I

NCOMETAXATI
ONOFI
NDI
VIDUALS&CORPORATI
ON
I
nst
ruct
ion:Sel
ectt
hebestanswert
oeachoft
hef
oll
owi
ngquest
ions.

1. Anexempt ional
lowedt oat axpayert
hathasqual
i
fiedl
egi
ti
mat
e,and/
orr
ecogni
zedorl
egal
l
yadopt
ed
chi
l
dren:
a. Additi
onalexempt i
on.
b. Specialaddi
tionalper
sonal exempti
on.
c. Optionalst
andar ddeduction.
d. Personalexempt i
on.

2. Afeat
ur eofordi
narygai
nsasdisti
nguishedf
rom capi
tal
gai
ns:
a. Gainsfrom sal
esofassetsnotstockint
rade.
b. Mayormaynotbet axabl
einfull
.
c. Sourcesarecapit
alasset
s.
d. Nohol di
ngperi
od.

3. Thefol
lowing,exceptone,
mayclai
m personalexempti
ons:
a. Non-resi
dentali
ennotengageint
radesorbusinessint
hePhil
ippi
nes.
b. Non-resi
dentali
enengageintr
adeorbusinessinthePhi
li
ppi
nes.
c. Residental
ien.
d. Cit
izen.

4. Oncapit
algaintaxonrealproper
ty,whichoft hefoll
owingstat
ementsisnottr
ue?
a. Thetaxshouldbepaid,i
finonel umpsum, withi
n30day sfr
om thedateofsal
e.
b. Theterm“ini
ti
alpayment”issynonymoust o“downpay ment”
.
c. The i
nstall
mentpay mentoft he taxshoul d be made withi
n 30 daysfrom recei
ptofeach
i
nstal
lmentpaymentont hesell
ingpr i
ce.
d. Thetaxmaybepai dininstal
l
menti ftheinit
ialpaymentsdonotexceed25%oft hesel
li
ngpr
ice.

5. Whichoft hef ol
lowi
ngt axpayer
swhoseper sonalexemptioni
ssubj ectt othelawonr eci
proci
tyunder
theTaxCode?
a. Non-residentcit
izenwithrespecttohi
si ncomeder i
vedoutsidethePhi l
ippi
nes.
b. Non-residentali
enwhoshal lcomet ot hePhil
ippi
nesandst ayt hereinforanaggregateperiod
mor ethan180day s.
c. Residental i
enderivi
ngincomef r
om af orei
gncount r
y.
d. Non-residentaliennotengagei nt r
adeorbusi nessint hePhi lippineswhosecount ryall
ows
personal exemptiontoFil
ipi
noswhoar enotr esidi
ngbutareder i
vingi ncomef r
om sai
dcountry.

6. RDEwasr et
ir
edbyhi semployercorporat
ionin2003andpaidP1,000,
000asaret
ir
ementgrat
uit
y
wit
houtanydeducti
onforwithhol
dingtax.Thecorporat
ionbecamebankr
upti
n2004.CantheBIR
subj
ectt
heP1,000,
000ret
ir
ementgratuit
ytoincometax?

1stanswer:Yes,i
ftheretir
ementgratui
tywaspaidbasedonar easonabl
epensi
onpl
anwer
eRDE
was50y earsol
dandhasser vedthecorporati
on.
2ndanswer:No,i
ftheRDEwasf orcedbyt hecor
por
ati
ontor
eti
re.
a. Bothanswersarewrong.
b. Bothanswersarecorrect
.
c. 1stansweri
scor r
ect
,2ndansweriswrong.
d. 1stansweri
swr 2ndansweri
ong, scorrect
.

7. Thewi dowofy ourbestfriendhasj ustbeenpaidP1,000,000onaccountoflif

ei nsur
ancepolicyofthe
deceasehusband.Sheasksy ouwhet hersheshoul
ddecl aret
heamountf ori
ncomet axespurposesor
forest atetaxpur poses.
1stadv ice:Thepr oceedsofl i
feinsur
ancepaidtot hebenefi
ciar
yupont hedeat hoftheinsuredare
exemptf rom i ncomet axandneednotbedecl aredforincomet axpur
poses.
2nd advise:Thepr oceedsofl i
feinsur
ancewouldhav et obedeclar
edfortheest atetaxpurposesif
thedesi gnat i
onoft hebenef i
ciarywasirrev
ocabl
e,otherwisei
tneednotbedecl ared.
a. Bot hadv isesar ecorrect.
b. 1stadv icecor rect
,2ndadv i
cearewr ong.
c. Bot hadv isesar ewrong.
d. 1stadv icewr ong,2ndadv i
cecor rect
.

8. Mr.Juandel aCruzt r
ansferredhi scommer ci
allandwi t
hacostofP500, 000butwi thafai
rmar ket
val
ueofP750, 000t oJDCCor porati
oninexchangeoft hestocksofthecor
porati
onswithparval
ueof
P1,
000,000.Asar esultofthetransferhebecamet hemaj orst
ockhol
derofthecorpor
ati
on.
Asaresultofthetransfer,
a. Ther ecogni
zedgai nisthedi ff
erencebetweent hefairmarketv
alueofthesharesofstocksand

1
 thecostoft heland.
b. Ther ecognizedgaini
sthedif
fer
encebet
weent heparval
ueoft hestockandthef ai
rmarketv
alue
oftheland.
c. Nor ecognizedgainbecauset
helandwasinexchangeorpur el
ystocksandMr .delaCr
uzbecame
themaj ori
tystockhol
ders.
d. Nor ecognizedgainbecauset
helandwasinexchangeofstocksofthecorpor
ation.

9. Grossincomei sr eport
edpar ti
all
yineachtaxabl
ey eari
npr
opor
ti
ont
ocol
l
ect
ionsmadei
nsuch
peri
odasitbear stothetotalcont
ractpr
icer
efer
sto:
a. Cropy earbasismethod.
b. Percentageofcompl eti
onbasismethod.
c. Accrualmet hod.
d. Inst
all
mentsal esmet hod.

10. “Schedul
arsystem ofincomet axat
ion”means:
a. Allty
pesofi ncomear eaddedtoget hertoarri
veatgrossi
ncome.
b. Separategraduatedratesareimposedondi ff
erentty
pesofi
ncome.
c. Capital
gainsar eexcl
udedi ndetermininggrossincome.
d. Compensat ionincomeandbusi nesspr of
essionali
ncomeareaddedt
oget
heri
nar
ri
vi
ngatgr
oss
i
ncome.

11. Iti
si mportantt oknow t hesourceofi ncomef ort axpurposes( i
.e.
,fr
om withi
norwit
houtthe
Phi
li
ppines)because:
a. Somei ndividualandcorporatetaxpay ersaret axedont hei
rwor l
dwideincomewhi
leother
sare
taxabl
eonl yuponi ncomefrom sourceswi t
hinthePhi l
ippi
nes.
b. ThePhi l
ippi
nesi mposesincomet axonl yonincomef r
om sourceswithi
n.
c. Somei ndivi
dual t
axpayer
sar ecit
izenswhi l
eother sareali
ens.
d. Exportsalesarenotsubjecttoincomet ax.

12. Incasesofdeducti
onandexempt iononi
ncomet
axr
etur
ndoubt
sshal
lber
esol
ved:
a.St r
ict
lyagai
nstthetaxpayer
.
b.St r
ict
lyagai
nstthegovernment.
c.Liberall
yinf
avorofthetaxpayer.
d.Liberall
yinf
avoroftheempl oyer
.

13. Theterm“capitalassets”incl
udes:
a. Stocki
nt radeorot herproper
tyincludedi
nt hetaxpay er
’si
nv entory
.
b. Realpropertynotusedi nthetr
adeorbusi nessoft axpayer.
c. Proper
typr i
mar i
lyforsaletocustomer si
ntheor di
nar ycourseofhi st
radeorbusi
ness.
d. Proper
tyusedi nt hetradeorbusinessofthetaxpay erandsubj ecttot
hedepreci
ati
on.

14. Lot
sbeingrentedwhensubsequent
lysol
dar
ecl
assi
fi
edas:
a. Capi
talassets.
b. Li
quidassets.
c. Ordi
naryassets.
d. Fi
xedassets.

15. Thefoll
owingareexamplesofcorporateexpensesdeducti
blefrom grossi
ncome, exceptone:
a. Represent
ati
onexpensesdesignedt opromotebusiness.
b. Contri
buti
onstodrum upbusiness,li
kecontri
but
ionsofsoftdri
nkst obarr
iofi
estas.
c. Expensespaidtoanadvert
isi
ngf i
rmi nordert
ocreateafavorableimageforthecorporati
on.
d. Premiumsonl i
fei
nsurancecoveringtheli
feofanempl oyeeift
hebenefici
aryishisheir
s.

16. ABCCor porat

iontookt wokeymeninsur
anceont heli
feofit
sPr esi
dent
,Mr.X.Inonepoli
cy,the
benef
ici
aryisthecorporati
ont
ocompensat
eitfori
tsexpect
edlossincaseofdeat
hofit
spresident
.
Theotherpoli
cydesignatesMr
.X’
swi
feasitsi
rr
evocabl
ebenefi
ciar
y.

Quest
ion1–Aretheinsur
ancepr
emi um pai
dbyXcorpor
ati
oninbot
hpol i
ciesdeducti
ble?
Quest
ion2–Wi l
ltheinsur
anceproceedsbetreat
edasincomesubjecttotaxbyt hecorpor
ati
on
andbythewi f
e?

o1standNot
a. Yest o2ndquest
ions.
b. Yest
obot hquesti
ons.
c. Noto1stquest
ionandYesto2ndquest
ion.
d. Notobothquesti
ons.

17. Whoamongt
hef
oll
owi
ngi
sanon-
resi
dental
i
en?

2
 a. Anal i
enwhocomest ot hePhil
i
ppinesforadefi
nitepurposewhi
chi
nit
snatur
emaybepromptl
y
accomplished.
b. Anal i
enwhocomest ot hePhil
ippi
nesforadefi
nitepurposewhi
chi
nit
snatur
ewoul
drequi
rean
extendedstay.
c. Anal i
enwhohasacquiredresi
denceinthePhi
li
ppines.
d. Anal i
enwhol i
vesi
nthePhili
ppi
neswithnodefi
nit
ei nt
enti
onastohi
sst
ay.

18. Anexempt ionprovidedbyt helawt otakecar

eofpersonal
,l
ivi
ngandfamil
yexpensesoft
het
axpay
er
andtheamountofwhi chisdeterminedaccor
dingt
othestat
usofthet
axpayerar
e:
a. Optionalst
andar ddeduction.
b. Personalexempt ion.
c. Additi
onalexempt i
on.
d. Specialaddi
tional per
sonal exempti
on.

19. Theper sonalexempt ionoft henon-resi

dental i
enengagedi nt r
adeorbusi nessinthePhil
ippi
nesis
equaltothatall
owedby :
a. Thei ncomet axlawofhi scountrytoaci t
izenoft hePhili
ppinesnotr esidi
ngthere.
b. Thei ncomet axlawofhi scountrytoaci ti
zenoft hePhi l
i
ppinesnotr esi
dingthereort
heamount
prov i
dedbytheNI RCt oaciti
zenorresident,whicheverislower .
c. TheNat ionalInt
er nalRevenueCodet oaci t
izenorresident.
d. Thei ncomet axl awofhi scountryallowst oaci ti
zenoft hePhi li
ppinesnotr esi
dingt
hereorthe
amountpr ovidedbyt heNIRCtoaci t
izenorr esi
dentalienwhi cheverishigher.

20. Ifanindi
v i
dualperformsser vicesf
oracr
edi
torwhoi
nconsi
der
ati
ont
her
eofcancel
sthedebt
,the
cancel
lat
ionofindebt ednessmayamount
:
a. Toagi ft
.
b. Toacapi talcontr
ibuti
on.
c. Toadonat oni
i ntervivos.
d. Toapay mentofi ncome.

21. St
atement1.Anon- r
esi
dentci
ti
zeni
staxabl
eonhisi
ncomefrom wi
thinthePhil
i
ppines.
St
atement2.Anon- r
esi
dentci
ti
zeni
snottaxabl
eonhi
sincomefrom out
sidethePhil
ippi
nes.
St
atement3.Anon- r
esi
dentci
ti
zeni
staxabl
eonhisi
ncomefrom wi
thinandoutsidethePhi
li
ppi
nes.
a. True,t
rue,true.
b. False,
false,false.
c. True,t
rue,false.
d. False,
false,true.

22. Thefol
lowi ngar ethegener alpri
nci plesofi ncomet axation:
a.Acit
izenoft hePhi li
ppinesr esidingt hereinistaxabl
eonal li
ncomeder ivedfrom sourceswithi
nand
withoutt hePhi li
ppines.
b.Anonr esidentcitizenist axableoni ncomeder i
vedfrom sourceswi t
hinthePhi l
i
ppines.
c.Anindi vidualcitizenoft hePhi l
ippineswhoi swor kingandder iv
ingi ncomef rom abroadasan
overseascont ractwor keristaxabl eonlyoni ncomef r
om sourceswithinthePhili
ppi
nes.
d.Anal i
eni ndividual,whet herar esidentornotoft hePhi l
i
ppines,i
staxabl eonl
yoni ncomeder iv
ed
fr
om sour ceswi thinthePhi l
ippines.
e.A domest iccor porati
oni staxabl eonal lincomeder iv
edf rom sourceswi t
hinandout si
dethe
Phili
ppines.
f.Aforeigncor poration,whet herengagedornoti nbusi nessint hePhilippi
nes,istaxableonlyon
i
ncomeder ivedf r
om sour ceswi thinthePhi li
ppi
nes.

a. All
thestatementsar
etrue.
b. All
thestatementsar
efalse.
c. Oneofthestatementsi
sf alse.
d. Someoft hestat
ementsar efal
se.

23. Acit
izenoft hePhi l
ippi
neswasanon- r
esidentciti
zenin2003.OnMay15,2004,hear
ri
vedi
nthe
Phi
li
ppinestoresidepermanent
lyi
nthePhil
ippines.Hisi
ncomefort
hey
earwas:
A–Fr om January1,2004toMay14,2004.
B–Fr om May15, 2004toDecember31,2004.

Whichoft
hefol l
owingi
swr ong?
a. Heisconsideredaresi
dentciti
zenonhi
s“B”i
ncome.
b. Heisconsideredanon-resi
dentci
ti
zenonhi
s“A”i
ncome.
c. Heisconsideredaresi
dentciti
zenonhi
s“A”and“
B”income.
d. Heisnottaxableonhis“A”income.

24. St
atement1.I
fat
axpay
ermar
ri
esorhasdependent
sdur
ingt
hey
ear
,ordi
esdur
ingt
hey
ear
,orhi
s

3
 spousedi esdur i
ngthey ear,he/hi
sestatemaycl ai
m per
sonal exempt
ioninf
ullf
orsuchyear
.
St
atement2.I fadependentchi l
ddieswithi
nthey ear
,orbecomest went
y-oneyear
soldwit
hint
hey
ear
,
thetaxpay ermayst i
ll
claim additi
onalexemption.
a. Fi
rststatementi scorr
ectwhi lesecondstatementiswrong.
b. Fi
rststatementi swrongwhi l
esecondstatementiscorrect
.
c. Bothstat ementsarewr ong.
d. Bothstat ementsarecor r
ect.

25. St
atement1.Ani ll
egi
ti
matechi
lddependentupont
het axpay
eri
saunitofaddit
ional
exempt
ion.
St
atement2.Adependentwhomar r
ieswithi
ntheyearorwhobecomesgainful
lyemploy
edduri
ngt
he
yearissti
lladependentwi
thaddi
ti
onalexempti
onf orthey
ear
.
a. True,t
rue.
b. True,f
alse.
c. False,
false.
d. False,
true.

26. Whichofthef ol
lowingisnotanincomet
axoncor
por
ati
on?
a. Normal tax.
b. Minimum cor porat
ei ncomet
ax.
c. Grossincomet ax.
d. Stocktransacti
ont ax.

27. Thenormal
taxofanor
dinar
ycor
por
ati
onef
fect
iveJanuar
y1,
2000i
s:
a. 34%.
b. 33%.
c. 32%.
d. 30%.

28. Themini
mum cor por
ateincomet
axofadomest
icorr
esi
dentt
radi
ngormanuf
act
uri
ngcor
por
ati
oni
s:
a. 2%ofgrossincome.
b. 5%ofgrosssales.
c. 15%ofgrossincome.
d. 15%ofgrosssales.

29. Themini
mum cor porat
ei ncomet
axofadomest
icorr
esi
dentser
vicecor
por
ati
oni
s:
a. 2%ofgrossreceipts.
b. 2%ofgrossincome.
c. 15%ofgrossr ecei
pts.
d. 15%ofgrossincome.

30. Oneoft hefoll

owi ngstatementsiscorrect.Whichi sit?Themi
nimum cor
por
atei
ncomet
axofa
cor
porati
oniscomput ed:
a. I
nt hequart
erl
yandannual retur
nsoft hecorporat
ion.
b. I
nt heannualincomet axr
eturnonlyofthecorporati
on.
c. I
nt hequart
erl
yr et
urnsonlyofthecorporat
ion.
d. I
nal lt
hetaxableyearsofoperati
onsofthecor por
ation.

31. Oneofthefol
lowi
ngiswr ong.Whichisit?Thegr
ossi
ncomet
axoncor
por
ati
oni
s:
a. Appli
cabl
etodomest iccorpor
ati
ons.
b. Notappli
cabl
etoresidentcorpor
ati
on.
c. Appli
cabl
etonon-residentcor
porat
ion.
d. Maybeginonlybeginning2000.

32. Whichstatementi swr ong?Thegr ossincometax:

a. Isoptionaltoaqual if
iedcorporat
ion.
b. Av ai
l
abl eonlyifther ati
oofcostofsal esdoesnotexceedf i
ft
y-f
ivepercentofgrosssal
esor
recei
pt sfr
om allsources.
c. Thechoi ceshallbei rrev
ocableforthreeconsecutiv
eyearst
hatthecorpor
ati
onisquali
fi
edunder
thescheme.
d. Isalway scomput edtocompar ewiththenor
mal incometaxandminimum cor
porat
eincometax.

33. Whichst
atementi
swr ong?Thegr ossi
ncomet
axoft
hecor
por
ati
oni
s:
a. 15%ofgrossi
ncome.
b. 15%ofgrosssales.
c. 15%ofgrossprofi
tfrom sal
es.
d. 15%ofgrossreceipt
s.

34. Oneoft
hef
oll
owi
ngst
atement
siswr
ong.I
dent
if
y.Thei
mpr
oper
lyaccumul
atedear
ningst
axi
mposed

4
 oncorpor
ati
ons:
a. I
scalcul
atedtoforcecorporat
ionstopayoutdi vi
dends.
b. I
scomput edonimpr operl
yaccumulatedincomeov erseveralyear
s.
c. I
sbasedont henetincomeperbooksaf t
erincomet ax.
d. I
sbasedonast atutoryfor
mulaf ori
mproperlyaccumulatedincome.
35. All
,exceptone, ofthefoll
owing,arenotsubjecttothei
mpr
oper
lyaccumul
atedear
ningst
ax.Whi
chi
s
theexception?:
a. Publicl
y -
hel
dcor porat
ions.
b. Banksandot hernonbankfinanci
ali
ntermediari
es.
c. Insurancecompani es.
d. Servi
ceent erpri
ses.
36. Thefoll
owing,exceptone,giver i
setothepr esumpt
iont
hatacor
porat
ioni
simproper
lyaccumul
ati
ng
prof
it
s.Identi
fytheexcept
ion:
a. Thecor porat
ioni
samer ehol dingcompany .
b. Thecor porat
ioni
saninv estmentcompany .
c. Thecor porat
ionpermi
tsi tsprofi
tst
oaccumul at
ebeyondt
her
easonabl
eneedsofthebusi
ness.
d. Thecor porat
ioni
saser viceenterpr
ise.
37. Whichofthefoll
owingi snottreatedasacor
porati
on?
a. Generalpart
nershipintrade.
b. Generalprof
essionalpartnershi
p.
c. Mutualfundcompany .
d. Regi
onal operat
ingheadquar ter
sofmult
inati
onal
company
.
38. Whichoft hefollowingst atement siswrong?
a. Agener alpar tnershi
pi nt radeisnottaxableasacor por
ati
on.
b. Ajointventur eforunder takingconstruct
ionprojectsisnott
axabl easacorporat
ion.
c. A consortium f orener gyoper at
ionspur suanttoanoper ati
ngconsor t
ium agreementundera
ser
vicecont ractwiththegov er
nmenti snottaxableasacor porati
on.
d. Aco- owner shipwher et heact ivi
ti
esoft heco-owner sarelimitedtothepreser
v at
ionofpr
opert
y
andcol l
ectionofi ncomef rom thepropertyisnottaxabl
easacor por
ati
on.
39. Asagener alrul
e,proceedsofi nsurancearenottaxabl
ebecauset
heyonl
yconst
it
utear
etur
nof
capi
tal(
ofwhatwasl ost).Whichist
heexception?
a. Proceedsofl
ifeinsurance.
b. Proceedsofaccidentorhealt
hinsurance.
c. Proceedsofpropertyinsur
ance.
d. Proceedsofcropinsurance.
40. Whichoft hef oll
owi ngi staxabl e?
a. Separ ationpayr ecei
v edbya50- yearoldempl oyeeduet other etr
enchmentpr ogram ofthe
empl oy er.
b. Reti
rementpayr eceivedf rom abenef i
tplanregisteredwi
ththeBureauofI nt
ernalRevenuewher e
atthet imet heempl oy eer eti
redhewas55y earsofage,reti
ri
ngf rom employmentf ort
hef i
rst
ti
mei nhi slife,andwasempl oy
edwi ththeempl oyerf
rom whom r eti
ri
ngf or6y earspri
ort o
ret
ir
ement .
c. Social securi
t ybenef i
tr eceivedbyabal i
kbayanfrom employerabroadattheageof35.
d. SSSandGSI Sbenef it
.
41. Whichofthef oll
owingistaxable?
a. Agri
culturall
andinheri
ted.
b. Cashr eceiv
edasgi f
t.
c. Phil
ippineCharit
ySweepst akeswi
nni
ngs.
d. Int
erestongov ernmentbonds.
42. Whichofthefoll
owingi
staxable?
a. Pri
zewoni nasessaycontest.
b. TheNobel pri
ze.
c. Prizewonasmembermy t
hicalt
eam i
nthePBA.
d. Awardforbeingamodel employee.
43. Whichoft hefol
lowi
ngi temst hatr
educesal
ari
esofempl
oyeesi
snotanexcl
usi
onsf
rom gr
oss
i
ncome?
a. GSISorSSScontribut
ions.
b. Pagibi
gcontr
ibut
ions.
c. Laboruni
ondues.
d. IOU’
s.

5
44. Whichofthefoll
owingistaxabl
e?
a. Int
erestonlong-
ter
m depositonbanksofi
ndi
vi
dual
s.
b. Gainonsaleof10-yearbond.
c. Pri
zeexceedingP10,000.
d. Lott
owi nni
ng.
45. Whichofthefol
l
owi ngi
snotgrosscompensat
ionincome?
a. Sal
aryofP20,000ofanemployee.
b. BonusofP20,000ofanempl oy
ee.
c. Sal
ari
esofP20,000ofapartnerofagener
alpartnershi
pintr
ade.
d. Honorar
ium ofP20,000 ofan employee who i s a memberoft
he boar
d ofdi
rect
orsofa
cor
porati
on.
46. Whichofthefol
lowingtaxr ef
undsconst
it
utesi
ncome?
a. RefundofPhili
ppineincometax.
b. Refundofestatetax.
c. Refundofdonor’stax.
d. Refundofpercentagetax.
47. Statement1.Onlybusi
nessexpensesmaybededuct edfr
om t
hegrossi
ncomeoftaxpay
ers.
Statement2.I t
emizeddeduct i
onsfrom grossincomeshoul dbedulysuppor
tedbyv oucher
sor
receipt
s.
a. Fi r
stst
atementist
ruewhi l
esecondstatementisfal
se.
b. Fi r
stst
atementisf
alsewhi l
esecondstatementistr
ue.
c. Bot hst
atementsaretrue.
d. Bot hst
atementsarefalse.
48. Stat
ement1.I nt
erestpaidori ncur
redintheacqui
si t
ionoffi
xedassetsmaybecapit
ali
zedt
otheasset
account.
Stat
ement2.Ani ndividualont hecashbasisofaccountingshal
ldeducti
nter
estpai
dinadv
ancei
nt he
yearthatthepri
ncipalispaid.
a. Statement1i scorrectwhilestatement2i
swr ong.
b. Statement1i swrongwhi l
estatement2iscorrect.
c. Bot hstat
ement sarecor r
ect.
d. Bot hstat
ement sarewr ong.
49. Oneofthefol
lowingisnotcorrectfordeductibi
li
tyofl
ossesfrom grossincome:
a. I
tmustar i
sefrom f
ir
e,storm, orothercasualt
y,r
obbery,t
heft,orembezzlement
.
b. I
tmustnotbecompensat edbyi nsuranceoranyform ofindemnity
.
c. Adeclar
ationofl
ossbycasual t
yshouldbef i
ledwitht
heBur eauofInternal
Revenue.
d. I
tisofpropert
yownedbyt hetaxpay er
,whetherusedi
nbusi nessornot.
50. Statement1.I nat otallossduet ocasual
ty,
themeasur eoflossisthebookvalueoftheassetreduced
byanyf orm ofi ndemni ty
.
Statement2.I napar ti
all ossduetocasualt
y,themeasur eoflossisthecostoft hepropert
y,orthe
costtor estorethepr oper t
ytoit
snormaloperatingcondi
tion,whi
cheveri
slower,reducedbyanyf or
m
ofindemni ty.
Statement3.I nawashsal e,l
ossisnotdeduct
ible.
Statement4.I n a mer gerorconsol i
dati
on,ort ransf
ert o a cont
rol
led cor
porati
on,lossisnot
deducti
bl e.
a. True, true,tr
ue, t
rue.
b. False, false,false,false.
c. True, false,true,false.
d. False, true,false,tr
ue.

51. Stat
ement1.Anetoper ati
nglossistheexcessofal
lowablededucti
onsoverthegrossincomefr
om
busi
nessforat axabl
eyear.
Stat
ement2.Anetoper atingl
osswhichhadnotprevi
ouslybeendeductedf
rom grossincomeshal
lbe
carr
iedoverasadeduct iononlyi
nthenextyeari
mmediatel
yfoll
owingtheyearofsuchloss.
a. True,t
rue.
b. False,
false.
c. True,f
alse.
d. False,
true.
52. St
atement1.Baddebtisanexpensei nthebooksofaccountwhenaprovisi
onismadefori
t.
St
atement2.Baddebtisadeductionfrom t
hegrossincomewhent heaccounti
swri
tt
enoff.
a. Thefi
rststat
ementistruewhil
ethesecondstatementisfal
se.
b. Thefi
rststat
ementisfalsewhil
ethesecondstatementistr
ue.
c. Bot
hst at
ementsaretrue.
d. Bot
hst at
ementsarefalse.

6
53. Stat
ement1.Thecostofl easehol
dimprovement
sshallbededucti
blebyt helesseebyspr eadi
ngthe
costofthei mpr ovementsoverthel
if
eoftheimprov
ementsorremai ningter
m ofthelease,whichev
er
peri
odisshor t
er.
Stat
ement2.Depr ecat
ionexpensecanbeadeductionforbot
ht angibleandintangi
blepropertywi
th
l
imitedusef ull
ife.
a. True,t
r ue.
b. False,false.
c. True,false.
d. False,true.

54. St
atement1.Cont r
ibut
ionsbyt
heempl oyertoapensiontr
ustforpastserv
icecosti
sdeduct
ibl
einful
l
i
nyeart hattheempl oy
ermadethecontri
butions,
ifheisonthecashbasisofaccount
ing.
St
atement2.Cont r
ibuti
onsordonat
ionsgi v
endirect
lytoindi
vidual
scannotbedeductedfr
om gross
i
ncome.
a. True,true.
b. False,false.
c. True,false.
d. False,true.

55. Whichstatementi snotcor r

ect?
a. Thededuct ionofani ndivi
dualforcontri
buti
onsubjectt oli
mi tationshoul dnotexceedtenpercent
(10%)ofhi staxabl
ei ncomef r
om business,tr
adeorpr ofessionbef orededuct i
onforcontri
buti
ons.
b. Thededuct i
onofacor porat
ionforcont r
ibuti
onssubj ectt ol imitat
ionshoul dnotexceedf ive
percent( 5%)ofi t
staxableincomef rom busi
nessort radebef orededuct ionforcontr
ibut
ions.
c. Contributionst omedi ainitsfunddr i
veforther el
iefofthecal amityv i
ctimsaredeductibl
efrom
grossi ncome.
d. Contributions ofcanned goods t o studentor ganizati
ons dur i
ng the Chr i
stmas season for
dist
ributiont oMuntinglupainmatesarededuct i
blefrom grossi ncome.

56. Whichstat
ementiswr ong/r
esearchanddevel
opmentcosts:
a. Whenr el
atedt
ot heacqui
si
tionand/ori
mprovementoflandandbuil
ding,mustbecapi
tal
i
zed.
b. Ifnotr
elat
edtolandandbuildi
ng,maybetreatedasanoutri
ghtdeducti
on.
c. Ifnotr
elat
edtolandandbuildi
ng,maybetreatedasadeferr
edexpensewhichmaybeamor ti
zed.
d. Cannotbedeductedbecauseithasunli
mit
edlife.

57. Whichst
atementiswrong?Thedeductionforpremi
umsonhospi tal
i
zat
ionandheal
thi
nsur
ancei
s:
a. NottoexceedP2,400ayearperfamil
y.
b. NottoexceedP200permont h.
c. Notall
owedifthefami
lyi
ncomeexceedsP250, 000.
d. Int
hecaseofmar ri
edpersons,
canbecl ai
medbyeitherspouse.

58. Whichstatementiswrong?Deduct i
onforpremiumsonhospital
izat
ionandheal
thi
nsur
ancei
s:
a. All
owedaci t
izenwithagrosscompensat i
ononl
y.
b. All
owedaci t
izenwithbusinessorprofessi
onali
ncomeonl y
.
c. All
owedaci t
izenwithmixedincome.
d. Onlyifthet
axpayerist
akingitemizeddeducti
onfrom gr
ossincome.

59. TheOpt i
onalStandar dDeducti
oni stenper cent( 10%)oft
hegr ossincome.Chooset hecorrectand
bestanswer :Forpur posesoft heOptionalSt andardDeducti
onofani ndi
vidual(
otherthannon-
resi
dentali
en)grossi ncomemeans:
a. Ifatradi
ngconcer n,
grossprofi
tfrom sales.
b. Ifaservi
ceconcer n,
grossreceipt
sleedirectcostofservi
ces.
c. Meansgr osspr ofitfr
om sales,orgrossr eceipt
sorrev
enuesl essdir
ectcostofservi
ces,plusal
l
otherit
emsofgr ossincome.
d. Incl
udest henetcapi t
algai
nofani ndivi
dual .

60. Whichstat
ementi swrong?Therulethatcapit
all
ossesarededuct
ibl
eonl
ytot
heext
entofcapi
tal
gai
nsisapplicable:
a. Toacor poration.
b. Toanindi vi
dual.
c. Totheindividualtaki
ngtheOpti
onalStandar
dDeducti
on.
d. Totheindividualtaki
ngthei
temizeddeducti
onfr
om grossi
ncome.

61. Whichstatementiswrong?Thefri
ngebenef
itt
axi
s:
a. Imposedont heemployer.
b. Imposedont heemployee.
c. Withheldatsour
ce.
d. Deductibl
ebytheemployer.

7
62. Whichstat
ementi swrong?Theamountonwhi chthefri
ngebenefi
ttaxr
ateisappl
i
edis:
a. Themonet ar
yv al
ueofthefri
ngebenefi
t.
b. Thegrossed-upmonetaryval
ueofthefri
ngebenefit
.
c. Theamountdeduct i
blebytheemployerf
rom his/
it
sgrossincome.
d. Refl
ectedint hebooksofaccount sinthetwoaccountoff r
ingebenefi
tsexpenseandf
ri
nge
benefi
ttaxexpense.
63. Whichofthefoll
owingfr
ingebenefi
tisnotsubj
ectt
othef
ri
ngebenef
it
stax?
a. Contri
buti
onsoft heempl oyerforthebenefi
toftheemployeetoreti
rement
,insur
anceand
hospit
ali
zati
onbenefi
tplans.
b. Housing.
c. Expenseaccount.
d. Vehicl
eofanykind.
64. St
atement1.A fringebenef i
twhi chissubjecttot hefr
ingebenef
ittaxistaxableincomeoft
he
employee.
St
atement2.Af r
ingebenef i
twhi chisnotsubjecttothefri
ngebenef
ittaxi
st axabl
eincomeoft
he
employee.
a. Fir
ststat
ementistruewhi lesecondstatementisfal
se.
b. Fir
ststat
ementisfalsewhi lesecondstatementistr
ue.
c. Bothstat
ementsaret rue.
d. Bothstat
ementsaref alse.
65. St
atement1.Thef r
ingebenef i
ttaxisdeducti
blefrom t
hegrossincomeoft
heempl
oyer
.
St
atement2.Thef r
ingebenef i
ttaxiswithhel
dbyt heemployer
.
a. Thefi
rststat
ementi struewhilesecondstatementisfal
se.
b. Thefi
rststat
ementi sfalsewhilesecondstatementistr
ue.
c. Bot
hst at
ementsar etrue.
d. Bot
hst at
ementsar efalse.
66. Stat
ement1:Acor por ati
oncannotdeductal ossarisi
ngfrom asalebet
weent
hecor
por
ati
onandt
he
contr
oll
ingindi
vidualst ockholders.
Stat
ement2:Acor por ati
oncannotdeductal ossarisi
ngfrom asalebet
weent
hecor
por
ati
onandt
he
contr
oll
ingparentcor porati
on.
a. Fir
ststatementi scor r
ect, butthesecondstatementi
swr ong.
b. Fir
ststatementi swr ong, butthesecondstatementiscor
r ect
.
c. Bothstatement sar ecor r
ect.
d. Bothstatement sar ewr ong.
67. Thef amil
yofani ndivi
dualshallincludehi sbr
othersandsi ster
s,whetherbywholeorhal fbl
ood,
spouse,ancest
orsandl inealdescendants.Inwhichofthef ol
lowingdoestheconceptnotappl
y?
a. Non-deducti
blelossf rom sal
esorexchangeofpr oper t
ybet weenmember softhefami
ly.
b. Non-deducti
blebaddebt sontransactionbet
weenmember softhefamily
.
c. Non-deducti
bleinterestexpensebet weenmember soft hef amil
y.
d. Deductibl
epremi umsonhospi t
ali
zationandhealt
hi nsuranceofthefamily.
68. Whichofthef
oll
owinglossesi
sdeduct
ibl
e?
a. Lossonwashsal e.
b. Lossonmer ger
.
c. Lossonatransferofpr
oper
tyt
oacorporati
onsol
elystockr
esult
ingi
ncontr
ol.
d. Lossonatransferofpr
oper
tyt
oacontrol
ledcor
porati
onsolel
yforst
ock.
69. Whichinter
estexpensecanbedeductedfrom gr
ossincome?
a. Int
erestexpenseonmoneyborrowedt obuygovernmentbonds.
b. Int
erestexpenseonmoneyborrowedt ofi
nancepetrol
eum oper
ati
ons.
c. Int
erestexpensebet
weenacorpor at
ionandthecontrol
li
ngindi
vi
dual
.
d. Noneoft heabove.
70. Whichst
atementiswrong?Thenetoper at
inglosscarr
y-over(
NOLCO)is:
a. Avai
labl
etoadomest i
ccor porat
ion.
b. Avai
labl
etoaregist
eredgeneral par
tnershi
pinbusinessinthePhi
li
ppi
nes.
c. Avai
labl
etoanindiv
iduali
nbusi nessinthePhili
ppi
nes.
d. Notavai
labl
etoagener al
pr of
essionalpart
nershi
pinthePhili
ppi
nes.
71. Whichstatementwrong?Resear chanddev elopmentcost:
a. Onl andandbui l
dingacqui r
edf orresearchanddev el
opmentpurposesisnotdeductibl
eas
resear
chanddev elopmentcost .
b. Maybecl aimedasanout r
ightdeducti
onf r
om grossincome.
c. Maybet r
eatedasadef er
redexpensetobeamor ti
zedovertheperi
odwhichwil
lbenefi
tfr
om the
expendit
ure.
d. Maybet reatedasadef erredexpensetobeamor t
izedoveraperi
odofnotlesst
hansixtymonths
from t
hedat ebenefi
tfrom expendit
ureisderi
ved.
72. Whichofthefoll
owingst at
ement siswrong?

8
 a. Adeducti
onforbaddebtisnotavai
labl
ewhenapr ovi
sionforitismade.
b. Adeducti
onforbaddebtisavai
labl
eonlywhenawr it
eoffismade.
c. Ther
eisnodeductionforbaddebtwhent hereisasuret
yf orthedebt
oragai
nstwhom col
l
ect
ion
maybeenforced.
d. Adeducti
onf oruncol
lect
ibl
eaccountisav ail
abl
etoat axpay erwhet
herheisonthecashor
accr
ualmethodofaccounti
ng.

73. Whichstatementi swrong?Contri

buti
onsmadebyanempl oyert
oapensiont
rust:
a. Forlumpsum pay menttocoverpastser v
icecost
,isall
owabl
easdeductionbegi
nningwiththe
yearthepay mentwasmade.
b. Forlumpsum pay mentt ocoverpastservi
cecostisal
lowabl
easdeducti
onamor t
izedforperi
od
ofteny ears.
c. Foral umpsum pay menttocoverpastservi
cecost
,maybeamor t
izedov
eraperiodofmor ethan,
butnotl essthantenyears.
d. Forpresentser v
icecost,i
sdeducti
bleintheyeart
hatpaymenti
smade.

74. Whichstatementisnotcorrect?Deductionfordepl
eti
on:
a. Isall
owedonwast ingasset sonly.
b. Forforei
gncorporati
onsengagedi ndoingbusi
nessint
hePhi l
i
ppinesisall
owedonl
yift
hemi
nei
s
locat
edinthePhili
ppines.
c. Fordomest i
ccorporati
ons, shall
beall
owedonlyifthemineislocat
edinthePhi
li
ppi
nes.
d. Isseparat
efrom deductionf ordepr
eciati
onofbui
ldi
nginthemi nesi
te.

75. Foranindi
vidualonthecashbasi sofaccount
ing,
prepaidint
erestonanindebt
ednessi
sdeduct
ibl
e:
a. Int
hey earthatt
heinterestisprepaid.
b. Int
hey earthatt
heprincipalispaid.
c. Fortheporti
onexpir
edcor respondingtot
hecurrentaccounti
ngper
iod.
d. Noneoft heabove.

76. Incomewhi chisconstr

ucti
vel
yrecei
vedi
sal
readyt
axabl
eincomei
sar
uleundert
hismet
hodof
account
ing:
a. Cashmet hod.
b. Accrualmethod.
c. Inst
all
mentmet hod.
d. Deferr
edpay mentmethod.

77. Whichstatementi swr ong?

a. Incomef rom agener alprofessi onalpar tnershi pisconstructi
velyrecei
vedbyapar tnerwhenhi s
shareintheneti ncomei scredi t
edt ohiscapi talaccount.
b. Incomef rom at axablepar t
ner shipisconst ructivelyr
ecei
vedbyapar tnerinthesametaxabl
ey ear
thatthepar t
nershipdet erminedi tsneti ncomeaf tert
ax.
c. Anydi st
ributi
onofdi videndsmadet oshar ehol dersofacor por
ationshallbedeemedt ohavebeen
madef r
om themostr ecentlyaccumul at edear ningsorsurplus.
d. Accumul atedpr ofi
tsofanyy eardi str
ibut edt oshar ehol
derofacor porati
onshallbeconsidered
divi
dendsubj ecttof i
nal t
axont hedi st
ribut eeint heyearreceived.

78. Whichiswrong?Deferr
edr ecognit
ionofi
ncomeisall
owedin:
a. Inst
all
mentsaleswheret heini
tial
pay
mentsdonotexceedtwenty-
fi
vepercentoft
hesel
li
ngpr
ice.
b. Inst
all
mentsaleswheret heini
tial
pay
mentsexceedtwent
y-f
iveper
centofthesell
i
ngpri
ce.
c. Long-t
erm contr
acts.
d. Advancerentalr
eceiv
ed.

79. Oneoft hef

ollowingstatementsiswr ong.Identif
y :
a. Thebasest ockmet hodofv alui
ngi nventoryisnotrecognizedfori
ncometaxpurposes.
b. Secondhandandoddorbr okenl otsgoodsi ntheinventoryshoul
dbev aluedatcostormar ket
,
whicheverislower.
c. TheCommi ssionerofInt
ernalRev enuemaypr ohibi
tthemet hodofinvent
oryval
uati
onusedint he
booksev enifsuchmet hodusedconf ormst oaccountingrules.
d. TheCommi ssionerofInter
nalRev enuemaydet er
minet hetaxabl
eincomeofat axpayerbyusing
standar
dsdev el
opedfrom othertaxpay ers.

80. Thetaxpayeri
snotadeal erofpersonalpr opert
yregularl
ysel
li
ngoninstal
lment.Inst
all
mentmethod
ofr
eporti
ngincomeisavailabl
etohim onasal eofpropert
yift
heini
ti
alpaymentsont hesal
e:
a. Exceed25%oftheselli
ngpr i
ce.
b. Donotexceed25%oft hesel
li
ngprice.
c. Regardl
essoft
heratioofinit
ialpay
ment stotheselli
ngpri
ce.
d. Donotexceed25%oft hecontr
actprice.
81. Def
erredpaymentmethodofr eport
ingincomeonani nstall
mentsal
eisavai
labl
et oataxpay
erif
,ther
e

9
 bei
ngar equi
rementofthelawont heratioofini
ti
alpay
mentstothesel
l
ingpr
ice,
thei
nit
ialpay
ment
s
onthesale:
a. Exceed25%oft hesel
li
ngpri
ce.
b. Donotexceed25%oft hesell
ingprice.
c. Regardl
essoftherati
oofini
ti
al pay
ment stothesel
li
ngpr
ice.
d. Donotexceed25%oft hecontractprice.

82. Whichiswr ong?Thenetwor t

h-expendit
uremet hodofi nvesti
gationwhichisusedbyt heBur eauof
Int
ernalRev enuet odeterminet axabl
eincomet hatwasf r
audulentl
yconceal
edbyani ndiv
iduali s
basedon:
a. The stat utor
yaut hor
ityoft he Commi ssionerofI nternalRev enue t
o promulgaterules and
regul
ations.
b. Thest atutoryauthori
tyoft heCommi ssioneroft heI nter
nalRev enuetodeterminethet axable
incomeofat axpayerfr
om thebestev i
denceobt ainable.
c. Thestat utoryaut
horit
yoftheCommi ssionerofI nternalRev enuetohavetheincomeofat axpay er
comput edundersuchmet hodasi nhisopi ni
oncl earl
yr efl
ectstheincome.
d. Alloft
heabov e.

83. Underthenetwor th-expendi t

uremet hodofi nvest
igati
on, unexplai
nedincreaseinnetwor t
hisatt
ri
bute
toundeclaredincome.
Statement1.Thef indingoft heBur eauofInternalRevenueofundecl aredi ncomeispresumedcorrect
,
unlessthetaxpay erpr ovesot herwi
se.
Statement2.Theunder decl arati
onofi ncomei spresumedt obef r
audulentandt heassessmentofthe
taxbytheBur eauofI nternal Revenuewi lli
mposedasur char geoffi
ft
yper cent.
a. Thef i
rststatementi st rue,thesecondst atementisf alse.
b. Thef i
rststatementi sf alse,thesecondst atementist rue.
c. Bothst at
ement sar et rue.
d. Bothst at
ement sar ef alse.

84. Whichmet hodofinvent

oryval
uat
ioni
snotr
ecogni
zedf
ori
ncomet
axpur
poses?
a. Cost.
b. Costormar ket,whi
chev
erisl
ower.
c. Farm pricemethod.
d. Basest ockmethod.

85. Statement1.TheCommi ssi

onerofI nternalRev enuecan,ifhemakesafindingthatthenatur
eofstock
onhand( e.
g.,scarci
ty,l
iquidi
ty ,marketabili
tyorpr i
cemov ement
s)issucht hati
nventorygai
nsshould
beconsi deredr eali
zedf ortaxpur poses,r equir
eachangei ntheinventoryvaluati
onmet hodofa
taxpayer.
Statement2.Theaccr ualmet hodofaccount i
ngi srequir
edoftradi
ng,manuf acturi
ngandserv i
ce
enterpri
ses.
a. Fi r
ststatementi scorrect
, secondst atementi swrong.
b. Fi r
ststatementi swrong, secondst atementi scorrect
.
c. Bot hstatement sarecor r
ect .
d. Bot hstatement sarewr ong.

86. Ifagener alprofessionalpartnershi

pi sont heaccr ualmethodofaccount ing,andapar t
ner,onhisown
transacti
ons,i sont hecashmet hodofaccount ing,int hepartner’
sdet erminat
ionofhi st axabl
e
i
ncomef oray ear:
a. Hecanconsol idatehisshar eint heneti ncomeoft hepar t
nershi
p,determinedbyt hepartnershi
p
undert heaccrual method, wit
hhi sowni ncomedet erminedunderthecashmet hod.
b. Hemustconv erthisincomef rom t hepartnershipintocashmet hodbef or
econsol i
dati
ngi twit
h
hisowni ncomeont hecashmet hod.
c. Hemustconv erthisowni ncomei ntoaccrualmet hodbef oreconsoli
datingitwit
hhisowni ncome
fr
om t hepartnershipundert heaccr ualmet hod.
d. Hedoesnothav etor eporthisi ncomef rom t hepartnershi
pbecauset hepartner
shipisexempt
fr
om incomet ax.

87. Anindi
vi
dualmakingacasualsal esordisposi
ti
onofpr
oper
tyi
nvol
vi
ngdef
err
edpay
ment
,noti
nthe
cour
seoftr
adeorbusi ness,mustrepor
thisi
ncome:
a. Onthecashmet hod.
b. Ontheaccrualmethod.
c. Onthei
nstall
mentmet hod.
d. Anyoftheabove.

88. St
atement1.Wher e dif
fer
ententer
pri
ses orcor
porati
on are owned bythe same t
axpayer
,the
Commissi
onerofInter
nalRevenuemaymakeanallocati
onofi ncomeandexpensesamongthem so
astocl
ear
lyref
lectt
heincomeofeachenter
pri
seorcorporat
ions.

10
 St
atement2.I nt hei
nterestofdet er
miningt hecorrectt
axableincome,i
tislegalfort
heCommi
ssi
oner
ofInt
ernalrev enuet odet er
mi nether evenueandgr ossi ncomeofat axpayerbasedoni
ndust
ry
st
andardsdev elopedbyt heBur eauofInter
nal Rev
enuefrom anindust
rystudy.
a. Bothstatement sarecor r
ect .
b. Bothstatement sarewr ong.
c. Fi
rststat
ementi scorrect
, butsecondst atementiswrong.
d. Fi
rststat
ementi swrong, butsecondst atementiscorrect.

89. Whichstatementi swr ong?Whenat axpay ercontrolsamanuf act

uringcorpor
ationandamar keti
ng
cor
porati
on,salesmadebyt hemanuf acturingcor porati
ontot hemar ket
ingcorpor at
ion,asrecor ded,
i
nthebooksofaccount ,maybeconsi der edbyt heBur eauofI nter
nalRevenueasnotr efl
ectiveof
cor
rectsell
ingprice.
a. Underther ul
eof“ piercingthev ei
lofcor porateficti
on”.
b. Underthepr ovisi
onoft heNat i
onalI nter nalRevenueCodewhi chauthori
zestheCommi ssionerof
Int
ernalRev enuet oal l
ocater evenuesandexpensesofcor porati
onscontr oll
edbyt hesame
int
erests,soast oclear l
yrefl
ectthei ncomeoft hetaxpayers.
c. Underthepr ovisi
onoft heNat i
onalI nter nalRevenueCodewhi chauthori
zestheCommi ssionerof
Int
ernalrevenuetodet erminethecor rectt axableincomef r
om thebestev i
denceobt ainable.
d. Cannotbedonebyt heBur eauofI nternal r
evenue.

90. Whichiscorr
ect?Whenittakesmor ethanoney earfrom t
hetimeofplant
ingtotheti
meofharvesti
ng
and sell
i
ng,incomemayber eported undert hecr op yearmethod,underwhich,deduct
ionsfor
expensesshall
beall
owedint heyearthattheincomef r
om thecr
opisreal
ized.
a. Thisisanaccount
ingperi
odofmor ethantwel vemonths.
b. Thisisst
il
lanaccount
ingper i
odoft welv
emont hs.
c. Therearet woaccounti
ngper iods,one,aone- yearperi
od,andtheot her
,aless-
than-
one-y
ear
accounti
ngperi
od.
d. Thereisnodefi
nit
eaccountingperiod.

91. St
atement1.Therecanbeanaccount i
ngperi
odoflesst hantwel
vemont hs.
St
atement2.Therecannotbeanaccountingperi
odofmor et
hantwelvemonths.
a. Bot
hst at
ementsarecorr
ect.
b. Bot
hst at
ementsarewrong.
c. Thefi
rststat
ementiscorr
ect
, whi
lethesecondstatementiswrong.
d. Thefi
rststat
ementiswrong,whil
ethesecondstatementiscorrect
.

92. Stat
ement1.Achangei nthemet hodofaccounti
ngrequir
esapr i
orapprovaloftheCommi ssi
onerof
Int
ernalRevenue.
Stat
ement2.Achangei naccount i
ngperi
oddoesnotr equir
epr i
orapprovaloftheCommi ssi
onerof
Int
ernalRevenueaslongasthenecessaryincometaxretur
nsf ort
hediff
erentaccount
ingperi
ods(ol
d,
i
nteri
m andnew)ar efi
led.
a. Bot hst
atementsarecorr
ect.
b. Bot hst
atementsarewrong.
c. Firstst
atementiscorr
ect,whi
lesecondstatementi
swr ong.
d. Firstst
atementiswrong,wil
esecondst at
ementiscorr
ect.

93. Whichstat
ementi swr ong?Inincomet axall
ocati
on:
a. Permanentdifferenceisani tem ofrevenueinthebooksofaccount
sbutwhichisnotataxable
income.
b. Permanentdifferencei
sani tem oftaxabl
eincomewhichisnotr
evenuei
nthebooksofaccount
s.
c. Timingdiff
erencei sani t
em ofr evenueinthebooksofaccountsinoneaccounti
ngperi
odbut
whichistaxableincomeinanot heraccounti
ngperi
od.
d. Timingdiffer
encei sani tem ofexpensei noneaccount i
ngperi
odandisnotadeduct ionfor
incometaxpur poses.

94. Oneoft hefoll

owi ngi
scorrect:
a. Income f rom long-t
erm cont r
acts maybe r eported on t
he compl eted contract
s method of
accounting.
b. Incomef rom long-t
erm contr
actsmustber eportedonlyontheper centageofcompl et
ionmet
hod
ofaccount ing.
c. Incomef rom deferr
edpay mentsalesmaynotber eport
edont heaccrualmet hod.
d. Wher einadef er
redpay mentsalestheinit
ialpaymentsexceedt went y-
fi
veper centofhesel
li
ng
price,
theincomef r
om thesalesmustber eport
edont heaccrualmet hod.

95. Whichincomefr
om sourcespart
lywi
thi
nandpar t
lyoutsidethePhili
ppinesi
sall
ocatedont het
ime
basi
s?
a. Incomeofaninter
nat
ional
shi
ppi
ngcorpor
ati
onwithv essel
stouchingPhil
i
ppi
nepor t
s.
b. Incomeofatelegr
aphcompanywi
thtr
ansmissi
onfrom thePhili
ppinestopoi
ntsabroad.

11
 c. I
ncomefrom goodspr
oducedinwhol
eori
nparti
nthePhi
l
ippi
nesandsol
dinaforei
gncount
ry,
or
v
ice-
ver
sa.
d. I
ncomefrom per
sonal
servi
cesper
for
medinpar
tint
hePhi
li
ppi
nesandinpar
tabroad.
96. Whoofthef ol
lowingneednotf il
eincomet axret
urn?
a. Ataxablecorporation,i
fwit
hanetl oss.
b. Ataxablepartnership,
ifwit
hanetl oss.
c. Ageneralprofessionalpart
nershi
p,withanetincomeornetl
oss.
d. Anempl oyeewi thagr osscompensat i
onincomeofP48, 500whent
hewi
thhol
dingt
axbyan
employeewascor rect
.
97. Theincomet axret
urnofapar entincl
udest
hei
ncomeofanunmar riedchi l
d:
a. Ifthechildi
smi norandt heincomewasderivedfrom pr oper
tyi nherit
edbythechil
d,wher
et he
estatetaxwaspaid.
b. Ifthechil
disminorandthei ncomewasderi
vedfrom propertyreceiv edasgi
ftf
rom ali
vi
ngparent
,
wher et
hedonor ’
staxwasnotpai d.
c. Ifthechil
dwasmi norandt heincomewasderiv
edf r
om pr oper t
yr ecei
vedasgif
tfrom t
heli
ving
parent,
wherethedonor ’
staxwaspai d.
d. Ifthechil
disminorandthei ncomewasderi
vedfrom hi
sl abor.
98. Stat
ement1:Thei ncomet axr eturnofhusbandandwi femaybesi
gnedbyoneofthespousesonl
y
desi
gnatedbythem ast heincomet axr
etur
nfi
ler
.
Stat
ement2:Thei ncomet axr eturnofhusbandandwi f
emustbesi
gnedbybot
hspouses.
a. Bothstat
ement sarecor r
ect.
b. Bothstat
ement sarewr ong.
c. Stat
ement1i scor r
ect,butSt atement2iswrong.
d. Stat
ement1i swr ong,butSt atement2iscorrect
.
99. Whichstatementiswr ong:
a. Theincomet axret urnofar eceiverofacorporati
onist heincomet axretur
nofthecorporati
on.
b. Thei ncomet axofami nor,unmar r
iedchil
d,from personalservices,fi
l
edbyt heguar di
anofthe
chi
ld, i
sanincomet axret ur
noft hechil
d.
c. Thei ncomet axr eturnofaper sonunderdisabili
ty,from servi
ces,orfrom proper
ty,fil
edbythe
guardian,i
sanincomet axr etur
noft hechil
d.
d. Theincomet axr eturnbyanagentoraut hori
zedr epresentat
iveofthetaxpayer,asi
ndicatedi
nthe
ret
urn, i
sunderthesol er esponsibi
li
tyoftheagentoraut hori
zedrepresentat
ive.
100. A corporat
ionwhi
chi si ncludedi nexemptcor porati
onunderSect ion30oft heNati
onalI
nternal
RevenueCode.(e.
g.,organizedandoper atedforchar i
tablepurposes)whichdi
dnotfil
eitsar
ti
cleof
i
ncorporati
onandby-l
awswi ththeBureauofI nt
ernal Revenue:
a. Isrequir
edtof
il
eani ncomet axreturnandpaidt heincomet ax.
b. Isrequir
edtof
il
eani ncomet axreturnalt
houghnotr equir
edt opaythei
ncometax.
c. Needst ofi
l
eonlyani nformationreturnandwi l
lnotber equiredtopaythei
ncometax.
d. Needst ofi
l
eaninformat ionretur
nandpayt heincomet ax.
101. Agener alprofessionalpartnershipisexemptfr
om incomet ax,butisrequi
redt
of i
l
eanincometax
ret
urn:
a. Forstati
sticalpurposes.
b. Becauset heneti ncomeoft hepart
nershi
pwil
lbetracedi
ntot hei
ncomet axr
etur
noft
hepart
ners.
c. Becauseal lincomeear nersarerequir
edtofi
lei
ncomet axreturn.
d. Noneoft heabov e.
102. Whenanindividual t
axpay erisundertemporarydisabi
l
ity
:
a. I
ncomet axr eturnisrequiredtobefil
edf orhi
m byhisguar
dian.
b. Noincomet axr eturnisrequir
edofhim.
c. I
ncomet axr eturnf ortheper iodwhenhewasunderdi sabi
li
tyshal
lber
equi
redonl
ywhen
becomesabl e.
d. Noneoftheabov est atementsarecorrect.
103. Statement1.Acor porati
onwi thanannualincomet axpai
dorpay abl
eofatleastP1,000,
000f
orthe
precedingtaxabley
earisal argetaxpayer
.
Stat
ement2.Whenacor por at
ionisdissol
veandi sunderrecei
vershi
p,t
hecor por
ationi
ssti
llt
he
taxpayerunti
l t
hecloseofthel i
quidat
ion.
a. Fi r
stst
atementi scorr
ect,whilesecondstatementi
swrong.
b. Fi r
stst
atementi swrong,whi l
esecondstatementiscor
rect
.
c. Bot hstatementsarecorrect.
d. Bot hstatementsatewrong.

104. Whichstatementi swr

ong?Whenani ndivi
dual,notwit
hstandi
ngwithhol
dingincometaxduri
ngthe
yearonhiscompensati
oni ncome,isr
equiredtof i
leanincometaxret
urnattheendoftheyear
,he:
a. Maypayt heincomet axintot
woinstall
ment siftheincometaxonhistaxabl
eincomefort
heyear
,
befor
ecreditforwi
thholdingi
ncomet ax,exceedsP2,000.

12
 b. Maypayt heincomet axintotwoi
nstal
l
ment sift
heincomet axonhistaxabl
eincomefortheyear
,
af
tercr
editforwithholdi
ngincometaxexceedsP2,000.
c. Maycreditt
hei ncomet axwit
hhel
dagainstthefi
rsti
nstal
lmenttaxdue.
d. Maysti
llpayt heincomet axi
nonelumpsum ev enifitexceedsP2,
000andcr edi
tthewi
thhol
ding
i
ncomet axagainstit.

105. Whichofthefoll
owingwi
thhol
dingincometaxshouldberemi
tt
edtotheBur
eauofI
nter
nal
Rev
enueas
afi
naltax?
a. Withholdi
ngincomet
axandcompensat i
onincome.
b. Withholdi
ngincomet
axoncer t
ainpassi
veincome.
c. Withholdi
ngincomet
axundertheExpandedWi t
hholdi
ngTaxSyst
em.
d. All
oft heabove.

106. Di
vi
dendr eceiv
edfrom aforeigncorporationshal l
besubj ecttowi thholdi
ngi ncomet axi
f:
a. Inallcaseswher etheforeigncorporationhadbusi nessint hePhi l
ippines.
b. Inallcaseswher et heforeigncorporat i
onengagedi nbusi nessint hePhi l
ippi
neshadmor ethan
fi
ftyper centofitswor l
dgr ossincomef orthethree-yearper iodpr ecedingthedeclar
ati
onof
divi
dendder iv
edf r
om Philippi
nesour ces.
c. Inallcaseswher et heforeigncorporat i
onengagedi nbusi nessint hePhi l
ippi
neshadmor ethan
eight
y -f
ivepercentofi tswor ldgrossi ncomef ort het hree-yearpr ecedingthedeclar
ati
onof
divi
dendder iv
edf r
om Philippi
nesour ces.
d. Noneoft heabove.

107. Whichisnotacredit
abl
ewi t
hhol
dingincometax?
a. Expandedwithhol
dingi
ncomet ax.
b. Withhol
dingi
ncomet axonpassiveincomeonpassi
vei
ncome.
]
c. Withhol
dingi
ncomet axatsource.
d. Noneoftheabov e.

108. Oneoft hefol

lowingst atementsiscorrect
.A choi
cebyani ndi
vi
dualoft
heOpt
ionalSt
andar
d
Deducti
onsmeanst hat:
a. Hisincomet axret
ur nneednotbeaccompani
edbyfinanci
alst
atement
s.
b. Heneednotkeepbooksofaccount s.
c. Heneednothav erecordsofgrossi
ncome.
d. Hischoicecanst i
l
l bechangedbyfi
li
nganamendedr et
urn.

109. Whichofthefol
l
owi ngi
sat axpay
errequi
redtof i
l
eani ncometaxreturn?
a. Anestatewhichisunderadmini
str
ati
on.
b. Atrustwher
et hefi
duciar
ymustaccumul atetheincomeofthetrust.
c. Atrustwher
et hefi
duciar
ymayaccumul ateordistri
but
etheincomeofthet
rust
,athi
sdi
scr
eti
on.
d. All
oftheabov e.

110. Whichiscorrect
?Theincomet axret
urnshallbeaccompaniedbythef ol
l
owi ng:
a. StatementofNetWor thandOper at
ions,i
fthegrossrecei
ptsfrom businessorprofessiondonot
exceedP50,000inanyonequar t
er.
b. BalanceSheetandI ncomeSt at
ement ,i
fthegrossrecei
ptsfrom businessorprofessionexceed
P50,000,butdonotexceedP150,000inanyonequar t
er.
c. BalanceSheetandI ncomeSt at
ementcer ti
fi
edbyani ndependentCertif
iedPubli
cAccount anti
f
thegrossrecei
ptsfr
om businessorprofessi
onexceedP150,000inanyonequar ter.
d. Alloftheabove.

111. St
atement1.Adonat i
ononwhi chthedonor’
staxwasnotpaidisnotav al
i
ddonation.
St
atement2.Ti t
letothedonat edrealproper
tycannotbet r
ansf
erredtot hedoneeint
heRegi
ster
Deedsunl
esst hedonor’
staxont hedonat
ionhadbeenpaid.
a. Bot
hst at
ementsarecor r
ect.
b. Bot
hst at
ementsarewr ong.
c. Thefi
rststat
ementiscor r
ectwhil
ethesecondstatementi
swrong.
d. Thefi
rststat
ementiswr ongwhilet
hesecondstatementiscor
rect.

112. Oneoft hefoll

owingisnotanexci setaxint heTaxCode.
a. Value-addedtax.
b. Communi t
ytax.
c. Incomet ax.
d. Percentagetax.
113. Oneoft hefoll
owingstatement si
swr ong:booksofaccount sarerequir
edtobekept,
asf ol
l
ows:
a. Wher ethequarterl
ygr osssales,earnings,receipt
sorout putdonotexceedP50,000,asimpli
fi
ed
setofbookkeepi ngrecords.
b. Wher ethequarterl
ygrosssales,earnings,receiptsoroutputexceedP50,
000journal
andledger,or

13
 theirequi
valent
.
c. Wher ethegrossquar t
erl
ysales,
earni
ngsoroutputexceedP150,
000,
thebooksshal
lbeexamined
andaudi t
edbyi ndependentCert
if
iedPubli
cAccountant
s.
d. Maybei nlanguageot herthannati
ve,Engl
ishorSpanishaslongasiti
sinthelanguageofthe
taxpayer.

114. Stat
ement1;Booksofaccount sshallbepr eservedforaper i
odbegi nni
ngfrom t helastentryi
nsuch
booksuntilt
heexpirati
onoft heperiodofassessment( ont ransact
ionsrecordedt here)thatmaybe
madebyt heBureauofInternalRevenue.
Stat
ement2:I nthecaseoft hetaxpayerswhosegr osssal es,earni
ngsorr eceiptsi nanyquarter
exceedP150,000,thebooksofaccountshoul dbeaudit edandexami nedbyi ndependentCerti
fi
ed
Publi
cAccountantsandtheirincomet axreturnsaccompani edwi t
hcerti
fi
edfinancialstat
ements.
a. Bothanswersarecor r
ect.
b. Bothanswersarewr ong.
c. Fir
ststat
ementi scorr
ectbutsecondst atementiswrong.
d. Fir
ststat
ementi swrongbutsecondst atementiscorrect.

115. Mr.Araki
,anon- residentali
enstockhol
der
,receiv
edadi vi
dendincomeofP300,000in2004fr
om a
f
orei
gncor porat
iondoi ngbusinessinthePhili
ppines.Thegrossincomeofthefor
eigncor
por
ati
on
wi
thi
nandwi thoutt hePhil
ippi
nesforthr
eeyearsprecedi
ng2004areasf ol
l
ows:

Sour
cesofIncome 2001 2002 2003
Fr
om wi
thi
nthePhili
ppi
nes P16,
000,000 P12,
000,000 P14,
000,000
Fr
om wi
thoutthePhi
li
ppi
nes 18,000,
000 14,000,
000 16,000,
000
Howmuchoft hedi
videndincomer ecei
vedbyMr.Arakii
sconsider
edincomefrom sourceswi
thi
n
thePhi
lippi
nes?
a. Zero.
b. P150,000. Div
idendincomepartl
ywit
hinandwithoutappl
i
esonlyt
oresidentci
ti
zen
c. P270,000.
d. Answernotgiven.

116. The fol

lowi
ng i
nformat
ion ar
ef rom the recor
ds ofthe Cent
ralPl
ain Uni
ver
sit
y,I
nc.
,a pr
ivat
e
educati
onal
inst
it
uti
on,f
orthefi
scalyearendedMay,31,
2003:
I
ncome: Miscell
aneousf ees P 362,
600
Tuit
ionf ees 2,
843,
100
I
ncomef rom rent s 60,
000
Netincome, school canteen 36,
200
Netincome, bookst ore 24,
800
Divi
dends 15,
000
I
nterestont i
medeposi t
s 45,
000
Expenses: Payrol
landadmi nistr
ati
vesalar
y 1,
452,
450
Otheroper ati
ngexpenses 762,330
I
nterestonP750, 000bankl oan 82,
100
Depreciation,newsi x-r
oom buil
ding 37,
500
I
nthefi
rstmont
hofthef
iscal
year,t
heschoolsecuredaloanf
rom abankintheamountofP750,
000.
Thepr
oceedsofthel
oanwerespenti
ntheconstruct
ionofanewsix-
room bui
l
ding.
Howmuchi sthei
ncomet
axduef
rom t
heCent
ralPl
ainUni
ver
sit
y,I
nc.f
ort
hef
iscaly
earendedMay
31,
2003?
a. P101,935.
b. P26,935.
c. P105,685.
d. P30,
685.

117. TheWestCent
ralColl
ege,I
nc.isapri
vateeducat
ionali
nsti
tuti
onrecogni
zedbyt
heGov
ernment
.It
submi
tt
edthef
oll
owingdatafort
hef
iscal
yearendi
ngApril30,2004:

Tuiti
onfees P9,
500,
000
Miscell
aneousfees 1,
200,
000
Cashdi vi
dendsfrom domesticcorpor
ati
on 80,
000
I
ncomef r
om bookstor e 350,
000
I
nterestsonbankdeposi t 70,
000
I
ncomeofschool canteen 180,
000
Salary,
all
owancesandbonus 6,
400,
000
Otheroperati
ngexpenses 2,
600,
000
Otherexpendit
uresforimprovementofschool
faci
l
iti
es:
Constructi
onofadditi
onalclassr
ooms 1,
300,
000

14
 Fur
nit
ureandequi
pmentofl
i
brar
y 400,
000

Theincomet axduefort
hefi
scalyearendingApr
il30,
2004:
a. P223,000.Tuiti
on+miscel
laneous+BS+SCminusexpenses=530,
000x10per
cent
b. P61,000.
c. P780,000.
d. P53,000.

118. TheCentr
alLuzonUniversi
ty,Inc.i
sapr i
vat
eeducati
onali
nst
it
utionr
ecogni
zedbyt
heGov
ernment
.
Thef
oll
owingarefi
nancialdatafori
tsf
iscaly
earendi
ngApri
l30,2004:

Tuiti
onf ees P12,
800,000
Miscellaneousf ees 2,
100,000
Int
erestonbankdeposi ts 15,
000
Rentincomef rom school canteen 120,000
Salaryandbonus, allpersonnel 8,
500,000
Otheroper ati
ngexpenses 3,
750,000
Const r
uctionofcl assroom buildi
ng 2,
150,000
Repay mentofl oan 500,000
Quarterly(thr
eequar ters)incomet axpai
d 36,
000
Theincomet axst il
lpayablebyt heCentr
alLuzonUniversi
ty,
Inc.f
orthey
earendedApri
l30,
2004:
a. P62, 000.
b. P241, 000.
c. P27, 580.
d. P26, 000. Tui tion+misc+rentminusexpensesncost=( 620000x10%)minus36k

119. Mrs.Evangel i
staownsapar celoflandwor thP500, 000whi chshei nheri
tedfr
om herfatheri
n2003
whenitwaswor thP300,000.Herfatherpurchasedi tin1990f orP100,000.IfMr
s.Evangel
istat
ransf
er
thi
spar celofl and to herwhol l
yowned cor poration i
n exchangef orsharesofst ocksofsai d
corpor
ationwor thP450,
000, Mrs.Evangel
ista’staxablegaini
s:
a. Zero.
b. P50,000. Thisis“exchangesol elyinkind”
.Not axableamount
c. P150, 000.
d. Answernotgi v
en.

120. Mr.SantiagopurchasedalifeannuityforP100,000whi chwi llpayhi m P10,000ayear

.Thelif
e
expect
ancyofMr .Santi
agois12y ears.Whichofthef ol
lowingwillMr .Sant
iagobeabl
etoexcl
ude
fr
om hisgrossi
ncome?
a. P100,000. 100krepr
esent
st hecapi
taltoberecovered(nontaxablepar
t)
b. P10,000.
c. P20,000.
d. Answernotgiven.

121. Astorebuil
dingwasconstruct
edonJanuar y2,1999wi t
hacostofP570, 000.I
tsesti
matedusef
ulli
fe
i
s16y earswithscrapval
ueofP70,
000after16y ear
s.InJanuary
,2004replacementofsomewor n-
out
part
soft hebuil
dingcost
ingP50,
000wasspent .Aft
ertherepai
rs,thebuil
dingwasappraisedwit
ha
fai
rmarketvalueofP770,
000.Theal
lowablededucti
onf ordepr
eciat
ionfortheyear2004is:
a. P35,794.
45.
b. P43,750.
00.
c. P49,431.
82.
d. Answernotgiv en.

122. Mr.Mont ewasinjuredi

nav ehi
cularacci
denti
n2001.Hei ncurredandpaidmedicalexpensesof
P20,000andlegalfeesofP10,000dur i
ngtheyear
.In2004,her ecei
vedP70,000assett
lementfrom
theinsur
ancecompanywhi chinsuredthecarownedbytheotherpartyi
nvolv
edintheaccident
.From
theabovepaymentsandtransacti
ons,theamountoft
axabl
eincomet oMr.Montei
n2004:
a. Zero.
b. P40,000.
c. P70,000.
d. Answernotgiven.

123. Ondif
fer
entdat
esaslist
edbel
ow,Mr.Santospur
chasedcommonst
ockofABCCor
por
ati
on.On
May31,
2004,her
ecei
veda50%stockdi
vi
dend.

Lot Dat
e No.of Cost Tot
al

15
 No. Purchased Shares PerShare Cost
1 Oct.15, 2003 400 P100.00 P40,
000.
00
2 Jan.15, 2004 300 120.
00 36,
000.00
3 Mar.15, 2004 200 140.
00 28,
000.00
4 May .15,2004 100 150.
00 15,
000.00
OnJune30,
2004,
Mr.Sant
ossol
d1,
400shar
esatP100.
00pershar
e.

Usi
ngt hefir
st-
in-
fi
rst-
outmet
hod,
thegai
nor(
loss)ofMr
.Sant
osi
s:
a. P31,000.
b. P(26,600).
c. P28,938.
d. Answernotgi ven.
124. Mr.Ri
veraleasedhisl
andt oMr .Gomez.Thet er
msoft hecontr
actofl
easeisf orfi
ft
een(15)years
andtherentalf
eeisP36,000ay ear
.Thecontr
actpr ovi
desthatMr
.Gomez,thelessee,wil
lconst
ructa
bui
ldi
ngandatt heendoft heter
m ofthecont
ract,thebui
ldi
ngwil
lbeownedbyMr .Ri
vera,t
helessor
.
Thebuil
dingwasconstructedatacostofP600,000andhasausef ul
li
feof30years.

AssumingMr .Riv
erawil
lspreadhi
sincomeov
ert
het
erm oft
hecont
ractofl
ease,f
ori
ncomet
ax
purposes,hi
syear
lyi
ncomeis:
a. P40,000.
b. P56,000.
c. P76,000.
d. P20,000.
125. Mr.Pascualboughta200squar emet erl
andatacostofP500, 000.Heleasedthelandt oMr.Franco
atanannualr entalofP40,000.Thet erm ofthecontr
actofleaseis15y ears.Thecont r
actoflease
provi
desthatMr .Francowillconst
ructabuildingwhi
chwil
lbelongtothelessorattheendofthet erm
oftheleaseoratt heter
minat i
onofthelease,thebui
l
dingwasconst r
uct
edatat otalcostofP400,000
and hasanest imated usefulli
fe of20 y earswhichi
st hebasi sofast r
aight-
li
nemet hod of
depreci
ati
on.
AssumingthatMr.Pascualwi
l
lspr
eadhi
sincomeov
ert
het
erm oft
hecont
ractofl
ease,t
heannual
i
ncomeofMr .Pascuali
s:
a. P46,666.
66.
b. P26,666.
66.
c. P66,666.
66.
d. P40,000.
Assumi ngthecont r
actofl
easewaster
minatedaftert
hetent
h(10th)y
earoratthebegi
nningofthe
th
elev
enth(11 )y earduetot
hefaul
tofthelessee,t
heincomeofMr .APascuali
ntheelevent
h(11th)
yearis;
a. P173,333.34.
b. P200,000.
c. P133,333.34.
d. P400,000.
126. Mr.B,marri
ed,i
saci
ti
zenandr
esi
dentoft
hePhi
l
ippi
nes.Hehadt
hef
oll
owi
ngdat
aoni
ncomeand
expenses:
Sal
aries,
netofP7,000SSS, Phi
l
healt
h,
Pagibigcontr
ibut
ions,
andlaboruni
ondues P88,000
Thir
teenmont hpay 8,000
All
owances 16,000
Gainonsaleofasset 10,000
Theincometaxwi
thhel
doncompensat
ioni
ncome:
a. P11,015. 88Tx12=1, 056,
000
b. P8,900.
c. P7,975.
d. P9,875.
127. Inquesti
on126,i fthei
ncometaxwaswi t
hheldcorr
ectl
ybytheemployer
,incomet
axsti
l
ldueatthe
endofthey eari
s:
a. P2,640.
b. P14,203.
c. P2,000.
d. P1,900.
128. Mr .RichardConcept i
on,aciti
zenandr esi
dentofthePhil
ippi
nes,marr
iedtoMrs.DawnSese-
Concepti
on,wi t
ht hemotherofMrs.Concepti
onli
vi
ngwi t
hthespouses,hadthef
oll
owingdat
afor
2004:

16
 Mr. Mr
s. Mr
.&Mr
s.
Grossi ncomef rom busi ness P220,000
Grossi ncomef rom pr ofessi on,
neti ncomeofa10%wi thholdingtax P180,
000
Renti ncomef r
om l andandbui l
ding P48,
000
Divi
dendf rom domest iccor porati
on 10,
000
I
nterestonnot esr eceiv abl e 2,000 1,
000
I
nterestonPhi lippinecur rency
bankdeposi t 3,
000 2,
000 8,
000
Capital gainonsal edi rect lytobuy erat
P280, 000ofshar esofdomest i
c
corpor ati
on 80,000
Capital gainonsal edi rect lytobuy erat
P2,000, 000ofl andi nt hePhi l
ippines 300,
000
I
nterestongov ernmentbonds 5,
000
Capital l
osst hrut hePhi lippine
StockexchangeatP60, 000ofshar esof
domest iccorpor ation 5,
000
I
ncomet axwi t
hhel donr entat5% 2,
400
I
ncomet axwi t
hhel donpr ofessional
feesat10% 20,000
Expenses, business/ pr ofessi on 150, 000 120,000 10,
000
Thecapit
al gai
ntaxespai
dwi
thi
nthey
ear
;
a. P8,150.
b. P108,000.
c. P124,000.
d. P108,150.

129. InQuesti
on128,
thef
inal
taxpai
donpassi
vei
ncomewi
thi
nthey
ear
:
a. P2,500.
b. P2,600.
c. P3,200.
d. P4,600.

130. InQuest
ion128,
thet
axabl
eincomebef
oreper
sonal
exempt
ionofMr
.Concepci
on:
a. P54,
000.
b. P73,
000.
c. P91,
000.
d. P92,
000.

131. InQuest
ion128,
thet
axabl
eincomeaf
terper
sonal
exempt
ionofMr
.Concepci
oni
s:
a. P59,
000.
b. P91,
000.
c. P75,
000.
d. P73,
000.

132. InQuest
ion128,t
het
axabl
eincomebef
oreper
sonal
exempt
ionofMr
s.Concepci
on:
a. P68,
000.
b. P63,
000.
c. P105,000.
d. P100,000.

133. InQuest
ion128,
thet
axabl
eincomeaf
terper
sonal
exempt
ionofMr
s.Concepci
on:
a. P73,
000.
b. P82,
000.
c. P68,
000.
d. P80,
000.

134. Mr
.Amar
ri
ed,
hadt
hef
oll
owi
ngdat
aforat
axabl
eyear
:

Grossincome,Phi
li
ppines P380,
600.
28
Grossincome,Uni
tedStates 255,
304.
65
Expenses,Phi
l
ippi
nes 194,
269.
03
Expenses,Uni
tedStat
es 193,
248.
39

Ift
hetaxpayeri
saresi
dentci
tizenoft
hePhi
li
ppi
neswhoi
smar
ri
ed,
hist
axabl
eincomei
s:
a. P216,387.
b. P216,387.
51. 248,
387MI NUS50,
000=198,
387

17
 c. P154,
331.
25.
d. P154,
331.

135. Ifi
nQuesti
on134,thet axpayerwasacit
izenofthePhili
ppi
neswi
thr
esi
dencei
ntheUni
tedSt
ates
whoismarri
ed,thet
axableincomeis:(
nonresi
dentci
ti
zen)
a. P216,
387.
b. P216,
387.51.
c. P154.
331.25.
d. P154,
331.

136. Ifi
nQuesti
on134,thet
axpay
erwasanon-
resi
dentali
enengagedinbusi
nessint
hePhi
li
ppi
neswhois
marri
edandthelawofhi
scount
ryal
l
owsfull
reci
proci
tyonpersonal
exempti
on,t
het
axabl
eincomei
s:
a. P216,
387.
b. P216,
387.51.
c. P154,
331.25.
d. P154,
331.

137. Ifi
nQuesti
on134,thetaxpayerwasanon-
resi
dental
i
ennotengagedi
nbusi
nessi
nthePhi
l
ippi
nes
whoismarri
ed,thet
axabl
eincomeis:
a. P186,
331.25.
b. P380,
600.28.
c. P154,
335.25.
d. P380,
600.

138. Acor
por
ati
on,
ini
tsf
ir
sty
earofoper
ati
ons,
hadt
hef
oll
owi
ngdat
a:

Phil
i
ppines Foreign
Grossincome P400,000 P300,000
Expenses 200,
000 200,000

Thetaxablei
ncome,
ifdomest
iccor
por
ati
onandt
hedat
aar
eonbusi
ness,
is:
a. P200,000.
b. P300,000.
c. P100,000.
d. P400,000.

139. Ifi
nQuesti
on138,t
het
axpay
eri
sar
esi
dentcor
por
ati
on,andt
hedat
aar
eonbusi
ness,t
het
axabl
e
i
ncome:
a. P200,
000.
b. P300,
000.
c. P100,
000.
d. P400,
000.

140. Ifi
nQuesti
on138,t hetaxpayerisanon-r
esi
dentcor
por
ati
on,andt
hei
ncomeandexpensesar
eon
i
solat
edtr
ansact
ion,thetaxabl
eincomeis:
a. P200,
000.
b. P300,
000.
c. P100,
000.
d. P400,
000.Gr ossincomeonly.

141. Adomest
iccor
por
ati
on,
ini
tsf
if
thy
earofoper
ati
onsi
n2002,
hadt
hef
oll
owi
ngdat
a:

Sal
es P2,
000,
000
Costofsal
es 1,
000,
000
Busi
nessexpenses 950,
000

Theincomet axoft
hecor
por
ati
onis:
a. P17,000.
b. P20,000. Mciti
shi
ghert
hannci
t.
c. P1,000.
d. P340,000.

142. I
n2002,adomest i
ccorpor
ati
onwasi ni
tssixt
hyearofoperat
ions.Thef
oll
owi
ngdat
aar
efort
he
years2001and2002:
2001 2002
Grossprofi
tfrom sal
es P600,
000 P700,
000
Businessexpenses 580,
000 650,
000
Thei
ncomet
axf
or2001i
s:

18
 a. P12,
000. MCI
Tishi
gher
b. P6,
800.
c. P4,
000.
d. P20,
400.

143. InQuest
ion142,
thei
ncomet
axduef
ro2002i
s:
a. P10,
400.
b. P16,
500.
c. P11,
300.
d. P17,
000.

144. I
nyear2002,
adomest
iccor
por
ati
onhadt
hef
oll
owi
ngdat
a:
Sal
es P4,
000,
000
Costofsal
es 1,
500,
000
Busi
nessexpenses 1,
000,
000
Thegrossincomet
axofthecor
por
ati
oni
s:
a. P375,000. 2.
5M x15%
b. P480,000 .
c. P600,000.
d. P125,000.

145. D.Co.i
sadomest
iccor
por
ati
onwi
tht
hef
oll
owi
ngdat
afor2002(
fi
rsty
earofoper
ati
ons)
:
Grosspr ofitfrom sal
es P2,
000,
000
Divi
dendf rom domest i
ccorporat
ion 20,
000
Capitalgai nonsal eofl andint hePhi
li
ppi
nesheldfortwo
y ears( soldatP1,000,
000)
200, 000
Capitalgai nsonsal eofshar esofdomest i
ccorporat
ionheldfort
wo
mont hs( dir
ectsaletobuyer)
120, 000
Businessexpenses
1, 100,000
Capitallossonbondsofdomest i
ccorpor
ati
onhel
dfor6mont hs
30, 000
Thetot
alcapi
tal
gai
nst
axesf
ort
hey
ear
:
a. P64,
000.
b. P54,
000.
c. P67,
000.
d. P0.

146. InQuesti
on145,thenor
mal
taxoft
hecor
por
ati
onatt
heendoft
hey
ear
:
a. P327,000.
b. P1,070,
000.
c. P288,000.
d. P900,000.

147. Selectedcumul
at i
vebal
ancesweret
akenfrom ther
ecor
dsofABCCo.,Inc.
,adomest
iccor
por
ati
on,
of
i
tsf ourt
hyearofoperat
ionsi
n2002,whichhadanincometaxref
undableofP10,
000forapr
ecedi
ng
yearforwhichtherei
sacerti
fi
cat
eoftaxcredi
t:
1stQ 2ndQ 3rdQ Year
Grosspr of
itfrom sales 800,000 1,
600,
000 2,
400,
000 3,
100,
000
Capi talgai n on sale di
rectl
yt o buyerof
shar es ofdomest iccorporation
50, 000 50,000
50, 000 100,000
Dividendf rom domest i
ccorporat i
on
10,000 10,000
20,000 20,000
I
nter estonPhi lippi
necurr
encybankdeposit
5,
000 10,000
15,000 20,000
Busi nessexpense
600,000 1,200,000
1,
700, 000 2,100,000
I
ncomet axwi thhel
d
15,000 35,
000

19
 65,
000 115,
000

Theincometaxdueatt
heendoft
hef
ir
stquar
ter
:
a. P39,000.
b. P45,000.
c. P55,000.
d. P60,000.

148. InQuest
ion147,t
hei
ncomet
axdueatt
heendoft
hesecondquar
ter
:
a. P50,
000.
b. P70,
000.
c. P140,000.
d. P44,
000.

149. InQuest
ion147,t
hei
ncomet
axdueatendoft
het
hir
dquar
ter
:]
a. P66,
000.
b. P50,
000.
c. P75,
000.
d. P140,000.

150. InQuesti
on147,t
hei
ncomet
axdue(
orr
efundabl
e)att
heendoft
hey
ear
:
a. P245,000.
b. P350,000.
c. (P10,000)
.
d. P46,000.

151. Adomesti
ccorpor
ati
onhadt hef
oll
owi
ngdat
afor2002,
theaccumul
atedear
ningsf
orwhi
chy
eart
he
Bur
eauofI
nter
nalRevenueconsi
der
edt
obeimproper
:

Sales P6,
000,
000
Costofsal es 2,
000,
000
Busi nessexpense 1,
000,
000
Int
er estonPhi l
i
ppi
necurrencybankdeposit 50,
000
Capi talgainonsaledi
rectl
ytobuy erofsharesofdomest
ic
corpor ati
on
120,000
Dividendi ncomefr
om domest i
ccorporat
ion
60,000
Dividenddecl ar
edandpaidduri
ngthey ear
500,000

Theimproperl
yaccumul
atedear
ningst
axi
s:
a. P175,300.
b. P221,000.
c. P171,000.
d. P323,000.

152. ABisageneralprof
essionalpar
tner
ship,wit
hA,mar r
ied,andB,si
ngle,parti
cipat
ingequal
l
yi nthe
i
ncomeandexpenses.Thefoll
owingaredatafort
hepart
nershi
pandthepartnersinacal
endaryear
:

AB A B
Grossincome P600,
000 P150,
000 P200,
000
Expenses 350,
000 70,
000 120,
000

ThegrossincomeofAf
rom t
hepar
tner
shi
pis:
a. P300,000.
b. P125,000.
c. P600,000.
d. None.

153. InQuest
ion152,thet
axabl
eincomeofAi
s:
a. P80,
000.
b. P205,000.
c. P173,000.
d. Someot heramount
.

154. TheYZ&Co.isageneralpar
tner
shi
pintrade,
init
sfi
ft
hyearofoper
ati
ons.I
nonecalendaryeari
thad
agrosspr
ofi
tfr
om sal
esandbusinessexpensesofP2,
000,
000andP1,000,
000,
respecti
vel
y.YandZ

20
 shar
eequal
l
yint
hepr
ofi
tsandl
ossesoft
hepar
tner
shi
p.

Theincomet axoft
hepar
tner
shi
pis:
a. P40,000.
b. P320,000.
c. P640,000.
d. P0.

155. TheincometaxofMr
.Yasaconsequenceofbei
ngapar
tneri
ntheYZPar
tner
shi
pis:
a. P0.
b. P68,000.
c. P77,000.
d. P32,000.

156. Thir
teenthmont hpay P25,
000
Chri
stmasbonus 5,
000
Producti
vit
yincenti
vespay 8,
000

Thetaxablecompensat
ioni
ncomei
s:
a. P38,000.
b. P13,000.
c. P8,000.
d. P1,000.

157. Mr.Awasi nsuredunderanendowmentpol i

cywithaval
ueofP500,000.Totalpr
emiumspai
dbyhim
dur
ing theterm ofpremiumspaymentsonthepoli
cywasP490,000,
from whicht
herewasaret
urnof
P40,
000.Att hemat uri
tyoft
hepoli
cy,Mr.Arecei
vedP500,
000.TheincomeofMr .Aundert
hepoli
cy
i
s:
a. Zero.
b. P500,000.
c. P10,000.
d. P50,000.

158. Aisanempl oy eeinaf i

rmt hatgivesbenefitstoitsr ank-and-
fi
leemployees.Her ecei
vedthe
fol
l
owinginayear :Sal
ari
es,netofSSS, Phil
heal
th,andPagi bigcont
ri
buti
ons,andoflaboruni
ondues,
P360,
000;Thi
rteenthmont hpay,30,000;Producti
vit
yincent i
vespay,30,
000;Mid-y
earbonus,15,
000;
Chri
stmasbonus, 30,
000;Ri
cesubsidy,20,000.

Thecompensat
ioni
ncomeofAsubj
ectt
oincomet
axi
s:
a. P590,
500.
b. P443,
000.
c. P473,
000.
d. P290,
500.

159. Receiv edbythet axpayerunderpol i

ci
es:
Proceedsofl ifeinsurance(asbenef i
ciaryofmot her) P400,
000
Proceedsofl ifeinsurance(asbenef i
ciaryoff at
her ) 600,
000
I
nsur ancepur chasedf r
om thefatheratcostt otaxpayerof 200,
000
Additionalpremi umspai dbythetaxpay ert ocontinuethepol
icy 50,
000
Amountr eceivedupont hedeathoft hef ather 500,
000
Proceedofendowmentpol i
cy,uponmat uri
ty,withpremium payment
s
madeofP800, 000
1,
000, 000
Proceedsofcompr ehensiv
ecarinsur ance
100,000
Cropi nsurance,from cropdestr
oy edbyt y phoon
50,000

Theincomef r
om t
heamount
srecei
vedi
s:
a. P2,300,
000.
b. P500,000.
c. P600,000.
d. P50,000.

160. Costofleaseholdimpr
ovement P1,
000,
000
Est
imatedusef ull
i
feofimpr
ovement
s 50year
s

21
 Remai
ningt
erm oft
hel
ease 40y
ear
s

Incomefrom t
heimpr
ovement
s,i
frepor
tedi
nonel
umpsum:
a. P1,000,
000.
b. P800,000.
c. P200,000.
d. 100,000.

161. InQuest
ion160,i
fthei
ncomef
rom t
hei
mpr
ovement
sisr
epor
tedannual
l
y,t
heannual
incomei
s:
a. P5,000.
b. P4,000.
c. P200,000.
d. P20,000.

162. InQuesti
on160, iftheincomefrom t
hei mprov
ementswasreport
edannual
ly
,andatthebeginni
ngof
thetwenty-
fi
rstyearoftheimprovements,whenthef
airmar
ketval
uether
eofwasP250,000,
thelessor
tookpossessionoft hei
mprovements,hi
sincomeinYear21is:
a. P250,000.
b. P100,000.
c. P150,000.
d. P50,000.
163. InQuesti
on160,ift
heincomewasr epor
tedannual
l
y ,
andt hel
easehol
dimprov
ementsweredestr
oyed
byfi
rebeforetheendofYear10,whenthefai
rmarketv al
uewasP800,000andinsur
ancer
ecover
yfor
thel
essorwasP40,000only,
thededucti
blel
ossofthelessori
s:
a. P5,000.
b. P800,000.
c. P700,000.
d. P45,000.
164. Recov
eryofbaddebtwr
it
tenof
fbyat
axpay
er:
No. 1:P20,000f rom accountswritt
enoffinay earwhichhadanetincomeofP200, 000bef
ore
wri
te-off(wri
te-of
ffort heyearwasP20,000).
No.2:P5, 000f rom accountswrit
tenoffi
nay earwhi
chhadanetlossbeforewri
te-
offofP36,
000
(
write-offf
orthey earwasP5, 000).
No.3:P10, 000f r
om accountswritt
enoffinayearwhichhadanetlossincomeofP8,000bef
ore
wri
teof fandawr iteoffforP12,000.
Theincomefrom t
hebaddebtr
ecov
eryi
s:
a. P35,000.
b. P20,000.
c. P26,000.
d. P30,000.
165. Mr.JoeyBar et
to,aciti
zenandr esi
dentofthePhi l
ippines,sol
dt oMar ti
nManzanoonJul y1,1998a
pi
eceofl andhel dascapit
alassetinthePhil
ippinesatasel l
i
ngpr i
ceofP5, 000,000.Thel andhada
costofP2,500,
000andatt heti
meoft hesalehadaf airmarketvalueofP6, 000,
000andamor t
gageof
P2,000,
000,whi ch mort
gagewasassumed byMr .Manzano.Thesal ecalled forapay mentof
P300,000ont hedat eofsaleandP200, 000onDecember1,1998.t hebal anceshal lbepai din
i
nstall
mentsofP500, 000eachonDecember1, 1999, December1, 200,
December1, 2001,December
1,2002andDecemberI ,2003.Mr .Baret
towi l
lpayt het axont hetransactionini nstal
lments,i
f
quali
fi
ed
The“i
nit
ialpayments”was:
a. P300,000.
b. P500,000.
c. P700,000.
d. Noneoft heabove.
166. InQuesti
on165,thecontr
actpr
icewas:
a. P3,000,
000.
b. P2,000,
000.
c. P2,500,
000.
d. Noneoft heabove.
167. InQuest
ion165,
thet
axpai
dont
hepay
mentr
ecei
vedonJul
y1,
1998was:
a. P20,
000.
b. P50,
000.
c. P30,
000.
d. P36,
000.

22
168. Sel
li
ngpriceoflandinthePhili
ppinesheldascapi
tal
asset P1,
700,
000
Fai
rmarketvalueoft hel
andatt heti
meofsale 2,
000,
000
Costofl
and 800,
000
Paymentsont hesell
ingpri
ce:
Assumptionbyt hebuyerofamor tgageontheproper
ty 900,
000
Cashinthey earofsal
e 300,
000
Cashinthesucceedingy ear 500,
000
Thecapi
talgai
ntaxi
nthey
earofsal
e(i
nst
all
ment
,ifqual
i
fied)
:
a. P17,
647.05.
b. P53,
333.33.
c. P44,
444.44.
d. P100,
000.00.

169. Thetaxpayeri
sadomesti
ccorporat
ionandthetaxabl
ey eari
s2003.i
tsol
dapi eceofl
andand
bui
ldi
ngabroadhel
dascapi
tal
assetatasel
li
ngpri
ceofP5,000,
000wi
thpaymenti
nonelumpsum.

Thecapi
talgai
ntax:
a. P0.
b. P250,
000.
c. P300,
000.
d. Noneoftheabove.

170. Aci ti
zenoft hePhil
i
ppinessol
dhispri
nci
palresi
denceint hePhi
li
ppi
nesatasell
ingpri
ceequaltoit
s
fairmarketvalueofP4,000,
000.Thebasi
sorcostofthepr oper
tywasP2,500,
000.
Iftheent i
reproceedsofthesaleisimmediatel
yinvest
edi nacqui
ri
nganetpr i
nci
palresi
dence,t
he
capitalgai
nt axis:
a. P240, 000.
b. P200, 000.
c. P0.
d. Someot heramount .

171. InQuesti
on170,howmuchi
sthebasi
soft
henewpr
inci
pal
resi
dence?
a. P0.
b. P249,000.
c. P2,500,
000.
d. Someot heramount
.

172. InQuestion170,ifonlyP3,000,
000outofP4,
000,
000wasut
il
izedi
nacqui
ri
nganew pr
inci
pal
resi
dence,t
hecapit
algai
ntaxis:
a. P60,000.
b. P240,000.
c. P180,000.
d. Someot heramount.

173. Calendary ear2002

Taxpay erisaci ti
zenoft hePhil
ippi
neswhoi ssingle:
Capitalgai nonsal eofbondshel dfor20mont hs P50,
000
Capitalgai nondi rectsalet obuy erofshar esofdomest ic
corporationhel dfor6mont hs
120,000
Capitallossonsal eoff amil
ycarhel dfor11mont hs
80,
000
Capitallossonsal eofl andinthePhi l
i
ppinesheldf or3years
60,
000
Netcapi tallossi n2001 ( nettaxablei ncomeoft hey earwas
P10,000)
20,
000

Tot
alcapi
talgai
nst
oconsi
deratt
heendoft
hey
ear
:
a. P145,
000.
b. P25,
000.
c. P120,
000.
d. P130,
000.
174. InQuest
ion173,
thenetcapi
tal
losscar
ry-
overf
rom 2001woul
dhav
ebeen:
a. P40,
000.
b. P55,
000.
c. P10,
000.

23
 d. P0.

175. Calendary ear2002:

Taxpay erisaciti
zenofthePhil
ippi
neswhoi ssingl
e
Capitalgainonsaleofbondshel df
or2mont hs
P45,000
Capitalgainonsal edir
ectl
ytobuy erofsharesofdomest i
ccor
porat
ion
heldfor16mont hs
120,000
Capitallossonsaleoffamil
ycarhel dfor5years
80,000
CapitallossonsaleoflandinthePhi l
i
ppinesheldf
or3y ear
sonasell
ing
pri
ceofP800, 000
60,000
Netcapi tall
ossin2001(nettaxabl
eincomeoft heyearwasP30,
000)
20,000

Thenetcapit
algaini
n2002was:
a. P50,000.
b. P5,000.
c. None.
d. Someot heramount.
176. InQuesti
on175,thenetcapi
tal
losscar
ryov
ert
o2002was:
a. P5,000.
b. P20,000.
c. P30,000.
d. Someot heramount.

177. Capitalst
ockissuedandoutstandingofdomesti
ccorpor
ation–Commononl
y
Stockowned:
Acqui
sit
ionNo.1: 100sharesacqui
redatP120pershare;
Acqui
sit
ionNo.2: 50sharesacqui
redatP130pershare.
Stockdivi
dendr ecei
ved:(
Acquisi
ti
onNo.3)–20%;
Sharessolddirectl
ytoabuyer–110shar esatP110pershare.

Ifcost
ingi
sundert
heFI
FOmet
hod,
thecapi
tal
gai
ntaxi
s:
a. P118.
b. P55.
c. P160.
d. P110.

178. InQuest
ion177,
ifcost
ingi
sundert
hemov
ingav
eragemet
hod,
thecapi
tal
gai
ntaxi
s:
a. P35.
75.
b. P121.67.
c. P39.
72.
d. P68.
60.

179. Proper
tyhel
dbyani ndi
vidualascapi
talasset(
notr
ealpr
oper
tyorshar
esofst
ock)wassol
din2001.
Dataontheproper
tyfol
low:

Sel
lingpri
ce P60,000
Cost 10,000
Paymentin2002 15,000
Paymentin2003 45,000
Holdingperi
od 2y ears

Capi
talgainoni
nst
all
ment(
ifopt
edt
o)i
n2002?
a. P6,
250.
b. P12,500.
c. P25,000.
d. P25,500.

180. InQuest
ion179,
capi
tal
gai
nini
nst
all
ment(
ifopt
ed)i
n2003?
a. P50,
000.
b. P25,
000.
c. P18,
750.
d. P37,
500.

24
181. In2002,ataxpayerbor
rowedmoneyfr
om BankA,thatgavehim ani
nterestexpenseofP8,000.He
deposit
edthemoneywi t
hBankB,andhehadanint
erestincomeofP10,000.Thededucti
bleint
erest
expenseis:
a. P8,000.
b. P3,900.
c. P4,200.
d. Noneoft hosementi
oned.

182. Adomest
iccor
por
ati
onhad:
Gr
osspr ofi
t Business
Year f
rom business Expenses
1998 P600,000 P700,000
1999 500,
000 470,000
2000 900,
000 850,000
2001 850,
000 900,000
2002 920,
000 620,000

Thetaxablei
ncomein2001:
a. P50,000.
b. P0.
c. Loss–( P20,
000)
.
d. Someot heramount
.
183. InQuesti
on182,thet
axabl
eincomei
n2002i
s:
a. P250,000.
b. P0.
c. P300,000.
d. Someot heramount
.

184. A t
axpayer
,aresi
dentci
ti
zenwhoismarri
ed,wit
hsixqualif
ieddependentchi
ldr
en,hadagr oss
compensat
ioni
ncomeofP180,
000,netofexcl
usi
onsfrom gr
osscompensationincome,premi
um
payment
sonhealthi
nsur
ancef
orthefami
lyofP4,
000,andexpensesrel
atedtohisemploymentof
P70,
000.

Thetaxablei
ncomeis:
a. P113,600.
b. P116,000.
c. P177,600.
d. Someot heramount
.

185. Thetaxpayeri
sar esi
dentci
ti
zenwhoi smarri
ed,wit
hgrossincomefr
om busi
nessofP500,
000,
busi
nessexpenseswit
hsuppor
ti
ngrecei
ptsofP40,
000andpremiumsonheal
thi
nsur
anceofP3,
000.

Ifchoosi
ngtheit
emizeddeduct
ionsf
rom gr
ossi
ncome,
thet
axabl
eincomei
s:
a. P460,000.
b. P428,000.
c. P418,000.
d. Someot heramount.

186. InQuest
ion185,ift
hetaxpay
erchoset
heOpt
ional
Standar
dDeduct
ion,
thet
axabl
eincomei
s:
a. P460,000.
b. P450,000.
c. P418,000.
d. Someot heramount.

187. Aciti
zenwhoi smar r
ied,hadthefoll
owi
ngdat
ain2000:
Grossrevenuesf r
om ser vi
ces P400,
000
Capit
algainonsal eofassetheldf or2y
ear
s 10,
000
Di
v i
dendf r
om residentcorporat
ion 15,
000
Di
rectcostsoft heser v
ices 100,
000
Capit
allossonsal eofassetheldfor6months 5,
000

Ifchoosi
ngtheOpti
onalSt
andar
dDeduct
ion,
thet
axabl
eincomei
s:
a. P288,000.
b. P256,000.
c. P246,000.
d. Someot heramount
.

188. I
n2002,
anempl
oyergav
ethef
oll
owi
ngf
ri
ngebenef
it
s,i
ncashandi
nki
nd,
toi
tsempl
oyees:

25
 Tomanagementl
evelemploy
ees P2,
040,
000
Tor
ank-
and-f
il
eemployees 5,
000,
000

Thefr
ingebenef
itt
axi
s:
a. P960,
000.
b. P652,
000.
c. P680,
000.
d. Someotheramount
.

189. InQuesti
on188,thededuct
ionf
rom t
hegr
ossi
ncomeoft
heempl
oyerf
orFr
ingeBenef
itExpensei
s:
a. P3,000,
000.
b. P2,040,
000.
c. P8,000,
000.
d. P7,040,
000.

190. Jour
nal
ent
ry:
(Debit
)Fri
ngebenefi
texpense P389,
000
(Debit
)Fri
ngebenefi
ttaxexpense 136,000
(Credi
t)Cash P389,
000
(Credi
t)Fr
ingebenef
ittaxpayabl
e 136,
000

Meansthatthegrossed-
upmonet
aryv
alueoft
hef
ri
ngebenef
it
stosuper
visor
yper
sonnelhada
gr
ossmonetaryv
alueof:
a. P425,
000.
b. P289,
000.
c. P186,
000.
d. P389,
000.

191. InQuest
ion190,t
hemonet
aryv
alueoft
hef
ri
ngebenef
itt
other
ank-
and-
fi
leempl
oyeesi
s:
a. P425,000.
b. P100,000.
c. P289,000.
d. P389,000.

192. Amanagementemploy
eebor rowedf r
om hisemployer(
advancesagai
nstsal
ari
es)P120,
000,
pay
able
fr
om hissal
ari
esatP5,000ev erypayday( f
if
teendays).Si
ncecheck-of
fwast obemadeagainst
sal
ari
es,t
her
ewasnointerestchargedtotheloan.

Thefr
ingebenefi
ttaxi
s:
a. P0.
b. P14,400.
22.
c. P6,776.
47.
d. P21,178.
49.

193. Incl
udedi nt
hecompensationpackageofanexecuti
vewast hefreeuseoft hecompany
’sr
esi
dent
ial
condominium uni
tinMakatiCi
ty,
Phil
ippi
nes.Dataonthecondominium unitf
oll
ow:
Fairmarketval
ueintheRealPr
opertyDecl
arati
on P1,000,
000
Zonalvalue 2,
000,000
Fairmarketval
ue 2,
500,000

Themonthl
ygrossmonet
aryv
alueoft
hef
ri
ngebenef
iti
s:
a. P1,
500,
000.
b. P2,
000,
000.
c. P6,
127.
45.
d. P4,
166.
67.

194. InQuest
ion193,howmuchi
sthef
ri
ngebenef
itt
ax?
a. P326,400.
b. P705,832.
35.
c. P1960.78.
d. P945,176.
47.

195. A corporat
ionboughtapi eceofl andwithabui l
dingatacostofP4, 000,
000f orthelandand
P1,000,
000f ort
hebui l
ding.Itwasnott hei
ntent
ionofthecorporat
iontousethebuil
dingbuttohave
i
trazedtomaket helandav ai
lablef
ortheconstr
ucti
onofi t
soffi
ces.Uponrazi
ngtheoldbuil
dingata
costofP200,000,thecorporationshall
haveadeducti
blelossof:
a. P0.
b. P1,000,
000.

26
 c. 1,
200,
000.
d. P200,
000.

196. ACo.hadi nvestmentsi

nshar esofst
ockofBCo.t hati
tacqui
redatacostofP20,
000.I
talsohad
i
nvestmentinsharesofstockofCCo.Thatitacquir
edatacostofP40,
000.Theval
ueoft
heshar es
ofst
ockofBCo.haddecr easedtoP15,
000,
whiletheshar
eofstockofCCo.arenowwort
hless,
and
hastobewr i
ttenoff
.

Thededuct
ibl
elossi
s:
a. P45,
000.
b. P40,
000.
c. P60,
000.
d. P0.

197. Cont
ri
but
ionsanddonat
ionswer
emadebyat
axpay
er,
asf
oll
ows:

TotheQuiapoCat holi
cChurch P15,000
TotheSociet
yf ortheBli
nd,I
nc.,
Phi
l
ippi
nes 10,000
Tobeggarsinthest r
eets 5,000
TotheSist
ineChapel inRome 20,000

Theactualcont
ri
but
ionst
obecompar
edwi
tht
he5%/
10%l
i
mit
ati
oni
s:
a. P50,000.
b. P25,000.
c. P45,000.
d. P20,000.

198. Husbandandwife,wi
thfi
vequal
if
ieddependentchi
l
dren,(
wit
hhusbandcl
aimi
ngt
headdi
ti
onal
exempti
ons)hadt
hefol
lowi
ngdat
afor2002:

Wif
e:
Salaries P180,000
Thirteenthmont hpay 15,000
Premi umsonheal thinsurancepai d 5,000
Husband:
Sales 2,000,000
Divi
dendf rom domest i
ccor poration 20,000
Divi
dendf rom residentcor porati
on 15,000
Int
er estonPhi l
i
ppinecur r
encybankdeposi t 100, 000
Roy altyfrom patentedi nventi
on 60,000
Roy altyfrom books 30,000
Capi talgainsonasset sheldfornotmor ethan12mont hs:
Onsal edirectl
ytobuy erofshar esofdomesticcorporat i
on 135,000
Onsal edirectl
ytobuy eronbondofdomest iccorporation 40, 000
Onsal et hrut hePhi l
ippi
neSt ockExchangeofshar esof
domest i
ccor poration
60,
000
Onsal et hruar ealest atebr okeroflandint hePhi li
ppines
(f
airmar ketv alue-P2,
800, 000,sel
li
ngpr i
ce-P3,
000, 000)

500,000
Onsaleofv acati
onhouseandl oti
nMal aysi
a 200,
000
Costofsales 980,
000
Capit
allossonassethel dformorethan12mont hs:
Onsaledirectl
ytobuyeroflandinIndonesia 250,
000
Onsaleoff amil
ycar 100,
000
Onsaledirectl
ytobuyerofbondsofdomest i
ccorpor
ati
on 25,
000
Contr
ibuti
onst ochurches 5,
000
Busi
nessexpenses 500,
000

Theincometaxwi
thhel
dont
hecompensat
ioni
ncomei
s:
a. P20,
400.
b. P24,
500.
c. P32,
650.
d. P35,
400.

199. I
nQuest
ion198,
thef
inal
taxonpassi
vei
ncomei
s:

27
 a. P35,
000.
b. P39,
200.
c. P20,
000.
d. P37,
000.

200. InQuest
ion198,t
hecapi
tal
gai
ntaxonr
eal
proper
ty:
a. P150,000.
b. P180,000.
c. P100,000.
d. P120,000.

201. InQuesti
on198,
thecapi
tal
gai
ntaxonshar
esofst
ock:
a. P8,500.
b. P17,000.
c. P13,500.
d. P27,000.

202. InQuesti
on198, t
henetcapi
tal
gai
n(l
oss)att
heendoft
hey
ear
:
a. P105,000.
b. P(135,000)
.
c. P52,500.
d. P40,500.

203. InQuest
ion198,t
hei
ncomet
axdueatt
heendoft
hey
earf
rom t
hehusbandandwi
fe:
a. P155,790.
b. P130,920.
c. P163,245.
d. P145,364.

204. Theyearis2002.adomesti
ccor
porati
onini
tssi
xthyearofoperat
ionshadagr
osspr
ofi
tfr
om sal
es
ofP2,
500,000,andneti
ncomeperbooksofP700,
000afterconsi
der
ing:

Di
videndi ncome:
Fr om domest iccorporation P 20,
000
Fr om residentcorporati
on 15,000
I
nterestincome:
Fr om tradenot esrecei
v abl
e 5,
000
Fr om Phili
ppinecur r
encybankdeposi ts 8,
000
Capitalgainonsal eatP4, 000,
000ofl andint hePhi l
i
ppines
hel dforteny ears
100, 000
Capitalgainonsal eofbondswi thmaturi
tyof10y ears
6,000
Capitalgai n on sal e ofshar es ofst ock ofa domest i
c
cor porati
onhel dforeightmont hs,
solddirect
lytobuy er
12, 000
I
ncomef rom trustindenturewiththeEquitabl
ePCI Bank
4,000

Baddebt s(directwri
t-
off) 18,
000
Salariesandwages 100,
000
Taxesandl icenses(i
ncludi
ngi ncometaxonint
eresti
ncomeand
oncapi talgainofP243,000)
260,000
Util
it
iesexpense
75,000
Losses
90,000
Depr eci
ation
40,000
Pensi ontrust
16,000
Incomet ax( threequart
erl
yincomet axes)
80,200
Capitallossonsal eofbondsofadomest i
ccorporat
ionhel
dfor
twoy ears

28
 5,
500
Di
vi
denddeclar
edandpai
d
200,
000

Theincomet axduef
rom t
hecor
por
ati
on:
a. P200,984.
b. P50,000.
c. P298,758.
d. P0.

205. InQuest
ion204,iftheaccumul
ati
onofpr
ofi
tsi
n2002i
sadj
udgedt
obei
mpr
oper
,thei
mpr
oper
ly
accumul
atedearni
ngstax(I
AET)i
s:
a. P72,
328.32.
b. P50,
364.86.
c. P37,
944.56.
d. P29,
901.60.

206. Mr.Asoldpr
opertywhi
chhadacostt ohim ofP110,000forasel
li
ngpr i
ceofP200, 000.Thesale
wasonJulyI
,2002,andundert
heter
msoft hesal
e,thebuyerwastoassumeamor tgageofP50,000
onthepr
opert
y,payP50,
000onthedateofsal
eandP50, 000ever
yJul
y1t hereaf
ter
.

Theincomein2002r
epor
tedundert
hei
nst
all
mentmet
hodwas:
a. P22,450.
b. P30,000.
c. P90,000.
d. Noneoftheabov
e.

207. CieloCo.sol dapieceofl

and(or
dinar
yasset)whichhadacostt oitofP1,
000,000f
oraselli
ngprice
ofP4, 000,000.Thesalecall
edforanassumpt ionbyt hebuy eroft hemor t
gageont helandof
P1,500,000,cashofP500,000ont hedateofsaleandi nstall
mentpay mentof500,000everyyear
thereafter
.Theincomet or
eporti
ntheyearofsal
eundert heinstal
l
mentmet hodofrepor
ti
ngincome
i
s:
a. P500, 000.
b. P750, 000.
c. P375, 000.
d. P1, 000,000.

208. DelMundoCo.soldapieceofland(or
dinaryasset)whichhadacostofP2,000,000forP4,
000,
000
onDecember1,2000.Thesalecall
edforapay mentondat eofsaleofP1,
500,000,andthebal
ance,
evi
dencedbyamor t
gagenotef orP2,
500,000,pay abl
eatP1, 500,
000onDecember1,2001and
P1,
000,000onDecember1,2002.Thenotehadaf airmarketv
alueatthet
imeofexecut i
onequalt
o
ei
ghty-
fiv
eper
centofit
sfaceval
ue.
Thei
ncomein2000undert
hedef
err
edpay
mentmet
hodofr
epor
ti
ngi
ncome:
a. P3,
000,
000.
b. P1,
625,
000.
c. P1,
500,
000.
d. P2,
000,
000.

209. InQuesti
on208,thei
ncomei
n2001whenP1,
500,
000i
scol
l
ect
ed:
a. P0.
b. P235,000.
c. P225,000.
d. P1,500,
000.

210. Thetaxpay
eri
sar esi
dentcit
izenwhoismarri
edwi
tht
woqual
i
fieddependentchi
l
dren.For2002
whichi
sunderi
nvest
igat
ion,
hehadt hef
oll
owi
ngdat
a:

Networ t
h, beginningofthey ear P400,
000
Networ t
h, endoft heyear 600,
000
I
nterestreceivedonl ong-ter
mi nvestmentinbanks 2,
000
Div
idendonshar esofst ockofdomest iccorporat
ion 5,
000
Rentincomeperbooks( outofanadv ancerentalofP60,
000) 10,
000
I
ncomet axpai dfor2001 60,
000
I
ncomet axshownont her eturnf
or2002 29,
000
I
nterestpai donmoneybor rowedf oruseinacqui r
ingl
ong-
ter
m
i
nvestment
1,
000
Personal,l
ivingandf amilyexpenses

29
 100,000
Costtorepairr
esi
dent
ial
housepart
ial
lydestroyedbyfir
e
30,000
Premiumsonf amil
yheal
thandhospit
ali
zat
ioninsurance
77,400
Capit
algainonbondsofadomest i
ccor porat
ionheldfor8
mont hs
30,000
Capit
allossonbondsofadomest i
ccor porati
onheldfor18
mont hs
70,000
Thetaxablei
ncomeperi
nvest
igat
ion:
a. P327,000.
b. P466,000.
c. P356,000.
d. P283,000.

211. Mr.Ai
snotadeal
eri
nsecuri
ti
es.In2002,hehadt
hef
oll
owi
ngt
ransact
ionsofcommonshar
esof
st
ockofZCo.
,adomest
iccor
porat
ion:
Pur
chaseonJanuary5,of100shar es P7,
000
Sal
eofJune18,ofthesharespurchasedonJanuary5 6,
000
Pur
chaseonJune22, of60shares 6,
500
Sal
eonOctober5,ofthesharespurchasedonJune22 8,
000
Thelossnotrecogni
zedont
hesal
eofJune18:
a. P1,000.
b. P600.
c. P0.
d. Someot heramount.
212. InPr
oblem 211,thebasi
soft
heshar
espur
chasedonJune22,
2000i
s:
a. P600.
b. P7,
100.
c. P6,
500.
d. Someot heramount.

213. InPr
oblem 211,thegai
nont
hesal
eofOct
ober5,
2000i
s:
a. P900.
b. P1,
500.
c. P0.
d. Someot heramount.

214. AnsonCo.wasmer gedi

ntoBonoCo.,andonlyBonoCo.conti
nuestoexist
.Mr.Arnol
dCustodio,a
stockhol
derofAnsonCo.wasaskedtosurrenderhi
s100sharesofAnsonCo.t hatheacqui
redfor
P100,000andrecei
vedundert
hemerger100sharesofBonoCo.wit
hafairmarketval
ueofP130,000
andcashof30,000.

ThegaintoMr .Ar
nol
dCust
odi
oont
hemer
geri
s:
a. P60,000.
b. P30,000.
c. P0.
d. Someot heramount
.

215. InQuest
ion214,thebasi
stoMr
.Ar
nol
dCust
odi
ooft
heshar
esofBonoCo.r
ecei
vedi
s:
a. P100,000.
b. P130,000.
c. P70,
000.
d. Someot heramount.

216. M CO.
,adomest
iccor
por
ati
on,
hadt
hef
oll
owi
ngdat
afor2000:

Taxabl
eincome,Phil
ippi
nes P1,
000,
000
Taxabl
eincome,XFor ei
gnCountry 600,
000
Taxabl
eincome,YFor ei
gnCountry 400,
000
I
ncomet axpaidt
oXFor eignCountry 250,
000
I
ncomet axpaidt
oYFor eignCountr
y 120,
000
Phil
i
ppineincometaxpaid,t
hreequarter
soft
hey
ear 110,
000

30
 Taxcredi
tforf
orei
gni
ncomet
axespai
d?
a. P540,
000.
b. P370,
000.
c. P312,
000.
d. P340,
000.

217. InQuest
ion216,t
hePhi
l
ippi
nei
ncomet
axst
il
ldue,
aft
ercr
edi
tforf
orei
gni
ncomet
axespai
dis:
a. P218,000.
b. P356,000.
c. P570,000.
d. P0.

218. Ifi
nQuest
ion216,t
hecorporat
ionchoset
odeductt
heforei
gnincometaxpai
d(i
nst
eadofav
ail
i
ngof
aforei
gni
ncometaxcredi
t)
,howmuchwoul dhav
ebeentheincometaxdue?
a. P521,
600.
b. P640,
000.
c. P411,
600.
d. Someotheramount.

219. Arevocabletransf
er,wit
haconsider
ati
onreceived:
Consi
der at
ionrecei
ved P200,
000
Fai
rmar ketvalueofproper
tyatt
hetimeoftransfer 300,
000
Fai
rmar ketvalueofproper
tyatt
hetimeofdeath 250,
000

Val
uetoincl
udei
nthegr
ossest
ate:
a. P300,
000.
b. P250,
000.
c. P100,
000.
d. P50,
000.

220. Adecedentwasmarri
edatt
het i
meofdeathandundert
hesy
stem ofconj
ugalpar
tner
shi
pofgai
ns.
Amongtheproper
ti
esint
hegrossest
atewere:

Land,
inher
it
edbef
orethemarri
age,
fairmarketval
ue P100,
000
Famil
yhomebuil
tbythespousesontheinheri
tedl
and 800,
000

Deduct
ionforf
ami
l
yhome:
a. P900,
000.
b. P500,
000.
c. P400,
000.
d. P450,
000.

#116sol
uti
on:
Tui t
ionf ees P2,
843,
100
Mi scellaneousf ees 362,
600
Incomef rom r ent
s 60,
000
Neti ncome, schoolcanteen 36,
200
Neti ncome, bookstore 24,
800
Grossi ncome P3,
326,
700
Less: Allowabl ededucti
ons:
Pay rollandadmi ni
strat
ivesalar
y
Otheroper at
ingexpenses
I
nt erestexpense
Out rightexpenseofcapitalexpendi
tur
esf
ornewsi
xrooms P1,
425,
420
Taxabl ei ncome 762,
330
82,
100 3,
019,
850
Mul ti
pl ybyt heappli
cabl
et axrate
750,
000 P306,
850
Incomet ax
10%
P 30,
685

31
32
33
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