©) studocu income taxtation testbank1. First Statement - Taxation power is considered inherent in a sovereign State because it is a necessary attribute of sovereignty. Without this power no sovereign State can exist or endure Second Statement - The power to tax proceeds upon the theory that the existence of a government is a necessity and this power is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent state or government. a. True, Falseao False, True False, False The following are stages/aspects of taxation, except a. Levying and imposition b. Administration and collection . Rayment By its nature taxation is a legislative power, i.e, such power being exclusively vested in the legislature, except a, In case of local governments, to raise their own revenue, within their own territorial jurisdiction, subject to limitations as may be provided by Congress. b. The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development pore of the Government, d. Neither AnorBwithin the Zone but outside such "secured area". Is the constitutional right to equal protection of the law violated a. Yes, the EO gave preferential rights to those located within the SEZA as against other business located within the Philippines. b. Yes, the EO being an issuance made by the executive branch of the Government encroached on the power of the Legislature to exercise the ower of taxation. d. No. Equal protection is not the issue on this matter rather the territoriality limitation has been breached. 6 The following are the usual methods of avoiding the occurrence of double taxation, except a. Allowing reciprocal exemption either by law or by treaty; b. Allowance of tax credit for foreign taxes paid; Allowance of deduction fer foreign taxes paid; and 7 Our national internal revenue laws are 2 Political in nature ». Penal and nature Criminal in nature& Generally, tax Jaws are prospective in character. It will be given retroactive effect under the following circumstances, except a. Itis necessarily implied from the language used b. Itinvolves income tax c. Its expressly provided or the retroactive application is clearly the intent of Congress 9% Which of the following statements is not correct? a. Taxes maybe imposed to raise revenue or to provide disincentives to certain activities within the State. b. The State can have the power of taxation even if the Constitution does not expressly give it the power to tax. c. In the exercise of the power of taxation, the State can tax anything at any time. 10. All of the following, except one, are basic principles of a sound taxation system: a. Fiscal adequacy + Administrative feasibility «Social equality 4 Theoretical justice 9. Under this basic principle of a sound taxation system, the government should not incur a deficit: 2. Theoretical justice ». Administrative feasibility « Fiscal adequacy 4 None of the above 10, The basic principle of a sound taxation system, where, “Taxes must be based on the taxpayer's ability to pay’ is called: a Equality in taxation ». Ability to pay theory «Theoretical justice 4 Equity in taxation 11. The tax law must be capable of convenient, just and effective administration 2. Equality or theoretical justice 6. Fiscal adequacy 4. Rule of apportionment 12. A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not acceptable for legally refusing to pay the tax? a. That he has been deprived of due process of law. b. That there is lack of territorial jurisdiction. c. That the prescrpve period for the tax has lapsed». Equality in taxation « Non-infringement of religious freedom 4. Non-impairment of obligations and contracts 15, No person shall be imprisoned for non-payment of this. a Property tax 6. Excise tax a Income tax 16, Where does the taxing power of the provinces, municipalities and cities precede from? ». Legislative enactment «Presidential decree or Executive act 4. Local legislation 17. Which of the following has no power of taxation? a Province of Bulacan ». Quezon City Baranaey wey se itsanctioned by law, hence legal. b. True, false c. False, false d. False, true 20. First Statement - Tax Pyramiding is the imposition of a tax upon another tax. Itis allowed under this jurisdiction. Second statement - A tax is deemed to have satisfied the uniformity rule when it operates with the same force and effect in every place where the subject maybe found. a. True, true b. True, False c. False, False 21. One of the following is NOT an inherent limitation: a. Taxes must be for public purposes c. Tertitoriality rule d, Government exemption 22. The power to tax is the power to destroy. Is this always so? a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory.b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property rights of a taxpayer. c. Yes. Tax laws should always be enforced because without taxes the very existence of the State is endangered. 23. Although the power of taxation is basically legislative in character, it is NOT the function of Congress to a, Fix with certainty the amount of taxes. b, collect the tax levied under the law. c. d, identify who should collect the tax. determine who should be subject to the tax. 24, Which among the following concepts of taxation is the basis for the situs of income taxation? a. Lifeblood doctrine of taxation c. Compensatory purpose of taxation 4, Sumptuary purpose of taxation 25, Taxes are assessed for the purpose of generating revenue to be used for public needs. Taxation itself is the power by which the state raises revenue to defray the expenses of government. A jurist said that a tax is what we pay for civilization. In our jurisdiction, which of the following statements may be erroneous? a, Taxes are pecuniary in nature. b. Taxes are enforced charges and contributions. cc, Taxes are imposed on persons and property within the territorial jurisdiction of the State. 26. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power to activate and operate it, resulting in its destruction? a, Power to destroy theory c. Sumptuary theory 4. Symbiotic doctrine 27. First Statement - In civil cases involving the collection of internal revenue taxes, prescription is construed strictly against the government and liberally in favor of the taxpayer. Second Statement - In criminal cases involving tax offenses punishable under the National Internal Revenue Code (NIRC), prescription is construed strictly against the government a. True, True29. Money collected from taxation shall not be paid to any religious dignitary EXCEPT when b. tis paid by a local government unit c. he payment is passed in audit by the COA. d._Itis part of a lawmaker's pork barrel, 30, The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as a, assessment. b. levy. c. paymen 31. Transfer of the tax burden by one whom the tax is assessed to another b. Capitalization ©. Tax exemption d. Transformation 32, The method by which the manufacturer or producer upon whom the tax is imposed pays the tax and strives to recover such expense through lower production cost34. Tax as distinguished from license fee: a. Non-payment does not necessarily render the business illegal; b. Aregulatory measure; c. Imposed in the exercise of police power; ._ Limited to cover cost of regulation. 35. Value-added tax is an example of: a. Graduated tax; b. Progressive tax; ©. Regressive tax; 36. First Statement — There will only be a tax if there is a law imposing the tax. Second Statement - The power to tax is inherent and no constitutional grant of said power is required before the state can exercise such power. a. True, True b. True, False ©. False, True d. False, False 37. For purposes of determining income tax liability: In case of conflict between the tax code and generally accepted accounting principles (GAAP): a, Both tax codes and GAAP shall be enforced; b. GAAP shall prevail over tax code;d. The issue shall be resolved by the courts. 38, First Statement — Tax and debt can be subject to off-set. Second Statement - Taxes are generally payable only in money. a, True, True b. True, False d. False, False 39, Which of the following statements is not correct? a, Taxes may be imposed to raise revenues or to regulate certain activities within the state; b. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax; ce For the exercise of the ca of tax the state can tax anything at any time; ‘40. First Statement — The income from bank deposit of a non-stock non-profit educational institution is exempt. Second Statement — income of a non-stock non-profit educational institution Is exemptd. ad valorem 3, The adapted system of income taxation in the Philippines is a, Global System b. Schedular system d. Modular system 4. First Statement - A global system of taxation is one where the taxpayer is required to lump up all items of income earned during taxable period and pay under a single set of income tax rules on these different items of income. Second Statement - A schedular system of taxation provides for a different tax treatment of different types of income so that a separate tax return is required to be filed for each type of income and the tax is computed on a per retum or per schedule. b. True, False c, False, False d. False, True 5. The following are the classification of income taxpayers for whom a particular chapter of the Tax Code was provided, except a. Corporation b. Estate and Trust c. Individual 6. The following are taxable on income derived from sources within the Philippines only, except a. A resident and citizen of Australia who went for a 9 month holiday in Boracay, Aklan b. A Citizen of the Philippines who has permanently migrated into the United States of America ¢. A Filipino who is a resident of Batanes Island d. A British Racecar driver, residing in Switzerland and on a weeklong beach holiday in Amanpulo Island. 7. One of the following income is considered derived from sources within the Philippines a. Gain on sale of shares of stocks of Microsoft Incorporated, created under the laws of the USA. b. Royalty income from use in Taiwan of software developed by Itlog Technologies, a corporation engaged in trade or business in the Philippines. ¢. Dividend income from a foreign corporation whose 60% of gross income from the pas 3 yours were attributed from its business in a8. Dr. Pepe, an expert American Virologist was hired by a Philippine Pharmaceutical company to assist the development of a vaccine, for which he had to stay in the Philippines for an indefinite period. His coming to the Philippines was for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the Philippines. The American virologist intends to leave the Philippines as soon as his Philippine assignment is completed. For income tax purposes, the American virologist shall be classified as: b. Nonresident alien engaged in trade or business ¢. Nonresident alien not engaged in trade or business d. Resident citizen 9. Epinem, an American Rapper, was engaged to perform for 2 nights at the Philippine Arena, after which he returned to the USA. For income tax purposes, he shall be classified as: a. Resident alien: b. Nonresident alien nga in trade or business. d. Resident citizen. 10.First Statement - An Overseas Filipino Worker is taxable on income derived from sources within the Philippines only. Second Statement — Seafarers, who are Filipino Citizens, who receive compensation as ‘a complement for services rendered abroad as a member and complement of a vessel engaged exclusively in international trade, shall be exempt from Philippine income tax from the aforesaid compensation income. Provided has a valid overseas employment certificate (OEC), valid Seafarers Identification Record Book (SIRB) or ‘Seaman's Book duly issued by the Maritime Industry Authority (MARINA) a. True, True b. True, False c, False, False 11. The following are income, derived from souces within the Philippines are subject to creditable withholding tax, except: a. Income derived from employer-employee relationship b. Sale of real property held as ordinary asset d. Rental income 12. Which of the following interest income derived within the Philippines is subject to basic income tax? a._ Interest income from bank deposits c. Interest income from deposit substitutes d. Interest income from trust funds 13. Which of the following interest income by a resident is subject to 15% final tax? a. Interest income from peso bank deposits b. Interest income from deposit substitutes15.Ben Marino, a seaman, opened a joint bank account, under the expanded foreign currency deposit system, with his wife. A month after, the bank deposit eamed interest in the amount of USD1,000 (foreign exchange rate is P50 for every USD1). The final tax due on the interest income is. c. P1,875 d. P10,000 16.Lucky Comcepto, a Filipino citizen, won from the Philippine Charity Sweepstakes ‘Swertres draw a prize amounting to P4,500. How much is the final tax on the said winning. b. P900 c. P450 d. P1,440 17. Fernando Amorsolo, retired from the Ninia Turtles. had the following income or the taxable vear ended December 31domestic corporation, cash dividend The final tax liability of Fernando is: a, P325,000 b. P75,000 c. PO d, P250,000 18. The following sale are not subject to the capital gains tax on real property, except. a. 10 door apartment building b. Condominium unit owned by a real estate dealer c. Recreational Vehicle used as a residence by a Doctor for the Barrios 19. The following are the requisites in order for the sale of real property, located in the Philippines and held as capital assets to be exempt from the capital gains tax, except a. The property sold is the principal residence of the seller b. The proceeds of the sale is utilized to acquire another principal residence c. The new principal residence is acquired or constructed within 18 months from the time of sale 20. Edwin Nola sold his principal residence for P16,000,000 when the cost to him of the same was P5,000,000. At the time of the sale the zonal and assessed value are Php20,000,000 and P15,000,000, respectively. The capital gains tax on the sale is. a 300,000 b. P1,200,000 ©. P900,000 d. PO21. Edwin Nola sold his principal residence for P16,000,000 when the cost to him of the same was P5,000,000. At the time of the sale the zonal and assessed value are Php20,000,000 and P15,000,000, respectively. Ten months after the sale, Edwin acquired another principal residence for P25,000,000. The cost basis of the new principal residence is. a. 25,000,000 b, P20,000,000 ¢. P14,000,000 d. 16,000,000 22. Edwin Nola sold his principal residence for P16,000,000 when the cost to him of the same was P5,000,000. At the time of the sale the zonal and assessed value are Php20,000,000 and P15,000,000, respectively. Ten months after the sale, Edwin acquired another principal residence for P12,000,000. The capital gains tax on the sale is @. 300,000 b, P1,200,000 c. P900,000 d. PO 23.Edwin Nola sold his principal residence for P16,000,000 when the cost to him of the same was P5,000,000. At the time of the sale the zonal and assessed value are Php20,000,000 and P15,000,000, respectively. Ten months after the sale, Edwin acquired another principal residence for P12,000,000. The cost basis of the new principal residence is a. 12,000,000 b. P5,000,000 c, 3,750,000 d. 1,250,000 24. Broget, is employed and paid a monthly salary equivalent to the statutory minimum wage. The following are his employment income during the year: Statutory minimum wage P 150,000 13! month pay 15,000 Overtime pay earned during the year 25,000 Night shift differential pay 20,000 Hazard pay 75,000 Holiday pay 15,000 Total 300,000 The taxable income of Broget during the year is a. P300,000 b. P35,000 d. P90,000 25.Amante is an MWE receiving salary equal to the statutory minimum wage (SMW). He got promoted and beginning July 1, 2020 his salary exceeds theNumbers 26 and 27 are based on the following set of facts Mrs and Mr Beltran, CPA and Lawyer, respectively, had the following data for taxable year ended December 31, 2021 Salaries, Mrs 600,000 Bonus (13" month pay), Mrs 60,000 Professional Fees, (net of 10% withholding tax) 7,200,000 Mr Expenses — Practice of profession 3,200,000 Rental income (net of 5% withholding tax) 712,500 Rental expenses 280,000 Other income, husband 840,000 26. The taxable income of Mr. Beltran is: 3,235,000 c, P835,000 d. P235,000 27. The taxable income of Mrs. Beltran is:28,How much is the total income tax of Christine? a. P52000 c, P621,200 d. P693,200 29.If Christine opted for the 8% income tax rate, her income tax expense is: a. P52,000 b, P701,200 c, P621,200 30.Based on the same set of fact facts in number 28, except that Christine is not ‘employed and opted to avail of the 8% income tax. Her income tax expense for the year is. a. P52,000 b, P701,200 c. P621,200 d. P693,200 31.An employer is required to register with the BIR within__days from employment and obtain a tax identification number (TIN) for his/her/its employee. a532. The following are the requisites of substituted filing, except: a. The individual earned purely compensation income during the taxable year b. The individual eared compensation income from a sole employer c. The amount of tax withheld by the employer is correct and complete 33. First Statement - Income tax returns of individual are required to filed not later than April 15 of the following year. Second Statement — An individual deriving income from business is required to submit 4 quarterly income tax returns. a. True, True b. True, False c. False, False d, False, True 34. An individual income taxpayer is allowed to pay his income tax due in 2 installment if his income tax due is in excess of a. Phpt,000 c. Php3,000 d, Php4,000 35. An individual income taxpayer who availed the installment method of paying his income tax is required to file and pay the second installment of his annual income tax due, not later than a, July 15 b. August 15 c. September15 36. The annual income tax return shall consist of a maximum of pages. a. One (1) b. Two (2) c. Three (3) 1. First Statement - A “fringe benefit” is defined as being any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee. Second Statement — It is the employer who is required to pay the income tax on the fringe benefit a. True, True b. True, False c. False, False 4. False, True 2. Share based payments, e.g, stock options, restricted stock units and alike, given by the employer to his/herlits employees, are4. The following are not subject to the Fringe Benefits tax, except a. Fringe benefit received by a rank-and-file employee b. Fringe benefit received by a managerial and supervisory employee c. sey and wages of manager gamployee 5. Identify the erroneous statement from the following: The Fringe Benefit Tax is a. The liability of the employer. b. An income tax of the employee subjected to the final withholding tax system whereby the burden thereof rest upon the employer ¢. Deductible expense of the empyer 6. Which among the following is a taxable “de minimis” benefit a, Medical cash allowance to cover medical and healthcare need, annual medical/executive check-up, maternity assistance and routine consultations not exceeding Php10,000/year. ». Gifts given during Christmas and major anniversary celebrations not exceeding Php5,000 per year 4. Rice allowance not exceeding Php2,000 per month. 7. The following are exempt de minimis benefits except: a. Uniform given to employees by the employer not exceeding Php6,000 per annum b. Laundry allowance not exceeding Php300 per month c. Productivity incentive pay not exceeding Php10,000 pursuant to a collective bargain a aareerent8, Sean Umali is a rank-and-file employee. During the year, he received the following from his employer: Basic Salary- net of statutory exclusions | Php 420,000 73" month pay Php35,000 Productivity Incentive pay w/ CBA Phpt5,000 Christmas Bonus Php35,000 Uniform Allowance Phpi0,000 Monelized unused vacation leave (15 | Php26,250 days_) Rice Subsidy Php30,000 Determine Sean Umali's Taxable Income for the year. a. Php420,000 b, Php433,750 c. Php445,000 d. Php170,000 Items 9 to 11 are based on the following Galante inc. provided residential accommodation to its Branch Manager. Rental expense per quarter, paid directly by the employer to the lessor is P130,000 9, The value of the benefit during the quarter is: a. rez eco cc, Php65,000 d. Php35,000 10, The monetary value during the quarter is: a. Php200,000 b. npc d, Php35,000 11, The Fringe Benefits Tax due for the quarter is: a. Php200,000 b. Php130,000 ©. Php65,000 12, The journal entry to record the fringe benefit is, Fringe Benefit Expense Php 130,000 Fringe Benefit Tax Expense Php 70,000 Cash — Php200,000 Fringe Benefit Expense Php 65,000Items 13 and 14 are based on the following: Trey Lorenz, a Senior Manager, was sent by his Firm to Bangkok Thailand to participate in the Leadership Development Program of their Global professional Firm. The training lasted for three (3) days. The following are the expenses incurred for his trip abroad. Air Fare — First Class Ticket USD2,000 ‘Air Fare — Economy Ticket USD700 Hotel Accommodation USD2,250 Per diem allowance( for inland travel | USD1,500 expenses) Assume that the foreign exchange is USD1.00 = Php50,00 13. Assuming that there was proper documentary evidence showing that the employee's foreign trip was related to his employer's business, the Fringe Benefits Tax due is: a. Php322,500 b. Php100,000 d. Php173,654 14, Assuming that there was no proper documentary evidence showing that the employee's foreign trip was related to his employer's business, the Fringe Benefits Tax due is: a. Php322,500 b. Php100,000 c. ee Numbers 15 and 16 are based on the following: 15, Source of Life, a non-stock non profit religious organization, owns a condominium unit at the Serendra in the Bonifacio Global City. It was bought by the Company at a price then of Php10,000,000, On the other hand, the fair value of the said condominium unit is Php15,000,000 as zonal value and Php8,000,000 in the City Assessors Office. This condominium unit is being used by the Company's head Pastor for his residential accommodation. How much is the fringe benefits tax due on the first quarter of the year. a, Php144,231 b. Php750,000 c. Php93750 16, Assuming the Company gave the condominium unit to the Head Pastor. The fringe benefits tax will be: a. Php5,384,615 c. Php15,000,000 d. Php7,500,00017. The fringe benefits tax on the motor vehicle provided to the Chief Designer is: b. Php56,538 cc, Php861,538 d. Php161,538 18, The quarterly fringe benefits tax on the motor vehicle, provided the same was bought in installment resulting to an interest of Php125,000 and registered under the name of the Chief Designer: a. nine °° ¢. Php861,538 d. Php161,538 19, The fringe benefits tax on the motor vehicle provided the Chief Designer shouldered the first Php500,000 of the price of the car: a. Php1,130,769 b. tS d. Php161,538 20, Benz Peredo is a managerial employee of Pranser and Never Inc. (PNI), as part of his compensation package, he was given stock options on the common shares of PNI (traded in the New York Stock Exchange). The following are the pertinent details of his stock options benefit: Number of Stock options Awarded 2,500 Exercise Price Php75 Fair market value al exercise Php 100 Assuming he exercised all of the stock options awarded to him, the fringe benefits tax on his stock options exercise is: b. Php96,154 c. Php134,615 d. Php100,962 21. The Quarterly Remittance Return of final income taxes withheld on fringe benefits paid to employees other than rank-and-file (BIR Form 1603Q) is due: a. Nott an xt ay nanan Cae oe arte dng b. Not later than the 20" day of the month following the close of the quarter during which the withholding was made. c. Not later than the 5" day of the month following the close of the quarter during which the withholding was made. 4. Not later than the 25" day of the month following the close of the querter during which the withholding was made. 22. The following are exempt fringe benefits except a. Contributions of the employer for the benfit of the employee to retirement, insurance and hospitalization benefit plans.Joint Venture Joint stock companies Joint accounts (cuentas en participacion) Associations Insurance companies SRmee The following are not “Corporation” under the National Internal Revenue Code, except: a. General Professional Partnership ». Joint venture or consortium formed for the purpose of undertaking construction projects c. Joint venture or consortium formed for the purpose of engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government Joint venture formed between two transport corporations granted their respective iranchise to operat publc uty of transportation . Technotronics Energy Corporation, a corporation registered in Belgium, has a 50 MW electric power plant in Ibaan, Bataan. Aside from Technotronic’s income from its power plant, which among the following is considered as part of its taxable income from sources within the Philippines?real properties. In 2021, it sold the land for P12 million which was its zonal valuation In the same year, it incurred a loss of P6 million for selling another parcel of land in its inventory. These were the only transactions it had in its real estate business. Which of the following is the applicable tax treatment? a. Villasis shall be subject to a tax of 6% CGT of P12 million c. Villasis’ gain of P5 million shall be subject to the holding period being held for less than a year 4. Villasis’ P6 million loss could not be deducted from its P5 million gain 5. Samsang Tech Corporation is registered under the laws of the British Virgin Islands, It has extensive operations in Asia. In the Philippines, its products are imported and sold at a mark-up by its exclusive distributor, Somewell, Inc. The BIR complied a record of all the imports of Somewell from Samsang and imposed a tax on Samsang’s net income derived from its exports to Somewell. Is the BIR correct?a. Yes, Samsang is a resident foreign corporation engaged in trade or business in the Philippines. No, Samsang is a non-resident foreign corporation not engaged in trade or business in the Philippines. Yes, Samsang is doing business in the Philippines through its exclusive distributor Somewell. The following government owned and controlled corporations are exempt from income tax, except: Social Security System Philippine Health Insurance Corporation (Philhealth) Government Service Insurance System Local Water Districts * emusement and Gaming Comeraon Piping 7. The following are classified as non-resident foreign corporation, except: a Non-resident owner of vessel chartered by Philippine nationalsb. Resident foreign corporation c. Domestic Corporation 4, Foreign corporation 9. First Statement - Non-Resident Foreign Corporations are not required to file any income tax return. Second Statement - Tax exempt corporations are also required to file an ITR for administrative purposes only a. True, True b. False, True c. False, False 4. True, False 10. The following passive income, from sources within the Philippines, received by a domestic corporation shall be subject to 20% final withholding tax, except a. Interest income from peso bank deposit b. Yield from deposit substitutes 4. Royalties11. A depository bank under Foreign Currency Deposit System has the following income from foreign currency transactions (Exchange Rate $1=P50): Other income From $50,000 Nonresidents Interest income from residents: 30,000 Other income- BPI (FCDU) 2,000 How much is the final withholding tax applicable on the above income? a. P225,500 b. P95,000 d. P545,000 12. Interest income of a domestic commercial bank derived from a peso loan to a domestic corporation in 2021 is: b, Subject to the 20% final withholding tax ¢. Subject to the 15% final withholding tax. 4. Subject to 10% final withholding tax. Numbers 13 to 15 are based on the following set of facts: On April 15, 2021, Aishin Corporation sold shares of stocks of Abu Co., a domestic corporation, It was sold at its fair market value of P5,000,000 when its cost to the seller was P2,000,000 13. Assuming Aishin Corporation is a domestic corporation, the capital gains tax on the transaction is: a. P450,000 b. P295,000 c. P750,000 d. P345,000 14, Assuming Aishin Corporation is a foreign corporation, the capital gains tax on the transaction is: a. P450,000 b. P295,000 ©. P750,000 d. P345,000 15, Assuming Aishin Corporation is a domestic corporation and the shares were sold at a price of P4,000,000, when its fairmarket value at the time was P5,000,000. The cost of the shares remain at P2,000,000. The total tax liability of the seller is:tax under CREATE Corporate income Type of Corporation The higher between the “Regular” or “MinimumCorporate Income Tax (MCIT)" Hundred Million (P 100,000,000), excluding the land ‘on which the particular business ‘antity's office. plant and rates Regular ici T Rate | Effectivity Rate Effectivity Domestic Corporation: Domestic corporations, in general] 25% | July 1, 2020 1% | duly 7, 2020 % June 30, 2023 2% — | July 1, 2023 For corporations with net taxable | 20% | July 1, 2020 7% | duly 7, 2020 to} income not exceeding Five June 30, 2023 Million Pesos (P5,000,000) AND total assetsnot exceeding One om July 1, 2023Resident Foreign Corporation 25% | July 1, 2020 June 30, 2023 2% _| July 1, 2023 The higher between the “Regular” or Type of Corporation “MinimumCorporate Income Tax (MCIT)” rates Regular MCT T Rate | Effectivity Rate Effectivity | Offshore Banking Unit (OBUs) 25% | Upon the 1% | Upon the (Note: OBUs shall now be taxed effectivityof the effectivity of asresident foreign corporation CREATE the uponeffectivity of the CREATE) CREATE until June 30, 2023, 2% July 1, 2023 Regional Operating Headquarters | 25% | January 1, 2022] 1% | January, 2022 (ROHQ) to June 30, 2023 2% July 1, 2023 Non-Resident Foreign 25% | Januar 1, 2021 Not applicable Corporation y16. Domestic Corporation was registered with the Bureau of Internal Revenue. Its Certificate of Registration (BIR Form 2313) indicates it was registered on December 27, 2020. It had a soft opening and made its first sale on January 7, 2021. It can be liable to the Minimum Corporate Income Tax on the year: a, 2022 b. 2023 c. 2024 d. 2025 17. The following corporations are exempt from the MCIT, except a. Non-resident owner of cinematographic Films b. Off shore banking unit c. Resident Intemational Carrier 18. One of the following is not a ground for exemption from MCIT: a. Prolonged labor dispute b. Force majeure problems c. Legitimate business reverse Numbers 19 to 21 are based on the following set of facts: Corporation A, a retailer, has a gross sales of P1,400,000,000 with a cost of sales of P560,000,000 and allowable deductions of 150,000,000 for the calendar year 2021. Its total assets of P180,000,000 as of December 31, 2021 per Audited Financial Statements includes the land costing P50,000,000 and the building of 25,000,000 in which the business entity is situated, with an aggregate amount of P75,000,000 as Fixed Assets. Assuming CY 2021 is the 5th year of operation of Corporation A, 19. Corporation A's regular corporate income tax for CY 2021 is: a. P172,500,000 b. P8,400,000 ©. 138,000,000 d. PO 20. Corporation A’s minimum corporate income tax for the CY 2021 is: a. P172,500,000 b. P8,400,000 c. P138,000,000 d. PO22. Took Mall Corporation, a domestic corporation and in its 7" year of operation in 2018, provided you with the following data: 2018 2015 2020 Gross sales P2,040,00 | P2,800,000 | P3,000,00 0 0 Sales retums 40,000 100,000 ~ Cost of sales 7,000,000 700,000 | 7,500,000 Business expenses ‘950,000 [2,100,000 | 7,200,000 ‘Assuming that for the year ended 2020, Took Mall's total asset is amounting to 250,000. The income tax due after tax credit, if any for taxable year 2020 is a. P10,000 b. P60,000 P30,000 d. P90,000 Numbers 23 to 26 are based on the following set of facts:Third 300,000 | 150,000 80,000 Fourth 300,000 [200,000 70,000 Additio nal Information: a) Excess MCIT for 2019, P60,000; b) Excess tax credits from 2019 amounts to P20,000. 23. How much was the income tax payable for the first quarter? a, P200,000 b. P120,000 c. P160,000 24, How much was the income tax payable for the second quarter? a. P660,000 b. P200,000 ° d. P60,000 25. How much was the income tax payable for the third quarter? a. P860,000 b. P600,000 c. P120,000 26. How much was the annual income tax Payable a, P1,260,000c, P390,000 d. P930,000 27.If the gross income from unrelated activity exceeds 50% of the total gross income derived by any private educational institution, the rate shall be 30% based on the entire taxable income. This principle is known as a. Constructive receipt b. Tax benefit rule c. End result doctrine Numbers 28 to 31 are based on the following set of facts: Chong A Arts High School, a proprietary educational institution organized in 1972, had the following data for 2020 Tuition Fees P850,000 Rental Income (net of 5% ewt)| _142,500 ‘School related expenses 820,000 DO The npn tay ctill dice Eee ODN ie.b. (P5,700) c. P10,500 d. P46,500 30, Assuming the year is 2023, the income tax due is: a. P2400 b. (P5,700) cc. P10,500 d. P46,500 31. Assuming the year is 2024, the income tax due is: a. P2,400 b. (P5,700) c, P10,500 d. P46,500 32. Xavier School for Gifted Youngsters, a proprietary educational institution organized in 2004, had the following data for 2020. Tuition Fees 480,000 Rental Income (net of 5% cwt) | 494,000 ‘School related expenses 945,000The income tax still due for 2020, assuming XSGY's total assets is P500,000,000 is: a. P16,500 b. (P9,500) c. (P10,875) d. P20,000 Numbers 33 to 43 are based on the following set of facts: The Legacy Corporation provided the following data for the calendar year ending December 31, 2021 ($1=P50) Philippines us A Gross Income P4,000,000| $40,000 Deductions 2,500,00 15,000 Income Tax Paid 3,000 33. If it is a domestic corporation, its income tax after tax credit is: a. P812,500 b. P537,500 c. P962,500 d. 400,000 34. If it is a domestic corporation and its total assets amount to P95,000,000, its income tax after tax credit is: a. P812,500 b. P537,500 c. P962,500 35. Ifit is a resident foreign corporation and its total assets amount to P95,000,006, its income tax is: a. P40,000 b. P450,000 d, P525,000 36. Ifitis a non-resident foreign corporation, its income tax is: a. P730,000 b. P1,280,000 d. P1,400,00038. If it is a resident international carrier, assuming the gross income from the Philippines is the gross Philippine billing, its income tax is: a, P100,000 b. P 10,000 ©. P 37,000 d, P125,000 b. P_ 100,000 c. P 300,000 39, d. P 128,000 )f it is a non-resident cinematographic film ownerllessor, its income tax is: a. P1,000,000 ans 40.income tax is: a.P'100,000 b. P180,000 cc, P300,000 d. P128,000 42. If it is a resident foreign corporation but its expenses within and outside the Philippines is P3M, unallocated (disregard original data on expense) its income tax is: a. P640,000 b. P700,000 cc. P480,000 43. If it is a resident foreign corporation and it remitted 60% of its net profit to its head office abroad, its total tax liability is (Original data) a. P480,000 b. P571,800 c. 476.250 d. P612,75044, Banco De Adamantium, a domestic corporation had the following data for the taxable year ended December 31, 2020 Regular Banking Unit Interest Income from loans P70,000,000 Interest Income from peso deposit with Bank of Gapan, a 7,000,000 domestic corp. Dividend Income from various domestic corporations 7,500,000 Foreign Currency Deposit Unit Tnterest Income from loans to residents 2,000,000 Tnterest Income from loans to nonresidents 500,000 Additional Information: Banco De Adamantium had total operating expenses of 212,000,000. How much was the normal income tax for the year? a. P600,000 b. P550,000 cc. P400,000 d. PO4. The domestic corporation has held the shareholdings uninterruptedly for a minimum of two (2) years at the time of the dividends distribution. In case the foreign corporation has been in existence for less than two(2) years al the time of dividends distribution, then the domestic corporation must have continuously held directly at least twenty percent (20%) in value of the foreign corporation's outstanding shares during the entire existence of the corporation 46. The following are exempt from the Improperly Accumulated Earnings Tax, except? a. Banks and other non-bank financial intermediaries b. Publicly-held corporations ¢. Insurance companies 47.1t is a test used in determining the reasonable needs of a business to justify the accumulation of earnings which will exempt the corporation from paying Improperly Accumulated Earnings Tax: a. Urgency test b. Immediacy test c. Reasonable needs test 4. Control test48, JCU Corporation, a domestic corporation had the following data for taxable year 2020: Sales P5,000,000 Cost of goods sold 2,000,000 General selling and administrative expenses 500,000 Interest income from Philippine bank deposit 700,000 Rental income (net of 5% withholding tax) 790,000 Dividend Income: From domestic corporation 60,000 From foreign corporation 50,000 Capital gains from sale of domestic shares of stocks sold Directly 75,000 to buyer Dividend declared and paid during the year 500,000 Retained earnings, 12/31/2019 1,000,000 Par Value of outstanding shares 500,000 The income tax payable was:P208,125 b. P213,625 ce, P108,125 d. P105,125 50. MNC Corporation, a domestic corporation, has unappropriated retained earnings in excess of its paid-up capital stock amounting to P20,000,000 and 50,000,000 as of thefiscal years ‘ending June 30, 2020 and June 30, 2021, respectively. MNC Corporation shall be subject to the 10% improperly accumulated earnings tax on the following fiscal years ending, except: a. June 30, 2018 b. June 30, 2019 ©. June 30, 2020 d. June 30, 2021 Numbers 51 to 53 are based on the following set of facts: Asian Spirit, an international air carrier showed the following gross receipts for 201 Polat of Destination ‘Gross Origin receipts Philippines United States of 8,000,000 ‘America Korea Malaysia 4,000,000 Thailand Philippines 3,750,000 Philippines Philippines 2,100,000 Additional information. = Thirty Five percent (35%) of the shipments from the Philippines to the United States were later shipped to the Soviet Union * 25% of all its revenues were from transport of cargoes and goods.51. The income tax payable for 2019 is: a, P127,500 ¢. P170,000 d. P150,000 52. How much is the income tax payable for 2019 assuming the Philippines and U.S. entered into a tax treaty subjecting international carriers to 1% income tax rate? a. P68,000 b. P60,000 d. P150,000 How mush is the 53. income tax payable for 2019 assuming that Philippine carriers are exempt from payment of income tax in the United States? a. P125,000 P60,000 d. P80,000 Numbers 54 to 56 are based on the following set of facts:Dividend from San Miguel Corp. 70,000 Dividend trom Ford Motors, USA 120,000 Gain on sale of San Miguel shares directly to buyers 150,000 Royalties, Phils, 50,000 Royalties, USA 100,000 Interest from receivables in the 60,000 Philippines Rent Income, land in USA 250,000 income, Building in the 700,000 Philippines The Company also sold a land classified as capital asset for 2,000,000. The cost of the land is P1,000,000 while its Zonal Value is P3,000,000. 54, Its income tax on all income as a domestic corporation is: a. P578,000 b. P963,600 c. P683,50055. Based on the above problem, its income tax on all income if itis a resident foreign corporation, ignoring sale of land b. P663,600 cc, P383,500 d. P509,000 56. And if itis a non-resident foreign corporation and there is tax sparing, its income tax on all income is (ignore sale of land): a. P378,000 b, P663,600 d. P509,000 57, A domestic corporation may employ, as a basis for filing its annual corporate income tax return the: a. Calendar year only c. Either calendar or fiscal year .a. Anon-stock and non-profit educational institution b. Public educational institution ©. Civic league or organization not organized for profit and operated exclusively for the ‘one of social welfare First Statement- Partnerships, no matter how created, are subject to income taxation like a corporation Second Statement - A partnership, like a corporation, are allowed to claim itemized deductions or optional standard deduction to determine taxable income or net distributable income. a. True, true b. True, False c. False, False 2. Ataxable partnership may be subject to the following taxes: 1, Minimum corporate income tax 2. Regular corporate income tax 3, Improperly accumulated earnings tax. a, 1,2and3 ¢. tonly d. None of the given choices 3. A partnership formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business. a. General business partnership b. General professional partnership c. Co-ownership with capital contribution of the co-owners d. Corporation by estoppel 4. A general professional partnership is exempt from income tax, but is required to file an income tax return a. For statistical purposes. c, Because all income earners are required to file income tax returns. d. None of the above. 5. Which of the following statements is wrong? a. Ageneral partnership in trade is not taxable as a corporation. b. A joint venture for undertaking construction projects is not taxable as a corporation. ©. A consortium for energy operations pursuant to an operating consortium agreement under a service contract with the government is not taxable as a corporation.Second Statement -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 therefrom. b. True, False c. False, False d. False, True 7. The partner's share in the profits of a partnership is regarded as received by the partners although not yet distributed. This concept of income reporting under the Tax Code is known as: a. Installment basis of reporting income b. Accrual basis of report income 4, Hybrid method of reporting income 8, 7 he share in the net income, received by a partner of a general professional partnership is b. Exempt from income tax cc Sihiect to fringe henefit tax.10. TR & Co was established as early as 2010. Partners Troy and Ruby are sharing profits 75:25. The following are the data on income and expenses for the year ended December 31, 2020. TR& Co Troy Ruby Gross Income 750,000 7,250,000 750,000 Expenses 200,000 400,000 300,000 Dividend from a 20,000 2,000 7,500 Domestic Corporation Interest from 700,000 currency deposit (gross) Total Assets 77,000,000 The corporate income tax due of the partnership as reported in its income tax return is b. Php15,000 cc, Php850,000 d. Php40,000 11. The taxable income of Troy in his income tax return is a. Php165,000 b. Php15,000d. Php40,000 12, Assuming Ruby opted to pay the 8% preferential income tax during the year 2020, income tax liability of Ruby is: a. Php165,000 b. Php15,000 c a 13. Amount of final taxes to be withheld on the respective shares of Troy and Ruby a P21,175.00 —-P17,325.00 b. 38,437.50 12,812.50 c. 25,025.00 20,475.00 d. 25,116.50 20,587.50 14, Assuming the partnership is a general professional partnership, the taxable income of Ruby is presse 100 c. Php485,000 d. Php162,500 15, It arises when two or more heirs or beneficiaries inherit an undivided property from a decedent, or when a donor makes a gift of an undivided property in favor of two or more donees: a. Joint account b. Partnership c. Estate Number 16 to 18 are based on the following: Toto, Rick and Jane and Tarzan, brothers and sisters, are the heirs of Don Facundo. The latter died, without leaving behind a last will and testament, and left a sole property, i.e., a building with an annual rent income of Php15,000,000. During the year 2020, the expenses of the property is Php1,500,000. During the same year, Toto had gross income of Php3,000,000 and expenses of Php500,000. 16. The income tax liability of the co-ownership is: 14,050,000 cc. Php300,000 d. Php2,000,000 17. The taxable income of Toto during the year ended December 31, 2020: b. Php2,500,000 cc, Php2,000,000 d. Php4,050,00019. Jeje Construction Inc and Monmon Construction, Inc formed a joint venture to create a 55 storey residential building along EDSA and agreed to share profits equally Both parties including the JV are duly registered with the Philippine Construction Accreditation Board. During the year ended December 31, 2020, the parties presented the following: Joint Venture Tee Monmon Gross Income 50,000,000 30,000,000 20,000,000 Business Expenses 35,000,000 20,000,000 75,000,000 19. The income tax of the JV is: a.Php4,500,000 b, Php1,500,000 c.Php0 d.Php5,250,0 00 20. The income tax of Jeje is: a. Php4,500,000 b. Php1,500,000 c. Php0 21. Assuming Jeje was not able to obtain a PCAB Accreditation Certificate, The total income tax of MonMon,, who did not qualify as an MSME, is a. Php4,500,000 b, PHp1,375,000 c. Phpo d. Php5,250,000 22. First Statement-Where the estate is under judicial administration, the income of the estate shall be taxable to the fiduciary or trustee. Second Statement-Where the estate is not under judicial administration, the income of the estate shall be taxable to the heirs and beneficiaries b. True, False c. False, False d. False, True 23. First Statement-When an estate, under administration, has income-producing properties, the annual income of the estate becomes part of the taxable gross estate. Second Statement-When an estate, under administration, has income- producing properties and its income during the year is distributed to the heirs, the income so distributed is taxable to the heirs as part of their gross income for the year.Php2,500,000and business expenses of Php1,750,000. John distributed to the heirs Php200,000 each, as their share in the income of the estate. Bert had gross income of Php1,000,000 and Php800,000 expense during the year ended December 31, 2020, 24. Income tax of the estate is a, Php30,000 b. Pho c. Php20,000 d, Php40,000 25. Income tax of Bert is: a. Php30,000 b. PhpO c. Php20,000 d. Php40,000 26. Assuming that there is no executor nor administrator of Steve's estate, Bert's income tax is: a. Php30,000 b. Phpo ¢. Php20,000 27. Which of the following is correct a. Income of the revocable trust is taxable to the trustee b. Income of an irrevocable trust not taxable to the trustee c. determination of income tax of an irrevocable trust is the same to that of a corporation 4. an irrevocable trust is subject to income tax like an individual Number 28 to 30 are based on the following Mr. Bones created a trust naming his minor son Nerf as the beneficiary of the same. Ms. Tee is designated as the trustee of the Trust amounting to Php50,000,000. During the year ended December 31, 2020, the trust earned net income of Php3,500,000 whereby Ms. Tee distributed Php750,000 to Nerf as his share in the income of the trust. 28. How much is the income tax of the trust assuming Mr. Bones can revoke the trust: a. Php b. Php730,000 c.Php250,0 00 d.Php345,6 00b. Php730,000 e.Php117,5 00 d.Php345,6 0031. The following are subject to income tax like that of an individual, except: Income accumulated in trust for the benefit of unborn or unascertained person or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust; Income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct; Income received by estates of deceased persons during the period of administration or settlement of the estate; and ee 32. The following are allowable deductions from the gross income of a trust administered in a foreign country, except: a, itemized deductions ». optional standard deduction 4. depreciation expense of the property held in trust s 1. Investment Promotion Agencies (IPAs)- refer to government entities created by law, executive order, decree or other issuance, in charge of promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of the different economic zones and freeports in accordance with their respective special laws. These include the following, except: a, Board of Investments (BOI) b. Regional Board of Investments Autonomous Region in Muslim Mindanao (RBOI- ARMM) Philippine Economic Zone Authority (PEZA) Bases Conversion and Development Authority (BCDA) Subic Bay Metropolitan Authority (SBMA) Clark Development Corporation (CDC) John Hay Management Corporation (JHMC) Poro Point Management Corporation (PPMC) Cagayan Economic Zone Authority (CEZA) Zamboanga City Special Economic Zone Authority (ZCSEZA) PHIVIDEC Industrial Authority (PIA) Aurora Pacific Economic Zone and Freeport Authority (APECO) . Authority of the Freeport Area of Bataan (AFAB) Tourism Infrastructure and Enterprise Zone Authority (TIEZA) All other similar existing authorities or that may be created by law unless otherwise specifically exempted from the coverage of this Code P. Financial incentives review board (FIRB) Numbers 2 and 3 are based on the following set of a a a facts:3. Assuming Clemency does not reapply its Fiscal Incentives with the pertinent IPA, it will be subjected to RCIT beginning the taxable year: a, January 1, 2030 b. January 1, 2031 d. January 1, 2036 4. Santo Sebastian College is a non-stock, non-profit educational institution run by the Archdiocese of Maynila. It collected and received the following exempt income, except: a. Tuition fees b. Dormitory fees c. Rentals from canteen concessionaires5. Santo Tomas Hospital Incorporated is organized exclusively for charitable and social welfare services when it offered medical services on its charitable ward At the same time, it opened a pay ward to cater to patients who have the capacity to pay. The following are the tax implications on Santo Tomas Hospital, except: a. Exempt from income tax on income it derived from social welfare activity b. Exempt from income tax on income it derived from charitable activity ©. Subject to 10% income tax on profit oriented activity provided exceeding 50% of its income is derived from related acty 6. The following statements are true for exempt corporations enumerated under Section 30 of the Tax Code, except: a. Income tax exemption covers only the income derived by the corporation in furtherance of the purposes for which it was organized under Section 30 of the NIRC of 1997 b. Section 30 corporations are still subject to the corresponding internal revenue taxes imposed under the NIRC of 1997 on income derived from any of their properties, real or personal, or any activity conducted for profit regardless of the disposition thereof (ie., interest income from bank deposits, gains from investments, rental income from real or personal properties), which income should be reported for taxation purposes. c. The interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangement, and royalties derived from sources within the Philippines of organizations under Section 30 are subject to the 20% final withholding tax. Moreover, the interest income derived by them from a depository bank under the expanded foreign currency deposit system shall be subject to 15% final withholding tax pursuant to Section 27 (D) (1) in relation to Section 57 (A), both of the NIRC of 1997, as amended. 4. Are required to obtain a Cerificate of Tax Exemption (CTE) which shall be effective for 5 cancelled, 7. Statement 1 — Exempt corporations under section 30 of the Tax Code must be non-profit, "Non-profit" means that "no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its activities conducted not for profit Statement 2 - To qualify as a non-profit corporation exempt from income tax, it must demonstrate that its earnings or assets inure to the benefit of any of its trustees, organizers, officers, members or any specific person. It must not be organized or operated for the benefit of private interests such as specific individuals, incorporators or his family, shareholders of the organization, or persons controlled directly or indirectly by such private interests. True, True c. False, False d. False Truec. False, False 4. False, True The following are the requisites of income to be taxable, except: a. There must be gain, derived from labor, capital or both labor and capital b. The gain must be realized or actually received c. The gain must not be explicitly excluded/exempted by law The following are taxable compensation income, except: a. Basic salary . Basic salary not exceeding or less than the statutory minimum wage c. 13" month pay and other benefits exceeding P90,000 4. Commission received by a minimum wage earner The following are statutory exclusions from the taxable compensation income of employees, except: a. GSIS or SSS Contributions b, Labor Union Dues ¢. _ Home Development Mutual Fund (Pag-ibig Fund) contribution The following are taxable compensation income, except: a. Monetized unused vacation leave not exceeding 10 days b. Christmas cash gift exceeding P5,000 per year ©. Separation pay of an employee who tendered her resignation 4. Loyalty award in the form of gift certificate valued at P10,000 Nar Cisa receives a P20,000 monthly allowance from her sister who works as a nurse in the United Kingdom. For the month of December, when she was checking for the credit on her bank account the usual allowance from her sister, she discovered that she was credited with an amount of P2,000,000. She immediately withdrew the entire 2,000,000 and spent the rest on luxury goods. Later on, the bank is demanding that she return P1,980,000. On account of error on encoding on the part of the bank personnel and she was meant to receive only P20,000. She refuses to return the demanded amount stating that she has already spent the rest of it. One of the following is correct:Nar Cisa has the right to retain the P1,980,000 grounded on the principle of finders keepers, losers weepers. The bank has no cause of action against Nar Cisa, considering it was the fault of their employee which resulted to damage to them. They should have been more prudent in hiring their employees. Nar Cisa received a donation from the bank and donor's tax should have been paid on the P1,980,000. - ©. 7. On February 14, 2021, Bronson sold shares of San Miguel Corporation through the local stock exchange, He was able to sell it at a price of P75,000 when the cost to him of said shares is P25,000. One of the following conclusions is correct: He will be liable to pay final capital gains tax of 7,500 on the said sale, He will be liable to pay final tax on capital gains of P2,500. The sale is subject to the stock transactions tax of P375. eege 8, The following are ordinary assets except: a, 10 door apartment, earning rental income, owned by a retired widower offering residential houses for rent c. Dental chair owned by a dentist d. Grocery items included in the inventory of a business operating a mini grocery 9. The following are the special rules applicable to capital gains and losses, except: | Capital losses are allowed only against capital gains eared during the same year. An individual income taxpayer sustains during the taxable year a net capital loss, such capital loss shall be treated in the subsequent year as a short term capital loss in an amount not exceeding the net income of the year it originated. ‘An individual's capital gain or loss to be taken into account, in case of property held by it for 12 months or less is 100% s = Numbers 10 to 13 are based on the following set of facts: The taxpayer provided you with the followingb. PO c. (P500,000) d. P 500,00011, Assuming the taxpayer is an individual, his taxable income for the year 2021 is: a. P8,500,000 b. P6,500,000 c. P8,000,000 d. PO 12. Assuming the taxpayer is a corporation and the property sold with capital gains were held for 13 months. Its taxable income for 2020 is: a. P2,000,000 b. PO (P500,000) d. P 500,000 13, Assuming the taxpayer is a corporation, the taxable income in 2021 is: a. P8,500,000 b. P6,500,000 c. P8,000,000 a PO 14, Tikboy Alangaling, a member of the Philippine boxing team received the following during the taxable year: Prize for winning gold in the South East Asian | P500,00 games 0 Athlete of the year award 100,000 Winnings from PCSO lotto 5,000 Prize — Me Donald raffle promo 70,000 From the foregoing, the amount that should be exempted from income tax: a. P100,000 b. P500,000 d. P615,000 15. Prizes and awards received shall be exempt from income tax when the following conditions are met, except: a, _ It is given in recognition of religious, charitable, scientific, educational, artistic, literary or civic achievement. b. The recipient of the award or prize is not required to render substantial future services as a condition in receiving the prize or award. c. The recipient of the award was selected without any action on his part to enter the contest or proceeding.16, Proceeds of insurance taken by a corporation on the life of an executive to indemnify the latter's beneficiaries against loss in case of the employee's death is: b. Part of taxable income c. Subject to final tax 4. Partly exempt, partly taxable 17. The premiums paid by the corporation in the preceding number is a: a, Taxable income of the executive b. Deductible expense of the corporation d. Neither a nor b 18, Bro Co, a domestic corporation, is paying P2,500,000 to Stateside Inc, a non- resident foreign corporation. Stateside is a resident of the United States of America without permanent establishment in the Philippines. The following statements are correct, except: a. As provided by Section 32 (B)(5) said payment is exempt from income tax in the Philippines, applying the Philippines - United States of America double tax treaty. Generally, without invoking the Treaty, payment to Stateside Inc. is subject to 25% final withholding tax. The parties may already avail of the treaty exemption provided a request for confirmation of treaty relief is lodged with the BIR — ITAD not later than the last day of the 4 month following the close of the taxable year. 19. One of the following is a taxable income: a, Car received as gift on account of wedding b. Diamond ring inherited from the mother ¢. _ PCSO lotto winning amounting to P7,500 20. The following dividends are taxable except: a, Cash dividend b. Stock dividend c. Property dividend d. — Liquidating dividendThe lease contract provides, among others that the lessee will construct a 5-storey building for parking purposes at a cost of P36,000,000. Ownership of the building shall belong to the lessor upon the expiration or termination of the lease contract. The building was completed on July 1, 2016 with an estimated useful life of 15 years. 21. Mr, Valentine shall report total income from the lease for 2014 at: a. P2,430,000 b. P2,400,000 d. P2,640,000 22. Assuming Mr. Valentine will use outright method in recognizing income from leasehold improvements, how much is the total income from lease for year 2016? a. P 3,030,000 b. P 3,630,000 c. P38,430,000 d. P 2,400,000 23. Assuming Mr. Valentine will use spread-out method in recognizing income from leasehold improvements, how much is the total income from lease for year 2016? a. P 3,030,000 b, P 3,630,000 c. P14,430,000 d. P 2,400,000 24. Assuming that due to the fault of the lessee, the lease contract was terminated on January 1, 2018, how much income is to be reported by the lessor in 2018? a, P32,400,000 b, P30,600,000 c. P34,830,000 25. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation of indebtedness may amount: a. Toagift b. Toa capital contribution ©. To a donation inter vivos 26. Gain realized from the sale, exchange or retirement of bonds, debentures or other certificate of indebtedness is excluded from gross income if it has a maturity of:First statement — Rene Rekets tured 60 on February 14, 2020. During the same year, he retired from his employer of 30 years and received retirement pay of P5,000,000. The retirement pay received by Rene is exempt from income tax and the consequent compensation withholding tax. Second Statement — Star Lu is an employee of Goto Mi Hopia Factory for the past 15 years. She tumed 54 on valentine's day of 2021 and decided to retire from work. Her employer gave her a retirement pay amounting to P5,000,000 out of the latter's working fund. The retirement pay is exempt from income tax and consequent withholding tax. a. True, True c. False, False a False, True 28. Refund of the following taxes are not recognized as income, except: a. Income tax b. Donor's tax c. Estate tax 29. First Statement — Thirteenth (13" month pay and other benefits received by officials and employees of public and private entities are exempt from income tax and creditable withholding tax on compensation, provided that the total exclusion shall not exceed P90,000. Second Statement — The excess of de minimis benefits over the ceiling would form part of an individual's gross income only if the total excess benefits including bonuses exceeds P90,000 and would be subject to income tax and applicable final withholding taxes. True, True c. False, False d. False, True 30. The following data were provided to you by Intelligent Corporation for the current year: ‘Amount PriorYear Income ‘Amount written-off (Loss) Recovered in Prior Year before write off in Current year P50,000 350,000 20,000 10,000 (60,000) 10,000 30,000 20,000 30,00031. Brando, married with 4 children, received the following during the taxable year: House and lot, inherited from his mother, FMV] P35,000,000 Car, recelved as a gif from his best fend, — [7,250,000 cost Proceed of life insurance of his mother 70,000,000 Cash, awarded in a court case, for lost profit | 15,000,000 Cash, awarded in a courl case, for moral | 500,000 damages The amount added in his gross income is: a. 61,750,000 b, P15,500,000 ¢, P15,000,000 d. P46,250,000 Numbers 32 to 34 are based on the following set of facts: Bob Eden, a nonresident Malaysian stockholder, received dividend income of 300,000 in 2020 from Ramen Incorporated, a foreign corporation doing business in the Philippines. The gross income of the foreign corporation from within and without the Philippines for the past three years preceding 2020 were as follows: Source 2017 2018 2019 Philippines [| P16,000,00 |P12,000,00 | P14,000,00 0 o 0 Abroad 8,000,000 _| 14,000,000 | 16,000,000 32. The amount of income subject to tax should be: a PO b. P 90,000 d. P300,000 33. Assuming the percentage of gross income over worldwide gross income of Ramen Inc. for the past three years is 40%, the income to be reported by Bob is: a PO b. P 90,000 c. P157,500 d. P300,000 34, Assuming Ramen Inc is a domestic corporation, the amount of income subject to tax of Bob should be: a PO35. Gains realized by the investor upon redemption of shares of stock in a mutual fund company is: a. Exempt b. Subject to final withholding tax c. Subject to basic tax 4. None of the above Numbers 36 and 37 are based on the following set of facts: Drago purchased a life insurance, which he will pay P100,000 for the next 10 years. If he die anytime, his beneficiary will receive P1,500,000. On the other hand, if he outlive the 10 years, he will receive the P1,500,000 on the 15" year. 36. _ How much should he recognize as income on the 15" year? a. P 100,000 b. P1,500,000 37. Assuming Drago died on the 2" year, how much should the beneficiary recognize as income on account of receipt of the P1,500,000? a. P 100,000 b. P1,500,000 c, P1,000,000 P 500,000 e. PO » The following describes a deduction , except: a. Itis charged against a taxpayers gross income to arrive at taxable income b. Itis nota receipt c. Ithas the effect of reducing the amount against which the income tax will be based 2, First Statement — Deductions from gross income are matters of legislative grace, i.e., what is not expressly granted by Congress is withheld Second Statement - Only those enumerated in Section 34 of the Tax Code and special laws may be claimed as deductions from Gross income to arrive at Taxable Income, b. True, False c. False, False d. False, True 3. The following are the requisites in order for an expense to be considered as an allowable deduction from gross income, except:5. The following are the characteristics of Capital expenditure, except: a. Incurred in the acquisition, betterment or permanent improvement of an asset b. Akin to the acquisition of capital assets which normally should be spread over a reasonable period of time c. Expected to benefit more than one accounting period eee 6. The following taxpayers are allowed to claim optional standard deductions (OSD), except a. Resident Citizen b. Non-resident Citizen c. Resident Alien 7. The basis of determining OSD for an individual is: a, Gross income b. Gross sales or gross receipts c. Net income 4. Taxable income8. The following corporate taxpayers are allowed to claim OSD, except: a. Proprietary educational institutions b. Domestic corporation Resident jorean ‘re 9. The basis of determining OSD for a corporate taxpayer is: a. Gross income b. Gross sales or gross receipts ©. Net income d. Taxable income 10. Statement 1- Exclusions are items or amounts allowed to be subtracted from gross income to arrive at the taxable income. Statement 2- Deductions from gross income are not presumed. a, True, true b. True, false c. False, false 11. The following itemized deductions are not deductible, if between related parties as described by section 36(b) of the Tax code, except a. Loss on dealings with property b. Interest ©. Bad debt write-off 12, The following are related parties enumerated on section 36(b) of the Tax Code whereby interest expense is not deductible, a. Between members of a family, which shall include only his brothers and sisters, spouse, ancestors and lineal descendants. b. Except in the case of distribution in liquidation, between an individual and corporation more than 50% in value of the outstanding stock of which is ‘owned, directly or indirectly, by or for such individual ©. Between the grantor and a fiduciary of any trust, 13, Interest expense incurred to acquire an asset used in the course of trade or business and such asset could be subject to an allowance for depreciation is a. Cannot be allowed as a deduction from gross income b. Can only be allowed as a deduction from gross income ©. May either be capitalized, added to the cost of the asset, or claimed as an outright interest expense at the prerogative of the taxpayer 14, Avenger Incorporated is engaged in manufacturing clothes. It reported the following during the year ended December 31, 2021: