Income Taxes for Corporation

True or False

T 1. Partnership, no matter how created or organized, are taxable as corporations for income tax
purposes.

F2. The term "domestic', when applied to a corporation means created or organized in the Philippines or under the
laws of a foreign country as long as it maintains a Philippine branch.

T 3. A corporation which is not domestic may be a resident (engaged in business in the Philippines) or nonresident
corporation (not engaged in business in the Philippines)

T4. Resident foreign corporation are subject to income tax based on net income from sources within the Philippines.

F 5.  Private educational corporations are subject to income tax based on the net income from sources within the
Philippines at the tax rate of 10%

T 6.) Any profit remitted by a branch office to its head office is subject to 15% tax rate. The computation shall be
based on profits applied or earnmarked for remittance without deduction for the tax component.

F 7. Improperly accumulated earnings tax is applicable only to listed entities

F 8 Optional corporate income tax is a tax imposed in the nature of a penalty to the corporation to prevent the
scheme of accumulating income rather than distribute the same to the stockholders for the purpose of avoiding tax
on dividends.

F 9. Regional Headquarters are subject to 10% income tax on its net income derived from the Philippines.

T 10.) nonresident owners of vessels are treated as special corporations only from charters or leases of the vessels
to Filipino citizens or corporations approved by the Maritime Industry Authority.

Partnership_Estates and Trusts

1. The following statements regarding taxable partnerships are correct, except

A. They file quarterly and year-end income tax returns.

B. They are subject to the rules on corporation for capital gain tax, final tax on passive

income, normal income tax, minimum corporate income tax and gross income tax.

C. The partners’ share in the distributable net income is subject to final tax.

D. They are subject to the improperly accumulated earnings tax

2. The net share received by a partner in a general professional partnership is

A. Part of his taxable income

 B. Exempt from income tax

C. Subject to corporate tax

D. Subject to final tax

3. The net shares received by a partner in a general co-partnership is

A. Part of his taxable income

B. Exempt from income tax

C. Subject to corporate tax

D. Subject to final tax

4. Which of the following statements is not correct?

A. When the co-owners invest the income of the property co-owned in a business or any income
producing properties or activities constituting themselves into a business partnership, such
partnership is consequently subject to tax as a corporation.

B. As a rule, a co ownership is mot subject to income tax because the activities of the co-owners are
limited to the preservation and enjoyment of the property and the collection of the income there
from.

C. A co-owner is subject to income tax on his share in the net income of the co-ownership

actually or constructively received.

D. All partnerships, no matter how created or organized are considered corporations subject to
corporate income tax.

5. Statement 1- A CPA and a Dentist may form a GPP or an ordinary partnership

Statement 2- Partnership and Corporations have separate juridical personalities distinct from

the owners, as such partners and stockholders are not liable to creditors of

business

A. True, true C.
False, true

B. False, false
D. True, false
6. Statement-1 The share of the partner in the net income of an OP is added on his own gross

income.

Statement-2 The share of the partner in the net income in GPP is also considered as passive

Income.

A. True, true C.
False, true

B. False, false
D. True, false

7. As regards a general professional partnership, which of the following statements is correct?

A. Treated like a corporation, hence it is subject to the corporate income tax

B. It is exempt from income tax, hence it need not file an ITR
C. Partners’ share are subject to final tax
D. Partners’ share will be included in their respective ITRs whether distributed or not

8. As regards an ordinary partnership, which of the following statements is correct?

A. Partners’ share are subject to final tax, hence it not file an ITR

B. Subject to improperly accumulated earnings tax

C. Treated like corporations, hence partners have limited liability

D. Partner’s share even if distributed will not be included in their ITR

9. If a partner on his own transactions, is on the cash method of accounting while the general
professional partnership is on the accrual method of accounting, in the partner’s determination of his
taxable income for the year, he

A. Must convert his income from the partnership into cash method

B. Must convert his own income into accrual method

C. Does not report his income from the partnership because the partnership is exempt from

income tax

D. Can consolidate his share in the net income of the partnership under accrual method with his own
income under cash method
10. Which of the following statements is correct?

A. Partners of a taxable partnership are considered as stockholders and profits

distributed to them by the partnership are considered as dividends.

B. The share of each partner in net income of a taxable partnership shall be based on their

capital contribution .

C. The share of an individual partner in the net income of taxable partnership shall be equal to

the share of a capitalist partner with the least capital contribution.

D. The industrial partner shall contribute money and or property but not services.

11. Which of the following statements is correct?

A. Estates and trusts are allowed a personal exemption of P32,000 if the executor or
trustee is

married.

B. The income tax rates for corporate taxpayers apply to taxable estates and trusts.

C. The taxable year of estates and trusts maybe calendar or fiscal year

D. For a trust to be taxable, it must be irrevocable, both as to corpus (principal) and

income

12. The property, rights and obligations of a person which are not extinguished by his death and

those which accrued thereto since the opening of succession.

A. Assets B. Capital C. Estate

D. Income

13. The term applied to the person whose property is transmitted through succession, whether or

not he left a will

A. Decedent B. Transferor C.
Transferee D. Grantor
14. The term applied to the answer in No. 3 if he left a will

A. Transferor B. Grantor C. Donor

D. Testator

15. The person called to the succession either by the provision of a will or by operation of law

A. Heir B. Devisee C.
Legatee D. Trustor

16. The person to whom a gift of real property is given by virtue of a will

A. Heir B. Devisee C.
Legatee D. Trustor

17. The person to whom the gift of personal property is given by virtue of a will

A. Heir B. Devisee C.
Legatee D. Trustor

18. The person who establishes a trust

A. Heir B. Devisee C.
Legatee D. Trustor

19. The person in whom confidence is reposed as regards property for the benefit of another

person

A. Devisee B. Trustee C. Legatee

D. Heir

20. The person for whose benefit the trust has been created

A. Legatee B. Heir C.
Beneficiary D. Trustee
Gross Income:

1. All of the following statements are correct, except one. Which is the exception?

A. The source of interest income is the country where the debtor resides

B. The source of dividend income is the country where the corporation was incorporated

C. Rents are considered derived from the country where the property is located

D. Income from personal services is considered derived from the country where the services were
rendered.

2. Which is not a creditable withholding income tax?

A. Expanded withholding income tax

B. Withholding income tax on passive income

C. Withholding income tax at source

D. Withholding income tax on compensation income

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

A. Profit sharing
C.Overtime pay

B. Hazard pay
D. 13th month pay

4. This is taxable income

A. Retrenchment pay

C.Separation pay due to resignation

B. SSS/GSIS benefits

D.Refund of Philippine Income tax

5. One of the following is taxable income

 A. Gifts, bequests and devices

B. Amounts received as rewards for giving information instrumental in the discovery of

violation of the Tax Code and seizure of smuggled goods

C. Proceeds from life insurance

D. Separation pay received by an employee due to a cause beyond his control

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

A. Cash dividend

C.Scrip dividend

B. Property dividend

D. Stock dividend

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

A. Labor union dues C.

IOU’s

B. SSS/GSIS premiums contributions D. Pag-ibig premiums

contributions

10. If refunded, this is taxable

A. Estate tax

C. Special assessment

B. Donor’s tax
D. Fringe benefit tax
11. Which of the following is subject to fringe benefit tax?

A. compensation income of the rank and file employees

B. fringe benefit of the rank and file employees

C. compensation income of the managerial employees

D. fringe benefit of the managerial employees

12. The following concepts denote exemption from the fringe benefits tax, except

A. convenience of the employer

B. necessity to the business or trade

C. welfare and benefits of the employee

D. de minimis benefits

13. The following concepts denote exemption from the fringe benefits tax, except

A. convenience of the employer

B. necessity to the business or trade

C. welfare and benefits of the employee

D. de minimis benefits

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

individual employee maybe subject to the fringe benefit tax, if given to

1. Rank and file employees

2. Managerial employees

3. Those holding supervisory positions

 A. 1 and 2 only
C. 2 and 3 only

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

5. The fringe benefit tax is

1. Imposed on the employer

2. Withheld at source

3. Deductible by the employer

A. 1 and 2 only
C. 2 and 3 only

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

Allowable Deductions.

1. Which of the following statements is true?

A. Payments which constitutes bribes, kickbacks, and others of similar nature

which are

necessary to realize the profit are allowed as deduction from gross income

B. The taxes which are deductible from gross income include the taxes, interest and penalties
incident to tax delinquency

C. Deductions are amounts allowed by the Tax Code to be deducted from gross income to
arrive at the income tax liability of a taxpayer.

D. Losses from wagering transactions shall be allowed only up to the extent of the gains
from such transactions.

2. This is not deductible from gross income

 A. Transportation expenses from the main office to the branch

B. Transportation expenses from home to the office and from the office back to home

C. Travel expenses on business trips

D. Travel expenses while away from home in the pursuit of trade, business or profession

3 . A revenue expenditure is

A. Usually incurred in the acquisition, betterment or permanent improvement of the asset

B. Capitalized and the cost is recovered through annual depreciation

C. Ordinarily to benefit more than one accounting period

D. To benefit one accounting period and is a deduction from gross income in the year paid or
incurred.

4. The phrase “related taxpayers” will apply to the following, except:

A. Between members of a family

B. Between the grantor and a fiduciary of any trust

C. Between a fiduciary of a trust and a beneficiary of such trust

D. Between an individual and a corporation more than 50% in value of the outstanding stock
of which is owned, directly or indirectly for such individual, in case of distributions in
liquidation.

5. May be deducted from gross income

A. Philippine income tax

B. Foreign income tax

C.Estate or donor’s tax

D. Special assessment