INCOME TAXATION | FINAL EXAMINATION

True or False

1. It is sufficient that the employee rendered more than 10 years of service for his retirement benefit to be
exempt.
 True
 False

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

3. An employee must have rendered more than 10 years of services before claiming exemption for his
termination benefits.
 True
 False
 
4. Compensation for injuries and sickness constitutes profit; hence, an inclusion in gross income
 True
 False
 
5. An employee can secure retirement benefit exemption only once in a lifetime.
 True
 False

6. GSIS and SSS benefits are included in gross income to the extent they exceed P90,000
 True
 False
 
7. The amount received in excess of the premium paid in an insurance contract an item of gross income
 True
 False

8. It is a must that the employer maintains a reasonable pension benefit plan for the retirement benefit to be
exempt.
 True
 False
 
9. Donated income is included in the gross income of the donee
 True
 False
 
10. The income of the Philippine government from essential public functions is exempt from any income tax.
 True
 False
 
11. Prizes paid to corporations are an inclusion in gross income subject to final tax.

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 INCOME TAXATION | FINAL EXAMINATION

 True
 False

12. Only the mandatory portion of GSIS, SSS, and union dues can be excluded in gross compensation income.
 True
 False
  
13. Social security benefits, retirement gratuities, and other benefits from foreign private entities are included in
gross income.
 True
 False
 
14. The gain from redemption of shares in mutual fund is an exclusion in gross income subject to regular
because it is an inclusion in gross income subject to capital gains tax.
 True
 False

15. Social security benefits, retirement gratuities, and other benefits from foreign governments are excluded in
gross income.
 True
 False

16. 13th month pay and other benefits are taxable only up to P90,000.
 True
 False

17. Prizes awarded upon the condition that the recipient shall render specified future services is an item of gross
income.
 True
 False
 
18. Compared to exclusion, deduction is included in the amount of gross income but both exclusion and
deductions are not reflected in the amount of taxable income.
 True
 False

19. Prizes from contests are included in gross income subject to regular income tax.
 True
 False

20. The income of government-owned and controlled corporations is an item of gross income.
 True
 False

21. A non-stock, non-profit entity is subject to tax on income from unrelated activities.
 True
 False

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 INCOME TAXATION | FINAL EXAMINATION

22. Benefits of veterans of war or retired US army personnel are excluded in gross income.
 True
 False
 
23. The employer's share to SSS, PhilHealth and Pag-lbig contributions are an exclusion in gross income.
 True
 False
 
24. The interest income from any bond or debentures, short-term or long-term, is an item of gross income.
 True
 False

25. Cooperatives that transact business only with members will, in no case, be subject to income tax.
 True
 False

26. Cooperatives, regardless of their classification, are taxable on income from their unrelated activities.
 True
 False

27. A general professional partnership can be registered as a BMBE.

 True
 False
 
28. The gain on the sale of long-term bonds with a maturity of five years is an exclusion in gross income.
 True
 False

29. Items of income subject to final tax or capital gains tax are exclusions in gross income subject to regular
income tax.
 True
 False

30. A BMBE must have a net asset not exceeding P 3,000,000 to be exempt
 True
 False

31. A consultant is not an employee

 True
 False

32. Filipinos employed by international missions are generally exempt

 True
 False

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 INCOME TAXATION | FINAL EXAMINATION

33. A rank and file employee recommends managerial actions

 True
 False
 
34. A manager has the power to lay down and executes policies
 True
 False

35. A regular employee is subject to regular income tax

 True
 False

36. A special employee may include Filipino citizens

 True
 False
 
37. A minimum wage earner is exempt from income tax
 True
 False

38. Filipinos working in Philippine embassies are exempt from taxation

 True
 False
 
39. Compensation income includes all remunerations received under an employer-employee relationship,
including all fringe benefits of managerial or supervisory employees.
 True
 False

40. Compensation income includes regular compensation, supplemental compensation and 13th month pay and
Other benefits in excess of P90,000
 True
 False

41. Benefits for the advantage of the employee are exempt from income tax
 True
 False

42. The exempt vacation leave credit Is 10 days for government employees.
 True
 False

43. Remunerations received as incidents of employment are exempt

 True
 False 

44. Tax exempt de minimis benefits include all benefits of relatively small value.

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 True
 False
 
45. The excess de Minimis considered "other income" for any employee
 True
 False

46. The employees share in SSS, GSIS, PhilHealth, and HDMF are excluded from compensation income.
 True
 False

47. The overtime pay of minimum wage earners is exempt from tax.
 True
 False
 
48. The supplemental compensations are fixed amounts regularly received by the employee every payroll
period.
 True
 False

49. The sick leave credit of private employees up to 10 days is exempt de Minimis.
 True
 False

50. The loss on the sale of stocks by a trust company is an ordinary loss
 True
 False
 
51. A regular employee can be a managerial, supervisory, or rank and file employee.
 True
 False
 
52. Capital loss is deductible to the extent of capital gains
 True
 False

53. The sale of foreclosed land by a bank is subject to regular income tax
 True
 False

54. The capital gain from the sale of domestic bonds and foreign stocks are subject to regular income tax
 True
 False
 
55. Tax basis means cost or depreciated cost of the property
 True
 False

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 INCOME TAXATION | FINAL EXAMINATION

 
56. The holding period rule is relevant to individuals and corporate taxpayers
 True
 False
 
57. Ordinary loss and capital loss are items of deduction from gross income
 True
 False

58. The loss on the sale of bonds by banks is an ordinary loss

 True
 False

59. An ordinary gain is an item of gross income while a net capital gain is an exclusion from gross income
 True
 False
 
60. 50% of the capital gain or loss is considered if the asset is held by individuals for one year or more
 True
 False

61. The gain is said to be short-term if the sale of the asset is made in less than one year from its acquisition
 True
 False

62. The gain or loss on the sale of any stocks is subject to capital gains tax.
 True
 False

63. Ordinary gains or losses are subject to the holding period rule if the taxpayer is an individual taxpayer
 True
 False
 
64. A net ordinary loss is deductible from gross income while a net capital loss is non-deductible.
 True
 False

65. Ordinary loss is deductible to the extent or Ordinary gains.

 True
 False

66. If assets are acquired by way of inheritance, their basis shall be their fair value at the point of death Of the
decedent.
 True
 False

67. If assets are acquired by way of donation. their basis shall be the fair value on the date of donation.

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 INCOME TAXATION | FINAL EXAMINATION

 True
 False

68. The amount of net capital loss carry-over must not exceed the net income in the year it was sustained.
 True
 False

69. The net capital loss can be carried over to a period of three years from the tirne it is sustained.
 True
 False

70. Obligations assumed on the property purchased form part of the basis thereof.
 True
 False

71. The indicated gain in a tax-free exchange shall be recognized not to exceed the value of cash or properties
received other than stocks.
 True
 False

72. The basis of properties received as boot in a tax-free exchange is their fair value upon receipt
 True
 False.

73. When no other property is involved in a share-swap pursuant to a plan Of merger or consolidation, there is
no gain to recognize.
 True
 False

74. Gains but not losses are recognized in tax-free exchanges.

 True
 False

75. No gain can be recognized on a pure share-swap transaction which is not pursuant to a plan or merger or
consolidation
 True
 False

76. Corporations are allowed to carry-over net capital loss for a period of one year only
 True
 False
 
77. In initial acquisition of control, it is necessary that there are at least five persons who acquired control Of a
corporation so that the exchange is exempt from income tax.
 True
 False

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 INCOME TAXATION | FINAL EXAMINATION

78. Capital gains within the 61-day period are but losses are deferred when there are acquisition of identical
securities in the same period.
 True
 False

79. When properties are sold for less than an adequate and full consideration, gain is measured as the difference
between fair value and the tax basis of property disposed.
 True
 False

80. Stock splits and stock dividends cause a dilution in the cost per unit of stocks which must be considered in
subsequent gain or loss measurement.
 True
 False
 
81. The entire cost of depreciable properties is deductible against their proceeds in the year of sale.
 True
 False

82. The cost of investments and land are deductible against their proceeds in the year of sale.
 True
 False

83. Prepaid expenses are deductible upon payment consistent with the rule that advanced incomes are taxable
upon receipt.
 True
 False

84. Losses on properties not used in business may be deducted but only to the extent of capital gains.
 True
 False
 
85. Capital expenditures are deductible against future income
 True
 False

86. Supplies and inventories are expensed using the inventory method
 True
 False

87. Personal expenses are deductible from gross income

 True
 False
 
88. Expenses intended for the business and the personal use of the taxpayer must be allocated between the two.
Only the portion pertaining to the business is deductible.
 True

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 INCOME TAXATION | FINAL EXAMINATION

 False

89. The depreciation of the property revaluation gain is deductible.

 True
 False

90. The expenses of defending a patent is a business expense deductible in the current period
 True
 False

Theory

91. Which is not an item of gross income subject to final tax?

 Share in the income of a general professional partnership
 Winnings
 Dividends from a domestic corporation
 Prizes in excess of PI 0,000 by an individual

92. Which is not subject to income tax?

 Prizes in recognition of civic, religious, and artistic achievements
 All of these
 PCSO and lotto winnings, not exceeding P20,000
 Gain from sale of shares in mutual funds by the investor
 
93. Which of these employee benefits is subject to final tax?
 Fringe benefits to supervisory and managerial employees
 Fringe benefits to rank and file employees
 Regular pay of rank and file employees
 Regular pay of supervisory and managerial employees

94. Which is an item of gross income subject to regular tax?

 Gain on sale of lot by a realty dealer
 Capital gain on the sale of domestic stocks
 Interest income from bank deposit
 Passive royalty income

95. All of these are items of gross income subject to regular tax except one. Select the exception
 Interest on notes receivable
 Compensation income
 Ordinary gain on sale of properties
 Interest income from long-term bank deposits
 
96. All of these are subject to regular income tax, except
 Professional fees
 Capital gain from the sale of real property located in the Philippines
 Business income
 Wages and commissions
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 INCOME TAXATION | FINAL EXAMINATION

 
97. Which is an income exempt from income tax?
 Income of a general professional partnership
 Income of government-owned and controlled corporation
 Foreign dividends
 Taxes collected by the government

98. Which item of gross income is not subject to regular tax?

 Gain on sale of domestic stocks by a security dealer
 Interest income from foreign bank deposits
 Capital gain on the sale of bonds with more than 5 years maturity
 Capital gain on sale of patent

 
99. Which is included in the gross income subject to regular tax of a resident alien?
 Gross income from the sale of goods abroad
 Interest income from promissory notes of resident clients
 Interest income from relatives abroad
 Gain from the sale of domestic stocks directly to a buyer

100. Which is exempt from regular tax?

 Income of qualified pension plans
 Income from financing or leasing
 Income from construction
 Income from merchandising or trading

101. Which is not part of compensation income subject to regular tax?

 Portion of salary contributed to SSS
 Director's fees
 Bonuses and fixed allowances
 Portion of salary used to pay salary loans
 
102. Which interest income is subject to regular tax?
 All of these
 Interest income from bonds
 Interest income from notes
 Interest income from lending
 
103. Which of the following deductions from gross compensation income is included as part of gross income
subject to regular tax?
 Pag-Ibig contributions
 Contributions to union
 dues Withholding tax
 PhilHealth contributions

104. Dividends subject to regular tax includes

 Neither a nor b
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 INCOME TAXATION | FINAL EXAMINATION

 Both a and b
 Domestic dividends
 Foreign dividends

105. Statement I: All prizes earned abroad are subject to regular tax
Statement 2: All prizes in the Philippines are subject to final tax
 
Which statement is generally correct?
 Both statements I and 2
 Neither Statement I or Il
 Statement 2
 Statement I

106. Which is subject to regular tax to a non-resident foreign corporation or non-resident alien not engaged in
trade or business?
 none of these
 dividends from domestic corporations
 capital gain from the sale of stocks directly to a buyer in the Philippines
 business income from the Philippines

107. Which is an item of gross income subject to regular tax?

 Leasehold improvements with useful life not extending beyond the least term
 Imputed interest income
 Lottery winnings from abroad
 Advanced rent representing security deposit for contingency which may or may not happen

108. Which is subject to regular tax to a resident foreign corporation?

 Gain from dealings in properties abroad
 Dividends from a domestic corporation
 Service fees abroad
 Gain from sale of real property capital assets in the Philippines
 
109. Which of the following is not subject to regular tax of a domestic corporation or resident citizen?
 Income from abroad exempt under treaty
 Deposit interest income from abroad
 Prize not exceeding P 10,000 from the Philippines
 Royalties from abroad

110. The proceeds of life insurance received by the wife of the insured is
 exempt from income tax
 part of taxable income
 partly exempt and partly taxable
 subject to final tax
 
111. Which of the following will not be reported in gross income?
 Royalties from foreign sources
 Income distribution from a taxable estate
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 INCOME TAXATION | FINAL EXAMINATION

 Receipt of inheritance
 Share in the net income of a foreign partnership

112. Which is not a type of gross income?

 dividends from a foreign corporation
 Capital gains from the sale of domestic stocks through the Philippine Stock Exchange
 Passive royalties
 Rent income
 
113. All income earned abroad that would otherwise be subject to final taxes if earned within the Philippines
shall be subject to progressive tax of a
 resident citizen
 resident alien
 all taxpayers
 domestic corporation
 
114. Which of the following is included in gross income subject to regular tax?
 Interest income from government securities
 Farming income
 Share in the net income of a taxable Co-ownership
 Sub-contract income from petroleum service contractors

115. Which corporate taxpayer is not subject to regular tax?

 domestic corporation
 resident corporation
 non-resident foreign corporation
 business partnership

116. All items of passive income earned abroad are subject to regular tax to
 a resident citizen only
 all taxpayers
 a domestic corporation only
 a resident citizens and domestic corporations
 
117. Which individual taxpayer is not subject to progressive tax?
 resident citizen
 Special aliens
 Non-resident Alien earning trade or business
 Resident alien
 
118. Individual taxpayers shall report their income on
 a crop year
 a fiscal year
 either a fiscal or calendar year
 a calendar year

 
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119. Which of these is subject to Philippine regular income tax to a foreigner?

 interest income from domestic bonds
 rent income on properties located abroad
 dividend income from a domestic corporation
 interest income on a deposit abroad

120. Corporations are allowed to report their income on

 a calendar year
 a crop year
 a fiscal year
 either a fiscal or calendar year
 

121. Corporations and individuals engaged in business or in the exercise of profession are required to report
their regular income
 quarterly and annually
 annually
 quarterly
 monthly

122. Which is not part of de Minimis benefits?

 monetized unused vacation leave credits
 actual medical benefits
 clothing allowance
 13th month pay

123. Which is incorrect concerning transactions between associated enterprises?

 Non-arms’ length pricing between related parties may be restated by the BIR to reflect the arms’
length value transactions
 Transactions between related parties should not be controlled
 Pricing should be determined by free market forces
 Pricing should be motivated by the need to save from total income tax

124. If not covered by the substituted filing system, employed individual taxpayers shall report their regular
income
 quarterly and annually
 quarterly
 monthly
 annually

125. Which is not an associated enterprise to the controlling individual of a holding company?
 A direct subsidiary company
 The parent company
 An associate of subsidiary company in the group
 A subsidiary of a subsidiary in the group

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 INCOME TAXATION | FINAL EXAMINATION

126. The de Minimis benefits not exceeding their thresholds are

 deductions from gross income
 subject to regular tax
 subject to fringe benefit tax
 exempt from income tax
 
127. Select the answer which more accurately completes the statement. The taxable fringe benefit of a
supervisory employee is
 the total of 13th month pay and other benefits exceeding P90,000
 subject to regular income tax as compensation income
 subject to fringe benefit tax
 the total of 13th month pay and other benefits not exceeding P90,000
 
128. Which of these items is subject to fringe benefit tax?
 Compensation income of managerial or supervisory employees
 Fringe benefits of rank and file employees
 Fringe benefits of managerial or supervisory employees
 Compensation income of rank and file employees
 
129. The fringe benefit tax by nature is a
 tax on passive income of managerial or supervisory employees
 tax to the employer of managerial or supervisory employees
 final tax
 tax to all employee on their fringe benefits
 
130. Who is subject to the fringe benefit tax?
 rank and file employees
 an employer of managerial or supervisory employees
 an employer of rank and file employees
 managerial or supervisory employees
 
131. Which is a correct statement?
 The personal expenses of any employees paid by the employer are subject to fringe benefit tax
 The personal expenses of rank and file employees paid by the employer subject to fringe benefit tax
 The personal expenses of managerial or supervisory employee shouldered by the employer are subject to
fringe benefit tax
 The fringe benefit tax is a tax upon the expense of the employer

132. As a rule. hybrid expenses are presumed

 100% fringe benefit
 50% fringe benefit
 50% de Minimis benefits
 100% legitimate business expenses
 
133. Which of the following phrases is not an exemption criterion for purposes of the fringe benefit tax?
convenience of the employer
 In furtherance of employee goodwill
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 for the furtherance of the employer's business

 necessary for the business of the employer
 convenience of the employer

134. For purposes of computing the annual value of benefits involving the free use of movable properties,
what percentage of the value of property is used?
 5%
 20%
 50%
 100%

135. An employer transferred title over property to the employee. What percentage of the benefit is
considered for purposes of the fringe benefit tax?
 100%
 5%
 50%
 20%

136. For purposes of computing the annual value of benefits involving the free use of immovable properties.
what percentage of the value of property is used?
 5%
 20%
 50%
 100%

137. When fringe benefit is in the form of free use of personal properties, what percentage of depreciation
value of the property is considered fringe benefits?
 20%
 50%
 100%
 5%

Problems
138. Mr. Tan died. His heirs collected the P200,000 proceeds of his life insurance policy. Mr. Tan previously
paid a total payment of P500,000 in premiums. Determine the amount to be excluded in gross income
 P1,500,000
 P-0-
 P2,000,000
 P500,000

139. Mr. Kabacan surrendered his life insurance policy and received a cash surrender value of P800,000 after
contributing P700,000 in annual premiums. Determine the total exclusion in gross income.
 P700,000
 P100,000
 P800,000
 P-0-
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140. Mr. Basilgo collected the P1,000,000 insurance proceeds of Mr. M which he bought from the latter for
P400,000. Before the death of Mr. Pantukan, Mr. Basilgo paid total premiums of P200,000. Determine
respectively the amount to be excluded in gross income
 P600,000
 P400,000
 P1,000,000
 P-0-
 
141. Mr. C insured his crops for a P1,000,000 insurance cover against calamities. He paid and expensed
P100,000 insurance premium. How must will be included in gross income.
 P100,000
 P900,000
 P1,000,000
 P-0-

142. Mr. m collected the P5,000,000 fire insurance proceeds of his building which was destroyed by fire. The
building had a tax basis of P4,500,000 at the occurrence of the fire. Determine the total amount to be
included in the gross income.
 P5,000,000
 P500,000
 P4,500,000
 P-0-

143. On January 1, 2019, Ms. S received a condominium including its accrued income as inheritance from
her deceased grandfather who died on April 1.2014. The following relates to the property:
Fair value of property P125,000,000
 Rent Income earned before death of decedent. P4,000,000
 Rent Income earned after death of decedent, P6,000,000
  Interest on deposits of rentals
(40% accruing after death) P100,000
How much of the above income will be included in the gross income of the estate?
 P4,100,000
 P6,100,000
 P4,000,000
 P6,000,000
 P6,040,000
 P4,060,000
 
144. At the age of 54, Mrs. S Was awarded a retirement gratuity of P2,000,000 for her 30 years of service in
a private company. The employer's retirement benefit plan was with an employee participation feature
where Mrs. S contributed a total premium of P800,000 in the fund. Mrs. S. also received P500,000 benefit
from the SSS. How much should be the total exclusion in gross income?
 P1,700,000
 P800,000
 P1,300,000
 P2,500,000

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145. Mr. D was hurt in a bus accident. he received a total indemnity of P800,000 from the insurer of the buy.
Mr. D paid P250,000 in hospital bills due to the accident. How much is the total amount to be excluded in
gross income?
P550,000
  P250,000
  P800,000
P-0-
146. Mrs. C retired from the government after 30 years of service at the age of 55. She received a total
retirement pay of P1,800,000 plus P400,000 GSIS benefits. How much will be excluded in gross income?
 P2,200,000
 P400,000
 P1,800,000
 P-0-

 
147. Mr. Alvarez had the following income during 2019:
  Gross compensation income including P25,000
13th month pay, and after deducting
tardiness or absences of P10,000 P315,000
  SSS deduction P12.000
PhilHealth deduction P9,000
Pag-Ibig deductions P10,000
Union dues P5,000
  Withholding tax P40,000
How much is the total exclusions from gross income?
 P66,000
 P71,000
 P36,000
 P61,000

148. 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?
 P100,000,000
 P105,000,000
 P5,000,000
 P-0-

149. Mr. H received the following during 2019:

Donated properties P200,000
  Income of donated property before donation P50,000
  Income of donated property after donation P30,000
Inherited properties P100,000
 How much is taxable under regular income tax to Mr. H?
 P50,000
 P230,000
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 P250,000
 P80,000

150. Mr. T has the following data during 2019:

  Basic salary. P1,200,000
  Income tax withheld P50,000
13th month pay P100,000
SSS contribution P2,000
  PhilHealth Contribution P1,800
Pag-Ibig contribution P1,700
  Union dues P500
  Capital build up contribution in a social fund P2,000
What is the amount of total exemptions and exclusions from gross income?
 P100,000
 P88,000
 P96,000
 P106,000
 
151. Mang Juan collected from the fire insurance company that insured his building which had a tax basis of
P1,800,000 when the fire occurred. During the period, he also Collected P300,000 crop insurance proceeds
pertaining to his crops destroyed by frost. The total item 0f gross income is
 P2,300,000
 P200,000
 P300,000
 P500,000

152. Wary of his deteriorating health conditions, Mr. B resigned from his job at age 40 after working as a
supervisor for 12 years. He was paid as separation pay. Is the separation pay subject to income tax?
 NO. because the reason for Mr. B’s termination was beyond his control
 Yes. because Mr. B resigned
 NO. because Mr. B worked for the company for more than 10 years
 Yes, because Mr. B is not yet 50 years Old
 
153. Mr. S discovered teleport technology where people can be transported over thousand miles in seconds.
Due to this. he was awarded by the scientific community the most coveted Nobel Prize award in 2019.the
total award was $ 150,000,0000. What is the most correct statement regarding the taxation of the award?
 The award is an exclusion in gross income
 The award is an inclusion in gross income subject to regular income tax since final taxes do not
apply abroad
 The award is an exclusion in gross income subject to regular tax since it is an inclusion in items of
gross income subject to final tax
 The award is an inclusion in gross income subject to final tax since it is more than P10,000

154. On December 25. 2019, Mr. Reynon was terminated by his employer at age 60 due to his failing
eyesight. He joined the company in February, 2011 and has since then worked as treasurer of the company.
Is Mr. Reynon’s retirement pay exempt from income tax?
 Yes, because his termination was beyond his control
 No. because he Was employed for less than 10 years
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 Yes, because he is over 50 years Old

 No. because the employee is already a senior citizen
 
155. Ms. He retired from her job after 25 years of service. She joined the company at the age Of 23 and was
promoted from an accounting clerk to Vice President Of was paid P2.OOO,OOO total retirement pay from
the employer's contributory pension plan which was duly registered with the BIR. Out Of the total proceeds,
Ms. H contributed P600,OOO. this was Ms. Henson's first retirement from employment. How much is
excluded from gross income?
 P1,400,000
 P2,000,000
 P600,000
 P-0-
 
156. The following relates to the compensation income of Ms. L in 2019:
 Compensation P2,400,000
 Contributions to SSS, PhilHealth and
HDMF: Mandatory 125,000; voluntary contributions. P150,000
  Contribution to PERA P20,000
Creditable withholding taxes P190,000
  Employer's share in SSS, and HDMF P105,000
 What is the total exclusion in gross income?
 P465,000
 P225,000
 P230,000
 P395,000

157. Ms. Sey invested in the mutual and savings deposit of BCBC Bank. She acquired a 100,000
participation shares when the net asset value per unit of the fund was P98,000. She pulled out her
investment When the net asset value per unit was P101.00 Ms. Sey also had P100,000 accrued interest in
her saving deposit
Which statement is incorrect?
 The P100,000 interest income is an inclusion in gross income subject to
 final tax.
 The P100,000 interest income is an exclusion in gross income subject to regular tax
 The P300,000 is an inclusion in gross income subject to regular tax, but the P100,000 is an exclusion
in gross income subject to final tax.
 The P300,000 gain is an exclusion in gross income
 
158. In 2017, Ms. Kay invested P8,000,000 in the to-year bonds of Compostela Mining Corporation. She
disposed the investment in 2019 for a total consideration of P8,500,000 inclusive of the P400,000 accrued
interest. At what amount should be included in gross income?
 P-0-
 P400,000
 P100,000
 P500,000

159. The following income relates to a proprietorship registered as a BMBE:

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Gross income from sales P400,000

  Dividend income – domestic P9,000
Interest on deposits P6,800
 Compute the total exclusion in gross income subject to regular tax
 P415,800
 P15,800
 P400,000
 P-0-

160. Mr. L a supervisory employee. received the following income in 2019:

Gross compensation income, before contributions to SSS, PhilHealth, and HDMF totaling P124,000,
P800,000 Fringe benefits, P200,000
Gain from redemption of shares in a mutual fund. P100,000
Commission income P150,000
Gain on sale Of stocks through the PSE P400,000
Determine the total income to be reported by Mr. L in gross income.
 P1,026,000
 P426,000
 P826,000
 P1,526,000

161. Calixto, employed derived the following income during the year
Gross salaries P 400, 000
13th month pay and other benefits 40, 000
SSS, PhilHealth, and Pag-ibig contribution 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
 P390,000
 P440,000
 P380,000
 P130,000

162. Corazon resigned in 2019 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 P40,000
13th month pay P480,000
  Separation pay P1,000,000
 Compute the gross income subject to progressive tax.
 P480,000
 P1,480,000
 P560,000
 P1,560,000

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163. 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 P1,900,000
  Real property tax of the leased building P50,000
  Reimbursement for utilities used by the lessee paid by Andres
P200,000
 How much will be included in gross income subject to regular tax?
 P1,850,000
 P2,000,000
 P2,250,000
 P2.050,000

164. Ms. P received a total P200,000 from her father for her support. During the year, she also received a
P150,000 total distribution from the trust irrevocably designed by her grandfather in her favor. She also
received pi 20,000 income distribution from the estate of her grandmother undergoing judicial settlement,
What is the total amount to be included in her gross income?
 P270,000
 P200,000
 P470,000
 P350,000
 
165. Mrs. K has several interests in various businesses and partnerships. She received the following income
during the year.
  Dividends from a domestic corporation P120,000
  Dividends from a resident foreign corporation P80,000
  Share in net income of a business partnership P200,000
  Share in the net income of a professional partnership P100,000
 What is the total income to be reported in gross income?
 P300,000
 P180,000
 P-0-
 P380,000

166. A taxpayer collected the following passive income during the year.
 Passive Income Philippines Abroad
 Interest income from banks P300,000 P800,000
 Royalties from books 200,000 100,000
 Rent Of properties 400.000 200,000
What is the amount to be reported in gross income the taxpayer is a resident citizen?
 P1,100,000
 P2,000,000
 P1,500,000
 P900,000

167. The following relates to an annual payroll of the employee:

Gross compensation income, before P44.000
contributions to SSS, PHIC and HDMF P1,068,000
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 Additional compensation 45,000

 13th month pay and Other benefits 89,000
 Compute the taxable compensation income
 P1,113,000
 P1,112,000
 P1,068,000
 P1,069,000

168. Mr. Juanito had following income in 2019:

Compensation income, net Of P77,000 SSS, HDMF and
union dues P300,000
  Supplemental compensation income 30,000
  13th pay and Other benefits 25,000
 What is the taxable compensation income?
 P330,000
 P375,000
 P380,000
 P402,000

169. Colyong, a government employee, receives a full 13th month pay of P20,000 exclusive of P14,000 other
benefits. He was deducted P18,000 during year for premium for his SSS. PHIC, and HDMF contributions.
Compute Colyong’s taxable compensation income.
 P240,000
 P222,000
 P226,000
 P254,000
 
170. An employee received the following compensation during the year:
  Gross compensation (11,000 x 13 moths) P143,000
 Overtime pay 12,000
 Less: SSS,PHIC,HDMF and union dues P5,200
Withholding tax 10,000 15,200
 
  Net pay P139,800
 Compute the taxable compensation income.
 P126,800
 P132,000
 P149,800
 P138,800

171. Johnny received a salary of 73,000 during the year consisting of: P60,000 basic salary, P8,000 overtime
pay and P5,000 13th month pay. Compute Johnny's taxable income using contemporary tax regulations,
 P73,000
 P68,000
 P60,000
 P-0-

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172. A private employee retired at 60 in the middle of the year and was paid the following remunerations:
Retirement benefits P2,000,000
  Terminal leave pay (150 accumulated days) 120.000
Compensation, net of P16,000 SSS, PHIC. and HDMF premium contribution 128,000
Mid-year bonus 8,000
  Pro-rated 13th month pay 12,000
 Compute the taxable compensation income
 P170,000
 P238,000
 P2,170,000
 P136,000
 
173. A supervisory employee had the following remunerations during the year.
Salaries, before P24,000 SSS, PhilHealth, HDMF, and union dues P258,000
  Profit sharing 20,000
  Fringe benefits 65,000
  13th month pay and Other benefits 21,000
 What is the taxable compensation income?
 P254,000
 P343,000
 P204,000
 P278,000

174. A managerial employee received the following remunerations:

  Gross salaries, net of SSS, PHIC, and HDMF P1,090,000
  SSS maternity leave benefits 30,000
  Profit sharing bonus 240,000
  13th month pay 95,000
 Determine the taxable compensation income.
 P1,330,000
 P1,335,000
 P1,365,000
 P1,350,000

175. An employee had the following details of compensation income in 2019:

  Regular compensation income P 780,000
  Overtime pay 43,000
13th month pay 65.000
De Minimis benefits:
  Medical assistance to employee 22,000
  Total of other de Minimis benefits 32,000
 Compute the taxable compensation income if the employee is a rank and file
 842,000
 836,000
 823,000
 780,000

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176. A managerial employee received tie following benefits during the year:
Compensation income, net of mandatory contribution P1,080,000
Housing allowance in addition to regular pay
  (P30,000 x 12; actual rent P25,OOO/month) 360,000
13th month pay 95,000
What is the taxable compensation income?
 P1,085,000
 P1,145,000
 P1,445,000
 P1,175,000

177. Mandaue reimbursed the following expense liquidation of its managerial employee:
  Purchase of office supplies P 20,000
  Personal meals and groceries 15,000
  Gasoline for transportation (112 for business) 8,000
Office electricity, water, and telephone bills 12,000
 Compute the value of fringe benefits
 P23,000
 P35,000
 P55,000
 P19,000
 
178. Danao bought a car worth P800,000 and registered it in the name of its supervisory employee. It was
agreed that the same will be used partially for the business of Danao. Compute the monetary value.
  P800,000
 P-0-
 P800,000
 P400,000
 P80,000

179. Lapu-Lapu Company grants its managerial employees the privilege to select a car of their choice with
value not exceeding P1,000,000 a unit or be given P1,000,000 cash benefit to acquire their own cars. It also
grants supervisory employees car benefits if they actually purchase their cars.
Car benefits given to a manager, net of withholding tax on compensation P 900.000
  Value of cars purchased for two other managers 2,000,000
Cash payments to various Car suppliers for supervisory employees P1,600,000
Compute the monetary value
 P3,600,000
 P2,000,000
 P1,600,000
 P4,500,000
 
180. Maasin Carbon Plant acquired a P1,000,000 motor vehicle for the use of its field engineer, a plant
supervisor, assigned to a very remote facility from town.
Compute the monetary value of benefits subject to tax.
 P1,000,000
 P200,000
 P100,000
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 INCOME TAXATION | FINAL EXAMINATION

 P-0-

181. Dexter acquired a car for P1,200,000 and transferred ownership to its supervisory employee for
P400,000. The car shall be used partly in the employer’s business. Compute the monetary value.
 P240,000
 P1,200.000
 P800,000
 P80,000

182. Dog Company made the following payments in the first quarter of 2019:
 Fringe benefits.
To supermarket in payment for groceries of the company's manager and family – P16,000
  To a university in payment for the tuition fee of the manager - P24,750
  Salary of the manager, net Of P50,000 withholding tax — P350,000
 Determine the fringe benefit tax due
 P21,942
 P19,412
 P19,176
 P184,118

183. Ormoc International acquired the following for the use of its executive officers:
Bell 206 helicopter P23,000,000
Elling 3 Executive (Seagoing motor yacht) 16,400,000
Compute the monetary value
 P16,400,000
 P39,400,000
 P410,000
 P1,640,000

184. Lila corporation paid the following fringe benefits during the calendar quarter to its managerial
employee:
  Salaries of household help P 10,000/1month
  Salaries of personal security guard 15,000/month
  Personal driver 15,000/month
  Annual home owner's association dues 4,000
  Garbage dues P 100/week
 Compute the quarter monetary value
 P121,200
 P125,200
 P122,200
 P44,100
 
185. Tolosa Company paid for furnished the following in behalf of a supervisory employee for the quarter
ended March 2019:
Membership dues in golf course P 10.000
One-year P200,000 interest free loan due December, 2019
Free vacation sponsored by Tolosa 12,000
Compute the monetary value
DULA-OGON, ELLYN MAE B. BSA 3D
 INCOME TAXATION | FINAL EXAMINATION

 P22,000
 P32,000
 P28,000
 P46,000

186. ABC Company owns a residential lot which was purchased for P800,000, either years ago. The lot was
sold to a supervisory employee for only P500,000 when it Was worth P1,200,000. Compute the fringe
benefit expense.
 P700,000
 P300,000
 P400,000
 P-0-
187. A taxpayer had the following dealings in properties:
Capital gain P 100.000
Ordinary gain 200,000
Capital loss 120,000
Ordinary loss 150,000

How much shall be included in gross income?

 P50,000
 P-0-
 P300,000
 P200,000
188. Mr. Herman had the following dealings in capital assets:
Short-term capital gain P 200,000
Long-term capital gain 100.000
Short-term capital loss 100,000
Long-term capital loss 150,000

Compute the reportable net capital gain

 P25,000
 P75,000
 P50,000
 P40,000

189. An individual taxpayer had the following dealings in properties:

Capital gain P 150.000 
Ordinary gain 200.000 
Capital loss 120.000
Ordinary loss 150.000

Compute the total amount of gain to be included in gross income subject to regular income tax
 P -0-
 P230,000
 P350,000
 P80,000

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 INCOME TAXATION | FINAL EXAMINATION

190. A taxpayer had a P300,000 net income before the following dealings in properties:
Ordinary gain P 80,000
Capital gain 60,000 
Ordinary loss 90,000 
Capital loss 70.000
If the taxpayer is an individual, what is the taxable net income?
 P300,000
 P290,000
 P260,000
 P280,000

191. After three years, an individual taxpayer disposed of a capital asset, other than domestic stock or real
property, with the following data:
Fair value P2,000,000
Selling price 1,500,000
Cost 1,200,000
What is the capital gain subject to regular tax?
 P-0-
 P150,000
 P300,000
 P800,000

192. Two years after acquisition, a domestic corporation disposed of a real property capital asset for
P3,000,000 at a 300,000 discount from its fair value. The property was acquired for P2,000,000 when its fair
value was 2,100,000. Compute the capital gains subject to regular tax.
 P1,000,000
 P-0-
 P3,000,000
 P1,300,000

193. After three years of use, Mr. B disposed of his malfunctioning factory equipment for P1,000,000. The
equipment was acquired for P1,500,000 and has a carrying value of P800,000 on the date of sale. Compute
the gain or (loss) to be included in the determination of regular income
 (P500,000)
 P-0-
 P200,000
 P100,000

194. Pedro, a realtor, was able to dispose his 2-hectare land inventory to a buyer after three years. The lot has
a fair value of P5,000,000 and was sold at a discount of P500,000. The lot was purchased at P3,000,000.
Compute the gain to be recognized in regular income.
 P1,500,000
 P-0-
 P2,500,000
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 P2,000,00

195. Ms. Taylorhad the following dealings in properties:

2018 2019
Net income P20,000 P80,000 
Capital gains 35,000 60,000 
Capital loss 60,000 25,000
Compute the net capital gains in 2019 
 P10,000
 P15,000
 P60,000
 P35,000

DULA-OGON, ELLYN MAE B. BSA 3D