I.

GROSS INCOME

1. In 2021, XYZ Company, a domestic corporation, recorded other income as follows:

Realized foreign exchange gain 26,337,740

Dividend from PLDT 17,213,965
Foreign exchange gain resulting from offsetting of accounts 8,445,934
Gain on sale of real properties subjected to CGT 1,000,000
Gain on sale of shares of stock subjected to CGT 250,000
Gain on sale of shares of stock subjected to OPT 100,000
Reversal of prior year provision for bad debts due to over recording in prior 250,000
year (not claimed as deduction in previous year)
Interest income – Peso deposits – gross of 20% FWT 5,000,000
Interest income – foreign currency deposits – gross of 15% FWT 3,500,000
Interest income from deposits abroad 1,450,000
Interest income on loans to affiliates 584,116
Share in equity earnings of Mabuhay Services, Inc., a local subsidiary 6,188,779
Royalties gross of 20% FWT 5,661,784
Insurance proceeds on casualty losses 2,358,226

How much is the total income not subject to regular income tax in 2021?

a. 32,975,749
b. 39,164,528
c. 47,610,462
d. 41,522,754 Ans

II. ALLOWABLE DEDUCTIONS

2. Company Z has a deposit with ABC Bank. It obtained a loan from ASAP Financing Corp. in connection with the
operation of its business. For the year 2019, assume the following:

Company Z’s Net Income before Interest Expense 2,500,000

Interest Income (from ABC Bank, gross of FWT) 480,000
FWT on Interest Income 96,000
Interest Expense 200,000

How much is the taxable income of Company Z for 2019 after deducting interest expense?

a. 2,300,000
b. 2,490,080
c. 2,426,720
d. 2,458,400 Ans

3. JAM Company recorded in its books taxes and licenses expenses amounting to P51,055,000. The breakdown of the
taxes and licenses account is as follows:

Payment of deficiency FBT 25,000,000

CGT on sale of real properties 200,000
CGT on sale of shares of stock 50,000
Other percentage tax on sale of shares of stock 5,000
Payment of surcharge 6,250,000
Payment of interest on deficiency FBT 1,250,000
Payment of compromise penalties 300,000
Business taxes and licenses 18,000,000

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 How much is the deductible taxes and licenses expenses for income tax purposes?

a. 19,250,000
b. 25,800,000
c. 44,250,000 Ans
d. 44,505,000

III. INDIVIDUAL INCOME TAXATION

4. RJ, married, left the Philippines in the middle of the year on July 1, 2021 to go abroad and work there for five (5)
years. The following data were provided as of December 31, 2021.

Gross Business Income Business Expenses

Period Philippines Abroad Philippines Abroad
Jan 1 – June 30 300,000 200,000 100,000 50,000
July 1 – Dec 31 600,000 400,000 150,000 50,000

RJ’s taxable net income for 2021 should be:

a. P800,000 Ans
b. P950,000
c. P600,000
d. P1,100,000

5. Based on the previous problem, but assuming RJ arrived from abroad on July 1, 2021 to permanently resettle in the
Philippines, his taxable income as of December 31, 2021 should be:

a. P600,000
b. P750,000
c. P1,100,000
d. P1,000,000 Ans

IV. CORPORATE INCOME TAXATION

6. Balong Corporation, a domestic corporation, has the following data for taxable year 2019:

Sales 5,000,000
Cost of goods sold 1,500,000
General selling and administrative expenses 500,000
Interest income from Philippine bank deposits 100,000
Rental income (net of 5% withholding tax) 190,000
Dividend income:
From domestic corporation 60,000
From resident foreign corporation 50,000
Capital gains from sale of domestic shares of stock 75,000
sold directly to the buyer

How much is the income tax payable for the year 2019?

a. 975,000
b. 957,000
c. 815,000
d. 965,000 Ans

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 Use the following data for the next six (6) questions:

A domestic corporation has the following income and expenses for the year:

Philippines Abroad
Gross Sales 100,000,000 80,000,000
Cost of Sales 40,000,000 20,000,000
Operating expenses 30,000,000 12,000,000

7. How much is the income tax due assuming the taxable year is 2019?

a. 19,500,000
b. 21,450,000
c. 23,400,000 Ans
d. 18,000,000

8. How much is the income tax due assuming the taxable year is 2020?

a. 19,500,000
b. 21,450,000 Ans
c. 23,400,000
d. 18,000,000

9. How much is the income tax due assuming the taxable year is 2021?

a. 19,500,000 Ans
b. 21,450,000
c. 23,400,000
d. 18,000,000

10. How much is the income tax due assuming the taxable year is 2021 and the Company’s total assets amounted to P80
million only?

a. 15,600,000
b. 19,500,000 Ans
c. 23,400,000
d. 15,000,000

11. How much is the tax due assuming

- The taxable year is 2022
- The Corporation is a resident foreign corporation

a. 7,500,000 Ans
b. 9,600,000
c. 14,400,000
d. 15,000,000

12. How much is the tax due assuming

- The taxable year is 2022
- The Corporation is a non-resident foreign corporation

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 a. 7,500,000
b. 9,600,000
c. 14,400,000
d. 15,000,000 Ans

13. Valorant Corporation, a domestic corporation, has the following income and expenses for taxable year 2020:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Gross Sales 2,000,000 3,000,000 5,000,000 8,000,000
Cost of Sales 1,200,000 1,600,000 2,800,000 4,400,000
Operating Expenses 400,000 1,000,000 1,200,00 1,400,000

The Company’s assets amounted to P50,000,000.

How much is the correct income tax due?

a. 880,000
b. 1,000,000
c. 1,040,000
d. 1,100,000 Ans

14. ML Corporation, a resident foreign corporation, has the following income and expenses in the Philippines for Fiscal
year 2019:

Oct 2019 to June 2020 July to Sept 2020

Gross Sales 5,000,000 15,000,000
Cost of Sales 2,000,000 8,000,000
Operating Expenses 800,000 3,200,000

How much is the income tax due for fiscal year 2019?

a. 1,350,000
b. 1,610,000
c. 1,650,000
d. 1,725,000 Ans

15. CREATE Company, a domestic corporation and a retailer of goods has gross sales of P14,000,000 with a cost of
sales of P7,500,000 and allowable deductions of P2,500,000 for the calendar year 2021. It’s total assets of P150,000
as of December 31, 2021 per Audited Financial Statements includes the land costing P40,000,000 and the building of
P30,000,000 in which business entity is situated, with an aggregate amount of P70,000,000 as Fixed Assets.

How much is the income tax due in 2021?

a. 800,000 Ans
b. 975,000
c. 1,000,000
d. 1,200,000

16. TRAIN Corporation, a corporation engaged in business in the Philippines and abroad has the following data for
taxable year 2021:

Gross Income, Philippines 975,000

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 Expenses, Philippines 750,000
Gross Income, Thailand 770,000
Expenses, Thailand 630,000
Interest on bank deposit 50,000
Assets 50,000,000

Determine the income tax due assuming the corporation is:

Resident Non-Resident
Domestic
Foreign Corp. foreign Corp.
a 83,000 72,000 68,750
.
b 73,000 56,250 256,250 ans
.
c. 91,250 56,250 250,000
d 116,800 72,000 250,000
.

17. The following information were taken from the records of ABC Inc., a domestic corporation in its 4 th year of operations:

Gross profit from sales 62,000,000

Capital gain on sale directly to buyer of shares in a 2,000,000
domestic corporation
Dividend received during the month of October from:
Domestic corporation 400,000
Resident foreign corporation (the ratio of gross 200,000
income in the Philippines over gross income from all
sources for the past 3 years is 60%)
Interest on:
Bank deposit 400,000
Trade receivable 1,000,000
Business expenses 42,000,000
Income tax withheld 2,300,000
Quarterly income tax payments 1,200,000
Excess tax payment from previous year 200,000
Total Assets 150,000,000

How much is the income tax payable assuming the taxable year is 2020?

a. 945,000
b. 2,130,00
c. 2,075,000 Ans
d. 5,775,000

Use the following data for the next two (2) questions

GMA Company, a domestic corporation registered with the BIR since 2015, has the following data for taxable year
2021:

Gross receipts 13,300,000

Discounts and allowances 2,500,000
Salaries of personnel directly involved in rendering service 3,000,000
Salaries of administrative personnel 1,500,000
Fees of consultants directly involved in rendering service 500,000
Rental of equipment used in rendering service 700,000
Rental of office space for use of administrative personnel 500,000

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 Other operating expenses 5,000,000
Total Assets 50,000,000

18. How much was the income tax due and payable in 2021?

a. 0 Ans
b. 48,000
c. 66,000
d. 96,000

19. Continuing the preceding number, the Company provided the following data in 2022:

Gross receipts 120,000,000

Salaries of personnel directly involved in rendering service 38,000,000
Salaries of administrative personnel 12,000,000
Fees of consultants directly involved in rendering service 16,000,000
Rental of equipment used in rendering service 15,000,000
Rental of office space for use of administrative personnel 5,000,000
Other operating expenses 23,000,000

How much was the income tax due and payable in 2022?

a. 2,602,000
b. 2,477,000
c. 2,584,000
d. 2,650,000Ans

20. A domestic corporation registered in 2008, provided the following data:

2021 2022 2023 2024

Gross Sales 25,000,000 32,000,000 29,000,000 35,000,000
Cost of goods sold 18,000,000 20,000,000 19,000,000 18,000,000
Business Expenses 7,200,000 11,900,000 10,500,000 9,000,000

Additional information:

- Remaining Net Operating Loss (2020) from 2018: P250,000

- NOL incurred in 2020: P180,000
- Excess MCIT over RCIT in 2018: P250,000
- Excess MCIT over RCIT in 2020: P80,000
- Total Assets: P150,000,000

The income tax payable in 2024 should be:

a. 1,867,500
b. 1,535,000
c. 1,465,000
d. 1,527,500

21. Advance Learning Institute, an educational non-profit institution, provided the following data for taxable year 2019:

Income from tuition fees P 4,500,000

Miscellaneous school fees 1,500,000
Dividend income:

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 Domestic corporation 2,000,000
Resident foreign corporation 2,000,000
Rent income (net of 5% withholding tax) 1,900,000
Operating expenses 4,000,000

The income tax payable of the school in 2019 was:

a. 400,000.00
b. 500,000.00 Ans
c. 600,000.00
d. 1,200,000.00

22. Creative College, a private educational institution has presented the following data for the year 2021:

Gross Income, related activities 5,000,000

Gross income, unrelated activities (except rental income) 5,000,000
Rental income (gross of 5% EWT) 2,000,000
Expenses, related activities 2,500,000
Expenses, unrelated activities 3,500,000
Dividend income from a domestic corporation 100,000
Quarterly income tax paid for the first 3 quarters 500,000

How much is the income tax payable in 2021?

a. 0
b. 600,000
c. 900,000 Ans
d. 1,500,000

V. WITHHOLDING TAX ON COMPENSATION

23. The following data were taken from Juan (single), holding managerial position for 2021 taxable year:

Gross salaries @ P50,000 per month P600,000

SSS contribution 12,000
Philhealth contributions 7,200
Pag-Ibig contributions 4,800
Union dues 3,000
Withholding tax on compensation income 73,250
Allowances, not subject to liquidation 100,000
Gasoline allowances, subject to liquidation 17,000
13th month pay 50,000
De minimis benefits 12,000

The taxable compensation income subject to graduated rate under Section 24(A) of the tax code is:

a. P576,000
b. P465,000
c. P600,000
d. P573,000 Ans

24. Juan dela Cruz, a newly hired operations manager of ABC Company, wondered how much would be his withholding
tax on compensation per month. Due to lack of technical knowledge on taxation, he consulted you and presented the
following information:

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 Basic monthly pay 45,500.00
Monthly gas allowance 1,000.00
Monthly rice subsidy 2,500.00
Mobile load and internet allowance 1,200.00

Monthly contributions:
SSS Contribution 1,125.00
Pag-IBIG Contribution 300.00
Philhealth Contribution 1,800.00

Compute the withholding tax on compensation income of Juan dela Cruz: [2,500 + (Excess of 33,333 * 25%)]

a. 5,235.50
b. 4,735.50 Ans
c. 5,910.50
d. 5,410.50

VI. EXPANDED WITHHOLDING TAX / FINAL WITHHOLDING TAX

Inc., a domestic corporation, paid the following during the month of April 2022:
XYZ
Particulars Payee/s Amount
Merchandise ABC Company (regular supplier) P 150,000
Professional Fees – IT services DEF IT Consulting Services, Inc. 400,000
(one-time transaction)
Security Agency Fee GHI Agency Services, Inc. 25,000
Rentals JKL Leasing Corporation 200,000
Cash Dividends Various shareholders (all are Filipino 400,000
residents)
Selling price of the land purchased Juan dela Cruz 1,560,000
from the seller which held the land
as a capital asset

The land was sold when the zonal value was 2 million.

Compute for the (i) expanded withholding tax and (ii) final withholding tax to be remitted by XYZ.

25. Expanded withholding tax

a. 20,000.00
b. 52,000.00
c. 64,285.72
d. 72,000.00

26. Final withholding tax

a. 133,600.00
b. 200,000.00
c. 160,000.00
d. 142,857.14

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 VII. FRINGE BENEFITS

27. Mapagpala Corporation paid for the monthly rental of the residential house of it branch manager amounting to
P204,000. How much is the fringe benefit expense for the month?

a. 0
b. 48,000.00
c. 102,000.00
d. 204,000.00 Ans

28. How much is the fringe benefit tax for the month?

a. 0
b. 54,923.00 Ans
c. 109,846.15
d. 204,000.00

29. The total allowable deduction from business income of Mapagpala Corporation is:

a. 204,000.00
b. 313,846.15
c. 300,000.00
d. 258,923.00 Ans

30. The employer of Mr. Juan dela Cruz, a NRF employee, provides cash to Mr. Dela Cruz so he can buy a car. The car
shall be in Mr. Dela Cruz’s name. The purchase price of the car amounts to P750,000, while the cash provided
amounts to P800,000. How much is the fringe benefits tax on the transaction?

a. 201,923.08
b. 403,846.15
c. 430,769.23 Ans
d. 215,384.62

31. The employer of Mr. Juan dela Cruz, a NRF employee and is not part of the sales, freight or delivery group of the
Company, provides him with a car that the employer owns and maintains. The purchase price of the car amounts to
P750,000. How much is the fringe benefits tax?

a. 80,769.23
b. 40,384.62
c. 403,846.15
d. 0

32. Cardo (NRF) traveled to the US for a week for a business conference bringing with him his wife and his 2 kids. He
flew through first class together with his wife, while his kids flew using economy class. He was provided with pocket
money of US$ 350/day for hotel accommodation abroad. The cost of first class ticket was P137,500/person, while the
economy class costs P49,500/person.

Assuming the business conference was evidenced by an official invitation, how much is the fringe benefits tax?
Exchange rate of P 45 to US$ 1.

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 a. 158,038.46 Ans
b. 675,365.00
c. 572,653.85
d. 438,307.69

VIII.TAX REMEDIES

A corporation requested to pay in three (3) monthly installments, starting July 15, 2020, its deficiency income tax
liability for the year 2018 in the amount of P180,000 per Final Assessment Notice issued on June 15, 2020, with due
date on July 15, 2020. Its request for installment payment has been duly approved.

Compute for the amount payable on July 15, 2020, August 15, 2020 and September 15, 2020.

Kindly input your answers in the text box. Do not use commas (Ex. 123,456 should be typed in as 123456). For
answers requiring a decimal point, you should input up to two decimal points only (Ex. 123,456.781 should be typed
in as 123456.78).

33. July 15, 2020 –

34. August 15, 2020 –

35. September 15, 2020 -

36. The Income Tax Return (ITR) for the calendar year 2018 was due for filing on April 15, 2019, but the taxpayer
voluntarily filed his tax return from the BIR only on July 15, 2019. The tax due per return amounts to P100,000. The
total amount due on July 15, 2019 (excluding compromise penalty) is: Please use months instead of days in
computing interest

a. 145,000
b. 117,500
c. 135,000
d. 128,000

37. Using the same facts in the previous question, but the ITR is filed on time but through an internal revenue officer other
than whom the return is required to be filed. The amount due is:

a. 100,000
b. 150,000
c. 125,000
d. 135,000

38. A corporation filed its ITR and paid the tax for calendar year 2018 with a net taxable income of P500,000. AT the
applicable tax rate of 35% for the year 2018, its income tax amounted to P175,000. Upon investigation, it was
disclosed that its ITR was false and fraudulent because it did not report a taxable income amounting to another
P500,000. On the net income of P1,000,000 per investigation, the income tax due is P350,000. Deducting its payment
per return filed, the deficiency excluding penalties, amounted to P175,000. Failing to protest on time against the
preliminary assessment notice, a final letter of demand and assessment notice was issued on June 15, 2020 calling
for payment on or before July 15, 2020. The amount still due on July 15, 2020 is:

a. 288,750.00

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 b. 328,125.00
c. 262,500.00
d. 297,500.00

39. In the preceding number, assuming that the assessment has become final and collectible, but the corporation pays
the tax assessment only on August 15, 2020, the total tax due (excluding compromise penalty) is:

a. 363,825.00
b. 387,917.00
c. 332,500.00
d. 376,833.00

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