Book3

TAXATION

1~7ax
 EXERCISES ON INDIVIDUAL TAXATION

I. One of them is not considered non-resident citizen.

a. A citizen of the Phi1ippines who establishes to the
satisfaction of the Commissioner the fact of this physical
presence abroad with a definite intention reside therein.
'•
b. A citizen of the Philippin~s who leaves the Philippines Ir
•
during the taxable year to reside abroad, either as an
immigrant or for employment on pennanent basis.
c. A citizen of the Philippines who works and derives income
from abroad and whose employment thereat requires him
'
!

to be physically present abroad most of the time during the

taxable year.
d. A citizen of the Philippines who went on a business trip
abroad and stayed therein most of the time during the year.

2. A, nonresident citizen, arrived in the Philippines on July 1, 2000

to reside here permanently after working as nurse in the United
States of America for many years.

Which of the following statements is correct with respect to

Ms. A's classification for income tax purposes?
a. She shall be classified as nonresident citizen for the year
2000 with respect to her income derived from sources abroad
from January 1, 2000 until the date of her arrival in the
Philippines.
b. She shall be classified as nonresident citizen for the whole
year of 2000.
c. She shall be classified as resident citizen for the whole year
· of 2000. .
d. She shall be classified as neither resident nor nonresident
citizen for the year 2000.

2l3
 . . . hired by a Philippines corporatio b. The Phjlippine imposes income tax only on income from
. , B. an Expert Phys1c~st ~ as d operation for which he had
.). . · · oarozauon an . . 0
t sources within .
c. Some indi vidual taxpayers are citizens while others are
to assist in its or= . ti indefinite penod. Hts comine t
. th Philippines or an h. h . . " o aliens.
stay m e d finite purpose w 1c m Its natur
•· · was for a e e d Export sales are not subject to income tax.
the Ph1hppmes d d ta); and to that end makes his horne
· an exten e s
would reqwre . . ines The American managemeni
·1v in the Phi 1ipp . . h. .
1.
1nmviduals sha!J be tax exempt on:
temporan ., . the Philippines as soon as 1s Job is
expert intends to lea, e a. Gross income not exceeding 250,000
b. Gross income exactly 250,000
finished.
c. Taxable Income not exceeding 250,000
th American management ex pen shall d Taxable Income exactly 250,000
for income tax purposes, e
be classified as:
_ Who may avail tax exemption of 250,000?
a. Resident alien._ . 0 ·d - trade or business. 8
a. Compensation earners
b. Nonres1·ctent ahen. en°a= =e0 0in d in trade or business. b. Purely in business or Professionals
C.
Nonresident ahen not en=a=e
c. Mixed earners .
d. Resident citizen.
d AJJ of the above
. . . _ enoaoed to sing for one week at t!-:c
4 C an i\mencan singer, \\ as = =. d USA
. · · . . . Pl after which she rerume to . Fer 9. An individual shall be subject to maximum income tax rate of?
\Meste rn Philippine aza .
hall be classified as: a. 6%
income taX purposes, she s
b. 8%
Resident alien. .
a. . ·ct
b Nonres1 ent a I
t·en enoaoed in trade or business.
c c .
C. 32%
• . . t enoa2:ed in trade or business. d 35%
1
c. Nonresident a 1en no c ~
d. Resident citizen.
IO. Who can avail 8% Gross Sales or Receipts Tax?
. ?
5. Situs of taxation is world/global raxation . a. Self-employed with Gross Receipts or Sales not exceeding
3,000,000.
a. Resident citizen.
b. Resident alien. b. Compensation earners with Gross compensation not
c. Nonresident citizen. exceeding 3,000,000
d. Nonresident alien. c. Mixed income earners with Gross Receipts or Sales and
other income not exceedine:'-" 3,000 '000
6. It is important to k.ntnv the source of income for tax purposes d. All of the above.
(i.e. from within and without the Philippines) because: .
a. Some individuals and corporate taxpayers are taxed on their 11. Interest income from foreign currency deposit system shall be
worldwide income while others are taxable only upon subject to a final tax of?
income from sources within the Philippines.
215
2·14
 a. 7.5% J6. Life i~5uranc~ premju~s paid by an individual taxpayer is
b. 15% deductible from gross mcome for an maximum amount of p
c. 20% 2,400 provided the family's gross income for the year does not
d. 35% exceed P 250,000.

12. PCSO and lotto winnings are: The premium on health and/or hospitalization insurance is
Exempt from tax deductible by t~e spouse who claimed the additional exemption
in case of roamed taxpayers.
~: Subject to 20% final tax eding IO 000 any in ex
Exempt from tax not exce ' cess Wi ll a. True, True c. False, False
c. 1 b. True, False
be subject to 20% fina tax._ d. False, True
d. Half will be exempt half Wlll be tax.
17 _ An individual who sell shares of stock not traded thru the local
l3. The amount of 13mmonth pay not taxable is? stock exchange is liable to pay:
a. 82,000 a. Capital gains tax of 5%
b. 90,000 b. Capital gains tax of 5% first I 00,000 and in excess I 0%.
C. 250,000
c. Capital gains tax of 15%
d. No limit d Capital gains tax of 5% if gain is less I 00,000 and 10% if
gain is more than I 00;000.
14. 1st Statement: A partner of a General Professional Partnership
may avail Optional Standard Deductions even when GPP avail 18. Filipino as well as alien employees of regional or area
already OSD. headquarters established in the Philippines by multinational·
companie~ sh~ll be subject to final tax of I~ % of gross
2nd Statement: A GPP and the partner may avail OSD only once. compensation mcome in the Philippines.
a. True, true
b. True, false Generally, nonresident aliens not engaged in trade or business
c. False, false are subject to 25% final tax on their gross income in the
d. False, True Philippines.
a. True, True c. True, False
15. An individual tax due in excess of 2,000 may avail installment b. False, False d. False, True
payment, when is the 2nd installment due?
a. July 15 19. "Global system of income taxation" means:
b. August 15 a. All types of income except those subject to final tax are
C. September 15 aggregated to arrive at gross income.
d. October 15 b. ~eparate graduated rates are imposed on different types of
mcome.

216 217
 ed in determmmg gross incoth
. · s are exc 1ud , . . .. ,e. to final tax but subject to progressive Net Income Tax.
c. Capita 1gai~ . nd business/professional income
. Compensation income a . the world. are c. An income which is subject to final tax is excluded from
d. d t different places in the computation of income subject to Section 24 (A) Net
taxe a
Income Tax.
. income of an individual taxpayer .
.ch of the following is d. An income _which is subject to creditable withholding tax
20. Wh I ?
is excluded m the computation of income subject to Section
. t to final tax . 'd ..
su b~ec . . Manila won by a rest ent citizen. 24 (A).
a. p I0,000 pnze _m d by a resident citizen from a reside
b. Dividend receive nt
corporation. c · 24_ Proceeds of sale of real property classified as principal residence
. ·th t income ofa general protess1ona 1partnership and capital asset are exempt from the 6% capital gains tax if
c Share 111 e ne .
. . ed by a resident alien. used to bui Id or buy a new principal residence within 18 months ·
rece1v · 1· fi
. . d ·'ved by a non-resident a 1en rom a domestic from the date of sale or of disposition.
d. Dividen rece1
corporation.
Gain from sale of real property classified as capital asset to the
· ed by nonresident individuals from a dl;!posi tory Government may be taxed under Section 24 (A) or capital gains
21. Interest rece1v . . . .
bank under the expanded foreign currency deposit system is tax at the option of the individual taxpayer.
exempt from tax. . .. . a. True, True c. False, False
Passive income received by a resident c1uzen_trom sources b. True. False d. False, True
outside the Philippines shall be generall y subJect to normal
income tax and not to final tax. 25. One of the following is not a deposit substitute.
a. True. True c. False. False a. Banker 's acceptance
b. True. False d. False, True b. Promissory notes
c. Repurchase agreements
22. Sale of real property located outside of Philippines shall be . d. Debt instruments issued for interbank call loans with
a. Subject to capital gains tax of 6% on selling price or fai r matmjty of not more than 5 days to cover deficiency in
market value whichever is higher. reserves against deposit liabilities.
b. Subject to capital gains tax of 15% on the net capital ga in.
c. Exempt from tax if the taxpayer is resident citizen . 26. Which of the following statements is incorrect?
d. Subject to net income tax if taxpayer is resident citizen or a. A prize of P l 0,000 is subject to net income tax.
domestic corporation. b. Winnings from Philippines Charity Sweepstakes are exempt
from income tax.
23. Which of the following statements is incorrect? c. Royalties on books, literary works and musical composition
a. To be subject to final tax passive income must be from are subject to l 0% final withholding tax.
Philippine sources. d. Interest income from long term deposit is exempt from
b. Passive income earned outside of the Philippines is not subject mcome tax.

218 219
 .. •<lends received from dorne . professional fee from various schools
erty dI\ 1 . St1c:
,7 Cash and,·or prop -·dent alien not engaged in trade (net of 10% withholding tax) 135,000
- • . b a nonre:,I of
corporaaon y . 75% final tax . Expenses incurred-practice of profession
. are subJect to - (Living expenses including tuition fees of
business
. . . the distributable net income after t~ children 25% thereof) 80,000
· - 10 · div1dua 1 U1 • l(!x
Share ot an . armership is subJect to final tax Health and/or hospitalization insurance
1
fes.s10na P ·
of a general pro c. False, False Premium paid 5,000
a. True, True d. False, True
b. True, False How much personal exemption may Mr. E claim?
•dent indi\idual taxpayer are also subject a. Zero c. P 75,000
ent _ Non-res1 . b. P50,000 d. PI 00,000
S
28. l tatem
;l th · . income from expanded foreign currency
to 15% final tax on etr .
deposit. Th be a 6% capital gains tax on sale of a 32. How much is Mr. E taxable income?
2o.1 Statement - ere ca O a. P480.000 c. P350,000
· ·n USA b. P355 ,000 d. P330,000
real property 1 · c. False. False
a. True. True d. False. True

I b. True, False

29. Which is covered bYgross 1

a. Resident alien
~
. rRA. ETB ,vi thout
·ocome taxation?
.
Reciproctty Law
33. f sold his residential house to Ms. P for P5M. Its FMV when
be inherited it was P6M although its presents FMV is P8M.
The tax on the above transaction is:
a. P360,000 CGT
b. P480,000 CGT
c. P30% donors tax
d. VAT
b.
c. 1\"RA - not ETB
d. ~on-resident citizen 34. Continuing #33, but assuming the residential house is located
abroad, the capital gain 's tax is:
. H b ·d - ·ocome taxation?
30. Which 1s governed by Y n gro 55 1 . . a. P360,000 C. Pl20,000
a. A resident Filipino with compensanon mcome onl y b. P480,000 d. P O
b. NRA-ETB with the benefit of reciprocity law.
c. A non-resident citizen with business income onl y. 35. G bought a plot ofland with a cash payment of P2,000,000 and
.
d. A resident citizen who 1s ·
considered · d·
a mLXe mcom e ~amer l, · a purchase money mortgage of P2,500,000. In addition, G paid
PI0,000 for title insurance policy. G's basis in this land is:
31 . E, Resident Filipino taxpayer single supporting three minor a. P2,000,000 c. P4,500,000
(illegitimate) children one of them living abroad showed tbe b. P2,010,000 d. P4,510,000
following data for taxable year 2019:

Salary from ABC Co. (net of P40,000

withholding tax) P35 0,000
221
220
 w~s a building which was rent
' . xpayer, o t 31 ect
I- basis ta ar lease expiring .Augus. I' ' 20 I 6· 0n 40. Mr. S, an individual calendar-year taxpayer purchased I 00
H n accrua
36. , a d a JO - ye as cons1derat1on 1or cancei ·
M un er ·d p30,000 . ing shares of Core Co. common stock for P15,000 on December
to 2 2oI3, Mpai ?0 I3 H leased the building top J5, 20 l 5 and an additional l 00 shares for P 13,000 on December
January ' On November 7, -. d HP I0,000 rent for 2 rnonth 30, 2015 . On January 3, 2016, S sold the shares purchased on
the teas\ - year lease. p pa~ an additional PS ,000 for the las December 15, 2015 for P 13,000. What amount of loss from the
under a mber an h Id H st
ber and Oece ' f rent income s ou report . sale of Core 's stock is deductible on Mr. S 20 I 5 and 20 I 6
Novem Wh t amount o 1n
I , rent a ? income tax _returns?
mont h s
I

I · return.
its 2013 income tax c. P40,000
a. PI0,000 d. P45 ,000 2015 2016
a. p 0 p
b. Pl 5,000 . 0
b. p 0
. t to Net Income Taxati on. <.:xccpt: P2,000
37 The foll owing ~~e subJeC C. Pl ,000 Pl ,000
. Resident Citizen . d. P2,000 p 0
a. Domestic Corpo_r~t1on gaaed in Busi ness
b. N0 n-Rcsident C1t1zen e~ c- 41 . Mr. 0 received the following in December:
c. . Corporation
d. Non-Resident
Thirteenth month pay
dcakr sold real properties l(1 different 15,000
38. Mr. L, a .cemetery lot Christmas bonus
15,000
Monetized vacati on leave for 5 days
buyers as fo ll ows: Selling Price Cost 10,000
p 2,000.000 p 1.250.000 The taxable compensation income of Jose is :
House & Lot p SOO,OOO P 300,000
a. P40,000 c. P25,000
Farm Lot p 45 ,000 p 20.00~ .
b. PO d. P20,000
Cemetery Lot . Id quire a condominium unit lor
d lot we1e so to ac ·
The house an . f .den cc What is Mr. L' capital
Mr. L' rn.;w principal place o res1 . 42 . Lessor had the following information for the given taxable year.
gai ns tax?
a. p170.700 C. p 48 ,000 Cost of leasehold improvement Pl ,000,000
b. Pl 6X.000 d. p 50,700 Annual rent
100,000
.
39. In June 2005 , J rece ived a p1cc~ o f Ian d . fa irl~v vaift. lued at
Since The estimated life of leasehold improvement is 50 years. The
p1 000 000 from his wealthy best fnend as a birthd Yg d . to term of the lease is 40 years. At the end of the twentieth (20 th )
' no· use of the said donated land he 1m~e
J had · ct·.1~tel y .sol
J) il year, the lease was terminated for va lid causes done by the
G for only PS00.000. What is the total tax liabil1 ty ot · lessee.
a. P 30,000 c. P2 I0,000
b. P 60.000 d. P360,00

222 223
 r Source of incorm: I
,
c. P605 .000 2013 201-1 20 15
d. P700,000
From within tht:
111
Philippines P16,000,000 P12.000,000 Pl4.000.000
l "abk dcductit1n of k sscc on the 20 year•)
~3 \\ hat ,~ t11t' •1111t c . From without the
:-1. rt-Ot1.nOO c. PI 00.000
ti Pt- _()()0 d. P500,000 Philippines 18.000,000 14,000,000 16,000,000
25
How. much. of the dividend income
. rere 1.ved b M A
~ Th~ (cillcwing indi\·iduals arc required to file an income tax
considered mcome from sources w'th · h . . ~ r.
15

a. Zero c l int c Phtl1pp1ncs?

return. C\apt:
a. \ on-n:-si dl'nt alien engaged in trade or business b Pl50 000 . PJOO,OOO
. ' d. P270.000
b. \ on-resident alien not engaged in trade or business
c Res ident ci11zcn 47. Mr. C, a widower, has two sons b h·, . .
lives with Mrs. J who is I y . is previous marriage. C
d. \'on-resident citizen . . 11
ega y mamed to Mr. J The hav
child named Jill. The children 'are all minors
. and· not gainful!
Y ea
45 . r Statement - Jn case of an individual taxpayer and the income emp loyed. How much personal exem ' Pt·ion can Mr. C claim"Y
ta.'< on the annual return exceeds two thousand pesos such tax
a. Zero c. PI 00 000
may be paid in two equal installments. b. P75,ooo d. PI 2s:ooo

!"1 Statement - If an indi vidual 's annual income tax is paid in 48. A privilege
• granted to .a taxpayer to deduc·t or se . t-o ff agamst
.
installment. First payment shall be made when the return is Phil . mcome tax, the . mcome . ' war pro t-its and excess profits
filed and the rest shall be paid on or before Oct. 15 following taxes 'T'that he has paid
. or has accrued to a f'ore1gn. country
the close of the year. a. 1ax exemption c· Tax conso1I.dat1.on
c. False; Tme b. Tax deduction d. Tax ere . J.1t
a. True: False
d. False; False
b. True: True
49. A, married to M had the following during the taxable year:
46. \1r. A, a non-resident alien stockholder, received a dividend Gross Income
income of P300,000 in 2016 from a foreign corporation doing From the practice of pro fession - - p 700,000
business in the Philippines. The gross income of the foreign AH Rental income of thei r conj ugal property - J00,000
c-0rporation from within and without the Philippines for three .puOwable deductions
years precedi ng 2016 are as follows : For the practice of profession - - - 520,000
For the property rented to tenants - - - - 140,000

2~5
224
 -,oJ 5wtement - ff a taxpaye r is unable to muke h• -. rtctum . Lh~
,., wrn n,uy be made by his guardian ur re prcscntull vc. the !utter
_ •.• ,til)tlS of~ lr. A is
b : f, ,~· l. u tllf :Ssut11ing the responsibi lities of making the return uncl incu rrm g
.. . \.-_,nl(· c p 260.000
111
'1'
1n'-" 1·l ,' :·ll.Hl.l)()(1 d.. pt 70.000 enalties if the sam e was erroneous.
p _ True: Fal se c. Fa ls~: Tru\.'.
J 1.
~ r I :--tlJ)()(1 . rest house with a FM V of p I 2tvl 8
b. True: True d. Fa lse: False
__ , -,r p lll \f hc:r Bagui~d nee If K utili zed P8M of th
" Statement · An indi vidual may employ either calendar year
-,o. " ~,,
t, {,) 1J' nt:'' pnn ( iPal res•. . eQ a new
. . .pal residence
. thee
1
pnnc1
It' u_ t· t c -al e in acqu1nn_, , 54 · or
1 fiscal year as basis for tiling its annual im;ome ta,"<. re turn .
~t1ll:,..: .
r n"'"" I ' n'- tJ.S payable IS p t 44 ooo z"' 51atemen t - The retu m of any ind ividua I shn II be filed on or
c.Jfl l Ll gJ I • C. •
~- p -.::o.OOo d. p t 20,000 before the 15" day of April of each year covering income for
b. p t-0().000 the preceding year
. is not correct? c. False: True
" I \\ nich of the foilov,11 ng f the Phi ls. who is working and a. True; False d . False: False
· · J . ..\Jl ind.I vJ·dual c1t1zen bo ad as an overseas contract worker b. True; True
deri\•ing income fr~rn a ro from sources within the Phils. 5, z js a Filipino immigrant living in the United States fo r more
is Ulla bl e Only 0. 11 income. . of the Phils. and who receives
•ho JS a c1uze
11 5 than 10 yea.rs. He is retired and he came back to the Philippines
b. A searn an '' .. s rendered abroad as a member of as a baiikbayan. Every time he comes to the Philippines. he
cornpensa I ( on for servf ice essel engaged exc Ius1vely
. in stays here for about a month. He regul arly receives a pension
the co mp 1ement oh a be v treated as an overseas contract
from his former employer in the United States. amounting to
II
in ternational trade s a US$ l ,000 a month. While in the Philippines. with his pension
worker. _ . . . ble only on income derived from pay from his fonner employer. he purchased three condominium
C- An alien ,nd1 v1dual IS_1axa
units in Makati which he is renting out for Pl S.000 a month
soui:c_es within thPeh~lh1l~- taxable on income derived from each. Does the US$ l ,000 pension be1;ome taxable because h~
ci .\ citLZen of the I s. IS .
. ·thI·n and without the Ph1ls. is now in the Philippines?
sources w1 . a. Yes, Income received in the Philippines by non-resident
5?. Optional standard deduction is allowed to, except citizens is taxable.
10 b. Yes, Income received in the Philippines or abroad by non-
a. !\'on-resident alien engaged busines~
b. Non-resident alien not engaged in business resident citizens is taxable.
c. No, Income earned abroad by non-resident citizens are no
c. Resident alien
d. General professional partnership longer taxable in the Philippines.
10 d. No, the pension is exempt from taxation being one of the
53. ISi Statement - The fact. that an. individual's
. c:
name
11 is rposes
signed that' exclusions from gross income.
filed return shall be pnma fac1e evidence 1or a pu
the return was actually signed by him.

226
 .h f\.· ,t house with a FMV of PJ 2 0. J(eynard. lac .. a Ph ilippines corporuti·on. ~o Id rhrou2.h the loc.iJ
er l"'~ 0 1~
1,., , •1
- p j() \ I · t\t 6
~C' - K s<.."'ld fN _ . -~ ·n.:c. tf K utili zed P8M of the pr le, stock
,
exchange
d Id h h
I0.000 PLDT.
share., that II boughl 2 yea.rs a~o
-- n.:1p.l 1r.. .' l l l l . ocee l(eyoar so I es ares for P2 million an . d rca. 11zed .i net g;.i· ,n
~uy J rK " r n lQ
3
nl.'.w principal residence. the c . d.\
l°'f the ~1k in .1 ..~u1n1 - ap1ta1 of P200.000 .00. How shaJJ 11 pay tax on th e trnnsact,on''
' I' '\ f\., , Jt,k tS
~! n:- .,_ t -. c. Pl44.000 a. It shall declare a P2 mtll1on gr0 ._._ u'"C
• • -- , ome in I t5 income ta;;
- v

- P- -"' l1•()()() d. Pl20.000 return. deductrng its cost of acqU1sition an C).pen-.e

3
b Pt>l'l1.l~)() b· It shall report
. the P200 · 000 · 00 m i""
u corpo rnte income taX
return adJusted by the holding period.
.:;- ~i,....-lJI ~-..Id his bachelor ·s pad for p ! :~00.000 to acquire a ~ -o c. It shall pay 15% tax on the ga 10 P200,000
~-oom lofi at prince,·ille _condonuruum for P3 ,~00.000 With d. It shall pay a tax of one-half of IO o of the P2 million gross
2 fur marke t \ alue of P}.)00.000. How much is the capital sales.
~,li35 ra..X? C. 210,000 1. Which theory in taxation states that without taxes. a government
- -"I000 6
a.. d. Zero would be paralyzed for lack of power to acuvate and operate it,
l - · 000
.tl ·9 1
resulting in its destruction?
=~b we. pi_,..,._,1;n
,.,...
g number. a sale of principal residence to purchax a. Power to destroy the.ory
_' c
. · o.u
·-~' -residenee. shall be exempt from tax 1f
.
done: b. Lifeblood theory
2 ~pnnclp<11 IR ' h' 1 c. Sumptuary theory
a_ ~ce e- ery 1o ye:ars and reported to B wit m 8 months
d. Symbiotic doctrine
from sale: . .
o. Once e"·ery 18 years and reported to BIR w1thm IO months
62. The payor of passive income subject to final tax lS required to
from sale: . . withhold the tax from the payment due the rec1p1enL Tb<=
c. ()oce e,·CT)' Jo years and reported to BIR within 2 months
withholding of the tax has the effect of
fro:n sa.Je: .th . 1 , a. A fin.a) settlement of the tax liab11.Jry on the LOCOme
d. (Jm;e e--,ery 10 years and reported to BlR w1 .m mon:n
b. A credit from the recipient 's mcome tax liabilit)
fro:JJ sa!e. c. Consummating the transaction r~ulu.ng m an UJCOflk.7
d A deduction in the recipients income ta.~ return
: 'J. ·ne fo!!cr;. ing mb1 be wn tained in JTR:
1. Per-,.oml p-:-ofile and information; : 63. Gu1dant Resources Corporation. a c-0rporauon ri:gute"rcd 1n
· · from compensauon c.
t1. TfJt?.J gross Sales, recei pts or income . ~ tr.~ Norway, has a 50 MW electnc JX>" er plant m San Jo.;c;, batang.dS
se-r, 1,ces rendered, conduct of trade or busine-,s_or ·· .A5ide from Guidant"s income from 1b po\\ er plant, "h1ch
- b. fina l ta' 1

tXi::iCise of '1 profc-;\ion, except income su ~ect to among the following 1s considered as part of 16 income from
as pro-, i&-...t..l under the Tax Code; M>Urces within the Philippines?
iii. Alh -;,~ble de-duc11ons under the Tax Code; a. Gains from the sale to an lloco:) ~one po., u plant of
1v. Tar..abk rnc11me as defined in the Tax Code; generator bought fro m the L:nitcd State:)
·1. !nciJme tar. due a.nd p-c1yab le.

a. L ii, 11i ~nd 1v c. i, ii, iii, iv and v 219

b. 11 , 11 1. iv and v d. iv and v
225-l
 e-<i on 1ts dollar deposits m a Phl11pplne b_;,..
'1. r
,
c. 'J o Ap l~ts 1s a non -re-.1den t fore-,gr, cvrp.,r:,1100 rl'A eng.aged
t, lr·.e~--t,~~-.'.i>~t ded Foreign Currency ~ epos n :Ystern
in trade or bustne5s m the Ph1h pP1~'\
_;xkr the E pan \ ear old ~ orweg1an subs1d1arv "' ,.
DI dends from a tv. o-, f• · d. Yes. Aplets is d<Jing bu~1ness 10 lh~ Ph1ltpp1nc~ t.hrou!?fi ,ts
... \ t . Zambia but deri\,es 60% o its gross 1ncorr,
opcrauons in . ex.elusive di stributor K im ·s Tradin g. Inc
from the Philippines .
. from lu<;
d Ro,a lu~ '-- use in Brazil of generator sets designed
66. Passive income includes income den"ed from an act1Hty m
m ~'le Phi Ii pp mes by its engineers. which the earner does not have any subs tanrnil part1c1pat100
This type of income is
1 bo ht a parcel of land in 2015 for P7 mill ion as a. Usually subject to a tinal tax
~ - Anktr)d, ?c·_ ug , of real properties. In 2016, it sold the land b. Exempt from income taxation
Part of 1ts In \ cntof) .
- " h'ch
for p I2 mi-11 10n 1
was its zonal valuat10n.
•
ln the same year. c . Taxable on ly iJ earned by a citizen
11 .mcurred a Ioss of P6 million for sellmg another . parcel
. of
. d. Included in the income tax return
· en tory. These were the only transactions
land m its In\ . . 1t had
. in
· bu51·ness · Which of the followmg 1s the applicable
its rcal estate 67. In 2018, Juli et Ulbod ea rned PS00.000.00 us income from h~r
tax treatment? . . beauty parlor and received P250.000.00 as Chri stmas gitl from
a. Anktryd shall be subject to a t_a~ of 6% of Pl~ m1ll10~ . her spinter aunt. She had no other receipts from the year. She
b Ankt.r)'d could deduct its P6 m1I11on loss from its PS mil lion spent 150,000 fo r parl or operating purposes. her gro~s tntom~:
gain. . . . for 2018 is
c. Anklf)d ·s gai n of PS million on shf11l be subJect to the a. P750,000.00
C. PJ50.000.00
hold ing period. . b. P500,000 .00
d. P600,000.00
cl Anklf)·d·s P6 million loss could not be _deducted from its
PS million gai n. 68. Federico, a Filipino c iti ze n. migrated to the United Stat~s some
six years ago and got a permanent resident status or green card.
65 Aplets Corporation is registered under the laws of the Virgin He should pay hi s Philippine income t,Lxcs on
Is lands. It has ex tensive operations in Southeast Asia. In the
a. The gains de ri ved from the sale in Ca li foni a, U. S.A. of
Phil ippines, its products arc imported and sold at a mark-up _by
jewelry he purc hased in the Philippines.
its exclusive distributor, Kim 's Trading, Inc. The BIR complied
b. The proceeds he rccci vcd from a Ph tl ipptn c insurance
a rec.ord of all the imports of Kim from Aplets and imposed a
c?mpany as the sole beneficiary of Ii t~- insuranct· taken by
tax on Aplets net income derived from its exports to Kim. Is
the Bl R correct? hts fath e r who died rcc1.:ntly.
a. Yes. Aplets is a non -resident foreign corporation engagcJ c. The gains derived from the sa le in the New York Stock
•~ trade or business in the Philippines. . f Exchan ge of shares of stock in PLOT. u Philippi ne
corporation .
b. No. The tax should have been computed on th e bas is 0
gross re ven ues and not net income. d. Dividends rece ived from a twu year old foreign corporatio n
Whose g ross income wns derived solely frum Philippi ne
sources .
230
23 1
.► taX where the concept of progressivity finds of P2 50,000 .00. she used the Pl.25 million to buy a solo
69. _.\.Il ex.ample of a diamond ring in November 2016 which she sold for P 1.5 million
application is the . di .duals in September 201 7. Tonette had no other transaction in jewelry
a. Income tax on m v1 oducts in 20 17. Which among the following describes the tax
b E..._cise tax on petroleum ?r, . implications arising from the above transactions?
. ded on certa1Il articles a. Tonette may deduct his 2016 loss from her 2016 professional
c· Value-ad taX .
boxmo exhib·u·
1 ons
cl Amusement rax on . o income.
b. Tonette may carry over and deduct her 2016 loss only from_
• • ...i red realized for taX purpose when

70 . Income is cons1ue . her 2017 gain.

. · ed as revenue under ac.countmg standards even
a. It 1.S recognu: c. Tonette may carry over and deduct her 2016 loss from her
if the law does not do so. . . 201 7 professional income as well as from her ~ in .
b. The taxpayer retires from the busmess without approval
cL Tonette may not deduct her 2016 loss from both her 2016
from the BIR. . . loss from both her 20 l 7 professional income and her gain.
c. The raxpayer has been paid and has received m cash m
near cash the taxable income. . 73. Anion, Inc. received a notice of assessment and a letter from
cl The earning process is complete or virtually complete and
the BIR demanding the payment of P3 million pesos in
an exchange has taken place. deficiency income taxes for the tax.able year 2015. The financial
statements of the company show that it has been sufferino
71. Which among the following taXpayers is required to use only financial reverses from the year 2016 up to the present_ Its asse~
the calendar year for taX purposes? . , position shows that it could pay only P500,000.00 which it
a. Partnership exclusively for the design of ~overnm~~t
offered as a compro~e to the BIR. Which among the following
infrastructure projects considered as practice of cml
may the BIR requrre to enable it to enter into a compromise
engineering. . with Anion, Inc.?
b. Joint-stock company formed for the purpose of undertaking
a~ Anion must show it has faithfully paid taxes before 2016.
construction projects. b. Anion must promise to pay its deficiency when financially
c. Business partnership engaged in energy operations under a
able.
service contract with the government.
c. ~on must waive its right to the secrecy of its bank deposits.
d. Joint account (cuentas en participation) engaged in the
d. Anion must immediately deposit the PS00.000.00 with the
trading of mineral ores.
BIR.
72. In March 2016, Tonette, who is fond of jewelries, bought a
74- Levox Filipino fighter received a PS million as prize money
diamond ring for P750,000.00, a bracelet for P250,000 .00, a
necklace for PS00,000.00, and a brooch for PS00 ,000.00. :r.~e _w orld . p rofessional boxing championship held in the
~ppmes. Smee the B oxing event was not sanctioned by the
~onette derives income from the exercise of her profession as a
licensed CPA. In October 2016, Tonette sold her diamond ring, National Government, is Levox subject to Income Tax?
bracelet, and necklace for only Pl .25 million incurring a loss a. No, so long as the prizes goes directly to the winners and

232 233

-
 th prizes goes directly to the winners and _Mr. Andes asks y_our professional exper~ise. whether the
No, so long as e . . 79 following items of mcome need be reported m hts Income Tax
a. h the assoc1at10n.
not th~oug f onal sports association did not sanctio Return:
b. Yes, since the na 1 n Passive income
1.
the fight. · to fi.ma1 tax •
•t • prize subJect ·u.· Fringe Benefits received
No because 1 is h fi p1 iii . Capital gains from sale of real property and shares of stock
c. ' th t part that exceeds t e 1rst 0,000.00 of
<l. 1
Yes but on Y a d · Exempt or exclusion from gross income e.g. Proceeds of
totai Levox prizes for the calen ar year. . 1v.
Life Insurance
owable deductions over gross income of the
75 The excess of all All of the above must be supplemented in the ITR;
. business in a taxable year is known as a.
b. None of the above must be supplemented in the ITR;
a. Net operating loss. .c. Only items i and ii must be supplemented in the ITR;
b. Ordinary loss. d. Only items i , ii and iii must be supplemented in the ITR.
c. Net deductible loss
d. NOLCO.
80. Mr. Camilo Cruz your client asks you to file a tentative income
76. Under the eFPS a return is deemed filed with the BIR after a tax return for his behalf because he is going abroad. However,
sequence Number is generated. What is this sequence Number? Mr. Cruz stay outside the Philippines is indefinite, so Mr. Cruz
a. Reference Number asks you when is his last day to make amendments to finalize
b. Confirmation Number his Income Tax Return?
c. Acknowledgement Number a. 3 years from the date of filing .
d. Computerized Generated Number b. 3 years from the date required by law.
c. Anytime until the BIR has not yet commenced its
77. Where to file income tax return? investigation over said return.
a. Authorized Agent Bank where taxpayer is registered d. Before Mr. Cruz receives a Letter of Authority from the
b. Revenue District Office where taxpayer is registered BIR and lapse of 3 years.
c. Local of City treasurer where the taxpayer is domiciled
d. Commissioner of Internal Revenue 81. Your client is Mr. Irving Ackerman, consulted you on how he
can transfer all his properties to his lone son with a minimum
78. Which is not a requisite of SUBSTITUTED FILING? tax consequen~e. What will you advise Mr. Irv ing Ackerman?
a. Only pertains to employees a. Sell all his properties in favor of his son. ·
b. There must be only one employer b. _Incorporate and give all stockholdings to his son.
c. The compensation tax was actually and correctly withheld c. Convert all properties into a life insurance and designate
and remitted to BIR ·
son as 3 rd party irrevocable beneficiary.
d. Applies only to single or head of family
d. Get a life insurance, the proceeds there from will cover the
tax consequence.
234
235
 1
·\f· - mployc<l individual file its I quarter
11

l\2. When will an ~c c ltJc()ni~

tax rctum'l
a May I ~ of cull cnt ycur
h Ma\ ~ \ 11f the c11rrc11t ycur.
c .lul~ I~ of the current ycur.
d t\l;~u,t \ 5 of the current year

ll ' In ~Ol ,t Ca.MO, a resident Filipino citizen, received di vidcncJ

income from lJ S Based corporation which owns a chain <
hhpmo m t.aurant in the West ~oast, U.~.A. The di vide:~
rcm1uc.d 10 CanJ!,{l ,~ suh1cct to U.S w1thholdmg tax with rcspe 1
lo a non-m 1dcn1alien like Caruso. The dividend is subject 1~
a. Fma\ income tax ·
b B~,c mcome tax
c Capital gams tax
d. Exempt from tax

~4 lo~ "' ~ employed by Timberland Inc., within how many d· .

o~e. n~ to obtain Tax Identification Number from BIR? ays
a l day of employment ·
b l Qtb day of employment
c. 1• month of employment
d. 1• year of employment.

236

i 4
 ANSW l•:H Kl>: Y
ON
INl)I Vll>I IAI. TAXATI ON

.Ill.
I.
2.
"
A ·11.
I)
A
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C
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4, (' ·i:i . II (,2 . A
5. A '14 . I) r,3.
h. A ]:'j I) ,~. u
A

1,5
7.
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37. "
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C
A
,,. 1k C 67. B
IO "
C :N 6K. C
II II 40 69. A
41 ll 70. I)
12 C
13. II 42 C 71. A
I) 43. ll 12. B
14
15 I) 44. ll 73. C
C 45. II 74. B
16
4(1 . A 71 A
17. C
I) 47. A 76. A
IK.
77. A
"·
20.
A
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4'.
49. "
C 78. D
50. A 79 u
21. A
KO D
22
23.
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51.
52 . " Kl. ll
A
53 . 82.
24. A 83 B
54. I)
25. I)
B
C 84
26. B 55 .
27. n 56. A
2K C 57, A
58. I)
2'I C

237