• Question 1

2 out of 2 points
An international air carrier doing business in the Philippines shall be subject to
Selected
Answer: Both 3% percentage tax on gross receipts from cargo operations
originating in the Philippines and 2 ½% income tax on Gross Philippine
billings.
Answers: 3% percentage tax on gross receipts from cargo operations originating in
the Philippines only.
2 ½% income tax on Gross Philippine billings only.

Both 3% percentage tax on gross receipts from cargo operations

originating in the Philippines and 2 ½% income tax on Gross Philippine
billings.
Neither the 3% percentage tax on gross receipts from cargo operations
originating in the Philippines in the Philippines nor 2 ½% income tax on
Gross Philippine billings.
• Question 2
0 out of 2 points
Bank of Manila a domestic corporation has the following data for the taxable year: (A)
Regular Banking Unit: (1) Interest Income from loans, P11,000,000; (2) Interest
Income from peso deposit with Bank of Philippine Islands, P1,000,000; (3) Dividend
Income from various domestic corporations, P1,500,000; (B) Foreign Currency
Deposit Unit: ($1=P40): (1) Interest Income from loans to residents, $50,000; (2)
Interest Income from loans to nonresidents, $12,500. Additional Information: The
bank has total operating expenses of P12,000,000. How much is the normal income
tax for the year?
Selected Answer:
P650,000
Answers: P600,000

P900,000
P650,000
P400,000
• Question 3
2 out of 2 points
Which of the following government-owned or controlled corporations shall be not
subject to the corporate income tax? I. Philippine Amusement and Gaming
Corporation (PAGCOR); II. National Development Corporation (NDC); III. Philippine
Charity Sweepstakes Office (PCSO); IV. Social Security System (SSS).
Selected Answer:
IV only
 Answers:
IV only
I and II only
I, II, III and IV
None of the above
• Question 4
0 out of 2 points
Hananiah Corporation, a corporation engaged in business in the Philippines and
abroad has the following data for the current year: (a) Gross Income, Philippines,
P975,000; (b) Expenses, Philippines, P750,000; (c) Gross Income, Malaysia,
P770,000; (d) Expenses, Malaysia, P630,000; (e) Interest on notes receivable,
P25,000. Determine the income tax due if the corporation is:
Selected Answer:
DC-P109,500 RFC-P67,500 NRFC-P300,000
Answers: DC-P126,100 RFC-P52,000 NRFC-P420,000
DC-P109,500 RFC-P67,500 NRFC-P300,000
DC-P87,360 RFC- P545,850 NRFC-P117,800

DC-P87,000 RFC-P75,000 NRFC-P300,000

• Question 5
2 out of 2 points
Which of the following statements about improperly accumulated earnings tax is
FALSE?
Selected
Answer: It shall not be imposed despite determination that a corporation has
accumulated beyond reasonable needs of the business.
Answers: It is the nature of a penalty to the corporation for improperly accumulating
earnings.
It aims to deter the avoidance of tax on the part of the shareholders on
earnings receiveD.
If undistributed earnings are used for the reasonable needs of the
business, such earnings is not subject to IAET.

It shall not be imposed despite determination that a corporation has

accumulated beyond reasonable needs of the business.
• Question 6
2 out of 2 points
During the year, a branch office of a multinational corporation remitted the following
income/revenues to its head office in Canada: (a) Dividend income from domestic
corporations, P500,000; (b) Interests from money placements in the banks, P200,000;
 (c) Royalty income, P300,000; (d) Net income from operations, P3,000,000. The
correct branch remittance tax is:
Selected Answer:
P450,000
Answers: P50,000
P300,000
P432,000

P450,000
• Question 7
2 out of 2 points
Offshore Banking Units (OBUs) are tax exempt on income derived from: I. Interest
income derived from foreign currency loans granted to residents. II. Foreign currency
transactions with local commercial banks. III. Foreign currency transactions with
branches of foreign banks authorized by BSP.
Selected Answer:
II and III only
Answers: I only
II only
I and II only

II and III only

• Question 8
0 out of 2 points
Legitimate "business reverses" shall include substantial losses sustained
Selected
Answer: Both of the above.
Answers: Due to fire, robbery, theft or embezzlement.
For other economic reasons as determined by the Secretary of
Finance.
Both of the above.

None of the above.

• Question 9
2 out of 2 points
The MCIT shall NOT apply to which of the following resident foreign corporations? I.
International carrier; II. Offshore banking units (OBUs) on their income from foreign
currency transactions with local commercial banks; III. Regional operating
headquarters; IV. Firms that are taxed under special income tax regime such as
PEZA registered firms.
 Selected Answer:
I, II, III and IV
Answers: I only
I and II only

I, II, III and IV

none of the above
• Question 10
2 out of 2 points
ABC Corporation earned the following income in 2019 (gross of withholding tax):
Interest on bank deposit, BPI Manila, P100,000; Interest, US Dollar dposit, BPI
Manila, $50,000; Dividend Income from a Domestic Co., P100,000; Royalty,
Philippines, P600,000; Royalty, US, P200,000; Exchange rate: P50:$1. How much is
the total final withholding taxes if ABC Corporation is a domestic corporation?
Selected Answer:
P515,000
Answers:
P515,000
P525,000
P327,500
P240,000
• Question 11
2 out of 2 points
Interest income received from a depository bank under expanded foreign currency
deposit system shall be subject to -
Selected Answer:
RFC-7 ½% NRFC -Exempt NRA-NETB-Exempt
Answers: RFC-20% NRFC -20% NRA-NETB-20%
RFC-15 ½% NRFC -Exempt NRA-NETB-Exempt

RFC-7 ½% NRFC -Exempt NRA-NETB-Exempt

RFC-30% NRFC -25% NRA-NETB-25%
• Question 12
0 out of 2 points
Which of the following is included in the Gross Philippine Billings for income tax
purposes of an international air carrier? I. Tickets sold outside the Philippines for
passengers originating from outside the Philippines. II. Passage documents sold
outside the Philippines for excess baggage originating from the Philippines. III.
Tickets sold in the Philippines for passengers originating from the Philippines but are
not actually flown. IV. Passage documents sold in the Philippines for cargoes
originating from outside the Philippines.
 Selected Answer:
III only
Answers:
II only
III only
II and IV only
I, II, III and IV
• Question 13
2 out of 2 points
Which of the following statements about improperly accumulated earnings tax is not
correct?
Selected
Answer: The subsequent distribution of undistributed earnings that were subjected
to IAET shall no longer be subjected to any tax
Answers: It is in the nature of a penalty to the corporation for improperly
accumulating earnings
It aims to deter the avoidance of tax on the part of the shareholders on
earnings received

The subsequent distribution of undistributed earnings that were subjected

to IAET shall no longer be subjected to any tax
If undistributed earnings are used for the reasonable needs of the
business, such earnings is not subject to IAET
• Question 14
2 out of 2 points
A domestic corporation provided the following data for the current year: (a) Gross
profit from sales, P3,000,000, (b) Business expenses, P1,800,000; (c) Dividend from
domestic corporation, P100,000; (d) Dividend income from a resident corporation,
P50,000; (e) Dividend income from a nonresident corporation, P90,000; (f) Capital
gain on sale of land in the Philippines (SP-P2.2M; FMV-1.8M; Cost-P1.7M),
P500,000; (g) Capital gain on sale of land in China (SP-P1.5M; FMV-1.8M; Cost-
P1.3M), P200,000; (h) Capital gain on shares of domestic corp. (direct sale to buyer),
P120,000; (i) Gain on sale of shares of a domestic corporation thru a local stock
exchange (SP-P200,000; Cost P150,000), P50,000; (j) Interest income from: (1)
Notes receivable, P20,000, (2) Bank deposits (peso accounts), P25,000, (3) Bank
deposits (foreign currencies), P30,000; (4) Treasury bills, P10,000. The total capital
gains taxes for the year is
Selected Answer:
P150,000
Answers: P155,750

P150,000
 P227,000
P138,000
• Question 15
2 out of 2 points
ABC Corporation started operations in 2013. The following data were made available:
2017: RCIT P50,000, MCIT P80,000; 2018: RCIT P70,000, MCIT P90,000; 2019:
RCIT P80,000, MCIT P50,000. How much is the income tax payable for 2019?
Selected Answer:
P30,000
Answers:
P30,000
P80,000
P50,000
P0
• Question 16
2 out of 2 points
A domestic corporation started operations in year 2008. The following data on income
taxes during the years 2012 to 2019 were made available: 2012: Basic Tax-P50,000,
MCIT-100,000, Excess of MCIT over Normal Income Tax, P50,000; 2013: Basic Tax-
P130,000, MCIT-P170,000, Excess of MCIT over Normal Income Tax, P40,000;
2014: Basic Tax-P200,000, MCIT-P190,000; 2015: Basic Tax-None, MCIT-P300,000,
Excess of MCIT over Normal Income Tax, P300,000; 2016: Basic Tax-P100,000,
MCIT-P50,000; 2017: Basic Tax-P150,000, MCIT-P60,000; 2018: Basic Tax-P8,000,
MCIT-P40,000, Excess of MCIT over Normal Income Tax, P32,000; 2019: Basic Tax-
P1,000, MCIT-P60,000, Excess of MCIT over Normal Income Tax, P59,000. Income
tax payable for the year 2017
Selected Answer:
P0
Answers: P60,000
P150,000
P105,000

P0
• Question 17
2 out of 2 points
Which of the following business is not taxable as a corporation?
Selected
Answer: Gary and Sonny, two senior staff auditors of a big auditing firm, resigned
from their job and organized a new firm which they named as Gary, Sonny
and Company, CPAs.
 Answers: Joyce, Rosana, and Priscilla contributed P500,000 each and opened up a
bar in Quezon City. They agreed that whatever that whatever net profit is
earned will be distributed equally to them. They did not bother to register
the business with the Securities and Exchange Commission.

Gary and Sonny, two senior staff auditors of a big auditing firm, resigned
from their job and organized a new firm which they named as Gary, Sonny
and Company, CPAs.
Liza, Nadine, and Kathryn formed a business organization with the
following agreed features: (1) they are deprived of their general agency to
act on behalf of their ventures: (2) the powers of management are vested in
the Board of Trustee; (3) the ownership is represented in transferable
certificates; (4) the business continues for its fixed term notwithstanding the
death or disability of one of them; and (5) the liability of the partners is not
limited to their contributions.
A group of five entrepreneurs had organized, filed and registereD. It has an
authorized capital stock of P10 million divided into 100,000 shares, each
share having a par value of P100.
• Question 18
2 out of 2 points
Statement 1: International air carriers and international shipping carriers shall not be
subject to 12% value added tax but to 3% common carrier's tax based on gross
receipts derived from their transport of passengers and goods from Philippines to
other countries. Statement 2: In cases when the Gross Philippines Billings Tax of
2.5% for international carriers is not applicable (i.e., tax exempt based on reciprocity
or treaty), the common carrier's tax under Section 118 of the NIRC, as amended, shall
still apply.
Selected Answer:
False, True
Answers: True, True
True, False

False, True
False, False
• Question 19
2 out of 2 points
Pacific Airlines, an international air carrier showed the following gross receipts for the
current year with the following data: Point of Origin/Destination/Gross receipts: (A)
Philippines-U.S.A., P10,000,000; (B) U.S.A.-U.K, P4,000,000; (C) U.S.A-Philippines,
P3,750,000; (D) U.K-Philippines, P2,100,000. Additional information: (1) Forty percent
(40%) of the shipments from the Philippines to the United States were later shipped to
the United Kingdom; (2) 25% of all its revenues were from transport of cargoes and
goods. The Income tax payable for the year is
 Selected Answer:
P250,000
Answers: P257,000

P250,000
P370,200
P200,000
• Question 20
0 out of 2 points
Masigasig University is a private educational institution had the following data for the
year: Tuition fees, P4,800,000; Rental income (gross), P4,940,000; Total school
expenses, P9,450,000. The income tax payable should be:
Selected Answer:
(P95,000)
Answers: P185,500
(P95,000)

(P160,000)
P210,000
• Question 21
2 out of 2 points
Which of the following is/are prima facie instances of accumulation of profit beyond
the reasonable needs of a business? I. Investment of substantial earnings and profits
of the corporation in unrelated business or in shares or securities of unrelated
business. II. Investment in bonds and other noncurrent securities. III. Accumulation of
earnings in excess of 100% of paid up capital, not otherwise intended for the
reasonable needs of the business as defineD.
Selected Answer:
I, II and III
Answers: I only
I and II only
III only

I, II and III
• Question 22
2 out of 2 points
A domestic proprietary educational institution improved its library facilities by adding a
new wing to its old library building. The capital outlay on library improvement, for
income tax purposes, may be:
Selected Answer:
Capitalized or expensed outright at the option of the school owners
 Answers: Deducted at full at the time of completion of the improvement
Capitalized or expensed outright at the option of the Government

Capitalized or expensed outright at the option of the school owners

Capitalized and depreciated over the estimated life of the improvement
• Question 23
2 out of 2 points
The president upon the recommendation of the secretary of finance may allow
corporation the option to be taxed on gross income, provided I. The tax rate is 15%. II.
Available to firms whose ratio of cost of sales to gross sales or receipt from all source
does not exceed 55%. III. Shall be irrevocable for 3 consecutive years during which
the corporation is qualified under the scheme.
Selected Answer:
I, II and III must be complied
Answers: Only I must be complied
Only I and II must be complied

I, II and III must be complied

None of the above
• Question 24
2 out of 2 points
A branch, subsidiary or affiliate of a foreign banking corporation which is duly
authorized by the Bangko Sentral ng Pilipinas (BSP) to transact offshore banking
business in the Philippines in accordance with the provisions of P.D. No. 1034 as
implemented by CB (now BSP) Circular No. 1389, as amendeD.
Selected Answer:
Offshore banking unit
Answers: Multinational company

Offshore banking unit

Petroleum Service Contractor and Subcontractor
None of the choices
• Question 25
2 out of 2 points
ABC Corporation earned the following income in 2019 (gross of withholding tax):
Interest on bank deposit, BPI Manila, P100,000; Interest, US Dollar dposit, BPI
Manila, $50,000; Dividend Income from a Domestic Co., P100,000; Royalty,
Philippines, P600,000; Royalty, US, P200,000; Exchange rate: P50:$1. How much is
the total final withholding taxes if ABC Corporation is a non-resident foreign
corporation?
Selected Answer:
 P240,000
Answers: P525,000

P240,000
P515,000
P327,500
• Question 26
2 out of 2 points
A domestic corporation started operations in year 2008. The following data on income
taxes during the years 2012 to 2019 were made available: 2012: Basic Tax-P50,000,
MCIT-100,000, Excess of MCIT over Normal Income Tax, P50,000; 2013: Basic Tax-
P130,000, MCIT-P170,000, Excess of MCIT over Normal Income Tax, P40,000;
2014: Basic Tax-P200,000, MCIT-P190,000; 2015: Basic Tax-None, MCIT-P300,000,
Excess of MCIT over Normal Income Tax, P300,000; 2016: Basic Tax-P100,000,
MCIT-P50,000; 2017: Basic Tax-P150,000, MCIT-P60,000; 2018: Basic Tax-P8,000,
MCIT-P40,000, Excess of MCIT over Normal Income Tax, P32,000; 2019: Basic Tax-
P1,000, MCIT-P60,000, Excess of MCIT over Normal Income Tax, P59,000. Income
tax payable for the year 2019
Selected Answer:
P60,000
Answers:
P60,000
P50,000
P1,000
P59,000
• Question 27
2 out of 2 points
A domestic corporation provided the following data for the current year: (a) Gross
profit from sales, P3,000,000, (b) Business expenses, P1,800,000; (c) Dividend from
domestic corporation, P100,000; (d) Dividend income from a resident corporation,
P50,000; (e) Dividend income from a nonresident corporation, P90,000; (f) Capital
gain on sale of land in the Philippines (SP-P2.2M; FMV-1.8M; Cost-P1.7M),
P500,000; (g) Capital gain on sale of land in China (SP-P1.5M; FMV-1.8M; Cost-
P1.3M), P200,000; (h) Capital gain on shares of domestic corp. (direct sale to buyer),
P120,000; (i) Gain on sale of shares of a domestic corporation thru a local stock
exchange (SP-P200,000; Cost P150,000), P50,000; (j) Interest income from: (1)
Notes receivable, P20,000, (2) Bank deposits (peso accounts), P25,000, (3) Bank
deposits (foreign currencies), P30,000; (4) Treasury bills, P10,000. The total final
taxes on passive income for the year is
Selected Answer:
P11,500
Answers: P15,750
 P11,500
P11,750
P29,635
• Question 28
2 out of 2 points
Which of the following is subject to income tax?
Selected Answer:
Philippine Amusement and Gaming Corporation
Answers: SSS and GSIS
Philippine Health Insurance Corporation
Local Water Districts

Philippine Amusement and Gaming Corporation

• Question 29
2 out of 2 points
A domestic corporation started operations in year 2008. The following data on income
taxes during the years 2012 to 2019 were made available: 2012: Basic Tax-P50,000,
MCIT-100,000, Excess of MCIT over Normal Income Tax, P50,000; 2013: Basic Tax-
P130,000, MCIT-P170,000, Excess of MCIT over Normal Income Tax, P40,000;
2014: Basic Tax-P200,000, MCIT-P190,000; 2015: Basic Tax-None, MCIT-P300,000,
Excess of MCIT over Normal Income Tax, P300,000; 2016: Basic Tax-P100,000,
MCIT-P50,000; 2017: Basic Tax-P150,000, MCIT-P60,000; 2018: Basic Tax-P8,000,
MCIT-P40,000, Excess of MCIT over Normal Income Tax, P32,000; 2019: Basic Tax-
P1,000, MCIT-P60,000, Excess of MCIT over Normal Income Tax, P59,000. Income
tax payable for the year 2016
Selected Answer:
P0
Answers: P50,000
P100,000
(P105,000)

P0
• Question 30
2 out of 2 points
Philippine air, a domestic corporation engaged in local and international operations
has the following data for the current year: Gross income and expenses from
international operations, P10,000,000 and P6,000,000, respectively. The income tax
due of the corporation is
Selected Answer:
P1,200,000
 Answers: P350,250

P1,200,000
P1,800,000
P3,200,000
• Question 31
2 out of 2 points
Gross income taxation results to:
Selected Answer:
Less discretion on the part of tax examiners
Answers: Lower income tax revenues
More graft and corruption
More complicated tax computations.

Less discretion on the part of tax examiners

• Question 32
2 out of 2 points
Pacific Airlines, an international air carrier showed the following gross receipts for the
current year with the following data: Point of Origin/Destination/Gross receipts: (A)
Philippines-U.S.A., P10,000,000; (B) U.S.A.-U.K, P4,000,000; (C) U.S.A-Philippines,
P3,750,000; (D) U.K-Philippines, P2,100,000. Additional information: (1) Forty percent
(40%) of the shipments from the Philippines to the United States were later shipped to
the United Kingdom; (2) 25% of all its revenues were from transport of cargoes and
goods. The total tax expense of Pacific Airlines for the year is
Selected Answer:
P325,000
Answers: P177,500
P230,000
P260,000

P325,000
• Question 33
2 out of 2 points
A domestic corporation started operations in year 2008. The following data on income
taxes during the years 2012 to 2019 were made available: 2012: Basic Tax-P50,000,
MCIT-100,000, Excess of MCIT over Normal Income Tax, P50,000; 2013: Basic Tax-
P130,000, MCIT-P170,000, Excess of MCIT over Normal Income Tax, P40,000;
2014: Basic Tax-P200,000, MCIT-P190,000; 2015: Basic Tax-None, MCIT-P300,000,
Excess of MCIT over Normal Income Tax, P300,000; 2016: Basic Tax-P100,000,
MCIT-P50,000; 2017: Basic Tax-P150,000, MCIT-P60,000; 2018: Basic Tax-P8,000,
MCIT-P40,000, Excess of MCIT over Normal Income Tax, P32,000; 2019: Basic Tax-
 P1,000, MCIT-P60,000, Excess of MCIT over Normal Income Tax, P59,000. Income
tax payable for the year 2014
Selected Answer:
P110,000
Answers: P200,000
P190,000
P105,000

P110,000
• Question 34
2 out of 2 points
Philippine air, a domestic corporation engaged in local and international operations
has the following data for the current year: Gross income and expenses from
international operations, P10,000,000 and P6,000,000, respectively. Assume the
carrier is an international carrier (a resident foreign corporation), the income tax due is
Selected Answer:
P250,000
Answers:
P250,000
P150,000
P1,800,000
P3,000,000
• Question 35
2 out of 2 points
A proprietary hospital had the following data for 2020: Gross receipts from patients
and laboratory services, P8,600,000; Rental income gross of 5% withholding tax,
P1,425,000; Hospital operating expenses, P8,200,000. The income tax payable of the
hospital for 2020 is:
Selected Answer:
P476,250
Answers: P95,000
P178,000
P465,000

P476,250
• Question 36
2 out of 2 points
ABC Corporation started operations on 01 January 2019 and decided to use the
calendar year for financial reporting purposes. The 2019 1st Quarter and Annual
Income Tax Returns are due on:
 Selected Answer:
May 30, 2019 and April 15, 2020, respectively
Answers: May 15, 2019 and April 30, 2020, respectively
April 15, 2019 and April 15, 2020, respectively
May 30, 2019 and April 30, 2020, respectively

May 30, 2019 and April 15, 2020, respectively

• Question 37
2 out of 2 points
The term "Corporation" shall include: I. Partnerships, no matter how created or
organized; II. Joint stock companies; III. Joint accounts (cuentas en participacion); IV.
Associations; V. Insurance companies; VI. Mutual fund companies; VII. Regional
headquarters of multinational corporations
Selected Answer:
All of the above
Answers: I and II only
I, II and III only
I, II, III, IV and V only

All of the above

• Question 38
2 out of 2 points
Which of the following corporations is not subject to income tax?
Selected
Answer: Regional or area headquarters (in the Philippines) of a multi-national
corporation
Answers: Proprietary educational institutions duly registered with the Department
of education

Regional or area headquarters (in the Philippines) of a multi-national

corporation
Closely-held corporations
Government-owned and controlled corporations (GOCCs)
• Question 39
0 out of 2 points
Proprietary educational institutions and non-profit hospitals shall be taxed at 10% of
their gross income, provided that their gross income from unrelated business does not
exceed 50% of their total gross income derived from all sources.
Selected
Answer: True for both proprietary educational institutions and non-profit hospitals
 Answers: True only for proprietary educational institutions
True only for non-profit hospitals
True for both proprietary educational institutions and non-profit hospitals

Not true as both proprietary educational institutions and non-profit

hospitals may be subject to regular corporate income tax of 30%
• Question 40
2 out of 2 points
During the current year, a domestic corporation declared and paid dividends to its
shareholders as follows: (1) To Louie, a resident citizen, P100,000; (2) To Floyd, a
nonresident citizen, P100,000; (3) To Zeus, a resident alien, P110,000; (4) To JJ, a
nonresident alien engaged in trade in the Philippines, P100,000; (5) To Francis, a
nonresident alien not engaged in trade in the Philippines, P110,000; (6) To Chen, a
domestic corporation, P100,000; (7) To a resident foreign corporation, P100,000; (8)
To a nonresident foreign corporation (with tax sparing), P110,000. How much final tax
shall be withheld by the corporation?
Selected Answer:
P95,000
Answers: P60,000
P90,000
P75,000

P95,000
• Question 41
2 out of 2 points
ABC Corporation earned the following income in 2019 (gross of withholding tax):
Interest on bank deposit, BPI Manila, P100,000; Interest, US Dollar dposit, BPI
Manila, $50,000; Dividend Income from a Domestic Co., P100,000; Royalty,
Philippines, P600,000; Royalty, US, P200,000; Exchange rate: P50:$1. How much is
the total final withholding taxes if ABC Corporation is a resident foreign corporation?
Selected Answer:
P327,500
Answers:
P327,500
P525,000
P515,000
P240,000
• Question 42
2 out of 2 points
Which of the following is not a domestic corporation?
Selected Answer:
 All of the above
Answers: Branch Office of NRFC located in the Philippines
Representative Office of NRFC located in the Philippines
ROHQs

All of the above

• Question 43
2 out of 2 points
A depository bank under Foreign Currency Deposit System has the following income from foreign currency
transactions (Exchange Rate $1=P45): (a) From Nonresidents, $5,000; (b) From residents, $3,000; (c)
From Philippine National Bank, $2,000. How much is the final withholding tax applicable on the above
income?

Selected Answer:
P13,500
Answers: P12,500
P13,500
P19,000

P16,500
• Question 44
2 out of 2 points
A private educational institution duly recognized by CHED has the following data for the fiscal year ending
March 30, 2020: Tuition and other fees, P 5,000,000; Rent income from canteen and bookstore
concessionaire, net of withholding tax, P475,000; Dividend from domestic corporation, P500,000; Interest
on bank deposit, net of tax, P16,000; Operating expenses, P1,500,000. During the year, the school
constructed a 2 storey school building costing P2,000,000. It is the school's policy to deduct this cost in full
during the taxable year. The income tax due and payable is:

Selected Answer:
P152,500
Answers: P152,500
354,000

P175,500
545,350
• Question 45
2 out of 2 points
This problem has 3 questions. ABC Corporation started operations in 2013. The
following data were made available: 2017: RCIT P50,000, MCIT P80,000; 2018: RCIT
P70,000, MCIT P90,000; 2019: RCIT P80,000, MCIT P50,000. How much is the
income tax payable for 2017?
Selected Answer:
P80,000
 Answers: P50,000
P30,000

P80,000
P0
• Question 46
2 out of 2 points
Advance Learning Institute, an educational institution provided the following data for
current taxable year: Income from tuition fees, P3,500,000; School miscellaneous
fees, P1,500,000; Dividend income: Domestic corporation, P2,000,000, Foreign
corporation, P2,000,000; Rent income (gross of 5% withholding tax), P1,900,000;
Operating expenses, P4,000,000. The income tax payable of the school is:
Selected Answer:
P395,000
Answers: P1,435,000
P1,250,000

P395,000
P400,000
• Question 47
2 out of 2 points
Which of the following income is not from a related trade, business or activity of a
domestic proprietary educational institution?
Selected
Answer: Income from rent of available office spaces
Answers: Income from the hospital where medical graduates are trained for
residency

Income from rent of available office spaces

Income from the canteen situated within the school campus
Income from bookstore situated within the school campus
• Question 48
2 out of 2 points
A domestic corporation provided the following data for the current year: (a) Gross
profit from sales, P3,000,000, (b) Business expenses, P1,800,000; (c) Dividend from
domestic corporation, P100,000; (d) Dividend income from a resident corporation,
P50,000; (e) Dividend income from a nonresident corporation, P90,000; (f) Capital
gain on sale of land in the Philippines (SP-P2.2M; FMV-1.8M; Cost-P1.7M),
P500,000; (g) Capital gain on sale of land in China (SP-P1.5M; FMV-1.8M; Cost-
P1.3M), P200,000; (h) Capital gain on shares of domestic corp. (direct sale to buyer),
P120,000; (i) Gain on sale of shares of a domestic corporation thru a local stock
 exchange (SP-P200,000; Cost P150,000), P50,000; (j) Interest income from: (1)
Notes receivable, P20,000, (2) Bank deposits (peso accounts), P25,000, (3) Bank
deposits (foreign currencies), P30,000; (4) Treasury bills, P10,000. The income tax
due for the year is
Selected Answer:
P468,000
Answers: P577,250

P468,000
P526,300
P453,000
• Question 49
2 out of 2 points
The minimum corporate income tax (MCIT) does not apply to a corporation, if
Selected
Answer: All of the above
Answers: Imposition was suspended by the Secretary of Finance due to a
corporation's heavy losses arising from prolonged labor dispute;
Corporation is in its initial year of operation;
Corporation is exempt from income tax by virtue of tax holidays granted
to it by the Board of Investment;

All of the above

• Question 50
2 out of 2 points
Pioneer College, a private educational institution has presented the following data for the year: (a) Gross
income, related activities, P5,000,000; (b) Gross income, unrelated activities (except rental income),
P5,000,000; (c) Rental income (gross of 5% WT), P1,000,000; (d) Expenses, related activities, P2,000,000;
(e) Expenses, unrelated activities, P3,000,000; (f) Dividend income from a domestic corporation, P100,000;
(g) Quarterly income tax paid for the first 3 quarters, P500,000. How much is the income tax payable?

Selected Answer:
P1,200,000
Answers: P565,000
P1,350,000

P1,200,000
P1,500,000
• Question 1
2.5 out of 2.5 points
Pedro received the following prizes and winnings: Cash prize as Pinoy Big Brother
winner P2,000,000 House and Lot won as PBB Big Winner 3,000,000 Philippine Lotto
winnings 10,000,000 Gambling winnings 3,000,000. How much is the taxable
winnings and prizes?
Selected Answer:
P18,000,000
Answers: P5,000,000
P15,000,000

P18,000,000
P3,000,000
• Question 2
2.5 out of 2.5 points
What is the correct treatment of advance payment made by the lessee to the lessor?
Selected
Answer: If the advance payment representing loan is applied to unpaid rent, the
amount is part of the lessor's taxable income.
Answers: If the advance payment represents loan, the amount is part of the
lessor's taxable income.
If the advance payment represents security deposit, the amount is part of
the lessor's taxable income.

If the advance payment representing loan is applied to unpaid rent, the

amount is part of the lessor's taxable income.
None of the above
• Question 3
2.5 out of 2.5 points
George was selected as the most outstanding "barrio teacher" in Di Mahanap-hanap
town of Tawi-Tawi region. His name was submitted by the school principal without his
knowledge. He received a trophy and a cash award of P500. The amount he received
is
Selected Answer:
Exempt from income tax
Answers: Subject to basic income tax
Subject to final tax

Exempt from income tax

Partly taxable, party exempt
• Question 4
 2.5 out of 2.5 points
Which of the following is taxable?
Selected
Answer: Retirement pay received from a benefit plan registered with the BIR where
at the time the employee retired, he was 57 years of age, retiring from
employment for the first time in his life, and was employed with the
employer for 8 years
Answers: Separation pay received by a 50-year old employee due to the
retrenchment program of the employer

Retirement pay received from a benefit plan registered with the BIR where
at the time the employee retired, he was 57 years of age, retiring from
employment for the first time in his life, and was employed with the
employer for 8 years
Social security benefit received by a balikbayan from employer abroad at
age of 30
None of the above
• Question 5
2.5 out of 2.5 points
One of the following compensation income of an individual taxpayer is not an
exclusion from gross income:
Selected
Answer: Separation pay of an employee who resigned from his employment.
Answers: Monetized vacation leaves not exceeding 10 days a year.

Separation pay of an employee who resigned from his employment.

Retirement benefits of an employee who has worked for an employer for at
least 10 years, who at the time of retirement is not less than 50 years of
age, and who avails of the retirement for the first time
All of these.
• Question 6
2.5 out of 2.5 points
Which of the following compensation will be subject to graduated rates?
Selected Answer:
Basic salary only if the employee is not a minimum wage earner
Answers: Basic salary whether or not the employee is a minimum wage earner

Basic salary only if the employee is not a minimum wage earner

13th month pay and other benefits not exceeding P90,000
Fringe benefits received by supervisory or managerial employee
• Question 7
 2.5 out of 2.5 points
Which of the following is not an income for income tax purposes?
Selected Answer:
Collection of loans receivable
Answers:
Collection of loans receivable
Condonation of debt for services rendered
Excess of selling price over the cost of an asset sold
None of the above
• Question 8
2.5 out of 2.5 points
Assume the following: Gain on sale of personal property purchased in the Philippines
and sold in Hongkong P400,000. Compensation received for personal services in the
Philippines 200,000. Rent income from real property in Malaysia 300,000. Gain from
sale in the Philippines of shares of a foreign corporation 100,000. Deductions
identified with: Philippine income 80,000 Foreign income 120,000 Deductions
unidentified with any particular income 30,000. The Philippine net income is
Selected Answer:
P211,000
Answers: P220,000

P211,000
P190,000
P111,000
• Question 9
2.5 out of 2.5 points
A taxpayer is employed by a shipping company touching Philippine and foreign ports.
In 2020, he received a gross payment for his services rendered of P300,000. In that
year, the vessels on board of which he rendered services had a total stay in Philippine
ports of four months. His gross income from the Philippines was
Selected Answer:
P100,000
Answers: P300,000
P0
P150,00

P100,000
• Question 10
2.5 out of 2.5 points
Which of the following is not a taxable income?
 Selected
Answer: Tax expense previously disallowed as deduction from taxable income,
fully refunded subsequently.
Answers: Bad debts previously deducted as item of expense and partially
recovered subsequently.

Tax expense previously disallowed as deduction from taxable income,

fully refunded subsequently.
Income from gambling.
Income from usurious financing.
• Question 11
2.5 out of 2.5 points
The following interest income are subject to final withholding tax, except
Selected
Answer: Interest income received from expanded foreign currency deposit
system earned by nonresidents.
Answers: Interest income earned from financial institutions.
Interest income from any currency bank deposit.
Interest income received from expanded foreign currency deposit
system earned by residents.

Interest income received from expanded foreign currency deposit

system earned by nonresidents.
• Question 12
2.5 out of 2.5 points
Lenovo, Inc., a resident foreign corporation, has earned the following income during
2020 taxable year: Dividend income from: Microsoft, a non-resident corporation
P500,000 Intel, a resident foreign corporation 400,000 IBM, a domestic corporation
300,000 Interest income from: Current account, BDO 600, 000 Savings deposit, ABN-
AMRO bank, UK 700,000 US dollar deposit (FCDU) BPI Makati 800,000 Royalty
income from various domestic corporations 100,000. Additional information: The ratio
of Microsoft's gross income in the Philippines over worldwide income for the past
three years was 40%. The ratio of Intel's gross income in the Philippines over
worldwide income for the past three years was 60%. The ratio of IBM's gross income
in the Philippines over worldwide income for the past three years was 80%. How
much is the total income tax expense of Lenovo?
Selected Answer:
P272,000
Answers: P200,000
P560,000
P320,000
 P272,000
• Question 13
2.5 out of 2.5 points
A resident alien had the following data for the year: Gross income, Philippines
P200,000 Business expenses 1,200,000. Dividends received: From domestic
corporation (net) 60% of its income came from the Philippines 90,000 40% of its
income came from the Philippines 72,000 From resident foreign corporation (gross)
60% of its income came from the Philippines 50,000 40% of its income came from the
Philippines 40,000. The final withholding taxes on dividends amount to
Selected Answer:
P18,000
Answers: P16,200

P18,000
P25,200
P26,000
• Question 14
2.5 out of 2.5 points
Sandara, a nonresident citizen, received a dividend income of P300,000 in 2020 from
Super Bowl Corporation, a foreign corporation doing business in the Philippines. The
gross income of the foreign corporation from sources within and without the
Philippines for the past three years preceding 2020 were provided as follows: Source
Philippines 2017 P14,000,000 2018 P10,000,000 2019 P12,000,000 Abroad 2017
10,000,000 2018 16,000,000 2019 18,000,000. The amount of income subject to tax
should be:
Selected Answer:
P0
Answers:
P0
P135,000
P165,000
P300,000
• Question 15
2.5 out of 2.5 points
The share in the profits of a partner in a general professional partnership is regarded
as received by him and thus taxable although not yet distributed. This principle is
known as
Selected Answer:
Constructive receipt of income
Answers: Actual receipt of income
 Advance reporting of income
Accrual method of accounting

Constructive receipt of income

• Question 16
2.5 out of 2.5 points
As a rule, income from whatever source is taxable. Income from whatever source may
come from: I. Gains arising from expropriation of property II. Gambling gains III.
Income from illegal business or from embezzlement IV. Recovery of receivables
previously written off V. Tax refunds VI. Compensation for injury suffered VII.
Gratuitous condonation of debt
Selected Answer:
I, II, III, IV and V only
Answers: I and II only
I, IV and V only
I, IV, V and VI only

I, II, III, IV and V only

• Question 17
2.5 out of 2.5 points
Which among the following dividend income is tax exempt? I. Pure stock dividend II.
Pure liquidating dividend.
Selected Answer:
I and II
Answers: I only
II only

I and II
Neither I nor II
• Question 18
2.5 out of 2.5 points
Constructive receipt occurs when the money consideration or its equivalent is placed
at the control of the person who rendered the service without restrictions by the payor.
The following are examples of constructive receipts, except
Selected
Answer: A security deposit to insure the faithful performance of certain obligations
of the lessee to the lessor.
Answers:
A security deposit to insure the faithful performance of certain obligations
of the lessee to the lessor.
 Deposit in banks which are made available to the seller of services
without restrictions;
Issuance by the debtor of a notice to offset any debt or obligation and
acceptance thereof by the seller as payment for services rendered;
Transfer of the amounts retained by the payor to the account of the
contractor.
• Question 19
2.5 out of 2.5 points
Which income from sources partly within and partly outside the Philippines is
allocated on the time basis?
Selected
Answer: Income from personal services performed in part in the Philippines and in
part abroad
Answers: Income of the international shipping corporation with vessels touching
Philippine ports
Income of a telegraph company with transmission from the Philippines to
points abroad
Income from goods produced in whole or in part in the Philippines and
sold in a foreign country, or vice-versa

Income from personal services performed in part in the Philippines and in

part abroad
• Question 20
2.5 out of 2.5 points
The following are the gross royalty income of a resident citizen for the period: Royalty
income as author P100,000 Royalty income from franchising 200,000 Royalty income
from gold mine 500,000 Royalty income from the use of its patents 100,000. The total
final tax on royalty income is
Selected Answer:
P170,000
Answers: P150,000
P100,000
P130,000

P170,000
• Question 21
2.5 out of 2.5 points
Which of the following test of source of income is incorrect?
Selected Answer:
Gain on sale of real property – place of sale.
Answers: Interest income - residence of the debtor
 Income from services – place of performance
Royalties – place of use of intangible

Gain on sale of real property – place of sale.

• Question 22
2.5 out of 2.5 points
Which of the following statements is incorrect?
Selected
Answer: When a stockholder receives a stock dividend which is taxable income, the
measure of income is the par value of the shares of stock received;
Answers: A stock dividend constitutes income if it gives the shareholder an interest
different from that which his former stock represented;
When there is only one class of stock issued and outstanding at the time of
the stock dividend, the dividend will not result in a change in the
proportionate interests of the shareholders in the net assets of the
corporation, hence, the stock dividend is not taxable;

When a stockholder receives a stock dividend which is taxable income, the

measure of income is the par value of the shares of stock received;
A stock dividend represents the transfer of surplus to a capital account.
• Question 23
2.5 out of 2.5 points
Which of the following is not an income for income tax purposes?
Selected Answer:
Gift received
Answers: Gain derived from labor.
Return on capital.
Excess of selling price over cost of assets sold.

Gift received
• Question 24
2.5 out of 2.5 points
Lenovo, Inc., a resident foreign corporation, has earned the following income during
2020 taxable year: Dividend income from: Microsoft, a non-resident corporation
P500,000 Intel, a resident foreign corporation 400,000 IBM, a domestic corporation
300,000 Interest income from: Current account, BDO 600, 000 Savings deposit, ABN-
AMRO bank, UK 700,000 US dollar deposit (FCDU) BPI Makati 800,000 Royalty
income from various domestic corporations 100,000. Additional information: The ratio
of Microsoft's gross income in the Philippines over worldwide income for the past
three years was 40%. The ratio of Intel's gross income in the Philippines over
worldwide income for the past three years was 60%. The ratio of IBM's gross income
in the Philippines over worldwide income for the past three years was 80%. Assuming
 Lenovo is a domestic corporation, how much is its total income tax expense of
Lenovo?
Selected Answer:
P740,000
Answers: P200,000
P560,000

P740,000
P680,000
• Question 25
2.5 out of 2.5 points
This refers to a specified income payable at stated intervals for a fixed or a contingent
period, often for the recipient's life, in consideration of a stipulated premium paid
either in prior installment payments or in a single payment.
Selected Answer:
Annuity
Answers:
Annuity
Royalty
Pension
Gratuity
• Question 26
2.5 out of 2.5 points
The sources from which income is derived
Selected Answer:
All of the above
Answers: Labor
The use of capital
Profits derived from sale or exchange of capital assets

All of the above

• Question 27
2.5 out of 2.5 points
A stock dividend is not taxable
Selected
Answer: All of the above
Answers: If there was no resulting change in the proportionate interest of the
shareholders in the net assets of the corporation.
If there was only one class of stock issued and outstanding at the time of
the dividend.
 Since it is only capitalization of the accumulated profits.

All of the above

• Question 28
2.5 out of 2.5 points
Which of the following payments made by a corporation to a shareholder is
considered dividend income of the latter subject to basic tax?
Selected
Answer: None of the above
Answers: Payment of property purchased from the shareholder in excess of its fair
values.
Payment to a shareholder for services rendered in excess of the fair
value of the service.
Cancellation of indebtedness of a shareholder.

None of the above

• Question 29
2.5 out of 2.5 points
A cash dividend of P100,000 received by a taxpayer in 2020 from a foreign
corporation whose income from Philippine sources was 40% of its total income is:
Statement 1: partly taxable if he is a resident citizen. Statement 2: Partly taxable if he
is a non-resident alien
Selected Answer:
Statements 1 & 2 are false
Answers:
Statements 1 & 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true
• Question 30
2.5 out of 2.5 points
Liquidating dividends are return of shareholders' investments. Which of the following
rules on liquidating dividend is incorrect?
Selected
Answer: If a shareholder sustains a loss brought about by the liquidating
dividend, such loss is not deductible.
Answers: The excess amount of liquidating over cost of shares surrendered is
taxable.
If a shareholder sustains a loss brought about by the liquidating
dividend, such loss is deductible.
 If a shareholder sustains a loss brought about by the liquidating
dividend, such loss is not deductible.
All of the above
• Question 31
2.5 out of 2.5 points
Which of the following is a requisite for an income to be taxable?
Selected Answer:
All of the above
Answers: There must be gain
The gain must be realized or received
The gain must not be excluded by law from taxation

All of the above

• Question 32
2.5 out of 2.5 points
Situs of taxation on income from sale shares of a foreign corporation.
Selected
Answer: May be treated as income within or without the Philippines depending on
the place of sale
Answers: Always treated as income derived from within the Philippines
Always treated as income derived from without the Philippines

May be treated as income within or without the Philippines depending on

the place of sale
May be treated as income within or without the Philippines depending
where the shares are kept
• Question 33
2.5 out of 2.5 points
Which is not a valid definition of income?
Selected
Answer: Income is a fund at one distinct point of time.
Answers: Income is the return from capital invested.

Income is a fund at one distinct point of time.

Income means all wealth which flows into the taxpayer other than a
mere return of capital.
Income means cash or its equivalent unless otherwise specified.
• Question 34
2.5 out of 2.5 points
Which of the following will result to earnings of income by the debtor?
 Selected
Answer: Cancellation of existing payables for services rendered to the creditor.
Answers: Cancellation of existing payables without any financial consideration.

Cancellation of existing payables for services rendered to the creditor.

Cancellation of existing payables to offset the equivalent amount of
collectibles.
Cancellation of existing payables due to bankruptcy of the debtor.
• Question 35
2.5 out of 2.5 points
This refers to earnings derived from depositing or lending of money, goods or credits.
Selected Answer:
Interest income
Answers: Dividend income

Interest income
Royalty income
Annuity
• Question 36
2.5 out of 2.5 points
Prizes and awards received shall be exempt from income tax when the following
conditions are met, except
Selected
Answer: The amount of prizes does not exceed P10,000
Answers: It is given in recognition of religious, charitable, scientific, educational,
artistic, literary or civic achievement.
The recipient of the award or prize is not required to render substantial
future services as a condition in receiving the prize or award.
The recipient of the award was selected without any action on his part to
enter the contest or proceeding.

The amount of prizes does not exceed P10,000

• Question 37
2.5 out of 2.5 points
A resident alien had the following data for the year: Gross income, Philippines
P200,000 Business expenses 1,200,000. Dividends received: From domestic
corporation (net) 60% of its income came from the Philippines 90,000 40% of its
income came from the Philippines 72,000 From resident foreign corporation (gross)
60% of its income came from the Philippines 50,000 40% of its income came from the
Philippines 40,000. The taxpayer's taxable income is
Selected Answer:
 P830,000
Answers: P750,000

P830,000
P796,000
P800,000
• Question 38
2.5 out of 2.5 points
There is constructive receipt of income when:
Selected
Answer: Both "a" and "b"
Answers: Payment is credited to payee's account
Payment is set aside for the payee, or otherwise made available so the
payee may draw upon it at any time, or so the payee could have drawn
upon it during the taxable year if notice of intention to withdraw had been
given without substantial limitations.

Both "a" and "b"

Neither "a" nor "b"
• Question 39
2.5 out of 2.5 points
Pedro, single received the following during the taxable year: Proceeds of his life
insurance paid at an annual premium of P15,000 within 25 years P2,000,000
Proceeds of his mother's life insurance paid at an annual premium of P10,000 within
20 years 1,000,000 House and lot inherited from his mother 4,000,000 Rent income
from inherited properties 200,000. For income tax purposes, how much of the above
items must be included in his gross income?
Selected Answer:
P1,825,000
Answers: P7,200,000
P1,200,000
P200,000

P1,825,000
• Question 40
2.5 out of 2.5 points
Which of the following statements is correct with respect to valuation of income?
Selected
Answer: All of the above
Answers: The amount of income recognized is generally the value received or which
the taxpayer has a right to receive.
If the services were rendered at a stipulated price, in the absence of any
evidence to the contrary, such price shall be presumed to be the fair market
value of the compensation received.
Transfer of land made by a person to another in payment of services
rendered in the form of attorney's fees shall be considered as part of the
gross income of the latter valued at either the fair market value or the zonal
valuation, whichever is higher, in the taxable year received.

All of the above