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Saint Paul School of Professional Studies

Final Examination in Taxation

1. Which is not subject to final tax?


a. Gain on sale of shares of stock directly to buyer
b. Royalties from musical composition
c. Capital gain on sale of real property classified as capital asset
d. Share of a partner in the distributive net income after tax of a business partnership

2. Which is subject to final tax?


a. Share of the distribute net income of a general professional partnership
b. Winnings not exceeding P10,000
c. Prizes not exceeding P10,000
d. Interest income from foreign bank deposits

3. Which of the following passive income is taxed on an annual and net basis?
a. Capital gain on sale of domestic stocks directly to buyer
b. Capital gain on sale of domestic stocks through the Philippine Stock Exchange
c. Capital gain on sale of real property classified as capital asset
d. Capital gain on sale of real property classified as ordinary asset

4. Capital gain on the sale of which capital asset below is conclusively presumed
a. Real property used in business c. Personal property not used in business
b. Real property not used in business d. Personal property used in business

5. The passive income that is subject to a two-tiered final tax structure is


a. Capital gain on sale of stocks of a resident foreign corporation directly to buyer
b. Capital gain on the sale of capital interest in a partnership
c. Capital gain on sale of sale of real property not used in business
d. Capital gain on the sale of stocks of a domestic corporation directly to buyer

6. Which is taxed at the lowest final tax rate among the following passive income?
a. Interest income received from a depositary bank under the expanded foreign currency
deposit system received by a resident citizen
b. Cash dividend from a domestic corporation
c. Royalties from books and other literary works
d. Interest income from long-term deposit with maturity of over five years

7. All of the following are subject to 7 % final tax on interest on FCDU Deposit, except
a. Resident citizen d. Domestic corporation
b. Non-resident citizen e. Resident corporation
c. Resident alien

8. Dividends received by which of the following is not subject to dividend tax?


a. Resident individual c. Resident corporation
b. General professional partnership d. Non-resident foreign corporation
Saint Paul School of Professional Studies
Final Examination in Taxation

9. Ambiong Bank of Baguio started operation in 1995 with the following information on results
of operation and dividend declarations.
Year Net income Dividends declared
1996 P -
500,000
1997 1,500,000 -
1998 2,000,000 -
1999 1,000,000 -
2000 2,500,000 P 6,500,000

How much tax must have been paid in the 2000 dividend declaration of Ambiong Bank?
a. P650,000 b. P390,000 c. P450,000 d. P0

10. The prizes on the following award or competition is generally taxable


a. Prize in a chess competition sponsored by an organization sanctioned by the Philippine
Olympic Committee.
b. Most Charitable Person of the Year
c. Nobel Prize Winner
d. Pageant competition

11. Interest income from foreign currency deposits made abroad by a resident citizen is subject
to
a. 20% final tax b. 7 % final tax c. 4 % final tax d. regular tax

12. Royalties on musical composition is subject to


a. 20% final tax b. 10% final tax c. 0% final tax d. regular tax

13. The interest income on long-term deposit that is pre-terminated on the third year is subject
to
a. 0% b. 12% c. 20% d. 5%

14. Armando is a partner in a business partnership. At the end of 2010, he has a total of
P300,000 profit sharing on the after tax income of the partnership inclusive of P120,000
salaries as a managing partner. Compute the amount final tax to be withheld from
Armandos profit sharing.
Saint Paul School of Professional Studies
Final Examination in Taxation
a. P12,000 c. P30,000
b. P18,000 d. P 0

15. Final taxes are generally withheld at source and does not require an income tax return,
which is an exception
a. Final tax on interest income from deposit
b. Final tax on royalties
c. Final tax on capital gain on sale of domestic shares of stock directly to buyer
d. Final tax on dividends

16. Which of the following is not subject to 20% final tax?


a. Interest income on long-term deposit of domestic corporation
b. Interest income on foreign loans
c. Interest income from money market placements or trust funds
d. Lotto winnings

17. Compute the total amount of income subject to final tax.


Yield from deposit substitute P 10,000
Interest income from bonds of a domestic 23,000
corporation
Property dividend declared by a foreign 40,000
corporation
Stock dividend declared by a domestic 50,000
corporation
Compensation income, net of P10,000 80,000
withholding tax
Prize on Search for Mr. Sexy Body 15,000
Royalties from books 24,000
Interest income on personal loans granted to a 8,000
friend
Salaries from a general professional partnership 30,000
Salaries from a business partnership 20,000
a. P89,000 b. P99,000 c. P49,000 d. P69,000
Saint Paul School of Professional Studies
Final Examination in Taxation
18. Determine the total amount of income tax withheld if the taxpayer received the following
passive income during the year:
Interest on Peso bank deposit P 90,000
Royalties 36,000
Dividends 63,000
Share in the distributive income of a joint 72,000
venture
a. P46,000 b. P53,000 c. P38,700 d. P46,500

19. On January 1, 2008, Kevin purchased 1,000 P1,000 face value bonds of a domestic
corporation at face value. The bonds were dated January 1, 2007 and mature on January 1,
2011. The bonds pay 12% annual interest every January 1. If Kevin disposed of this
investment directly to buyer on December 31, 2008 at 102, how much is the total final tax
due?
a. P24,000 b. P25,000 c. P1,000 d. P0

20. On January 1, 2005, Helen invested P1,000,000 to RCBC Commercial Banks 5-year, tax-free
time deposit. The long-term deposit pays 15% annual interest every January 1. In need of
cash, Helen pre-terminated her investment on July 1, 2008. How much is the final tax due
and the proceeds of Helens investment?
a. P9,000; P1,066,000 c. P18,750; P1,056,250
b. P63,000; P1,012,000 d. P30,000; P1,345,000

21. How much final tax is withheld in the interest income paid by the bank on January 1, 2006?
a. P0 b. P18,000 c. P30,000 d. P7,500

22. Assuming the same information in the problem above, except that the investment was
made by a domestic corporation, how much final tax is withheld in the year of pre-
termination and the proceeds to the corporation?
a. P15,000; P1,060,000 c. P18,750; P1,056,250
b. P45,000; P1,030,000 d. P30,000; P1,345,000

20. Andromeda, a non-resident alien, rendered professional services to Philippine company, a


domestic corporation. The total consultancy fees agreed were P1,000,000. How much
should Philippine company withhold?
a. P100,000 b. P200,000 c. P250,000 d. P 0

21. Andromeda, a non-resident alien, invests in the 60-day Peso time deposit of Metro Pilipino
Bank. Andromeda earned P100,000 interest income. How much final tax should Metro
Pilipino Bank withhold?
a. P 0 b. P20,000 c. P25,000 d. P 30,000
22. Assuming the same information in the preceding problem except that Andromeda is a non-
resident corporation. How much final tax is to be withheld?
Saint Paul School of Professional Studies
Final Examination in Taxation
a. P 0 b. P20,000 c. P25,000 d. P 30,000

23. Andromeda, a non-resident alien, deposited $100,000 in the FCDU unit of Universal Bank, a
resident foreign bank. During the period, Andromeda earned $1,000 total interest. The
relevant exchange rate between the Peso and the Dollar was P50:$1. How much final tax
should Metro Pilipino Bank withhold?
b. P50,000 b. P100,000 c. P125,000 d. P 0

24. Sunrise Bank, a non-resident foreign bank, has substantial foreign currency deposit at the
FCDU unit of Banco Italiano, a resident foreign bank, totaling $5,000,000. Total interest
credited to Sunrise Bank was $600,000 equivalent to P28,800,000 at the time of payment.
How much is the final tax on the interest received by Sunrise Bank?
a. P10,080,000 b. P5,760,000 c. P2,880,000 d. Exempt

25. The system of tax compliance wherein the employees does not have to make computations
nor file an income tax return at the end of the year
a. Final withholding tax scheme c. Substituted Filing of Tax Returns
b. Creditable withholding tax scheme d. Self-Assessment Method

26. The substituted Filing of Tax Return is applicable where (choose the exception)
a. The employee earns pure compensation income
b. The employee has only one employer
c. The tax withheld by the employer is correct
d. The employee is also engaged in the exercise of a profession

27. Creditable withholding tax rates shall not be less than ____ but not more than ____
a. 5%; 20% c. 1%; 32%
b. 1%; 20% d. 2%; 15%

28. Which is subject to final withholding taxes?


a. Interest on loans of by banks c. Dividends from foreign corporations
b. Prizes from abroad d. Book royalties

29. Which is subject to creditable withholding taxes?


a. Rent income c. Winnings from PCSO
b. Dividends from domestic corporations d. Interest income from long-term deposits
by corporations

30. The return for final withholding tax by withholding agent shall be filed not later than
a. 20 days from the close of each calendar quarter
b. 25 days from the close of each calendar quarter
c. 23 days from the close of each calendar quarter
d. 60 days from the close of each calendar quarter
Saint Paul School of Professional Studies
Final Examination in Taxation

31. The process by which the sovereign raises income to defray the expenses of the
government is called
a. Subsidy c. Taxation
b. Tariff d. Tribute

32. One of the characteristics of internal revenue tax is that they are
a. Criminal in nature c. Penal in nature
b. Political in nature d. Generally prospective in application

33. In case of conflict between tax laws and generally accepted accounting principles (GAAP)
a. Both tax laws and GAAP shall be enforced c. GAAP shall prevail over tax laws
b. Tax laws shall prevail over GAAP d. The issue shall be resolved by the court

34. Which of the following has no power of taxation


a. Provinces c. barangays
b. Cities d. barrios

35. Schedular system of income taxation means


a. All types of income are added together to arrive at gross income
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income
d. Compensation income and business/professional income are added together in arriving
at gross income.

36. A tax reform at any given time underscores the fact that taxation is a/an
a. Inherent power of the state c. Essentially a legislative power
b. Power that is very broad d. State can and should adopt progressive
taxation

37. The legislative body can impose a tax at any amount underscores the legal truism that
taxation is
a. An inherent power of the tax c. very broad power of the state
b. Essentially a legislative power d. for public purpose

38. Under this basic principle of sound tax system, the government should not incur a deficit
a. Theoretical justice c. fiscal adequacy
b. Administrative feasibility d. None of the above

39. A feasibility study needs or need to look into the taxes of different political subdivisions of
government which may be alternative sites of the business
Saint Paul School of Professional Studies
Final Examination in Taxation
a. Provinces, cities and municipalities must have uniform taxes between and among
themselves
b. The local taxes of a political subdivision need not be uniform with the local taxes of
another political subdivision
c. Business that are subject to national taxes are exempted from local business taxes.
d. Local business taxes may be credited against national business taxes

40. Which of the following statements is not correct


a. Taxes may be imposed to raise revenue or to provide disincentives to certain activities
within the state
b. The state can have the power of taxation even if the constitution does not expressly give
it the power to tax
c. For the exercise of the power of taxation, the state can tax anything at anytime
d. The power of taxation in the Philippine Constitution are grants of power and not
limitations on taxing powers.

41. Which of the following is not a resident citizen?


a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the
fact of his physical presence abroad with a definite intention to reside therein
b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a permanent basis
c. A citizen of the Philippines who works and derives income from sources abroad and
whose employment thereat requires him to be physically present abroad most of the
time during the taxable year
d. A citizen of the Philippines who goes on a business trip abroad and stays therein most of
the time during the year.

42. Which of the following may not claim personal exemptions?


a. Nonresident alien not engaged in trade or business in the Philippines
b. Nonresident alien engaged in trade or business in the Philippines
c. Resident alien
d. Citizen

43. The personal exemption of the nonresident alien engaged in trade or business in the
Philippines is equal to that allowed by:
a. The income tax law of his country to a citizen of the Philippines not residing therein
b. Income tax law of his country to a citizen of the Philippines not residing there or the
amount provided by the NIRC to a citizen or resident, whichever is lower
c. The NIRC to a citizen or resident
d. The income tax law of his country allows to a citizen of the Philippines not residing there
or the amount provided by the NIRC to a citizen or resident alien, whichever is higher.
Saint Paul School of Professional Studies
Final Examination in Taxation
44. A nonresident alien deriving income from Philippine sources claims that he is entitled to
personal exemptions. Which of the following is not a condition for the allowance of
personal exemptions to said nonresident alien?
a. The taxpayer stayed in the Philippines for an aggregate period of more than 180 days
b. His country has an income tax law that allows personal exemptions to Filipinos not
residing therein
c. That He has filed a true and accurate return of his total income from all sources within
the Philippines
d. Taxpayer is married to a Filipinos

45. Statement 1: If the taxpayer dies during the taxable year, his estate may still claim the
personal and additional exemptions for himself and his dependent as if he died at the close
of such year.
Statement 2: If the spouse or any of the dependents dies or if any of such dependents
marries, becomes twenty one (21) years old or becomes gainfully employed during the
taxable year, the taxpayer may still claim the same exemptions as if the spouse or any of the
dependents died, or as if such dependents married, became twenty one (21) years or
became gainfully employed at the close of such year.
a. Only statement 1 is correct c. Both Statements are incorrect
b. Only Statement 2 is correct d. Both statements are correct

46. Which of the following statements is true?


a. Individuals who are self-employed report a taxable income only at the end of the year
b. Individuals who are self-employed file three quarterly income tax returns and an annual
income tax return
c. The capital gains tax on shares of stock of a domestic corporations is computed on net
capital gain, which means that capital gains and losses on such shares are offset against
each other to arrive at a net of the capital gains and losses for the year
d. The capital gain tax on real property is computed on the consideration stated in the
deed of sale.

47. All requirements for services performed by an employee for his employer, whether paid in
cash or in kind, not specially exempted under the Tax Code are known as:
a. Gross business income; c. Gross compensation income;
b. Gross professional income; d. Passive income;

48. Which of the following statement is incorrect?


a. When compensation is received in money, the measure of the income is the amount of
money received;
b. When compensation is received other than in money, the f air market value of the thing
taken in payment is the measure of income;
c. If services were rendered at a stipulated price, in the absence of proof to the contrary,
such price will be presumed to be the fair market1alue of the compensation received;
Saint Paul School of Professional Studies
Final Examination in Taxation
d. The fair discounted value of a non-interest bearing note issued as security for payments,
shall be treated as income as of the time of receipt;

49. One of the following is NOT' taxable as compensation income:


a. Fixed or variable transportation, representation and other allowances received by
employee from employer in addition to the regular compensation;
b. Excess of advances over actual expenses not returned by employee to employer;
c. Premiums on life insurance covering the life of an employee paid by the employer
where the insured employee is the beneficiary, directly or indirectly, under the policy;
d. Payments made by a general professional partnership to a partner for services rendered
by him to the partnership;

50. In computing gain or loss from the sale of other disposition of property acquired as gift or
donation, the basis of cost shall be:
a. The fair market value as 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;

---End of Examination ---