Principles
a. No, she had no income because she had no right to the mistakenly
credited in
1. Income, for tax purposes:
I. Means all income from whatever source (legal or illegal), unless
specifically excluded under the Tax Code.
II. Means all wealth which flows into the taxpayer other than return
of capital.
III. Is recognized in the year it is actually received in cash or cash
equivalent.
IV. Refer to the amount of money coming to a person or corporation
within a specified time, whether as payment of services, interest,
or profits from investment.
a. l, ll and III only
b. I and IV only
b. Yes, income is income regardless of the source.
c. No, it was not her fault that the funds in excess of $10,000 were
credited to
d. No, the funds in excess of$10,000 were in effect donated to her.
5. Which of the following is a characteristic of income?
A.
B.
C.
D.
Increase in taxpayer’s wealth True
True
True
False
C. I, II, III and IV
Realization of gain
True
False
False
False
d. None of the above
Return on taxpayer’s wealth
True
True
False
False
6. Which of the following is a requisite for an income to be taxable?
2. The sources from which income is derived
a. Labor
a. There must be gain
b. Illegal activities
b. The gain must be realized or received
c. Profits derived from sale or exchange of capital assets
c. The gain must not be excluded by law from taxation
d. All of the above
d. All of the above
7. Which of the following is not an income for income tax purposes?
3. The sources from which income is derived
A.
B.
C.
D.
a. Gain derived from labor.
True
True
True
False
b. Return on capital
Gifts and inheritance True
False
False
False
c. Excess of selling price over cost of assets sold.
Use of capital
True
False
False
d. Gift received
Labor
True
4. In 2018, Pedro sent his sister Ana $10,000 via a telegraphic transfer through
the Banko De Uro el Pilipinas. Lorna, the bank's remittance clerk made a
mistake and credi Ana with 100,000 which she promptly withdrew. The
bank demanded the relu of the mistakenly credited excess, but Ana refused.
The BIR entered the picture investigated Ana. Would the BIR be correct if it
determines that Ana ear taxable income under these facts?
8. Which of the following is not an income for income tax purposes?
a. Collection of loans receivable
b. Condonation of debt for services rendered
c. Excess of selling price over the cost of an asset sold
d. None of the above
9. Which of the following is not a characteristic of income?
a. Increase in taxpayer's wealth.
b. Realization or receipt of gain.
c. Earnings constructively received.
d. Return of taxpayer's wealth.
10. Which is not a valid definition of income?
a. Income is the return from capital invested.
b. Income is a fund at one distinct point of time.
service without restrictions by the payor. The following are examples of
constructive receipts, except
a. A security deposit to insure the faithful performance of certain
obligations of the lessee to the lessor.
b. Deposit in banks which are made available to the seller of services
without restrictions;
c. Issuance by the debtor of a notice to offset any debt or obligation
and acceptance thereof by the seller as payment for services
rendered;
d. Transfer of the amounts retained by the payor to the account of
the contractor.
c. Income means all wealth which flows into the taxpayer other than
a mere return of capital.
d. Income means cash or its equivalent unless otherwise specified.
14. There is constructive receipt of income when:
a. Payment is credited to payee's account
11. The share in the profits of a partner in a general professional partnership
is regarded as received by him and thus taxable although not yet
distributed. This principle is known as
a. Actual receipt of income
b. Advance reporting of income
b. Payment is set aside for the payee, or otherwise made available
so the payee may draw upon it at any time, or so the payee could
have drawn upon it during the taxable year if notice of intention
to withdraw had been given without substantial limitations.
c. Both “a” and “b"
d. Neither “a” nor "b"
c. Accrual method of accounting
d. Constructive receipt of income
12. Which of the following is considered or construed as an example of
"constructive receipt"?
a. Retirement benefits, pensions, gratuities
b. Fees paid to a public official
c. Interest coupons that have matured and are payable but have not
been cashed
d. Deposits for rentals to answer for damages, restricted as to use
15. When different types of income are subjected to common tax rate, the
tax system is described as
a. Global tax system
b. Gross income tax system
c. Scheduler tax system
d. Final tax system
Situs of Income
16. Situs, for taxation purposes will depend upon various factors, including
I. The nature of the tax and the subject matter thereof.
13. Constructive receipt occurs when the money consideration or its
equivalent is placed at the control of the person who rendered the
II. The possible protection and benefit that may accrue both to the
government and to the taxpayer. Domicile or residence
b. Income from services - place of performance
III. Citizenship
d. Gain on sale of real property - place of sale.
c. Royalties - place of use of intangible
IV. Source of income
a. I and V only
C. I, III, IV and V
b. I, III and IV only
d. I, II, III, IV and V
20. Situs of taxation on income from sale shares of a domestic corporation.
a. Always treated as income derived from within the Philippines
b. Always treated as income derived from without the Philippines
17. As a rule, income from whatever source is taxable. Income from
whatever source may come from:
I. Gains arising from expropriation of property
II. Gambling gains
III. Income from illegal business or from embezzlement
IV. Recovery of receivables previously written off
V. Tax refunds
VI. Compensation for injury suffered
c. May be treated as income within or without the Philippines
depending on the place of sale
d. May be treated as income within or without the Philippines
depending where the shares are kept
21. Situs of taxation on income from sale shares of a foreign corporation.
a. Always treated as income derived from within the Philippines
b. Always treated as income derived from without the Philippines
VII. Gratuitous condonation of debt
c. May be treated as income within or without the Philippines
depending on the place of sale
a. I and II only
d. d. May be treated as income within or without the Philippines
depending where the shares are kept
b. I, 1V and V only
c. I, IV, V and VI only
d. I, II, III, IV and V only
18. Situs of taxation on income from sale of property purchased.
a. Place of the seller
b. Place of sale
c. Place of buyer
d. As determined by the Commissioner
19. Which of the following test of source of income is incorrect?
a. Interest income - residence of the debtor
22. Statement 1: A gain from sale of shares of a domestic corporation shall be
considered derived from the Philippines regardless of where the shares
were sold.
Statement 2: A gain from a sale of shares of a foreign corporation shall
be considered derived from the country where the corporation was
created or organized.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
23. Pedro earned interest income from a promissory note issued to him by
Juan, a of California, U.S.A. Assuming that Pedro is a nonresident citizen,
the interest in
a. Subject to basic income tax
b. Subject to final tax
c. Not subject to income tax
a. Domestic corporation
b. Resident foreign corporation
c. Resident citizen
d. Both "a" and "C"
27. Which of the following is NOT true about source of income?
d. Partly subject to scheduler and partly subject to final tax
a. In case of income derived from labor, source is the place where
the labor is performed
24. Mr. Parker, a French citizen permanently residing in the Philippines,
received several items during the taxable year. Which among the
following is not subject to Philippine income taxation?
b. In case of income derived from use of capital, source is the place
where the capital is employed.
a. Consultancy fees received for designing a computer program and
installing the same in Shanghai facility of a Chinese firm.
b. Interest from his deposits in a local bank of foreign currency
earned abroad converted to Philippine pesos.
c. Dividends received from an American corporation which derived
60% of its annual gross receipts from Philippine sources for the
past ten (10) years.
d. Gains derived from the sale of his condominium unit located in
Quezon City
c. In case of profits from the sale or exchange of capital assets,
source is the place or transaction occurs.
d. None of the above
28. Which income from sources partly within and partly outside the
Philippines is allocated on the time basis?
a. Income of the international shipping corporation with vessels
touching Philippine ports
b. Income of a telegraph company with transmission from the
Philippines to
points abroad
25. It is important to know the source of income for tax purposes (i.e., from
within or without the Philippines) because:
a. Some individual and corporate taxpayers are taxed on their
worldwide income while others are taxable only upon income
from sources within the Philippines
b. The Philippines imposes income tax only on income from sources
within
c. Some individual taxpayers are citizens while others are aliens
d. Export sales are not subject to income tax
26. Which of the following taxpayers is taxable on income from all sources
within and outside the Philippines?
c. Income from goods produced in whole or in part in the Philippines
and sold in a foreign
country, or vice-versa
d. Income from personal services performed in part in the
Philippines and in part abroad
29. A taxpayer is employed by a shipping company touching Philippine and
foreign ports. In 2018, he received a gross payment for his services
rendered of P3,000,000. In that year, the vessels on board of which he
rendered services had a total stay in Philippine ports of four months. His
gross income from the Philippines was
a. P0
c. P1,500,000
b. P1,000,000
d. P3,000,000
30. Chris is a Filipino immigrant living in the United States for more than 15
years. He is retired and he came back to the Philippines as a balikbayan.
Every time he comes to the Philippines, he stays here about a month. He
regularly receives a pension from his former employer in the United
States, amounting to US$2,000 a month. While in the Philippines, with
his pension pay from his former employer, he purchased three
condominium units in Makati which he is renting out for P25,000 a
month each. Does the US$2.000 pension become taxable because he is
now in the Philippines
a. Yes. Income received in the Philippines by the non-resident
citizens is taxable.
b. Yes. Income received in the Philippines or abroad by non-resident
citizen is taxable.
c. No. Income earned abroad by a non-resident citizen is not taxable
in the Philippines.
d. No. The pension is exempt from taxation being one of the
exclusions from gross income.
31. All of the following are correct except one. Which is the exception?
a. The source of interest income is the country where the debtor
resides.
b. The source of interest income is the country where the creditor
resides.
c. Rents or royalties are considered derived from the country where
the property is located.
d. Income from personal services is considered derived from the
county where the services were rendered.
32. Which of the following is considered income derived from within the
Philippines?
I. Gain on sale of personal property purchased in the Philippines and
sold in Canada.
II. Compensation received from services in the Philippines.
III. Rent income from real property located in USA.
IV. Gain on sale of shares of a foreign corporation sold in the
Philippines.
a. I and II only
c. ll and IV only
b. l, ll and IV only
d. All of the above
33. Which of the following is not an income derived from sources within the
Philippines for income tax purposes?
a. Interests derived from bonds issued by a foreign corporation
b. Interest on notes or other interest-bearing obligations of
residents
c. Both “a” and “b”.
d. Neither “a” nor “b”
34. Which of the following statements is correct with respect to valuation of
income?
a. The amount of income recognized is generally the value received
or which the taxpayer has a right to receive.
b. If the services were rendered at a stipulated price, in the absence
of any evidence to the contrary, such price shall be presumed to
be the fair market value of the compensation received.
c. Transfer of land made by a person to another in payment of
services rendered in the form of attorney's fees shall be
considered as part of the gross income of the latter valued at
either the fair market value or the zonal valuation, whichever is
higher, in the taxable year received.
d. All of the above
Compensation Income
35. Compensation income is earned when an employer-employee
relationship exists. Which of
the following income represents income earned through employeeemployer relationship?
I. Professional fees
39. One of the following compensation income of an individual taxpayer is
not an exclusion from gross income:
II. Wages
III. Pension pay
a. Monetized vacation leaves not exceeding 10 days a year.
IV. Capital gain
b. Separations pay of an employee who resigned from his
employment.
a. I only
c. ll and III only
b. I and III only
d. I, II, III and IV
36. Pedro is a member of the board of directors of ABC Company. During the
taxable year, Pedro received director's fees amounting to P300,000 from
quarterly hi meetings he attended. Such fees should
a. Form part of Pedro's gross compensation income, whether or not
he is at the same time an employee of the corporation
c. Retirement benefits of an employee under a qualified benefit
plan who has worked for an employer for at least 10 years, who
at the time of retirement is 10 50 years of age, and who avails of
the retirement for the first time
d. All of these
40. Which of the following is taxable?
b. Form part of Pedro's gross compensation income only if he is at
the same time an employee of the corporation
a. Separation pay received by a 50-vear old employee due to the
retrenchment program of the employer
c. Both “a” and “b” are correct
b. Retirement pay received from a benefit plan registered with the
BIR where at the time the employee retired, he was 57 years of
age, retiring from employment for the first time in his life, and
was employed with the employer for 8 years
d. Neither “a” nor “b” is correct
37. Which of the following compensation will be subject to graduated rates?
a. Basic salary whether or not the employee is a minimum wage
earner
c. Social security benefit received by a balikbayan from employer
abroad at age of 30
d. None of the above
b. Basic salary only if the employee is not a minimum wage earner
c. 13th month pay and other benefits not exceeding P30,000
d. Fringe benefits received by supervisory or managerial employee
38. Which of the following items that reduces salaries of employees is not an
exclusion from gross income?
a. GSIS or SSS Contributions
b. Pag-Ibig Contributions
41. Statement 1: Amounts received by reason of involuntary separation
remain exempt from income tax even if the official or employee at the
time of separation has rendered less ten (10) years of service and/or
below fifty (50) years of age.
Statement 2: Any amount received by an official or employee or by his
heirs from the employer due to death, sickness or other physical
disability or for any cause beyond the control of the said official or
employee, such as retrenchment, redundancy, or cessation of business
are exempt from income tax.
c. Labor Union Dues
a. Both statements are correct
d. None of the choices
b. Both statements are not correct
c. Only the first statement is correct
d. Only the second statement is correct
42. The taxpayer was retired by his employer in 2016 and paid P2,000,000 as
a retirement gratuity without any deduction for withholding tax. The
corporation became bankrupt in 2018. Can the BIR subject the
P2,000,000 retirement gratuity to income tax in 2018?
II. Insurance premium paid by employer on the life insurance policy
of the employee
where the designated beneficiary is the employer.
III. The income tax of the employee paid by the employer as part of
the employee's
benefit.
1st Answer: Yes, if the retirement gratuity was paid based on a
reasonable pension where the taxpayer was 50 years old and has
served the corporation
IV. The income tax of the employee advanced by the employer,
deductible
2nd answer: No, if the taxpayer was forced by the corporation to
retire.
a. I only
c. II and III only
b. I and III only
d. III only
a. 1st and 2nd answers are correct
b. 1st answer 1 is correct but 2nd answer is wrong
c. 1st answer is wrong but 2nd answer is correct
d. 1st and 2nd answers are wrong
43. JJ. An official of Excel Corporation, asked for an earlier retirement
because immigrating to Canada with his girlfriend. He was paid P3,
000,000 as separation day in recognition of his valuable services to the
corporation. Paul, another official of the same company was separated
for occupying a redundant position. He was given P1, 000 separation pay.
Rene who has rendered 11 years of service and who is now P55 yrs. old
opted to retire for the first time. He received P2, 000,000 retirement pay.
The total income subject to withholding tax is
against future income of the employee.
45. Statement 1: Remuneration for services constitutes compensation
income even if the relationship of employer and employee does not exist
any longer at the time when payment is made between the person in
whose employ the services had been performed and the individual who
performed them.
Statement 2: In general, fixed or variable allowances which are received
by a public officer or employee or officer or employee of a private entity,
in addition to the regular compensation, fixed for his position or office,
is compensation subject to income tax and consequently creditable
withholding tax on compensation income,
a. Both statements are correct
b. Both statements are incorrect
a. P1,000,000
c. 3,000,000
c. Only the first statement is correct
b. P2,000,000
d. P6,000,000
d. Only the second statement is correct
44. Which among the following is part of the taxable income of an employee?
I. Insurance premium provided by employer on the life insurance
policy of
the employee where the designated beneficiary is the relative of the
employee.
46. Statement 1: Representation and Transportation Allowances (RATA)
granted under Section 34 of the General Appropriations Act to certain
officials and employees of the government are considered
reimbursements for the expenses incurred in the performance one's
duties rather than as additional compensation.
Statement 2: The excess of RATA in statement 1. If not returned to the
employer, constitutes taxable compensation income of the employee.
Statement 3: COLA of minimum wage earners is exempt from income
tax.
a. All statements are correct
b. All statements are incorrect
a. All statements are correct
c. Only statement 3 is correct
b. All statements are incorrect
d. Only statement 3 is incorrect
c. Only statement 3 is correct
d. Only statement 3 is incorrect
47. Juana, widow received the following during 2018:
•
•
•
•
Received $500 ($1=P44) monthly interest income from the
pension plan of his deceased husband who served in the US
Army for 20 years.
Won a beauty contest “Miss Byuda 2018”. She received the
following as prizes:
49. Statement 1: Tips or gratuities paid directly to an employee by a customer
of the employer that are not accounted for by the employee to the
employer are considered as taxable income subject to basic tax.
Statement 2: The tips described in statement 1 shall not be subject to
withholding the reason that tips are not accounted for by the employee
to the employer.
a. Both statements are correct
◊ Cash prize, P50,000
b. Both statements are incorrect
◊ Free-trip abroad worth P50,000
c. Only the first statement is correct
◊ College scholarship with International College of Business and
Economics worth P100,000
d. Only the second statement is correct
◊ Goods worth P20, 000.
Business income Practice of Profession
P100, 000 from her debtor in payment of a loan, and interest in
the sum of P15, 000.
Inherited from her grandmother a lot and apartment valued at
P2,500,000 from which she is receiving monthly rental of
P15,000.
50. Which of the following statements is incorrect?
a. Income from business is never subject to final withholding tax
b. Income from exercise of profession may be exempt from income
tax
c. Income from business may be subject to capital gains tax
The income subject to tax is a. P415,000
c. P250,000
b. P679,000
d. P515,000
d. Income from exercise of profession may be subject to income tax
The following rules shall be observed on what type of income shall apply:
48. Statement 1: The stipends received by resident physicians during their
intensive to in the residency program of a hospital are subject to
creditable withholding to compensation income.
Statement 2: Reasonable amounts of reimbursements/advances for
travellina entertainment expenses which are pre-computed on a daily
basis and are paid to employee while he is on an assignment or duty such
as “per diem” need not be subissis the requirement of substantiation
and to withholding tax.
◊ Ordinary Income = Basic Tax or Normal Tax
◊ Passive income, Philippines (must be in the list of income) = FWT.
◊ Passive income derived abroad = Basic Tax (For RCs and DCs only)
◊ Capital Gains:
•
•
On sale of shares of non-listed DC = CGT
On sale of real properties in the Phils. = CGT
•
•
On sale of shares of DC listed in the local stock exchange
from income tax but subject to stock transaction tax.
Other Capital Gains = Basic Tax
53. The following data on net income, bad debt, write-off and recovery
show:
Case B
Case C
Net income (loss) before write-off P120, 000
P60,000
(P40,000)
◊ Employment (except FBs subject to FBT)
Less: Bad debt written-off claimed 40.000
40,000
50.000
◊ Business income
as deduction
◊ Sale of ordinary income
Net income (loss) after write-off
P80,000
P20,000
(P90,000)
◊ Sale of capital assets not subject to CGTS
201 8 :
◊ All other income not exempt from tax + not subject to FWT or CGT
Subsequent recovery
P40,000
P10,000
P50,000
Ordinary incomes subject to basic tax are incomes derived from.
51. Which of the following dealings in property is subject to normal income
tax?
2017 :
Case A
The taxable recovery in 2018 is:
Case A
Case B
Case C
a. Sale of ordinary assets
a. P40,000
P20,000
P50,000
b. Sale of real property, located in the Philippines, classified as
capital asset
b. P40,000
P20,000
P0
c. P40,000
P10,000
P0
c. Sale of shares in a domestic corporation sold outside the local
stock exchange
d. P40,000 P0 P0
d. All of the choices
54. The following were taken from the income statement of domestic
corporation for the taxable year 2018:
52. Which of the following interest income is subject to normal tax?
I. Interest income earned or derived from the normal course of
trade or business
II. Interest income earned or derived from notes receivable.
III. Interest income earned or derived from the over-payment of
income tax
Gross profit on sales
P800,000
Less: Deductible expenses
P440,000
Provision for bad debts
Net income before tax
80,000
(520,000)
P280,000
Additional information:
for previous years
IV. Interest income derived from investments in government bonds
•
a. I only
c. I, II and III only
•
b. I and li only
d. All of the above
Accounts written-off during the year and charged to allowance
for bad debts - P50,000.
Recoveries on accounts receivable previously written off in
2016 and credited to allowance for bad debts.
Allowed as deduction by the BIR - P30,000.
Recovery of previously written-off bad debts
Refund of previously paid taxes
Disallowed by the BIR as deduction - P20,000.
The taxable income of the corporation in 2018 should be:
a. P280,000
c. P330,000
b. 260,000
d. P340,000
55. Which of the following is not a taxable income?
a. Bad debts previously deducted as item of expense and partially
recovered subsequently
b. Tax expense previously disallowed as deduction from taxable
income, fully refunded subsequently
c. Income from gambling
The common carrier's tax, real estate tax and P60, 000 of the income
tax were refunded in 2018. If the income of ABC in 2018 was P1,
200,000, the taxable income for the year should be:
a. P 1,200,000
c. P 1,420,000
b. 1,480,000
d. P1, 410,000
Condonation of Debt
59. For tax purposes, which among the following rules shall be observed
with respect to forgiveness of indebtedness?
d. Income from usurious financing
I. If debtor rendered service in favor of the creditor: forgiveness of
debt results a taxable income to the debtor.
56. Which of the following tax refunds is taxable?
II. If the debtor did not render service in favor of the creditor,
forgiveness or de results in a taxable indirect gift.
a. Percentage tax on person's exempt from VAT
b. Estate or donor's tax
III. If the debtor is a shareholder of a corporation, forgiveness of
debt by me creditor corporation results in dividend distribution.
c. Stock transaction tax
a. I only
c. I and II only
d. Income tax paid to a foreign country if claimed as tax credit during
the year.
b. ll only
d. I, II and III
57. The following are not taxable, except
a. Refund of fringe benefits tax
b. Refund of Philippine income tax
c. Refund of estate or donor's tax
d. Refund of special assessment
60. If an individual performs services for a creditor who in consideration
thereof cancels the debt, the cancellation of indebtedness may
amount:
a. To a gift
b. To a capital contribution
c. To a donation inter vivos
58. ABC Company paid the following taxes in 2018:
Income tax
120,000
Common carrier's tax
150,000
Local business taxes
100,000
Donor's tax
60,000
Real estate tax
70,000
d. To a payment of income
61. Pobre borrowed from Rich P100, 000 payable in five (5) equal monthly
installments. Before the first installment became due, Pobre rendered
general cleaning services in the entire office building of Rich, and as
compensation, Rich cancelled the indebtedness of Pobre up to the
amount of P75, 000. The P75, 000 may amount to:
a. To a gift
b. To a capital contribution
65. Using the same data in the preceding number, how much was the
income of Mike in 2018
c. To a donation inter vivos
d. To a payment of income
using cash method?
Rental Income
a. P200,000
c. P600,000
62. One of the following income shall be returned in the year received.
b. 400,000
d. None of the choices
a. Interest earned on bank deposit.
b. Share in the net income of professional partnership.
c. Stock dividend.
d. Rentals for 2018, 2019 and 2020 received in 2018 by a lessor
under accrual method.
63. What is the correct treatment of advance payment made by the lessee
to the lessor?
I. If the advance payment represents loan, the amount is part of the
lessor's taxable income.
II. If the advance payment represents security deposit, the amount
is part of the lessor's taxable income.
III. If the advance payment representing loan is applied to unpaid
rent, the amount is part of the lessor's taxable income.
IV. Prepaid rent must be reported in full in the year of receipt,
a. All of the above
c. I, III, and III only
b. None of the above
d. III and IV only
Use the following data for the next fou r (4) questions:
Mike leased his land to Leomar for two years beginning July 1, 2018. Leomar
would pay monthly rental of P100,000. He paid rent up to October 2018 and
then
defaulted
for
the
rest
of
the
year.
64. Under accrual method, how much was the income of Mike for 2018?
a. P200,000
c. P600,000
b. 400,000
d. None of the choices
66. Under accrual method, how much was the deductible expense of
Leomar in 2018?
a. P600,000
c. P200,000
b. 400,000
d. None of the choices
67. Under cash method, how much was the deductible expense of Leomar
in 2018?
a. P600,000
c. P200,000
b. b. P400, 000
d. None of the choices
Use the following d ata for the next three ( 3) questio ns :
On January 1, 2017, Cathrina leased her land to Leah. The terms of the
contract of lea for fifteen (16) years and the rental fee i 360,000 a year. The
contract provides that Leah construct a building and at the end of the term
of the contract, the ownership of the ina will be transferred to Cathrina. The
building, with a useful life of 30 years, was Completed on January 1, 2018 at
a
cost
of
P6.000.000.
68. Assume Cathrina will spread his income over the term of the contract of
lease. For income tax purposes, Cathrina's 2018 income is:
a. P360,000
c. P760,000
b. P560,000
d. P6,360,000
69. Assume Cathrina opted to use the lump-sum method of recognizing
income from leasehold improvement, her taxable income in 2018
should be:
a. P360,000
c. P760,000
b. P560,000
d. P6,360,000
70. Using the assumption in the immediately preceding number, Cathrina's
taxable income in 2019 should be:
d. P2,400,000
74. Assuming Pedro will use spread-out method in recognizing income from
lease no improvements, how much is the total income from lease for
year 2018?
a. P360,000
c. P760,000
a. P3,030,000
c. $14,430,000
b. b. P560,000
d. P6,360,000
b. P3,630,000
d. P2,400.000
Use the following data for the next five (5) questions:
On July 1, 2016, Pedro leased his vacant lot for a period of 12 years to Juan
at an annual of P2, 400,000. It was also agreed that Juan will pay the
following in 2016:
•
•
•
b. P3,630,000
84,800,000 representing rental payment for two (2) years.
Security deposit of P2, 400,000.
Annual real property tax of P30, 000.
The lease contract provides among others that Juan will construct a
5-storey building for parking purposes at a cost of P36, 000,000.
Ownership of the building shall belong to Pedro upon the expiration
or termination of the lease contract. The building was completed on
July 1, 2018 with an estimated useful life of 15 years.
71. Pedro shall report total income from the lease in 2016 at
a. P30,000
c. P2,430,000
b. P2,400,000
d. 24,830,000
72. Pedro shall report total income in 2017 at
a. P30,000
c. P2,430,000
b. P2,400,000
d. 24,830,000
73. Assuming Pedro will use outright method in recognizing income from
leasehold improvements, how much is the total income from lease for
year 2018?
a. P3,030,000
c. R38,430,000
75. Assuming that due to the fault of the lessee, the lease contract was
terminated on January 1, 2020, how much income is to be reported by
the lessor in 2020?
a. P32,400,000
c. 234,830,000
b. P30.600.000
d. P33.030.000
76. On January 1, 2017. Mike leased to Leomar a piece of vacant lot on
which the latter constructed a 3-storey building for P 6,000.000. The
building was completed on December 31, 2018. The term of the lease
is 10 years, while the estimated useful life of the building is 15 years.
Mike opted to use the spread out method in recognizing income.
Which of the following statements is correct?
a. Mike's annual depreciation expense on the leasehold
improvement is P400,000
b. Aside from rent, Mike should recognize annual income of P
350,000 due to the
c. Mike has the option either to deduct in full the cost of the building
in the completion, or claim deductions for such building annual
depreciation up to of the term of the lease.
d. If the fair market value of the building as of the date of
completion is known a required to recognize as income such fair
market value in the year of completion.
77. Lessor, had the following information for 2018:
Cost of leasehold improvement
P1, 000, 000
Annual rent
100,000
The estimated life of leasehold improvement is 50 years. The term
of the lease is 40 years. At the end of the twentieth (20th) year, the
lease was terminated for valid causes done by the lessee.
a. All of the above
c. I and II only
b. None of the above
d. I, II and III only
82. Which among the following dividend income is tax exempt?
What is the income to be reported by the lessor at the end of the
20th year?
I. Pure stock dividend
a. P100,000
c. P605,000
a. I only
c. I and II
b. P125,000
d. P700,000
b. b. II only
d. None of the choices
78. How much is the allowable deduction of lessee on the 20th year?
a. P600,000
c. P100,000
b. P625,000
d. P500,000
Dividend Income
NOTE: This topic was extensively illustrated in Part 2 (individuals) and 4
(corporation).
79. If a corporation distributes its own treasury stocks to its stockholders, this
kind on a corporate distribution which is recognized in the Tax Code is a:
a. stock dividend
c. cash dividend
b. property dividend
d. liquidating dividend
80. If a corporation distributes its assets to its stockholders upon
dissolution, this kind of corporate distribution will result in:
II. Pure liquidating dividend
83. Liquidating dividends are return of shareholders' investment. Which of
the following rules on liquidating dividend is incorrect?
a. The excess amount of liquidating dividend over cost of shares
surrendered is taxable.
b. If a shareholder sustains a loss brought about by the liquidating
dividend, such loss is deductible.
c. If a shareholder sustains a loss brought about by the liquidating
dividend, such loss is not deductible.
d. All of the above
84. Which of the following statements regarding "indirect dividends" is
correct?
I. Indirect dividends are other dividends representing payment or
rights, which are in
a. stock dividends
c. cash dividend
substance, dividends.
b. property dividend
d. liquidating dividend
II. If the shareholder is a debtor of a corporation, cancellation of
indebtedness by the
81. Which among the following dividend income is tax exempt? Dividend
income received from
I. A domestic corporation by a domestic corporation.
II. A domestic corporation by a resident foreign corporation.
III.A domestic corporation by a nonresident foreign corporation.
IV. A resident foreign corporation by a domestic corporation.
creditor-corporation results in indirect dividend distribution.
III. The amount of the debt cancelled in statement “II” is returnable
income of the
shareholder.
a. I only
c. I and II only
b. II only
d. I, II and III
85. A cash dividend of P100,000 received by a taxpayer in 2018 from a
foreign corporation whose income from Philippine sources is 40% of its
total income is
Statement 1: partly taxable if he is a resident citizen.
Statement 2: Partly taxable if he is a non-resident alien
a. Statements 1 & 2 are false
87. The taxpayer's taxable income is
a. P750,000
c. P796.000
b. P830,000
d. P800,000
88. The final withholding taxes on dividends amount to
a. P16,200
c. P25,200
b. P18,000
d. P26,000
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
86. Using the above data, which of the following is correct? The cash
dividend is
a. Exempt from income tax if he is a resident citizen.
b. Partly taxable if he is a resident alien.
c. Taxable in full if he is a nonresident citizen.
d. Exempt from income tax if he is a nonresident alien.
Use the following data for the next two (2) questions:
A resident alien had the following data in 2018:
89. Cabarles Corporation declared and distributed to its stockholders shares
of Soliman Corporation. One of its stockholders, Brianne, who is a
Filipino, received 100 shares of Soliman Corporation as dividends. At the
date of dividend declaration, the fair market value of shares of Soliman
Corporation was P120 per share and by the time Brianne received the
dividend the fair market value per share was P180. Which of the
following is correct? The dividend is
a. A stock dividend, hence, exempt from income taxation.
b. A property dividend, hence, taxable subject to the graduated tax
rate.
c. A property dividend, hence, taxable and subject to the final tax
rate of 10%.
d. A property dividend, hence, taxable and subject to the final tax
rate of 20%
Gross income, Philippines P2, 000,000
Business expenses 1 1,200,000
Dividends received:
From domestic corporation (net).
90. This refers to a specified income payable at stated intervals for a fixed
or a contingent period, often for the recipient's life, in consideration of
a stipulated premium paid either in prior installment payments or in a
single payment.
60% of its income came from the Philippines 90,000
a. Annuity
c. Pension
40% of its income came from the Philippines 72,000
b. Royalty
d. Gratuity
From resident foreign corporation (gross)
60% of its income came from the Philippines 50,000
40% of its income came from the Philippines 40,000
91. Annuity payments received by a taxpayer represent a part which is
taxable and not taxable. Which of the following statement is correct?
a. If annuity received represents interest, it is a taxable income.
b. If annuity received represents return of premium, it is not a
taxable income.
c. Both statements are correct
95. Prizes and awards received shall be exempt from income tax when the
following conditions are met, except
d. Both statements are not correct
a. It is given in recognition of religious, charitable, scientific,
educational, artistic, literary or civic achievement.
92. Mr Santiago purchased a life annuity for P100, 000 which will pay him
P10,000 a year. The life expectancy of Mr Santiago is 12 years. Which
of the following will Mr Santiago be able to exclude from his gross
income?
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.
a. P10,000
C. P100,000
c. The recipient of the award was selected without any action on his
part to enter the contest or proceeding.
b. P20,000
d. P120,000
d. None of the above
Prizes, Awards and Other Winnings
96. Pedro was selected as the most outstanding "barrio teacher” in Di
Mahagilap town of Region XX. His name was submitted by the school
principal without his knowledge. He received a trophy and a cash
award of P50, 000. The amount he received is
a. Subject to basic income tax
93. Ana received the following winnings in 2018. Which of the following is
subject to final tax of 20%
b. Subject to final tax
a. P10, 000 winnings outside the Philippines
c. Exempt from income tax
b. P1, 000,000 Lotto winnings
d. Partly taxable, party exempt
c. P6,000 prize in a singing contest
d. P8,000 PCSO winnings
94. Prizes and awards received shall be exempt from income tax when the
following conditions are met, except
97. Brian is an amateur boxer who represented the Philippine team in the
recently concluded Rio Olympics held in Brazil. For winning in the said
competition, he received the following amounts:
•
P500,000, cash prize from the Amateur Boxing Association of the
Philippines (accredited national sports association)
P2,000,000 cash award donated by Rizal Commercial Banking
Corporation (RCBC);
P600,000 talent fee as model of a known boxing gear; and
P900,000 professional fee from ABS-CBN for being an instant
celebrity.
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.
How much of the above amounts is taxable to Brian?
d. The amount of prizes does not exceed P10, 000
a. P0
c. P2,000,000
b. P1,500,000
d. R4,000,000
98. Pacman, a professional boxer, won in his title-bout against Timmy Bradly
held at Mandalay Bay, Las Vegas, Nevada. During the year, Pacman
received the following amounts:
•
•
•
there is no showing that the boxing match was
sanctioned by the Philippine National Sports
Commission. Therefore, the prize money is not
excluded.
Answer to Question 3:
Apol may avail of tax credit against his tax liability in
the Philippines for taxes paid in foreign countries. He
may also choose to classify such income tax payments
as deduction from his gross income. He has to signify
in his income tax return his desire to avail the
deduction.
P25 Million as cash prize in the fight
P30 million from Pay Per View
P12 million talent fee as commercial model of San Miguel Beer.
How much of the following amounts is exempt from income tax?
a. P0
c. 230,000,000
b. P25,000,000
d. P67,000,000
a. All the answers to the questions are correct
b. Only the answers to Questions 1 and 2 are correct
99. Apol, a citizen and resident of the Philippines, is a professional boxer.
In a professional boxing match held in 2018, he won prize money in
United States (US) dollars equivalent to P800,000,000.
Question 1: Is the prize money paid to and received by Apol in the
US taxable in the Philippines?
Question 2: May Apol's prize money qualify as an exclusion from his
gross income?
Question 3: The US already imposed and withheld income taxes
from Apol's prize money. How may Apol use or apply
the income taxes he paid on his prize money to the
US when he computes his income tax liability in the
Philippines for 2017?
Answer to Question 1:
Yes. Under the Tax Code, the income within and
without of a resident citizen is taxable. Since Apol is a
resident Filipino citizen, his income worldwide is
taxable in the Philippines.
Answer to Question 2:
No. Under the law, all prizes and awards granted to
athletes in local and international sports competitions
whether held in the Philippines or abroad and
sanctioned by their national sports association are
excluded from gross income. However, in this case,
c. Only the answer to Question 3 is incorrect
d. All the answers to the questions are incorrect
100. JJ a member of the Philippine boxing team received the following
during 2018:
Prize for winning gold in the Asian games
P500, 000
Athlete of the year award
100,000
Winnings from Philippine lotto
400,000
Prize - Mc Donald raffle promo
10,000
Cash gift from his SM Foundation
100,000
The amount not subject to income tax is
a. P700,000
c. P1,110,000
b. P1,100,000
d. P1,010,000
Proceeds from Insurance
101. Proceeds of insurance taken by a corporation on the life of an executive
to indemnify it against loss in case of his death is
a. Exempt from income tax
b. Part of taxable income
c. Subject to final tax
d. Answer not given
d. Partly exempt, partly taxable
102. The proceeds received under a life insurance endowment contract is
not considered part of gross income:
105. Which of the following may be excluded from the gross income of a
taxpayer?
a. Income derived from bequests and devices.
a. If it is so stated in the life insurance endowment policy.
b. Interest on proceeds of life insurance policies.
b. If the price for the endowment policy was not fully paid.
c. Interest received from a domestic corporation.
c. Where payment is made as a result of the death of the insured.
d. None of the above.
d. Where the beneficiary was not the one who took out the
endowment contract.
106. Which of the following is taxable?
a. Property acquired through donation
103. Pedro, single received the following during the taxable year:
Proceeds of his life insurance paid at an
b. Inherited properties
c. Income from letters "a" and "b"
annual premium of P15, 000 within 25 years
P2, 000,000
d. None of the choices
Proceeds of his mother's life insurance paid
at an annual premium of P10,000 within 20 years
1, 000,000
House and lot inherited from his mother
4,000,000
Rent income from inherited properties
P200, 000
For income tax purposes, how much of the above items must be
included in his gross income?
a. P7, 200,000
C. P200, 000
b. P1, 200,000
d. P1, 825,000
104. Pedro insured his life with his estate as beneficiary. In 2016, after Pedro
nad P650,000 in premium, he assigned the policy to Jose for P600,000.
Jose cont paving the premiums. Pedro died in 2018 and Jose collected
the total proceeds 22.000.000. Jose, after the assignment and Pedro's
death paid total premiums of 2800.000. As a result of the above
transactions, Jose:
Compensation for Injuries suffered
107. The following are examples of nontaxable compensation for injuries,
except.
a. Actual damages for injuries suffered.
b. Compensatory damages for unrealized profits.
c. Moral damages for grief, anxiety and physical sufferings
d. Exemplary damages.
108. This income is subject to basic tax
a. Compensation for personal injuries or sickness
b. Salaries or emoluments received during a leave of absence
a. May consider the proceeds of P2,000,000 as exempt from tax
c. Winnings from PCSO and Philippine lotto
b. Derived a taxable income of P550,000
d. Fringe benefits given to managerial employees
c. Derived a taxable income of P600,000
109. Marlon was hit by a car driven by Jaysee causing severe injuries to the
former. It was found out during trial that the driver was drunk at the
time of the incident. After trial, the court awarded the following:
•
•
•
•
P1, 500,000 actual damages for hospitalization
P300,000 exemplary damages
P500,000 for loss of income, and
P100,000 moral damages.
Marlon also received a cash gift of P100, 000 from Jaysee. The taxable
income received by Marlon is:
a. P2, 400,000
c. P1,500,000
b. P1,900,000
d. P500,000
110. Recoveries of damages, shall not form part of the taxable income when
it represents compensation for personal injuries arising from:
I. Libels
II. Defamation
III. Slander
IV. Breach of promise to marry
V. Alienation of affection
a. I and II only
c. I, II, III, IV and V
b. I, II and III only
d. None of the above
111. The following are examples of nontaxable compensation for injuries,
except.
a. Actual damages for injuries suffered.
a. 5 years or more
b. 5 years or less
c. More than 5 years
d. Exactly 5 years
113. Which is not a creditable withholding income tax?
a. Expanded withholding income tax
b. Withholding income tax on passive income
c. Withholding income tax at source
d. None of the above
114. Mike is the hottest designer and make-up artist in the Metropolis
today. His annual professional income is P15, 000,000. On February 14,
2014, he inherited from a relative a 10-door high-end apartment worth
P50, 000,000. Net rental income from the apartment during the year
amounted to P3, 000,000. Mike's other income is from interest on his
gratuity of P5, 000,000 under time deposit with BDO at a rate of 10%
per annum. Which among the following is correct?
a. The apartment he inherited forms part of his taxable income
during the year,
b. The net rental income from apartment he inherited forms part of
his taxable income during the year.
c. The interest on his gratuity forms part of his taxable income
during the year.
d. All of the above
b. Compensatory damages for unrealized profits.
c. Moral damages for grief, anxiety and physical sufferings
d. Exemplary damages.
112. In order for gains realized from the sale or exchange or retirement of
bonds, debentures or other certificate of indebtedness be exempt
from income taxation, what is the prescribed length of its maturity?
115. A tax exclusion is defined as
a. An item or amount which the law allows to be deducted from
gross income in order to arrive at net income.
b. The grant of immunity to particular persons or corporations from
a tax which others within the same taxing district are obliged to
pay.
c. Income received but which is not part of gross income as it is
exempted by law or by treaty.
d. A deduction from income tax due of any amount paid to a foreign
country subject to limitation.
116. Which of the following is not an income tax on corporations?
a. Normal tax
b. Minimum corporate income tax
c. Gross income tax
d. Stock transaction tax
117. Which among the following are examples of income that are exempt
from income tax by virtue of a treaty?
a. Salaries of officials of the United Nations assigned in the
Philippines if paid by the United Nations and certified by the
Secretary General of the United Nations.
b. Salaries, allowances, fees, or wages received by citizens of the
United States of America working in consular offices in the
Philippines are exempt from all taxes.
c. Salaries of diplomatic officials and agents.
d. All of the above
119. Which of the following items is not part of gross income to be reported
in the income tax return?
a. Increase in value of land
b. Gambling winnings
c. Prize of P10,000
d. Gain from sale of store's air conditioner
120. Mr. Joe, an American residing in Hongkong came to the Philippines to
sing the American national anthem on a professional boxing
championship match held in the Araneta Coliseum. He was paid P1,
000, 000 as talent fee. His Philippine income tax would be:
a. P320,000
c. P250,000
b. P285,000
d. P150,000
121. 1st statement: To be exempt from income taxation. long term bank
deposit or investment should not be terminated by the investor
before the 5th year; otherwise, it shall be subjected to final tax rates
of 5%, 12%, or 20% on interest income earnings.
2nd statement: For purposes of exemption from income taxation, the
long term deposit investment above refer to those investments
issued by banks and other financial institutions.
a. Only 1st statement is correct
118. Which among the following are examples of income that are exempt
from income tax by virtue of special laws?
b. Only 2nd statement is correct
a. Payments of benefits due or to become due under United States
Veterans Administration are not included in the gross income.
d. Both statements are incorrect
b. Benefits received from or enjoyed under the Social Security
System (SSS) are not included in the gross income.
c. Benefits received from the GSIS including retirement gratuity
received by government officials and employees are not
included in the gross income.
d. All of the above
c. Both statements are correct
122. Which of the following organizations shall be exempt from income tax?
a. Organizations such as provincial fairs and like associations of a
quasipublic character, which are designed to encourage the
development of better agricultural and horticultural products
through a system of awards, prizes, or premiums, and whose
income derived from gate receipts, entry fees, donations is used
exclusively to meet all the necessary expenses of upkeep and
operation
b. Associations which have for their purpose, the holding of
periodical race meets, the profits from which may inure to the
benefit of their shareholders.
c. Corporations engaged in growing agricultural or horticultural
products or raising livestock or similar products for profits.
d. None of the choices.
123. Which of the following government owned or controlled corporations,
agencies or instrumentalities shall pay such rate of tax upon their
taxable income as are imposed upon corporations or associations
engaged in similar business, industry or activity?
a. Government Service Insurance System (GSIS)
a. Only from the cash sale of property
b. From cash and gratuitous receipts of property
c. From sale and lease of property
d. Only from sale of property
126. The term “capital assets” includes
a. Stock in trade or other property included in the taxpayer's
inventory.
b. Real property not used in the trade or business of taxpayer.
c. Property primarily for sale to customers in the ordinary course of
trade or business.
d. Property used in the trade or business of the taxpayer and subject
to depreciation.
b. Social Security System (SSS)
c. Philippine Amusement and Gaming Corporation (PAGCOR)
d. Philippine Charity Sweepstakes Office (PCSO)
124. Ana sued Pedro for breach of promise to marry. Pedro lost the case
and duly paid the court's award that included, among others, P100,000
as moral damages for the mental anguish Ana suffered. Did Ana earn a
taxable income?
a. She had a taxable income of P100, 000 since income is income
from what source.
b. She had no taxable income because it was a donation.
c. She had taxable income since she made a profit.
d. She had no taxable income since moral damages are
compensatory.
Dealings in Property
Capital Gains and Losses
125. Income from dealings in property (real, personal, or mixed) is the gain
or loss derived:
127. Under Section 39 (b) of the Tax Code, how much shall be taken into
account computing net income, if a gain is realized by an individual
taxpayer from the sale or exchange of capital assets (other than real
properties and shares of stocks, more than 12 months?
a. 40% of the net capital gain.
b. 50% of the net capital gain.
c. 60% of the net capital gain.
d. 100% of the net capital gain.
128. Lots being rented when subsequently sold are classified as
a. Capital assets
c. Ordinary assets
b. Liquid assets
d. Fixed assets
129. The following rules shall be observed when a capital gain or capital loss
is sustained by a corporation, except
a. Capital gains and losses are recognized to the extent of its full
amount.
b. Capital losses are deductible only to the extent of capital gains.
c. Net capital losses are not deductible from ordinary gain or income
but ordinary losses are deductible from capital gains.
d. There is a holding period
130. The following taxpayers consider holding period in determining the
taxable capital gain or deductible capital loss and carry-over net
capital loss the following year, except
a. Individual
c. Corporation
b. Estates
d. Trusts
131. Rules on capital gains and losses of corporations, except:
a. Capital gains and losses are recognized to the extent of 100%
regardless of the holding period.
b. The net capital loss carry over is not applicable.
c. Capital losses are deductible only to the extent of capital gains.
d. There is a final tax of 5% on real property sold.
134. Juan received as gift from his mother property purchased ten years ago
for R100.00 0 at the time of donation, the property had a fair market
value of P2,000,000. After owning the property for 3 years, Juan sold
them for P2,500,000. Which of the following statements is correct?
a. The gain on the sale was a capital gain of P2, 400,000.
b. The gain on the sale was an ordinary gain of P2, 400,000.
c. The holding period of the asset is immaterial
d. The gain on the sale going into the net taxable income was P2,
400,000.
135. Andres inherited a piece of land from his father (purchased by the
father at P5,000,000) with a fair market value of P3,000,000 when
inherited. He transferred this property to a corporation where he is the
majority stockholder, Omega Corporation, and received for it newly
issued shares of stocks with a par value of P4, 500,000 and fair market
value of P5,000,000. Which of the following is wrong?
a. The gain to Andres on the transfer is P2, 000,000.
b. The gain to Omega Corporation on the transfer is PO.
132. Which of the following statements is incorrect?
a. Capital losses are deductible only to the extent of capital gains.
b. Ordinary losses are deductible only to the extent of ordinary
gains.
c. Ordinary gains are always subject to basic tax.
d. Capital gains may be subject to basic tax.
133. In computing gain or loss from the sale or other disposition of property
acquired as gift or donation, the basis of cost shall be:
a. The fair market value as of the date of acquisition.
b. The purchase price plus expenses of acquisition.
c. The latest inventory value.
d. The same as it would be in the hands of the donor.
c. The basis of the shares in the hands of Omega is P5, 000,000.
d. There is no gain from any and all transactions.
136. Manuel transferred his commercial land with a cost of P500,000 but
with a fair market value of P750,000 to MHD Corporation in exchange
of the stocks of the corporation with par value of P1,000,000. As a
result of the transfer, he became the major stockholder of the
corporation. As a result of the transfer:
a. The recognized gain is the difference between the fair market
value of the shares of stocks and the cost of the land.
b. The recognized gain is the difference between the par value of
the stocks and the fair market value of land.
c. No recognized gain because the land was in exchange of purely
stocks and Manuel became the majority stockholder.
d. No recognized gain because the land was in exchange of stocks
of the corporation.
137. Emilio was a stockholder of EAC Co. He owned shares of stock which
he acquired five years ago at a cost of R100, 000. EAC was dissolved.
He received a liquidating dividend of R140, 000. The gain subject to
income tax is
a. An ordinary gain to consider is P40, 000.
140. How much is Pedro's taxable income assuming the taxable year is
2018?
a. P484,000
c. P435,500
b. P2444,000
d. P385,500
141. Based on the above problem, assuming the taxpayer is a corporation,
how much is the taxable income?
b. A capital gain to consider is R40, 000.
c. A capital gain to consider is P20, 000.
a. P484,000
c. 8435,500
d. No gain to consider.
b. P444,000
d. P385,500
138. Apol owns 51% of JJ Corporation valued at P25,000,000. Due to
bankruptcy, JJ was liquidated. Apol received P20, 000,000 as liquidating
dividend. Was the loss deductible?
a. No, because Apol and JJ are considered related parties.
b. Yes, the loss is classified as capital loss and could be deducted
from capital gain, if any.
c. No, because the amount received by Apol was subject to capital
gains tax.
142. How much is the taxable income of Emilio for year 2016?
a. P6,700
c. P106,700
b. P56,700
d. nil
143. How much is the taxable income of Emilio for the year 2017?
a. P13,800
c. P113,800
b. P110,800
d. P260,600
d. Yes, because losses as a rule are deductible.
139. Pedro generated net income from trade amounting to P400, 000. His
capital asset transactions during 2017 are summarized as follows:
144. How much is the taxable income of Emilio assuming the current taxable
year is 2018?
Holding Period Amount
a. P13,800
c. P213,800
Capital gain
6 months
P50, 000
b. P110,800
d. P260,600
Capital gain
2 years
45,000
Capital loss
12 months
23,000
Capital loss
10 years
28,000
How much is Pedro's taxable income in 2017?
a. P484,000
c. P435,500
b. P444,000
d. P385,500
145. If the taxpayer is a corporation, how much is the taxable income for
the year 2016?
a. P6,700
c. P106,700
b. P56,700
d. nil
146. If the taxpayer is a corporation, how much is the taxable income for
the year 2017?
a. P13,800
c. P113,800
b. P110,800
d. P260,600
151. How much is the total capital gains tax assuming the current taxable
year is 2018?
147. If the taxpayer is a corporation, how much is the taxable income
assuming the current taxable year is 2018?
a. P13,800
c. P113,800
b. P110,800
d. P260,600
a. P2,000
c. P332,000
b. b. P166,000
d. P336,000
152. Juan, a Filipino citizen, migrated to the United States some eight (8)
years ago and got a permanent resident status or green card. He should
pay his Philippine income taxes on:
148. Jose has the following information in 2017:
a. The gains derived from the sale in California, U.S.A. of jewelry he
purchased in the Philippines
Gross profit from sale of inventories held for 2 years
P 500, 000
Loss on two (2) weeks option contract
50, 000
b. The proceeds he received from a Philippine insurance company
as the sole beneficiary of life insurance taken by his father who
died recently.
160, 000
c. The gains derived from the sale in New York Stock Exchange of
shares of stock in PLDT, a Philippine corporation.
Gain on sale of bonds (holding period: 6 months)
60, 000
Gain on sale of delivery truck held for 3 12 years
400 000
Gain on sale of personal car held for 5 years
Capital gain on direct sale to buyers of shares of stocks held 40, 000
for 4 years 40, 000
Sale of 2-year old residential house (Cost: P540, 000)
5, 500, 000
In 2016, Jose had a net taxable income of P50, 000 and a capital loss of
P75,000.
How much is the taxable net income?
a. P415, 000
C. P890,000
b. P490,000
d. P940,000
d. Dividends received from a two year old foreign corporation
whose gross income was derived solely from Philippine sources.
153. Statement 1: Gain on sale of all kinds of capital assets are subject to
the final tax on capital gains.
Statement 2: Gain from sale of real property classified as capital asset
and located in Miami, Florida is not subject to the final tax on capital
gain.
a. Both statements are correct
149. How much is the taxable net income assuming the current taxable year
is 2018?
a. P415,000
c. P890,000
b. P490,000
d. P940,000
150. How much is the total capital gains tax?
a. P2,000
c. P332,000
b. P166,000
d. P336,000
b. Both statements are not correct
c. Only the first statement is correct
d. Only the second statement is correct
154. In 2016, Mr. Vicente Tagle, a retiree, bought 10,000 CDA shares that
are unlisted in the local stock exchange for P10 per share. In 2010, the
said shares had a book value per share of P60 per share. In view of a
car accident in 2010, Mr: Vicente Tagle had to sell his CDA shares but
he could sell the same only for P50 per share. The sale is subject to tax
as follows:
a. 5%/10% capital gains tax on the capital gain from sale of P40 per
share (P50 selling price less P10 cost).
b. 5%/10% capital gains tax on the capital gain of P50 per share,
arrived at by deducting the cost (P10 per share) from the book
value (P60 per share).
c. 5%/10% capital gains tax on the capital gain from sale of P40 per
share (P50 selling price less P10 cost) plus donor's tax on the
excess of the fair market value of the shares over the
consideration.
d. Graduated income tax rates of 5% to 32% on the net taxable
income from the sale of the shares.
155. The sale in the immediately preceding number, in case the taxable year
is 2018, IS subject to:
a. 15% capital gains tax on the capital gain from sale of P40 per share
(P50 selling price less P10 cost).
b. 15% capital gains tax on the capital gain of P50 per share, arrived
at by deducting the cost (P10 per share) from the book value
(P60 per share).
c. 15% capital gains tax on the capital gain from sale of P40 per share
(P50 selling price less P10 cost) plus donor's tax on the excess of
the fair market value of the shares over the consideration.
d. The revised graduated income tax rates of 20% to 35% on the net
taxable income from the sale of the shares.
156. Assume the shares sold were from a foreign corporation, the sale is
subject to:
a. 5%/10% capital gains tax on the capital gain from sale of P40 per
share (P50 selling price less P10 cost).
b. 15% capital gains tax on the capital gain from sale of P40 per
share (P50 selling price less P10 cost).
c. Stock transaction tax of 12 of 1% of gross selling price
d. Basic income tax