TAXATION REVIEW

Final Income Tax

1. Interest on deposits with:
BPI Family Bank 1,000,000
A local offshore banking unit of a foreign bank 2,000,000

How much tax should be paid from the aforesaid in the preparation of annual income tax returns?
a. P200,0000 c. P500,000
b. P300,000 d. P0

Aquaman collected from Aquagay P69,000 interest income.

2. How much is the withholding tax?

a. P13,800 c. P0
b. P17,250 d. some other answer

3. What is the tax liability of Aquaman?

a. Final income tax c. Creditable withholding tax
b. Norman income tax d. Excise tax

On January 1, 2019, Rick Ross acquired a 10-year term bond investment for P1,000,000 and
subsequently sold the same on September 30, 2019 for P1,100,000. These bonds bear 8% interest
payable every December 31.

4. What is the gain from the sale of security?

a. P40,000 c. P100,000
b. P60,000 d. some other amount

5. Compute the final tax from the sale transaction.

a. P20,000 c. P8,000
b. P12,000 d. P0

X-men.com presented these files for due diligence reporting:

Winnings from charity horse race sweepstakes from PCSO P10,000
Gain from sale of a 5-year bond 60,000
Interest income from a 5-year bank deposit 50,000
Interest income from a 10-year bond investment 40,000
Gains from redemption of shares in mutual fund 30,000

6. How much is the final tax?

a. P38,000 c. P30,000
b. P10,000 d. some other amount

7. How much is not subject to any tax consequence?

a. P140,000 c. P130,000
b. P180,000 d. P40,000

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 These are the various sources of interest income of Moana for the year 2018:
5-year bank deposit 1,000,000
3-year bank deposit 1,500,000
Dollar accounts 2,000,000
Euro accounts 2,500,000
6-year debt instrument 3,000,000
Deposit substitute 3,500,000
Treasury bills 4,000,000
Government debt instruments 4,500,000
Promissory notes 5,000,000

8. How much is the final withholding tax?

a. P4,975,000 c. P3,300,000
b. P1,675,000 d. P3,375,000

9. How much is the creditable withholding tax?

a. P3,300,000 c. P1,000,000
b. P2,200,000 d. some other amount

Jayvee earned interest income from various time deposits (TD):

4-year TD P10,000
5-year TD 20,000
6-year TD 30,000

10. Assume Jayvee is an individual taxpayer, how much is the final income tax?
a. P6,000 c. P2,000
b. P12,000 d. some other amount

11. Assume Jayvee is an corporate taxpayer, how much is the final income tax?
a. P6,000 c. P2,000
b. P12,000 d. some other amount

12. Assume Jayvee, an individual taxpayer, pre-terminated the 6-year TD on after four and a half years,
how much is jayvee’s income tax liability?
a. P6,750 c. P8,750
b. P750 d. some other amount

13. Assume Jayvee, a corporate taxpayer, pre-terminated the 6-year TD on after four and a half years,
how much is jayvee’s income tax liability?
a. P6,750 c. P8,750
b. P750 d. some other amount

Ace had the following time deposits in BPI:

P2,000,000; 12%; 4-year TD; January 3, 2016
3,000,000; 12%; 7-year TD; January 4, 2013
4,000,000; 12%; 8-year TD; January 5, 2014
5,000,000; 12%; 9-year TD; January 6, 2015

14. These accounts were withdrawn by ACE last June 1, 2018. Determine the final tax liability upon
withdrawal.
a. P60,000 c. P372,000
b. P72,000 d. P352,000

15. How much is the net proceeds?

a. P14,640,000 c. P14,328,000

Admission year 2019 – 2020 K.T. Tegio

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 b. P14,628,000 d. P14,348,000

Leighman’s Brothers paid out the following interests to various clients:

Resident citizens P100,000
Non-resident citizens 100,000
Resident aliens 150,000
Non-resident alien engaged in trade 200,000
Non-resident alien not engaged in any business 250,000
Domestic corporations 300,000
Resident corporations 350,000
Non-resident corporations 400,000
Total interest pay-out P1,750,000

16. Compute the final tax to be withheld by the bank:

a. P422,500 c. P467,500
b. P402,500 d. some other amounts

17. Assume Leighman’s Brothers is a credit cooperative, determine the final tax on these interest pay-
out to its members.
a. P422,500 c. P467,500
b. P402,500 d. some other amounts

18. Assume Leighman’s Brothers is a corporate bank and the deposits are all foreign accounts, converted
into its peso equivalent, and assume further that the deposits of resident citizens and aliens are
classified as long term time deposits, compute the final tax liability to be withheld by the bank.
a. P108,750 c. P60,000
b. P135,000 d. some other amounts

19. Assume that the NRCs deposits are covered under FCDU and are made through joint accounts, how
much final tax shall be withheld from the same accounts?
a. P15,000 c. P7,500
b. P20,000 d. P0

20. Fred, was a stockholder in the Philippine American Drug Company. Said corporation condoned
P1,000,000 of its receivables from Fred. The CIR, demanded payment of income tax on the aforesaid
transaction. Fred protested the assessment made against him and claimed that the condonation in
question are not income but are gratuity and are, therefore, not subject to income tax. How much is
the income tax?
a. P100,000 c. P300,000
b. P250,000 d. P0

The following are the financial figures of Carpon & Calabia Holdings (C&CHs) since the start of its
global business conglomerate:

Year Gross income Dividend Declared and Paid

Within Without
2016 P200,000,000 P100,000,000 P10,000,000
2017 P300,000,000 P200,000,000 20,000,000
2018 P400,000,000 P600,000,000 30,000,000

21. Assume C&CHs is a domestic corporation; 50%, 30%, 20% of its 2018 dividend was paid to resident
citizens, non-resident citizens, and NRA-ETBs respectively. Assess the total final tax liability.
a. P3,600,000 c. P2,700,000
b. P3,000,000 d. some other amount

22. Assume C&CHs is a domestic corporation; 50%, 30%, 20% of its 2018 dividend was paid to Domestic
corporations, resident corporations, and NRFCs respectively. Assess the total final tax liability.

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 a. P3,600,000 c. P4,500,000
b. P1,800,000 d. some other amount
23. Using immediately preceding facts, and assuming further that the country of the NRFCs allows tax
credit. Compute the final tax liability.
a. P900,000 c. P2,250,000
b. P1,800,000 d. some other amount

24. Assume C&CHs is a resident foreign corporation; 50%, 30%, 20% of its 2018 dividend was paid to
resident citizens, non-resident citizens, and NRA-ETBs respectively. Determine the dividend subject
to tax.
a. P30,000,000 c. P24,000,000
b. P15,000,000 d. some other amount

25. Assume C&CHs is a non-resident foreign corporation; 50%, 30%, 20% of its 2018 dividend was paid
to resident citizens, non-resident citizens, and NRA-ETBs respectively. Assess the total final tax
liability.
a. P3,600,000 c. P1,500,000
b. P3,000,000 d. some other amount

26. A domestic corporation received ₱500,000 cash dividend from a foreign corporation the earning of
which are70% earned in the Philippines. The taxable dividend income of the domestic corporation is
a. 500,000 c. 150,000
b. 350,000 d. 100,000

27. Edgar won the following items in 2018:

Cash prizes 10,000
Grocery prizes 15,000
PCSO winnings 10,000
Lotto winnings 20,000
Horse race winnings 30,000

Compute final tax liability.

a. P13,000 c. P17,000
b. P15,000 d. some other amount

28. ABC, a domestic corporation, entered into a software license agreement with XYZ, a non-resident
foreign corporation based in the U.S. Under the agreement which the parties forged in the U.S., XYZ
granted ABC the right to use a computer system program and to avail of technical know-how relative
to such program. In consideration for such rights, ABC agreed to pay 5% of the revenues it receives
from customers who will use and apply the program in the Philippines. What is the tax implication of
the transaction?
a. 10% royalty tax c. 25% royalty tax
b. 20% royalty tax d. 30% royalty tax

29. Assume XYZ is a domestic corporation, what is the applicable tax?

a. 10% royalty tax c. 25% royalty tax
b. 20% royalty tax d. 30% royalty tax

30. Assume XYZ is a domestic corporation and assume further that the royalty was derived from sales of
musical composition. What is the applicable tax?
a. 10% royalty tax c. 25% royalty tax
b. 20% royalty tax d. 30% royalty tax

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Admission year 2019 – 2020 K.T. Tegio