COMPREHENSIVE EXAM-INCOME TAXATION

Name :
Date :
1. Which is not a correct principle of individual income taxation?
a. Resident Filipino citizens are taxable on all income from sources within and without.
b. Non-resident citizens are taxable only on income from sources within.
c. Overseas contract workers are taxable only on income from sources without the Philippines.
d. An alien individual whether resident or not of the Philippines is taxable only on income from
within.
2. Which is not a correct principle of corporate income taxation?
a. Domestic Corporations are taxable on all income from within and without.
b. Resident Corporations and non-resident corporations are taxable on all their income from
Philippines.
c. Foreign Corporations are subject to 15% on their remittance to their head office abroad.
d. Non-resident corporations are not covered by the rule on MCIT.
3. On November 8, 2012, Mr. and Mrs. Tolentino sold their principal residence in Makati for P10,000.
The ff. must be met in order that the capital gains presumed to have been realized from such sale
may not be subject to capital gains tax, except:
a. They must use the proceeds of the said sale to acquire or construct a new principal residence
within 2 years from the date of sale.
b. They must inform the BIR of that intention within 30 days from the date of sale.
c. They can only avail of the said privilege once every ten years.
d. The historical cost or adjusted basis of the real property sold shall be carried to the new
principal residence built or acquired.
4. Which is an incorrect principle about withholding taxes?
a. Returnable income are income usually subject to creditable withholding tax.
b. Passive income are subject to final non-creditable withholding tax.
c. Special income like income subject to CGT are also subject to final non-creditable withholding
tax.
d. Fringe benefits are subject to final non-creditable withholding tax.
5. The following expenses are not allowed as deductions from gross income except;
a. Personal, living or family expenses.
b. Amounts paid out for new buildings or for permanent improvements or betterments made to
increase the value of the property.
c. Amounts expanded in restoring a property.
d. Premiums paid by a corporation or any life insurance policy covering the life of any of its officers
or employees.
6. Reno G. had the ff.transactions:
2011-Taxable income from her business P20,000
Dividends received:
From Resident Corp. P3,000
From Non-resident Corp. P1,000
Interest from bank deposits P10,000
Interest from trade receivables P4,000
Capital gains on assets held for 8 mos. P34,000
Capital loss on assets held for 12 mos. P70,000

2012 Taxable income from her business P140,000

Capital gains on assets held for 13 mos. P30,000
Capital loss on assets held for 7 mos. P6,000
Amount received as liquidating dividends P150,000
(Cost=P100,000)held for 19 mos.
The taxable income before personal exemptions in 2011 is:

a. 28,000
b. 36,000
c. 62,000
d. 0

7. The taxable income before personal exemptions in 2012 is:

a. 62,000
b. 71,000
c. 72,000
d. 146,000
8. If the taxpayer is a corporation, the taxable income in 2011 is:

a. 28,000 c. 62,000
b. 36,000 d. 0

9. If the taxpayer is a corporation, the taxable income in 2012 is:

 a. 78,000 c. 86,000
b. 214,000 d. 49,000

10. The following fringe benefits are not taxable except:

a. Those which are authorized and exempted under special laws
b. Contributions of the employer for the benefit of the employee to retirement, insurance,
hospitalization, benefit plans, holiday and vacation expenses.
c. Those benefits given to rank and file employees.
d. De minimis benefits
11. All of the ff. fringe benefits are not taxable except:
a. De minimis benefits
b. Benefits given to clerk of the company
c. Those authorized and exempted under contractual agreements
d. Contributions of the employer for the benefit of the employee to retirement, insurance and
hospitalization
12. All are exempted from IAET tax except:

a. Banks & non-banking financial b. Life insurance companies

institutions c. Private educational institutions
d. Taxable partnership

13. All are exempted from MCIT tax except:

a. Hospitals c. Offshore banking units

b. International carriers d. Resident foreign corporations

14. Which of the ff. is a method of accounting for income determination in farming?

a. Cash basis c. Crop basis

b. Accrual basis d. All of the above

15. A taxpayer provided the ff.data

16. Sales (net of P1M discounts and returns) P10M
17. COGS P4M
18. Operating expenses P2M
19. Royalty Income P1M
20. Using OSD, the taxable net income if the taxpayer is a corporation is

a. 3,600,000 c. 5,900,000
b. 4,200,00 d. 6,450,000

21. Using OSD, the taxable net income if the taxpayer is an individual, married w/ 5 minor children is:

a. P5,900,000 c. P3,600,000
b. P5,850,000 d. P5,450,000

22. The whole amount of income realized by the employee which includes the net amount of money or
net monetary value of property which has been received plus the amount of fringe benefit tax due
thereon

a. Grossed-up monetary value c. Fringe benefit tax

b. De minimis benefit d. Fringe benefit

23. Which statement is wrong? The fringe benefit tax is:

a. Withheld at source c. Imposed on the employee

b. Imposed on the employer d. Deductible by the employer

24. The grossed up monetary value of fringe benefit subject to fringe benefit tax received by a non-
resident alien individual not engaged in trade or business in the Philippines is computed by dividing
the monetary value of the fringe benefit by

a. 15% c. 85%
b. 25% d. 75%

25. The employer subject to the fringe benefit tax may be a/an

a. Corporation c. Professional partnership

b. Individual d. All of the above

26. Any good, service, or other benefit furnished or granted by an employer in cash or in kind in
addition to basic salaries, to an individual employee(except rank and file employee)
 a. Fringe benefit c. De minimis benefit
b. Fringe benefit tax d. Grossed-up monetary value

27. Which is not correct? The P82,000 limit on gross benefits of employees

a. Include Christmas bonus. d. Does not include employees of private

b. Include productivity incentive pay. entities.
c. May be increased by the Secretary of
Finance.

28. Which is not compensation?

a. Non-exempt pensions, retirement and separation pay
b. Living quarters and meals in addition to salary
c. Tips and gratuities when not accounted for by the employee to the employer
d. None of the above
29.
30. Which of the ff. is taxable?

a. Lotto winnings d. Interest on long-term deposit or

b. Prize exceeding P10,000 investment
c. Gain on sale of 10-year bond

31. Income from whatever source includes all other income not expressly exempt under the laws.
Which does not belong?
a. Bad debts written off then recovered
b. Moral damages for slander
c. Income from gambling
d. All of the above
32. When an individual dies, future income on his property will be taxed to:
a. The individual himself
b. The estate itself after the heirs have received the property
c. Those who inherit the property after they receive the property
d. None of the above
33. The general term applies to all persons or corporations that occupy positions of peculiar confidence
towards others, such as trustees, executors, guardians, or administrators, receivers, or
conservators:

a. Grantor c. Fiduciary
b. Trustor d. Beneficiary

34. The person for whose benefit the trust has been created.

a. Trustor c. Fiduciary
b. Grantor d. Beneficiary

35. Mr. BFG passed away on June 30, 2015. His estate, which is under judicial settlement, accumulated
P800,000 gross income for the remaining half of the year. Deductions attributable to the income
amount to P400,000. How much is the tax payable by the estate for 2012?

a. 800,000 c. 380,000
b. 400,000 d. 89,000

e.
36. Lady M. created two irrevocable trusts naming her favorite granddaughter, Saharah as beneficiary
of both trusts. It is provided in the document that starting the year 2012, when Saharah turns 18,
she is to receive 25% of the net income of both trusts for her education. Below are additional
information:
f. Trust 1 Trust 2

g. Gross income P600,000 P900,000

h. Deductions P180,000 P280,000
i. The estate or trust is allowed a personal exemption of:
a. 20,000
b. 40,000
c. 50,000
d. 25,000
37. How much is the consolidated tax due?
a. 760,000
b. 208,200
c. 260,000
d. 1,500,000
38. How much is the share of each trust on the consolidated tax due?
 a. 84,080 and 124,119
b. 306,923 and 453,077
c. 105,000 and 155,000
d. 605,769 and 894,230
39. A domestic corporation has the ff. data for the year 2000(4th year of operation)
j. Sales P5,000,000
k. Cost of sales P1,500,000
l. Business expense P800,000
m. Dividend from domestic corporation P50,000
n. Selling price of land classified as
o. capital asset(cost, 3,500,000) P4,000,000
p. Interest on Philippine currency bank deposit P40,000
q. Dividend declared and paid P500,000
r. Tax paid for the first three quarters P150,000
s. The BIR upon investigation, found out that there is improper accumulation of earnings.
t. The normal income tax of the corporation is:
a. 70,000
b. 1,050,000
c. 810,000
d. 270,000
u.
v.
40. The Improperly accumulated earnings tax is:
a. 167,800 c. 517,800
b. 187,000 d. 173,200
41. Zaidia corporation, a domestic corporation had the ff. data for the taxable year 2010:
42. Sales P5,000,000
43. Cost of goods sold P2,000,000
44. General selling and administrative expenses P500,000
45. Interest income from Philippine bank deposit P100,000
46. Rental income(net of 5% w/holding tax) P190,000
47. Dividend income:
48. From domestic corp. P60,000
49. From foreign corp. P50,000
50. Winnings from charity sweepstakes P1,000,000
51. Capital gains from sale of domestic shares
52. of stocks sold directly to buyer P P75,000
53. Dividend declared & paid during the year P500,000
54. Retained earnings, beginning of the
55. year (subject to IAET last year) P1,000,000
56. Note: The Board of Directors approved a resolution reserving P1,500,000 of its net profit for the
year for plant expansion.
57. The normal income tax after tax credit if any is:(6points)
a. 825,000
b. 815,000
c. 899,200
d. 819,200
58.Based on the foregoing problem, the Improperly accumulated earnings tax is:(6points)
a. 208,125 c. 113,625
b. 108,125 d. 105,125
e.
59. Haidia corporation, an educational institution provided the ff.data for the taxable year 2010:
f. Income from tuition fees P2,500,000
g. School miscellaneous fees P1,000,000
h. Dividend income:
i. Domestic corp P2,000,000
j. Foreign corp P2,000,000
k. Rent income(net of 5% w/holding tax) P1,900,000
l. Operating expenses P4,000,000
m.
n. The income tax due of the school is: (5points)
a. 1,050,000 c. 950,000
b. 350,000 d. 750,000
60. RICO an official of ABC Corporation asked for an earlier retirement because he was emigrating to
Canada, he was paid P2M separation pay in recognition of his valuable services to the corporation
plus P200,000 13th month pay. JEKKY, another official was separated for his falling eyesight. He was
given P1M separation pay. JUAN was separated for occupying a redundant position. He was given
P500,000 separation pay. BENJIE opted to retire at 55years old. After working for 10 years in the
same company. He received P1M. All of them except Benjie were not qualified to retire under the
BIR approved pension plan. The total income subject to withholding tax on the above payment is:
(5points)
a. 2,200,000 c. 3,000,000
b. 2,118,000 d. 4,000,000
 e.
f. TRUE or FALSE(2points each)
1. When disposing of a property, the nature of the same, i.e, a capital asset or an ordinary
asset, does not matter because capital and ordinary assets are given the same tax
treatment.
2. Net capital gain is the excess of the gains from sales or exchanges of capital assets over the
losses from such sales or exchanges while net capital loss is the excess of the losses from
sales or exchanges of capital assets over the gains from such sales or exchanges.
3. Ordinary gain includes capital gains such as those derived from the performance of services,
whether personal or professional, and those accruing from business.
4. Stocks held by dealers in securities are classified as capital assets.
5. Capital gains realized during each taxable year by the individuals or corporations from sale,
exchange or disposition of shares of stock in any domestic corporation not traded through a
local stock exchange are subject to final tax of 5% for the first P100,000, and 10% for the
amount in excess of P100,000.
g.
h.
i. Prepared By:
j. Karen May M. Jimenez
k.
l.
m.
n.
o.
p. Graduated Income Tax Schedule