Philippine Christian University

Sampaloc 1, Dasmarinas City, Cavite

College of Business and Technology

Name: _________________________________Course/Year: ___________ Date:__________

INCOME TAXATION (MIDTERM EXAM)

Multiple Choice:
Identify the choice that best completes the statement or answers the question.

_____ 1. Exclusions from gross income, except

a. Interest on the price of the 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.

_____ 2. Which of the following statements is correct?

a. The power of taxation reaches even the citizens abroad and their income
earned from sources
outside the Phils.
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 CBA are
exempt from income tax.
d. The value of a property received as a gift, or under a will or testament or
through legal succession is
exempt from taxation.

_____ 3. One of the following is taxable income

a. Gifts, bequests and devices
b. Amounts received as rewards for giving information instrumental in
the discovery of violation of the
Tax Code and seizure of smuggled goods.
c. Proceeds from life insurance
d. Separation pay received by an employee due to a cause beyond his control.

_____ 4. Which of the following statements is correct as regards a resident citizen?

a. Income from illegal activities are 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 10,000,
otherwise they will be part of taxable income.

_____ 5. Which of the following statements is not correct?

 a. Minimum wage earners shall be exempt from the payment of income tax
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
d. Benefits received from or enjoyed under the Social Security System are
exclusions from Gross Income

_____ 6. One of the following is part of taxable income subject to schedular rate
a. Compensation for damages
b. The share of a partner in the undistributed net income of a general co-
partnership
c. Living quarters and meals furnished and given to an employee for
the convenience of the employee
d. 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.

______ 7. Which of the following is taxable?

a. 100,000 interest on long-term deposit or investment
b. 200,000 gain on sale of 10-year bonds
c. 12,000 prize in a supermarket raffle
d. 1M winnings from Phil. Lotto

______ 8. A) PCSO and Phil. lotto winnings are excluded from gross income because they
are subject to final tax
B) Prizes, awards and winnings are excluded from gross income because they
are subject to final tax
a. Both are true b. Both are false c. Only the first is true d.
Only the second is true

______ 9. Dividends paid by a domestic corporation maybe taxable but subject to final
tax, except
a. if received by a resident citizen c. if received by a non-resident
corporation
b. if received by a resident alien d. if received by another domestic
corporation

_____ 10. If refunded, this is taxable

a. estate tax b. donor’s tax c. special assessment d. fringe
benefit tax

_____ 11. Income tax payments to a foreign country, in the case of a resident citizen may
be claimed as
a. tax credit and deduction from gross income c. tax credit or deduction
from gross income
b. tax credit only d. deduction from gross income
only

_____ 12. Which of the following is part of gross income?

a. PCSO & Phil. Lotto winnings c. Proceeds of life insurance
 b. Bank interest on long-term deposit d. Raffle prize not exceeding
10,000

_____ 13. The following items are exclusions from gross income, except
a. labor union dues c. IOUs
b. SSS/GSIS premiums contributions d. Pag-ibig premiums contributions

_____ 14. As a rule, the following are taxable income, except

a. cash dividend b. property dividend c. scrip dividend d.
stock dividend

_____ 15. Which of the following statements regarding dividends is correct?

a. Exempt from tax if received by a resident citizen from a domestic
corporation.
b. Exempt from tax if received by a resident alien from a domestic corporation.
c. Taxable subject to year-end tax if received by a resident citizen from
a non-resident corporation
d. Taxable subject to final tax if received by a non-resident citizen from a non-
resident corporation

_____ 16. Which of the following is taxable?

a. Prizes and awards as an awardee of Ramon Magsaysay Award Foundation
b. Damages awarded as a consequence of a libel and slander suits
c. Interest on Philippine lotto winnings
d. Amounts received as returns of premiums

_____ 17. This is a taxable income

a. Retrenchment pay c. Separation pay due to
resignation
b. SSS/GSIS benefits d. Refund of Phil. Income Tax

_____ 18. As a rule, this is not part of taxable income

a. Profit sharing b. Hazard pay c. Overtime pay d. 13th
month pay

_____ 19. Which is not a creditable withholding income tax?

a. Expanded withholding income tax c. Withholding income tax on
passive income
b. Withholding income tax at source d. Withholding income tax on
compensation income

_____ 20. Gain realized from the sale or exchange or retirement of bonds, debentures or
other certificate of
indebtedness is excluded from gross income if with a maturity of
a. 5 years or more b. More than 7 years c. More than 8 years d. More
than 10 years

_____ 21. Gross benefits received by officials and employees of public and private entities
as thirteen month pay
and other benefits such as productivity bonus, service incentive pay and
Christmas bonus shall be
 excluded from taxable income up to
a. 20,000 b. 82,000 c. 40,000 d. 50,000

_____ 22. Advance rental in the nature of prepaid rental, received by the lessor under a
claim or right and without
restriction as to use is
a. Taxable income of the lessor in the year received if he is on the cash method
of accounting
b. Taxable income of the lessor in the year received if he is on the accrual
method of accounting
c. Taxable income of the lessor in the year received whether he is on
the cash or accrual method of
accounting
d. Taxable income of the lessor up to the amount earned in the year the rental
is received.

_____ 23. Which payments made by the lessee under such terms of the lease contract
should be considered as
additional rent income of the lessor?
a. If a lessee paid directly to the government of a real estate tax on the property
of the lessor
b. If the amount received by the lessor is in the nature of a security deposit for
the faithful compliance
by the lessee of the terms of the contract
c. If the amount received by the lessor is in the nature of a loan extended by the
lessee the lessor.
a. Only A b. Only A and C c. Only B & C d. A, B, and
C

_____ 24. After 10 yrs of romantic relationship, A decided to end his relationship with B
which made B very angry,
B with anger in her eyes boxed, kicked and berated A. A tried to pacify B, but
slipped, lost control and
fell to the ground requiring hospitalization. To buy peace, A decided to shoulder
the medical expenses
for the injuries suffered by B. The amount is
a. Taxable income of B c. Subject to final tax
b. Deductible expense of A d. Exempt from income
tax

_____ 25. One of the following may be a taxable income for a resident individual:
a. Property received as gifts c. Interest on Phil. lotto
winnings
b. Cash received as inheritance d. Benefits from the SSS and/or
GSIS

_____ 26. One of the following represents taxable income:

a. Refund of overpaid rental expense in prior year c. Refund of
income tax paid in prior year
b. Refund of donor’s tax paid in prior year d. Refund of special
assessment paid in prior year
_____ 27. This is not part of gross compensation income
a. Salary of 10,000 a month of an employee
b. Fringe benefits of 10,000 a month
c. Salary of 10,000 a month of a partner in a general professional
partnership
d. Honorarium and allowances of 10,000 of a member of the board of directors
of a corporation

______ 28. A purchased a life annuity for 1,000,000 which will pay him 100,000 a year.
The life expectancy of A
is 12 years. Which of the following will A be able to exclude from his income?
a. 1,000,000 b. 1,200,000 c. 200,000 d. 100,000

_____ 29. A, was adjudged the best boxer in the recently concluded Asian games. In
recognition of his splendid
performance, he was awarded a trophy and a cash price of 1M. As a result,
a. The value of the trophy and the cash prize are part of his taxable income
b. Only the value of trophy is taxable
c. Only the cash prize is taxable
d. Both are exempt from income tax

_____ 30. The Optional Standard Deduction for corporations is

a.10% of the gross income c. 40% of the gross
income
b.10% of the Gross sales/receipts d. 40% of the gross
sales/receipts

_____ 31. The Optional Standard deduction for Individuals is

a.10% of the gross income c. 40% of the gross income
b.10% of the gross sales/receipts d. 40% of the gross
sales/receipts

_____ 32. For individuals, premiums paid during the taxable year for health and/or
hospitalization insurance
taken out by him on himself, including his family shall be allowed as
deductions from gross income,
provided that the family has a gross income of
a. More than 250,000 c. Not more than 250,000
b. More than 500,000 d. Not more than 2,400