(OPV UT 8 RCISES MULTIPLE CHOICE. Choose the letter of the correct answer. 1. Income, for tax purposes: | or illegal), 1. Means all income from whatever source (lega Code. unless specifically excluded under the Tax er other than ll. Means all wealth which flows into the taxpay return of capital. Ill. Is recognized in the year it is actually received in cash or cash equivalent. IV. _ Refer to the amount of money coming to a person or corporation within a specified time, whether as payment of services, interest, or profits from investment. a. |, ll and Ill only c. I, Il, Illand IV b. land IV only d. None of the above 2. The sources from which income is derived a. Labor b. The use ofcapital c. Profits derived from sale or exchange o' d. All of the above 3, The sources from which income is derived A. B. Cc. D. True True True False Labor Gifts and inheritance True False False Falsé False __ False Use of capital True __ True 4. Which of the following is a characteristic of income? A. B. Cc. D. Increase in taxpayer's wealth True True True False True False False False Realization of gain False Return on taxpayer's wealth True __True__False ‘ollowing is a requisite for an income to be taxablé? f capital assets 5. Which of the f a. There must be gain b. The gain must be realized or received c. The gain must not be excluded by law from taxation d. All of the above is not an income for income tax purposes? 8. Which of the following i a. Gain derived from labor. b. Return on capital. 319C hapler Exercises C ross Jnceme c. Excess of selling price over cost of assets sold. d. Gift received 7. Which of the following is not an income for income tax purposes? a. Collection of loans receivable “Bb. Condonation of debt for services rendered c. Excess of selling price over the cost of an asset sold d. None of the above 8. Which of the following is not a characteristic of income? a. Increase in taxpayer's wealth. b. Realization or receipt of gain. c. Earnings constructively received. d. Return of taxpayer's wealth. 9. Which is not a valid definition of income? Income is the return from capital invested. a. b. Income is a fund at one distinct point of time. “c. Income means all wealth which flows into the taxpayer other than a mere return of capital. d. {Income means cash or its equivalent unless otherwise specified. 10. The share in the profits of a partner in a general professional partnership is regarded as received by him and thus taxable although not yet distributed. This principle is known as Actual receipt of income Advance reporting of income Accrual method of accounting Constructive receipt of income aooD 11. Which of the following is considered or construed as an example of “constructive receipt’? a. Retirement benefits, pensions, gratuities b. Fees paid to a public official c. Interest coupons that have matured eee and are payable but have d. Deposits for rentals to answer for damages, restricted as to use 320Chaser Exrercises Gres Drone 12. constcivg receipt occurs when the money consideration or its equivalent is placed at the contro! of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts, except a A Security deposit to insure the faithful performance of certain obligations of the lessee to the lessor. b. Deposit in banks which are made available to the seller of services without restrictions; (es Issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; d. Transfer of the amounts retained by the payor to the account of the contractor. 13. There is constructive receipt of income when: a. Payment is credited to payee’s account b. Payment is set aside for the payee, or otherwise made available so the payee may draw upon it at any time, or so the Payee could have drawn upon it during the taxable year if notice of intention to withdraw had been given without substantial limitations. c. Both “a” and “b” “d. Neither “a” nor “b” 14. As a rule, income from whatever source is taxable. Income from whatever source may come from: 1. Gains arising from expropriation of property Il. Gambling gains Ill. Income from illegal business or from embezzlement IV. Recovery of receivables previously written off V. Tax refunds VI. Compensation for injury suffered VII. Gratuitous condonation of debt a. land Il only b. 1, IV and V only c. 1, IV, Vand VI only d. 1, Il, Ill, \V and V only 321i Chapter Exverceses — Gress Jacome J 15. When different types of income are subjected to common tax rate, the tax system 1s described as a. Global tax system b. Gross income tax system 4 _£. Scheduler tax system d. Final tax system 146. Situs of taxation on income from sale of property purchased. a. Place of the seller b. Place of sale t. Place of buyer ; d. As determined by the Commissioner 17. Which of the following test of source of income is incorrect? a. Interest income - residence of the debtor b. Income from services — place of performance c. Royalties — place of use of intangible d. Gain on sale of real property — place of sale. 18. Situs of taxation on income from sale shares of a domestic corporation. a. Always treated as income derived from within the Philippines “B. Always treated as income derived from without the Philippines c. May be treated as income within or without the Philippines depending on the place of sale j d. May be treated as income within or without the Philippines!’ depending where the shares are kept 19. Situs of taxation on income from sale shares of a foreign corporation. Always treated as income derived from within the Philippines Always treated as income derived from without the Philippines May be treated as income within or without the Philippine: depending on the place of sale May be treated as income within or without the Philippine: depending where the shares are kept ajoom 20. Pedro eared interest income from a Promissory note issued to him b' Juan, a resident of California, U.S.A. Assuming that Pedro is a nonresident citizen, the interest income is a. Subject to basic income tax b. Subject to final tax 322Chapter Evercéses Gress Stceme a Respect to income tax - Pa i 'Y Subject to scheduler and Partly subject to final tax 21 It is important to know the soi i from within or without th lippines a Some apes and corporate taxpayers are taxed on their ’ 'ncome while others are taxable only upon income SS within the Philippines b. ‘e Philippines imposes incom ino Seen TTS tax only on income from c. Some individual taxpayers are citizens while others are aliens d Export sales are not subject to income tax : ‘Urce of income for tax purposes (i.e. 'e Philippines) because: 22. Situs, for taxation purposes will depend upon various factors, including |. The nature of the tax and the subject matter thereof. Il. The possible protection and benefit that may accrue both to the government and to the taxpayer. Ill. Domicile or residence IV. Citizenship V. Source of income a. | and V only c. 1, Ill, Vand V b. |, Ill and IV only G1, Hl, I, WV and V 23. Which of the following taxpayers is taxable on income from all sources within and outside the Philippines? . a. Domestic corporation b. Resident foreign corporation c. Resident citizen d. Both “a” and “c” 24. Which of the following is NOT true about source of income? a. Incase of income derived from labor, source is the place where the labor is performed. ; b. Incase of income derived from use of capital, source is the place where the capital is employed. In case of profits from the sale or exchange of capital assets, source is the place or transaction occurs. None of the above. jo 323C ne Exveretses a Gross Ineo, ye 25. Which income from sources partly within [end partly outside the Philippines is allocated on the time basis? ; ; a Income of the international shipping corporation with vessels touching Philippine ports | b. Income of a telegraph ere wi Philippines to points abroat : , , ee from goods produced in whole or in part in the Philippines and sold in a foreign country, or vice-versa d. Income from personal services performed in part in the — Philippines and in part abroad ith transmission from the @ 26. All of the following are correct except one. Which is the exception? a. The source of interest income is the country where the debtor resides. b. The source of interest income is the country where the creditor resides. c. Rents or royalties are considered derived from the country where the property is located. d. Income from personal services is considered derived from the county where the services were rendered. 27. Statement 1: A gain from sale of shares of a domestic corporation shall be considered derived from the Philippines regardless of where the shares were sold. Statement 2: A gain from a sale of shares of a foreign corporation shall be considered derived from the country where the corporation was created or organized. a. Statements 1 & 2 are false _b. Statement 1 is true but statement 2 is false ¢. Statement 1 is false but statement 2 is true d. Statements 1 and 2.are true 28. Which of the following is not an income derived from sources within the Philippines for income tax purposes? .a._ Interests derived from bonds issued by a foreign corporation b. Interest on notes or other interest-beari igati -be residents aring obligations of c. Both “a” and “b” d. Neither “a” nor “b” 324Chapter Eueretses Gross Jacome 29. Which of the following statements is correct with respect td valuation of income? a. b. J. The amount of income recognized is generally the value received or which the taxpayer has a right to receive. If the services were rendered at a stipulated price, in the absence of any evidence to the contrary, such price shall be Presumed to be the fair market value of the compensation received. Transfer of land made by a person to another in payment of services rendered in the form of attorney's fees shall be considered as part of the gross income of the latter valued at either the fair market value or the zonal valuation, whichever is higher, in the taxable year received. All of the above 30. A cash dividend of P100,000 received by a taxpayer in 2015 from a foreign corporation whose income from Philippine sources is 40% of its total income is Statement 1: partly taxable if he is a resident citizen. Statement 2: Partly taxable if he is a non-resident alien a. b. c. d. 31. Statements 1 & 2 are false Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true Statements 1 and 2 are true Using the above data, which of the following is correct? The cash dividend is a. b. c. a. Exempt from income tax if he is a resident citizen. Partly taxable if he is a resident alien. Taxable in full if he is a nonresident citizen. Exempt from income tax if he is a nonresident alien. 32. A taxpayer is employed by a shipping company touching Philippine and foreign ports. In 2007, he received a gross payment for his services rendered of P300,000. In that year, the vessels on board of which he rendered services had a total stay in Philippine ports of four months. His gross income from the Philippines was a. P300,000 c. P150,000 b. PO d. P100,000 325Chapter Ervercises. — Gress Sncome p U I 33. Assume the following: Gain on sale of personal property purchased in the © P400,000 Philippines and sold in Hongkong Compensation received for personal services in 200,000 the Philippines Rent income from real property in Malaysia 300,000 Gain from sale in the Philippines of shares of a 100,000 foreign corporation Deductions identified with: Philippine income 80,000 Foreign income 120,000 Deductions unidentified with any particular income 30,000 The Philippine net income is a. P220,000 c. P190,000 b. P211,000 d. P111,000 34. An operator of an illegal horse betting business, single, has the following data in 2018: Receipt from illegal bets _ -P600,000 Rent of space where bets are received, gross of 5% 120,000 withholding tax Salaries of assistants, gross of creditable 100,000 withholding tax Bribe money to obtain protection from arrest and 50,000 prosecution How much is the taxable income a. P380,000 c. R180,000 b 330,000 d. R150,000 Use the following data for the next two (2) questions: A resident alien had the following data in 2018: Gross income, Philippines P2,000,000 Business expenses 1,200,000 Dividends received: From domestic Corporation (net) 60% Of its income came from the Philippines 90,000 40% of its income came from the Philippines 72,000 326 | i aeCrapler Euersises — roe [een From resident foreign corporation (gross) 60% of its income came from the Philippines palo 40% of its income came from the Philippines Coe 35 The taxpayer's taxable income is a. P750,000 c. P796,000 b. P830,000 d. P800,000 36. The final withholding taxes on dividends amount to a. P16,200 c. P25,200 b. P18,000 d. P26,000 Use the following data for the next two (2) questions: F5 Corporation, a domestic corporation had the following data during the calendar year 2012 Gross Income, Philippines 10,000,000 Allowable itemized deductions/expenses 4,000.000 Dividend income FROM: a) Domestic corporation 4,000,000 b) Foreign corporation, 80% of its gross 1,000,000 income were derived from the Philippines Foreign corporation, 60% of its gross income were derived from the Philippines d) Foreign corporation, 25% of its gross income were derived from the Philippines c) 800,000 400,000 37. The taxable income is a. P9,200,000 ¢. P8,200,000 b. R7,500,000 d. R7,430,000 38. Assume that F5 Corporation is a resident foreign corporation, how much is the taxable income? a. P9,200,000 c. R8,200,000 b. P7,500,000 d. P7,280,000 327Cnadtes b tereeses Crs Pariare 4 Use the following data for the next two (2) questions: Lenovo, Inc., a resident foreign corporation, has eared the following income during 2018 taxable year: Dividend income from: Microsoft, a non-resident corporation P500,009 Intel, a resident foreign corporation 400,009 IBM, a domestic corporation 300,008 Interest income from: Current account, BDO 800,000, Savings deposit, ABN-AMRO bank, UK 700.000 US dollar deposit (FCDU}- BP! Makati 800,000 Royalty income from various domestic corporations 100,000 Additional information: * The ratio of Microsoft's gross income in the Philippines over worldwide income for the past three years is 40%. = The ratio of Intel's gross income in the Philippines over worldwide income for the past three years is 60%. = The ratio of IBM's gross income in the Philippines over worldwide income for the past three years is 80%. 39. How much is the total income tax expense of Lenovo? a. P200,000 c. P320,000 b. P400,000 d. P272,000 40. Assuming Lenovo is a domestic corporation, how much is its total income tax expense of Lenovo? a. P200,000 c. P740,000 b. P560,000 d. P680,000 Use the following data for the next three (3) questions: Sandara, a nonresident Korean stockholder, received a dividend incom of P300,000 in 2015 from Super Bow! Corporation, a foreign corporati doing business in the Philippines. The gross income of the foreig corporation from sources within and without the Philippines for the pa three years preceding 2015 is provided as follows: Source 2012 2013 2014 Philippines P16,000,000 P15,000,000 P17,000,000 Abroad 8,000,000 11,000,000 13,000,000 328Gos Income len T veretses 41 The amount of income subject to tax should be n PO c. P180,000 b F120,000 d. P300,000 42 Sandarn is subject to: a Danic Income tax on P180,000 b. Basic income tax on gross income of P300,000 ¢, Final withholding tax of 25% on P180,000 d_ Final withholding tax of 25% on gross income of P300,000 43 Awnuming Super Bowl is a domestic corporation, the amount of income subject to tax should be: a. PO c, P180,000 b. P120,000 d, P300,000 44, Sandara, a nonresident citizen, received a dividend income of P300,000 in 2015 from Super Bow! Corporation, a foreign corporation doing business in the Philippines. The gross income of the foreign corporation from sources within and without the Philippines for the past three years preceding 2015 is provided as follows: Source 2012 2013 2014 Philippines P14,000,000 P10,000,000 P12,000,000 Abroad 40,000,000 16,000,000 18,000,000 The amount of income subject to tax should be: a. PO c, P165,000 —b. P135,000 d. P300,000 329