of a will

a. Heir b. Devisee c. Legatee d. Trustor

f. The person to whom a gift of personal property is given by virtue of a will

a. Heir b. Devisee c. Legatee d. Trustor

g. The person who establishes a trust

a. Heir b. Devisee c. Legatee d. Trustor

h. The person in whom confidence is reposed as regards property for the benefit of another person
a. Devisee b. Trustee c. Legatee d. Trustor

i. The person for whose benefit the trust has been created
a. Legatee b. Heir c. Beneficiary d. Trustee

j. For income tax purposes, any person or corporation that holds in trust an estate of another person or persons
a. Beneficiary b. Fiduciary c. Legatee d. Devisee

k. Which of the following statements is correct?

a. Estates and trusts are allowed a personal exemption of P32,000 if the executor or trustee is married.
b. The income tax rates for corporate taxpayers apply to taxable estates and trusts
c. The taxable year of estates and trusts maybe calendar or fiscal year
d. For a trust to be taxable, it must be irrevocable, both as to corpus (principal) and income

l. Taxable estate as distinguished from a taxable trust

a. The exemption is P20,000
b. The income tax rates for individuals apply
c. The income tax return should be filed if the gross income is P20,000 or more
d. May claim the same exemption allowed for individuals

m. A died on January 2, 2011, survived by his wife and four qualified dependent children. He left a net estate
of P8,000,000 which is in the hands of an executor. The estate had a gross income of P3,000,000 and
expenses of P2,200,000. The net taxable income of the estate in 2011 is
 a. P800,000 b. P780,000 c. P750,000 d. P650,000

n. A died on January 2, 2011 leaving a net estate of P4,000,000. The estate is in the hands of an executor. B, a
nephew of A, married, is one of the heirs of A. in 2012, the estate had a gross income of P800,000 and
expenses of P500,000 on the properties on the estate. B, had own gross income of P200,000 and expenses of
P120,000. The executor distributed to B the following:

From the properties in the estate P250,000

From the current year’s income 100,000

Determine:

a. The taxable income of the estate P180,000

b. The taxable income of B 130,000

o. A created a trust for his daughter, B, and appointed C as the trustee. A transferred a 10-door apartment
where rent income of P190,000 per month (net of 5% withholding tax) was received by the trust with an
expense of P980,000 during the year. 30% of the net income was given to B. Determine the income tax still
due from the trust. P156,680

p. A created two trusts, Trust 1 and Trust 2 with different trustees but with common beneficiary, the following
data pertain to the trusts and beneficiary’s own account:

Trust 1 Trust 2 Beneficiary

Gross Income P400,000 P800,000 P250,000
Deduction 75,000 125,000 100,000
Income distributed to Beneficiary 150,000 175,000

Required: Determine the taxable income of:

(a) Trust 1 P155,000
(b) Trust 2 480,000
(c) Consolidated Trusts 655,000
(d) Beneficiary 425,000

q. A, a resident citizen died leaving a net estate of P4,000,000. His estate is under administration. The net
estate which includes an apartment, realized a total income of P2,280,000 (net of 5% tax). The executor
distributed P200,000 and P300,000 to A’s daughter and son respectively. 75% of the amount distributed
came from the income of the estate while 25% came from A’s estate. The estate also incurred expenses
amounting to P1,200,000 but, 25% of which is a non-deductible expense.
Required: Determine the tax still due from the estate. P318,600-P120,000 = P198,600
 CPA Review School of the Philippines
Manila

PARTNERSHIPS, JOINT VENTURE AND CO-OWNERSHIP Dela Cruz / De Vera / Lopez

1. The following statements regarding taxable partnerships are correct, except

a. They file quarterly and year-end income tax returns.
b. They are subject to the rules on corporation for capital gains tax, final tax on passive income, normal
income tax, minimum corporate income tax and gross income tax.
c. The partner’s share in the distributable net income is subject to final tax.
d. They are subject to the improperly accumulated earnings tax.

2. As regards a general professional partnership, which of the following is not correct?

a. It shall not be subject to income tax
b. The partners shall not be liable for income tax on their respective distributive share
c. Each partner shall report as gross income his distributive share in the partnership net income
d. The share of a partner shall be subject to a creditable withholding tax of 10% if his distributive share is
P720,000 and below, and 15% if more than P720,000.

3. If a partner, on his own transactions, is on the cash method of accounting while the general professional
partnership is on the accrual method of accounting, in the partner’s determination of his taxable income for the
year, he
a. Must convert his income from the partnership into cash method
b. Must convert his own income into accrual method
c. Does not report his income from the partnership because the partnership is exempt from income tax
d. Can consolidate his share in the net income of the partnership under accrual method with his own
income under cash method

4. Which of the following statements is not correct?

a. When the co-owners invest the income of the property co-owned in a business or in any income
producing properties or activities constituting themselves into a business partnership, such partnership is
consequently subject to tax as a corporation.
b. As a rule, a co-ownership is not subject to income tax because the activities of the co-owners are limited
to the preservation and enjoyment of the property and the collection of the income there from.
c. A co-owner is subject to income tax on his share in the net income of the co-ownership actually or
constructively received.
d. All partnerships, no matter how created or organized are considered corporations subject to
corporate income tax.

5. As regards a ordinary partnership, which of the following statements is correct?

a. Partners’ share are subject to final tax, hence it need not file an ITR
b. Subject to improperly accumulated earnings tax
c. Treated like corporations, hence partners have limited liability
d. Partners’ share even if distributed will not be included in their ITR

6. As regards a general professional partnership, which of the following statements is correct?

a. Treated like corporations, hence t is subject to corporate income tax
b. It is exempt from income tax, hence it need not file an ITR
c. Partners’ share are subject to final tax,
d. Partners’ share will be included in their respective ITRs whether distributed or not
7. Which of the following statements is correct?
a. Partners of a taxable partnership are considered as stockholders and profits distributed to them
by the partnership are considered as dividends
b. The share of each partner in net income of a taxable partnership shall be based on their capital
contribution
c. The share of an industrial partner in net income of a taxable partnership shall be equal to the share of a
capitalist partner with the least capital contribution
d. The industrial partner shall contribute money and or property but not services

8. Statement 1 – A CPA and a Lawyer may form a general co-partnership to sell law and accounting books
Statement 2 – Partnerships and Corporations have separate juridical personalities distinct from the owners,
as such partners and stockholders are not liable to creditors of the business
a. True, true b. False, false c. False, true d. True, false

9. Statement 1 – The general professional partnership may claim itemized deduction in computing its net
income and a partner may also claim itemized deduction in computing his total net income
Statement 2 – The general professional partnership may claim optional standard deduction in computing its
net income while a partner may claim itemized deduction in computing his net income
a. True, true b. True, false c. False, true d. False, false

10. Statement 1 – The general professional partnership may claim itemized deduction in computing its net
income while a partner may claim optional standard deduction in computing his net income
Statement 2 – The general professional partnership may claim optional standard deduction in computing its
net income and a partner may also claim optional standard deduction in computing its net income
a. True, true b. True, false c. False, true d. False, false

11. Statement 1 – The share of the partner in the net income of an OP is added to his own gross income
Statement 2 – The share of the partner in the net income of a GPP is also considered as passive income
a. True, true b. False, false c. False, true d. True, false

12. The net share received by a partner in a general professional partnership is

a. Part of his taxable income c. Subject to 10% creditable withholding tax
b. Exempt form income tax d. Subject to final tax

13. The net share received by a partner in a general co-partnership is

a. Part of his taxable income c. Subject to 10% creditable withholding tax
b. Exempt form income tax d. Subject to final tax

14. Which of the following statements is not correct?

a. A and B, both CPAs can form a general professional partnership to go into public accounting
b. W and Y both lawyers, can form a general professional partnership to practice law
c. C, a CPA and D, a lawyer can form a general professional partnership to go into the practice of
taxation as they have a common field of practice
d. K, a doctor and L, a medical technologist can form a partnership to engage in the operation of a
drugstore

15. As regards a business partnership, which of the following is not correct?

a. The partnership must file quarterly and year end income tax returns
b. The distributable income available to the partners is the taxable income less the income tax
thereon
c. The share of a partner in the distributable net income, even if not actually received is considered
constructively received by the partner
 d. The share of partner in the distributive net income whether actually received or not is subject to a final
withholding tax of 10%, as if dividend

16. AB partnership with A and B as partners had a net professional income amounting to P500,000 for 2012. Its
other income included bank interest income of P8,000, net of final withholding tax and it received dividend
income from a domestic corporation of P10,000. A is single and has a net income of P200,000, the net taxable
income of A who shares profit and loss equally with B is
a. P364,000 b. P440,000 c. P439,000 d. P409,000

17. Using the preceding number, but it is a business partnership, the taxable income of the partnership is
a. P518,000 b. P500,000 c. P510,000 d. P508,000

r. Using the preceding number, the net distributable share of A is

a. P162,500 b. P146,250 c. P165,600 d. P154,350

19. A and B are partners in a Partnership which realized a gross income of P800,000 with a corresponding
P350,000 expenses in the year 2012. A is married with 2 qualified dependent children, he earned P400,000 in
his own business, incurring P230,000 allowable expenses while B, single had P450,000 and P250,000 gross
income and expenses respectively. They share profits and losses at 4:6. If the partnership is a GPP, the taxable
income of A subject to 5-3% is
a. P276,000 b. P70,000 c. P302,000 d. P250,000

20. And the taxable income of B subject to 5-3% is

a. P150,000 b. P420,000 c. P450,000 d. P470,000

21. If the partnership is an OP, its tax due is

a. P144,000 b. P148,500 c. P135,000 d. P157,500

22. A, B and C are partners sharing profits and losses 30%, 30% and 40%, respectively. The following data
pertain to the partnership and the individual account of the members in their own business for the taxable year
2012:
A B C Partnership
Gross Income P400,000 P300,000 P350,000 P900,000
Deductions 100,000 70,000 160,000 420,000
Civil Status Single Married Head of the Family

If the partnership is a GPP, the taxable income of C is

a. P332,000 b. P342,000 c. P357,000 d. P344,500

23. The taxable income of B is (GPP)

a. P301,000 b. P342,000 c. P357,000 d. P324,000

24. The taxable income of A is (OP)

a. P280,000 b. P394,000 c. P265,000 d. P250,000

25. The taxable income of B is (OP)

a. P180,000 b. P198,000 c. P165,000 d. P189,000

26. The taxable income of C is (OP)

a. P152,500 b. P198,000 c. P165,000 d. P140,000

27. The income tax due of the partnership if OP

 a. P153,000 b. P168,000 c. P 37,000 d. P144,000

28. A and B are co-owners by virtue of a property given to them by their father. The co-ownership had a gross
rental income of P500,000 (gross of 5% tax) and expenses related to rental activity of P300,000 but 10% is not
deductible for the year 2012. A and B share in the profits at 75% and 25%, respectively. A withdrew P50,000
from the co-ownership net income for the year, B did not withdraw any amount. A and B are both single. The
income tax liability of the co-ownership
a. P102,400 b. P 76,800 c. P 80,000 d. P 0

29. The taxable income of A before exemption

a. P172,500 b. P150,000 c. P122,500 d. P 0

30. Suppose A and B did not divide but instead invested the entire profit in another profit in another business
venture where they earned a net income after deductions of P450,000, the tax due of the co-ownership is
a. P135,000 b. P144,000 c. P157,500 d. P 0

31. X and Y are partners in the following partnerships.

Ordinary Partnership General Professional Partnership
Gross Income P500,000 P400,000
Deductible expenses 300,000 180,000

Personal Income and Expenses:

X Y
Gross Income P400,000 P280,000
Deductible expenses 250,000 120,000
Dividend from domestic corporation 20,000 30,000
Dividend from foreign corporation 10,000 8,000
Prize, supermarket raffle 15,000 8,000
Royalty, books 10,000 12,000

Partners agreed to share partnership income and losses as follow:

X = 40% (Partner X is married with 2 qualified dependent children)
Y = 60% (Partner Y is single but supporting her 18 year old boyfriend living with and dependent
upon her for his chief support)
Determine the respective taxable income of partners X and Y, assuming 2007, 2008 and 2009

32. For the calendar year 2012, AB Partnership, a general partnership in trade, and Mr. A a partner, single, had
the following data:
Gross income of AB P1,040,000
Business expenses of AB 960,000
Participation of A 60%
Own gross income from profession of A 1,000,000
Own expenses of A, practice of profession 360,000
Income tax withheld from practice of profession 100,000
Determine:
a. Final tax payable on the share of Mr. A in AB partnership income.
b. The income tax due (refundable of Mr. A)

33. A Co. and B Co., both in construction business, formed a joint venture to build houses for the poor, a
government project, with an agreed equal sharing in net income. Data on income and expenses for the year:

Joint Venture A Co. B Co.

Gross income P80,000,000 P2,000,000 P3,000,000
Expenses 60,000,000 1,200,000 2,000,000
Determine:
a. The income tax liability of the joint venture.
b. The income tax liability of A Co.

34. A Co. and B Co. both engaged in transportation business operating in Northern and Central Luzon formed a
joint venture agreeing to distribute the net income of the joint venture equally. In a taxable year, the joint
venture had a gross income of P5,000,000 and expenses of P3,500,000.
Determine:
a. The income tax liability of the joint venture.
b. The share of A Co. in the distributable net income.

35. A is a 40% partner in ABC, a general professional partnership. The partnership was organized in 2010, with
A contributing P200,000. The partnership had the following net income:
2011 – P120,000 distributed to the partners
2012 – P 70,000 not yet distributed to the partners
In 2012, the partnership was dissolved and A received the sum of P250,000 upon liquidation.
Determine the taxable gain or deductible loss of A.