COLEGIO DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

INCOME TAXATION
Summer, AY 2017-2018
Final Examination (Set A)

Write the letter of the BEST answer. NO ERASURES ON FINAL ANSWERS.

1. Which of the following statements is not correct?

A. An individual citizens of the Philippines who is working and deriving income from abroad as an overseas contract
worker is taxable on income from sources within and without the Philippines.
B. A seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member
of the complement of vessel engaged exclusively in international trade shall be treated as a resident citizen.
C. A non- resident citizen who is not engaged in business in the Philippines is treated as non-resident alien who is not
engaged in business in the Philippines
D. An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources in the
Philippines

2. A resident citizen is taxable on all income derived from sources

A.Within the Philippines only
B.Without the Philippines only
C.Partly within and partly without
D.Within and without the Philippines

3. As a rule, this is not part of taxable income

A. Profit sharingC.Overtime pay
B. Hazard payD.13th month pay

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

A.Within the Philippines only
B.Without the Philippines only
C.Partly within and partly without
D.Within and without the Philippines

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

A.Within the Philippines only
B.Without the Philippines only
C.Partly within and partly without
D.Within and without the Philippines

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

A.Within the Philippines only
B.Without the Philippines only
C.Partly within and partly without
D.Within and without the Philippines

7. 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

8. 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

9. All of the following are subject to 15% final tax on interest on FCDU Deposit, except
a. Resident citizenc. Domestic corporation
b. Non-resident citizend. Resident corporation
c. Resident alien

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10. A citizen of the Phils. who works and derives income from abroad is a resident if he stayed outside the Phils.
A.For less than 180 days
B.For more than 180 days
C.For 183 days or more
D.For less 183 days

11. A citizen of the Phils. Who works abroad and whose employment requires him to be
physically present abroad most of the time during taxable years
A.Taxable on income within and without the Phils.
B.Taxable on income from without the Phils.
C.Exempt from income tax
D.Taxable income from within the Phils.

12. A citizen of a foreign country is considered a non-resident alien engaged in business in the
Phils. If he stayed inside the Phils.
A.For 183 days or more
B.For less than 183 days
C.For more than 180 days
D.For less than 180 days

13. This is taxable income

A. Retrenchment payC.Separation pay due to resignation
B. SSS/GSIS benefitsD.Refund of Philippine Income tax

14. Which of the following is taxable income?

A. Prizes and awards as an awardee of Ramon Magsaysay Award Foundation
B. Damages awarded as a consequence of a libel and slander suits
C. Interest on Philippine lotto winnings
D. Amounts received as returns of premiums

15. One of the following is taxable income

A. Gifts, bequests and devices
B. Amounts received as rewards for giving information instrumental in the discovery of violation of the Tax Code and
seizure of smuggled goods
C. Proceeds from life insurance
D. Separation pay received by an employee due to a cause beyond his control

16. As a rule, the following are taxable income, except

A. Cash dividendC.Scrip dividend
B. Property dividendD.Stock dividend

17. Which of the following statements is not correct?

A. Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are excluded from gross income
regardless of whether the proceeds are received as a single sum or in installments.
B. In case of transfer for a valuable consideration by assignment or otherwise of a life
insurance, endowment or annuity contract or any interest therein, only the actual value of such consideration and the
amount of the premium and the sums subsequently paid by the transferee are exempt from income tax.
C. Marriage fees, baptismal offerings, sums paid for saying masses for the dead and other
contributions received by a clergyman, evangelist or religious worker for services rendered is taxable income.
D. Monetization of leave credits of employees who were unable to go on leave due to
exigencies of the service constitute taxable income.

18. – PCSO and Phil lotto winnings are excluded from gross income because they are subject to
final tax.
- Prizes, awards and winnings are excluded from gross income because they are subject to
final tax.
A. Both are trueC.True; False
B. Both are FalseD.False; True

19. Which statements is correct?

A. Incomes from illegal activities are taxable.
B. Tax refunds constitute taxable income to the taxpayer.
C. Recovery of bad debts previously written off is part of taxable income

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D. As a rule, contest awards and prizes are subject to 20% final tax if they amount to P10,00 or more, otherwise they will
be exempt from income tax.

20. Exclusions from gross income, except:

A. Interest on the price of the land covered by the Presidential Decree on land reform.
B. Interest payments on proceeds of life insurance held by the insurer
C. GSIS/SSS, Philhealth and Pag-ibig contributions and Union dues of individuals
D. Gains realized by an investor upon redemption of shares of stock in a mutual fund
company.

21. One of the following represents taxable income:

A. Refund of overpaid rental expense in prior year
B. Refund of donor’s tax paid in prior year
C. Refund of income tax in prior year
D. Refund of special assessment paid in prior year

22. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation of
indebtedness may amount to
a. A gift
b. A capital contribution
c. A donation inter-vivos
d. A payment of income

23. This is not part of gross compensation income

A. Salary of P 20,000 a month
B. Fringe benefits of P10,000 of an employee
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

24. Which of the following is subject to fringe benefit tax?

A. compensation income of the rank and file employees
B. fringe benefit of the rank and file employees
C. compensation income of the managerial employees
D. fringe benefit of the managerial employees

25. The following concepts denote exemption from the fringe benefits tax, except
A. convenience of the employer
B. necessity to the business or trade
C. welfare and benefits of the employee
D. de minimis benefits

26. The following items are exclusions from gross income, except
A. Labor union dues
B. IOU’s
C. SSS/GSIS premiums contributions
D. Pag-ibig premiums contributions

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

A. PCSO & Phil Lotto winnings
B. Bank interest on long-term deposit
C. Proceeds of life insurance
D. Raffle prize not exceeding P10,000

28. If refunded, this is taxable

A. Estate tax
B. Special assessment
C. Donor’s tax
D. Fringe benefit tax

29. Income tax payments to a foreign country, in the case of a resident citizen may be claimed as
A. Tax credit and deduction from gross income
B. Tax credit only
C. Tax credit or deduction from gross income

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D. Deduction from gross income only

30. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except
A. if received by a resident citizen
B. if received by a resident alien
C. if received by a non-resident corporation
D. if received by another domestic corporation

31. As a rule, fringe benefit furnished or granted in cash or in kind by an employer to an

individual employee maybe subject to the fringe benefit tax, if given to
1.Rank and file employees
2.Managerial employees
3.Those holding supervisory positions

A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3

32. The fringe benefit tax is

1. Imposed on the employer
2. Withheld at source
3. Deductible by the employer

A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3

33. With regard to the amount on which the fringe benefit tax rate is applied, which statement is wrong? The tax benefit
rate is applied on
A. The monetary value of the fringe benefit
B. The gross-up monetary value of the fringe benefit
C. The amount deductible by the employer from gross income
D. Both accounts of the fringe benefit and the fringe benefit tax

34. The following fringe benefits are not subject to fringe benefit tax, except
A. if required by the nature of or necessary to the trade, business or profession of the
employer
B. contributions of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefit plans
C. benefits given to the rank and file employees
D. if given for the convenience or advantage of the employee

35. Basic rules on fringe benefits tax, except

A. Fringe benefit given to rank and file employees is not subject to fringe benefits tax
B. Fringe benefit given to a supervisory or managerial employee is subject to fringe
benefits tax
C. De minimis benefit whether given to rank and file employee or to supervisory or
managerial employee is not subject to fringe benefit tax
D. The fringe benefit tax is a tax paid by the managerial or supervisory employee.

36. Facilities or privileges or offered or furnished or offered by an employer to his employees

that are of relatively small value and are offered or furnished by the employer merely as a
means of promoting the health, goodwill, contentment, or efficiency of his employees.
A. Fringe benefitC.De minimis benefit
B. Fringe benefit taxD.Grossed-up monetary

37. Which statement is wrong? The fringe benefit tax is

A. imposed on the employer
B. imposed on the managerial or supervisory employee
C. withheld at source
D. deductible by the employer

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38. The grossed-up monetary value of fringe benefit subject to fringe benefit tax received by a
non-resident alien individual not engaged in trade or business in the Philippines is
computed by dividing the monetary value of the fringe benefit by
A. 75%
B.85%
C. 25%
D.15%

39. The following fringe benefits are not subject to fringe benefits tax, except:
A. Fringe benefits given to the rank and file employees, whether granted under a collective bargaining agreement or not
B. Contributions of the employer for the benefit of the employees to retirement, insurance and hospitalization benefits
plans
C. De minimis benefits, as defined in the rules and regulations to be promulgated by the Secretary of Finance, upon
recommendations of the Commissioner.
D. Fringe benefits furnished or granted by the employer to its managerial and supervisory employees.

40. 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

41. The phrase “related taxpayers” will apply to the following, except:
A. Between members of a family
B. Between the grantor and a fiduciary of any trust
C. Between a fiduciary of a trust and a beneficiary of such trust
D. Between an individual and a corporation more than 50% in value of the outstanding stock of which is owned, directly or
indirectly for such individual, in case of distributions in liquidation.

42. Examples of taxes that are deductible except

A. Occupation tax
B. Documentary stamp tax
C. Privilege tax
D. Philippine income tax

43. - An expense which is necessary but not ordinary, or ordinary but not necessary is
Deductible from gross income.
- The taxpayer must signify his intention to elect the itemized deduction, otherwise, he is
deemed to have chosen the optional standard deduction.
A. True; True
B.False; True
C. True; False
D.False; False

44. - Interest paid on preferred stock is deductible from gross income of the paying
corporation.
- A capital expenditure usually benefits more than one accounting period and is
deductible from gross income in the year it is paid or incurred.

A. True; True
B.False; True
C. True; False
D. False; False

45. SEYCHELLE, A STAFF AUDITOR OF SGV & CO., TOOK AND PASSED THE EXAMINATION FOR CERTIFIED INTERNAL AUDITOR
(CIA). THE FOLLOWING YEAR, HE RESIGNED FROM HIS JOB AND LEFT THE PHILIPPINES ON APRIL 10, 2016 TO WORK AS
AN INTERNAL AUDITOR IN A BIG ESTABLISHMENT IN MELBOURNE, AUSTRALIA. FOR INCOME TAX PURPOSES, WHICH OF
THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO SEYCHELLE’s CLASSIFICATION?
a. HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE WHOLE YEAR OF 2016
b. HIS CLASSIFICATION AS A NON-RESIDENT CITIZEN WILL START IN 2017
c. HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE YEAR 2016 WITH RESPECT TO HIS INCOME DERIVED FROM
SOURCES WITHOUT FROM APRIL 10, 2016
d. HE SHALL BE CLASSIFIED AS NON-RESIDENT CITIZEN FOR THE YEAR 2016 WITH RESPECT TO HIS INCOME DERIVED FROM
SOURCES WITHOUT FROM APRIL 11,2016

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