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Reviewer in Taxation (Book 1) Asser S.

Tamayo (2012 Edition)

Chapter 1
TAX ON INDIVIDUALS, ESTATES AND TRUSTS

1. Which of the following is not a nonresident 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.

Answer: D

2. A citizen who has been previously considered as nonresident citizen and who arrives in
the Philippines at any time during the taxable year to reside permanently in the
Philippines shall likewise be treated as a nonresident citizen for the taxable year in which
he arrives in the Philippines with respect to his:

a) Income derived from sources abroad until the date of his arrival in the
Philippines.
b) Income derived from sources within the Philippines.
c) Income derived from source abroad until the last day of the calendar year.
d) Income derived from sources within and outside the Philippines.

Answer: A

3. To be considered physically present abroad most of the time during the taxable year, a
contract worker must have been outside the Philippines for not less than:
a) 180 days
b) 183 days
c) 185 days
d) 190 days

Answer: B

4. Kitty, non-resident citizen, arrives in the Philippines on July 1, 2007 to reside here
permanently after working as a nurse in the United States of America for many years. For
income tax purposes, she will be classified as:
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a) Nonresident citizen for the year 2007 with respect to her income derived
from sources abroad from January 1, 2007 until the date of her arrival in the
Philippines.
b) Nonresident citizen for the whole year of 2007.
c) Resident citizen for the whole year of 2007.
d) Neither resident nor nonresident citizen for the year 2007

Answer: A

5. Denzel Wetta, an American management expert is hired by a Philippines corporation to


assist in its organization and operation for which he has to stay in the Philippines for 5
months. He came to the Philippines for this definite purpose but the nature of his job may
require him to extend his stay and live temporarily in the Philippines. The American
management expert intends to leave the Philippines as soon as his job is done. For
income tax purposes, the American management expert shall be classified as:

a) Resident alien
b) Nonresident alien engaged in trade or business
c) Nonresident alien not engaged in trade or business
d) Resident citizen

Answer: A

6. Palito Lippi, an American singer, was engaged to sing for one week at the Sofitel
Philippine Plaza after which he returned to USA. For income tax purposes, Palito Lippi
should be classified as:

a) Resident alien
b) Nonresident alien engaged in trade or business
c) Nonresident alien not engaged in trade or business
d) Resident citizen

Answer: C

7. Which of the following individual taxpayers is taxed on income from sources within and
without the Philippines?

a) A citizen of the Philippines residing therein


b) A non-resident citizen
c) An individual citizen of the Philippines who is working and deriving income
abroad as an overseas contract worker
d) An individual, whether a resident or not of the Philippines

Answer: A
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

8. [Phil. CPA] It is important to know the source of income for tax purposes [i.e. from
within and without the Philippines] because:
a) Some individuals 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 source within
c) Some individual taxpayers are citizens while others are aliens
d) Export sales are not subject to income tax
Answer: A

9. Which of the following individuals shall not be subject to income tax under section 24
(A)?
a) Individual citizen of the Philippines residing therein
b) Individual citizen of the Philippines residing outside the Philippines including
overseas contract workers
c) Individual alien who is a resident of the Philippines
d) Individual alien who is not a resident of the Philippines

Answer: D

10. Which of the following shall not be included in the term “trade business or profession”?
a) Performance of the functions of a public office
b) Performance of services to the general public for a fee
c) Performance of services as an employee
d) None of the choices

Answer: C

11. First statement: The husband and wife shall compute their individual income tax
separately based on their respective total taxable income

Second statement: if any income cannot be definitely attributed to or identified as income


exclusively earned or realized by either of the spouse, the same shall be divided equally
between the spouses for the purpose of determining their respective taxable income

a) Both statements are correct


b) Both statements are incorrect
c) Only the first statement is correct
d) Only the second statement is correct

Answer: A

12. A non-resident alien individual engaged in trade or business in the Philippines shall be
subject to an income tax in the same manner as an individual citizen and a resident alien
individual, on taxable income received from:
a) All sources within the Philippines
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b) All sources within and outside the Philippines


c) All sources outside the Philippines
d) None of the choices

Answer: A

13. A nonresident alien individual who shall come to the Philippines shall be deemed a
nonresident alien doing business in the Philippines if he stays therein for an aggregate
period of how many days during any calendar year?
a) More the one hundred eighty-three (183) days
b) One hundred eighty (180) days or less
c) More the one hundred eighty (180) days
d) More the one hundred ninety (190) days

Answer: C

14. There shall be levied, collected and paid for each taxable year upon the entire income
received by every nonresident alien individual not engaged in trade or business within the
Philippines from:
a) All sources within the Philippines
b) All sources within and without the Philippines
c) All sources without the Philippines
d) None of the choices

Answer: A

15. There shall be levied, collected and paid for each taxable year upon gross income
received by every alien individual employed by regional or area headquarters and
regional operating headquarters established in the Philippines by multinational companies
from such regional or area headquarters and regional operating headquarters, a tax equal
to:
a) Twenty-five percent (25%) of such gross income
b) Twenty percent (20%) of such gross income
c) Fifteen percent (15%) of such gross income
d) Ten percent (10%) of such gross income
Answer: C

16. The same tax treatment shall apply to Filipinos employed and occupying what similar
positions as those of aliens employed by these multinational companies?
a) Managerial and technical positions
b) Rank-and-file positions
c) Managerial positions only
d) None of the choices

Answer: A
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

17. The term means a foreign firm or entity engaged in international trade with affiliates
subsidiaries or branch officers in the Asia-Pacific Region and other foreign markets
a) Offshore banking unit
b) Multinational company
c) Petroleum Service Contractor and Subcontractor
d) None of the choices

Answer: B

18. There shall be levied, collected and paid for each taxable year upon the gross income
received by every alien individual employed by offshore banking units established in the
Philippines a tax equal to
a) Ten percent (10%) of such gross income
b) Fifteen percent (15) of such gross income
c) Twenty percent (20) of such gross income
d) Twenty-five (25) of such gross income

Answer: B

19. The same tax treatment shall apply to Filipinos employed and occupying what similar
positions as those of aliens employed by these offshore banking units?
a) Managerial and technical positions
b) Rank-and-file positions
c) Managerial positions only
d) None of the choices

Answer: A

20. First statement: The 15% preferential tax treatment shall apply only in case where an
alien concurrently holds a position similar to that of a Filipino.

Second statement: In instance where the counterpart expatriate is recalled to the head
office or reassigned, whether temporarily or otherwise, and there is no expatriate present
and working in the establishment, Filipinos employed by OBUs shall be liable to the
normal income tax.

a) Both statements are correct


b) Both statements are incorrect
c) Only the first statement is correct
d) Only the second statement is correct

Answer: A
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

21. A branch, subsidiary or affiliate of a foreign banking corporation which is duly


authorized by the Bangko Sentral ng Pilipinas (BSP) to transact offshore banking
business in the Philippines in accordance with the provisions of P.D. NO. 1034 as
implemented by CB (now BSP) Circular No. 1389, as amended.
a) Offshore banking unit
b) Multinational company
c) Petroleum Service Contractor and Subcontractor
d) None of the choices

Answer: A

22. An alien individual who is a permanent resident of a foreign country but who is
employed and assigned in the Philippines by a Foreign Service contractor or by a Foreign
Service subcontractor engaged in petroleum operations in the Philippines shall be liable
to a tax of:
a) Twenty-five percent (25%) of such gross income
b) Twenty percent (20%) of such gross income
c) Fifteen percent (15%) of such gross income
d) Ten percent (10%) of such gross income
Answer: C

23. The same tax treatment shall apply to Filipinos employed and occupying what positions
as those of aliens employed by a foreign petroleum service contractor or subcontractor?
a) Managerial and technical positions
b) Managerial positions only
c) Rank-and-file positions
d) Same positions as those of alien employees

Answer: D

24. Any income earned from all other sources within the Philippines by the alien employees
of Regional or Area Headquarters and Regional Operating Headquarters of Multinational
Companies, Offshore Banking Units and Petroleum Service Contractor and Subcontractor
shall be subject to the:
a) Pertinent income tax, as the case may be, imposed under this Code
b) Fifteen percent (15%) final tax
c) Twenty-five percent (25%) final tax
d) Thirty percent (30%) final tax

Answer: A

25. An alien employee of an offshore banking unit has the following income for the current
year:
Salary received from the
offshore banking unit (OBU) P10,000,000
Honoraria and allowances received from the OBU 5,000,000
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Interest income from a domestic bank


on his peso deposits 50,000
Capital gain from sale of shares in a
domestic Corporation 100,000

How much is the tax from his gross income in the Philippines?
a) 2,272,500
b) 2,250,000
c) 1,500,000
d) None of the choices

Answer: B

26. These are arbitrary amount allowed, in the nature of a deduction from the amount of
gross compensation income and / or net business and / or professional income, as the case
may be, for personal, living or family expenses of an individual taxpayer.
a) Tax credit
b) Tax refund
c) Personal exemptions
d) Ordinary deduction
Answer: C

27. For purposes of determining the tax provided in the Tax Code, there shall be allowed a
basic personal exemption of:
a) P 50,000
b) P 32,000
c) P 25,000
d) P 20,000

Answer: A

28. How much is the basic personal exemption in the case of married, individual where only
one of the spouses is deriving gross income?
a) P 100,000
b) P 64,000
c) P 50,000
d) P 40,000

Answer: C

29. A married individual deriving income within the Philippines whose spouse is
unemployed or is a nonresident citizen deriving income from foreign sources, shall be
entitled to a personal exemption of:
a) P 100,000 only
b) P 64,000 only
c) P 50,000 only
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

d) P 40,000 only

Answer: C

30. The term means an unmarried or legally separated man or woman with one or both
parents, or with one or more brothers or sisters, or with one or more legitimate,
recognized natural or legally adopted children living with and dependent upon him for
their chief support
a) Married but legally separated
b) Single
c) Head of family
d) None of the choices

Answer: C

31. Which of the following shall be the qualification of a parent form head of family
purposes?
I – Living with the taxpayer
II – dependent upon the taxpayer for chief support
a) Both I and II
b) Neither I nor II
c) I only
d) II only

Answer: A

32. Which of the following is not a qualification of a dependent brother, sister, or child?
a) Living with and dependent upon the taxpayer for chief support
b) Not more than twenty-one years of age
c) Unmarried and not gainfully employed
d) None of the choices

Answer: D

33. A single individual supporting a 24-year old brother incapable of self-support of physical
defect shall qualify as:
a) Married
b) Head of family
c) Single
d) None of the choices

Answer: B
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

34. It shall refer to any resident Filipino citizen aged 60 years old and above.
a) Elderly or senior citizen
b) Dependent parent
c) Benefactor
d) None of the choices

Answer: A

35. For a benefactor to qualify as head of family, his dependent senior citizen shall have the
following qualifications, except which of the following?
a) His annual taxable income does not exceed the poverty level as determined by
NEDA
b) Living with the benefactor
c) Dependent upon his benefactor foe chief support
d) Unmarried

Answer: D

36. A benefactor has a qualified dependent senior citizen. For income tax purposes which of
the following statements is incorrect?
a) The benefactor shall be entitled only to the basic personal exemption allowed to
head of family.
b) The benefactor shall be entitled to both basic and personal exemptions
c) The benefactor shall register the senior citizen as his dependent and
himself/herself as benefactor in the RDO having jurisdiction over the place where
he/she and the senior citizen resident.
d) If required to file an income tax return, the benefactor shall state therein the name,
birthday, and Office for Senior Citizen Affairs (OSCA) ID number of the
dependent senior citizen.

Answer: B

37. One of the following is not a head if family for income tax purposes:

a) Widower supporting his mother-in-law, 60 y.o


b) Unmarried taxpayer supporting his mother, 50 y.o
c) Married taxpayer supporting a legitimate child, 6 y.o
d) Legally separated taxpayer supporting a brother, 22 y.o, physically incapacitated

Answer: C

38. How much shall be allowed an additional exemption for each dependent child not
exceeding four?
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a) 25,000
b) 20,000
c) 10,000
d) 8,000

Answer: A

39. First Statement: The additional exemption for dependent shall be claimed by only one of
the spouses in the case of married individuals.

Second statement: The husband is the proper claimant of the additional exemption for
qualified dependent children unless he explicitly waives his right in favor of his wife.

a) Both statements are correct.


b) Both statements are incorrect.
c) Only the first statement is correct.
d) Only the second statement is correct.

Answer: A

40. Where the spouse of the employee is unemployed or is a nonresident citizen deriving
income from foreign sources, the employed spouse within the Philippines shall:
a) Be automatically entitled to claim the additional exemption for children
b) Be entitled to claim the additional exemption for children if the other spouse
waives his right in favor of the employed spouse
c) Be entitled to claim the additional exemption if he is the husband
d) None of the choices

Answer: A

41. In the case of legally separated spouses, additional exemptions may be claimed only by
the:
a) Husband
b) Wife
c) Spouse who has custody of the child or children
d) None of the choices

Answer: C

42. In the case of legally separated spouses, the total amount of additional exemptions that
may be claimed by both shall:
a) Not exceed the maximum additional exemptions allowed
b) Be decreed by the court
c) Be based on the number of children under their custody
d) None of the choices
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Answer: A

43. For purposes of additional exemption, a ‘dependent’ means any of the following except:
a) Legitimate child
b) Illegitimate child
c) Legally adopted child
d) Senior citizen

Answer: D

44. For additional exemption purposes, the qualified dependent child shall possess the
following qualifications except:
a) Chiefly dependent upon and living with the taxpayer
b) Not more than twenty-one years of age
c) Unmarried and not gainfully employed
d) None of the choices

Answer: D

45. A dependent, regardless of age, is qualified fore additional exemptions if:


I- Incapable of self-support
II- With mental of physical defect

a) I only
b) II only
c) Both I and II
d) Neither I nor II

Answer: C

46. It means principal or main support which is more than one-half of the support required by
the dependent.
a) Personal exemption
b) Additional exemption
c) Chief support
d) Partial support

Answer: C

47. The additional exemption applies in all of the following cases, except when:
a) The father is absent on a business
b) A child or other dependent is away at school or on a visit
c) A parent, through force of circumstances, is obliged to maintain his dependent
children with relatives in a boarding house while he lives elsewhere.
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

d) Without necessity the dependent continuously makes his home, elsewhere

Answer: D

48. If the taxpayer married or should have additional dependent during the taxable year:
a) The taxpayer may claim the corresponding additional exemption, in full of
such year
b) The taxpayer may claim the corresponding additional exemption, only on the
following year
c) The taxpayer cannot claim the corresponding additional exemption in any year
d) None of the choices

Answer: A

49. Which of the following will change the status of the taxpayer?
a) Marriage of a dependent within the taxable year
b) Dependent becoming 21 years old during the year
c) Dependent gaining employment during the year
d) Marriage of taxpayer himself during the year

Answer: D

50. First Statement: If the taxpayer dies during the taxable year, his estate may still claim the
personal and additional exemptions for himself and his dependent (s) as if he died at the
close of such year.

Second Statement: If the spouse or any of the dependent(s) dies or any of such
dependents marries, becomes 21 years old or becomes gainfully employed during the
taxable year, the taxpayer may claim the same exemptions as if the spouse or any of the
dependents died, or as if such dependents married, became 21 years old or became
gainfully employed at the close of such year.

a) Both statements are correct.


b) Both statements are incorrect.
c) Only the first statement is correct.
d) Only the second statement is correct.
Answer: A

51. (Phil. CPA) Among these taxpayers, whose personal exemption is subject to the law of
reciprocity under the Tax Code?

a) Nonresidents’ citizen with respect to his income derived from sources outside the
Philippines
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b) Nonresidents alien who shall come to the Philippines and stay herein for an
aggregate period of more than 180 days during any calendar year
c) Resident alien deriving income from a foreign country
d) Nonresident alien not engaged in trade or business in the Philippines whose
country allows personal exemption to Filipinos who are not residing but are
deriving income from said country

Answer: B

52. The taxpayer is a married nonresident alien engaged in business in the Philippines with
two (2) qualified dependent children. His country gives a nonresident Filipino with
income there from a basic personal exemption of P 20 000 and additional exemption of P
4 000.
a) P 20 000
b) P32 000
c) P 28 000
d) P 48 000

Answer: C

53. Who of the following cannot claim additional exemption?


a) Married taxpayers with qualified dependent illegitimate children
b) Single benefactor with a qualified dependent senior citizen
c) Single taxpayer with qualified dependent children
d) Married with qualified adopted children

Answer: B

54. (Phil CPA) A nonresident alien deriving income from Philippines sources claims that he
is entitled to personal exemptions. Which of the following is not a condition for the
allowance of personal exemption to said nonresident citizen?
a) That he has stayed in the Philippines for an aggregate period of more than 180
days
b) That 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) That he is married to a Filipina

Answer: D

55. One of the following is not qualified as dependent for income tax purposes
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a) Illegitimate child, 16 years old, living in the United States because of his studies
b) Senior citizen, not related to the taxpayer, living with and dependent upon the
taxpayer for chief support
c) Legitimate child, 21 years old, with a yearly income of P 60 000 living with
the taxpayer
d) Brother, 24 years old, incapable of self-support because of physical disability

Answer: C

56. How much of the premiums paid during the taxable year for health and / or
hospitalization insurance for the taxpayer and his family shall be allowed as a deduction
from his gross income?
a) Not to exceed Two thousand four hundred (P 2 400) per family or Two
hundred pesos (P 200) a month
b) Not less than Two thousand four hundred pesos (P 2 400) per family or Two
hundred pesos (P200) a month
c) Not exceed Three thousand four hundred pesos (P 3 400) per family
d) Not to exceed Two thousand four hundred pesos (P 2 400) per spouse or Two
hundred pesos (P200) a month

Answer: A

57. In order to be allowed a deduction for premiums paid during the taxable year for health
and / or hospitalization insurance, the family has to have a gross income of:
a) Not more the Two hundred fifty thousand pesos (P 250 000) for the taxable
year
b) Not less than Two hundred fifty thousand pesos (P 250 000) for the taxable year
c) Not more than Five hundred fifty thousand pesos (P 550 000) for the taxable year
d) Not more than Two hundred fifty thousand pesos (P 250 000) for the month
ending the taxable year

Answer: A

58. Who shall claim the deduction for premiums paid during the taxable year of health and /
or hospitalization insurance?
a) The husband always
b) The wife always
c) The spouse claiming the additional exemption for dependents
d) The spouse who has the higher income

Answer: C
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

59. Total family income includes primary income and other income from sources received
by:
a) The husband only
b) The wife only
c) The husband and wife only
d) All members of the nuclear family

Answer: D

60. Which of the following shall be considered nuclear family?


a) Father, mother, unmarried children living together as one household
b) Single parent with children
c) A single person living alone
d) All of the choices

Answer: D

61. A mass of all property, rights and obligations, which are not extinguished by death, of a
person existing at the time of his death, and includes those which have accrued since the
opening of succession
a) Estate
b) Trust
c) Co-ownership
d) Partnership

Answer: A

62. A right of property, real or personal, held by one person for the benefit of another
a) Estate
b) Trust
c) Co-ownership
d) Partnership

Answer: B

63. The tax imposed upon individuals shall apply to the income of estates or of any kind of
property held in trust, including
a) Income accumulated in trust for the benefit of unborn or unascertained person or
persons with contingent interests, and income accumulated or held for future
distribution under the terms of the will or trust
b) Income which is to be distributed currently by the fiduciary to the beneficiaries,
and income collected by a guardian of an infant who is to be held or distributed as
the court may direct
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

c) Income received by estates of deceased persons during the period of


administration or settlement of the estate
d) All of the choices

Answers: D

64. The tax imposed on trust shall no apply to employee’s trust which forms part of a
pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all
of his employees:

I-if contributions are made to the trust by such employer, or employees, or both for
the purpose of distributing to such employees the earnings and principal of the
fund accumulated by the trust in accordance with such plan;

II-if under the trust instrument it is impossible, at anytime prior to the satisfaction of
all liabilities with respect to employees under the trust, for any part of the corpus
or income to be (within the taxable year or thereafter) used for, or diverted to,
purposes other than for the exclusive benefit of his employees

a) Both I and II are correct


b) Neither I nor II is correct
c) Only I is correct
d) Only II is correct

Answer: A

65. First statement: Any amount actually distributed to any employee or distributee shall be
taxable to him in the year in which it was so distributed to the extent that it exceeds the
amount contributed by such employee or distributee

Second statement: The tax shall be computed upon the taxable income of the estate or
trust and shall be paid by the fiduciary, except as provided in Section 63 (relating to
revocable trusts) and Section 64 (relating to income for the benefit of the grantor)

a) Both statements are correct


b) Both statements are incorrect
c) Only the first statement is correct
d) Only the second statement is correct

Answer: A

66. Which of the following statement is incorrect?


a) The taxable manner and on the same basis as in the case of an individual
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b) There shall be allowed as a deduction in computing the taxable income of the


estate or trust the amount of the income of the estate or trust fir the taxable year
which is to be distributed currently by the fiduciary to the beneficiaries
c) There shall be allowed as a deduction in computing the taxable income of the
estate or trust the amount of the income collected by a guardian of an infant which
is to be held or distributed as the court may direct
d) The amount so allowed as a deduction in letters a. and b. above shall be
included in computing the taxable income of the beneficiaries only when
distributed to them

Answer: D

67. There shall be allowed as an additional deduction in computing the taxable income of the
estate or trust the amount of the income of the estate or trust for its taxable year, which is
properly paid or credited during such year to any legatee, heir or beneficiary but the
amount so allowed as a deduction shall be included in computing the taxable income of
the legatee, heir or beneficiary

I-In the case of income received by estates of deceased persons during the period
of administration or settlement of the estate

II-In the case of income which, in the discretion of the fiduciary, may be either
distributed to the beneficiary or accumulated

a) Both I and II are correct


b) Neither I and Ii is correct
c) Only I is correct
d) Only II is correct

Answer: A

68. First statement: In the case of a trust administered in a foreign country, the deductions
mentioned in Subsections (A) and (B) of Section 61 shall not be allowed

Second statement: The amount of any income included in the return of said trust
administered in a foreign country shall not be included in computing the income if the
beneficiaries

a) Both statements are correct


b) Both statements are incorrect
c) Only the first statement in correct
d) Only the second statement is correct

Answer: A
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

69. The exemption allowed to the estate and trust is:


a) Zero
b) P 20 000
c) P 25 000
d) P 50 000

Answer: D

70. In which of the following cases shall the income of such part of the trust be included in
computing the taxable income of the grantor?

I-Where at any time the power to revest in the grantor title to any part of the corpus of
the trust is vested in the grantor either alone or in conjunction with any person not
having a substantial adverse interest in the disposition of such part of the corpus or
the income there from.

II-Where at any time the power to revest in the grantor title to any part of the corpus
of the trust is vested in any person not having a substantial adverse interest in the
disposition of such part of the corpus or the income there from

a) I and II
b) I only
c) II only
d) None of the choices

Answer: A

71. In which of the following cases shall part of the income of the trust be included in
computing the taxable income of the grantor?
a) Where any part of the income or a trust is, or in the discretion of the grantor or of
any person not having a substantial adverse interest in the disposition of such part
of the income may be held or accumulated for future distribution to the grantor
b) Where any part of the income of a trust may, or in the discretion of the grantor or
of any person not having a substantial adverse interest in the disposition of such
part of the income, be distributed to the grantor
c) Where any part of the income of a trust is, or in the discretion of the grantor or of
any person not having a substantial adverse interest in the disposition of such part
of the income may be applied to the payment of premiums upon policies of
insurance on the life of the grantor
d) All of the choices

Answer: D

72. Which of the following statements is incorrect?


Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a) Guardians, trustees, executors, administrators, receivers, conservators, and all


persons or corporation, acting in any fiduciary capacity, shall render, at least in
duplicate, a return of the income of the person, trust or estate for whom or which
they act
b) A return for estate and trust shall be filed only in case such person, estate or trust
has a gross income of over Twenty thousand pesos (P 20 000) during the taxable
year
c) Such fiduciary or person filing the return for him or it, shall take oath that
he has sufficient knowledge of the affairs of such person, trust or estate to
enable him to make such return and that the same is, to the best of his
knowledge and belief, true and correct, and be subject to all the provisions
which apply to individuals
d) A return made by or for one or two or more joint fiduciaries filed in the province
where such fiduciaries reside; under each rules and regulations as the Secretary of
Finance, upon recommendation of the Commissioner, shall prescribe, shall be a
sufficient compliance with the requirements of the Tax Code

Answer: C

73. First statement: Where the estate is under judicial administration, the income of the estate
shall be taxable to the fiduciary or trustee who shall pay file the return for the estate and
pay the income tax due thereon

Second statement: Where the estate is not under judicial administration, the income of the
estate shall be taxable to the heirs and beneficiaries who shall include in their returns
their distributive share of the net income of the estate.

a) True, True
b) False, False
c) True, False
d) False, True

Answer: A

74. Which of the following is included in the income of the estate of a decedent?
a) Income received by the estate of a deceased person during the period of
administration or settlement of the estate
b) Excess of selling price over the appraised value placed upon the property at the
time of death, where the property was sold after the settlement of the estate
c) Appreciation in the value of the property passed to the executor or administrator
upon death of decent
d) Delivery of property in kind to legatee or distributee
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Answer: A

75. First statement: The amount of income of the estate for the taxable year, which is
properly paid or credited during such year to any legatee, heir or beneficiary, is a special
item of deduction from the gross income of the estate.

Second statement: An allowance paid a widow or heir out of the corpus of the estate is
not deductible from the gross income of the estate

a) True, True
b) False, False
c) True, False
d) False, True

Answer: A

76. The income distributed to the beneficiaries of estates and trusts, except income subject to
final withholding tax and income exempt from tax, is subject to:
a) Creditable withholding tax of 10%
b) Creditable withholding tax of 15%
c) Final withholding tax of 20%
d) Neither final nor creditable withholding tax

Answer: B

77. A trust where the income and the corpus of which do not revert to the grantor, title to any
part of the corpus of the trust, is vested in the grantor himself or in any person not having
any substantial adverse interest in the trust corpus or in its income
a) Ordinary trust
b) Revocable trust
c) Irrevocable trust
d) Employee’s trust

Answer: A

78. A trust in which the power to revest in the grantor, title to any part of the corpus of the
trust, is vested in the grantor himself or in any person not having any substantial adverse
interest in the trust corpus or in its income
a) Ordinary trust
b) Revocable trust
c) Irrevocable trust
d) Employee’s trust
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Answer: B

79. Which of the following income of the trust is not taxable to the trust?

a) Income of the trust which is to be accumulated or held for future distribution


consisting of ordinary income or gain from the sale of assets included in the corpus of
the trust.

b) Income of the trust, whether created by will or deed, for accumulation of income,
whether for an unascertained person or persons with contingent interest or otherwise.

c) Income of the trust, where under the terms of a will or deed, the trustee may, in his
discretion, distribute the income or accumulate it.

d) Income of a trust, which in whole or in part, is subject to revocation by the


grantor.

Answer: D.