Name __________________________________
Section _____
1. There is no taxable income until such income is recognized. Taxable income is recognized when
the
(A) taxpayer fails to include the income in his income tax return.
(B) income has been actually received in money or its equivalent.
(C) income has been received, either actually or constructively.
(D) transaction that is the source of the income is consummated.
2. Keyrand, Inc., a Philippine corporation, sold through the local stock exchange 10,000 PLDT
shares that it bought 2 years ago. Keyrand sold the shares for P2 million and realized a net gain
of P200,000.00. How shall it pay tax on the transaction?
(A) It shall declare a P2 million gross income in its income tax return, deducting its cost of
acquisition as an expense.
(B) It shall report the P200,000.00 in its corporate income tax return adjusted by the
holding period.
(C) It shall pay 5% tax on the first P100,000.00 of the P200,000.00 and 10% tax on the
remaining P100,000.00.
(D) It shall pay a tax of one-half of 1% of the P2 million gross sales.
3. The payor of passive income subject to final tax is required to withhold the tax from the payment
due the recipient. The withholding of the tax has the effect of
(A) a final settlement of the tax liability on the income.
(B) a credit from the recipient's income tax liability.
(C) consummating the transaction resulting in an income.
(D) a deduction in the recipient's income tax return.
4. Guidant Resources Corporation, a corporation registered in Norway, has a 50 MW electric power
plant in San Jose, Batangas. Aside from Guidant's income from its power plant, which among the
following is considered as part of its income from sources within the Philippines?
(A) Gains from the sale to an Ilocos Norte power plant of generators bought from the
United States.
(B) Interests earned on its dollar deposits in a Philippine bank under the Expanded
Foreign Currency Deposit System.
(C) Dividends from a two-year old Norwegian subsidiary with operations in Zambia but
derives 60% of its gross income from the Philippines.
(D) Royalties from the use in Brazil of generator sets designed in the Philippines by its
engineers.
5. Anktryd, Inc., bought a parcel of land in 2009 for P7 million as part of its inventory of real
properties. In 2010, 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) Anktryd shall be subject to a tax of 6% of P12 million.
(B) Anktryd could deduct its P6 million loss from its P5 million gain.
(C) Anktryd's gain of P5 million shall be subject to the holding period.
(D) Anktryd's P6 million loss could not be deducted from its P5 million gain.
6. In 2009, Spratz, Inc.’s net profit before tax was P35 million while its operating expenses was P31
million. In 2010, its net profit before tax was P40 million and its operating expenses was P38
million. It did not declare dividends for 2009 and 2010. And it has no proposed capital
expenditures for 2011 and the immediate future. May Spratz be subject to the improperly
accumulated tax on its retained profits for 2009 and 2010?
(A) Yes, since the accumulated amounts are reasonable for operations in relation to what
it usually needed annually.
(B) Yes, since the accumulation is not reasonably necessary for the immediate needs of
the business.
(C) No, because there is no showing that the taxpayer's 2009 and 2010 net profit before
tax exceeded its paid-up capital.
(D) No, because the taxpayer is not shown to be a publicly-listed corporation, a bank, or
an insurance company.
7. In 2010, Juliet Ulbod earned P500,000.00 as income from her beauty parlor and received
P250,000.00 as Christmas gift from her spinster aunt. She had no other receipts for the year. She
spent P150,000.00 for the operation of her beauty parlor. For tax purposes, her gross income for
2010 is
(A) P750,000.00.
(B) P500,000.00.
(C) P350,000.00.
(D) P600,000.00.
8. What is the rule on the taxability of income that a government educational institution derives from
its school operations? Such income is
(A) subject to 10% tax on its net taxable income as if it is a proprietary educational
institution.
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9.
10.
11.
12.
13.
14.
15.
(B) Exempt from income taxation if it is actually, directly, and exclusively used for
educational purposes.
(C) subject to the ordinary income tax rates with respect to incomes derived from
educational activities.
(D) Exempt from income taxation in the same manner as government-owned and
controlled corporations.
Alain Descartes, 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?
(A) Consultancy fees received for designing a computer program and installing the same
in the Shanghai facility of a Chinese firm.
(B) Interests 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 7 years.
(D) Gains derived from the sale of his condominium unit located in The Fort, Taguig City
to another resident alien.
Income is considered realized for tax purposes when
(A) it is recognized as revenue under accounting standards even if the law does not do
so.
(B) the taxpayer retires from the business without approval from the BIR.
(C) the taxpayer has been paid and has received in cash or near cash the taxable
income.
(D) the earning process is complete or virtually complete and an exchange has taken
place.
Dondon and Helena were legally separated. They had six minor children, all qualified to be
claimed as additional exemptions for income tax purposes. The court awarded custody of two of
the children to Dondon and three to Helena, with Dondon directed to provide full financial support
for them as well. The court awarded the 6th child to Dondon's father with Dondon also providing
full financial support. Assuming that only Dondon is gainfully employed while Helena is not, for
how many children could Dondon claim additional exemptions when he files his income tax
return?
(A) Six children.
(B) Five children.
(C) Three children.
(D) Two children.
Levox Corporation wanted to donate P5 million as prize money for the world professional billiard
championship to be held in the Philippines. Since the Billiard Sports Confederation of the
Philippines does not recognize the event, it was held under the auspices of the International
Professional Billiards Association, Inc. Is Levox subject to the donor's tax on its donation?
(A) No, so long as the donated money goes directly to the winners and not through the
association.
(B) Yes, since the national sports association for billiards does not sanction the event.
(C) No, because it is donated as prize for an international competition under the billiards
association.
(D) Yes, but only that part that exceeds the first P100,000.00 of total Levox donations for
the calendar year.
The proceeds received under a life insurance endowment contract is NOT considered part of
gross income
(A) if it is so stated in the life insurance endowment policy.
(B) if the price for the endowment policy was not fully paid.
(C) where payment is made as a result of the death of the insured.
(D) where the beneficiary was not the one who took out the endowment contract.
The excess of allowable deductions over gross income of the business in a taxable year is known
as
(A) net operating loss.
(B) ordinary loss.
(C) net deductible loss.
(D) NOLCO.
Lualhati Educational Foundation, Inc., a stock educational institution organized for profit, decided
to lease for commercial use a 1,500 sq. m. portion of its school. The school actually, directly, and
exclusively used the rents for the maintenance of its school buildings, including payment of
janitorial services. Is the leased portion subject to real property tax?
(A) Yes, since Lualhati is a stock and for profit educational institution.
(B) No, since the school actually, directly, and exclusively used the rents for educational
purposes.
(C) No, but it may be subject to income taxation on the rents it receives.
(D) Yes, since the leased portion is not actually, directly, and exclusively used for
educational purposes.
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The next five (5) questions are based on the following information:
Dino Sour Corporation is engaged in the manufacture and sale of exotic furnitures. During the
current taxable year, 2013, its financial operations may be summarized as follows:
Gross sales
P3,800,000
Beginning inventory, raw materials
115,000
Purchases
700,000
Ending inventory, raw materials
100,000
Direct labor
400,000
Factory overhead
150,000
Work in process, beginning
380,000
Work in process, end
250,000
Finished goods, beginning
75,000
Finished goods, end
95,000
Salaries and wages, adm and selling
155,000
Bonuses paid for last year’s operations
20,000
despite net loss of P550,000
Entertainment expenses (including a bribe
of P35,000 to a gov’t official)
75,000
Interest expense paid (accrued P10,000)
149,000
Quarterly taxes already paid
115,000
Payments to construction company for additional
building wing
380,000
Premiums paid for life of its key officers
beneficiary is the corporation
15,000
beneficiary are the heirs of officers
20,000
Special assessment paid to local government
25,000
Donor’s taxes paid
6,000
Exchange land for another land owned by Mr. Tong, a stockholder
who own’s 51% of Dino Sour Corporation
Value of land exchanged
1,500,000
Value of land acquired
1,200,000
A fire destroyed one of the company’s annexes, data relevant thereto are:
Cost of building
750,000
Accumulated depreciation
550,000
Fire insurance (maximum recovery allowed : 80% of loss)
Provision for bad debts (actually written off - 10,000)
35,000
Depreciation
210,000
Contributions to employees pension plan:
Current year
P30,000
Prior years
70,000
100,000
Charitable contributions to DOST, on a national
priority project
50,000
Donation to Cagayan De Oro Police department
160,000
(value of police car)
Tithes paid to First Baptist Church
10,000
Donation to private foundation (administrative
15,000
expenses accounts for 35% of total expenses)
Telecommunications expenses
Utility expenses
45,000
65,000
16. Dino Sour Corporation’s gross income for 2013 is:
a) P3,800,000
b) P1,375,000 c) P2,425,000 d) P2,555,000 e) some other amount
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17. The Minimum Corporate Income Tax is:
a) P 76,000
b) P 27,500
c) P 48,500
d) P51,100
e) some other amount
18. The allowable deductions from gross income before contributions and donations is:
a) P806,000
b) P914,000
c) P750,000
d) some other amount
19. The total charitable, religious, scientific, educational and other contributions and donations
allowable as deduction is:
a) P335,000
b) P130,950
c) P220,000
d) some other figure
20. The income tax payable by Dino Sour Corporation for 2013 is:
a) P505,937
b) P499,800
c) P 455,600
d) some other figure
The following data pertain to the operations of Reyes Futuristic Corp. for the last five years (all figures in ‘000s):
2009
2010
2011
2012
2013
Gross Income
P1,500
P1,750
P2,000
P2,500
P3,500
Allowable deductions
1,950
2,000
2,300
2,400
2,500
21. For the year 2010, there is a Deferred Tax Asset of:
a) P450,000
b) P0
c) P 153,000
d) P148,500
22. The taxable income for the year 2012 by Reyes Futuristic Corp. is:
a) P100,000
b) 0
c) P ( 900,000)
d) P (1,000,000)
23. The taxable income for the year 2013 by Reyes Futuristic Corp. is:
a) P550,000
b)P100,000
c)P200,000
d) P0
24. The adjusting entry to made in the year 2013 pertaining to the Deferred Tax Asset Account is:
a) None required
b) Deferred Tax Asset
Retained Earnings
c) Retained Earnings
Deferred Tax Liability
d) Retained Earnings
Deferred Tax Asset
P300,000
P300,000
P300,000
P300,000
P102,000
P102,000
25. The Income Tax payable by Reyes Futuristic Corp. for 2013 is:
a) P33,000
b) P66,000
c) 181,500
d) P70,000
26. Apple Corporation, Inc. was issued a certificate of incorporation by the SEC on June 30, 2012. It
commenced formal operations of July 01, 2012 which was also the start of its fiscal year and
ends every June 30 of the succeeding year. For its first year of operations, the following data
were made available:
First Q
Second Q
Third Q
Fourth Q
Gross Income
P400,000
P750,000
P550,000
P800,000
Deductions
380,000
620,000
430,000
860,000
How much is the tax payable/(tax credit) due from the taxpayer for the second quarter?
27. In the preceding number when is deadline for the filing of the third quarter Income tax return?
28. Refer to the same facts in number 17, how much is the regular tax due from Apple Corporation
for its fiscal year?
29. Again refer to number 26, how much is the Minimum Corporate Income Tax due?
30. The tax payable/(tax credit) for the fourth quarter of Apple Corporation is:
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31. Tralala Corp., a domestic corporation organized in 2008, had the following financial data for the
years indicated:
Gross Income Taxable Income (loss)
2010
P200,000
(P 30,000)
2011
P250,000
P 15,000
2012
P400,000
P 80,000
2013
P300,000
(P50,000)
The tax payable/(refundable) for taxable year 2010 is:
32. The tax payable/(refundable) for 2011 in the preceding number is:
33. The tax payable/(refundable) for the year 2012 in number 31 is:
a) P25,600
b) P8,000
c) P26,400
d) some other amount
34. The following information for the three schools for taxable year 1998 is made available:
All figures are in thousands (‘000)
School 1
School 2
School 3
Income from:
Tuition
P3,000
P4,000
P7,000
Bookstore
500
250
600
School canteen
450
460
700
Rental income(gross)
1,500
5,000
3,500
Dividend income
100
200
500
Interest income
200
350
400
Less :
Deductions
2,450
3,200
5,630
Additional information:
School 3 is a non stock, non profit educational institution
Required:
The taxable incomes for schools 1, 2 and 3, respectively, are:
35. In the preceding number, the reportable amount of tax payable/(refundable) by Schools 1, 2 and
3, respectively, are as follows:
36. Assume the same facts in number 34, except that school # 2 incurred the following additional
expenses:
1. Construction of a new building wing at a cost of P2,500,000 with
an estimated useful life of 10 years; salvage value is nil
2. Expansion of library facilities P800,000 which is expected to last for
5 years; no salvage value
3. Gym construction, P2,500,000, useful life 10 years, salvage value
P500,000
The tax due for School # 2 assuming it opts to deduct the cost of the improvement as outright
expense is:
The next three (3) question, are based on the following information:
A corporation has the following income and expenses for the taxable calendar year 1998:
Gross income, Phils.
Gross income, USA
Gross, income, Canada
Expenses, Phils.
Expenses, USA
Expenses, Canada
Other income and expenses are as follows:
a. Dividend, Ayala Land Inc. (ALI)
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P300,000
200,000
150,000
150,000
100,000
75,000
40,000
b. Gain , sale of ALI shares (selling price P1.0 M) traded in
c.
d.
e.
f.
g.
h.
the Philippine Stock Exchange
Royalties, Phils.
Royalties, Canada
Rent, land in Phils., gross
Rent, land, USA, gross
Rent, equipment, Phils.
Prize, contest in Cagayan De Oro
200,000
100,000
150,000
200,000
300,000
100,000
25,000
37. On the assumption that the taxpayer is a domestic corporation, created and organized under
the laws of the Republic of the Philippines, the income tax payable for 1998 is:
38. The final tax due from the above items of income is:
39. If the corporate taxpayer is a Canadian corporation engaged in trade and business in the Phils.,
USA and Canada, the Philippine income tax payable is:
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