Assessment Task 3

Part I. Multiple Choice –Theory

1. Which of the following statements is never true?

a. An individual taxpayer who earns compensation income is an employee.

b. Business income may arise from self-employment or practice of profession.

c. Business income may arise from self-employment or compensation income.

d. An individual taxpayer may earn both compensation income and business income.

2. Who is not required to file a declaration of estimated income?

a. resident citizen with respect to his income without the Philippines

b. non-resident alien engaged in trade or business in the Philippines

c. non-resident alien not engaged in trade or business in the Philippines

d. non-resident citizen with respect to his income within the Philippines.

3. Which of the following statement is false?

a. Passive income are not included in the computation of gross income from

compensation and business.

b. Fringe benefits subject to the fringe benefit tax do not include fringe benefits to

the rank and file employees.

c. Capital gains from sale of shares of stock, not traded through the stock exchange

and capital gains from sale of real property are not to be included in the computation of gross income
taxable under section 24(A).

d. None of the above.

4. Taxable income may mean any of the following.

a. gross/net income

b. net compensation income

c. gross compensation income

d. all of the above

5. All statements except one are correct. Which is it?

a. Non-resident alien is taxable on income derived within the Philippines.

b. Non-resident citizen is taxable on income derived within the Philippines.

c. Resident alien is taxable on income derived within and without the Philippines

d. Resident citizen is taxable on income derived within and without the Philippines.

6. Which of the following is not true about a resident alien?

a. His residence is within the Philippines but is not a citizen thereof.

b. His income is subject to the same treatment as a resident citizen’s in all respect

c. He is one who is actually present in the Philippines and who is not a mere

transient or sojourner.

d. An alien is considered a resident or a non-resident depending on his intention

with regard to the length and nature of his stay.

7. Who among the following is a non-resident alien?

a. An alien who has acquired residence in the Philippines.

b. An alien who lives in the Philippines with no definite intention as to his stay

c. An alien who comes to the Philippines for a definite purpose which is its nature may be
promptly accomplished.

d. An alien who comes to the Philippines for a definite purpose which in its nature

would require an extended stay.

8. Which statement is false? In taxing individuals.

a. tax rates are generally higher for higher levels of income.

b. if a person engages in different business activities, his taxable income is

determined by aggregating income and losses.

c. if two or more individuals professionals form a general professional partnership,

there is no income tax imposed on the entity.

d. all of the above

9. The payor of passive income subject to final tax is required to withhold the tax from the payment
due the recipient. The withholding of the tax has the effect of

a. a final settlement of the tax liability on the income.

b. a credit from the recipient’s income tax liability.

c. consummating the transaction resulting in an income.

d. a deduction in the recipient’s income tax return.

10. Passive income includes income derived from an activity in which the earner does not have any
substantial participation. This type of income is

a. usually subject to a final tax

b. exempt from income taxation

c. taxable only if earned by a citizen.

d. included in the income tax return.

11. Pertinent items of gross income less the deductions and/or personal and additional

exemptions, if any, authorized for such types of income is

a. tax due

b. tax rate

c. tax credit

d. taxable income

12. Who is not a Philippine income tax payer?

a. A resident citizen of the Philippines with income from within and outside the Philippines;

b. A resident citizen of the Philippines with income from within the Philippines only;

c. A non-resident citizen of the Philippines with income from outside the Philippines only.

d. A non-citizen of the Philippines with income from within the Philippines only.

13. Which taxpayer is not a natural person?

a. Resident citizen

b. Taxable estate

c. Non-resident alien engaged in trade or business

d. Non-resident alien not engaged in trade or business

14. Which is not subject to income tax?

a. Sale of service

b. Sale of goods

c. Donation
d. Barter of goods

15.All other employees who are not occupying managerial or technical positions are

considered as regular employees who will be subject to;

a. regular income tax rate on their taxable compensation income.

b. 15% preferential tax rate on their gross income.

c. 20% final tax on their gross income

d. none of the choices.

Answers:
1. C 6. B 11. D
2. C 7. C 12. C
3, D 8. D 13. B
4. D 9. A 14. C
5. C 10. A 15. A

Part II –The tax concept of income.

Check the appropriate box whether the following are exempt or taxable:

Item Taxable Exempt

1. Winnings from gambling √

2. Gain on sale of goods and services between relatives √

3. Interest income √

4. Income from swindling √

5. Income of a registered Barangay Micro Business Enterprise √

6. Appreciation in the value of land √

7. Receipt of bank loan √

8. Compensation income √

9. Cancellation of debt by the creditor in exchange for services rendered by the √

 debtor

10. Salaries of minimum wage earner √

11. Cancellation of debt out of gratuity of the creditor √

12. PCSO or lotto winnings √

13. Benefits from GSIS, SSS, Pagibig or Philhealth √

14. Gain on sale of goods and services √

15. Matured interest from long term bonds. √