BLT CHALLENGE (July 17, 2009)

1. Statement # 1: Wagering losses are deductible only to the extent of wagering gains.
Statement # 2: Capital losses are deductible only to the extent of capital gains.
Which of the following is/are true? ___________
2. A domestic corporation had a net operating loss in 2004 of P300,000 and the following data in 2005:
Gross income from operations
P2,000,000
Expenses of operations
2,600,000
Net loss from operations
(600,000)
Capital gain
P 200,000
Less: Capital loss
300,000
Net capital loss
(100,000)
The net operating loss carry-over available in 2006 is ______________.
3. The amount of the informers reward shall be equivalent to
a. 10% of the amount recovered or P1,000,000 per case, whichever is higher
b. 10% of the amount recovered or P1,000,000 per case, whichever is lower
c. 15% of the amount recovered
d. None of the choices
4. What shall be the effect of the failure to pay or affix the documentary stamp tax on the instrument,
document or paper which is required by law to be stamped?
a. The instrument, document or paper shall not be recorded.
b. The instrument, document or paper or any copy thereof or any record of the same shall not be
admitted or used in evidence in any court
c. No notary public or other officer authorized to administer oaths shall add his
acknowledgment to any document
d. All of the choices
5. XYZ owns a condominium unit. During the year 2006, the said corporation furnished and granted the
said property for the residential use of its Assistant Vice-President. The fair market value of the
property per BIR amounts to P10,000,000 while its fair market value as shown in its current Real
Property Declaration amounts to P8,000,000.
a) How much is the value of the fringe benefit? ______________
b) How much is the monetary value of the fringe benefit? __________
c) How much is the monthly fringe benefit expense? ____________
d) How much is the monthly fringe benefit tax expense? ___________
6. A business partnership organized by partners Ash and Cris, equal partners, has the following data for
the year ended 2009:
Gross business income
P1,000,000
Deductible expenses
P 300,000
Yield from deposit substitute, net of final withholding tax
P 50,000
Interest income derived from a depository bank under
EFCDS, net of withholding tax
P 100,000
Gain from sale of shares of stock not traded in the local
Stock exchange, net of capital gains tax
P 80,000
Withdrawals on the share in the net income of the partners,
Net of withholding tax
P 150,000
Rent income, gross of 5% withholding tax
P 300,000
Payments of quarterly taxes, first 3 quarters
P 120,000
a) How much is the taxable net income of the business partnership? ______________

b) How much is the tax payable of the business partnership? _________________

c) How much is the distributable net income of the partnership? _______________
d) How much is the final withholding tax on the share of each partner, if any? ______________
7. Statement # 1: The actual cost of other property which is destroyed by order of authorities may be
claimed as a loss by a farmer.
Statement # 2: If an individual owns and operates a farm, in addition to being engaged in another
trade, business or calling, and sustains a loss from such operation of the farm, then the amount of loss
sustained may be deducted from gross income received from all sources, provided the farm is not
operated for recreation or pleasure.
Statement # 3: Any net loss incurred in a taxable year during which the taxpayer was exempt from
income tax shall not be allowed as a net operating loss carryover deduction.
Statement # 4: NOLCO shall be allowed only if there has been no substantial change in the
ownership of the business or enterprise.
Which of the following statement/s is/are true? ___________
8. An individual taxpayer has the following data for the current year:
Tax due
P100,000
Less: Creditable withholding tax
30,000
Tax payable
P 70,000
The taxpayer elects to pay the tax in 2 equal installments. How much is the tax payable?
a) The time the return is filed - ______________
b) July 15
- ______________
9. Which of the following shall not be considered as agricultural product in its original state and
therefore subject to VAT? (Polished rice, molasses, copra, bagasse)
10. The monetary value of the following housing privilege shall be 50% of the value of the benefit,
except
a. If the employer leases a residential property for the use of his employee and the said property
is the usual place of residence of the employee
b. If the employer owns a residential property and the same is assigned for the use of his
employee as his usual place of residence
c. If the employer purchases a residential property on installment basis and allows his employee
to use the same as his usual place of residence
d. None of the choices
11. The income distributed to the beneficiaries of estates and trusts, except income subject to final
withholding tax and income exempt from tax, is subject to
a. Creditable withholding tax of 10%
b. Creditable withholding tax of 15%
c. Final withholding tax of 20%
d. Neither final nor creditable withholding tax
12. A farmer under accrual basis has the following data for the year:
Beginning inventory:
Livestock and farm products raised in the farm
Livestock and farm products purchased in the previous year
Ending inventory:
Livestock and farm products raised in the farm
Livestock and farm products purchased
Sales of livestock and farm products raised and purchased
Cost of livestock and farm products purchased during the year
Miscellaneous receipts:

P60,000
30,000
P100,000
80,000
120,000
100,000

Gain on sale of work, breeding or dairy animals

Gain on sale of farm equipment and machinery
Hire of tractor
Hire of teams like hire of carabaos or horses
Others
How much is his gross income? ______________

P 30,000
P 10,000
P 20,000
P 6,000
P 4,000

13. Mr. E, married and has two qualified dependent children, received the following for the year 2009:
Basic monthly salary
P 45,000
Overtime pay for November
P 5,000
13th month pay
P 45,000
Other benefits
P 12,000
The withholding tax from January to November was P98,082. How much was the tax to be collected
(refunded) for the month of December? ____________
14. ABC Corp. took two keymen insurance on the life of President, Mr. X. In the policy, the beneficiary
is the corporation to compensate it for its expected loss in case of death of its President. The other
policy designates Mr. Xs wife as its irrevocable beneficiary.
Q1: Are the insurance premiums paid by X Corp. in both policies deductible? ____________
Q2: Will the insurance proceeds be treated as income subject to tax by the corporation and by the
wife? _________
15. From the sale or disposition of real property under Section 24(D), an individual shall file a return
within how may days following each sale or other disposition? ___ days
16. One of the following percentage taxes is paid on a monthly basis. (Overseas communications tax,
amusement tax, tax on winnings, franchise tax)
17. Dayag Builders was a contractor. It entered into a contract on December 31, 2006, which was
completed on March 15, 2007. It received the total value of the contract including materials charged
with the services amounting to P5,500,000 on March 25, 2007. Dayag Builders spent for the
materials used in the contract which it acquired from value-added tax registered suppliers costing
P1,500,000. During the month of January 2007, it purchased an equipment with a contract price of
P2,500,000 and paid P500,000 as down payment. The estimated life of equipment is 4 years. How
much was the VAT payable for the quarter ending March 31, 2007 using 12% VAT rate assuming all
the data were exclusive of VAT? ______________
18. Statement # 1: In all cases, void donations are subject to donors tax.
Statement # 2: Every donation between the spouses during the marriage shall be void.
Which of the following statement/s is/are correct? ________________
19. On account of the marriage of Amiel Sy and Ana Dinio, son and daughter-in-law, Mr. Allan Sy
donated a real property with a fair market value of P1,500,000 but subject to a mortgage of P300,000
which was assumed by the donees. The donors tax is __________.
20. In determining the tax base one of the following is excluded from other charges prior to release of
goods from Bureau of Customs. (wharfage dues, arrastre charges, brokerage fees, facilitation fees)
21. For VAT exemption purposes, the age limit of passenger and/or cargo vessels at the time of
acquisition counted from the date of the vessels original commissioning shall be ____ years old.
22. Jaypi Cruz insured his life with his estate as beneficiary. In 2004, after Mr. Cruz had paid P65,000 in
premiums, he assigned the policy to Mr. S. Santos for P60,000, and Mr. Santos collected the total
proceeds of P200,000. Mr. Santos, after the assignment, and before Mr. Cruzs death, paid total
premiums of P80,000. How much is the taxable amount? ____________

23. Mr. Mendoza assigned and conveyed his principal residence with fair market value of P4,000,000 and
in addition paid P2,000,000 to acquire as new principal residence of Ms. Co. Ms. Co, on the other
hand, conveyed principal residence to Mr. Mendoza with fair market value of P5,000,000 with the
intention of making the property received from Mr. Mendoza as her new principal residence. The
historical cost of the old principal residence of Mr. Mendoza is P1,000,000 while the historical cost of
the old principal residence of Ms. Co is P500,000.
Q1: How much was the capital gains tax due on the exchange of property by Mr. Mendoza? ________
Q2: How much was the cost basis of the new principal residence of Mr. Mendoza? __________
Q3: How much was the capital gains tax due from Ms. Co? ____________
Q4: How much was the cost basis of the new principal residence of Ms. Co? __________
24. An unmarried non-resident alien, died intestate on November 2, 2008. The following data were
provided by his estate:
House and lot, USA (family home)
P2,000,000
Investment in stock, Philippines
800,000
Investment in stock, USA
1,000,000
Investment in bonds, USA (85% of the business of the US Corp.
Is in the Philippines)
700,000
Cash in bank, Phils.
300,000
Cash on hand, Phils.
50,000
Accounts receivable from a debtor who resides in USA (fully uncollectible) 200,000
Car, Phils.
800,000
Actual funeral expenses
150,000
Judicial expenses
300,000
Unpaid Phil. Income tax for 2007 income
120,000
Loss on Dec. 31, 2008 due to theft of cash on hand
10,000
Loss on sale of a portion of investment in stock, Phils.
20,000
Devise to Quezon City for childrens playground
70,000
Medical expenses
500,000
Q1: How much was the Phil. Gross estate? _____________
Q2: How much was the total deductions from the Phil. Gross estate? ___________
Q3: How much was the net taxable estate in the Phils.? ______________
Q4: How much was the estate tax payable in the Phils.? ______________
25. Mr. Rodolfo Felix made the following gifts in 2008:
Date
Donations
January 2
P500,000 to Ana, his acknowledged natural daughter on account of her marriage
celebrated on Jan. 2, 2007
March 9
A diamond ring purchased by Mr. Felix at the cost of P5,000 (but with a fair
market value of P9,000 at the time of donation) given to his wife as a birthday gift
June 20
P150,000 to Boy, his legitimate son on account of his marriage on Dec. 12, 2007
Dec. 25
P120,000 cash donation to Hospicio de San Jose, a charitable institution
Q1: How much is the donors tax due for the gift made on January 2? __________
Q2: How much is the donors tax due for the gift made on March 9? __________
Q3: How much is the donors tax due for the gift made on June 20? ___________
Q4: How much is the donors tax due for the gift made on Dec. 25? ___________
26. In case of mutual error as to the legal effect of an agreement when the real purpose of the parties is
frustrated, the proper remedy shall be
a. Reformation of an instrument
b. Annulment of a voidable contract
c. Declaration of nullity of a void contract

d. Rescission of a rescissible contract

27. A borrowed from B P5,000,000 and agreed that in case of non-payment on the date stipulated, As
house and lot would be sold to B for the same amount. Is the stipulation valid?
a. It is valid because it does not partake of pactum commissorium.
b. It is not valid since it is pactum commissorium.
c. It is valid if A would have the option not to sell the house and lot.
d. It is not valid because the price depends upon the will of the buyer only.
28. D owes C the amount of P2,000,000. Without knowledge or against the will of D, X paid C the entire
loan of D. In this case:
a. X can demand reimbursement from D.
b. X cannot demand reimbursement from D because he paid without the consent of D.
c. X can recover from D with interest.
d. It is optional on the part of D to reimburse X.
29. A obliged himself to deliver to B a brand new Toyota Corolla car on February 3, 2008. On the said
date, while A was driving the car he was to deliver to B, a band of robbers held him up and forcibly
took the car from him. Was the obligation of A was extinguished?
a. As obligation to deliver the car agreed upon was extinguished due to fortuitous event.
b. As obligation to deliver is converted to monetary liability for damages.
c. As obligation was not extinguished because fortuitous event applies only to determinate
things.
d. As obligation was extinguished because he was not in delay when the loss due to fortuitous
event took place.
30. D mortgaged his land to C for a loan of P2,000,000. The foreclosure of mortgage took place for
failure of D to pay his debt and the land was sold for P2,500,000. The excess shall pertain to:
a. C, he being the mortgagee unless otherwise stipulated
b. D, he being the mortgagor
c. D, with or without stipulation to the contrary
d. C, with or without stipulation to the contrary
31. XY is a recreational club which was organized to operate a golf course for its members with an
original authorized capital stock of P100,000,000. The articles of incorporation and by-laws did not
provide for distribution of dividend although there is a provision that after its dissolution, the assets
shall be given to a charitable corporation. Is XY a stock corporation?
a. XY is a stock corporation because it has an authorized capital stock divided into shares of
stock.
b. It is not a stock corporation because the articles of incorporation and the by-laws do not
provide for the distribution of dividends.
c. It is a stock corporation because of the provision in the articles of incorporation that after
dissolution, the assets shall be given to a charitable corporation.
d. It is not a stock corporation because the purpose is to operate a golf course for its members
only as a recreational club.
32. M issued a promissory note to P who indorsed it to A who also indorsed it to B, the holder. M
dishonored the note and P tendered payment to B who without valid reason refused the payment
offered by P. Therefore:
a. P, who tendered payment, is discharged.
b. P and A are discharged.
c. Only A is discharged.
d. M, P and A are all discharged.

33. Corporation A passed a board resolution removing X as manager of the corporation. X objected to
his removal by mere majority vote of the board of directors alleging that 2/3 of the outstanding capital
is necessary for the removal of the manager. Decide.
a. The removal of a manager requires a mere board resolution as an act of management by the
board of directors.
b. The removal must be with the concurrence of 2/3 of the outstanding capital stock.
c. The removal by 2/3 vote of the outstanding capital stock refers only to corporate officers.
d. The removal by 2/3 vote of the outstanding capital stock refers to directors but there must be
cause for removal.
34. For the past three years, Corporation X has been earning tremendously in excess of 100% of the
corporations paid in capital. All of the stockholders have been claiming that they share in the
profits of the corporation by way of dividends but the board of directors failed to lift its finger. Is the
corporation obliged to declare dividends?
a. No, because the corporation can retain surplus profits in excess of 100% of its paid-up capital
b. Yes, because a corporation cannot retain surplus profits in excess of 100% of its paid-up
capital always.
c. Yes, because a corporation as a rule cannot retain surplus profits in excess of 100% of its
paid-in capital.
d. No, because it is a management prerogative of the board of directors whether or not it will
declare dividends.
35. A is the registered owner of Stock Certificate No. 0007. He entrusted the possession thereof to B who
borrowed the said endorsed certificate to support Bs application for passport (or for a purpose other
than transfer). But B sold the certificate to X, a bona fide purchaser who relied on the endorsed
certificate and believed him to be the true owner. Can A claim the shares of stocks from X?
a. No, because X is an innocent purchaser for value of shares of stock evidenced by a duly
endorsed stock certificate.
b. No, if X has registered the sale with the corporation.
c. Yes, because A did not sell the shares of stock to B and therefore the latter cannot transfer
title to X.
d. Yes, because the transfer of shares was not registered with the corporation and hence it is not
valid even between B and X.
36. A issued a promissory note payable to B or bearer. A delivered the note to B. B indorsed the note to
C. C placed the note in his drawer, which was stolen by the janitor X. X indorsed the note to D by
forging Cs signature. D indorsed the note to E who in turn delivered the note to F, a holder in due
course, without indorsement. Who shall be liable to F?
a. Only E shall be liable to F.
b. Both A and E are liable to F.
c. B, C and D are liable to F.
d. Nobody is liable to F because of the forgery in indorsement of C.
37. P, who was in Hongkong, made an overseas call to A, his friend, to sell Ps lot in Quezon City
immediately as P needed cash. Accordingly, A sold the lot to B. The deed of sale is in a public
document. The sale of Ps lot is (valid, rescissible, unenforceable, void)
38. Which of the following is correct?
a. Eleemosynary corporation is one established for business or profit.
b. Corporation aggregate is one established for religious purposes.
c. Civil corporation is one established under the laws of the Philippines.
d. Lay corporation is one established for purposes other than religious.
39. Which of the following is not valid?

a.
b.
c.
d.

Mutual promise to marry entered into orally

Sale of immovable property orally entered into
One of the parties in a contract is incapable of giving consent
Mortgagor of an immovable cannot alienate it without the mortgagees consent

40. D borrowed a sum of money from C promising to pay on December 20, 2000 with interest. On
December 5, 2000, D offered to pay his debt but C refused to accept the same. Which of the two is
right?
a. D may rightfully pay his debt even before the due date because C shall benefit from his
payment since the risk in collection is extinguished.
b. C is right in refusing the payment because the period is for his benefit.
c. D is right because the benefit of the period is with him.
d. C is justified in refusing the payment as a creditor may refuse premature payment by a debtor.
41. Statement # 1: The payee of a check may sue the bank for damages if the latter failed to pay the
check despite sufficiency of funds.
Statement # 2: The bill of exchange is an assignment of funds in the hands of the drawee for the
payment thereof and therefore the drawee is liable to the holder thereof.
Which of the following statement/s is/are correct? ____________
42. X borrowed money from Y and gave a piece of land and security by way of mortgage. It was agreed
between the parties that upon non-payment of the loan, the land would already belong to Y. If X
failed to pay the debt, would Y now become the owner of the land?
a. Y would become the owner because it was agreed upon by them based on the principle of
autonomy of contracts.
b. Y would not become the owner because the agreement that he would become the owner upon
default of X is against the law.
c. Y become the owner but with right of redemption by X.
d. Y would not become owner if X annuls the voidable agreement.
43. P authorized A to sell his car for P1M with 5% commission. A sold the car to B for P1.5M. For how
much is A accountable to P? ___________
44. Statement # 1: Contract of lease of a parcel of land for a term of one year must be written otherwise
unenforceable.
Statement # 2: Contract of sale of parcel of land must be in public instrument otherwise
unenforceable.
Which of the statement/s is/are correct? _______________
45. Who among the following are liable for warranties as well as secondary liability? (drawer, maker,
qualified indorser, unqualified indorser)
46. Which of the following transactions or contracts involving the sale or financing of real estate on
installment payments is not covered by Maceda law? (residential, condominium, apartment,
commercial building)
47. These are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized. (Moral, temperate, nominal, actual) damages
48. And B are debtors of C for P2,000,000. As consent was obtained by C thru fraud.
a. C can collect the entire P2,000,000 from B
b. C can collect the entireP2,000,000 from B but the latter can recover from A P1,000,000.
c. A is liable only to C for P1,000,000 because he can interpose his defense of fraud.
d. B is liable to C for his share of P1,000,000.

ANSWER KEY:
1 Both statements
2 P900,000
3 B
4 D
5 P500,000; P250,000; P0; P9,804
6 P1,000,000; P165,000; P880,000; P44,000
7 Statements 1-4
8 P20,000; P50,000
9 Bagasse
10 D
11 B
12 P180,000
13 P18,517.73
14 Yes, No
15 30
16 Franchise tax
17 P461,250
18 Statement # 1 only
19 P199,400
20 Facilitation fees
21 15
22 P60,000
23 Zero; P3M; P60,000; P416,667
24 2,650,000; 324,808, 2,325,192, 170,771
25 14,000; 0; 8,400; 0
26 B
27 A
28 A
29 C
30 B
31 A
32 B
33 A
34 C
35 A
36 B
37 void
38 D
39 D
40 D
41 None
42 B
43 P950,000
44 None
45 Unqualified indorser
46 Commercial building
47 Nominal damages
48 D