Which of the following shall not be subject to the 20% final withholding

tax beginning January 1, 2018?

a.
Prizes amounting to the thousand pesos (P10,000) or less.

b.
Philippine Charity Sweepstakes and Lotto winnings exceeding P10,000

c.
Winnings other than Philippine Charity Sweepstakes and Lotto winnings regardless of amount.

d.
Amount of interest from any currency bank deposit and yield or any other monetary benefit
from deposit substitutes and from trust funds and similar arrangements.
Feedback
The correct answer is: Prizes amounting to the thousand pesos (P10,000) or less.

Question 2
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6. Marga initially presumed that her gross sales and other non-operating
income for the taxable year will not exceed P3,000,000 VAT threshold.
Consequently, she registered .as a non-VAT taxpayer. However, her
actual gross sales/receipts and other non-operating income exceeded the
VAT threshold during the taxable year. Which of the following
statements is correct?

a.
All of the above.

b.
She shall immediately update his/her registration to reflect the change in tax profile from non-
VAT to VAT taxpayer.

c.
She shall be liable to VAT prospectively starting on the first day of the month following the
month when the threshold is breached.
d.
She shall be required to update her registration immediately within the month following the
month she exceeded the VAT threshold.
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The correct answer is: All of the above.

Question 3
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2. Statement 1: The provision of the Tax Code, as amended which allows
an 8% income tax rate on gross sales/receipts and other non-operating
income in excess of P250,000 is available only to purely self-employed
and/or professionals.

Statement 2: The P250,000 mentioned in the 1st statement is not

applicable to mixed income earners since it is already incorporated in the
first tier of the graduated income tax rates applicable to compensation
income.

a.
Both statements are incorrect.

b.
Only statement 1 is correct.

c.
Only statement 2 is correct.

d.
Both statements are correct.
Feedback
The correct answer is: Both statements are correct.

Question 4
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33. Fringe benefit tax is computed based on

a.
Grossed-up monetary value

b.
As Monetary Value

c.
Net compensation

d.
Gross compensation
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The correct answer is: Grossed-up monetary value

Question 5
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5. In 2018, Cassie signified her intention to be taxed at 8% income tax
rate on gross sales in her 1st quarter income tax return. Her gross sales
during the year exceeded the VAT threshold of P3M as follows:
  Q1 Q2 Q3 Q4/Annual
  (8% tax) (8% tax) (8% tax) (Graduated)
Sales P500,000 P500,000 P2,000,000 P3,500,000
Cost of Sales (300,000) (300,000) (1,200,000) (1,200,000)
Gross Income 200,000 200,000 800,000 2,300,000
Operating Expenses (120,000) (120,000) (480,000) (720,000)
Net taxable Income 80,000 80,000 320,000 1,580,000

How much is Cassie’s annual income tax payable?

a.
P 509,200

b.
P 289,200

c.
P2,060,000

d.
P 220,000
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The correct answer is: P 289,200

Question 6
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9. Which of the following statements about interest income from long-
term deposit is false?

a.
Interest income from long-term deposits or investment is exempt from income tax.

b.
If a long-term deposit or investment is pre-terminated, the applicable tax rate on the interest
income is 0% if the holding period is 5 years or more.

c.
If a long-term deposit is pre-terminated, the applicable tax rate on the interest income is 12% of
the holding period is 3 years to less than 4 years.

d.
If a long-term deposit is pre-terminated, the applicable rate on the interest income is 0% if the
holding period is 4 years to less than 5 years.
Feedback
The correct answer is: If a long-term deposit is pre-terminated, the applicable rate on the
interest income is 0% if the holding period is 4 years to less than 5 years.

Question 7
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46. On January 1, 2018, A established a trust fund for the benefit of his
son, C. A appointed B as the trustee. The property transferred to the trust
is a piece of land with a dormitory earning rental income. During the
year, the trust earned P40M revenues and incurred expenses of P10M.
Out of the trust’s income, B gave C P10M cash. In the same year, C
earned compensation income of P3M. The income tax of C is:

a.
P11,450,000

b.
P12,950,000

c.
P13,000,000

d.
P2,950,000
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The correct answer is: P13,000,000

Question 8
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Question text
24. Statement 1: Passive incomes are subject to separate and final tax
rates.

Statement 2: Passive incomes are included in the computation of taxable

income from compensation or business/professional income.

a.
Only statement 2 is correct.

b.
Both statements are correct.

c.
Only statement 1 is correct.

d.
Both statements are incorrect.
Feedback
The correct answer is: Only statement 1 is correct.

Question 9
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50. Which of the following statements is correct?

I. The term “domestic” when applied to a corporation, means created or

organized in the Philippines or under the laws of a foreign country as
long as it maintains a Philippine Branch
II. A corporation which is not domestic, may be a resident (engaged in
business in the Philippines) or nonresident corporation (not engaged in
business in the Philippines)
III. Resident foreign corporations are subject to income tax based on net
income from sources within the Philippines. 
a.
II and III only

b.
I only

c.
II only

d.
I, II, and III
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The correct answer is: II and III only

Question 10
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29. Beda University granted a scholarship grant abroad to Nena, one of
its regular faculty members. The management of Beda believed that the
university will be able to improve its accountancy program through the
scholarship grant. Nonetheless, no written contract was executed
between Beda and Nena requiring the latter to remain as an employee
for a certain period of time. The scholarship grant is:

a.
Subject to basic income tax or fringe benefit tax depending on the rank of Nena

b.
The benefit was provided for the benefit of the employer, hence, non-taxable on the part of the
employee

c.
De minimis benefit, hence tax-exempt regardless of rank

d.
None of the above.
Feedback
The correct answer is: Subject to basic income tax or fringe benefit tax depending on the rank of
Nena

10. If the amount of prize received did not exceed P10,000, what type if
income tax will apply?

a.
Fringe benefit tax

b.
Final withholding tax on passive income

c.
Capital gains tax

d.
Basic income tax

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The correct answer is: Basic income tax

Question 12
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21. Taxable only on income from sources within the Philippines, except

a.
Nonresident alien
b.
Nonresident citizen

c.
Resident citizen

d.
Resident alien

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The correct answer is: Resident citizen

Question 13
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40. Which of the following is included in the income of the estate of a
decedent?

a.
Appreciation in the value of the property passed to the executor or administrator upon death of
decedent.

b.
Delivery of property in kind to legatee or devisee.

c.
Excess of selling price over the appraised value placed upon the property at the time of death,
where the property was sold after the settlement of the estate.

d.
Income received by the estate of a deceased person during the period of administration or
settlement of the estate.

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The correct answer is: Income received by the estate of a deceased person during the period of
administration or settlement of the estate.

Question 14
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42. The following are the classifications of Trusts, except

a.
Irrevocable Trust

b.
Revocable Trust

c.
Employer’s Trust

d.
Ordinary Trust
Feedback
The correct answer is: Employer’s Trust

Question 15
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26.
Diego, a resident of Isabela Province, had the following data for the
taxable year 2018: (Use $1-P40 for exchange rates)

  Philippines Abroad
Salaries P165,000 $    2,000
Business Income 450,000 6,000
Business Expenses 120,000 1,500
Interest Income:    
    Personal Receivables 10,000  
    FCDU $   2,500  
    Bank Deposits (20% long-term) 25,000 3,000
Royalty Income (20% from books) 22,000 1,000
Prize won in contest 10,000  
Winnings from Philippine Charity Sweepstakes 80,000  
Sale of shares of stocks of a domestic corp.    
    Directly to a buyer (cost P10,000) 30,000  
 
Additional information:
  Diego received the following dividend income during the taxable
year:
 P70,000 from a domestic corporation. 30% of its income is
attributed to its operations abroad.
 P60,000 from a resident foreign corporation. The ratio of its gross
income in the Philippines over worldwide income for the past three
years is only 40%.
 P80,000 from a nonresident foreign corporation. The ratio of its
gross income in the Philippines over worldwide income for the past
three years is 10%.

 
Diego is married with the following dependents:

 Ana, 23, disabled

 Marie, turned 21 on January 1, 2015
 Chris, 28. Recently retrenched by his employer.
 Pao, college student living in Manila. 

He also sold a condominium unit in Manila (residential) for P2M

although the FMV is P3M but with a zonal value of P4M

Diego’s final taxes on his passive income is:

a.
P22,460

b.
P45,960

c.
P15,440

d.
P38,460

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The correct answer is: P45,960

Question 16
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18. Income payment made by top withholding agents, either private
corporations or individuals to their local/resident supplier of goods and
local/resident supplier of services other than those covered by other
rates of withholding tax
Supplier of goods               Supplier of services

a.
1%                                             1%

b.
2%                                            1%

c.
2%                                            2%

d.
1%                                            2%

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The correct answer is: 1%                                            2%
Question 17
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13. Carlos, a resident citizen, disposed of the following shares of stock of
a domestic corporation whose shares are not listed and traded in the
local stock exchange:
Date of Sale Cost Selling Price
Jan. 15, 2019 P80,000 P135,000
Feb. 14, 2019 175,000 150,000
March 30, 2019 256,000 360,000

The capital gains tax on the Jan. 15, 2019 sale is?

a.
P1,375

b.
P2,750

c.
P675

d.
P8,250

Feedback
The correct answer is: P8,250

Question 18
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44. Statement 1: A revocable trust exist when the grantor reserves the
right to revoke his power to change at any part of the terms of the trust.

Statement 2: The income of the revocable trust is taxable against the

grantor

a.
Both statements are incorrect.

b.
Only statement 1 is correct.

c.
Only statement 2 is correct.

d.
Both statements are correct.

Feedback
The correct answer is: Both statements are correct.

Question 19
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41. Income received by the estate during the period of administration or
settlement of the estate, for tax purposes is known as

a.
Income of the heirs

b.
Income of the estate

c.
Income of the trustee

d.
Income of the testator

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The correct answer is: Income of the estate

Question 20
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4. Assume that Emma did not avail the 8% income tax rate upon her
registration with the BIR on February 1, 2018 or upon filing of her first
quarterly income tax return. Which of the following statements is
correct?
Statement 1: She is subject to the graduated income tax rate.
Statement 2: The 3rd quarterly percentage return that she needs to file
should cover the period from July 1 to September 2018, which is due on
or before October 20, 2018.

a.
Both statements are correct.

b.
Only statement 2 is correct.

c.
Only statement 1 is correct.

d.
Both statements are incorrect.

Feedback
The correct answer is: Both statements are correct.

49. Statement 1: Partnerships, no matter how created or organized, are

taxable as corporations for income tax purposes.

Statement 2: Associations and mutual fund companies, for income tax

purposes, are excluded in the definition of corporations.

a.
Only statement 1 is correct
b.
Both statements are correct

c.
Only statement 2 is correct

d.
Both statements are incorrect

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The correct answer is: Only statement 1 is correct

Question 22
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20. Statement 1: Individual taxpayers are natural persons with income
derived from the territorial jurisdiction of a taxing authority.

Statement 2. Individual taxpayers are natural persons classified as

citizens and aliens.

a.
Only statement 2 is correct.

b.
Only statement 1 is correct.
c.
Both statements are correct.

d.
Both statements are incorrect.

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The correct answer is: Both statements are correct.

Question 23
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43. When an individual taxpayer dies, future income on his property will
be taxed to

a.
None of the above

b.
Those who inherent the property after they receive the property

c.
The individual himself

d.
The estate itself, after the heirs have received the property

Feedback
The correct answer is: Those who inherent the property after they receive the property

Question 24
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1. Mae owns a nightclub and a videoke bar, with gross receipts of
P2,500,000. Her cost of direct services and operating expenses are
P1,000,000 and P600,000, respectively, and with non-operating income
of P200,000. Which of the following statements is correct?

a.
Aside from income tax computed using the graduated income tax rate, Mae is still liable to
prescribed business tax, which, under this case, is Amusement Tax under Sec. 125 of the Tax
Code, as amended.

b.
All of the above.

c.
Mae’s income tax shall be computed using the graduated tax rate.

d.
Mae has no option to avail the 8% income tax rate.

Feedback
The correct answer is: All of the above.

Question 25
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47. The term “Corporation” shall include:

I. Partnership, no matter how created or organized

II. Joint Stock Companies
III. Joint Accounts
IV. Associations
V. Insurance Companies
VI. Mutual fund Companies
VII. Regional operating headquarters of multinational corporation

a.
I, II and III only

b.
I,II, III, IV and V only

c.
I and II only

d.
All of the above

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The correct answer is: All of the above

Question 26
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35. BAC Company owns a condominium unit in “The Residences” which
is near the factory and the plant’s administrative building. To make it
convenient to its executive, they allowed the latter to use the said
property. The zonal value of the property is P32M while its fair market
value shown in the current real property tax declaration amounts to
P25M. How much is the fringe benefit expense?

a.
P800,000

b.
P0

c.
P25,000,000

d.
P32,000,000

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The correct answer is: P0

Question 27
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 Flag question

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8. Which of the following interest income derived within the Philippines
is subject to basic income tax?

a.
Interest Income from trust funds.

b.
Interest Income from loans.

c.
Interest Income from bank deposits.

d.
Interest Income from deposit substitutes

Feedback
The correct answer is: Interest Income from loans.

Question 28
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28. Statement 1: Meal allowance and lodging furnished by the employer
to the employees are exempt from tax if furnished for the “advantage or
convenience of the employee”.

Statement 2: Tax exempt meal allowance should be furnished within the

premised of the employer.

a.
Only statement 1 is correct.

b.
Both statements are incorrect.

c.
Only statement 2 is correct.

d.
Both statements are correct.

Feedback
The correct answer is: Only statement 2 is correct.

Question 29
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22. Daniela, an executive of Camila’s Sardines, earned in 2018
P1,200,000 compensation income, inclusive of 13th month pay and
other benefits amounting to P120,000. Aside from employment, she
owns a farm, with gross sales of P5M. Her cost of sales and operating
expenses amounted to P2,000,000 and P600,000, respectively, and with
non-operating income of P100,000. Which of the following is incorrect?

a.
All of the above.

b.
Aside from income tax computed using the graduated income tax rate, Daniela is liable to
prescribed business tax, which, under this case, is VAT gross sales/receipts and other non-
operating income exceeded the VAT threshold of P3M.

c.
Daniela’s income tax shall be computed using the graduated tax rate.

d.
Daniela has no option to avail the 8% income tax rate.

Feedback
The correct answer is: Aside from income tax computed using the graduated income tax rate,
Daniela is liable to prescribed business tax, which, under this case, is VAT gross sales/receipts
and other non-operating income exceeded the VAT threshold of P3M.

Question 30
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17. Income payments to certain contractors, whether individual or
corporate, such as general engineering contractors, general building
contractors, specialty contractors, and other contractors are subject to
creditable withholding tax rate of:

a.
2%

b.
5%

c.
10%

d.
Nil

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The correct answer is: 2%

Question 31
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31. Statement 1: Representation and transportation allowance given
regularly on a monthly basis is not taxable fringe benefits but taxable as
compensation income subject to basic income tax.

Statement 2: Expenses in connection with attending business meeting or

convention in the Philippines such as food and beverage, and
transportation are nontaxable benefits of an employee.
a.
Both statements are correct.

b.
Only statement 2 is correct.

c.
Only statement 1 is correct.

d.
Both statements are incorrect.

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The correct answer is: Both statements are correct.

Question 32
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39. Statement 1: Where the estate is under juridical administration, the
income of the estate shall be taxable to the fiduciary or trustee.

Statement 2: Where the estate is not under juridical administration, the

income of the estate shall be taxable to the heirs and beneficiaries.

a.
Only statement 1 is correct.
b.
Only statement 2 is correct.

c.
Both statements are incorrect.

d.
Both statements are correct.

Feedback
The correct answer is: Both statements are correct.

Question 33
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37.
In 2019, MON Corporation gave the following fringe benefits to its
employees:
Salaries to rank and file employees                                         P1,000,000
Salaries to managerial employees                                              1,800,000
De minimis benefits to rank and file employees                           54,400
De minimis benefits managerial employees                                  27,200
Fringe benefits to rank and file employees                                  102,000
Fringe benefits to managerial employees                                     170,000
How much is the total allowable deduction from business income for
MON Corporation?

a.
P3,217,938

b.
P3,245,138

c.
P3,271,600

d.
P3,153,600

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The correct answer is: P3,245,138

Question 34
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23. The income tax due of a mixed income earner who opted to be taxed
at 8% income tax rate shall be:

a.
Either “A” or “B” at the options of the self-employed and/or professional
b.
The sum of “A” and “B”

c.
The tax due from self-employment and/or practice of profession, resulting from the
multiplication of the 8% income tax rate with the total of the gross sales/receipts and other non-
operating income.

d.
The tax due from compensation computed using the graduated tax rate.

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The correct answer is: The sum of “A” and “B”

Question 35
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19. Statement 1: Taxable Income from self-employment (business and
profession) is reported on a quarterly and annual basis

 Statement 2: The quarterly income tax return shall be filed and tax paid
as follows: 1st Q – not later than April 15, 2nd Q – not later than August
15, 3rd Q – not later than September 15.

a.
Both statements are correct.
b.
Both statements are incorrect.

c.
Only statement 2 is correct.

d.
Only statement 1 is correct.

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The correct answer is: Only statement 1 is correct.

Question 36
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3. Emma is a newly registered non-VAT taxpayer engaged in
merchandising of cellphone accessories on February 1, 2018. In
September 2018, her cumulative gross sales/receipts reached
P3,500,000. Assume further that she availed the 8% income tax rate
upon her registration with the BIR on February 1, 2018 or upon filing of
her first quarterly income tax return. Which of the following statements
is correct?

a.
All of the above.

b.
She is liable to VAT beginning October 1, 2018.
c.
She is required to file percentage return covering the sales/receipts and other non-operating
income from February 1 to September 30, 2018 due on or before October 20, 2018, without
imposition of penalty if timely paid.

d.
Emma is required to register under the VAT system on or before October 31, 2018, one month
from the time she exceeded the P3,000,000 VAT threshold.

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The correct answer is: She is liable to VAT beginning October 1, 2018.

Question 37
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30. Statement 1: Expenses under the name of the employer which do not
partake the nature of personal expenses attributable to employees should
not be treated as taxable fringe benefits.

Statement 2: The expenses described above, if incurred by a managerial

employee, should neither be included in the computation of fringe
benefits tax nor in the determination of the individual taxpayer’s
returnable compensation income.

a.
Only statement 1 is correct.

b.
Both statements are incorrect.

c.
Only statement 2 is correct.

d.
Both statements are correct.

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The correct answer is: Both statements are correct.

Question 38
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14. Which of the following transaction is subject to 6% capital gains tax?

a.
Sale of apartment houses

b.
Sale of real property utilized for office use

c.
Sale of condominium units by a real estate dealer

d.
Sale of vacant lot by an employee

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The correct answer is: Sale of vacant lot by an employee

Question 39
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12. Which of the following sale transactions will be subject to capital
gains tax?

a.
Sale of shares of stock not through local stock exchange by a person who is not a dealer in
securities.

b.
Sale of shares of stock by a dealer in securities

c.
Sale of shares of stock during an Initial Public Offering

d.
Sale of shares of stock through local stock exchange by a person who is not a dealer in securities.

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The correct answer is: Sale of shares of stock not through local stock exchange by a person who
is not a dealer in securities.

Question 40
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45. On January 1, 2018, A established a trust fund for the benefit of his
son, C. A appointed B as the trustee. The property transferred to the trust
is a piece of land with a dormitory earning rental income. During the
year, the trust earned P40M revenues and incurred expenses of P10M.
Out of the trust’s income, B gave C P10M cash. In the same year, C
earned compensation income of P3M. The taxable income of the trust is?

a.
P29,980,000

b.
P19,980,000

c.
P20,000,000

d.
P30,000,000

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The correct answer is: P20,000,000

Question 41
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Question text
48. Which of the following is not treated as corporation?

a.
A joint or consortium for engaging in petroleum, coal, geothermal and other energy options

b.
General Professional Partnership

c.
A joint venture or consortium formed for the purpose of undertaking construction projects.

d.
All of the above.
Feedback
The correct answer is: All of the above.

Question 42
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15. Statement 1: Proceeds of sale of real property classified as capital
asset may be exempt from the 6% capital gains tax.

Statement 2: Gain from sale of real property classified as capital asset to

the Government may be taxed under Section 24(A) at the option of the
individual taxpayer.

a.
Both statements are incorrect.

b.
Only statement 2 is correct.
c.
Both statements are correct.

d.
Only statement 1 is correct.
Feedback
The correct answer is: Both statements are correct.

Question 43
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32. Statement 1: Monetized value of unused sick leave credits not
exceeding 10 days to private employees is a tax-exempt benefit.

Statement 2: Monetized value of unused sick leave credits not exceeding

10 days to government employees is a tax-exempt benefit.

a.
Only statement 2 is correct.

b.
Both statements are correct.

c.
Only statement 1 is correct.

d.
Both statements are incorrect.
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The correct answer is: Both statements are incorrect.

Question 44
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27. The amount of de minimis benefits conforming to the ceiling of de
minimis benefits shall be:
I. Exempt from income tax, regardless of the rank of the employee.
II. Not be considered in determining the ceiling of other benefits
excluded from the gross income under the Code, as amended.

a.
II only

b.
Neither I nor II

c.
I only

d.
Both I and II
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The correct answer is: Both I and II

Question 45
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36. In 2019, MON Corporation gave the following fringe benefits to its
employees:

Salaries to rank and file employees                                          P1,000,000

Salaries to managerial employees                                               1,800,000
De minimis benefits to rank and file employees                           54,400
De minimis benefits managerial employees                                   27,200
Fringe benefits to rank and file employees                                   102,000
Fringe benefits to managerial employees                                     170,000

How much is the fringe benefit tax?

a.
P166,400

b.
P80,000

c.
P91,538

d.
P48,000
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The correct answer is: P91,538

Question 46
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38. It composed of all property, rights and obligations of a deceased
person which are not extinguished by his death, including those which
have accrued thereto since the opening of succession.

a.
Devisee
b.
Testator

c.
Estate

d.
Legatee
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The correct answer is: Estate

Question 47
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25. Diego, a resident of Isabela Province, had the following data for the
taxable year 2018: (Use $1-P40 for exchange rates)
  Philippines Abroad
Salaries P165,000 $    2,000
Business Income 450,000 6,000
Business Expenses 120,000 1,500
Interest Income:    
    Personal Receivables 10,000  
    FCDU $   2,500  
    Bank Deposits (20% long-term) 25,000 3,000
Royalty Income (20% from books) 22,000 1,000
Prize won in contest 10,000  
Winnings from Philippine Charity Sweepstakes 80,000  
Sale of shares of stocks of a domestic corp.    
    Directly to a buyer (cost P10,000) 30,000  
 
Additional information:
  Diego received the following dividend income during the taxable
year:
 P70,000 from a domestic corporation. 30% of its income is
attributed to its operations abroad.
 P60,000 from a resident foreign corporation. The ratio of its gross
income in the Philippines over worldwide income for the past three
years is only 40%.
 P80,000 from a nonresident foreign corporation. The ratio of its
gross income in the Philippines over worldwide income for the past
three years is 10%.

 
Diego is married with the following dependents:

 Ana, 23, disabled

 Marie, turned 21 on January 1, 2015
 Chris, 28. Recently retrenched by his employer.
 Pao, college student living in Manila. 

He also sold a condominium unit in Manila (residential) for P2M

although the FMV is P3M but with a zonal value of P4M

The taxable income of Diego is:

a.
P1,075,000

b.
P950,000

c.
P858,000

d.
P825,000
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The correct answer is: P1,075,000

Question 48
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11. If the amount of PCSO/Philippine lotto winnings received by a
resident citizen in 2018 did not exceed P10,000, what type of income tax
will apply?

a.
Capital gains tax

b.
Final withholding tax on passive income

c.
Fringe benefit tax

d.
Basic income tax
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The correct answer is: Final withholding tax on passive income

Question 49
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34. Which of the following may be subject to fringe benefit tax?

a.
Both B and C

b.
Benefits of managerial employees

c.
Benefits of rank and file employees

d.
Compensation income of managerial employees
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The correct answer is: Benefits of managerial employees

Question 50
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16. Cody sold a residential house and lot held for P10M to his friend. Its
FMV when he inherited it from his father was P12M although its present
FMV is P15M. The tax on the above transaction is:

a.
P900,000 capital gains tax

b.
P720,000 capital gains tax

c.
30% donor’s tax

d.
Value added tax
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The correct answer is: P900,000 capital gains tax