SEMI FINALS

Questions: Exclusions from Gross Income

1. The proceeds of the life insurance received by the heirs of the insured
upon his death is excluded in gross income.
a. True b. False

2. The amount received in excess of the premium paid in an insurance

contract constitutes an item of gross income.
a. True b. False

3. Donated income is included in the gross income of the donee.

a. True b. False

4. Compensation for injuries and sickness constitutes profit; hence, an

inclusion in gross income.
a. True b. False

5. It is sufficient that the employee rendered more than 10 years of

service for his retirement benefit to be exempt.
a. True b. False

6. An employee can secure retirement benefit exemption only once in a

lifetime.
a. True b. False

7. It is a must that the employer maintains a reasonable pension benefit

plan for the retirement benefit to be exempt.
a. True b. False

8. An employee must have rendered more than 10 years of service for

his retirement benefit to be exempt.
a. True b. False

9. The income of the Philippine government from essential public

functions is exempt from any income tax.
a. True b. False
10. Prizes paid to corporations are an inclusion in gross income
subject to final tax.
a. True b. False

11. Only the mandatory portion of GSIS, SSS, Philhealth, and union
dues can be excluded in gross compensation income.
a. True b. False

12. Social security benefits, retirement gratuities, and other

benefits from foreign governments are excluded in gross income.
a. True b. False

13. Social security benefits, retirement gratuities, and other

benefits from foreign private entities are included in gross income.
a. True b. False

14. The gain from redemption of shares in mutual fund is an

exclusion in gross income subject to regular tax because it is an
inclusion in gross income subject to capital gains tax.
a. True b. False

15. 13th month pay and other benefits are taxable only up to
P90,000.
a. True b. False

16. Mr. Bisligo collected the P1,000,000 insurance proceeds of Mr.

Pantukan which he bought from the latter for P400,000. Before the
death of Mr. Pantukan, Mr. Bislogo paid total premiums of P200,000.
Determine respectively the exclusion in gross income and the
inclusion in gross income.
a. P1,000,000; P0 c. P400,000; P600,000
b. P0; P1,000,000 d. P600,000; P400,000

17. Mr. Kabacan surrendered his life insurance policy and received
a cash surrender value of P800,000 after contributing P700,000 in
annual premiums. Determine respectively the total exclusion in gross
income and the inclusion in gross income.
a. P800,000; P0 c. P100,000; P700,000
b. P0; P800,000 d. P700,000; P100,000
18. Mr. Tarragoza died. His heirs collected the P2,000,000 proceeds
of his life insurance policy. Mr. Tarragoza previously paid a total
payment of P500,000 in premiums. Determine respectively the
exclusion in gross income and the inclusion in gross income.
a. P2,000,000; P0 c. P2,000,000; P0
b. P500,000; P1,500,000 d. P0; P2,000,000
19. Mr. Malalag collected the P5,000,000 fire insurance proceeds of
his building which was destroyed by fire. The building had a tax basis
of 4,500,000 at the occurrence of the fire. Determine respectively the
total exclusion in gross income and the inclusion in gross income.
a. P5,000,000; P0 c. P4,500,000; P500,000
b. P0; P5,000,000 d. P500,000; P4,500,000

20. Mr. Cateel insured his crops for a P1,000,000 insurance cover
against calamities. He paid and expensed P100,000 insurance
premium. How much will be included in gross income?
a. P900,000 c. P100,000
b. P1,000,000 d. P0

21. Ms. Sindangan received a condominium including its accrued

income as inheritance from her deceased grandfather on April 1,
2014. The following data relates to the property:
Fair value of the property P 125,000,000
Rent income earned before death of decedent 4,000,000
Rent income earned after death of decedent 6,000,000
Interest on deposits of rentals 100,000
(40% accruing after death)
How much of the above income will be included in the gross income of
Mr. Sindangan and in the gross income of the decedent?
a. P6,040,000; c. P4,060,000;
P4,060,000 P6,040,000
b. P6,000,000; d. P4,000,000;
P4,000,000 P6,000,000

22. Mr. Dimataling was hurt in a bus accident. He received a total

indemnity of P800,000 from the insurer of the bus. Mr. Dimataling
paid P250,000 in hospital bills due to the accident. Compute the total
amount to be excluded in gross income.
a. P0 c. P550,000
b. P250,000 d. P800,000
23. At the age of 54, Mrs. Sindangan was awarded a retirement
gratuity of P2,000,000 for her 30 years of service in the Sirawai
Company. The employer’s retirement benefit plan was with an
employee participation feature where Mrs. Sindangan contributed a
total premium of P800,000 in the fund. Mrs. Sindangan contributed a
total premium of P800,000 in the fund. Mrs. Sindangan also received
P500,000 benefit from the SSS.
Compute the total exclusion in gross income.
a. P1,700,000 c. P800,000
b. P1,300,000 d. P2,500,000

24. Mrs. Candoni retired from the government after 30 years of

service at the age of 55. He received a total retirement pay of
P1,800,000 plus P400,000 GSIS benefits. How much will be excluded
in gross income?
a. P0 c. P2,200,000
b. P400,000 d. P1,800,000

25. The Professional Regulations Commission collected a total sum

of P100,000,000 from professional license fees. It also collected
P5,000,000 from rentals of government properties. What is the total
exclusion in gross income?
a. P0 c. P100,000,000
b. P5,000,000 d. P105,000,000

26. Mr. Alvarez had the following income during the year:
Gross compensation income P 325,000
th
(including P25,000 13 month pay)
Less: Tardiness or absences 10,000
Net compensation income P 315,000
SSS deductions (12,000)
Philhealth deductions (9,000)
Pag-ibig deductions (10,000)
Union dues (5,000)
Withholding tax (40,000)
Net pay P 239,000
Compute the total exclusions from gross income.
 a. P36,000 c. P66,000
b. P61,000 d. P71,000

27. Mr. Henares received the following during the year:

Donated properties P 200,000
Income of donated property before donation 50,000
Income of donated property after donation 30,000
Inherited properties 100,000
How much is taxable to Mr. Henares?
a. P380,000 c. P30,000
b. P80,000 d. P50,000

28. Mr. Tacurong has the following data during the year:
Basic salary P 1,200,000
Income tax withheld 50,000
th
13 month pay 100,000
SSS 2,000
PhilHealth 1,800
Pag-Ibig 1,700
Union dues 500
Capital build up contribution in a social fund 2,000

Compute the total exemptions and exclusions from gross income.

a. P106,000 c. P96,000
b. P100,000 d. P88,000

29. Mang Antonio collected P2,000,000 from the fire insurance

company that insured his building which had a tax basis of P1,800,000
when the fire occurred. During the same period, he also collected
P300,000 crop insurance proceeds pertaining to his crops destroyed
by frost. The total item of gross income is
a. P2,300,000 c. P300,000
b. P200,000 d. P500,000

30.

Questions: Inclusions in Gross Income

31. Items of gross income subject to regular income tax and capital
gains tax are reportable to the government.
 a. True b. False

32. Rent is a passive income, but is not subject to final tax.

a. True b. False

33. The interest income from bonds issued by banks is subject to

final tax.
a. True b. False

34. Gains from dealings in capital assets are generally subject to the
regular income tax.
a. True b. False

35. The gross income from operations enjoying a tax holiday are
included in gross income subject to regular tax, but are presented as
deductions in the income tax return.
a. True b. False

36. The share in a business partnership is subject to final tax, but

the share in a general professional partnership is subject to regular
income tax.
a. True b. False

37. Gains from dealings in ordinary assets are subject to regular

income tax.
a. True b. False

38. Items of passive royalty income are subject to final income tax
while items of active royalty income are subject to regular income tax.
a. True b. False

39. Compensation income is an inclusion in gross income subject to

regular tax except compensation income of special aliens.
a. True b. False

40. The reportable gross income from business or the exercise of a

profession is net of the cost of goods sold or cost of services.
a. True b. False
41. Items of income which are included in gross income subject to
final tax are excluded in gross income subject to regular income tax.
a. True b. False

42. Imputed interest income is an item of gross income subject to

regular income tax.
a. True b. False

43. Advanced rentals are income in the year received.

a. True b. False

44. Real property tax and insurance on the property if assumed by

the lessee constitute income to the lessor.
a. True b. False

45. Corporate winnings are exclusions in gross income; hence, they

are exempt from income tax.
a. True b. False

46. Stock dividends are never subject to income tax.

a. True b. False

47. Pensions or retirement benefits are inclusions in gross income

subject to regular income tax if the employee is terminated due to any
cause within his control.
a. True b. False

48. Prizes in athletic competitions sanctioned by the Philippine

government are exclusions in gross income subject to final tax, but
are inclusions in gross income subject to regular tax.
a. True b. False

49. Corporate prizes are exclusions in gross income subject to final

tax but are inclusions in gross income subject to regular income tax.
a. True b. False

50. Stock splits are never subject to income tax.

a. True b. False
51. Mr. Lolong, a supervisory employee, received the following
income in 2015:
Gross compensation income, before contributions to SSS,
PhilHealth, and HDMF totaling P124,000 P
800,000
Fringe benefits 200,000
Gain from redemption of shares in a mutual fund 100,000
Commission income 150,000
Gain on sale of stocks through PSE 400,000
Determine the total income to be reported by Mr. Lolong in gross
income.
a. P1,526,000 c. P1,026,000
b. P1,426,000 d. P826,000

52. Calixto, employed, derived the following income during the

year:
Gross salaries P 400,000
th
13 month pay and other benefits 40,000
SSS, PhilHealth, and Pag-Ibig contributions 20,000
Deductions for loans repayments 50,000
Deductions for withholding tax 60,000
Compute the compensation income to be reported in the annual
income tax return.
a. P440,000 c. P380,000
b. P330,000 d. P390,000

53. Corazon resigned in 2015 after 12 years of service. She had the
following income during the year.
Salary, net of P80,000 withholding tax, P20,000 SSS, P18,000
PhilHealth and P40,000 13th month pay
P 480,000
Separation pay 1,000,000
Compute the gross income subject to progressive (regular tax)
a. P1,480,000 c. P560,000
b. P1,560,000 d. P480,000
54. Iriga Corporation is engaged in the sales of goods. It reported
the following summarized financial statements during the year:
Sales P 3,500,000
Less: Cost of Sales 2,000,000

Gross Profit P 1,500,000

Commission income on consignment
200,000
Interest income from customers 20,000
Interest income, net of final tax 10,000
Dividend income 50,000

Total Income P 1,780,000

Less: Admin & Selling Expenses 1,000,000

Net Income P 780,000

Compute the total gross income subject to regular tax.
a. P1,720,000 c. P1,780,000
b. P1,770,000 d. P840,000

55. Precy, Inc., a domestic corporation, reported the following

income in 2014:
Philippines Abroad
Service fees P 400,000 P 300,000
Interest income – bank 40,000 70,000
Royalties – franchise 80,000 30,000
Compute the total gross income subject to regular tax.
a. P920,000 c. P800,000
b. P860,000 d. P700,000

56. If Precy Inc. is a resident foreign corporation, compute the gross

income subject to regular tax.
a. P520,000 c. P400,000
b. P480,000 d. P440,000

57. Andres leases a building to a client. During the year, he received

the following remittance from the lessee:
Rental, net of 5% creditable withholding tax P
1,900,000
Real property tax of the leased building
50,000
 Reimbursement for utilities used by the lessee paid by Andres
200,000
How much will be included in the gross income subject to regular tax?
a. P2,050,000 c. P2,000,000
b. P2,250,000 d. P1,950,000

58. Mr. Croki, a professional practitioner, received the following

from his clients:
Advances for future services to be rendered P
30,000
Collections for past services rendered
70,000
Reimbursements for client expenses
40,000
Reimbursement for out-of-pocket expenses
10,000
How much will be included in Croki’s gross income for regular income
tax purposes?
a. P150,000 c. P110,000
b. P140,000 d. P100,000

59. The Big Bird Security Agency (BBSA) received P3,000,000 from
its clients. P2,400,000 of this was designated for salaries of guards
assigned to various client establishments.
How much will be included in the gross income of BBSA?
a. P600,000 c. P3,000,000
b. P2,400,000 d. P0

60. Farmers, Inc. purchased an agricultural lot for P1,000,000. It

was later discovered that the lot had gold deposits. Thus its fair value
increased to P4,000,000. This increase in fair value is
a. Exempt from income tax
b. Subject to income tax
c. Partially exempt and partially taxable
d. Any of these

61. Northern Cattle Company produces beef meat. In 2015, it

reported the following:
 Sales of live cattle P 600,000
Sale of young feeders 200,000
Increase in value of cattle inventory 300,000
Compute the income subject to regular tax.
a. P1,100,000 c. P900,000
b. P800,000 d. P600,000

62. Don Juanito has the following income in 2015:

Sales from vegetables P 400,000
Sales from fruits 200,000
Sales of carabao (acquired for P30,000 in 2015) 35,000
Interest income from tenants on the sale of agricultural land
pursuant to Agrarian Reform Program
12,000
The gross income subject to progressive tax is
a. P647,000 c. P600,000
b. P617,000 d. P605,000

63. Mr. Conner purchased a life annuity for P1,000,000 which will
pay him P100,000 a year. What will Mr. Conner include in his gross
income on the 11th year of the policy?
a. P1,000,000 c. P200,000
b. P100,000 d. P1,200,000

64. Edwin purchased the life insurance policy of Paulo for P50,000.
He continued the policy by paying P20,000 premium after which Paulo
died