1. The term “Corporation” shall include:
I.
Partnerships no matter how created or organized
II.
Joint stock companies
III.
Joint accounts (ceuntas en participacion)
IV.
Associations
V.
Insurance companies
VI.
Regional operating headquarters of multinational corporations
a. I and II only
b. I, II and III only
c. I,II,III,IV and V only
d. All of the above
Answer: D
2. Which of the following is not treated as corporation?
a. General professional partnership
b. A joint venture or consortium formed for the purpose of undertaking construction
projects.
c. A joint or consortium for engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating consortium agreement under a service contract
with the government
d. All of the above
Answer: D
 Generally, a Joint Venture is taxable as a corporation, unless it pertains to a joint venture
describe in “b” and “c” above
3. Statement 1: Partnerships, no matter how created or organized, are taxable as corporations for
income tax purposes.
Statement 2: Associations and mutual fund companies, for income tax purposes, are excluded in
the definition of corporations.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: A
 “No matter how created” simply refer to how the partnership was established, either orally
or in writing.
4. Which of the following is not a taxable corporation?
a. Ana, Lorna and Fe agreed to contribute their money into s common fund to engage in
the business of buying and selling consumer goods. Their total investment amounted to
P300,000 and they did not bother to register their business with the DTI and the SEC.
b. Pedro, Juan and Luna all certified public accountants, agreed to contribute their money
property and industry to a common fund with the sole intention of jointly exercising
their common profession. They have registered with the SEC.
c. Victorious Bus Company and California Bus Company owns separate franchise to operate
a public utulity covering the area of Northern Luzon. To achieve maximum efficiency of
utilizing their assets and to avoid the negative effects of competition, the two companies
agreed to pool their resources together and operate as a single company.
d. Rody and Allan, lawyer and certified public accountants, respectively. agreed to
contribute their money, property and industry to a common fund to render service of
business process outsourcing.
Answer: B
 The partnership organized in “b” is a GPP, hence, non-taxable
5. Which is not Characteristic of corporate income tax.
a. Progressive tax
b. Direct tax
c. General tax
d. National tax
Answer: A
6. Which of the following is subject to income tax?
a. SSS and GSIS
b. Philippine Health Insurance Corporation (PHIC)
c. Local Water Districts
d. Philippine Amusement and Gaming Corporation (PAGCOR)
Answer: D
7. One of the following is exempt from income tax
a. Proprietary educational institutions
b. Private cemeteries
c. Government educational institutions
d. Mutual savings bank
Answer: C
8. Statement 1: Corporations exempt from income tax are not subject to income tax on incomes
received which are incidental or necessarily connected with the purposes for which they were
organized and operating.
Statement 2: Corporations exempt from income tax are subject to income tax on income of
whatever kind and character from any of their properties(real or personal) or from any other
activity conducted for profit, regardless of the disposition of such income.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: C
9. Which of the following statements is incorrect? “Joint Stock Companies” are constituted when a
group of individuals, acting jointly, establish and operate business enterprise
a. Under an artificial name
b. With an invested capital divided into transferable shares
c. An elected board of directors, and other corporate characterisrics
d. Operating with formal government authority
Answer: D
10. A “Joint Account” is constituted when one interests himself in the business of another by/and
I.
Contributing capital thereto.
II.
Sharing in the profits or losses in the proportion agreed upon.
III.
They are not subject to any formality.
IV.
It may be privately contracted orally or in writing.
a. I and II only
b. I, II and III only
c. I, II, III and IV
d. None of the above
Answer: C
11. Statement 1: Joint ventures, regardless of the purpose by they were created, are generally
exempt from corporate income tax.
Statement 2: The share of a co-venturer corporation in the net income of tax exempt joint
venture or consortium is sibjected to corporate income tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: B
12. Which of the following statements is correct?
I.
The term “ domestic “. When applied to a corporation, means created or organized in
the philippines or under the laws of a foreign country as long as it maintains a Philippine
branch.
II.
A corporation which is not domestic may be a resident ( engaged in business in the
Philippines) or nonresident corporation (not engaged in business in the philippines)
III.
Resident foreign corporations are subject to income tax based on net income from
sources within the philippines.
a. I only
b. II only
c. II and III only
d. I, II and III
Answer: C
13. Statement 1: Non-resident foreign corporation applies to a foreign corporation engaged in trade
or business within the philippines.
Statement 2: Resident foreign corporation applies to a foreign corporation not engaged in trade
or business in the Philippines.
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 & 2 are true
Answer: A
14. Which of the following is taxable based on income from all sources, within and without?
a. Domestic Corporations
b. Resident Foreign Corporations
c. Non-resident Foreign Corporations
d. All of the choices
Answer: A
15. The term applies to a foreign corporation engaged in trade or business in the Philippines.
a. Resident foreign corporation
b. Nonresident foreign corporation
c. Multinational corporation
d. Petroleum contractor
Answer: A
1 . A domestic corporation had the following data on income and expenses during the year 2018:
Gross income, Philippines
10,000,000
Business expenses, Philippines
2,000,000
Gross income, China
5,000,000
Business expenses, China
1,500,000
Interest income, Metrobank, Philippines
300,000
Interest income, Shanghai Banking Corporation, China
100,000
Rent income, net of 5%withholding tax
190,000
How much was the income tax payable?
a. P3,540,000
b. P3,530,000
c. P3,440,000
d. P2,480,000
Answer: B
Solution:
Gross income, Philippines
Gross income, China
Business expenses, Philippines
Business expenses, China
Interest income, Shanghai Banking Corporation, China
Rent income, net of 5%withholding tax
(190,000/95%)
Taxable net income
X RCIT %
Income Tax Due
Less. CWT on rental income
INCOME TAX PAYABLE
10,000,000
5,000,000
(2,000,000)
(1,500,000)
100,000
200,000
___________
11,800,000
30%
___________
3,540,000
(10,000)
___________
3,530,000
2. Hananiah Corporation, a corporation engaged in business in the Philippines and abroad has
the following data for the current year:
Gross Income, Philippines
975,000
Expenses, Philippines
750,000
Gross Income, Malaysia
770,000
Expenses, Malaysia
630,000
Interest on bank deposit
25,000
Determine the income tax due if the corporation is
Domestic
Resident Foreign Corp.
a.
116,800
72,000
b.
109,500
67,500
c.
312,000
515,850
d.
109,500
72,000
Answer: B
Solution:
Non-resident Foreign Corp.
320,000
300,000
116,800
300,000
Gross Income, Phil.
Expenses, Phil.
Gross Income, Malaysia
Expenses, Malaysia
Interest on bank deposit
Taxable Income
Tax rate
Tax Due
Domestic
975,000
(750,000)
770,000
(630,000)
365,000
30%
109,500
RFC
975,000
(750,000)
NRFC
975,000
25,000
1,000,000
225,000
30%
30%
67,500
300,000
3. Ace, Inc., Philippines is engaged in research and development services and product development
related to computer and aircraft parts. During the year, Ace reported the following income and expenses:
Sales
10,000,000
Cost of sales
4,000,000
Operating expenses
2,500,000
Interest income, net of final tax
200,000
Dividend income, tax-exempt
800,000
The income tax of Ace. Inc., Philippines would be
Sales
Less. COS
Gross income
Less. Operating Expenses
Net taxable income
X by: applicable tax rate
Income tax due
10,000,000
4,000,000
6,000,000
2,500,000
3,500,000
10%
350,000
4. The following data were provided by Air Jordan, an international air carrier doing business in the
Philippines.
Gross ticket sales in the Philippines
P10,000,000
(Manila. – Macau flight)
Gross ticket sales in China (Manila. – Beijing flight)
5,000,000
Gross ticket sales in China (Beijing – Manila flight)
5,000,000
Gross ticket sales in japan (Tokyo- Manila flight)
3,000,000
Gross ticket sales in the Philippines (Manila _ L.A.)
 Passengers were transshipped in Tokyo to L.A. by another airline 8,000,000
 Estimated hours during the flight
 Manila to Tokyo-5 hrs;
 Tokyo to L.A.-15 hrs.)
Gross ticket sales in L.A., USA(Manila – L.,A.)
 Passeengers were transshipped in Tokyo to L.A. by a different
Plane of same airline company
 Estimated hours during the flight
 Manila to Tokyo-5 hrs;
 Tokyo to L.A,-15 hrs
Expenses, Philippines
8,000,000
5,000,000
Question: How much is the income tax due of Air Jordan?

Answer: P625,000 computed as follows:
Gross ticket sales in the Philippines (Manila. –Macau flight)
Gross ticket sales in China (Manila. – Beijing flight)
Gross tickets sales in the Philippines (Manila – L.A. flight);
Manila to Tokyo only (P8M x 5/20)
Gross tickets sales in USA (Manila – L.A. flight)
Total Gross “Philippine” Billings
P10,000,000
5,000,000
2,000,000
8,000,000
P25,000,000
Income Tax Rate
2.5%
Income Tax Due
P625,000
 Gross ticket sales in China were excluded because the flight did not originate in the Philippines
 Gross ticket sales in the Philippines for Manila to L.A. flight were apportioned or allocated by 5/2
because the flight is considered interrupted in Tokyo. Thus, only the amount proportionate to
Philippine to Tokyo flight should be included in the determination of GPB.
5. Case A (Related income > Unrelated income):
Infotech College is a private educational institution. It owns a six (6) storey building where the first 3
floors are being used for its operations and the other 3 floors are being rented by other entities. During
the taxable year, its icome and expenses are as follows:
Gross income from
Tuition fees
Rent income
Operating expenses
Determine the income tax due of infotech

Answer: P350,000 (5M-1.5M) x 10%
Case B (Related income < Unrelated income):
P4,000,000
1,000,000
1,500,000
Using the same data in Case A except that the income for the year amounted to P7,500,000. Determine
the income tax due of Infotech.

Answer: P3,000,000
>
(4M + 7.5-1.5M) x 30%
>
The related income < unrelated income. Consequently, the educational
institution is subject to normal corporate tax of 30% based on net income.
6. Maikli Corporation has the following data:
2015
P1,700,000
1,050,000
615,000
Sales
Cost of sales
Operating expenses
2016
P2,300,000
1,425,000
480,000
The income tax payable in 2015 is –
A.
B.
Answer:
P 13,000
12,250
C.
D.
P 35,000
10,500
A
Gross income (1,700,000 – 1,050,000)
Less: Operating expenses
Taxable income
Rate of tax
Normal income tax
MCIT (650,000 x 2%)
Tax payable (higher)
650,000
615,000
35,000
30%
10,500
13,000
13,000
7. In Number 162, the income tax payable by Maikli Corporation in 2016 is –
Answer:
A.
P 118,500
C.
P 116,000
B.
17,500
D.
137,500
C
Gross income (2,300,000 – 1,425,000)
Less: Operating expenses
Taxable income
Rate of tax
Normal income tax
MCIT (875,000 x 2%)
Income tax (higher)
Less: Carry forward of excess MCIT (13,000 – 10,500)
Income tax payable
875,000
480,000
395,000
30%
118,500
17,500
118,500
2,500
116,000
8. Na Dhale Corporation, a domestic corporation, had the following selected data:
YEAR
GROSS INCOME
EXPENSES
2014
P1,000,000
P1,200,000
2015
2,000,000
1,900,000
2016
3,000,000
2,950,000
2017
1,000,000
1,100,000
2018
980,000
500,000
The taxable income in 2018 was:
a. P380,000
c. P100,000
b. P0
d. P50,000
Answer:
A
Solution:
Gross Income
Expenses
NOLCO:
2014
2017
Income(loss)
2014
P1,000,000
(1,200,000)
2015
P2,000,000
(1,200,000)
2016
2017
P3,000,000
P1,000,000
(2,950,000) (P1,100,000)
(100,000)
(50,000)
2018
P980,000
(500,000)
(100,000)
(200,000)
P0
P0
(P100,000)
P380,000
 NOLCO may be deductible from gross income for the next three succeeding years only. The
remaining NOLCO of P50,000 from 2014 is already beyond the allowable 3-year period in 2018,
hence, no longer deductible.