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1.

A resident citizen, single, with 4 qualified dependent illegitimate children had the following during the calendar year:

Gross compensation income P250,000


Expenses related to his employment 120,000
SSS premium contributions 3,600
Philhealth contribution 2,400
Pag-ibig contributions 2,000
Union dues 1,000
Premiums on health insurance 4,000

The taxable income for the year before personal and additional exemption is
______________

Use the ff. for numbers 2-6


Gross income, Philippines P400,000
Gross income, USA 300,000
Expenses, Philippines 200,000
Expenses, USA 150,000

2. If the taxpayer is a resident citizen, married his taxable income is

a. P309,000 b. P318,000 c. P350,000 d. P300,000

3. If the taxpayer is a non-resident citizen, married, his taxable income is

a. P300,000 b. P159,000 c. P150,000 d. P200,000

4. If the taxpayer is a resident alien, married, his taxable income is

a. P300,000 b. P159,000 c. P150,000 d. P200,000

5. If the taxpayer is a non-resident alien engaged in business in the Philippines married and his country allows reciprocity
of P30,000, as personal exemption for married individuals, his taxable income is

a. P370,000 b. P170,000 c. P200,000 d. P150,000

6. If the taxpayer is a non-resident alien engaged in business in the Philippines, married, and his country grants P35,000
as personal exemption for married individuals, his taxable income is

a. P370,000 b. P170,000 c. P200,000 d. P400,000

7. A, a Frenchman, arrived in the Philippines on January 1, 2014 and continued to live and engage in business in the
Philippines. He went on a tour of Southeast Asia from August 1 to November 5, 2014. He returned to the Philippines
on November 6, 2014 and stayed until April 15, 2015 when he returned to France. He earned during his year in the
Philippines a gross income of P3 million from his investments in the country. For the year 2014, Pierre’s taxable status
is that of
a. A non-resident alien no engaged in trade or business in the Philippines.
b. A non-resident alien engaged in trade or business in the Philippines.
c. A resident alien not engaged in trade or business in the Philippines.
d. A resident alien engaged in trade or business in the Philippines.

8. A citizen of the Philippines who works and derives income from abroad is a resident citizen if he stayed outside the
Philippines

a. For less than 180 days c. For 183 days or more


b. For more than 180 days d. For less than 183 days

9. A non-resident citizen is taxable on all income derived from sources


a. Within the Philippines c. Partly within and partly without
b. Without the Philippines d. Within and without the Philippines

10. A resident alien is taxable on all income derived from sources

a. Within the Philippines c. Partly within and partly without


b. Without the Philippines d. Within and without the Philippines

11. A non-resident alien is taxable on all income derived from sources

a. Within the Philippines c. Partly within and partly without


b. Without the Philippines d. Within and without the Philippines

12. A, single, earned P200,000(net of P50,000 withholding tax) compensation income from employment from July to
December 2014. He has a legally adopted child as qualified dependent and paid P3,000 as health and hospitalization
insurance premiums from July to December. For 2014, he can deduct premiums for health and hospitalization
insurance of:

a. P3,000 b. P2,400 c. P1,200 d. P0

13. A non-resident alien is deemed doing business in the Philippines if he


a. Is an individual whose residence is within the Philippines
b. Is an individual whose father or mother is an alien who is engaged in business in the Philippines
c. Is an individual who is naturalized in accordance with law
d. Shall come to the Philippines and stay therein for an aggregate period of more than 180 days during a calendar
year.

14. In 2015, Nelia Gomez, a MWE, received from her employer an annual minimum wage salary of P99,702. Aside from
this, she also received P8,000 for holiday pay, overtime pay, and night shift differential pay. Furthermore, she received
P8,303 as her 13th month pay. What amounts shall she be taxable on?

a. P8,000. b. P107,702. c. P8,303. d. PNone.

15. Nelia in Number 14 above was promoted in June 2016, and starting the same month was given a raise in salary which
is more than the statutory minimum wage. Will her entire compensation during 2016 bw taxable and subject to
withholding tax?
a. Yes. Her entire earnings shall be taxable.
b. No. Her entire earnings shall not be taxable.
c. Only her earnings from June 2016 to December 2016 shall be taxable and subject to withholding tax.
d. None of the above.

16. Kaino sold his residential house and lot located in Manila on January 5, 2015 for P8,000,000. The property was
purchased in 2005 for P3,000,000. The current market value of the property at the time of sale was:
BIR Commissioner’s zonal valuation - P9,000,000
City Assessor’s schedule of values - P6,000,000

What is the capital gains tax on the sale?

a. P300,000 b. P360,000 c. P480,000 d. P540,000

17. If Kaino in number 16 above, within 6 months after the sale, purchases another residence for P8,000,000, what will be
the capital gains tax on the sale and what would be the cost(basis) of the new residence for income tax purposes?

a. P540,000; P8,000,000 c. P540,000; P9,000,000


b. P0; P6,000,000 d. P0; P3,000,000
18. Suppose Kaino in number 16, within the 18-month reglementary period, instead purchases a new principal residence
at a cost of P10,000,000. What will be the capital gains tax on the sale and what would be the cost(adjusted basis) of
the new residence for income tax purposes?

a. P0; P3,000,000 b. P0; P10,000,000 c. P0; P9,000,000 d. P0; P5,000,000

19. Suppose Kaino in number 16, within the 18-month reglementary period instead purchases a new residence at a cost of
P5,000,000. What will be the capital gains tax on the sale?

a. P202,500 b. P300,000 c. P480,000 d. P337,500

20. In number 19, what would be the cost (adjusted basis) of the new residence for income tax purposes?

a. P3,000,000 b. P1,875,000 c. P0 d. P5,000,000

21. The power to acquire private property upon payment of just compensation for public purpose.

a. Power of taxation c. Power of eminent domain


b. Police power d. Power of recall

22. It is the privilege of not being imposed a financial obligation to which others are subject

a. Tax incentive b. Tax exemption c. Tax amnesty d. Tax credit

23. Which of the following is not a determinant of the place of taxation?

a. The power is exercised by legislative action c. It is generally payable in money


b. It is essentially an administrative function d. Without it the state can continue to exist.

24. The use of illegal or fraudulent means to avoid or defeat the payment of tax

a. Shifting c. Transformation
b. Exemption d. Capitalization

25. Which of the following is not correct?


a. Minimum wage earners shall be exempt from the payment of income tax.
b. Holiday pay, overtime pay, night shift differential and hazard pay shall be exempt from income tax.
c. Prizes and awards granted to athletes in local and international sports competitions and tournaments whether
held in the Philippines or abroad, and sanctioned by their national sports associations are exclusions from gross
income.
d. Benefits received from or enjoyed under the Social Security System are exclusions from gross income.

26. This is a taxable income

a. Retrenchment pay c. Separation pay due to resignation


b. SSS?GSIS benefits d. Refund of Philippine income tax

27. The following items are exclusions from gross income, except

a. Labor union dues c. IOUs


b. SSS/GSIS premiums contribution d. Pag-ibig premium contribution

28. Which of the following is part of gross income?

a. PCSO and Philippine Lotto winnings c. Proceeds of life insurance


b. Bank interest on long term deposit d. Raffle prize not exceeding P10,000

29. Gross benefits received by officials and employees of public and private entities as 13 th month pay and other benefits
such as productivity bonus, services incentive pay and Christmas bonus shall be excluded from taxable income up to
a. P20,000 b. P82,000 c. P40,000 d. P90,000

30. Dividends paid by a domestic corporation may be taxable but subject to final tax, except

a. If received by a resident citizen c. If received by a non-resident corporation


b. If received by a resident alien d. If received by another domestic corporation

31. PCSO and Philippine lotto winnings are excluded from gross income because they are subject to final tax.
Prizes, awards, winnings are excluded from gross income because they are subject to final tax.

a. Both are true c. Only the first is true


b. Both are false d. Only the second is true.

32. Income tax payments to foreign country, in the case of a resident citizen may be claimed as

a. Tax credit and deduction from gross income c. Tax credit or deduction from gross income
b. Tax credit only d. Deduction from gross income only

33. Which payments made by the lessee under such terms of the lease contract should be considered as additional rent
income of the lessor?
A. If a lessee paid directly to the government the real estate tax on the property of the lessor
B. If the amount received by the lessor is in the nature of a security deposit for the faithful compliance by the lessee
of the terms of the contract
C. If the amount received by the lessor is in nature of a loan extended by the lessee to the lessor.

a. Only A b. Only A and C c. Only B and C d. A,B and C

34. After 10 years of romantic relationship, A decided to end his relationship with B which made B very angry. B with anger
in her eyes boxed, kicked and berated A. A tried to pacify B, but B slipped, lost control and fell to the ground requiring
hospitalization. To buy peace, A decided to shoulder the medical expenses for the injuries suffered by B. the amount is

a. Taxable income B c. Subject to final tax


b. Deductible expense of A d. Exempt from income tax

35. In 2014, A inherited pieces of jewelry from her father with a FMV of P500,000. Her father acquired the property in
1975 for P200,000. If A sells these pieces of jewelry in 2014 for P550,000, A’s gross profit is

a. P350,000 b. P50,000 c. P550,000 d. P300,000

36. Using the preceding number, except that A acquired the property as a birthday gift from her father, A’s gross profit is

a. P350,000 b. P50,000 c. P550,000 d. P300,000

37. A purchased a life annuity for P1,000,000 which will pay him P100,000 a year. The life expectancy of A is 12 years.
Which of the following will A be able to exclude from his income?

a. P1,000,000 b. P1,200,000 c. P 200,000 d. P 100,000

38. This is not a part of gross compensation income


a. Salary of P10,000 a month of an employee
b. Fringe benefits of P10,000 a month
c. Salary of P10,000 a month of a partner in a general professional partnership
d. Honorarium and allowances of P10,000 of a member of the board of directors of a corporation.

39. The records of ABC Corporation, organized in 2004 showed the following data for 2014.
Gross Income P2,000,000
Less: Allowable business expenses(other than bad debts) P 1,850,000
Bad debts written off 100,000 1,950,000
Taxable net income P 50,000

In 2015, 80% of the bad debts written off in 2014 was collected

The income tax due in 2014 is

a. P40,000 b. P45,000 c. P15,000 d. P25,000

40. Using the information from the preceding number, which of the following statement is correct?
a. There is a deficiency income tax of P24,000 for 2014
b. The taxable net income should be corrected to P130,000
c. There is a taxable recovery amounting to P80,000 in 2015
d. The bad debts expense is 2014 should be reduced to P20,000.

41. The following may be allowed to claim optional standard deduction, except

a. Resident citizen c. Resident alien


b. Non-resident citizen d. Non-resident alien

42. May be deducted from gross income

a. Philippine income tax c. Estate or donor’s tax


b. Foreign income tax d. Special assessment

43. This is not deductible from gross income


a. Transportation expenses from the main office to the branch.
b. Transportation expenses from home to the office and from the office back to home.
c. Travel expenses on business trips.
d. Travel expenses while away from home in the pursuit of trade, business or profession.

44. No deductions shall be allowed where the transaction is between “related taxpayers” for
A. Losses from sales or exchanges of property
B. Interest expense
C. Bad debts

a. A and B b. B and C c. A and C d. A,B and C

45. The optional standard deduction for corporations is

a. 10% of the gross income c. 40% of the gross income


b. 10% of the gross sales/receipts d. 40% of the gross sales/receipts

46. The optional standard deduction for individuals is

a. 10% of the gross income c. 40% of the gross income


b. 10% of the gross sales/receipts d. 40% of the gross sales/receipts

47. For individuals, premiums paid during the taxable year for health and/or hospitalization insurance taken out by him on
himself, including his family shall be allowed as deductions from gross income, provided that the family has a gross
income of

a. More than P250,000 c. Not more than P250,000


b. More than P500,000 d. Not more than P2,400.

48. Interest expense incurred to acquire property used in trade or business or exercise of profession is
a. Not allowed as a deduction against gross income.
b. Required to be treated as a capital expenditure from the part of the cost of the asset.
c. Allowed as a deduction or treated as a capital expenditure at the option of the taxpayer
d. Allowed as a deduction or treated as a capital expenditure at the option of the government.

49. A Corp. had net sales of P1M. the actual entertainment, amusement and recreation expense amounted to P20,000.
The deductible “EAR” expense is

a. P20,000 b. P6,000 c. P10,000 d. P5,000

50. A Corp. had net revenues of P1M. the actual entertainment, amusement and recreation expense amounted to
P20,000. The deductible “EAR” expense is

a. P20,000 b. P6,000 c. P5,000 d. P10,000

51. I. An expense which is necessary but nt ordinary, or ordinary but not necessary is deductible from gross income.
II. The taxpayer must signify his intention to elect the itemized deduction, otherwise, he is deemed to have shosen the
optional standard deduction.

a. True, true c. False, true


b. True, false d. False, false

52. I. The cost of leasehold improvements shall be deductible by the lessee by spreading the cost of the improvements
over the life of the improvements or the remaining term of the lease, whichever period is shorter.
II.Contributions by the emplolyer to a pension trust for past service cost is deductible in full in the year that the
employer made the contributions.

a. True, true b. True, false c. False, true d. False, false

53. A, dedicated and honest employee of ABC Corp. for the past 10 years was advised that he is to be retrenched as the
company was losing heavily but that he would be given the separation pay provided by law. To avoid implication of
inefficiency, A was advised to file a letter of resignation instead of being retrenched. If A files a letter of resignation and
receives the separation pay, such amount is

a. Taxable in full c. Exempt from income tax


b. Partly taxable, partly exempt d. Subject to final tax.

54. Using the preceding number, if A is retrenched and receives the separation pay, such amount is

a. Taxable in full c. Exempt from income tax


b. Partly taxable, partly exempt d. Subject to final tax

55. A building was partially destroyed by fire in 2009. The building had a book value of P5M. the insurance company was
willing to pay P4M, which was refused by the owner. Finally, the claim was settled in 2011 for P4.6M. The proceeds will
be

a. Exempt from income tax c. Subject to final tax


b. Part of taxable income d. Partly exempt, partly taxable.

56. One of the following is not correct for deductibility of losses from gross income
a. Must arise from fire, storm or other casualty, robbery, theft or embezzlement.
b. Must not be compensated by insurance or other form of indemnity.
c. A declaration of loss by casualty should be filed with the Bureau of Internal Revenue.
d. Must have been claimed as deduction in the estate return of the taxpayer.

57. The net operating loss, which had not been previously offset as deduction from gross income shall be carried over as
deduction from gross income for the next
a. 2 consecutive taxable years immediately following such loss.
b. 3 consecutive taxable years immediately following such loss.
c. 4 consecutive taxable years immediately following such loss.
d. Taxable year immediately following such loss.
58. Mr. Santos, a retailer of goods, uses the accrual method in reporting his income and expenses. His transactions show:

Jan. 1 to June 30 July 1 to Sept.30 Oct. 1 to Dec. 31


Gross sales P1,000,000 P700,000 P900,000
Cost of Sales 600,000 200,000 300,000
Business expenses 100,000 50,000 70,000

If the calendar year is 2015, the net income before exemption using OSD is

a. P1,560,000 b. P1,040,000 c. P 900,000 d. P 600,000

59. Using the preceding number, but using ID, the net income before exemption is

a. P1,280,000 b. P1,500,000 c. P1,230,000 d. P 900,000

60. The records of a domestic corporation organized in 2000 show:

2009 2010 2011 2012


Gross Income P2,000,000 P2,200,000 P2,500,000 P2,800,000
Deductions (where 5% represents bad debts written off) 1,900,000 2,000,000 P2,520,000 2,400,000
Net Income (Loss) P100,000 P200,000 (P 20,000) P 400,000
Subsequent recovery of bad debts written off:
In 2009 P60,000
In 2010 P10,000

A. The income tax payable for 2009 is

a. P30,000 b. P40,000 c. P58,500 d. P40,500

B. The income tax payable for 2010 is

a. P78,000 b. P68,000 c. P60,000 d. P50,000

C. The income tax payable in 2011 is

a. P 0 b. P50,000 c. P18,000 d. P24,000

D. The income tax payable for 2012 is

a. P73,000 b. P70,000 c. P67,000 d. P64,000

61. The records of Manila Bus Corp. show salaries and wages paid for its rank and file employees:
To non-senior citizens P1,800,000
To senior citizen 200,000

The deductible salaries and wages expense is

a. P2,000,000 b. P1,960,000 c. P2,400,000 d. P2,030,000

62. For mines other than oil and gas wells, a net operating loss without the benefit of incentives under Executive Order
226, as amended, otherwise known as Ombinus Investment Code of 1987, maybe carried over as a deduction from
taxable income, if incurred in any of the

a. First 10 years of operation c. First 3 years of operation


b. First 4 years of operation d. First 5 years of operation

63. Using the preceding number, such net operating loss can be carried as a deduction from taxable income, within how
many years immediately following the year of such loss?

a. 5 years b. 3 years c. 10 years d. 4 years


INCOME TAX ON CORPORATIONS
64. Which of the following is classified as a special corporation subject to preferential corporate income tax rate?

a. Social Security System c. Philippine Charity Sweepstakes Office


b. Proprietary Educational Institution d. Government Services Insurance System

65. If the gross income from unrelated activity exceeds 50% of the total gross income derived by any private educational
institution, the tax rate shall be the regular 30% based on the entire taxable income. This is known as the

a. Constructive receipt c. End trust doctrine


b. Tax benefit rule d. Predominance test

A Corporation’s record show: (for items 66-69)

Quarter Normal Income Tax MCIT per Quarter Taxes Withheld Excess MCIT Prior Excess Withholding
per Quarter per Quarter Year Tax Prior Year
First P100,000 P80,000 P20,000 P30,000 P10,000
Second 120,000 250,000 30,000
Third 250,000 100,000 40,000
Fourth 200,000 100,000 35,000

66. The income tax due and income tax payable, respectively, for the first quarter are

a. P100,000; P100,000 c. P100,000; P50,000


b. P100,000; P80,000 d. P100,000; P40,000

67. The income tax due and income tax payable, respectively, for the second quarter are

a. P330,000; P120,000 c. P330,000; P150,000


b. P330,000; P250,000 d. P330,000; P230,000

68. The income tax due and income tax payable, respectively, for the third quarter are

a. P470,000; P250,000 c. P470,000; P140,000


b. P470,000; P100,000 d. P470,000; P70,000

69. The income tax due and income tax payable, respectively, for the year are

a. P670,000; P200,000 c. P670,000; P135,000


b. P670,000; P100,000 d. P670,000; P165,000

70. Using the preceding problem except that the normal income tax for the fourth quarter is P50,000 (instead of
P200,000), the income tax still due for the year is

a. P120,000 b. P 55,000 c. P 45,000 d. P 75,000

71. A CPA University, a proprietary educational institution organized in 2000, had the following data for 2012.
Tuition P850,000
Rental Income(net of 55% cwt) 142,500
School related expenses 820,000

The income tax still due for 2012 is

a. P54,000 b. P10,500 c. P18,000 d. P46,500

72. CPA Airlines, a resident foreign international carrier has the following records of income for the period. (The income
represents gross billings.)
a. Continuous flight from Manila to Tokyo = 1,000 tickets at P2,000 per ticket
b. Flight from Manila to Taipei; transfer flight (on CPAR Airlines) from Taipei to Tokyo = 2,000 tickets at P2,000 per
ticket
c. Continuous flight from Manila to Taipei -= 3,000 at P1,000 per ticket
The income tax due is

a. P225,000 b. P125,000 c. P100,000 d. P175,000

For items 73-82. The Corporation provided date for the calendar year ending December 31, 2012. ($1 = P50)

Philippines Abroad
Gross Income P4,000,000 $40,000
Deductions P2,500,000 $15,000
Income Tax Paid $ 3,000

73. If it is a domestic corporation, its income tax after tax credit is

a. P812,500 b. P675,000 c. P962,500 d. P480,000

74. If it is a resident foreign corporation, its income tax is

a. P730,000 b. P450,000 c. P480,000 d. P525,000

75. If it is a non-resident foreign corporation, its income is

a. P730,000 b. P1,280,000 c. P1,200,000 d. P1,400,000

76. If it is a domestic corporation, but it opts to claim the tax paid abroad as deduction from gross income, its income tax is

a. P910,000 b. P832,000 c. P237,000 d. P780,000

77. If it is a resident international carrier, its income tax is

a. P100,000 b. P10,000 c. P37,000 d. P125,000

78. If it is a non-resident cinematographic film owner/lessor, its income tax is

a. P1,000,000 b. P100,000 c. P300,000 d. P128,000

79. If it is a non-resident lessor of vessels, its income tax is

a. P100,000 b. P180,000 c. P300,000 d. P128,000

80. If it is a non-resident lessor of aircrafts, machineries and equipment, its income tax is

a. P100,000 b. P180,000 c. P300,000 d. P128,000

81. If it is a resident foreign corporation but its expenses within and outside the Philippines is P3M, unallocated (disregards
original data on expense) its income tax is

a. P640,000 b. P700,000 c. P480,000 d. P600,000

82. If it is a resident foreign corporation and it remitted 60% of its net profit to its head office abroad, its total tax liability is
(Original data)

a. P480,000 b. P571,800 c. P544, 500 d. P612,750

83. The record of a closely-held domestic corporation show the following data for 2014:
Gross income P1,500,000
Business expenses 600,000
Gain on sale of business asset 60,000
Interest on deposits with Metrobank, net of tax 5,000
Sale of shares of stocks, not listed and traded:
Selling price 150,000
Cost 115,000
Dividends from Victory Corporation, domestic 35,000
Dividends paid during the year 120,000
Reserved for building acquisition 300,000

In 2013, the corporation suffered an operating loss of P130,000. This amount was carried forward and claimed as
deduction from gross income 2014. The income tax due in 2014 is

a. 234,375 b. P249,000 c. P273, 937 d. P288,000

84. Using the preceding number, the improperly accumulated earnings tax

a. P48,640 b. P34,765 c. P35,640 d. P36,075