Chapter 3 - Introduction to Income Tax Income description Within Without s July has a store in a tourist park in Baguio City, Philippines. He earned a total of P40,000 gain from selling souvenir items. 40% were from foreign tourists. Don Flores sold at a gain of P2,000,000 to. a client abroad a commercial building located in Quezon City, Philippines. 9 John sold his stocks in a domestic corporation to a foreign investor at a gain of P50,000. 2 Villanueva received P20,000 dividends from a domestic corporation and P30,000 dividend income from a non- resident foreign corporation. 10. Andrew Johnson received P40,00 dividends from a resident foreign corporation; 60% of its historical income is from the Philippines. 11. ‘Abreeza, Inc. manufactures in the Philippines and sells to unaffiliated export clients. A total of P100,000 gross income was earned during the period. 12. Marawi manufactures abroad and sells to its Philippines branch at market prices. Production cost abroad were P200,000. Billings to branch totaled P300,000 while branch sales totaled P450,000. James Fernandez received P100,000 is from a resident foreign hambus plant manufactures | tables e es ident clients. A total of Scanned with CamScannerChapter 3 - Introduction to Income Tax Multiple Choice - Theory: Part 1 1. When paid for, which of the following items may involve a return o a. House and lot c. Dignity Capi b. Life d. Health 2. Which is nota requisite of gross income? a. Return on capital . Exempted by law b. Realized benefit d. Not exempted by law 3. Which is taxable item of income? a. Increase in numbers of a herd of animals b. Compensation for personal injuries c. Moral damages d. Interest on moral damages 4, Which is not subject to income tax? a. Donation c. Sales of goods b. Sale of service d. Barter of goods 5. The total consideration received from the sale of service constitute a. Return on capital c. Either a orb b. Return of capital Both aandb 6. The total consideration received from the sale of goods at a gain represe: a. Return on capital c. Either aorb b, Return of capital d. Both aand b 7. The total consideration received from the sale of goods at a loss represet, a. Return on capital c, Either aor b b, Return of capital d. Both aand b se of a taxpayer's wealth. ayers’ ability to pay tax. me than the poor. wing purposes, except imption taxes ' fe inequalities in the distribut” Scanned with CamScannerChapter 3 - Introduction to Income Tax. 10, Which is not an item of gross income because of the absence of an undertaking from the taxpayer? a. Proceeds ofa life insurance policy b. Forgiveness of indebtedness as an act of gratuity” c. Revaluation surplus on properties d. Service fees . Which is subject to income tax? a. Proceeds of life insurance policy received by the family of the insured b. Excess of proceeds over the premiums paid received by the taxpayer c. Life insurance proceeds received by the corporation from the insurance of a deceased officer d. None of these 1 12. Which of the following is exempted from income taxation because of the absence of ability to pay? a. Damages received from patent infringement suit b. Unrealized income from investments c. Gain on sale of goods d, Inheritance Which of the following constitutes taxable income? a, Return of premium on life insurance received by the insured b. Moral damages received from slander ©. Proceeds of crop insurance d. Compensation for personal injury 1 2 14, Which is specifically exempted from income taxation by virtue of legal exemption? a. Minimum wage b. Gain on sale of prohibited drugs c._ Unrealized gain nota constructive receipt of income? tedness in consideration of service interest coupons taxpayer's bank accounts ployee, consideration are subject to c.Bither aor b d. Both aor by Scanned with CamScanner