.
EXCLUSION FROM GROSS
INCOME
Source: Income Taxation by Rex Banggawan
(2015 edition)
Submitted by: BLANCAVER, JO MARIE T
Exclusion from Gross Income
Multiple Choice – Problems
1. Mr. Chua collected the P 1,000,000 insurance proceeds of Mr. Sy which he bought from the latter for P 400,000. Before
the death of Mr. Sy, Mr Chua paid a total premium of P 200,000. What is the exclusion in gross income and inclusion in
gross income, respectively?
a. P 1,000,000; P 0
b. P 600,000; P 400,000
c. P 400,000; P 600,000
d. P 0; P 1,000,000
2. Mr. Bisligo surrendered his life insurance policy and received a cash surrendered value of P 800,000 after contributing
P 700,000 in annual premiums. Determine the total exclusion in gross income and the inclusion in gross income,
respectively?
a. P 800,000; P 0
b. P 700,000; P 100,000
c. P 100,000; P 700,000
d. P 0; P 800,000
3. Mr. Cateel died. His heirs collected the P 2,000,000 proceeds of his life insurance policy. Mr. Cateel previously paid a
total payment of P 500,000 in premiums. What is the exclusion in gross income?
a. P 3,000,000
b. P 500,000
c. P 2,000,000
d. P 0
4. Mr. Malalag collected the P 5,000,000 fire insurance proceeds of his buildings which was destroyed by fire. The
building had a tax basis of P 4,500,000 at the occurrence of the fire. What is the total exclusion in gross income?
a. P 5,000,000
b. P 4,500,000
c. P 0
d. P 500,000
5. Mr. Kabacan insured his crops for a P 1,000,000 insurance cover against calamities. He paid P 100,000 insurance
premium. What is the amount to be included in gross income?
a. P 1,000,000
b. P 900,000
c. P 100,000
d. P 0
6. Mr. Dimataling was one of the passengers who were hurt in a bus accident. He received a total indemnity of P 800,000
from the insurer of the bus. Mr. Dimataling paid P 250,000 in hospital bills due to the accident. Compute the total amount
to be excluded in gross income.
a. P 0
b. P 250,000
c. P 550,000
d. P 800,000
7. At the age of 54, Mrs. Reyes was awarded with a retirement gratuity of P 2,000,000 for his 30 years of service. The
employer’s retirement benefit plan was with an employee participation feature where Mrs. Reyes contributed a total
premium of P 800,000 in the fund. Mrs Reyes also received P 500,000 benefit from the SSS. Compute the total exclusion
in gross income.
a. P 800,000
b. P 1,300,000
c. P 1,700,000
d. P 2,500,000
8. Mrs. Canadoni retired for the government after 30 years of service at the age of 55. He received a total retirement pay of
P 1,800,000 plus P 400,000 GSIS benefits. How much will be excluded in gross income?
a. P 0
b. P 400,000
c. P 1,800,000
d. P 2,200,000
9. The Professional Regulation Commission collected a total sum of P 100,000,000 from professional license fees. It also
collected P 5,000,000 from rentals at government properties. What is the total exclusion in gross income?
a. P 0
b. P 5,000,000
c. P 100,000,000
d. P 105,000,000
10. Mr. Alvarez had the following income during the year:
Gross compensation income
Including P 25,000 13th month pay
Less: Tardy or absences
Net compensation income
SSS Deductions
PhilHealth deductions
Pag ibig deductions
Union dues
Withholding tax
P 325,000
( 10,000)
P 315,000
P 12,000
P 9,000
P 10,000
P 5,000
P 40,000
P 239,000
Compute the total exclusions from gross income?
a. P 36,000
b. P 61,000
c. P 66,000
d. 71,000
11. Mr. Henares received the following:
Donated properties
Income of donated property before donation
Income of donated property after donation
Inherited properties
How much is taxable to Mr. Henares?
a. P 380,000
b. 80,000
c. P 50,000
d. P 30,000
P 200,00
P 50,000
P 30,000
P 100,000
12. Mr. Tacurong has the following data during the year:
Basic Salary
P 400,000
Income tax withheld
P 50,000
13TH month pay
P 40,000
SSS
P 2,000
PhilHealth
p 1,800
Pag – Ibig
P 1,700
Union dues
P 500
Capital contribution
P 2,000
Compute the total exemtions and exclusions from gross income:
a. P 56,000
b. 46,000
c. 38,000
d. 36,000
13. Mang Antonio collected P 2,000,000 from the fire insurance company that insured his building which has a tax basis
of P 1,800,000 when the fire occurred. During the same period, he also collected P 300,000 crop insurance proceeds
pertaining to his crop destroyed by frost. The total item of gross income is
a. P 2,300,000
b. P 500,000
c. P 300,000
d. P 200,000
14. The policy holder of a life insurance contract outlived his insurance policy. He was paid P 300,000 upon maturity of
the policy. He paid P 250,000 total premium. What is the inclusion I gross income?
a. P 300,000
b. P 250,000
c. P 50,000
d. P 0
15. Ms. Henson retired from her job after 25 years of service. She joined the company at the age of 23 and was promoted
from a clerk to VP Finance. She was paid P 2,000,000 total retirement pay from the employes’s contributory pension plan.
Out of the total proceeds, Ms Henson contributed P 600,000. This was Ms Henson’s first retirement from employment.
How much is excluded in gross income?
a. P 2,000,000
b. P 1,400,000
c. P 600,000
d. P 0
16. The following related to the compensation income of Ms. Lamitan in 2015.:
Compensation
P 2,400,000
Contribution to SSS, Philhealth, HDMF:
- Mandatory contributions
P 125,000
- Voluntary contributions
P 150,000
Creditable withholding taxes
P 190,000
Employer’s share in SSS, PhilHealth, HDMF
P 105,000
What is the total exclusion in gross income?
a. P 125,000
b, P 230,000
c. P 275,000
d. P 465,000
17. The following income related to a proprietorship registered as BMBE:
Gross income from sales
P 400,000
Dividend income – domestic
P 9,000
Interest on deposits
P 6,800
Compute the total exclusion in gross income subject to regular tax?
a. P 415,000
b. P 400,000
c. P 15,800
d. P 0
18. Compute the total inclusion in gross income subject to final tax.
a. P 0
b. P 9,000
c. P 6,800
d. P 15,800
19. KKB, a credit cooperative, had the following:
Income from related activities
Income from unrelated activities
- Dividends from stocks
- Income from time deposits
- Rent income
Compute the total exclusion in gross income.
a. P 0
b. P 38,000
c. P 400,000
d. P 438,000
P 400,000
P 20,000
P 18,000
P 60,000
20. In the immediately preceding problem, compute the total inclusion in gross income subject to regular tax.
a. P 460,000
b. P 98,000
c. P 60,000
d. P 38,000
21. A charity received the following:
Contributions from the public
P 1,400,000
Income for the sale of merchandise
P 500,000
Gain on sale of properties
P 300,000
What is the total exclusion in gross income?
a. P 2,200,000
b. P 1,900,000
c. P 1,400,000
d. P 1,300,000
22. Mr. Santiago purchased a life annuity For P 100,000 which will pay him P 10,000 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?
a. P 10,000
B. p 20,000
c. P100,000
d. P 120,000
23. A non profit organization received the following during 2015
Contributions from the public
P 1,900,000
Income for the sale of merchandise
P 500,000
Gain on sale of properties
P 300,000
What is the total exclusion in gross income?
a. P 2,200,000
b. P 1,900,000
c. P 1,400,000
d. P 1,300,000
24. Mr. Ketchum collected the P 1,000,000 fire insurance proceeds of Mr. Brock which he bought from the latter for P
400,000. Before the death of Mr. Brock, Mr Ketchum paid P 300,000 for the premium. What is the exclusion in gross
income?
a. P 7,000,000
b. P 300,000
c. P 400,000
d. P 0
25. Team Rocket surrendered their life insurance policy and received a cash surrendered value of P 800,000 after
contributing P 900,000 in annual premiums. Determine the total exclusion in gross income?
a. P 800,000
b. P 900,000
c. P 100,000
d. P 0
28. Misty died last month. Her heirs collected the P 7,000,000 proceeds of her life insurance policy. Misty previously paid
a total payment of P 1,500,000 in premiums. What is the exclusion in gross income?
a. P 5,500,000
b. P 1, 500,000
c. P 7,000,000
d. P 0
29. Kirito was one of the passengers who were hurt in a plane crash. He received a total indemnity of P 2,800,000 from
the insurer of the plane. Kirito paid P 250,000 in hospital bills due to the accident. Compute the total amount to be
excluded in gross income.
a. P 0
b. P 250,000
c. P 550,000
d. P 2,800,000
30. Cherry Pie retired after 30 years of service as a Nurse at the age of 55. She received a total retirement pay of P
1,800,000 plus P 500,000 GSIS benefits. How much will be excluded in gross income?
a. P 0
b. P 500,000
c. P 1,800,000
d. P 2,300,000
31. The Securities and Exchange Commission collected a total sum of P 200,000,000 from professional license fees. It also
collected P 5,000,000 from rentals at government properties. What is the total exclusion in gross income?
a. P 0
b. P 5,000,000
c. P 200,000,000
d. P 205,000,000
32. Mr. Rex had the following income during the year:
SSS Deductions
PhilHealth deductions
Pag ibig deductions
Union dues
Withholding tax
P 12,000
P 9,000
P 10,000
P 5,000
P 40,000
Compute the total exclusions from gross income?
a. P 36,000
b. P 15,000
c. P 50,000
d. 76,000
33. Voldemort received the following data for the year 2016:
Income of donated property before donation
P 50,000
Income of donated property after donation
P 30,000
Inherited properties
P 100,000
How much is taxable to Voldemort?
a. P 180,000
b. 80,000
c. P 50,000
d. P 30,000
34. Pikachu has the following data:
13TH month pay
SSS
PhilHealth
Pag – Ibig
Union dues
P 40,000
P 2,000
p 1,800
P 1,700
P 500
Compute the total exemtions and exclusions from gross income:
a. P 40,000
b. 46,000
c. 42,500
d. 1,700
35. Gerry collected P 12,000,000 from the fire insurance company that insured his building which has a tax basis of P
11,800,000 when the fire occurred. During the same period, he also collected P 1,300,000 crop insurance proceeds
pertaining to his crop destroyed by frost. The total item of gross income is
a. P 12,300,000
b. P 1500,000
c. P 1,300,000
d. P 1,200,000
36. The Barangay Micro Business Enterprise has the following:
SSS Deductions
P 12,000
PhilHealth deductions
P 9,000
Pag ibig deductions
P 10,000
Union dues
P 5,000
Withholding tax
P 40,000
Gross income from sales
P 400,000
Dividend income – domestic
P 9,000
Interest on deposits
P 6,800
Compute the total exclusion in gross income subject to regular tax?
a. P 415,000
b. P 400,000
c. P 15,800
d. P 0
37. Yvonne is an employee of Goldfish Company. Yvonne’s last paycheck shows the following detail:
Unpaid salary in the last two months
P 30,000
Current month salary
P 15,000
Separation Pay
P 100,000
Compute the total exclusion in gross income subject to regular tax?
a. P 100,000
b. 30,000
c. 15,000
d. 45,000
38. Ron Weasley had the following details:
SSS Mandatory contributions
HDMF Voluntary contributions
Creditable withholding taxes
Employer’s share in SSS, PhilHealth, HDMF
P 200,000
P 150,000
P 190,000
P 105,000
Compute the total exclusion in gross income subject to regular tax?
a. P 200,000
b. 150, 000
c. 190,000
d. 105,000
39. Mr. Baracho won P 500,000 in a local chess competition that was sanctioned by a sports organization. Is the P
500,000 prize considered an item of gross income?
a. Yes, because all prizes are subject to income tax.
b. No, because the chess is not an international organization
c. Yes, because the organizer is not an accredited sports organization
d. No, because the sports completion is a local competition
40. A church located in Tanay, Rizal received the following:
Creditable withholding taxes
P 190,000
Contributions from the public
P 2,400,000
Income for the sale of merchandise
P 500,000
Gain on sale of properties
P 300,000
What is the total exclusion in gross income?
a. P 800,000
b. P 1,900,00
c. P 2,400,000
d. P 300,000
Multiple Choice –Theory
1. Which is true with the regular income tax?
a. Tax is payable at regular interval.
b. Certain items of income are subject to final withholding tax.
c. Income tax return is not required.
d. All of these.
2. Which is not a feature of regular income tax?
a. It generally applies to all items of gross income not subject to final tax.
b. Gross income tax
c. Accounting period
d. Creditable withholding tax
3. Statement 1: Items of passive income from abroad are subject to regular income tax.
Statement 2: Items of passive income from the Philippines are generally subject to final income tax.
Which statement is generally correct?
a. Statement 1
b. Statement 2
c. Both statements are correct.
d. Neither statement is correct.
4. Progressive income tax does not apply to
a. resident citizen
b. resident alien
c. non – resident citizen
d. special alien
5. Which is not included under the term “corporation”?
a. business partnership
b. joint venture
c. non – profit charitable institution
d. co – ownership
6. The highest marginal tax rate for individual income taxpayers is
a. 25%
b. 30%
c. 32%
d. 35%
7. Which corporate taxpayer is not subject to regular income tax?
a. business partnership
b. domestic corporation
c. resident foreign corporation
d. non – resident corporation
8. Which is correct with respect to exclusions from gross income?
a. They are included as part of gross income but are subsequently deducted.
b. They are not included in gross income but are added to the taxable income.
c. They are synonymous with deductions.
d. They are not considered in the computation of taxable income.
9. Which constitute a taxable item of gross income?
a. compensation for personal injuries
b. gain from sale of government bonds
c. income exempt under treaty
d. gain from sale of shares in mutual funds
10. Which is correct with respect to deductions from gross income?
a. They are excluded from the determination of taxable income.
b. They are included all expenses incurred in the generation of any income.
c. They include personal exemptions.
d. They pertain to expenses of generating items of business or professional gross income.