TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

COLLEGE OF BUSINESS EDUCATION

QUIZ 2 – INCOME TAXATION – SET A
December 10, 2019

PART. MULTIPLE CHOICE. Write in the answer sheet the letter of your best answer.
1. Which of the following is a taxable compensation income
a) Retirement pay under BIR approved retirement plan
b) Separation pay due to disability
c) Separation pay due to resignation
d) Terminal pay by fact of death
2. The business entity reported the following changes during the year:
Increase in total assets 450,000
Decrease in total liabilities 360,000
Additional investment to the business 250,000
Drawings during the year 220,000
The business income for the year amounts to
a) P 370,000 c) P 810,000
b) P 510,000 d) P 670,000
3. The tax rate for cash or property dividend payment by domestic corporation to nonresident foreign
corporation without reciprocity rule is
a) 30 percent d) 15 percent
b) 20 percent e) 10 percent
4. Which of the following is subject to fringe benefit tax ?
a) Compensation of the rank-and-file employees
b) Compensation of the supervisory and managerial employees
c) Fringe benefit of the rank and file employees
d) Fringe benefit of the supervisory and managerial employee
5. Which of the following individual taxpayers is not required to file an income tax return ?
a) A citizen receiving compensation and business income
b) A minimum wage earner who has no other extra source of income except his employment
c) An employee receiving purely compensation income from two employers
d) An individual receiving purely compensation income from one employer, but whose spouse is
required to file an income tax return
6. Statement1: Monetized value of unused sick leave credits not exceeding 10 days to private
employees is a tax exempt benefit.
Statement 2: monetized value of unused sick leave credits not exceeding 10 days to government
employees is a tax exempt benefit.
a) Only statement 1 is correct. c) Both statements are correct
b) Only statement 2 is correct d) Both statements are not correct
7. Which of the following is not a compensation income ?
a) Retirement pay c) Professional fees
b) Wages d) Fixed Allowance
8. Prizes and winnings are generally taxable except when the law provides for their exclusion from
gross income. Prizes received amounting to greater than P10,000 shall be subjected to
 a) A final tax of 10 percent c) A normal tax
b) A final tax of 20 percent d) Tax exempt
9. If the amount of PCSO/Phil Lotto winnings received by a resident citizen and resident alien in 2018 is
more than P10,000, what type of income tax will apply?
a) Final withholding tax on passive income c) Basic income tax
b) Capital gains tax d) Exempt
10. If the PCSO/Lotto winnings in the preceding number was received by a non-resident alien engaged in
trade or business, what type of income tax liability will apply ?
a) Final withholding tax on passive income c) Basic income tax
b) Capital gains tax d) Exempt
11. Which of the following income of a non-resident citizen will be taxed differently if the taxpayer is
non-resident alien engaged in trade or business ?
a) Interest income c) Dividends
b) Royalties d) Prizes
12. Which of the following income will be taxed in the same manner regardless of the classification of
the taxpayer ?
a) Capital gain on sale of land and/or building
b) Capital gain on sale of shares of stock of a domestic corporation
c) Ordinary gain on sale of land and/or building
d) Ordinary gain on sale of shares of stock of a domestic corporation
13. Which of the following transactions is subject to 6% capital gains tax ?
a) Sale of condominium units by a real estate dealer
b) Sale of real property utilized for office use
c) Sale of apartment houses
d) Sale of vacant lot by an employee
14. Fringe benefit tax is computed based on:
a) Grossed-up monetary value c) Gross compensation
b) Monetary value d) Net compensation
15. Which of the following is a fringe benefit not covered by the fringe benefit tax ?
a) De minimis benefit
b) Housing privileges granted to rank and file employees
c) Fringe benefits granted as a result of the nature of the business, trade or profession of the
employer.
d) All of these
16. Fringe benefit tax is computed based on the
a) Monetary value of the fringe benefit
b) Book value of the fringe benefit
c) Grossed-up monetary value of the fringe benefit
d) Fair value of the fringe benefit
17. Which of the following is an income subject to the basic tax ?
a) Share in the net income of ordinary partnership
b) Dividends received from domestic corporation
c) Prizes from USA lotto
d) Interest income from BPI, Manila
18. Which of the following statements regarding minimum wage earner (MWE) is correct ?
a) The MWE is exempt from income tax on his basic statutory minimum wage SMW)
 b) The MWE is exempt from income tax on his overtime pay, holiday pay, night shift differential and
hazard pay
c) The MWE is subject to income tax on income other than those mentioned in “a” and “b”
d) All of the above
19. Who of the following individual taxpayers is taxable on income derived from within and without the
Philippines ?
a) Miguel Viray, a native of Bacolod City, working as overseas contract worker in Iraq
b) Regine Custodio, naturalized Filipino citizen and married to a Filipino. She had been living in
Pampanga since 1990.
c) John Casimiro, Spanish citizen, a resident of Madrid, Spain, spent a one week vacation in Boracay
d) Josh Estipanio, Korean singer, held a 3-day concert in Manila
20. Jessica Sanchez, an American singer was engaged to sing for one week at the Westin Philippine Plaza
after which she returned to the USA. For income tax purposes, Jessica shall be classified as
a) Resident alien
b) Non-resident alien engaged in trade or business
c) Non-resident alien not engaged in trade or business
d) Resident citizen

PART II. PROBLEM SOLVING. ALL FINAL ANSWERS TO BE ROUNDED TO WHOLE NUMBERS.

Problem #1
MAKISIG Company purchased a residential property and transferred the same in the name of its CEO as a
fringe benefit. The property has a fair market value of P7,500,000 while its zonal value is P7,000,000.
The property was acquired at a price of P7,300,000.
1. What is the grossed-up monetary value of the fringe benefit ?
2. What is the amount of fringe benefit tax to be paid
3. What is the total fringe benefit expense to be recognized by the company ?

Problem #2
The following data were given by Ms Zarriaga (single), holding a managerial position for 2018 taxable
year as follows:
P55,000 gross salary per month P 660,000
Pag-ibig contribution 3,600
Social Security Service contribution 12,000
Philhealth contribution 7,200
Union dues 3,000
Withholding tax on compensation income 72,500
Gasoline allowance subject to liquidation 15,000
Other allowances not subject to liquidation 100,000
13th month pay 50,000
De minimis benefits 12,000
4. What is the amount of taxable compensation income subject to graduated rate under Section
24(A) of the tax code ?
 5. What is the amount of fringe benefit tax due based on the data given above ?
6. What is the total tax expense of Ms.Zarriaga for 2018 ?
7. What is the income tax payable of Ms. Zarriaga ?

Problem #3
KATE sold the following shares of stock of a domestic corporation which she bought for investment
purposes as follows:
Listed & Traded Not Listed and traded
Selling price P 300,000 P 145,680
Selling expenses 15,000 3,731
Cost 150,000 81,114
8. How much is the capital gain tax (CGT)assuming the transaction took place in 2017 ?
9. How much is the capital gains tax (CGT) assuming the transaction took place in 2018 ?

Problem #4
Sharon Cometa received the following income in 2018 as follows:
Business income:
Philippines . . . . . . . . . . . . . . . . . . . . P 400,000
Saudi Arabia . . . . . . . . . . . . . . . . . . . . 350,000
Business expenses:
Philippines . . . . . . . . . . . . . . . . . . . . 280,000
Saudi Arabia . . . . . . . . . . . . . . . . . . . . 150,000
Interest on deposits:
With BPI .................... 5,000
With US bank . . . . . . . . . . . . . . . . . . US$ 700 (Forex US$1 = Php 44)
Cash price won:
Domestic contest . . . . . . . . . . . . . . . . 10,000
Foreign contest . . . . . . . . . . . . . . . . . 12,000
Winnings in lotto:
Philippines . . . . . . . . . . . . . . . . . . . . 110,000
USA . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Dividends from a domestic corporation . 25,000

10. If Ms. Cometa is a resident citizen, single, how much will be her taxable income ?
11. If Ms. Cometa is a nonresident alien, engaged in trade or business, married with five (5)
dependent children, how much will be her taxable income ?
12. Assuming Ms. Cometa is a nonresident alien not engaged in trade or business, single, what is her
income tax due and payable ?

Problem #5
DALIMOT Corporation furnished and granted the use of its condominium unit to its Executive Vice-
President. The fair market value of the property is P4,800,000 while its acquisition cost is P3,000,000.
13. What is the amount of the monthly fringe benefit tax due thereon ?

Problem #6
MASAGANA Corporation assigned Mr. Maginhawa, one of its employees in the head office in Davao to
manage their branch office in Pangasinan. The company provided for the residential house of the
manager paying a monthly rental of P40,000.
14. What is the amount of the monthly fringe benefit tax thereon ?
15. What is the amount of the deductible expense from the gross income of the corporation ?

END OF QUIZ – GOOD LUCK

“Coming together is a beginning; keeping together is progress;

working together is success “