True or False 1
1. The proceeds of life insurance received by the heirs of the insured upon
his death is excluded in gross income. TRUE
2. The amount received in excess of the premium paid in an insurance contract
constitutes an item of gross income. TRUE
3. Donated income is included in the gross income of the donee. FALSE
4. Compensation for injuries and sickness constitutes profit; hence, an
inclusion gross income. FALSE
5. It is sufficient that the employee rendered more than 10 years of service
for his retirement benefit to be exempt. FALSE (other requisites exist)
6. An employee can secure retirement benefit exemption only once in a
lifetime. TRUE
7. It is a must that the employer maintains a reasonable pension benefit plan
for the retirement benefit to be exempt. TRUE
8. An employee must have rendered more than 10 years of service before
claiming exemption for his termination benefits. FALSE
9.
The income of the Philippine government from essential public functions
exempt from any income tax. TRUE
10. Prizes paid to corporations are an inclusion in gross income
subject to final tax. TRUE
11. Only the mandatory portion of GSIS, SSS, PhilHealth, and union dues can be
excluded in gross compensation income. TRUE
12. Social security benefits, retirement gratuities, and other benefits from
foreign governments are excluded in gross income. TRUE
13. Social security benefits, retirement gratuities, and other benefits from
foreign private entities are included in gross income. FALSE
14. The gain from redemption of shares in mutual fund is an exclusion in gross
income subject to regular tax because it is an inclusion in gross income
subject to capital gains tax. FALSE
15. 13th month pay and other benefits are taxable only up to P 90,000. FALSE
True or False 2
1. GSIS and SSS benefits are included in gross income to the extent they
exceed P90,000. FALSE
2. Prizes awarded upon the condition that the recipient shall render
specified future services is an item of gross income. TRUE
3. Prizes from contests are included in gross income subject to regular
income tax. FALSE (it depends on the source and amount)
4. The income of government-owned and controlled corporations is an item of
gross income. TRUE
5. Benefits of veterans of war or retired US army personnel are excluded in
gross income. TRUE
6. The employer's share to SSS, PhilHealth and Pag-Ibig contributions are
exclusion in gross income. FALSE
7. Compared to exclusion, deduction is included in the amount of gross income
but both exclusion and deductions are not reflected in the amount of
taxable income. TRUE
8. The interest income from any bond or debentures, short-term or long-term,
is an item of gross income. TRUE (as a rule)
9. Cooperatives that transact business only with members will, in no case, be
subject to income tax. FALSE (They are still taxable on income from
unrelated operations)
10. Cooperatives, regardless of their classification, are taxable on income
from their unrelated activities. TRUE
11. The gain on the sale of long-term bonds with a maturity of five years is
exclusion in gross income. FALSE
12. A non-stock, non-profit entity is subject to tax on income from unrelated
activities. TRUE
13. A general professional partnership can be registered as a BMBE. FALSE
14. Items of income subject to final tax or capital gains tax are exclusions
in gross income subject to regular income tax. TRUE
15. A BMBE must have a net asset not exceeding P3,000,000 to be exempt. FALSE
Multiple Choice - Theory 1
1. 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. Both statements
c. Statement 2
d. Neither statement
2.
Which is true with the regular income tax?
a. Certain items of income are subject to final withholding tax.
b. Tax is payable at regular intervals.
c. Income tax returns are not required.
d. All of these
3. 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. Creditable withholding tax
b. Gross income tax
c. Accounting period
4. Statement 1: Capital gains are generally subject to capital gains tax.
Statement 2: Items of passive income in the Philippines are generally
subject to regular income tax.
a. Statement 1 is true.
b. Statement 2 is true.
c. Both statements 1 and 2 are true.
d. Neither statement 1 nor 2 is true.
5. Deductions from gross income are
a. Personal expenses c. Either A or B
b. Business expenses d. Neither A nor B
6. Which of the following statement best distinguishes deductions from
exclusion from gross income?
a. Deductions can be claimed by citizens while P250,000 income exemption
cannot be claimed by aliens.
b. Deductions are outflows from gross incomes while exclusions are
outflows from gross income.
c. Both deductions and exclusions are deducted from gross income.
d. All of these.
7. Progressive income tax does not apply to a
a. Non-resident alien. c. non-resident citizen.
b. b. resident alien. d. resident citizen.
8. Proportional income tax does not apply to a
a. Domestic corporation
b. Resident foreign corporation
c. Business partnership
d. General professional partnership
9. Which is not included under the term "corporation"?
a. Business partnership
c. Non-profit charitable institution
b. b. Co-ownership
d. Joint venture
10. The highest marginal tax rate for individual income taxpayers’ is
a. 25%
c. 35%
b. 30%
d. 32%
11. Which corporate taxpayer is not subject to regular income tax?
a. Non-resident foreign corporation c. Resident foreign corporation
b. Domestic corporation
d. Business partnership
12. Which individual income taxpayer is not subject to regular tax?
a. Resident alien not engaged in trade or business
b. Non-resident citizen not engaged in trade or business
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
13. 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 not considered in the computation of taxable income.
d. They are synonymous with deductions.
14. Which is correct with respect to deductions from gross income?
a. They pertain to expenses of generating items of business or
professional
b. gross income.
c. b They are excluded from the determination of taxable income.
d. They include all expenses incurred in the generation of any income.
e. They include P250, 000 annual income exemptions.
15. Which constitute a taxable item of gross income?
a. Compensation for personal injuries
b. Gain from sale of shares in mutual funds
c. Gain from sale of government bonds
d. Income exempt under treaty
Multiple Choices - Theory 2
1. The proceeds of an insurance policy received by the corporation as
beneficiary on the life insurance of its officer is
a. a gift
c. an inheritance.
b. a taxable income.
d. exempt from income tax.
2. Mr. Buguey was insured in a life insurance with his daughter, Ybon, as the
irrevocable beneficiary. Ybon was paid the entire proceeds when Mr. Buguey
died. The proceeds constitute
a. a taxable inheritance. c. a taxable income.
b. a taxable gift.
d. an exclusion from gross income.
3. A policy holder who outlived the policy and received a cash surrender
value in excess of premiums paid is exempt upon
a. the amount representing a return of premiums.
b. the entire amount received.
c. the excess of the amount received over the premiums paid.
d. None of these
4. The assignment of an insurance policy at an amount in excess of the
premiums paid on the policy is subject to
a. donor's tax.
c. estate tax.
b. income tax.
d. any of these.
5. A widow who collected the life insurance proceeds of her decease husband
is
a. exempt to the entire amount of the proceeds.
b. taxable to the excess of the proceeds over the premiums paid by the
husband.
c. taxable to the excess of the proceeds over the premiums paid by the
widow.
d. exempt with respect to the portion of the proceeds representing returns
of premiums.
6. The policyholder of a life insurance contract outlives his insurance
policy. He was paid P300, 000 upon maturity of the policy. He paid P250,
000 total premiums. What is the inclusion in gross income?
a. P300, 000
c. P 50.000
b. P250, 000
d. P 0
7. Which of the following is subject to tax?
a. Proceeds of crop insurance
b. Proceeds of livestock insurance
c. C. Indemnity under patent infringement suit
d. All of these
8. Which is not a requisite of exemption of a retirement benefit plan?
a. 10 years of employment
b. The employer maintains a reasonable pension benefit plan.
c. The retiree must be a senior citizen.
d. First time availment of retirement exemption
9. Termination benefits are exempt from income tax provided that the reason
for termination is
a. beyond the employee's control. c. within the employee's control.
b. within the employer's control. d. beyond the employer's control.
10.
Which is not an item of exclusion from gross income?
a. SSS benefits
b. Income of the government and its political subdivisions
c. Income of government-owned and controlled corporations
d. Income of foreign governments
11.
Which of the following government-owned and controlled corporations is
subject to income tax?
a. Social Security System
b. National Development Corporation
c. Philippine Charity Sweepstakes Office
d. Philippine Health Insurance Corporation
12.
13.
Which is not an acceptable ground for exemption of termination pay?
a. Mass employee lay-off
b. Closure of employer's business
c. Grave misconduct and neglect of duty
d. Retrenchment of employer's business
Which is not an item of gross income for taxation purposes?
a. a Unrealized income
b. Income earned between related parties
c. Advanced income
d. All of these
14.
Which is subject to income tax?
a. Gain on sale of 6-year bonds.
b. Gain on sale of shares in mutual fund.
c. Interest income on long-term bonds with a maturity period exceeding
five years.
d. Interest income on long-term deposits by individual taxpayers.
15.
Which of the following is not an exclusion from gross income?
a. Income of government properties
b. Income taxes collected by the Bureau of Internal Revenue
c. Dividend income payable to a foreign government
d. Social Security benefits
Multiple Choice - Problem: Part 1
1.
Mr. Bisligo collected the P1,000,000 insurance proceeds of Mr. Pantukan
which he bought from the latter for P400,000. Before the death of Mr.
Pantukan, Mr. Bisligo paid total premiums of P200,000. Determine
respectively the exclusion in gross income and the inclusion in gross
income.
a. P1,000,000; PO
b. P400,000; P600,000
c. PO; P1,000,000
d. P600,000; P400,000
2.
Mr. Kabacan surrendered his life insurance policy and received a cash
surrender value of P800,000 after contributing P700,000 in annual premiums.
Determine respectively the total exclusion in gross income and the
inclusion in gross income.
a. P800,000; POS
c. P100,000; P700,000
b. PO; P800,000
d. P700,000; P100,000
3. Mr. Tarragoza died. His heirs collected the P2,000,000 proceeds of his
life insurance policy. Mr. Tarragoza previously paid a total payment of
P500.000 in premiums. Determine respectively the exclusion in gross income
and the inclusion in gross income.
a. P2,000,000; PO
c. P2,000,000; PO
b. P500,000; P1,500,000
d. PO; P2,000,000
4. Mr. Malalag collected the P5,000,000 fire insurance proceeds of his bull
was destroyed by fire. The building had a tax basis of P4,500,000 in gross
income occurrence of the fire. Determine respectively the total exclusion
in and the inclusion in gross income.
a. P5,000,000; PO
b. P4,500,000; P500,000
c. PO; P5,000,000
d. P500,000; P4,500,000
5. Mr. Cateel insured his crops for a P1,000,000 insurance cover against
calamities. He paid and expensed P100,000 insurance premium. How much in
gross income?
a. P900,000
b. P100,000
c. P1,000,000
d. PO
6. Ms. Sindangan received a condominium including its accrued income as
inheritance from her deceased grandfather on April 1, 2014. The following
data relates to the property:
Fair value of property
P 125,000,000
Rent income earned before death of decedent
4,000,000
Rent income earned after death of decedent
6,000,000
Interest on deposits of rentals
(40% accruing after death)
100,000
How much of the above income will be included in the gross income of Mr.
Sindangan and in the gross income of the decedent?
a. P6,040,000; P4,060,000 c. P4,060,000; P6,040,000
b. P6,000,000; P4,000,000 d. P4,000,000; P6,000,000
7. Mr. Dimataling was hurt in a bus accident. He received a total indemnity
of P800,000 from the insurer of the bus. Mr. Dimataling paid P250,000 in
hospital bills due to the accident. Compute the total amount to be
excluded in gross income.
a. PO
b. P550,000
c. P250,000
d. P800,000
8. At the age of 54, Mrs. Sindangan was awarded a retirement gratuity of
P2,000,000 for her 30 years of service in the Sirawai Company. The
employer's retirement benefit plan was with an employee participation
feature where Mrs. Sindangan contributed a total premium of P800,000 in
the fund. Mrs. Sindangan also received P500,000 benefit from the SSS.
Compute the total exclusion in gross income.
a. P1,700,000
b. P800,000
c. P1,300,000
d. P2,500,000
9.
Mrs. Candoni retired from the government after 30 years of service
at the age of 55. He received a total retirement pay of P1,800,000
plus P400,000 GSIS benefits.
a. P 0
b. P400,000 c. P2,200,000
d. P1,800,000
10. The Professional Regulations Commission collected a total sum of
P100,000,000 from professional license fees. It also collected P5,000,000
from rentals of government properties. What is the total exclusion in
gross income?
a. PO
b. P5,000,000
c. P100,000,000
d. P105,000,000
11. Mr. Alvarez had the following income during the year:
Gross compensation income
including P25,000 13th month pay
Less: Tardiness or absences
Net compensation income
SSS deductions
PhilHealth deductions
Pag-Ibig deductions
Union dues
Withholding tax
Net pay
P 325,000
( 10,000)
P 315,000
12,000
9,000
10,000
5,000
40,000
P 239,000
Compute the total exclusions from gross income.
a.
c.
b.
d.
P36,000
P66,000
P61,000
P71,000
12. Mr. Henares received the following during the year:
Donated properties
Income of donated property before donation
Income of donated property after donation
Inherited properties
How much is taxable to Mr. Henares?
a.
b.
c.
d.
P 200,000
50,000
30,000
100,000
380, 000
80,000
30,000
50,000
13. Mr. Tacurong has the following data during the year:
Basic salary
1,200,000
Income tax withheld
50,000
13th month pay
100,000
SSS
2,000
PhilHealth
1,800
Pag-Ibig
1,700
Union dues
500
Capital build up contribution in a social fund
2,000
Compute the total exemptions and exclusions from gross income:
a. P 106,000
c P 96,000
b. P100,000
d. P 88,000
14. Mang Antonio collected P2.000.000 from the fire insurance company that
insured his building which had a tax basis of P1,800,000 when the fire
occurred. During the same period, he also collected P300,000 crop insurance
his crops destroyed by frost. The total item of gross income is:
a. P2,300,000.
c. P300,000
b. P200,000
d. P500,000.
Multiple Choices - Problems: Part 2
1. Wary of his deteriorating health conditions. Mr. Benigno resign
his job age 40 after working as a supervisor for 12 years. He was
paid P2,000,000 separation pay the P2,000,000 separation as separation
pay. Is the P2,000,000 separation pay subject to income tax?
a. No, because the reason for Mr. Benigno's termination was beyond his
control
b. Yes, because Mr. Benigno resigned.
c. No, because Mr. Benigno worked for the company for more than 10
years.
d. Yes, because Mr. Benigno is not yet 50 years old.
2. On December 25, 2021. Mr. Revnon was terminated by his employer at
age 60 due to his failing eyesight. He joined the company in February
2013 and has since then worked as treasurer of the company. Is Mr.
Reynon's retirement pay exempt from Income tax?
a. Yes, because his termination was beyond his control.
b. No, because he was employed for less than 10 years.
C. Yes, because he is over 50 years old.
d. No, because the employee is already a senior citizen.
3. Ms. Henson retired from her job after 25 years of service. She
joined the company at the age of 23 and was promoted from an
accounting clerk to VP Finance. She was paid P2,000,000 total
retirement pay from the employer's contributory pension plan which was
duly registered with the BIR. Out of the total proceeds, Ms. Henson
contributed P600,000. This was Ms. Henson's first retirement from
employment. How much is excluded from gross income?
a. P600,000
c. P2,000,000
b. P1,400,000
d. PO
Explanation: she is 48-year old
4. Assuming Ms. Henson transferred to another company and was retired
after 15 years of service. The second employer paid P1.500.000 out of
its non- contributory pension fund as retirement pay to Ms. Henson.
The pension fund was also duly registered with the BIR. Is the second
retirement pay exempt from income tax?
a. No, because this is the second time Ms. Henson retired from
employment.
b. Yes, because Ms. Henson is already a senior citizen.
c. Yes, because this is the first time Ms. Henson qualifies for
retirement pay exemption.
d. No, because an employee must work under one employer until
retirement to qualify for retirement exemption.
5. Mr. Baracho won P500,000 in a local chess competition that was
sanctioned by a sports organization that is currently applying for
accreditation from the national spoorts association. Is the P500,000
prize considered an item of gross income?
a. Yes, because all prizes are subject to income tax.
B. No, because the chess competition is not an international
competition.
C. No, because the sport competition is a local competition.
D. Yes, because the organizer is not an accredited sports organization
6. Mr. Sibuco discovered teleport technology where people can be
transported over thousand miles in seconds. Due to this, he was
awarded by the scientific community the most coveted Nobel Prize award
in 2015. The total award was $150,000,000.What is the most correct
statement regarding the taxation of the award?
a. The award is an inclusion in gross income subject to regular income
tax since final taxes do not apply abroad.
b. The award is an inclusion in gross income subject to final tax
since it is more than P10,000.
c. The award is an exclusion in gross income subject to regular tax
since it is an inclusion in items of gross income subject to final tax.
d. The award is exclusion in gross income.
7. The following relates to the compensation income of Ms. Lamitan in
2017:
Compensation
P 2,400,000
Contributions to SSS, PhilHealth, and HDMF:
- Mandatory contributions
125,000
- Voluntary contributions
150,000
Contribution to PERA
120,000
Creditable withholding taxes
190,000
Employer's share in SSS, PhilHealth and HDMF
105,000
What is the total exclusion in gross income?
a. P225,000
c. P395,000
b. P230,0000
d. P465,000
8. In 2014, Ms. Kabacan invested P8,000,000 in the 10-year bonds of
Compostela
Mining Corporation. She disposed the investment in 2016 for the total
consideration of P8,500,000 inclusive of the P400,000 accrued interest.
What are respectively the inclusion in gross income and the exclusion
in gross income
a. P500, 000; PO
c. P400, 000; P100,000
b. P100,000; P400,000 d. PO; P500,000
9. Ms. Sibuco invested in the mutual fund and savings deposit of BCBC
Bank. She acquired a 100,000 participation shares when the net asset
value per unit of the fund was P98.00. She pulled out her investment
when the net asset value per unit was P101.00. Ms. Sibuco also had
P100.000 accrued interest in her savings deposit.
Which statement is incorrect?
a. The P300,000 gain is an exclusion in gross income.
b. The P100,000 interest income is an exclusion in gross income
subject to regular tax.
c. The P100,000 interest income is an inclusion in gross income
subject to final tax
d. The P300,000 is an inclusion in gross income subject to regular tax,
but the P100,000 is an exclusion in gross income subject to final tax.
10. The following income relates to a proprietorship registered as a
BMBE:
Gross income from sales
P 400,000
Dividend income – domestic
9,000
Interest on deposits
6900
Compute the total exclusion in gross income subject to regular tax.
a. P400,000
c. P15,800
b. P415,800
d. PO
11. In the immediately preceding problem, compute the total inclusions
in gross income subject to final tax.
a. PO
c. P6, 800
b. P15,800
d. P9,000
12. KKB, a multi-purpose credit cooperative, had the following income
in 2015:
Income from related activities
P 400,000
Income from unrelated activities:
20,000
- Dividends from stocks
18,000
- Income from time deposits
-Rent income
60,000
Compute the total exclusion from gross income subject to regular tax
of the cooperative
a. PO
b. P38,000
c. P438,000
d. P400,000
13. In the immediately preceding problem, compute the total inclusion
in gross income subject to regular tax.
a. P60,000
c.P460, 000
b. P98,000
d.P38,000
14. A non-stock, non-profit charitable entity received the following
during 2015:
Contributions from the public
P1,400,00
Income from the sale of merchandise
500,000
Gain on the sale of properties
300,00
What is the total exclusion from gross income subject to regular tax?
a.P2,200,00
c. P1,400,000
b.P1,900,00 0
d. P1,300,000
15. Mr. Santiago purchased a life annuity for P100,00 which will pay
him P10,000 a year. The life expectancy of Mr. Santiago is 12 years.
Which of the following can Mr. Santiago exclude from his gross income?
a. P10,000
c. P120,000
b. P. 20,000
d. P100,000