Fitero B.

Garlitos
2017-E905019

Problem 3-2
Encircle the letter that contains the best answer.
1. Statement 1: all wealth that flows into the taxpayer’s hand other than mere return of
capital is income.
Statement 2: all earnings are taxable with income tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement is correct
d. Both statement are not correct
2. Which of the following is not classified as income?
a. Gain derived from labor
b. Return all capital
c. Excess of selling price over cost of assets sold
d. Gift received
3. Which of the following is not a characteristic if income?
a. Increase in taxpayers wealth
b. Return of taxpayers wealth
c. Realization or receipt of gain
d. Earnings constructively received
4. Which of the following is not a criterion of taxable income?
a. There must be gain
b. The gain need not actually received
c. The gain must be included by the law as treaty from taxation
d. The law as treaty from taxation must exclude the gain
5. If a property is received in lieu of cash compensation, the basis of tax is the
a. Supposed amount of cash to be received.
b. Agreed value of the property received.
c. Fair market value of the property received
d. Salvage value of the property received
6. If service are rendered for the cancellation of debts, the basis of tax is the
a. Fair market value of the service rendered
b. Amount of obligation omitted
c. Fair market value of the property received
d. Salvage value of the property received
7. If the taxpayer is subjected to jeopardy assessment, his taxable accounting period would
be
a. Calendar period
b. Fiscal period
c. Short period
d. Variable period
8. Which of the following business is/are normally reporting income on accrual basis?
a. Real property lessor
b. Professional partnership
c. Trading business
Fitero B. Garlitos
2017-E905019

d. Brokerage business
9. Which of the following is/are generally subject to final tax?
i. Compensation income
ii. Business income
iii. Passive income
iv. Capital income
a. I, ii, and iv
b. I and ii only
c. Iii and iv only
d. Iii only
10. Which of the following is/are reportable (returnable) in the annual income tax return?
i. Compensation income
ii. Business income
iii. Passive income
iv. Capital income
a. I, ii, and iv
b. I and ii only
c. I and iii only
d. I only
11. All of the following is passive income except?
a. Gross profit
b. Royalty
c. Interest
d. Dividend
12. Which of the following is not correct?
a. All income is received is taxable
b. Taxable income is equal to gross income less statutory
c. Net income is synonymous to taxable income
d. Income derived from illegal activities is taxable income
13. One of the following is taxable income
a. Income from a qualified pension plan
b. Compensation for personal injuries
c. Stock dividend received
d. Vacation leave with pay
14. Which of the following is incorrect
a. Rent for 2 years collected in year 1
b. Income from 1 year, collected in year 2
c. Service for 1 year, collected in 2 year
d. Income from year 2 sales, collected in advance in tear 1
15. Statement 1: all foreign corporations are taxable only for income earned within the
Philippines.
Statement 2: all Filipino citizens are taxable for their income earned within and outside
the Philippines.
a. Both statement is correct
Fitero B. Garlitos
2017-E905019

b. Only statement 1 is correct

c. Only statement 2 is correct
d. Both statements are incorrect
16. If an individual renders for a creditors who in consideration thereof cancels the debt, the
cancellation of indebtedness may amount to a
a. Gift
b. Capital contribution
c. Donation inter-vivos
d. Payment of income
17. Which of the following is correct?
a. Compensation income
b. Business income
c. Passive income earned within
d. Capital gain on real estate (capital asset)
18. When there are no beginning and ending inventories of farm crops harvested, which of
the following is true?
a. Income is greater leaser
b. Business income lesser greater
c. Income is the same the same
d. Expense is greater lesser
19. Which of the following sales is allowed to be reported under instalment reporting of
income?
a. Regular instalment sale of personal property
b. Casual sale of personal property within initial payment of 25% and below of the selling
price
c. Sale of real property within initial payment of 25% of the selling price
d. All of the above
20. Under which case an instalment method of reporting income on instalment sale is
allowed?
1. Movable property is regularly sold on an instalment basis by a dealer
2. Sale of real property where the initial payments exceeds 25% of the selling price.
a. Only no. 1
b. Only no. 2
c. Both no, 1 and 2
d. None.