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