SET- B

ST. PAUL UNIVERSITY SURIGAO

Cor. San Nicolas & Rizal Streets
8400 Surigao City, Philippines

COLLEGE OF BUSINESS & TECHNOLOGY

REMOVAL/QUALIFYING EXAMINATION

Subject: INCOME TAXATION

Name: Date:
INSTRUCTION: Read the questions carefully. Use the bubble sheet and shade the circle that corresponds to your
answer for each question. Avoid erasures.
1. Statement 1: A state has the power of tax even if not granted by the constitution
Statement 2: A state cannot exercise police power if not granted by the constitution
A. If only second statement is correct. C. If only first statement is correct.
B. If both statements are correct. D. If both statements are incorrect.

2. Statement 1: An exercise tax is also called privilege tax.

Statement 2: A tax which is neither personal nor property, is an excise tax.
A. If only first statement is correct. C. If only second statement is correct.
B. If both statements are incorrect D. If both statements are correct.

3. Statement 1: All of our tax laws are statutory laws.

Statement 2: The non-impairment clause is a statutory law on taxation.
A. If only first statement is correct. C. If only second statement is correct.
B. If both statements are incorrect D. If both statements are correct.

4. Statement 1: taxes may be used for sectarian purposes if allowed by an ordinance.

Statement 2: The President can refuse to implement a tax law if it appears to be unconstitutional.
A. If only first statement is correct. C. If only second statement is correct.
B. If both statements are incorrect D. If both statements are correct.

5. Statement 1: A tax may include the power to destroy.

Statement 2: A tax may be imposed violating uniformity of taxation.
A. If only second statement is correct. C. If only first statement is correct.
B. If both statements are correct. D. If both statements are incorrect.

6. Our tax laws are:

A. Political in nature. B. Civil in nature. C. Penal in nature. D. Social in nature.

7. A tax is invalid, EXCEPT:

A. Theory of taxation and its purpose are disregarded. C. Basis of taxation is not recognized.
B. Inherent and constitutional limitations are not observed. D. It results to double taxation.

8. Below are characteristics of a sound taxation system,

EXCEPT:
A. Administrative feasibility and compliance. C. fiscal adequacy
B. Theoretical justice D. Uniformity of taxation

9. Taxation is equitable in all of the following, EXCEPT:

A. Its burden falls on those better to pay C. It is based on ability to pay.
B. It is based on benefits received. D. It is based on uniformity rule.

10. A tax which is BOTH under taxation and Police Power:

A. Compensatory Tax B. National Tax C. Regulatory Tax D. General Tax

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 11. The taxpayer is a domestic corporation:
Gross sales P9,350,000
Sales return and allowances 250,000
Sales discounts 100,000
Interest income on trade notes receivable 150,000
Other income 50,000
Cost of sales 3,000,000
Operating expenses with vouchers and receipts 4,000,000
Operating expenses without vouchers and receipts 500,000
Interest income from saving deposit 80,000
Interest income from deposit under FCDS 125,000
Royalty income 100,000
Taxable income using itemized deduction
A. P1,675,000 B. P2,175,000 C. P1,700,000 D. P2,200,000
12. One of the following is NOT a source of our tax laws:
A. Administrative rulings and opinions C. Judicial decisions
B. 1987 Constitutions D. Expert Opinion on Taxation

13. The theory which most justifies the necessity of taxation:

A. Protection and benefits theory C. Revenue purposes theory
B. Lifeblood theory D. Ability to pay theory

14. In case of conflict between the tax code and generally accepted accounting principles (GAAP):
A. Both tax codes and GAAP shall be enforced C. GAAP shall prevail over tax code
B. Tax code shall prevail over GAAP D. The issue shall be resolved by the courts.

15. 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

16. Imposed based on the control and superiority of one country over another.
A. TITHE B. TRIBUTE C. TAX D. TOLL

17. All are objectives of taxation except:

A. Revenue purpose B. Regulation C. Increase of social inequity D. Encourage economic growth

18. The National Internal Revenue Code is also known as:

A. Republic Act 9337 B. Republic Act 8424 C. Presidential Decree 1158 D. Executive Order 464

19. What is required to make BIR ruling of first impression a valid one, except?
A. Must be reasonable and within the authority conferred. C. Must be published.
B. Must be germane to the purpose of the law. D. Must be prospective in application

20. The following are the powers of BIR except:

A. The assessment and collection of all national internal revenue taxes.
B. The execution of all judgements in all cases decided in its favor by the CTA and the ordinary courts.
C. The enforcement of all forfeitures, penalties and fines connected with national internal revenue taxes.
D. The assessment and collection of some customs duties.

21. which of the following is not considered as one of the characteristics of special assessments?
A. It is based solely on the benefit derived by the owners of the land.
B. It is levied only on land
C. It is based on the government’s need of money to support its legitimate objectives
D. It is not personal liability of the person assessed.

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 22. This rule is not applicable on the construction of tax laws
A. If the law is repealed, taxes assessed before repeat 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 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.

23. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, issued a Revenue
Regulation using gross income as the tax base for corporations doing business in the Philippines. Is the
Revenue Regulation valid?
A. Yes, the Secretary of Finance has the power to issue rules and regulations
B. Yes, gross income taxation over corporations is valid
C. No, Secretary of Finance has virtually amended the NIRC
D. No, only the Commissioner of the BIR has the authority to make revenue rules and regulations.

24. 1st Statement: 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.
2 Statement: The CIR may examine the bank records of the deceased in order to determine the latter’s
nd

taxable net estate.

A. True; False B. False; True C. True; True D. False; False

25. What is the rule on the taxability of income that a government educational institution derives from its school
operations? such income is
A. Subject to 10% tax on its net taxable income as if it is a propriety educational institution,
B. Exempt from income taxation if it is actually, directly and exclusively used for educational
purposes.
C. Subject to the ordinary income tax rates with respect to incomes derived from educational activities.
D. Exempt from income taxation in the same manner as government-owned and controlled corporations.

26. The taxpayer is a domestic corporation:

Gross sales P9,350,000
Sales return and allowances 250,000
Sales discounts 100,000
Interest income on trade notes receivable 150,000
Other income 50,000
Cost of sales 3,000,000
Operating expenses with vouchers and receipts 4,000,000
Operating expenses without vouchers and receipts 500,000
Interest income from saving deposit 80,000
Interest income from deposit under FCDS 125,000
Royalty income 100,000
Taxable income using OSD
A. P3,755,000 B. P5,470,000 C. P3,695,000 D. P3,720,000
27. 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 C. Collect the tax levied under the law
B. Identify who should collect the tax D. Determine who should be subject to the tax

28. B, an Expert Physicist was hired by a Philippines corporation to assist in its organization and operation for
which he had to stay in the Philippines for an indefinite purpose which in its nature would require an extended
stay and to that end makes his home temporarily in the Philippines. The American management expert intends
to leave the Philippines as soon as his job is finished. For income tax purposes, the American management
expert shall be classified as:
A. Resident alien. C. Nonresident alien engaged in trade or business.
B. Nonresident alien not engaged in trade or business. D. Resident citizen.

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 29. Filipino as well as alien employees of regional or area headquarters established in the Philippines by
multinational companies shall be subject to final tax of 15% of gross compensation income in the Philippines.
Generally, nonresident aliens not engaged in trade or business are subject to 25% final tax on their gross
income in the Philippines.
A. True, True B. True, False C. False, False D. False, True

30. A nonresident alien deriving income from Philippines sources claims that he is entitled to personal
exemptions. Which of the following is not a condition for the allowance of personal exemptions to said
nonresident citizen?
A. That he has stayed in the Philippines for an aggregate period of more than 180 days.
B. That his country has an income tax law that allows personal exemptions to Filipinos not residing therein.
C. That he has filed a true and accurate return of his total income from all sources within the Philippines.
D. That he is married to a Filipina.

31. Which of the following is incorrect?

A. A price of P 10,000 is subject to 20% final tax.
B. Winnings from the Philippines Charity Sweepstakes are exempt from income tax.
C. Royalties in books, literary works and musical composition are subject to 10% final withholding tax.
D. Interest income from long term deposit es exempt from income tax.

32. The following individual are required to file an income tax return, except:
A. Non-resident alien engaged in trade or business C. Resident citizen
B. Non-resident alien not engaged in trade or business D. Non-resident citizen

33. A, married to M had the following during the taxable year:

Gross Income
From the practice of profession P700,000
Rental income of their conjugal property 300,000
Allowable deductions
For the practice of profession 520,000
For the property rented to tenants 140,000
The taxable income before exemptions of Mr. A is
A. P340,000 B. P180,000 C. P260,000 D. P170,000

34. An example of a tax where the concept of progressivity finds application is the
A. Income tax on individuals C. Excise tax on petroleum products
B. Value-added tax on certain articles D. Amusement tax on boxing exhibitions

35. In computing net income, no deduction shall in any case be allowed in respect to, except:
A. Personal, living or family expenses.
B. Any amount paid out for new buildings or for permanent improvements, or betterment made to increase
the value of any property or estate.
C. Any amount expended in restoring property or any making good the exhaustion thereof which an
allowance is or has been made.
D. Premiums paid on any life insurance policy covering the life of any officer or employee, when the
immediate family members of such employee are directly the beneficiary.

36. Cash dividend received by a domestic corporation from a domestic corporation is

A. Exempt from income tax C. Subject to final tax
B. Part of taxable income D. Partly exempt, partly taxable

37. 1st Statement –Laundry allowance not exceeding P300 per month is exempt de minimis benefit.
2nd Statement –Medical cash allowance to dependants of employee not exceeding P750 per employee per
semester or one hundred twenty five pesos (P125) per month is exempt de minimis benefit.
A. True; False B. False; True C. True; True D. False; False

38. In case of foreign travel of employees for the purpose of attending business meeting or conventions:
1st Statement –Such travel expenses shall not be treated as taxable fringe benefits regardless of its amount.

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 2nd Statement –The cost of economy and business class airplane ticket shall not be subject to the fringe
benefit tax. However, 30 percent of the cost of first class airplane ticket shall be subject to the fringe benefit
tax.
A. True; False B. False; True C. True; True D. False; False

39. Who is subject to the fringe benefit tax?

A. An employer of rank and file employees C. Managerial or supervisory employees
B. An employer of managerial or supervisory employees D. Rank and file employees

40. What is not a characteristic of the fringe benefit tax?

A. A final tax C. An income tax
B. Payable by the employer D. Imposed upon the monetary value of benefits

41. Which is subject to fringe benefit tax?

A. Premiums of employee group insurance
B. Expenses of business travels
C. Housing for an employee to ensure his immediate availability
D. Housing for the family members of an employee

42. Kalibo Company purchased a residential unit for P3,000,000 and transferred ownership to its supervisory
employee. The property has a zonal value of P3,500,00. Compute the monetary value.
A. P3,000,000 B. P3,500,000 C. P1,750,000 D. P175,000

43. Danao bought a car worth P800,000 and registered it in the name of its supervisory employee. It was agreed
that the same will be used partially for the business of Danao. What is the fringe benefit tax assuming the
employee is a non-resident alien?
A. P376,471 B. P266,667 C. P188,235 D. P133,333

44. When will compromise penalties is not allowed?

A. Failure to preserve or keep books of accounts and accounting records
B. Failure to keep books of accounts or records in a native language or in English
C. Failure to have books of accounts audited and have financial statements attached to income tax return
certified by an independent CPA
D. Keeping two (2) sets of books of accounts or records.

45. A compromise for a tax liability on the ground of financial incapacity to pay shall involve a payment of tax
from the taxpayer at a minimum compromise rate of
A. 10% of the basic assessed tax C. 20% of the basic assessed tax
B. 30% of the basic assessed tax D. 50% of basic assessed tax

46. An assessment shall become final if not protested administratively, if such protest is not filed with the BIR,
from receipt of the assessment within
A. 30 days B. 90 days C. 60 days D. 180 days

47. Where a return was filed, as a general rule, the prescriptive period for assessment after the date the return was
due or was filed, whichever is later, is within
A. 3 years B. 7 years C. 5 years D. 10 years

48. Date of payment of tax erroneously paid April 15, 2017

Date a claim for refund was filed January 15, 2018
Date decision of denial by the BIR was received September 15, 2018
If date of decision of denial by the BIR was received on March 31, 2019, the last day to appeal to the
CTA is
A. April 30, 2016 B. March 31 2017 C. April 15, 2016 D. may 30, 2017

49. Date assessment was received March 8, 2018

Date petition for reconsideration was filed with the BIR March 28, 2018
Date of filing of documents to support the petition May 8,2018
No decision on the protest is received as of October 30, 2018
The last day to appeal to the CTA is
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 A. April 15, 2019 B. December 6, 2018 C. November 8, 2018 D. November 30, 2018

50. The following are grounds to cancel a tax liability by the commissioner, except
A. The tax is unjustly or excessively assessed
B. The administration and collection costs involved do not justify the collection of the amount
C. A reasonable doubt as to validity of the claim against the taxpayer
D. Illegal collection of tax

51. Commissioner of BIR may compromise any internal revenue tax when, except one
A. A reasonable doubt as to the validity of the claim against the taxpayer exists
B. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
C. The tax any portion thereof appears to be unjustly or excessively assessed
D. The taxpayer has been granted by the SEC or by any competent tribunal a moratorium or suspension
of payments to creditors, or otherwise declared bankrupt or insolvent

52. The powers and duties of the Bureau of Internal Revenue comprehend the following, except?
A. Assessment and collection of all national and local revenue taxes.
B. Enforcement of all forfeitures, penalties and fines in connection connected with the collection of
national internal revenue taxes.
C. Execution of judgement in all cases decided in its favor by the Court of Appeals, and the ordinary
courts.
D. Effecting and administrating the supervisory and police powers conferred to it by the Tax Code or
other laws.

53. The power referred to above is subject to the exclusive appellate jurisdiction of the
A. Commissioner of Internal Revenue C. Regional Trial Court
B. Secretary of Finance D. Court of Tax Appeals

54. For a finding of “filing a fraudulent return” by the BIR prosper:

Statement 1: Fraud must be intentional, consisting of deception willfully and deliberately done or
resorted to in order to avoid payment of the tax.
Statement 2: Fraud cannot be presumed but must be proved. fraudulent intent cannot be deducted from
mistakes however frequent they may be, especially if such mistakes emanate from erroneous
classification of items in accounting methods utilized for determination of tax liabilities.
A. True; False B. False; True C. True; True D. False; False

55. 1st Statement- 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.
2nd Statement- The CIR may examine the bank records of the deceased in order to determine the latter’s
taxable net estate.
A,. True; False B. False; True C. True; True D. False; False

56. 1st Statement- generally, interval revenue taxes shall be assessed within three years after the last day
prescribed by law.
2nd Statement- If the return was amended substantially, the counting of the period starts from the date the
amended return was filed.
A. True; False B. False; True C. True; True D. False; False

57. The following are the powers of the BIR, except:

A. The assessment and collection of all national internal revenue taxes.
B. The execution of all judgements in all cases decided in its favor by the CTA and the ordinary courts.
C. The enforcement of all forfeitures, penalties and fines connected with national internal revenue taxes.
D. The assessment and collection of some customs duties.

58. 1st Statement- The CTA may sit in banc or in three divisions each divisions consisting of 3 justices.
2nd Statement: The Court of Tax appeals, now treated as having the same level as the Court of
Appeals, shall be composed of 1 presiding justice and 8 associate justices.
A. True; False B. False; True C. True; True D. False; False

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 Questions 70- 75. Taxpayer received the following income in 2018..
a.. Rent Philippines P20,000
b. Rent, Hongkong 40,000
c. Interest, peso deposit, PNB 20,000
d. Interest, US$ deposit, PNB ($2,000xP40) 80,000
e. Interest, deposit in Hongkong (HK$ 2,000xP5) 10,000
f. Prize (cash) won in a local contest 16,000
g. Prize (TV) won in a local lottery valued at 30,000
h. Prize won in contest in US 60,000
i. Lotto winning in US 20,000
j. Dividends, domestic company 120,000
Determine the taxable income if taxpayer is:
59. A resident citizen
A. P416,000 B. P166,000 C. P370,000 D. P296,000

60. A nonresident citizen

A. P166.000 B. P20,000 C. P416,000 D. P36,000

61. A nonresident alien

A. P156,000 B. P66,000 C. P286,000 D. 36,000

62. A nonresident alien (ETB

A. P156,000 B. P66,000 C. P286,000 D. 36,000

63. A nonresident alien (not ETB)

A. P206,000 B. P66,000 C. P286,000 D. P156,000

64. The chief officials of the BIR shall be composed of:

A. 1 Commissioner and 6 Deputy Commissioners
B. 1 Commissioner and 5 Deputy Commissioners
C. 1 Commissioner, 2 Assistant Commissioner and 2 Deputy Commissioners
D. 1 Commissioner and 7 Deputy Commissioner.

65. What are the means employed in the assessment of taxes, EXCEPT?
A. Examination of tax returns (tax audit)
B. Inventory taking surveillance and use of presumptions gross sales or receipts;
C. Prescription of real property values;
D. Examination of bank deposits;
E. requiring of additional documentary evidences.

66. For purposes of computing the MCIT, which will not form part of cost of goods sold for traders:
A. Invoice cost B. Freight C. Import duties D. Wharfage

67. What is the effect on the tax liability of a taxpayer who does not protest an assessment for deficiency taxes?
A. The taxpayer may appeal his liability to the CTA since the assessment is a final decision of the
Commissioner on the matter.
B. The BIR could already enforce the collection of the taxpayer’s liability if it could secure authority from
the CTA.
C. The taxpayer’s liability becomes fixed and subject to collection as the assessment becomes final and
collectible.
D. The taxpayer’s liability remains suspended for 180 days from the expiration of the period to protest.

68. In filing a protest with the Bureau of Internal revenue, what remedies may be availed by the taxpayer
simultaneously?
A. Reinvestigation or abatement; C. Reinvestigation or compromise;
B. Reinvestigation or reconsideration; D. Reinvestigation or review.

69. For purposes of computing the MCIT, which will not form part of cost of goods sold if the taxpayer is a
seller of services: which will not form part of cost of services?
A. Salaries & supplies B. Employee benefits C. Depreciation & rental expenses D. Interest expense
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 70. To record application of excess MCIT vs. NORMAL income tax, what account is credited:
A. Income tax payable B. Retained earnings C. Cash in bank D. Deferred charges MCIT

71. 1st Statement: Non stock-non-profit corporation are tax-exempt from their income from all operations.
2nd Statement: Intercorporate dividends are tax-exempt if the recipient is a foreign corporation.
A. True; True B. False; True C. False; False D, True; False

72. 1st Statement: Foreign income tax may be treated by a corporate taxpayer as tax credit but not as deduction
from gross income. 2nd Statement: Being a holding company is conclusive evidence of improper accumulation
of profit.
A. True; True B. True; False C. False; False D. False; True

73. The IAE tax is essentially a:

A. General tax B. Regulatory or Penalty tax C. Property tax D. Excise tax

74. The following corporations are exempt from the Minimum Corporate Income Tax, except:
A. Non-profit hospitals C. Proprietary educational istitutions
B. Non-stock, non—profit educational institutions D. Resident corporations

75. In 2018 Cable Corp., a calendar –year corporation, contributed P80,000 to a qualified charitable organization.
Cable’s 2018 net income was P820,000. In 2018, what amount can Cable deduct as charitable contributions?
A. P80,000 B. P41,000 C. P45,000 D. P51,000

76. Premium paid for health and hospitalization insurance shall be allowed as a deduction.
A. The claim does not exceed two thousand five hundred pesos (P2,500) per year.
B. Must be claim by each spouse separately.
C. Gross income of the family does not exceed two hundred fifty thousand pesos (P250,000).
D. The amounts of premium payment claimed is not exceeding two hundred fifty pesos (P250) a month.

77. Williams, a domestic corporation had the following data

Taxable Year Gross Income Deductions
2018 1,000,000 1,100,000
2019 980,000 500,000
The income tax payable in 2018 is:
A. P20,000 B. P380,000 C. P 0 D. P100,000

78. Resident international carriers are taxed on gross Philippine billing at

A. 2 ½% B. 7 ½% C. 5% D. 10%

79. ABC Corporation sold a real property in Malolos, Bulacan to XYZ Corporation. The property has classified
as residential and with a zonal valuation of P1,000 per square meter. The capital gains tax was paid based on
the zonal value. The Revenue District Officer (RDO) , however, refused to issue the Certificate Authority
Registration for the reason that based on his ocular inspection the property should have a higher zonal
valuation determined by the Commissioner of Internal Revenue because the area is already a commercial
area. Accordingly, the RDO wanted to make a recomputation of the taxes due by using the fair market value
appearing in a nearby bank’s valuation list which is practically double the existing zonal value. What values
must the RDO use as the basis for determining the capital gains tax?
A. Fair Market Values or Zonal Values which ever is higher.
B. Fair Market Values or Gross Selling Price which ever is higher.
C. Fair Market Value or Assessed Values which ever is higher.
D. Fair Market Value or Bank’s Valuation which ever is higher.

80. Ayer Domestic Corporation hired Velayo, Gorres and Santos accounting firm to conduct its annual audit for
the year 2018. Ayer corporation paid VGS & Co., an engagement fees equivalent to Php 100 Million. Such
payment to VGS & Co. Shall be:
A. Subject to 1% withholding tax on its gross payment.
B. Subject to 2% withholding tax on its gross payment.
C. Subject to 5% withholding tax on its gross payment.
D. Exempt from withholding tax.
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 81. Agustos is a Greek company that manufacturers keratonin. Its Philippine exclusive distributor is Loom
Industries Philippines Incorporated. Agustos receives royalty income from sources within the Philippines. As
a Certified Public Accountant, which of the following is correct with regard to the applicable tax impose upon
the royalty income?
A. Subject to final withholding tax of 10%. C. Subject to final withholding tax of 20%.
B. Subject to final withholding tax of 30%. D. Subject to final withholding tax of 15%.

82. For purposes of computing the MCIT, which will not form part of cost of goods sold for traders:
One of the following is not excluded from gross income.
A. Amounts received by insured as return of premium
B. Life insurance proceeds
C. Compensation for injuries as sickness
D. Share in the net income of a general professional partnership

83. Cash dividend received by a domestic corporation from a domestic corporation is

C. Exempt from income tax C. Subject to final tax
D. Part of taxable income D. Partly exempt, partly taxable

84. In a year, ABC Corp. paid total premiums of P1,000 for the life insurance policy of the vice president, where
the beneficiary is the corporation. At the end of the year, ABC received dividend of P100 because of the
policy. The corporation should indicate a claim for a deduction for life insurance premium of
A. P1,000 B. P1,100 C. P900 D. Zero

85. Which statement is wrong? The gross income tax:

A. Is optional to a qualified corporation.
B. Available only if the ratio of cost of sales does not exceed fifty-five per cent of gross sales or receipts
from all sources.
C. The choice shall be irrevocable for three consecutive years that the corporation is qualified under the
scheme.
D. Is always computed to compare with the normal income tax and minimum corporate income
tax.

86. All, except one, of the following, are not subject to the improperly accumulated earnings tax. Which is the
exception?:
A. Publicly-held corporations. C. Banks and other nonbank financial intermediaries.
B. Insurance companies. D. Service enterprises.

Questions 98 to 100.The following are the records of a domestic corporation:

2016 2017 2018
Gross sales P3,300,000 2,340,000 825,000
Cost of sales 2,400,000 1,010,000 380,000
Dividend-resident foreign 140,000 - 32,000
Interest income on notes receivable 28,000 16,400 -
Capital gain (short term) - 13,000 18,500
Capital loss (long-term) 20,000 - 22,000
Business expenses 1,475,000 1,025,000 459,000
87. The taxable income / (loss) in 2016
A. P(575,000 B. P(407,000) C. P(427,000) D. P(1,068,000
88. The taxable income /(loss) in 2017
A. P0 B. P274,400 C. P(132,600) D. P254,400
89. The taxable income /(loss) in 2018
A. P18,000 B. P0 C. P170,600 D. P18,000
90. Atty. Cahayon acquired a property for use in his business. After a devastating typhoon, the machinery
suffered partial damage. The following were made available:
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 Cost P500,000
Accumulated depreciation 300,000
Restoration cost 250,000
Estimated useful life 5 years
How much is the deductible loss?
A. P0 B. P200,000 C . P250,000 D. P100,000
91. In 2018, a taxpayer’s residence was totally destroyed by fire. The property had an adjusted basis and a fair
market value of P1,300,000 before the fire. During 2018, the taxpayer received insurance reimbursement of
P1,200,000 for the destruction of his home. Taxpayer’s 2018 adjusted income was P700,000. The taxpayer’s
has no casualty gains during the year. What amount of the fire loss was the taxpayer entitled to claim as an
itemized deduction in 2018 tax return?
A. P0 B. P85,000 C. P85,000 P100,000
92. A taxpayer has a business property having an adjusted basis of P1,000,000. It is completely destroyed by fire
in 2018 but compensated by an insurance claim for P800,000. How much is the deductible loss?
A. P1,000,000 B. P800,000 C. P200,000 D. P100,000
93. One of the following is deductible from gross income
A. Personal living and family expenses
B. Amount paid out for new building or for permanent improvement or betterment, made to increase the
value of property or estate.
C. Losses from sales or exchanges directly or indirectly between members of the family
D. Gross-up monetary value of fringe benefits.
94. Which of the following is not deductible from business income?
A. Casual losses on properties connected in the conduct of trade or business.
B. Loss of business property due to embezzlement.
C. Loss on exchange of capital assets
D. Net operating loss carry over
95. Which of the following statements regarding NOLCO is incorrect?
I. The source of operating loss carry-over (NOLCO) is from the ordinary trade and business of the
taxpayer.
II. NOLCO is not applicable against MCIT
III. The three (3) year reglementary period on the carry-over of NOLCO shall continue to run
notwithstanding the fact that the corporation paid its income tax under the Minimum Corporate
Income Tax (MCIT) computation.
A. II only B. II and III only C. All of the above D. None of the above
96. The following are requisites in the carry-over of NOLCO, except
A. There must be no substantial change in the ownership of the business
B. Carry-over is not allowed if the corporation is subject to MCIT during the taxable year
C. Even if the corporation is paid based on MCIT, the running of the prescriptive period is not interrupted.
D. The carry-over is good for one (1) year.
97. Alpha company was mere with Beta, Inc., and only the latter continues to exist. Mr. Masinop a stockholder of
Alpha company was ask to surrender his 100 shares that he acquired for P1,000,000 and received under the
merger 100 shares of Beta, Inc. with a fair market value of P1,300,000 and a cash of P300,000. The gain to
Mr. Masinop on the merger was
A. P600,000 B. P300,000 C. P200,000 D. P100,000
98. What would be the allowable deduction for P8,000 contribution made by a resident citizen to a religious
organization from his P70,000 net income after contribution?
A. P3,5000 B. P7,000 C. P7,800 D. P8,000

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 99. A Domestic corporation has the following data on income and expenses
Gross business income P6,200,000
Deduction including SSS and Philhealth contribution of P150,000 2,500,000
Contribution to Government-priority project P100,000
Contribution to foreign private foundation P100,000
Contribution to domestic charitable organization P190,000
How much is the total deductible charitable and other contributions?
A. P390,000 B. P290,000 C. P285,000 D. P211,000

100. Research and development deduction shall not be apply to

I. Any expenditure for the acquisition or improvement of land, or for the improvements of property to be
used in connection with research and development of a character which is subject to depreciation and
depletion.
II. Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, quality
of any deposit or one or other mineral, including oil and gas.
A. I only B. II only C. Both I and II D. Neither I nor II

END

GOOD LUCK!

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