COMPREHENSIVE EXAM-INCOME TAXATION

Name :
Date :
1. Which is not a correct principle of individual income taxation?
a. Resident Filipino citizens are taxable on all income from sources within and without.
b. Non-resident citizens are taxable only on income from sources within.
c. Overseas contract workers are taxable only on income from sources without the Philippines.
d. An alien individual whether resident or not of the Philippines is taxable only on income from within.
2. Which is not a correct principle of corporate income taxation?
a. Domestic Corporations are taxable on all income from within and without.
b. Resident Corporations and non-resident corporations are taxable on all their income from Philippines.
c. Foreign Corporations are subject to 15% on their remittance to their head office abroad.
d. Non-resident corporations are not covered by the rule on MCIT.
3. On November 8, 2012, Mr. and Mrs. Tolentino sold their principal residence in Makati for P10,000. The ff. must be met in
order that the capital gains presumed to have been realized from such sale may not be subject to capital gains tax, except:
a. They must use the proceeds of the said sale to acquire or construct a new principal residence within 2 years from the
date of sale.
b. They must inform the BIR of that intention within 30 days from the date of sale.
c. They can only avail of the said privilege once every ten years.
d. The historical cost or adjusted basis of the real property sold shall be carried to the new principal residence built or
acquired.
4. Which is an incorrect principle about withholding taxes?
a. Returnable income are income usually subject to creditable withholding tax.
b. Passive income are subject to final non-creditable withholding tax.
c. Special income like income subject to CGT are also subject to final non-creditable withholding tax.
d. Fringe benefits are subject to final non-creditable withholding tax.
5. The following expenses are not allowed as deductions from gross income except;
a. Personal, living or family expenses.
b. Amounts paid out for new buildings or for permanent improvements or betterments made to increase the value of the
property.
c. Amounts expanded in restoring a property.
d. Premiums paid by a corporation or any life insurance policy covering the life of any of its officers or employees.
6. Reno G. had the ff.transactions:
2011-Taxable income from her business P20,000
Dividends received:
From Resident Corp. P3,000
From Non-resident Corp. P1,000
Interest from bank deposits P10,000
Interest from trade receivables P4,000
Capital gains on assets held for 8 mos. P34,000
Capital loss on assets held for 12 mos. P70,000

2012 Taxable income from her business P140,000

Capital gains on assets held for 13 mos. P30,000
Capital loss on assets held for 7 mos. P6,000
Amount received as liquidating dividends P150,000
(Cost=P100,000)held for 19 mos.
The taxable income before personal exemptions in 2011 is:
a. 28,000
b. 36,000
c. 62,000
d. 0
7. The taxable income before personal exemptions in 2012 is:
a. 62,000
b. 71,000
c. 72,000
d. 146,000
8. If the taxpayer is a corporation, the taxable income in 2011 is:
a. 28,000 c. 62,000
b. 36,000 d. 0
9. If the taxpayer is a corporation, the taxable income in 2012 is:
a. 78,000 c. 86,000
b. 214,000 d. 49,000
10. The following fringe benefits are not taxable except:
a. Those which are authorized and exempted under special laws
b. Contributions of the employer for the benefit of the employee to retirement, insurance, hospitalization, benefit plans,
holiday and vacation expenses.
c. Those benefits given to rank and file employees.
d. De minimis benefits
11. All of the ff. fringe benefits are not taxable except:
a. De minimis benefits
b. Benefits given to clerk of the company
c. Those authorized and exempted under contractual agreements
d. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization
12. All are exempted from IAET tax except:
a. Banks & non-banking financial institutions c. Private educational institutions
b. Life insurance companies d. Taxable partnership
13. All are exempted from MCIT tax except:
a. Hospitals c. Offshore banking units
b. International carriers d. Resident foreign corporations
14. Which of the ff. is a method of accounting for income determination in farming?
a. Cash basis c. Crop basis
b. Accrual basis d. All of the above
15. A taxpayer provided the ff.data
Sales (net of P1M discounts and returns) P10M
COGS P4M
Operating expenses P2M
Royalty Income P1M
Using OSD, the taxable net income if the taxpayer is a corporation is
a. 3,600,000 c. 5,900,000
b. 4,200,00 d. 6,450,000
16. Using OSD, the taxable net income if the taxpayer is an individual, married w/ 5 minor children is:
a. P5,900,000 c. P3,600,000
b. P5,850,000 d. P5,450,000
17. The whole amount of income realized by the employee which includes the net amount of money or net monetary value of
property which has been received plus the amount of fringe benefit tax due thereon
a. Grossed-up monetary value c. Fringe benefit tax
b. De minimis benefit d. Fringe benefit
18. Which statement is wrong? The fringe benefit tax is:
a. Withheld at source c. Imposed on the employee
b. Imposed on the employer d. Deductible by the employer
19. 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. 15% c. 85%
b. 25% d. 75%
20. The employer subject to the fringe benefit tax may be a/an
a. Corporation c. Professional partnership
b. Individual d. All of the above
21. Any good, service, or other benefit furnished or granted by an employer in cash or in kind in addition to basic salaries, to an
individual employee(except rank and file employee)
a. Fringe benefit c. De minimis benefit
b. Fringe benefit tax d. Grossed-up monetary value
22. Which is not correct? The P82,000 limit on gross benefits of employees
a. Include Christmas bonus. c. May be increased by the Secretary of Finance.
b. Include productivity incentive pay. d. Does not include employees of private entities.
23. Which is not compensation?
a. Non-exempt pensions, retirement and separation pay
b. Living quarters and meals in addition to salary
c. Tips and gratuities when not accounted for by the employee to the employer
d. None of the above
 24. Which of the ff. is taxable?
a. Lotto winnings c. Gain on sale of 10-year bond
b. Prize exceeding P10,000 d. Interest on long-term deposit or investment
25. Income from whatever source includes all other income not expressly exempt under the laws. Which does not belong?
a. Bad debts written off then recovered
b. Moral damages for slander
c. Income from gambling
d. All of the above
26. When an individual dies, future income on his property will be taxed to:
a. The individual himself
b. The estate itself after the heirs have received the property
c. Those who inherit the property after they receive the property
d. None of the above
27. The general term applies to all persons or corporations that occupy positions of peculiar confidence towards others, such as
trustees, executors, guardians, or administrators, receivers, or conservators:
a. Grantor c. Fiduciary
b. Trustor d. Beneficiary
28. The person for whose benefit the trust has been created.
a. Trustor c. Fiduciary
b. Grantor d. Beneficiary
29. Mr. BFG passed away on June 30, 2015. His estate, which is under judicial settlement, accumulated P800,000 gross income
for the remaining half of the year. Deductions attributable to the income amount to P400,000. How much is the tax payable
by the estate for 2012?
a. 800,000 c. 380,000
b. 400,000 d. 89,000

30. Lady M. created two irrevocable trusts naming her favorite granddaughter, Saharah as beneficiary of both trusts. It is
provided in the document that starting the year 2012, when Saharah turns 18, she is to receive 25% of the net income of
both trusts for her education. Below are additional information:
Trust 1 Trust 2

Gross income P600,000 P900,000

Deductions P180,000 P280,000
The estate or trust is allowed a personal exemption of:
a. 20,000
b. 40,000
c. 50,000
d. 25,000
31. How much is the consolidated tax due?
a. 760,000
b. 208,200
c. 260,000
d. 1,500,000
32. How much is the share of each trust on the consolidated tax due?
a. 84,080 and 124,119
b. 306,923 and 453,077
c. 105,000 and 155,000
d. 605,769 and 894,230
33. A domestic corporation has the ff. data for the year 2000(4th year of operation)
Sales P5,000,000
Cost of sales P1,500,000
Business expense P800,000
Dividend from domestic corporation P50,000
Selling price of land classified as
capital asset(cost, 3,500,000) P4,000,000
Interest on Philippine currency bank deposit P40,000
Dividend declared and paid P500,000
Tax paid for the first three quarters P150,000
The BIR upon investigation, found out that there is improper accumulation of earnings.
The normal income tax of the corporation is:
a. 70,000
b. 1,050,000
c. 810,000
d. 270,000
 34. The Improperly accumulated earnings tax is:
a. 167,800 c. 517,800
b. 187,000 d. 173,200
35. Zaidia corporation, a domestic corporation had the ff. data for the taxable year 2010:
Sales P5,000,000
Cost of goods sold P2,000,000
General selling and administrative expenses P500,000
Interest income from Philippine bank deposit P100,000
Rental income(net of 5% w/holding tax) P190,000
Dividend income:
From domestic corp. P60,000
From foreign corp. P50,000
Winnings from charity sweepstakes P1,000,000
Capital gains from sale of domestic shares
of stocks sold directly to buyer P P75,000
Dividend declared & paid during the year P500,000
Retained earnings, beginning of the
year (subject to IAET last year) P1,000,000
Note: The Board of Directors approved a resolution reserving P1,500,000 of its net profit for the year for plant expansion.
The normal income tax after tax credit if any is:(6points)
a. 825,000
b. 815,000
c. 899,200
d. 819,200
36. Based on the foregoing problem, the Improperly accumulated earnings tax is:(6points)
a. 208,125 c. 113,625
b. 108,125 d. 105,125

37. Haidia corporation, an educational institution provided the ff.data for the taxable year 2010:
Income from tuition fees P2,500,000
School miscellaneous fees P1,000,000
Dividend income:
Domestic corp P2,000,000
Foreign corp P2,000,000
Rent income(net of 5% w/holding tax) P1,900,000
Operating expenses P4,000,000

The income tax due of the school is: (5points)

a. 1,050,000 c. 950,000
b. 350,000 d. 750,000
38. RICO an official of ABC Corporation asked for an earlier retirement because he was emigrating to Canada, he was paid P2M
separation pay in recognition of his valuable services to the corporation plus P200,000 13th month pay. JEKKY, another
official was separated for his falling eyesight. He was given P1M separation pay. JUAN was separated for occupying a
redundant position. He was given P500,000 separation pay. BENJIE opted to retire at 55years old. After working for 10 years
in the same company. He received P1M. All of them except Benjie were not qualified to retire under the BIR approved
pension plan. The total income subject to withholding tax on the above payment is: (5points)
a. 2,200,000 c. 3,000,000
b. 2,118,000 d. 4,000,000

TRUE or FALSE(2points each)

1. When disposing of a property, the nature of the same, i.e, a capital asset or an ordinary asset, does not matter
because capital and ordinary assets are given the same tax treatment.
2. Net capital gain is the excess of the gains from sales or exchanges of capital assets over the losses from such sales
or exchanges while net capital loss is the excess of the losses from sales or exchanges of capital assets over the
gains from such sales or exchanges.
3. Ordinary gain includes capital gains such as those derived from the performance of services, whether personal or
professional, and those accruing from business.
4. Stocks held by dealers in securities are classified as capital assets.
5. Capital gains realized during each taxable year by the individuals or corporations from sale, exchange or disposition
of shares of stock in any domestic corporation not traded through a local stock exchange are subject to final tax of
5% for the first P100,000, and 10% for the amount in excess of P100,000.

Prepared By:
Karen May M. Jimenez
Graduated Income Tax Schedule