Bayag 1

Prelim Quiz No.
I. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is the
best answer.
1. Johnny English, an American tourist, went to the Philippines on September 1, 2020 and stayed for 9 months.
What is his classification for the year 2020?
a. Non-resident citizen
b. Resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
2. i. The point on which a tax is originally imposed is impact of taxation.

ii. Police power is superior to the non-impairment clause of the constitution.
iii. As a rule, provisions on the validity of tax exemptions are resolved liberally in favor of the taxpayer.
iv. As a rule, taxes are subject to set-off compensation.
a. True, False, False, False

b. True, True, False, True
c. True, True, False, False
d. False, True, False, False
3. In case of doubt, tax exemptions are construed

a. Liberally in favor of the government and strictly against the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and in favor of the taxpayer
d. Strictly against the government and the taxpayer
4. Our tax laws are both

a. Civil and progressive
b. Progressive and prospective
c. Penal and regulatory
d. Personal and regulatory
5. Which is not a power of the BIR Commissioner?

a. Terminate taxable period
b. Promulgate rules and regulations
c. Make arrests and seizures
d. Prescribe real property values
6. i. Equal protection of the law is the right of every taxpayer to be heard.

ii. Equality is the same as progressive taxation.
a. True, True
b. True, False
c. False, True
d. False, False
7. A non-resident Chinese citizen in the Philippines is assigned as consular head of the Chinese Embassy in the
Philippines. As consul, he generates several passive income from interest on bank deposit, royalties from
intellectual creation and dividends from several multinational corporation. BIR assessed him of deficiency
income tax. As his accountant, what would you advise him?
a. BIR is erroneous because of territorial jurisdiction
b. BIR is erroneous because of international comity
c. BIR is correct but with application of reciprocity provision
d. BIR is correct but with application of tax sparing rule
8. The following are the duties of the Commissioner of Internal Revenue, except:
a. Power to interpret tax law and decide tax cases
b. Power to obtain information, summons, examine and take testimony
c. Power to delegate power to any subordinate officials
d. Power to make assessments, prescribe additional requirements for tax administration and enforcement
9. Which is not an essential characteristic of a tax?

a. It is unlimited as to amount
b. It is payable in money
c. It is proportionate in character
d. It is an enforced contribution
10. It is a privilege of not being imposed a financial obligation to which other are subject
a. Tax exemption
b. Tax incentive
c. Tax amnesty
d. Tax credit
11. The principal purpose of taxation is

a. To encourage growth of home industries through the proper use of tax exemptions and tax incentives
b. To implement the police power of the state
c. To raise revenue for governmental needs
d. To reduce excessive inequalities of wealth
12. Taxation as distinguished form police power and power of eminent domain
a. Property is taken to promote general welfare
b. There is generally no limit as to the amount that may be imposed
c. Maybe exercised only by the government
d. Operates upon the whole citizenry
13. The aspects of taxation are

a. Legislative in character
b. Executive in character
c. Shared by legislative and executive departments
d. None of the above
14. This is a constitutional limitation on the power of taxation

a. Tax laws must be applied within the territorial jurisdiction of the state
b. Exemption of government agencies and instrumentalities from taxation
c. Power to tax cannot be delegated to private persons or entities
d. No appropriation of public money for religious purposes
15. Synonymous to tax evasion

a. Tax dodging
b. Tax minimization
c. Tax exemption
d. Tax shield
16. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS)
a. Tax Code shall prevail over PAS
b. PAS shall prevail over the Tax Code
c. The taxpayer may choose either of the above
d. Both shall be disregarded
17. As to scope of the legislative power to tax, which is not correct?

a. Where there are not constitutional restrictions, and provided the subjects are within the territorial
jurisdiction of the state, the Congress has unlimited discretion as to the persons, property, or occupation to
be taxed.
b. In the absence of any constitutional prohibitions, the House of Representative has the right to levy a tax of
any amount it sees fit.
c. The discretion of Congress in imposing taxes extends to the mode, method or kind of tax, if not restricted by
the constitution.
d. The sole arbiter of the purpose for which taxes shall be levied is the Commissioner of Internal Revenue (CIR),
provided the purpose is public. However, the courts may review the levy of the tax to determine whether or
not the purpose is public.
18. Which of the following is not a constitutional limitation on the power of taxation?
a. No person shall be deprived of life, liberty, or property without due process of law.
b. No person shall be denied the equal protection of the law.
c. No person shall be imprisoned for debt or non-payment of tax.
d. No law granting any tax exemption shall be passed without the concurrence of a majority of all the members
of the Congress.
19. The Department of Finance thru its officers entered into a contract with foreign investors, granting them
exemption from all forms of taxes to encourage investments in the Philippines. The contract is
a. Void, unless the President ratifies
b. Void, because the power to grant tax exemption is vested in Congress
c. Valid, if the President has authorized the officers to enter into such contract
d. Valid, because the purpose is to promote public welfare
20. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power to
activate and operate it, resulting in its destruction?
a. Lifeblood theory
b. Sumptuary theory
c. Power to destroy theory
d. Benefits protection theory
II. Enumeration.
Discuss the inherent limitations of taxation power (5pts.)
Three inherent powers of the state and define each (6pts.)
Basic principles of a sound tax system and define each (6pts.)
Requisites of taxability of income (3pts.)
A. Territoriality or double taxation
International comity
Public purpose
Exemption of government
Non-delegation of taxation
B.
Power to tax
Police power
Power of eminent domain
-enforce proportional contribution from its subjects to sustain
itself
-enact laws to protect the health, general welfare, safety and morals of the
public
-take private property for a public purpose after paying just compensation
C.
Fiscal adequacy
sufficient to meet the demands of public expenditures
Equality or theoretical justice
proportionate to the taxpayer’s ability to
pay
Administrative feasibility
convenient, just, and effective
administration
D.
gain or profit
realized or received
not excluded by law or treaty
III. Classification. Classify the individual taxpayer by indicating the appropriate letter.
a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien engaged in trade or business
e. Non-resident alien not engaged in trade or businesS
DNRA-ETB 1. Eric C., an American, stayed in the Philippines as manager of a Philippine airline from January to
October.
D. NRA-ETB 2. Angelina J., an America, stayed in the Philippines for more than one hundred eighty days
E. NRA-NETB 3. Via A., a British, stayed in the Philippines from September to December for vacation
A. RC 4. Cindy R., a Filipino singer, visited Korea for one month for her family’s reunion
B. NRC 5. Anna G., a Filipino overseas contract worker, on vacation in the Philippines for 2 months
B. NRC 6. Bianca T., a citizen, stayed in Hong Kong for 10 months
C. RA 7. Henry S., a Chinese, stayed in the Philippines for more than a year
A. RC 8. Ken V., a Filipino, stayed in London for three months
B. NRC 9. Miguel W., a citizen, maintained his residence in Canada
B. NRC 10. Joy M., a citizen, departed from the Philippines to work as a nurse in the U.S.
Prelim Quiz No. 2
I. Problem-solving. Round-off your final answers to two decimal places.

1. Mr. A received a dividend income of Php 200,000 in 2020 from a corporation. The gross income of the
corporation from within and without the Philippines for the three preceding years are as follows:
Source of income 2017 2018 2019
Within the Philippines 15,500,000 17,500,000 21,000,000
Without the Philippines 15,000,000 16,000,000 18,000,000
How much of the dividend income received by Mr. A is considered income from sources within the Philippines if:
200 000 a. Mr. A is a non-resident alien engaged in trade or business and the corporation is a domestic corporation
0 b. Mr. A is a non-resident citizen and the corporation is a non-resident foreign corporation
104 854.37 c. Mr. A is resident citizen and the corporation is a resident foreign corporation
0 d. Mr. A is a resident alien and the corporation is a non-resident foreign corporation
2. Mr. B has the following income for 2020:

 Php 20,000 interest income from a non-resident Taiwanese friend
 Php 40,000 interest income from Philippine residents
 Php 500,000 rent income from an apartment located in Canada, which is leased to resident Filipinos
 Php 300,000 rent income from a boarding house in Makati City
 Php 400,000 salary from a resident foreign corporation
 Php 100,000 professional fees rendered to Filipino citizens in Hong Kong
 Php 50,000 gain on sale of merchandise purchased in Korea and sold in the Philippines
 Php 250,000 gain on sale of a house and lot located in Nueva Ecija to a non-resident Chinese
Compute the total income earned from sources:

620 000 a. Within the Philippines
1 040 000 b. Outside the Philippines
3. In 2020, Mr. C sold a piece of land which had a cost of Php 2,000,00 for a selling price of Php 4,000,000. The sale
called for an assumption by the buyer of a mortgage on the land of Php 2,500,000, cash of Php 500,000 on the
date of sale and installment payments of Php 200,000 every year thereafter. The land is an ordinary asset.
2 000 000 a. How much is the contract price?
1 000 000 b. How much is the income to be reported in 2020 under the installment method?
4. Identify the tax due on the following passive income:

32 000 a. Royalties from an invention by a resident alien, Php 160,000
Exempt b. Interest from an investment management account with Metrobank with a 6-year term of a non-
resident alien engaged in research consultancy in the Philippines, Php 100,000
Exempt c. PCSO winnings of a resident alien, Php 10,000
40 000 d. Royalties as musical composer received by a non-resident citizen, Php 360,000
10 000 e. Bingo winnings at SM Manila of a non-resident citizen, Php 50,000
6 000 f. Prize in a singing contest, Php 30,000
200 000 g. Share of a resident citizen, a partner in computer system design business in the Philippines, Php
2,000,000
5 000 h. Cash dividend from San Miguel Corporation, a domestic corporation, received by a non-resident alien
engaged in business in the Philippines, Php 20,000
Exempt i. Interest from BDO bank deposit under the expanded foreign currency deposit system of non-resident
citizen, Php 300,000
10 000 j. Interest from BPI savings deposit received by a resident citizen, Php 40,000
5. Mr. D has the following income and expenses for the year 2020:
 Gross income, Philippines, Php 3,000,000
 Gross income, USA, Php 2,000,000
 Business expense, Philippines, Php 500,000
 Business expense, USA, Php 300,000
 Interest income, peso bank deposit BDO-Manila, Php 20,000
 Interest income, US dollar deposit BPI-Manila, Php 50,000
 Lotto winnings, Php 5,000,000
Compute the final income tax on passive income assuming Mr. D is a:

1 011 500 a.Resident citizen
1 004 000 b.Non-resident citizen
1 011 500 c.Resident alien
4 000 d.NRA-ETB
2 005 000 e.NRA-NETB
II. Multiple choice.

1. Congress passed a sin tax law that increased the tax rates on cigarettes by 1000%. The law was thought to be
sufficient to drive many cigarette companies out of business and was questioned by court by a cigarette
company that would go out of business because it would not be able to pay the increased tax. The cigarette
company is:
a. Correct because no government can deprive a person of his livelihood
b. Correct because Congress, in this case, exceeded its power to tax
c. Wrong because taxes are the lifeblood of the government
d. Wrong because the law recognizes that the power to tax is the power to destroy
2. The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence,
even if not mentioned in the Constitution, the state can still exercise the power.
It is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls to
Congress as part of the general power of lawmaking.
a. True, True
b. True, False
c. False, False
d. False, True
Income Taxation 1a
Preliminary Examination
I. Problem solving. Round off final answers to two decimal places.
1. Taxpayer A has the following data for the year 2020:

Dividend from San Miguel Corp. Php 1,000,00
Dividend from Ford USA 120,000
Dividend from cooperative 90,000
Royalties from books, Philippines 50,000
Royalties from others, Philippines, net of tax 80,000
Royalties from literary works, USA 150,000
Interest income from:
- 6-month time deposit 8,000
- 2-year time deposit 12,000
- 5-year time deposit 40,000
- Foreign currency deposit (in US Dollars) 55,000
Prize, contest in Manila 250,000
Prize, contest in Nueva Ecija 8,000
PCSO winnings 2,000,000
Other winnings, Philippines 100,000
Other winnings, USA 75,000
Prize, Cebu 10,000
Prize, USA 11,000
Prize, Batangas 15,000
Exchange rate for 1USD is Php 50.00
a. If Taxpayer A is a resident citizen, what would be the total amount of:

6,285,000.00 i. Gross income subject to final tax
374,000.00 ii.Gross income subject to regular income tax
1,014,500.00 iii.Final tax
b. If Taxpayer A is a non-resident alien engaged in trade or business, what would be the total amount of:
1,535,000.00 i.Gross income subject to final tax
18 000 ii.Gross income subject to regular income tax
302 000 iii.Final tax
c. If Taxpayer A is a domestic corporation, what would be the total amount of:

2 960 000 i.Gross income subject to final tax
2 739 000 ii.Gross income subject to regular income tax
454 500 iii.Final tax
2. Mr. B is a Filipino in the abroad. He stayed in New York and came back in the Philippines for good. Knowing the
opportunities in the Philippines, he decided to spread his wealth. Mr. B invested his money on corporations, one
of these is the ABC Corporation which is incorporated under the Philippine laws, the other corporation is the DEF
Corporation, a resident corporation not incorporated under the Philippine laws. He received the following
income from these corporations as follows:
Corporation Ownership Dividend received
ABC 20% Php 2,500,000
DEF 30% 3,000,000
Mr. B also deposited Php 10,000,000 of his money to GHI Bank, earning 8.5% with the term six years. He also
placed his money amounting to 15,000,000 euros in a foreign currency denominated deposit under JKL Bank and
earning 450,000 euros. The exchange rate is Php0.95=1euro. Today, after 3 years, he pre-terminated his deposit
on GHI Bank.
One time, Mr. B went to the mall and bought some groceries and got ten raffle entries to win Php 500,000 each.
Luckily, Mr. B won all the winnings from his raffle entries. He also joined in two competitions and received Php
15,000 and Php 9,999. While on his way home, he saw some documents of XYZ Corp. and found out that the
corporation is evading from paying its tax to the government. Mr. B then proceeds to the BIR. The BIR assessed
XYZ Corp. and ordered to pay its tax amounting to Php 900,000. Mr. B received a reward from the BIR since he
qualified for all the requirements of the BIR as tax informer.
Compute for the following:

a. Total final tax on interest income of Mr. B 370,125.00
b. Total final tax on dividend income 277,777.78
c. Proceeds from the pre-terminated deposit in GHI Bank 10,544,000.00
d. Proceeds from tax informer’s reward from the BIR 81,000.00
e. Total final tax of Mr. B 1,663,152.53
f. Total income subject to regular income tax 3,000,000.00
3. Taxpayer C presented the following data regarding the items of income he earned during the taxable year 2020:
Gross rental income
- From an apartment unit in USA Php 240,000
- From a parcel of land in BGC 180,000
Royalties from book
- Published in the Philippines 30,000
- Published in USA 20,000
Interest income earned on notes receivable
- From a debtor who resides in London 15,000
- From a debtor who resides in Manila 25,000
Net profit from sales, merchandising business
- From Philippine outlet 300,000
- From USA outlet 200,000
Dividend income from domestic corporations. The gross income from the
Philippines in the past 3 years
- 60% of its world income 60,000
Dividend income from resident foreign corporations. The gross income from
the Philippines for the past 3 years
Prizes received from Supermarket raffle
- From the Philippines
a. ABC Supermarket 8,000
b. DEF Supermarket 12,000
- From USA
a. GHI Supermarket 6,000
b. JKL Supermarket 14,000
Winnings from lotto
- Philippine lotto 200,000
- USA lotto 100,000
Compute the following:

a. Total income from sources inside the Philippines 907,000.00
b. Total income from sources outside the Philippines 643,000.00
c. Assume that Taxpayer C is a resident citizen, what is the gross taxable income subject to regular income tax
1,168,000.00
d. Assume that Taxpayer C is a resident alien, what is the total final income tax 60,000.00
e. Assume that Taxpayer C is a non-resident citizen, what is the gross taxable income subject to regular income
tax 525,000.00
II. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is the
best answer.
1. Tips or gratuities paid directly to an employee by a customer of the employer which are not accounted for by
the employee to the employer are
Statement 1 – considered as passive income
Statement 2 – subject to creditable withholding tax
a. Both statements are true

b. Both statements are false
c. Only the first statement is true
d. Only the second statement is true
2. The following, except one are the basic principles of a sound tax system. The exception is:
a. It should be capable of being effectively enforced.
b. It should consider the taxpayer’s ability to pay.
c. It is levied by the lawmaking body of the state.
d. The sources of revenue must be sufficient to meet the government expenditures and other public needs.
3. As to scope of legislature power to tax, which of the following is correct?

a. The power to tax is supreme, plenary, comprehensive and without any limit because the existence of the
government is a necessity.
b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the
constitution provides otherwise.
c. Congress has the right to levy a tax of any kind at any amount it sees fit, even in the absence of any
constitutional provision.
d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided that the purpose is
public and the courts may not review the levy of the tax to determine whether or not the purpose is public.
4. Congress passed a sin tax law that increased the tax rates on cigarettes by 1000%. The laws was thought to be
sufficient to drive many cigarette companies out of business and was questioned in court by a cigarette company
that would go out of business because it would not be able to pay the increased tax. The cigarette company is
a. Wrong because the law recognizes that the power to tax is the power to destroy.
b. Wrong because taxes are the lifeblood of the government.
c. Correct because no government can deprive a person of his livelihood.
d. Correct because Congress, in this case, exceeded its power to tax.
5. ABC Corporation manufactures glass panels and is almost at the point of insolvency. It has no more cash and all
it has are unsold glass panels. It received an assessment from the BIR for deficiency income taxes. ABC wants to
pay but due to lack of cash, it seeks permission to pay in kind with glass panels. Should the BIR grant the
requested permission?
a. It should grant permission to make payment convenient to taxpayers.
b. It should grant permission, otherwise, ABC would not be able to pay.
c. It should not grant permission because a tax is generally a pecuniary burden.
d. It should not grant permission because the government does not have the storage facilities for glass panels.
6. Joy sued Patrick for breach of promise to marry. Patrick lost the case and duly paid the court’s award that
included among others, Php 100,000 as moral damages for the mental anguish Joy suffered. Did Joy earn a
taxable income?
a. She had a taxable income of Php 100,000 since income is income from whatever source.
b. She had no taxable income because it was a donation.
c. She had a taxable income since she made a profit.
d. She had no taxable income since moral damages are compensatory.
7. Which of the following statements is incorrect?

a. The power of taxation may be exercised by the government, its political subdivisions and public utilities.
b. The money contributed as tax becomes part of the public funds.
c. The power of the State to tax is subject to constitutional limitations.
d. Generally, there is no limit on the amount of tax that may be imposed.
8. For income tax purposes, the source of the service income is important for the taxpayer, who is a
a. Filipino citizen residing in Makati City
b. Non-resident Filipino citizen working and residing in London
c. Filipino citizen who is married to a Japanese citizen and residing in BGC, Taguig City
d. Domestic corporation
9. Which of the following is correct?

a. The power of taxation must first be expressly granted, either by law or by the constitution for the State to
validly exercise it.
b. The power of taxation and police power may be exercised simultaneously.
c. The Philippine government may subject the land where embassies of foreign governments are located to
real estate taxes.
d. Government owned and controlled corporations are exempted from taxes because it would be impractical
for the government to be taxing itself.
10. Statement 1 – All prizes and awards granted to athletes in local and international sports competitions and
tournaments whether held in the Philippines or abroad and sanctioned by their national sports associations are
exclusions from gross income.
Statement 2 – Income derived by the government from the exercise of any essential governmental function
accruing to the Government of the Philippines or to any political subdivisions thereof are exclusions from gross
income.
a. Both statements are correct.

b. Both statements are not correct.
c. Only Statement 1 is correct.
d. Only Statement 2 is correct.
11. A test applied in the realization of income and expenses by an accrual basis taxpayer.
a. All events test
b. Immediacy test
c. Rational basis test
d. Pre-dominance test
12. The payor of passive income subject to final tax is required to withhold the tax from the payment due the
recipient. The withholding of the tax has the effect of
a. A credit from the recipient’s income tax liability.
b. Consummating the transaction resulting in an income.
c. A deduction in the recipient’s income tax return.
d. A final settlement of the tax liability on the income.
13. John, a Filipino citizen, migrated to the United States seven years ago and got a permanent resident status or
green card. He should pay his Philippine income taxes on
a. The gains derived from the sale in California, USA of jewelry he purchased in the Philippines.
b. The proceeds he received from a Philippine insurance company as the sole beneficiary of life insurance
taken by his father who died recently.
c. The gains derived from the sale in the New York Stock Exchange of shares in stock in PLDT, a Philippine
corporation.
d. Dividends received from a two-year old foreign corporation.
14. Jane, a Canadian citizen permanently residing in the Philippines, received several items during the taxable year.
Which among the following is not subject to Philippine income tax?
a. Interests from her deposits in a local bank of foreign currency earned abroad converted to Philippine pesos.
b. Consultancy fees received for designing a computer program and installing the same in the Shanghai facility
of a Chinese firm.
c. Dividends received from an American corporation which derived 60% of its annual gross receipts from
Philippine sources for the past 5 years.
d. Gains derived from the sale of her condominium unit located in BGC, Taguig City to another resident alien.
15. Pierre, a French citizen, arrived in the Philippines on January 1, 2019 and continued to live and engage in
business in the Philippines. He went on a tour of Southeast Asia from August 1 to November 5, 2019. He
returned to the Philippines on November 6, 2019 and stayed until April 15, 2020. For the year 2019, Pierre’s
taxable status is that of
a. A resident alien engaged in trade or business
b. A resident alien not engaged in trade or business
c. A non-resident alien engaged in trade or business
d. A non-resident alien not engaged in trade or business
16. There is no taxable income until such income is recognized. Taxable income is recognized when
a. Taxpayer fails to include the income in his income tax return.
b. Income has been actually received in money or its equivalent.
c. Transaction that is the source of the income is consummated.
d. Income has been received, either actually or constructively.
17. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In this
sense, double taxation
a. Violates the right to equal protection
b. Does not violate the right to equal protection
c. Violates substantive due process
d. Does not violate substantive due process
18. The power to tax is the power to destroy. Is this always so?
a. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property rights of a
taxpayer.
b. Yes. Tax laws should always be enforced because without taxes, the very existence of the State is
endangered.
c. No. The Supreme Court may nullify a tax law hence, property rights are not affected.
d. No. The executive branch may decide not to enforce a tax law which it believes to be confiscatory.
19. Although the power of taxation is basically legislative in character, it is not the function of Congress to
a. Fix with certainty the amount of taxes.
b. Collect the tax levied under the law.
c. Identify who should collect the tax.
d. Determine who should be subject to the tax.
20. This is an inherent limitation on the power of taxation.

a. The rule on taxation shall be uniform and equitable.
b. No law impairing the obligations of contracts shall be enacted.
c. Charitable institutions, churches, personages or convents appurtenant thereto, mosque and non-profit
cemeteries and all kinds of lands, buildings, and improvements actually, directly, and exclusively used for
religious or charitable purposes shall be exempt from taxation.
d. The tax laws cannot apply to the property of foreign governments.
Midterm Activity No. 1

1. A resident citizen had the following data for the years 2018 and 2019:
2018 2019
Net income before dealings Php 60,000 Php 142,000
Gain from sale of capital asset:
- Held for 12 months 5,000 57,000
- Held for 13 months 20,000 28,000
Loss from sale of capital asset:
- Held for 19 months 60,000 -
- Held for 7 months 120,000 5,000
a. Compute the taxable income of the taxpayer for the year 2018. 60,000.00
b. Compute the taxable income of the taxpayer for the year 2019. 148,000.00
2. ABC Inc. exchanged the shares of DEF Inc. it acquired for Php 1,000,000 for a lot valued at Php 1,400,000.
Compute the capital gains tax. 60,000.00
3. A sold his domestic bonds directly to buyer at a gain of Php 400,000. Compute the capital gains tax. 0- RIT
4. ABC In. acquired the DEF stock rights for Php 200,000. ABC subsequently disposed these rights for Php 400,000.
5. A sold his domestic stocks through the PSE at a gain of Php 400,000. Compute the capital gains tax. -STT
6. A, a security dealer, sold his domestic stocks directly to a buyer at a gain of Php 300,000. Compute the capital
gains tax. RIT
7. A sold one of his house and lot in Japan at a gain of Php 2,000,000. This property has an appraised value of Php
5,000,00 and were acquired at Php 3,000,000. Compute the capital gains tax. -
8. A wishes to expand business. He sold his warehouse consisting of a lot and a building for Php 5,000,000. The lot
and building has assessed value of Php 4,000,000 and zonal value of Php 4,500,000. Compute the capital gains
tax. RIT
9. A, a dealer of personal property, sold a vacant lot in Cabanatuan City at a gain of Php 400,000. The lot cost him
Php 600,000 and has an assessed value and zonal value of Php 800,000 and Php 1,200,000, respectively.
10. A sold his old residence for Php 4,000,000 to finance his business. His old residence has an appraisal value of Php
5,000,000; assessed value of Php 3,000,000 and zonal value of Php 4,500,000. Compute the capital gains tax.
270,000.00
11. A sold his principal residence for Php 2,500,000. He immediately repurchased a new residential lot for Php
2,000,000. Information for the property disposed of is as follows:
Zonal value Php 3,000,000
Assessed value 2,500,000
Appraisal value 3,500,000
Cost 2,000,000
12. A sold one of his residential property for Php 4,000,000. He immediately repurchased a new residence for Php
4,200,000. Information for the property disposed of is as follows:
Cost 2,000,000
13. A’s house and lot was foreclosed after his failure to pay the Php 2,000,000 mortgage on the property. The bank
paid him Php 500,000 for after the auction sale. Information for the property disposed of is as follows:
Cost 2,000,000
14. A sold his house and lot with fair value of Php 3,500,000 for Php 3,000,000 on July 1, 2020. The house and lot,
which was subject to Php 2,000,000 mortgage was acquired for Php 1,500,000 in 2019. The buyer assumed the
mortgage on the property and signed a note payable for the balance payable in 5 semi-annual installments.
a. Compute the initial payment. 700,000.00

b. Compute the contract price. 1,500,000.00
c. Compute the capital gains tax in 2021. 56,000.00
15. A sold his residential house under the following terms:

Cash received, January 10, 2019 Php 100,000
Amount received, June 10, 2019 100,000
Installment due, June 10, 2020 600,000
Additional information:
Cost of the land Php 150,000
Mortgage assumed by the buyer 200,000
Mortgage on the land executed by the buyer in 600,000
favor of the seller to guarantee payment
a. Compute the selling price. 1,000,000.00

b. Compute the contract price. 850,000.00
c. Compute the initial payment. 250,000.00
Midterm Activity No. 2
1. A, resident citizen, single had the following during the year 2018:
Gross compensation income Php 480,000
Deductions from compensation income:
- SSS contributions 3,600
- Pag-ibig contributions 1,200
- PhilHealth contributions 1,800
- Union dues 2,400
Other income:
- Prizes and awards received as best athlete in the Palarong Pambansa 10,000
- Prizes and awards received for the silver medal in the South East 25,000
Asian games
- Prize won in a Supermarket raffle 10,000
- Prize won as a Luck Home Viewer 20,000
- 13th month pay 95,000
- Interest on bank deposit (net of 20% withholding tax) 16,000
- Interest on foreign currency deposit (net of 15% withholding tax) 10,000
Determine the taxable income. 486,000.00
2. Mr. B was injured in a vehicular accident in 2020. He incurred and paid medical expense of Php 20,000 and legal
fees of Php 10,000 during the year. In 2021, he received Php 170,000 as settlement from the insurance company
which insured the car owned by the other party involved in the accident. From the above payments and
transactions, the amount of taxable income of Mr. B in 2021 is? -
3. Mr. C was hit by a wayward bus while on his way home. He survived but had to pay Php 150,000 for his
hospitalization. He was unable to work for 6 months and did not received his usual Php 10,000 monthly salary.
He sued the bus company and was awarded by a final judgement a sum of Php 460,000: Php 150,000 as
reimbursement for his hospitalization, Php 60,000 for his lost salaries, and Php 250,00 as moral damages for his
pain and suffering. How much income did he realized when he collected from the judgement? 60 000
4. Mr. X bought a 2,000 square meter of and at a cost of Php 500,000. He leased the land to Mr. Z at an annual
rental of Php 40,000. The term of the contract lease was 15 years. The contract of lease provides that Mr. Z will
construct a building on the land, which will belong to the lessor at the end of the term of the lease of at the
termination of the lease. The building was constructed for a total cost of Php 400,000 and has an estimated
useful life of 20 years which was the basis of a straight-line method of depreciation. The remaining term of the
lease when the building was completed was 14 years.
a. Compute the income from the leasehold improvement using the outright method. 120 000
b. Compute the yearly income assuming Mr. X will spread his income from leasehold over the term of the lease
contract. 48 571. 43
c. Compute the income of Mr. X assuming the contract of lease was terminated just after the 10 th year due to
the fault of the lessee. 182 857.14
d. Compute the deductible loss of Mr. X assuming the leasehold improvement was destroyed at the beginning
of the 9th year of the lease contract. 60 000
5. The following were received by a resident citizen employee, married and with four dependent children for the
year 2018: salary (net of Php 60,000 withholding tax, Php 6,000 SSS contribution, Php 5,000 PhilHealth, Php
4,000 union dues), Php 600,000; 13 th month pay, Php 50,000; 14 th month pay, Php 50,000. How much is the
taxable income? 670,000.00
6. In 2018, A acquired pieces of jewelry as a birthday gift from her father with a FMV of Php 500,000. Her father
acquired the property in 1990 for Php 200,000. If A sells these pieces of jewelry in 2019 for Php 550,000. A’s
gross profit is? 350,000.00
7. A farmer had the following data for the year:

Sales of livestock and farm products raised Php 270,000
Sales of livestock and farm products purchased 160,000
Cost of raising livestock and farm products 190,000
Cost of livestock and farm products purchased and sold 140,000
Rental income of farm equipment 105,000
Inventory of livestock and farm products, January 1 110,000
Inventory of livestock and farm products, December 31 113,000
Determine the income using the cash method of accounting. 205,000.00
SUMMER MIDTERM QUIZ 1

IV. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is the
best answer.
1. Tax as distinguished from license fee

a. Non-payment does not necessary render the business illegal.
b. A regulatory measure.
c. Imposed in the exercise of police power.
d. Limited to cover cost of regulation.
2. Value-added tax is an example of

a. Graduated tax
b. Progressive tax
c. Regressive tax
d. Proportional tax
3. Which statement refers to police power as distinguished from taxation?

a. It can only be imposed on specific property or properties.
b. The amount imposed depends on whether the activity is useful or not.
c. It involves the taking of property by the government.
d. The amount imposed has no limit.
4. I – Tax exemptions are strictly construed against the government.

II – When the tax law is not clear and there is doubt whether he is taxable or not, the doubt shall be settled
against the government.
a. Only the first statement is correct.

b. Only the second statement is correct.
c. Both statements are correct.
d. Both statements are incorrect.
5. I – Tax imposed outside the situs of taxation is void.

II – International comity is an exception to the territoriality doctrine.

6. Imposed based on the control and superiority of one country over another
a. Tithe
b. Tax
c. Tribute
d. Toll
7. Taxes are
a. Retroactive
b. Prospective
c. Generally proportional
d. Personal to the taxpayer
8. I – Courts can review or inquire into the wisdom or advisability of a tax law.
II – Our constitution does not contain any provision granting tax exemption to the government.
a. True, true
b. False, false
c. False, true
d. True, false
9. I – To be exempt from taxation under the Constitution, land and buildings must be exclusively and actually used
for religious, educational, or charitable purposes, even if not directly.
II – Exemptions of non-profit schools are only limited to revenue and assets derived from strictly school
operations.
a. True, true
b. False, false
c. False, true
d. True, false
10. I – A taxpayer’s tax-exempt status justifies the non-keeping of books of accounts and other accounting records.
II – The salaries of the Chief Justice and associate justice of the Supreme Court are tax-exempt.
a. True, true
b. False, false
c. False, true
d. True, false
11. The National Internal Revenue Code is also known as – TRAIN law is RA 10963
a. Republic Act 9337
b. Republic Act 8424
c. Presidential Decree 1158
d. Executive Order 464
12. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential or executive act
d. Local legislation
13. How will the local government units be able to exercise their taxing powers?
a. By local legislation
b. By authority conferred by the Congress
c. By the issuance of the Department of Finance
d. By the help of the Bureau of Internal Revenue
14. A tax is invalid, except

a. Theory of taxation and its purpose are disregarded.
b. Basis of taxation is not recognized.
c. Inherent and constitutional limitations are not observed.
d. It results to double taxation.
15. Taxation is an inherent power because

a. It is the lifeblood of the government.
b. Protection and benefit theory.
c. It co-exists with the existence of the state.
d. It is exercised for the general welfare of the people.
16. All are essential characteristics of a tax, except

a. It is an enforced contribution.
b. It is generally unlimited in amount.
c. It is generally payable in money.
d. It is a proportionate burden.
17. I – A tax may include the power to destroy. – Marshall doctrine
II – A tax may be imposed violating uniformity of taxation.

18. I – A tax may be subjected to set-off or compensation.

II – A tax ordinarily includes interest.

19. I – A tax bill may embrace more than one subject.

II – Non-payment of a tax can result to criminal liability on the part of the taxpayer, not only civil liability.

20. I – Taxes may be used for sectarian purposes if allowed by an ordinance.

II – The President can refuse to implement a tax law if it appears to be unconstitutional.

21. I – There can be double taxation in the Philippines.

II – Double taxation is illegal if it violates the uniformity of taxation.

22. I – Taxation without representation is not tyranny.

II – In the exercise of taxation, the state can tax anything at anytime at any amount.

23. I – Taxation power and power of eminent domain may be exercised simultaneously.
II – Taxation and police power may be exercised simultaneously.

24. I – A license fee is a charge imposed under the police power of the state.
II – Penalty is imposed by the state only.

25. I – One of the essential characteristics of a tax is it is unlimited in amount.
II – A tax is generally unlimited because it is based on the needs of the state.

26. I – A person may refuse to pay a tax on the ground that he receives no benefit from it.
II – A taxpayer has a right to question illegal expenditures of public funds.

27. I – The RDO is known as the alter ego of the BIR Commissioner.
II – The BIR Commissioner is directly under the President’s Office. – Department of Finance

28. I – A state has the power to tax even if not granted by the Constitution.
II – A state cannot exercise police power if not granted by the Constitution.

29. I – A tax is based on law while debt is based on contract.

II – A tax is also a custom’s duty.

30. Although the power of taxation is basically legislative in character, it is not the function of the Congress to
a. Fix with certainty the amount of taxes.
b. Collect the tax levied under the law.
c. Identify who should collect the tax.
d. Determine who should be subject to tax.
31. The power to tax is the power to destroy. Is this always so?
a. No. The Supreme Court may nullify a tax law hence, property rights are not affected.
b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property rights of a
taxpayer.
c. Yes. Tax laws should always be enforced because without taxes the very existence of the State is
endangered.
d. No. The executive branch may decide not to enforce a tax law which it believes to be confiscatory.
32. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the Tax Code or other laws is vested with
a. The Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals.
b. The Secretary of Finance, subject to the review of Office of the President.
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Supreme Court.
d. The Regular Courts, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
33. I – Internal revenue laws are civil in nature. They are not political and as such were continued in force during the
period of enemy occupation and in effect were actually enforced by the occupation of the government, such tax
laws being deemed to be laws of the occupied territory and not of the occupying enemies.
II – Internal revenue laws are not penal in nature thus, the principle of ex post facto does not apply to them.
However, for violations of the internal revenue laws penalties may be provided.
a. True, false
b. True, true
c. False, true
d. False, false
34. I – The BIR is authorized to collect estate tax deficiency through the summary remedy of levying upon and sale
of real properties of a decedent, without the cognition and authority of the court.
II – The CIR may examine the bank records of the deceased in order to determine the latter’s taxable net estate.
a. True, false
b. True, true
c. False, true
d. False, false
35. Basis of taxation

a. Lifeblood theory
b. Necessity theory
c. Benefit-protection theory
d. Reciprocal theory
36. The President of the Philippines and the Prime Minister of Japan entered into an executive agreement of a loan
facility to the Philippines from Japan whereby it was stipulated that interest loans granted by private Japanese
financial institutions to private financial institutions in the Philippines shall not be subject to Philippine income
taxes. Is the tax exemption valid?
a. Yes, based on international comity. – entered into a treaty
b. Yes, based on an executive agreements and treaties.
c. No, it is a violation of essential characteristics of taxation.
d. No, based on the doctrine of territoriality.
37. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and private international banks (as
lenders), it is stipulated that all payments of interest by the Central Bank to the lenders shall be made free and
clear from all Philippine taxes which may be imposed thereon. Is the stipulation valid?
a. Yes, based on international comity.
b. Yes, based on the doctrine of non-taxability of the government.
c. No, violative of the inherent limitations.
d. No, violative of the constitutional limitations.
38. The following reasons may be given by a taxpayer in refusing to pay his tax liability. Which is not acceptable for
legally refusing to pay the tax.
a. That he has been deprived of due process of law.
b. That there lacks territorial jurisdiction.
c. That he derived no benefit from the tax.
d. That the prescription period for the collection of tax has lapsed.
39. Which statement is wrong?

I. A tax is a demand of sovereignty.
II. A toll is a demand of ownership.
III. A special assessment is a tax.
IV. Customs duty is a tax.
a. III and IV
b. II, III and IV
c. III only
d. IV only
40. This rule is not applicable on the construction of tax laws.
a. If the law is repealed, taxes assessed before repeal of the law may no longer be collected.
b. If the intent of the tax is not clear as to whether the taxpayer is covered by the tax obligation, the law shall
be construed against the government.
c. Where the intent to tax is clear and the taxpayer claims he is exempt from the tax obligation, the tax shall be
construed against the taxpayer.
d. Provisions intended for the security of the taxpayer or to insure equality or uniformity of taxation are
mandatory.
Midterm Quiz No. 1
V. Problem-solving. Round-off your final answers to two decimal places.
1. A sold his principal residence at a selling price of Php 5,000,000 and with a fair market value of Php 6,000,000.
The property sold was acquired for Php 3,000,000. He immediately purchased his new principal residence at a
cost of Php 7,000,000.
a. What is the capital gains tax? -exempt

b. How much is the basis (cost) of the new principal residence? 5 000 000
c. If only Php 4,000,00 out of Php 5,000,000 was utilized in acquiring his new principal residence, how much is
the capital gains tax? 72 000
d. If only Php 4,000,00 out of Php 5,000,000 was utilized in acquiring his new principal residence, what is the
basis (cost) of the new principal residence? 2 400 000
2. Taxpayer B has the following income and expenses for the year 2021:
Gross income, Philippines Php 3,000,000
Gross income, USA 2,000,000
Business expenses, Philippines 500,000
Business expenses, USA 300,000
Interest income, peso bank deposit BPI-Manila 20,000
Interest income, US dollar deposit, BPI-Manila 50,000
Gain from sale of vacant land used as parking space for rent 500,000
(selling price, Php 3,000,000; FMV at time of sale, Php 5,000,000)
Gain from sale of shares of stock listed and traded in the local stock exchange 30,000
(selling price, Php 100,000)
Compute the capital gains tax due assuming the Taxpayer B is

a. A resident citizen 0
b. A non-resident citizen 0
c. A resident alien 0
d. An NRA-ETB 0
e. An NRA-NETB 0
3. A taxpayer has the following information for the taxable year 2020:
Selling price – Php 1,700,000
Fair market value of the land at the time of sale – Php 2,000,000
Cost of the land – Php 800,000
Payments on the selling price:

Assumption by the buyer of a mortgage on land – Php 900,000
Cash in the year of sale – Php 300,000
Cash in the succeeding year – Php 500,000
The capital gain tax in the year of sale is? 53,333.33
4. A taxpayer sold the following capital assets:

Land 1 Land 2 Land 3
Selling price Php 150,000 Php 500,000 Php 800,000
Cost 100,000 550,000 300,000
Terms:
Down payment, Feb. 14, 2020 Php 15,000 Php 50,000 Php 20,000
Installment payments:
- July 14, 2020 7,500 25,000 75,000
- December 14, 2020 7,500 25,000 75,000
- December 14, 2021 120,000 400,000 630,000
a. Compute the tax due in 2020 for sale of Land 1. 1,800.00

b. Compute the total tax due in 2020 for sale of the capital assets. 18,000.00
5. A taxpayer has the following data for the taxable year 2020:
Capital stock issued and outstanding – common only
Stock owned:
Acquisition no. 1: 100 shares acquired at Php 120 per share
Acquisition no. 2: 50 shares acquired at Php 130 per share
Stock dividend received – 20%
Shares sold directly to a buyer – 110 shares at Php 110 per share
If costing is under FIFO method, the capital gains tax is? 165.00
6. Mr. C, a non-security dealer, presented the following information for the year 2020:
Short Term Long Term
Capital gains
- Sale of domestic stocks directly to buyer Php 40,000 Php 50,000
- Sale of domestic bonds directly to buyer 40,000 20,000
Ordinary gains
- Sale of equipment 20,000 10,000
Capital loss
- Sale of foreign stocks 10,000 10,000
- Sale of domestic stocks directly to buyer 10,000 -
Ordinary loss
- Sale of old machine - 40,000
Mr. C has business income totaling Php 500,000 including Php 18,000 dividend income from a domestic
corporation.
a. Compute the total income of Mr. C subject to progressive income taxation. 507,000.00
b. Compute Mr. C’s net capital gains tax due on the sale of domestic stock directly to buyer. 12,000.00
VI. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is the
best answer.
1. Capital losses are deductible from ordinary gains but net capital loss is not deductible from ordinary gains.
Ordinary losses are deductible only to the extent of the capital gains but the net capital loss is not deductible
from ordinary gains.
a. True, true
b. True, false
c. False, true
d. False, false
2. Which is not true to the basis of property disposed of?

a. If the property was acquired by purchase, basis is cost or purchase price plus expenses related to acquisition.
b. If the property is included in the taxpayer’s inventory, basis is the latest inventory value.
c. If the property was acquired by devise, gift, bequest, or inheritance, basis is the fair market value as of date
of acquisition.
d. If the property was acquired for less than an adequate consideration in money or in money’s worth, the basis
is the amount paid by the transferee for the property or the transferor’s adjusted basis.
3. All the following are ordinary assets to a real property developer except
a. Mortgage receivables on properties sold
b. Land currently under development
c. Raw land held for future development
d. Raw and undeveloped land intended to be sold as is
4. Which of the following constitutes a long-term holding period?

a. An asset acquired on November 30, 2019 and was disposed of on November 28, 2020.
b. An asset acquired on March 28, 2019 and was disposed of on April 30, 2020.
c. An asset acquired on November 28, 2018 and was disposed of on November 29, 2018.
d. An asset acquired on March 13, 2019 and was disposed of on January 31, 2020.
5. Where the taxpayer is a corporation, which of the following statements is true?
a. The holding period does not apply to corporation, hence, capital gains and losses are recognized at 50%.
b. The net capital loss can be carried over in the next succeeding year.
c. Capital loss is deductible only up to the extent of ordinary gains.
d. Ordinary loss is deductible from capital gains.
6. A non-resident alien disposed his stock investments in a domestic corporation to a non-resident citizen at a gain
of Php 300,000. Which statement is correct?
a. The sale is not subject to capital gains tax since the property involved is a personal property and is deemed
located abroad.
b. The sale is not subject to capital gains tax as the buyer is a non-resident individual.
c. The sale is subject to capital gains tax even if the sale occurred outside the Philippines.
d. None of these.
7. Which of the following entities is not exempt to the final capital gains tax imposed on the sale, exchange, and
other disposition of real property?
a. Banks on their sale of real and other assets acquired in the Philippines.
b. Resident corporations on their land not used in business in the Philippines.
c. Real estate developer or dealer on their sale of condo units.
d. Resident citizen on his sale of one of his residence under foreclosure sale.
8. Which is not a requisite of the was sales rule of securities?

a. The seller must be a dealer in securities in a short sale transaction.
b. The sale or other disposition of securities resulted to a loss.
c. There was an acquisition or contract or option for acquisition of stock or securities within 30 days before the
sale or after the sale.
d. The stock or securities sold were substantially the same as those acquired within the 61-day period.
9. To which of the following is the capital gains tax required to be filed? Select the exception.
a. Authorized agent bank under the jurisdiction of the RDO where the seller is required to register
b. Revenue collection officer
c. Duly authorized city or municipal treasurer of the RDO where the seller is required to register
d. Office of the Commissioner of Internal Revenue
10. The following rules as to recognition of capital gains or losses from the disposition of personal property classified
as capital asset apply where the taxpayer is an individual. Which is the exception?
a. Depending on the holding period, the percentages of gain or loss is 100% if the capital asset has been held for
12 months or less, and 50% if the capital asset has been held for more than 12 months.
b. Capital losses are deductible only to the extent of the capital gains; hence, the net capital loss is not
deductible.
c. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain.
d. Net capital loss carry over in a taxable year should not exceed the capital gain the year the loss was incurred.
Midterm Quiz No. 2
VII.Problem-solving. Round-off only your final answers to two decimal places.
1. Mr. A leased his land as follows:

Lessee Mr. X
Agreed annual rental Php 200,000
Start of lease January 1, 2019
Rentals received by the lessor on January 1, 2019 (for 3 years’ rent) 600,000
Security deposit 200,000
Improvements introduced by the lessee (will belong to the lessor upon 10,000,000
expiration/termination)
Estimated useful life of improvements 25 years
Date of completion of improvements July 1, 2019
Term of lease 20 years
a. Determine the income to be reported by the lessor in 2019 assuming he will spread his income on the
improvement over the lease term of the lease. 656,410.26
b. Determine the income to be reported by the lessor in 2020 assuming he will spread his income on the
improvement over the lease term of the lease. 112,820.51
c. Determine the deductible expense of Mr. X in 2020. 712,820.51
d. Suppose the lease was terminated thru the fault of the lessee at the start of the 19 th year, determine the
income to be reported by the lessor on the improvements. 1,025,641.03
e. Suppose the improvements were destroyed by fire on January of the 15 th year of the lease, determine the
deductible loss of the lessor on the improvements if the salvage value is Php 50,000. 1,473,076.92
2. Mr. X derived the following income in 2019:

Business income Php 200,000
Compensation income 300,000
Interest income from 5/6 lending to clients 100,000
Interest income from bank deposits 20,000
Royalty income 100,000
Capital gain on sale of personal car 20,000
Capital gain on sale of stocks directly to buyer 40,000
Ordinary gain on sale of old office furniture 10,000
Dividend income 50,000
a. Compute the total passive income subject to final tax. 170,000.00

b. Compute the total income subject to regular tax. 630,000.00
c. Compute the capital gain subject to capital gains tax. 40,000.00
3. A taxpayer received the following during the year:

Donated properties Php 200,000
Income of donated property before donation 50,000
Income of donated property after donation 30,000
Inherited properties 100,000
How much is taxable to the taxpayer? 30,000.00
4. A resident citizen disclosed the following income before the applicable income taxes in 2019:
Dividends from domestic corporation Php 200,000
Dividends from a resident corporation (85% of income in the 3 prior years from 100,000
the Philippines)
Rent income 200,000
Dollar interest income from Bank of Tokyo, Japan (peso equivalent) 120,000
Dollar interest income in under EFCDU 80,000
Compensation, net of 15% withholding tax, Php 2,000 SSS, Php 1,500 170,000
PhilHealth, Php 1,000 Pag-ibig, and Php 500 union dues
Professional fees, net of 10% withholding tax 90,000
Compute the total reportable income in 2019. 720,000.00
5. A resident citizen had the following data on income and expenses:

Gross business income Php 500,000
Business expenses 200,000
Interest from savings deposit, BPI Makati 50,000
Prize in a literary contest he joined 100,000
Prize received for achievement in literature (did not join the contest) 10,000
Gain from sale of bonds (maturity is 6 years) 5,000
Separation pay from his former job (resigned) 250,000
Cash he inherited from his uncle 300,000
Proceeds of his wife’s life insurance (irrevocable beneficiary) 1,000,000
Amount received as a return of premium (premium paid is Php 150,000) 200,000
Tax informer’s reward 500,000
Interest income from government bonds 10,000
Winnings from illegal gambling 20,000
a. Compute the total amount of excluded or exempted income. 1,465,000.00

b. Compute the taxable net income subject to regular income tax. 600,000.00
VIII. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is
the best answer.
1. A, dedicated and honest employee of ABC corp. for the past 20 years was advised that he is to be retrenched as
the company was losing heavily but that he would be given the separation pay provided by law. To avoid
implication of inefficiency, A was advised to file a letter of resignation instead of being retrenched. If A files a
letter of resignation and receives the separation pay, such amount is
a. Taxable in full
b. Partly taxable, partly exempt
c. Exempt from income tax
d. Subject to final tax
2. Juan is engaged in the marketing of cars. When Juan’s son got married to the daughter of a senator, he gave the
newly wedded couple a brand new car worth Php 800,000 as a wedding gift. The value of the car is
a. Taxable income to the newly wedded couple
b. Deductible expense of Juan
c. Not taxable income to the newly wedded couple
d. Taxable income to the couple and deductible expense of Juan
3. I – Income derived from investments in the Philippines in loans, stocks, bonds, or other domestic securities, or
from interest on deposits in banks in the Philippines, including sale of investments, by foreign governments and
financial institutions wholly-owned, controlled, or enjoying financing from foreign governments, shall be exempt
from income tax, and consequently from withholding tax.
II – Gains realized from the sale or exchange or retirement of bonds, debentures, or other certificate of
indebtedness with a maturity of at least 5 years, shall not be taxable to the investor-seller.
a. Statement 1 is true.
b. Statement 2 is true.
c. Both statements are true.
d. Both statements are false.
4. Pedro Dela Cruz has been an employee of Matatag Steelworks Inc. for the last 25 years. His employer set up a
BIR-approved private benefit plan primarily for retirement payments to its retiring employees. His employer also
set up a trust fund for the exclusive benefit of its employees, and to which the employees can make
contributions. So far, Pedro has contributed a total of Php 40,000 to this trust fund.
When he retired at the age of 55, he received the following amounts from his employer: Php 125,000
representing his retirement benefits and which was paid out of the BIR-approved benefit plan, and a dividend of
Php 140,000 from the trust fund.
Which statement is correct?

a. Only Pedro’s retirement benefits are tax-exempt.
b. Both retirement benefits and the dividend form the trust fund are tax-exempt.
c. The excess of the dividend over his contribution to the trust fund shall be taxable, and includible in gross
income in his income tax return.
d. None of the above.
5. Which of the following is not correct?

a. Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are excluded from
gross income regardless of whether the proceeds are received as a single sum or in installments.
b. In case of transfer for a valuable consideration by assignment or otherwise of a life insurance, endowment or
annuity contract or any interest therein, only the actual value of such consideration and the amount of the
premium and the sums subsequently paid by the transferee are exempt from income tax.
c. Marriage fees, baptismal offerings, sums paid for saying masses for the dead and other contributions
received by a clergyman, evangelist or religious worker for services rendered is taxable income.
d. Monetization of leave credits of employees who were unable to go on leave due to exigencies of the service
constitutes taxable income.
6. Which of the following statements is correct as regards a resident citizen?

a. Income from illegal activities is subject to final tax.
b. Income tax refunds constitute taxable income to the taxpayer.
c. Recovery of bad debts previously written off is part of taxable income.
d. As a rule, contest awards and prizes are subject to 20% final tax if they amount to more than Php 10,000,
otherwise they will be part of taxable income.
7. Which of the following statements is not correct?

a. Minimum wage earners shall be exempt from the payment of income tax on their SMW.
b. Holiday pay, overtime pay, night shift differential and hazard pay shall be exempt from income tax.
c. Prizes and awards granted to athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national sports associations are exclusions
from gross income.
d. Benefits received from or enjoyed under the Social Security System are exclusions from gross income.
8. Which of the following statement is correct?

a. The power of taxation reaches event he citizens abroad and their income earned from sources outside the
Philippines.
b. Priests and religious institutions are exempt from income and property taxes.
c. Separation benefits received by terminated employees resulting from a deadlock in their collective
bargaining agreement are exempt from income tax.
d. The value of property received as gift, or under a will or testament or through legal succession is exempt
from taxation.
9. Which is not a creditable withholding income tax?

a. Expanded withholding income tax
b. Withholding income tax at source
c. Withholding income tax on passive income
d. Withholding income tax on compensation income
10. One of the following is part of taxable income subject to progressive rates:
a. Living quarters and meals furnished and given to a rank-and-file employee for the convenience of the
employee.
b. Facilities or privilege of relatively small value offered by the employer as a means of promoting the health,
goodwill, contentment, or efficiency of the employee.
c. Compensation for damages
d. The share of a partner in the undistributed net income of a general co-partnership.
11. Which of the following taxpayer is not required to file an income tax return?
a. Non-resident alien engaged in trade or business
b. Non-resident alien not engaged in trade or business
c. Minimum wage earner with Php 250,000 business income
d. Employed citizen with Php 250,000 compensation income
Midterm Examination
III. Problem solving. Round off final answers to two decimal places. (2pts each)
1. Spouses A and B sold their family home, a capital asset for Php 5,000,000. It was acquired in 1980 at Php
2,000,000. The fair market value as determined by the BIR is Php 6,000,000 but the fair market value as shown in
the schedule of values of the City Assessor is Php 5,500,000. Later, the spouses utilized Php 4,000,000 for the
acquisition of their new family home.
a. The capital gains tax due is? 72,000.00

b. What is the cost basis of the new family home? 1,600,000.00
2. Gab sold for Php 10,000,000 his Baguio rest house with a fair market value of Php 12,000,000 to buy a new
principal residence. If Gab utilized Php 8,000,000 of the proceeds of the sale in acquiring a new principal
residence, the capital gains tax payable is? 720,000.00
3. Mark, realty dealer, sold the following properties in 2019:

Properties sold Holding Gain/(Loss)
period
Principal residence Long-term Php
800,000
Stocks sold directly to Short-term 200,000
buyer
Personal car Long-term (40,000)
Office equipment Long-term 50,000
Bonds, held as investment Short-term 80,000
Compute the net capital gains subject to regular tax. 60,000.00

4. Stan died during the year 2017 leaving the following:
Proceeds of life insurance Php
1,000,000
Death benefits received from SSS 200,000
Separation benefit from employer 800,000
Salary accruing before death 50,000
Compute the total exclusion from gross income. 2,000,000.00
5. May, a resident citizen, had the following dealings in the stocks of Banco De Oro:
Date Transaction Shares Amount
April 1, 2020 Purchase 100,000 Php 24
June 1, 2020 Stock 20%
dividend
August 15, 2020 Purchase 30,000 18
September 4, Sale 50,000 17
2020
November 5, 2020 Cash 1.5 per
dividend share
December 6, 2020 Sale 80,000 25
December 30, Sale 20,000 26
2020
May uses the FIFO method.
a. Compute the deductible loss on September 4, 2020. (60,000.00)

b. Compute the capital gains tax on the sale on December 6, 2020. 58,500.00
c. Compute the final tax on dividends. 15,000.00
6. A taxpayer derived the following income during 2019:

Philippines Abroad
Compensation income, net of Php 500 SSS, Php 250 Php
PhilHealth, and Php 10,000 withholding tax 200,000
Rental of house to student boarders 400,000
Gross profit on sale of peanut butter 300,000 Php
200,000
Interest income from bank deposit 18,000 27,000
Gain on sale of bonds with 5 year maturity 50,000
Prizes in a singing competition 80,000 120,000
Interest income from loan to OFWs 100,000
SSS benefits received 20,000
a. Compute the total income to be reported assuming the taxpayer is a resident citizen. 1,407,000.00
b. Compute the total income to be reported assuming the taxpayer is a non-resident citizen. 960,000.00
7. Mary, a married resident citizen, had the following data for 2018:
Business income
- Rental income from real property, net of 5% withholding tax Php
285,000
Real property tax paid by the lessor 50,000
Note: The lessee reimbursed 50% of the tax as per agreement in the lease
contract.
Deductible expense 120,000
- Rental income from real property, net of 5% withholding tax 142,500
Rel property tax paid by the lessor 20,000
Note: The lessee reimbursed 100% of the tax as per agreement in the lease
contract
Deductible expense 40,000
Sale of capital assets
- Shares of ABC (domestic) not traded Selling
Cost (2004) Php 180,000 price
Php
300,000
- Shares of DEF (domestic) traded Selling
Php
100,000
- Shares of XYZ (foreign) Selling
Php
500,000
- Vacant lot Selling
Php
800,000
- Toyota Car Selling
Php
100,000
Other transactions
- In 2000, she purchased shares of A Corporation for Php 50,000 which became
worthless and was written of in 2018.
- In 2018, she received liquidating dividend from B Corporation in the amount of Php
450,000. The investment in 2000 was Php 300,000.
Determine the taxable income of Mary. (3pts) 415,000.00

8. The records of Jay, a married citizen with 2 dependent children show the following for 2018:
Business income, net of Php 240,000 expense Php
160,000
Rental income, net of 5% withholding tax 95,000
Dividend received from a foreign corporation 20,000
Winnings from PCSO 400,000
Other transactions:
1. Sale of assets used in business
Delivery equipment
-Selling price 200,000
-Cost (2005) 300,000
-Accumulated depreciation 60,000
Land
-Cost (2002) 180,000
Warehouse
-Selling price 10,000,000
-Cost (2003) 11,800,000
-Accumulated depreciation 2,000,000
2. Sale of capital assets:
Jewelry
-Cost (2002) 180,000
Land
-Cost (2000) 900,000
Furniture and fixture
-Cost (2010) 40,000
3. Shares of stocks
Traded in the stock exchange
-Cost (2004) 300,000
Not traded in the stock exchange
-Cost (2004) 180,000
Determine the taxable income of Jay. (3pts) 480,000.00
IV. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think
is the best answer.
1. Joy sued Carl for breach of promise to marry. Carl lost the case and duly paid the court’s award that included
among others, Php 100,000 as moral damages for the mental anguish Joy suffered. Did Joy earn a taxable
income?
a. She had a taxable income of Php 100,000 since income is income from whatever source.
b. She had no taxable income because it was a donation.
c. She had taxable income since she made a profit.
d. She had no taxable income since moral damages are compensatory.
2. In 2019, an individual who is a real estate dealer sold a residential lot in Nueva Ecija at a gain of Php 100,000. The
sale is subject to income tax as follows:
a. Six percent capital gains tax on the gain
b. Six percent capital gains tax on the selling price or fair market value, whichever is higher
c. Ordinary income tax at the graduated rates of 0% to 35% of net taxable income
d. 30% income tax on net taxable income
3. Which statement is correct? A non-stock, non-profit charitable association that sells its idle agricultural property
is
a. Not required to file an income tax return nor pay income tax on the transaction to the BIR, provided that the
sales proceeds are invested in another real estate during the year.
b. Required to pay the six percent capital gains tax on the gross selling price or fair market value, whichever is
higher.
c. Mandated to pay the thirty percent regular corporate income tax on the gain from sale.
d. Required to withhold the applicable expanded withholding tax rate on the transaction and remit the same to
the BIR.
4. A has 4,000 shares of investment in the common shares of LABAN LANG Corporation, costing Php 500,000.
During the current taxable year, he received from LABAN LANG Corporation, 200 shares of SUKO NA Corporation
with a par value of Php 100 per share as dividends. At the date of dividend declaration, the fair market value of
LABAN LANG Corporation was Php 120 per share and by the time he received the dividend, the fair market value
was Php 180 per share. The dividend is
a. Subject to final tax
b. Exempt from income tax
c. Part of taxable income
d. A stock dividend
5. B is the cost accountant of a domestic corporation. In 2019, he was promoted to chief accountant. Later, he
bought a new car worth Php 1,500,000 and he traded his old car with a fair market value of Php 700,000 and paid
the difference of Php 800,000 to the seller. His old car was donated by his father who bought the car 2 years ago
at a price of Php 600,000. His father paid the corresponding donor’s tax. Which of the following is incorrect?
a. The cost basis of the old car is Php 600,000.
b. The old car is a capital asset.
c. The capital gain subject to income tax is Php 100,000.
d. The father of B is not required to report the capital gain as part of his taxable income.
6. A dealer in securities sold unlisted shares of stocks of a domestic corporation in 2019 and derived a gain of Php
1,000,000 therefrom. The gain is
a. Taxable at the regular income tax based on net taxable income.
b. Taxable at 15% capital gains tax based on net capital gain.
c. Taxable at 6/10 of 1% stock transaction tax based on the gross selling price or fair market value, whichever is
higher.
d. Exempt from income tax.
7. In 2020, a minimum wage earner received from his employer a total amount of Php 195,000 inclusive of the 13 th
month pay of Php 15,000. He also received overtime pay of Php 48,000 and night shift differential of Php 22,000.
He also received commission income from his employer amounting to Php 25,000, thus, the total income
received from his employer amounted to Php 290,000. The taxable income is
a. Php 0
b. Php 25,000
c. Php 290,000
d. Php 275,000
8. SUKO KA NA BA Company, a domestic corporation, is in the business of owning, purchasing, licensing, and
acquiring trademarks and other intellectual property rights. How should its royalty fees be taxed?
a. They should be treated as passive income subject to the 20% final tax.
b. They should be included in the corporation’s ITR and be subject to the 30% regular corporate income tax.
c. Half of the royalties earned shall be included in the ITR and the other half shall be subject to the 20% final
tax.
d. None of these.
9. LABAN O BAWI Corporation shortened its corporate life until January 31, 2021 which was approved by the
Securities and Exchange Commission. On December 31, 2023, a Deed of Conveyance was executed distributing
real properties as liquidating dividend to LABAN O BAWI shareholders.
One of the shareholders, Juan Tamad recognized the liquidating gain as part of its other taxable income in its 2023
annual income tax return subject to the regular income tax. The BIR, however, is assessing Juan Tamad deficiency
capital gains tax (CGT) on the transaction. Which tax treatment is correct?
a. Juan Tamad is correct. The receipt by a stockholder of real property as liquidating dividends from a dissolving
corporation is not subject to CGT but to the ordinary income tax.
b. BIR is correct. Juan Tamad clearly realized a gain from the liquidating dividend. And since the gain was
realized from an exchange of real properties held by LABAN O BAWI Corporation with Juan’s surrender of his
shares, the transaction should be subject to CGT.
c. Both are correct.
d. None are correct.
10. In March 2018, Anna who is fond of jewelry bought a diamond ring for Php 750,000, a bracelet for Php 250,000, a
necklace for Php 500,000, and a brooch for Php 500,000. Anna derives income from the exercise of her
profession as a license CPA. In October 2018, Anna sold her diamond ring, bracelet, and necklace for only Php
1,250,000 incurring a loss of Php 250,000. She used her Php 1,250,000 to buy a solo diamond ring in November
2018 which she sold for Php 1,500,000 in September 2019. She had no other transaction in jewelry in 2019.
Which among the following describes the tax implications arising from the above transactions?
a. Anna may deduct his 2018 loss only from her 2018 professional income.
b. Anna may carry over and deduct her 2018 loss only from her 2019 gain.
c. Ann may carry over and deduct her 2018 loss from her 2019 professional income as well as from her gain.
d. Anna may not deduct her 2018 loss from both her 2019 professional income and her gain.
11. The proceeds received under a life insurance endowment contract is not considered part of gross income
a. If it is so stated in the life insurance endowment policy.
b. If the price for the endowment policy was not fully paid.
c. Where payment is made as a result of the death of the insured.
d. Where the beneficiary was not the once who took out the endowment contract.
12. A Corporation was merged with B Corporation. C, a stockholder of A Corporation was asked to surrender his
shares of stock of A Corporation which C acquired for Php 200,000 and in exchange he received shares of stock of
B Corporation with a fair market value of Php 220,000 plus cash of Php 30,000. After the merger, C later sold his
B Corporation shares for Php 240,000. C will recognize a gain of:
a. Merger 30,000; Sale 40,000
b. Merger 50,000; Sale 20,000
c. Merger 30,000; Sale 20,000
d. Merger 50,000; Sale 40,000
13. The following are examples of non-taxable compensation for injuries except:
a. Actual damages for injuries suffered
b. Exemplary damages
c. Compensatory damages for unrealized profits
d. Moral damages for grief, anxiety and physical sufferings
14. The following are not taxable except:

a. Refund of fringe benefit tax
b. Refund of Philippine income tax
c. Refund of estate tax
d. Refund of special assessment
15. Ella was selected as the most outstanding teacher in her region. Her name was submitted by the school principal
without her knowledge. She received a trophy and a cash award of Php 15,000.
a. Taxable income
b. Subject to final tax
c. Exempt from income tax
d. Partly taxable, partly exempt
16. One of the following is a taxable income

a. Compensation for injuries and sickness
b. Income derived from gifts, bequest and devices
c. Proceeds of life insurance
d. Amounts received as returns of premium
17. A worked for a manufacturing firm but due to business reverses, the firm offered a voluntary redundancy
program in order to reduce overhead expenses. Under the program, an employee who offered to resign would
be given separation pay equivalent to his 3 months basic salary for every year of service. A accepted the offer and
received Php 800,000 as separation pay under the program. After all the employees who accepted the offer were
paid, the firm found its overhead still excessive. Hence, it adopted another program where various unprofitable
departments were closed. As a result, B was separated from the service, B also received Php 800,000 as
separation pay. At the time of separation, both A and B have rendered at least 10 years of service but A was 55
years old while B was only 45 year old. As a result
a. Both amounts are exempt from income tax.
b. Both amounts are subject to income tax.
c. Only Mr. A is subject to income tax.
d. Only Mr. B is subject to income tax.
18. Renz, a Filipino citizen residing in Makati City, owns a vacation house and lot in California which he acquired in
2000 for Php 15,000,000. On January 2012, he sold said real property to Dan, another Filipino citizen residing in
Quezon City for Php 20,000,000. On February 8, 2012, Renz filed the capital gains tax return and paid Php
1,200,000 representing 6% capital gains tax. Since Rends did not derive any ordinary income, no income tax
return was filed by him in 2012. After the tax audit conducted in 2013, the BIR officer assessed Renz for
deficiency income tax computed as follows: Php 5,000,000 (20M less 15M) x 30% = Php 1,500,000, without the
capital gains tax paid being allowed as tax credit. Renz consulted a real estate broker who said that the Php
1,200,000 capital gains tax should be credited from Php 1,500,000 deficiency income tax. Is the BIR officer’s tax
assessment correct?
a. Yes, assessment issued by the BIR is presumed correct.
b. Yes, because the vacation house is located abroad.
c. No, the capital gains tax paid should have been deducted from the Php 1,500,000 deficiency income tax.
d. No, because the 30% tax rate applies to corporations.
19. I – All income payments received by a minimum wage earner are exempt from withholding.
II – An individual payee shall not be subjected to withholding if the total of the income payments he receives is not
more than Php 250,000.
a. True, true
b. False, true
c. True, false
d. False, false
20. Alma sold her principal residence to Bob as evidenced by a notarized Deed of Absolute Sale executed on
September 10,2013. Alma also acquired a new principal residence from Carl which was evidenced by another
notarized Deed of Sale executed on September 9, 2013. Is the sale of Alma’s principal residence exempt from the
6% capital gains tax?
a. Yes. Alma bought a new principal residence even before selling her old principal residence.
b. Yes. Alma utilized the proceeds from the sale of her old principal residence in buying a new principal
residence within 18 months from the sale of her old residence.
c. No. The sale of the old principal residence must precede the acquisition of the new principal residence.
21. At the testimonial dinner for new CPAs, Popoy, a reviewer was requested to sing the theme song of the movie
“One More Chance”. Basha, a new CPA, was so delighted that she felt she was falling in love with Popoy so she
decided to cancel Popoy’s indebtedness to her. As a result
a. Popoy realized a taxable income as compensation for services.
b. If Popoy accepts the cancellation, he will pay donor’s tax.
c. Popoy received a gift from Basha and therefore is not part of his taxable income.
d. The amount of indebtedness cancelled is partly taxable, partly exempt.
22. The following income received by officials and employees in the public sector are not subject to income tax and
withholding tax on compensation except
a. Representation and transportation allowance (RATA) granted under the General Appropriations Act
b. The excess of the 13th month pay and other benefits paid or accrued during the year over Php 90,000
c. Personnel Economic Relief Allowance (PERA) granted to government personnel
d. Monetized value of leave credits paid to government officials and employees
23. Exclusions from gross income except:

a. Interest on the price of land covered by the Presidential Decree on land reform
b. Interest payments on proceeds of life insurance held by the insurer
c. GSIS, SSS, PhilHealth, and Pag-Ibig contributions and union dues of individuals
d. Gains realized by an investor upon redemption of shares of stock in a mutual fund company.
24. This is a taxable income

a. Retrenchment pay
b. SSS/GSIS benefits
c. Separation pay due to resignation
d. Refund of Philippine income tax
Finals Quiz No. 1
I. Problem-solving. Round-off your final answers to two decimal places. (30 min.)
1. Based on the current year data, compute the tax-exempt compensation income of an employee:
Salary, gross of withholding tax Php 480,000; Allowance Php 20,000; Thirteenth month pay Php 40,000;
Christmas bonus Php 40,000; Reimbursement for transportation expenses Php 5,000;
Payroll deductions: SSS contributions (mandatory contributions Php 4,000) Php 6,000; PhilHealth contributions
(mandatory contributions Php 3,000) Php 5,000; Pag-Ibig contributions (mandatory contributions Php 2,400) Php
3,400; Charitable contributions by the employee to the employer’s outreach program Php 5,000; Loan payment
Php 20,000
89,400.00
2. Compute the taxable benefits of a rank-and-file employee of a government owned and controlled corporation
who received the following benefits from his employer:
13th month pay Php 40,000
14th month pay 40,000
Christmas bonus 22,000
Loyalty award 16,000
Additional compensation allowance (ACA) 20,000
48,000.00
3. AA, an official of NA PRESSURE Corporation, asked for an earlier retirement because he was immigrating to
Canada with his girlfriend. He was paid Php 3,000,000 as separation pay in recognition of his valuable services to the
corporation. BB, another official of the same company was separated for occupying a redundant position. He was given
Php 1,000,000 separation pay. CC, who has rendered 11 years of service and is now 55 years old. He opted to retire for
the first time. He received Php 2,000,000 retirement pay. The total income subject to withholding tax is? 3,000,000.00
4. Juana Tamad, widow received the following during 2018:

Received $500 ($1=Php44) monthly interest income from the pension plan of his deceased husband who served
in the US Army for 20 years.
Won a beauty contest “Miss Byuda 2018”. She received the following as prizes:
Cash prize, Php 50,000
Free trip abroad worth Php 50,000
College scholarship worth Php 100,000
Goods worth Php 20,000
Php 100,000 from her debtor in payment of a loan, and interest in the sum of Php 15,000.
Inherited from her grandmother a lot and apartment valued at Php 2,500,000 from which she is receiving
monthly rental of Php 15,000. Compute the income subject to income tax. 679,000.00
5. Pedro, single, is a minimum wage earner who earns a basic minimum wage of Php 180,000 for the year 2018. He
also received the following benefits:
De minimis Php 140,000 (80,000 over the ceiling)
13th month pay and other benefits Php 112,000
a. How much is the taxable income of Pedro? 102,000.00

b. How much is the income tax due of Pedro assuming he also earned Php 450,000 derived from his business of
buying and selling various consumer products? 68,000.00
6. AAA, an employee of NO PRESSURE Corporation holding a managerial position for 2019 taxable year: gross
salaries @ Php 50,000 per month, Php 600,000; SSS contributions, Php 12,000; PhilHealth contributions, Php 7,200; Pag-
Ibig contributions, Php 4,800; Union dues, Php 3,000; Withholding tax on compensation income, Php 73,250; Allowances
not subject to liquidation, Php 100,000; Gasoline allowances subject to liquidation, Php 17,000; 13 th month pay, Php
50,000; De minimis benefits, Php 12,000. Compute the taxable compensation income subject to graduated tax rate.
573,000.00
7. BBQ, a resident of Nueva Ecija Province, had the following data for taxable year 2018 (Exchange rate $1-Php40):
Philippines Abroad
Salaries Php 165,000 $ 2,000
Business income 450,000 6,000
Business expenses 120,000 1,500
Interest income:
- Personal receivable 10,000
- FCDU $2,500
- On 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
Sales of shares of stocks directly to buyer (cost Php 10,000) 30,000
Additional information:
BBQ received the following dividend income during the taxable year:
Php 70,000 from a domestic corporation. 30% of its income is attributed to its operations abroad.
Php 60,000 from a resident corporation. The ratio of its gross income in the Philippines over worldwide income
for the past three years is only 40%.
Php 80,000 from a non-resident foreign corporation. The ratio of its gross income in the Philippines over
worldwide income for the past three years is 10%.
He also sold a condominium unit in Manila (residential) for Php 2,000,000 although its FMV is Php 3,000,000 but
with a zonal value of Php 4,000,000.
a. The taxable income of BBQ is? 1,075,000.00

b. If he is a non-resident citizen, his total final tax on passive income is? 30,960.00
c. If he is a non-resident alien not engaged in trade or business, his total combined taxes on all income from
Philippines is (excluding business income)? 338,500.00
IX. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think
is the best answer.
1. Pedro is a member of the board of directors of ABC Company. During the current taxable year, Pedro received
director’s fees amounting to Php 300,000 from quarterly board meetings he attended. Such fees should
a. Form part of Pedro’s gross compensation income, whether or not he is at the same time an employee of the
corporation.
b. Form part of Pedro’s gross compensation income only if he is at the same time an employee of the
corporation.
c. Either is correct.
d. Neither is correct.
2. One of the following compensation income of an individual taxpayer is not an exclusion from gross income:
a. Monetized vacation leaves not exceeding 10 days a year.
b. Separation pay of an employee who resigned from his employment.
c. Retirement benefits of an employee under a qualified benefit plan 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.
d. All of these.
3. The taxpayer was retired by his employer in 2020 and paid Php 2,000,000 as a retirement gratuity without any
deduction for withholding tax. The corporation became bankrupt in 2021. Can the BIR subject the Php 2,000,000
retirement gratuity to income tax in 2020?
I. Yes, if the retirement gratuity was paid based on a reasonable pension where the taxpayer was 50 years
old and has served the corporation.
II. No, if the taxpayer was forced by the corporation to retire.
a. Both answers are correct.
b. I is correct but II is wrong.
c. I is wrong but II is correct.

d. Both answers are wrong.
4. Which among the following is part of the taxable income of an employee?
I. Insurance premium provided by employer on the life insurance policy of the employee where the
designated beneficiary is the relative of the employer.
II. Insurance premium paid by the employer on the life insurance policy of the employee where the
designated beneficiary is the employer.
III. The income tax of the employee paid by the employer as part of the employee’s benefit.
IV. The income tax of the employee advanced by the employer, deductible against future income of the
employee.
a. I only
b. I and III only
c. II and III only
d. I, II, and IV
e. II, III, and IV
f. III only
5. I – Remuneration for services constitutes compensation income even if the relationship of employer and
employee does not exist any longer at the time when payment is made between the person in whose employ
the services had been performed and the individual who performed them.
II – In general, fixed or variable allowances which are received by a public officer or employee or officer or employee of a
private entity, in addition to the regular compensation, fixed for his position or office, is compensation subject to income
tax and consequently, creditable withholding tax on compensation income.
a. Both are correct.
b. Both are incorrect.
c. Only the first statement is correct.
d. Only the second statement is correct.
6. I – Representation and transportation allowance granted under Section 34 of the General Appropriations Act to
certain officials and employees of the government are considered reimbursements for the expenses incurred in
the performance of one’s duties rather than as additional compensation.
II – The excess of RATA in statement 1, if not returned to the employer, constitutes taxable compensation income of the
employee.
III – COLA of minimum wage earners is exempt from income tax.
a. All statements are correct.
b. All statements are incorrect.
c. Only I and III are correct.
d. Only I is correct.
7. I – The stipends received by resident physicians during their intensive training in the residency program of a
hospital are subject to creditable withholding tax on compensation income.
II – Reasonable amount of reimbursements/advances for travelling and entertainment expenses which are pre-
computed on a daily basis are paid to an employee while he is on an assignment or duty such as “per diem” need not be
subject to the requirement of substantiation and to withholding tax.
a. Both are correct.
b. Both are incorrect.
c. Only the first statement is correct.
d. Only the second statement is correct.
8. A domestic corporation provides fixed daily meal allowance to all its regular employees. The meal allowance is:
a. Exempt from basic income tax.
b. Subject to fringe benefit tax if the recipient is a rank and file employee.
c. Subject to fringe benefit tax if the recipient is a managerial employee.
d. Subject to basic income tax.
9. Wesleyan University provided a scholarship grant abroad (Master of Science in Accountancy) to BEBE MO, one
of its regular faculty members. The management believed that the university will be able to improve its
accountancy program through the scholarship grant. Nonetheless, no written contract was executed between
the university and BEBE MO requiring the latter to remain in the employ of the employer 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 BEBE MO.
b. De minimis benefit, hence, tax-exempt regardless of rank.
c. The benefit was provided for the benefit of the employer, hence, non-taxable on the part of the employee.
10. The cot of educational assistance extended by an employer to the dependents of an employee shall be treated
as taxable fringe benefits, unless:
a. The education or study is directly connected with the parent’s employer’s business or profession.
b. There is a written contract between the parents and the employer that the former is under obligation to
remain in the employ of the latter for period of time they have mutually agreed upon.
c. The assistance was provided through a competitive scheme under the scholarship program of the employer.
d. None of the choices.
Finals Quiz No. 2
X. Problem-solving. Round-off only your final answers to two decimal places.
1. A resident rank-and-file private employee has two qualified dependent children at the beginning of the year. He
also supports his father in-law who is a PWD and his uncle who is a senior citizen. The following data are made
available for the year 2018:
Salary, net of Php 117,500 withholding tax, Php 6,975 SSS contributions, Php 5,250 PhilHealth contributions, and Php
1,500 union dues, Php 482,500
13th month pay, Php 50,000
Rice subsidy (Php 1,500 x 12), Php 18,000
Uniform and clothing allowance, Php 5,000
Monetized unused vacation leave credits (12 days), Php 6,000
Actual medical benefits, Php 15,000
Christmas gift, Php 10,000
Laundry allowance (Php 400 x 12), Php 4,800
Employee achievement award (amount of cash given), Php 10,000
Monetary gift given on account of birth of a child during the year, Php 5,000
Benefits received by virtue of a collective bargaining agreement and productivity incentive schemes, Php 14,000
Separation pay from a previous employer (terminated due to redundancy), Php 150,000
Interest income from a long-term deposit which was pre-terminated (remaining maturity is 4 years), Php 40,000
Dividend from regional operating headquarters of a multinational corporation in the Philippines, Php 10,000
Philippine lotto winnings, Php 100,000
Gain from sale of shares of stock listed and traded in the local stock exchange, Php 20,000
Prize in a literary contest he joined, Php 70,000
Compute the following:
a. Tax-exempt de minimis benefits 56,600.00

b. Total exclusions/exemptions (including de minimis benefits) 330,325.00
c. Total final withholding taxes 37,000.00
d. Taxable compensation income 641,200.00
2. In 2018, an executive of a BABAGSAK bank, was granted a loan by the bank. The amount of the loan was Php
2,000,000 at 8% interest per annum. The loan was payable in four months. How much is the monthly fringe
benefit tax? 3,589.74
3. BABAGSAK KA BA Corp. owns a condominium unit. During the year 2018, the said corporation furnished and
granted the said property for the residential use of its Assistant Vice President. The fair market value of the
property per BIR amounts to Php 10,000,000 while its fair market value as shown in its current Real Property
Declaration amounts to Php 8,000,000. What is the monthly fringe benefits tax? 11,217.95
4. BABAGSAK YATA Corp., maker of the best-selling ice cream, owns a fleet of motor vehicles for use of the
business and its employees. One of the motor vehicles costing Php 450,000 is not used for business purposes,
but for the employees’ personal needs. How much is the annual fringe benefits tax? 24,230.77
5. PABAGSAK YATA Corp. owns a house and lot. The ownership of the said house and lot was transferred to its
President in 2018. The following data were made available: cost of Php 5,000,000; fair market value per BIR of
Php 4,500,000; fair market value per assessor’s office of Php 3,000,000. How much is the fringe benefits tax, if
any? 2,692,307.69
6. BABAGSAK TALAGA Corp. gave the following fringe benefits to its employees during 2018: salaries to rank and
file employees, Php 1,000,000; salaries to managerial employees, Php 1,800,000; de minimis benefits to rank
and file employees, Php 54,400; de minimis benefits to managerial employees, Php 27,200; fringe benefits to
rank and file employees, Php 102,000; fringe benefits to managerial employees, Php 170,000.
a. How much is the fringe benefit tax? 91,538.46
b. How much is the total allowable deduction from business income? 3,245,138.46
7. PABAGSAK KA BA Corp. owns a condominium unit which is near the factory and the plant’s administrative
building. To make it convenient to its executive, it allowed the latter to use the said property as his residence.
The zonal value of the property is Php 32,000,000 while its fair market value as shown in its current real
property tax declaration amounts to Php 25,000,000. How much is the fringe benefit expense? -
8. PABAGSAK TALAGA Corp. operates a manufacturing plant in Davao Economic Zone, a PEZA registered economic
zone. Juan was assigned to lead the conduct of audit and performance evaluation of the plant which is
estimated to last for a period of two to three months. He was provided a free housing benefit for the duration of
the audit in one of the prominent subdivisions in the city. The zonal value of the property is Php 32,000,000
while is fair market value as shown in its current real property tax declaration amounts to Php 25,000,000.
Determine the fringe benefit expense. -
9. BUMAGSAK NA Corp. bought a condominium unit on installment for the use of its executive. The acquisition cost
inclusive of 12% interest is Php 6,720,000. The fair market value of the property per tax declaration is Php
6,800,000 while the zonal value is Php 6,500,000.
a. How much is the fringe benefit tax? 80,769.23
b. Assume the ownership over the property will be transferred to the executive, how much is the fringe benefit
tax? 3,500,000.00
10. BUMAGSAK NGA Corp. bought a condominium unit for Php 6,000,000. The fair market value of the property per
tax declaration is Php 6,800,000 while the zonal value is Php 6,500,000. It was transferred in the name of Juana,
one of its executive, for a lower consideration amounting to Php 5,800,000. How much is the fringe benefit tax?
538,461.54
Income Taxation 1a
Final Examination
I. Problem solving. Round off final answers to two decimal places. (2pts each)
1. Mr. LAST NA TO, 35 years old, resident citizen, non-dealer of securities, legally separated, with dependents, had
the following during the calendar year:
Dependents:
Legitimate child by a former marriage, 8 years old
Legitimate child, 7 years old, used to live with the taxpayer but currently residing in USA
Legally adopted child, 5 years old, living with the taxpayer but presently studying in Korea
Illegitimate child, 3 years old, living with the taxpayer
Son, 21 years old, suffering from physical disabilities
Sister of his wife, 20 years old, single, and unemployed
Natural child of the sister of his wife, 2 years old
Daughter, 21 years old, celebrated her birthday during the taxable year
Gross compensation income, net of 20% withholding tax, gross of exclusions Php 400,000
SSS premium contribution 8,000
PAG-IBIG contribution 7,000
PhilHealth contribution 5,000
Union dues 2,000
13th month pay35,000
Hazard pay 20,000
Night differential pay 30,000
Overtime pay 15,000
Holiday pay 10,000
Christmas bonus 9,000
Rice subsidy 26,000
Actual medical assistance 15,000
Laundry allowance 4,000
Dividends from domestic corporation 200,000
Dividends from foreign corporation 150,000
Prizes from singing contest 15,000
Prizes from dancing contest 10,000
Uniform allowance 9,000
Medical allowance for dependents 5,000
Productivity bonus 10,000
Net gains from sale of stock directly to buyer 600,000
Net gains from sale of stock through PSE
- Selling price
- Cost 200,000
1,000,000
800,000
Sale of real property not used in trade or business
- Selling price
- Appraised value
- Zonal value
- Assessed value
1,200,000
1,100,000
1,300,000
1,500,000
Amount received by Mr. LAST NA TO as return of premiums from insurance (premiums paid Php 1,500,000)
1,600,000
Retirement benefit received from his previous employer that maintained reasonable private benefit plan (he served the
company for 12 years) 50,000
Interest income (Php 16,000 from bank deposits, remaining from lending institutions) 25,000
Interest on long-term deposit with maturity period of 5 years 30,000
Philippine lotto winnings 500,000
Share in net income of a business partnership 100,000
Required:
a. Compute the excess de minimis benefits. 12,400.00
b. Compute the total exclusions/exemptions (including de minimis benefits). 1,665,000.00
c. Compute the total final income taxes withheld. 136,200.00
d. Compute the capital gains taxes. 180,000.00
e. Compute the taxable income. 872,000.00
f. Compute the tax due under regular income tax. 151,600.00
2. Mr. GALINGAN MO, a married CPA lawyer, is a private business owner and a passport holder of the Philippines
who stayed in abroad for vacation from October 1, 2020 until March 31, 2021. Below are the transactions of Mr.
GALINGAN MO during 2020.
Income:
Interest income from short term deposit (Philippines), Php 50,000
Interest income from short term deposit (Abroad), Php 65,000
Interest income from short term investment issued by banks (Philippines), Php 75,000
Interest income from short term investment (Abroad), Php 98,000
Share in partnership income (Accounting firm), Php 90,000
Share in partnership income (Law firm), Php 30,000
Undeclared income from selling smuggled goods, Php 250,000
Revenue from selling goods, Php 750,000
Winnings from PCSO lottery, Php 10,000
Income from proceeds of life insurance (Minor accident), Php 250,000
Income from annual compensation, Php 350,000
Benefits received from employer:

Rice allowance per month, Php 4,000
Uniform allowance per year, Php 5,000
Monetized unused vacation leave 15 days, Php 15,000
Overtime pay, Php 15,000
Hazard pay, Php 10,000
Expenses:
Business related expenses, Php 150,000
Revolutionary taxes paid to NPA representative, Php 300,000
Payment of monthly percentage taxes, Php 1,500
Payment of BIR penalties and surcharges, Php 45,000
Payment of BIR official to lessen taxes, Php 150,000
Required:
a. Compute the amount of non-taxable income. 128,000.00
b. Compute the taxable net income subject to regular income tax. 1,740,000.00
c. Compute the regular income tax due for the year. 412,000.00
d. Compute the final income taxes withheld for the year. 25,000.00
3. In 2018, WAG IIYAK Corporation allowed its sales manager to incur expenses subject to reimbursement as
follows:
Electricity (Meralco) – 70% in the name of WAG IIYAK Corporation, Php 20,000
Water (Maynilad) – 70% in the name of WAG IIYAK Corporation, Php 2,000
Grocery, Php 10,000
Gasoline of company car, Php 12,000
Representation and transportation for business trip, Php 4,000
The amount subject to fringe benefit tax is? 16,600.00
4. The following data belong to WAG SUMUKO Company for the year 2018:
• Educational assistance to supervisors and their children, Php 100,000
• Employer’s contribution for the benefit of the employees to retirement, insurance, and hospitalization benefit
plans, Php 80,000
• Year’s rental for an apartment paid by the corporation for the use of its comptroller, Php 120,000
The fringe benefits tax due in 2018 is? 86,153.85
5. NO PRESSURE Company is a domestic corporation engaged in the merchandising business. For the calendar year,
2018, it had a net income per books of Php 500,000, after considering, among others, the following:
Dividend received from a domestic corporation Php 30,000
Provision for doubtful accounts 10,000
Dividend received from a foreign corporation 20,000
Portion of Php 150,000 advance rental already earned 100,000
Recovery of receivables previously written off (included as part of book net income)
- Previously allowed by the BIR as deduction
- Previously disallowed by the BIR as deduction
10,000
30,000
Refund of deductible taxes (included as part of book net income)
- Previously allowed by the BIR as deduction
- Previously disallowed by the BIR as deduction
25,000
15,000
Bank interest income
- Philippine bank
- USA bank
80,000
100,000
The taxable net income is? 405,000.00
6. PAPASA KA BA Company granted the following fringe benefits in 2020:

January 15 – paid Php 65,000 for the birthday celebration expenses of its vice president for operations.
February 14 – distributed iPhones costing Php 47,600 each to four supervisory employees as incentives.
April 2 – granted the use of a residential unit to the vice president for finance with fair value of Php 3,000,000.
August 4 – transferred ownership of a residential dwelling with zonal value of Php 4,000,000 and assessed value of Php
3,000,000 to the company president.
December 15 – distributed Php 896,000 in 13th month pay to all employees, 20% of this relates to managerial or
supervisory employees.
a. Compute the total fringe benefits tax to be remitted by PAPASA KA BA Company for its first and second quarters
of 2020. 147,619.23
b. Compute the total fringe benefits tax to be remitted by PAPASA KA BA Company for its third and fourth quarters
of 2020. 2,174,038.45
II. Multiple choice. Each choice has an equal chance of being correct, choose the corresponding letter you think is
the best answer.
1. Congress passed a law which granted tax amnesty to those who have not paid their income taxes in 2010 but did
not provide for the refund to those who paid. Is the law valid?
a. No, this will encourage taxpayers not to pay their taxes.
b. Yes, Congress has the sole discretion of determining whom to tax.
c. No, the grant of amnesty is the sole prerogative of the President.
d. Yes, Congress provided for a valid classification.
2. An individual taxpayer shall file his last quarterly return for the year on
a. November 15
b. December 15
c. January 15
d. April 15
3. Under the TRAIN Law, the quarterly income tax return of individual income taxpayers is due
a. 30 days after the end of the first three quarters.
b. 45 days after the end of the first three quarters.
c. 60 days after the end of the first three quarters.
d. April 15, August 15, and November 15 for the first to third quarter, respectively.
4. Ms. Princess, a CPA, started a professional practice in early 2020 as a sole proprietorship. With increasing clients,
she was convinced of the need to have a partner. She met a handsome and passionate accountant, Mr. Patrick. So she
decided to admit Patrick into her professional practice on February 14, 2020. The partners agreed to share profits
equally. The firm registered a 2020 profit of Php 1,000,000 which is inclusive of Php 200,000 earned before February 14.
Compute the reportable gross income of Ms. Princess for 2020.
a. Php 200,000
b. Php 500,000
c. Php 600,000
d. Php 1,000,000
5. Mr. A is a self-published author. He prints his book and contracts National Book Store, a book publisher and
distributor, to market his book. He gives National Book Store a 30% discount off the total invoice price of his books.
During the month, National Book Store purchased a total of Php 3,000,000. Which is correct?
a. Mr. A shall withhold a final tax from the pre-agreed discounts of National Book Store.
b. National Book Store shall withhold a 10% final tax on Mr. A’s income.
c. Mr. A is subject to regular tax on his gross income.
d. None of these.
6. A law firm rendered professional services to ABC Company for a monthly retainer of Php 200,000 a month.
Which is true with respect to withholding taxes?
a. ABC shall not deduct any withholding taxes.
b. ABC shall deduct a 15% creditable withholding tax.
c. ABC shall deduct a 10% creditable withholding tax on the professional fees.
d. ABC shall deduct a 10% final withholding tax on the professional fees.
7. John qualified to the employee stock appreciation plan of his employer wherein he shall be entitled to buy
100,000 shares of its employer for Php 10 a share currently worth Php 25 a share. John immediately sold the share to a
buyer for Php 27 each, gross of 0.5% broker’s commission on sales. Compute the amount of supplemental compensation
income.
a. Php 0
b. Php 200,000
c. Php 1,500,000
d. Php 1,700,000
8. The monetized unused vacation leave credits of government employees is
a. Exempt from tax
b. Exempt to the extent of the first 10 days
c. Exempt to the extent of the excess over 10 days
d. Subject to tax
9. The monetized unused sick leave credits of private employees is

a. Exempt from tax
b. Exempt to the extent of the first 10 days
c. Exempt to the extent of the excess over 10 days
d. Subject to tax
10. Which is not part of the 13th month pay and other benefits?
a. Basic pay
b. Performance bonus
c. De minimis benefits within regulatory limits
d. All of these
11. Atty. Annalise Keating is a supervisory employee of NO CHEATING Company. During the calendar quarter, Atty.
Keating and her employer NO CHEATING made the following contributions to her SSS:
Atty. Keating NO CHEATING Company
Contributions made Php 18,000 Php 30,000
Required 11,880 24,120
Excess Php 6,120 Php 5,880
Which is incorrect with respect to the foregoing?

a. Atty. Keating can claim Php 36,000 as non-taxable compensation income.
b. Atty. Keating can claim Php 11,880 as non-taxable compensation income.
c. NO CHEATING Company shall pay fringe benefits tax on the Php 5,880 contribution.
d. NO CHEATING Company can claim as expense the Php 30,000 contribution to SSS.
12. Which is non-deductible against gross income?

a. Staff transportation expense
b. Client entertainment expense
c. Home repair expense
d. Vacation expense of the company president
13. A business partnership has the following data of income and expenses for 2020:
Gross income Php 2,400,000
Expenses Php 1,000,000
Partners A and B share profits and losses in the ratio of 80% and 20%, respectively. What is the total final tax to be
withheld on the profit sharing of partners A and B?
a. Php 0
b. Php 80,000
c. Php 98,000
d. Php 140,000
14. Which of the following is included in taxable compensation income?

a. Employee mandatory share in SSS, PhilHealth, and HDMF
b. De minimis benefits
c. Overtime pay
d. 13th month pay and other benefits not exceeding Php 90,000
15. Mr. Tan is engaged in the business of buying and selling of used cars. In the taxable year, he sold a used car to
his first cousin thereby incurring a loss of Php 50,000. Tan’s acquisition cost of the car was Php 100,000. Can Tan deduct
the loss in his income tax return in computing his income tax payable?
a. No. The loss is personal and is not connected with his business.
b. No. the loss is connected with his business, but the loss is between related parties under Section 36 (B) of the
Tax Code.
c. Yes. The loss is a capital loss which can be offset against capital gains that are includible in the income tax return.
d. Yes. The loss is connected with his business and is not between related parties.
16. A, not happy with her present job, resigned and started her own business. The business requires her to travel so
she used her car for the purpose. Assume that A started her business on April 1 and that she uses the car for business
70% of the time. Assuming total expenses for the year for the use of the car is Php 300,000, the deductible expense is?
a. Php 210,000
b. Php 157,500
c. Php 300,000
d. Php 225,000
17. I – An expense which is necessary but not ordinary, or ordinary but not necessary is deductible from gross
income.
II – The taxpayer must signify his intention to elect the itemized deduction otherwise, he is deemed to have chosen the
optional standard deduction.
a. True, true
b. True, false
c. False, true
d. False, false
18. One of the following losses cannot be deducted from gross income:
a. To construct a bigger warehouse, a corporation demolished an old warehouse which had a construction cost of
Php 2M and a book value of Php 300,000.
b. Demolition of a building existing on land purchased, where the corporation had no use for the building at the
time of purchase and it was its intention to remove the building in order to build its factory.
c. A corporation retired its machinery from the business because of the increase in the cost of production and the
failure of the machinery to meet the desired number of units of production.
d. A Corp. ascertained that its B Corp. stocks are worthless because of the total insolvency of B Corp.
19. XYZ Corporation purchased a residential house and lot with a swimming pool in an upscale subdivision and
required the company president to stay there without paying rent; it reasoned out that the company president must
maintain a certain image and be able to entertain guest at the house to promote the company’s business. The company
president declared that because they are childless, he and his wife would very well live in a smaller house. Was there a
taxable fringe benefit?
a. There was no taxable fringe benefit since it was for the convenience of the employer and was necessary for its
business.
b. There was a taxable fringe benefit since the stay at the house was for free.
c. There was a taxable fringe benefit because the house was very luxurious.
d. There was no taxable fringe benefit because the company president was only required to stay there and did not
demand free housing.
20. Which of the following statements is correct?

a. If the fringe benefit is taxable, the tax will be paid by the employer.
b. Fringe benefits may be given to managerial, supervisory, and rank and file employees.
c. Fringe benefit given to employees is subject to fringe benefit tax.
d. Fringe benefit given to employees is exempt from fringe benefit tax.

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Prelim Quiz No.

2. i. The point on which a tax is originally imposed is impact of taxation.

a. True, False, False, False

3. In case of doubt, tax exemptions are construed

4. Our tax laws are both

5. Which is not a power of the BIR Commissioner?

6. i. Equal protection of the law is the right of every taxpayer to be heard.

9. Which is not an essential characteristic of a tax?

11. The principal purpose of taxation is

13. The aspects of taxation are

14. This is a constitutional limitation on the power of taxation

15. Synonymous to tax evasion

17. As to scope of the legislative power to tax, which is not correct?

I. Problem-solving. Round-off your final answers to two decimal places.

2. Mr. B has the following income for 2020:

Compute the total income earned from sources:

4. Identify the tax due on the following passive income:

Compute the final income tax on passive income assuming Mr. D is a:

II. Multiple choice.

I. Problem solving. Round off final answers to two decimal places.

1. Taxpayer A has the following data for the year 2020:

Exchange rate for 1USD is Php 50.00

a. If Taxpayer A is a resident citizen, what would be the total amount of:

c. If Taxpayer A is a domestic corporation, what would be the total amount of:

Compute for the following:

Compute the following:

a. Both statements are true

3. As to scope of legislature power to tax, which of the following is correct?

7. Which of the following statements is incorrect?

9. Which of the following is correct?

a. Both statements are correct.

20. This is an inherent limitation on the power of taxation.

Midterm Activity No. 1

Compute the capital gains tax. 180,000.00

Compute the capital gains tax. 240,000.00

Compute the capital gains tax. 180,000.00

a. Compute the initial payment. 700,000.00

15. A sold his residential house under the following terms:

a. Compute the selling price. 1,000,000.00

Midterm Activity No. 2

I. Problem-solving. Round-off your final answers to two decimal places.

Determine the taxable income. 486,000.00

7. A farmer had the following data for the year:

Determine the income using the cash method of accounting. 205,000.00

SUMMER MIDTERM QUIZ 1

1. Tax as distinguished from license fee

2. Value-added tax is an example of

3. Which statement refers to police power as distinguished from taxation?

4. I – Tax exemptions are strictly construed against the government.

a. Only the first statement is correct.

5. I – Tax imposed outside the situs of taxation is void.

a. Only the first statement is correct.

14. A tax is invalid, except

15. Taxation is an inherent power because

16. All are essential characteristics of a tax, except

a. Only the first statement is correct.

18. I – A tax may be subjected to set-off or compensation.

a. Only the first statement is correct.

19. I – A tax bill may embrace more than one subject.

a. Only the first statement is correct.

20. I – Taxes may be used for sectarian purposes if allowed by an ordinance.

a. Only the first statement is correct.

21. I – There can be double taxation in the Philippines.