Tax 11 CE 2017

Summer 2017 Comprehensive / Re-admission Examination
Tax 11 – Income Taxation
Code _______________________________ Date _____________
Multiple Choice
Department of
Identify the choice that best completes the statement or answers the question. Accountancy
Write your final answer on the answer sheet provided.
1. (Phil. CPA) The term “capital asset” includes:

a. stock in trade or other property included in the taxpayer’s inventory.
b. real property not used in the trade or business of taxpayer.
c. property primarily for sale to customers in the ordinary course of his trade or business.
d. property used in the trade or business of the taxpayer and subject to depreciation.
2. First statement: Real property initially acquired by a taxpayer engaged in the real estate business shall not result in its
conversion into a capital asset even if the same is subsequently abandoned or becomes idle.
Second statement: Real properties classified as ordinary assets for being used in business by a taxpayer other than real estate
business are automatically converted into capital assets upon showing of proof that the same have not been used in business
for more than two (2) years prior to consummation of the taxable transactions involving said properties.
a. True, True c. True, False
b. False, False d. False, True
3. (Phil. CPA) Lots being rented when subsequently sold are classified as:
a. capital assets. c. ordinary assets.
b. liquid assets. d. fixed assets.
4. This is the length of time capital assets are held. It covers the period from date of acquisition to date of sale.
a. Holding period c. Accounting period
b. Taxable period d. Audit period
5. (Phil. CPA) A feature of ordinary gains as distinguished from capital gains.

a. Gains from sale of assets not stock in trade c. Sources are capital assets
b. May or may not be taxable in full d. No holding period
6. A purchaser of accounts receivable which cannot be collected and are consequently charged off the books as bad debts is
entitled to deduct them, the amount of deduction to be based upon:
a. the face value of the accounts receivable. c. the price paid for the accounts receivable.
b. the net realizable value of the accounts d. the fair discounted value of the accounts
receivable. receivable.
7. It is the gradual diminution of the useful value of tangible property resulting from wear and tear and normal obsolescence. It is
also applied to the amortization of intangible assets whose use in the trade or business is definitely limited in duration.
a. Depreciation c. Obsolescence
b. Depletion d. Bad debt
8. First statement: The phrase “actually charged off from the taxpayer’s books of accounts” means that 1) the amount of money
lent by the taxpayer (in the course of his business or trade) to his debtor; 2) had been recorded in his books of account as a
receivable has actually become worthless as of the end of the taxable year, and 3) the said receivable has been cancelled and
written off from the said taxpayer’s books of account.
Second statement: A mere recording in the taxpayer’s books of account of estimated uncollectible accounts does not constitute
a write-off of the said receivable, hence, shall not be a valid basis for its deduction as a bad debt expense.
9. It means expenditures paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit
of ore or other mineral, and paid or incurred before the beginning of the development stage of the mine or deposit.
a. Intangible costs of petroleum operation c. Development cost
b. Exploration cost d. Depreciable cost
10. It means expenditures paid or incurred during the development stage of the mine or other natural deposits.
a. Intangible costs of petroleum operation c. Development cost
b. Exploration cost d. Depreciable cost
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11. First statement: The term “losses” implies an unintentional parting with something of value.
Second statement: No loss shall be allowed as a deduction from gross income if at the time of the filing of Department of
the return, such loss has been claimed as a deduction for estate tax purposes in the estate tax return. Accountancy
a. Only the first statement is correct c. Both statements are correct
b. Only the second statement is correct d. Both statements are incorrect
12. First statement: Losses are deductible only by the corporation sustaining them, thus, the loss suffered by a corporation which
has a separate personality from its stockholders, cannot be deducted by the latter.
Second statement: In the case of a nonresident individual or foreign corporation, the losses deductible shall be those actually
sustained during the year and incurred in business, trade or exercise of a profession conducted within the Philippines, when
such losses are not compensated for by insurance or other forms of indemnity.
a. Both statements are incorrect c. Only the second statement is correct
b. Only the first statement is correct d. Both statements are correct
13. During an unusually strong typhoon in 2010, a warehouse was destroyed. The owner filed a claim of P1,000,000, the book
value of the warehouse, against the insurance company. The insurance company was willing to pay P600,000. Finally, the
claim was settled in 2012 for P750,000, the insurance company paying that amount in the same year.
When would the loss of P250,000 be deductible?
a. 2010 c. 2012
b. 2011 d. None of the choices
14. One of the following losses is deductible:

a. Loss caused by the steady weakening of the building due to normal wind and weather conditions.
b. Loss due to termite or moth damage.
c. Loss resulting from car accident due to willful negligence or willful act.
d. Loss resulting from car accident because of faulty driving.
15. First statement: The actual cost of other property which is destroyed by order of authorities may be claimed as a loss by a
farmer.
Second statement: If an individual owns and operates a farm, in addition to being engaged in another trade, business or
calling, and sustains a loss from such operation of the farm, then the amount of loss sustained may be deducted from gross
income received from all sources, provided the farm is not operated for recreation or pleasure.
a. Both statements are incorrect c. Only the second statement is correct
16. First statement: Exclusions are receipts which are excluded from the gross income, hence, do not form part of the gross
income.
Second statement: Deductions are allowable items or amounts that can be subtracted from the gross income to arrive at the
taxable income.
17. First statement: A taxpayer can deduct an item or amount from the gross income only if there is a law authorizing such
deduction.
Second statement: For income tax purposes, a taxpayer is free to deduct from the gross income the full amount or a lesser
amount of the deduction allowed or not claim any deduction at all.
18. Which of the following is not a requisite for the deductibility of salaries, wages and other forms of compensation including the
grossed-up monetary value of fringe benefit furnished or granted by the employer to the employee?
a. Reasonable c. Withholding tax has been paid
b. Services are actually rendered d. None of the choices
19. First statement: The term “entertainment, amusement and recreation expenses” includes representation expenses and/or
depreciation or rental expense relating to entertainment facilities.
Second statement: The term “entertainment facilities” shall refer to a yacht, vacation home or condominium and any similar
item of real or personal property used by the taxpayer primarily for the entertainment, amusement, or recreation of guests or
employees.
a. Both statements are true c. Only the first statement is true
b. Both statements are false d. Only the second statement is true
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20. One of the following is not deductible from the gross income of the employer.
a. De minimis benefits given to employees
b. Fringe benefits given to rank and file
Department of
c. SSS, GSIS, Philhealth, HDMF and other contributions Accountancy
d. Cost of advertising to influence legislation
21. First statement: Donations to the Government of the Philippines or to any of its agencies or political subdivisions, including
fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities are
deductible in full.
Second statement: Any donation which is made to the Government or to any of its agencies or political subdivisions not in
accordance with the said annual priority plan shall be subject to the 5% or 10% limitations prescribed in the Tax Code.
22. Which of the following donations shall be deductible in full?

a. Donations to the Artesian Well Fund
b. Donations to the University of the Philippines and other state colleges and universities
c. Donations to the Cultural Center of the Philippines
d. All of the choices
23. First statement: A taxpayer may treat research or development expenditures which are paid or incurred by him during the
taxable year in connection with his trade, business or profession as ordinary and necessary expenses which are not chargeable
to capital account.
Second statement: The expenditures so treated shall be allowed as deduction during the taxable year when paid or incurred.
24. Contributions to pension trust during the taxable year to cover the pension liability accruing during the year, shall be allowed as
a deduction under:
a. ordinary and necessary expenses. c. losses.
b. interest expenses. d. taxes.
25. First statement: Contributions or gifts shall be allowable as deductions only if verified under the rules and regulations
prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
Second statement: Deduction of amounts contributed to charity is based on public policy and provisions allowing deductions of
charitable contributions should not be narrowly construed, hence, deduction for contributions may still be allowed even if the
taxpayer fails to attach receipts.
a. Both statements are correct c. Only the first statement is correct
b. Both statements are incorrect d. Only the second statement is correct
26. Which of the following may be allowed to claim OSD in lieu of the itemized deductions?
a. Taxable estates and trusts c. Resident foreign corporation
b. Domestic corporation d. All of the choices
27. First statement: The “cost of sales” in case of individual seller of goods, or the “cost of services” in the case of individual seller
of services, are not allowed to be deducted for purposes of determining the basis of the OSD.
Second statement: For other individual taxpayers allowed by law to report their income and deductions under a different
method of accounting (e.g. percentage of completion basis, etc.) other than cash and accrual method of accounting, the “gross
sales” or “gross receipts” shall be determined in accordance with said acceptable method.
a. Both statements are correct c. Both statements are incorrect
b. Only the first statement is correct d. Only the second statement is correct
28. First statement: The items of gross income under Section 32(A) of the Tax Code, as amended, which are required to be
declared in the income tax return of the taxpayer for the taxable year are part of the gross income against which the OSD may
be deducted in arriving at taxable income.
Second statement: Passive income which have been subjected to a final tax at source shall not form part of the gross income
for purposes of computing the forty percent (40%) optional standard deduction.
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29. A retailer of goods whose accounting method is under the accrual basis, has a gross sale of P1,000,000
with a cost of sales amounting to P800,000 for year 2009. The taxpayer is qualified to choose OSD as Department of
deductions. Accountancy
How much is the net taxable income assuming the taxpayer is a single individual with no dependents?
a. P550,000 c. P120,000
b. P200,000 d. None of the choices
30. First statement: In the case of married taxpayers, only the spouse claiming the additional exemption for dependents shall be
entitled to deduct premium payments on health and/or hospitalization insurance.
Second statement: Individual taxpayers earning compensation income arising from personal services rendered under an
employer-employee relationship cannot avail of the deduction for premium payments on health and/or hospitalization insurance.
31. First statement: Tax-free income is not to be included in the income tax return unless information regarding it is specifically
called for.
Second statement: While exclusions are simply not taken into account in determining gross income, deductions are subtracted
from gross income to arrive at net income.
32. First statement: Proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a
single sum or otherwise are excluded from gross income.
Second statement: If such amounts of the proceeds of life insurance are held by the insurer under an agreement to pay interest
thereon, the interest payments shall be included in gross income.
33. First statement: The amount received by the insured, as a return of premium paid by him under life insurance, endowment or
annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the
contract shall be excluded from gross income.
Second statement: If the amounts, when added to amounts received before the taxable year under such contract, exceed the
aggregate premium paid, whether or not paid during the taxable year, then the excess shall be included in the gross income.
34. (Phil. CPA) Mr. Santiago purchased a life annuity for P100,000 which would pay him P10,000 a year. The life expectancy of
Mr. Santiago was 12 years. Which of the following would Mr. Santiago be able to exclude from his gross income?
a. P 120,000 c. P 20,000
b. P 100,000 d. P 10,000
35. First statement: The value of property acquired by gift, bequest, devise or descent shall be excluded from the gross income.
Second statement: Income from property received as gift, bequest, devise or descent as well as gift, bequest, devise or
descent of income from any property, in case of transfer or divided property, shall be included in gross income.
36. (Phil. CPA) Mr. Monte was injured in a vehicular accident in 2009. He incurred and paid medical expenses of P20,000 and
legal fees of P10,000 during the year. In 2001, he received P70,000 as settlement from the insurance company which insured
the car owned by the other party involved in the accident. From the above payments and transactions, the amount of taxable
income to Mr. Monte in 2011was:
a. P 70,000. c. P 40,000.
b. P 50,000. d. zero.
37. First statement: The law does not require that the 10-year requirement for tax-exempt retirement benefits should be
uninterrupted.
Second statement: The tax-exempt retirement benefits shall be availed of by the official or employee only once.
a. Both statements are correct; c. Only the first statement is correct;
b. Both statements are incorrect; d. Only the second statement is correct.
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38. Any amount received by an official or employee or by his heirs from the employer as a consequence of
separation of such official or employee from the service of the employer shall be excluded from gross Department of
income except if caused by: Accountancy
a. death.
b. sickness or other physical disability.
c. any cause beyond the control of the official or employee.
d. none of the choices.
39. First statement: In order for the separation pay to be exempt from income tax, the separation from the service of the official or
employee must not be asked for or initiated by him or not of his own making.
Second statement: Any payment made by an employer to an employee on account of dismissal, constitutes compensation
regardless of whether the employer is legally bound by contract, statute, or otherwise to make such payment.
b. Only the second statement is correct d. Both statements are not correct
40. First statement: Generally, the income of government entities performing proprietary function is subject to tax.
Second statement: Income derived from any public utility or from the exercise of any essential governmental function accruing
to the Government of the Philippines or to any political subdivision is not taxable.
41. How much is the final tax imposed on the grossed-up monetary value of fringe benefit granted by the employer to the employee
except rank and file employees, starting January 1, 2000?
a. 34% c. 32%
b. 33% d. 25%
42. Fringe benefit tax is imposed on:

a. Managerial and supervisory employees. c. consultants.
b. rank and file employees. d. employers.
43. First statement: The fringe benefit tax is imposed only when the employer is a corporation.
Second statement: The fringe benefit tax shall be withheld and paid by the employer in accordance with the provision of
Section 57 (A).
44. In which of the following cases shall the monetary value be the entire value of the benefit?
I - If the employer purchases a residential property and transfers ownership of the said property in the name of the
employee
II - If the employer purchases a residential property and transfers ownership of the said property to his employee for the
latter’s residential use, at a price less than the employer’s acquisition cost
a. Both I and II c. Neither I nor II
b. I only d. II only
45. Membership fees, dues, and other expenses borne by the employer for his employee, in social and athletic clubs or other
similar organizations shall be treated as taxable fringe benefit:
a. at fifty percent (50%) of such fees or dues.
b. in full.
c. in full or fifty percent (50%) of such fees or dues depending on the agreement between the employer
and the employee.
d. none of the choices
46. First statement: In the absence of documentary evidence showing that the employee’s travel abroad was in connection with
business meetings or conventions, the entire cost of the ticket, including cost of hotel accommodations and other expenses
incident thereto shouldered by the employer, shall be treated as taxable fringe benefits.
Second statement: Travelling expenses which are paid by the employer for the travel of the family members of the employee
shall be treated as taxable fringe benefits of the employee.
a. Only the first statement is correct c. Both statements are incorrect
b. Only the second statement is correct d. Both statements are correct
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47. First statement; Holiday and vacation expenses of the employee borne by his employer shall be treated as
taxable fringe benefits. Department of
Second statement: The cost of the educational assistance to the employee which are borne by the Accountancy
employer, shall, in general, be treated as taxable fringe benefit.
48. A scholarship grant to the employee by the employer shall not be treated as taxable fringe benefit if:
I - the education or study involved is directly connected with the employer’s trade, business or profession.
II - there is a written contract between them that the employee is under obligation to remain in the employ of the employer for
a period of time that they have mutually agreed upon.
a. Both I and II are correct c. Only I is correct
b. Neither I nor II is correct d. Only II is correct
49. The cost of life or health insurance and other non-life insurance premiums borne by the employer for his employee shall be
treated as taxable fringe benefit, except which of the following?
I - Contributions of the employer for the benefit of employee, pursuant to the provisions of existing laws, such as under the
Social Security System (SSS) (R.A. No. 8282, as amended) or under the Government Service Insurance System (GSIS) (R.A.
No. 8291, as amended), or similar contributions arising from the provisions of any other existing laws
II - The cost of premiums borne by the employer for the group insurance of his employees
a. Both I and II c. Neither I nor II
b. I only d. II only
50. First statement: The exemption of any fringe benefit from the fringe benefit tax shall not be interpreted to mean exemption from
any other income tax imposed under the Tax Code except if the same is likewise expressly exempt from any other income tax
impose under the Tax Code or under any other existing laws.
Second statement: If the fringe benefit is exempted from the fringe benefit tax, the same may, however, still form part of the
employee’s gross compensation income which is subject to income tax, hence, likewise subject to withholding tax on
compensation income payment.
b. False, False d. False. True
51. It means income (in the broad sense) excluding income which is by statutory provisions or otherwise exempt from the tax
impose by law.
a. Gross income c. Net assets
b. Net income d. None of the choices
52. The term means the pertinent items of gross income specified in the Tax Code, less the deductions and /or personal and
additional exemptions, if any, authorized for such types of income by the Tax Code or other special laws.
a. Gross income c. Net assets
b. Taxable income d. None of the choices
53. This term, as applied to taxation, refers to all funds or income derived by the government whether from tax or other sources.
a. Capital c. Revenue
b. Receipts d. Income
54. Which of the following statements is incorrect?

a. A mere increase in the value of the property is not income but merely an unrealized increase in
capital.
b. Gain may occur as a result of exchange of property, payment, assumption, reduction or cancellation
of the taxpayers’ indebtedness (unless it amounts to a gift) or other profit realized from the
completion of a transaction.
c. If the taxpayer receives, through mistake, an amount in excess of the amount agreed upon, the
excess is not taxable income unless the duty to return is not clear or is disputed.
d. None of the choices
55. First statement: Compensation may be paid in money or in some medium other than money, as for example, stocks, bonds or
other forms of property.
Second statement: Where compensation is paid in property other than money, the employer shall make necessary
arrangements to ensure that the amount of the tax required to be withheld is available for payment to the Commissioner.
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56. Any amount paid specifically, either as advances or reimbursements for traveling, representation and other
bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred by the Department of
employee in the performance of his duties are not compensation subject to withholding, if which of the Accountancy
following conditions is satisfied?
I - It is for ordinary and necessary travelling and representation or entertainment expenses paid or
incurred by the employee in the pursuit of the trade, business or profession.
II - The employee is required to account/liquidate for the foregoing expenses in accordance with the specific requirements of
substantiation for each category of expenses pursuant to Sec. 34 of the Code.
a. Neither I nor II c. I only
b. Both I and II d. II only
57. First statement: The excess of advances made over actual expenses shall constitute taxable income if such amount is not
returned to the employer.
Second statement: Reasonable amounts of reimbursements/advances for traveling and entertainment expenses which are pre-
computed on a daily basis and are paid to an employee while he is on assignment or duty need not be subject to the
requirement of substantiation and to withholding.
58. First statement: In the case of manufacturing, merchandising, or mining business, “gross income” means the total sales, less
the cost of goods sold, plus any income from investments and from incidental or outside operations or sources.
Second statement: In determining the gross income of manufacturing, merchandising, or mining business, subtractions should
not be made for depreciation, depletion, selling expenses or losses, or for items not ordinarily used in computing the cost of
goods sold.
a. Only the second statement is correct c. Both statements are incorrect
59. First statement: All individuals, partnerships or corporations that cultivate, operate or manage farms for gain or profit either as
owners or as tenants are designated as farmers.
Second statement: Persons cultivating or operating farms for recreation or pleasure, the result of which is a continual loss from
year to year, are not regarded as farmers.
a. Both statements are correct c. Only the second statement is correct
b. Both statements are incorrect d. Only the first statement is correct
60. In the case of a farmer reporting on accrual basis, his gross profits are ascertained by:
I - adding to the inventory value of livestock and products on hand at the end of the year the amount received from the sale of
livestock products, and miscellaneous receipts for hire of teams, machinery, and the like during the year.
II - deducting from the sum the inventory value of livestock and products on hand at the beginning of the year and the cost of
livestock raised or purchased during the year.
a. Both I and II c. I only
b. Neither I nor II d. II only
61. Interests, royalties, prizes and other winnings derived from Philippine sources by individuals except nonresident aliens not
engaged in trade or business shall be subject to a final tax of:
a. 10%. c. 30%.
b. 20%. d. 32%.
62. The term shall mean an alternative form of obtaining funds from the public other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrowers own account, for the purpose of relending or purchasing of
receivables and other obligations, or financing their own needs or the needs of their agent or dealer.
a. Quasi-banking activities c. Banking activities
b. Deposit substitutes d. Mutual funding
63. Interest income received by an individual taxpayer (except a nonresident individual) from a depository bank under the
expanded foreign currency deposit system shall be subject to a final income tax at the rate of:
a. twenty percent (20%) of such interest income.
b. fifteen percent (15%) of such interest income. *updated
c. seven and one-half percent (7 1/2%)f such interest income.
d. two and one-half percent (2 1/2%) of such interest income.
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64. First statement: The tax on interest income from foreign currency deposit shall be imposed unless the
depositor who is a nonresident citizen or nonresident alien can present documentary evidence that he is a Department of
nonresident of the Philippines. Accountancy
Second statement: To be entitled to an exemption from the tax on interest income on foreign currency
deposit, the Foreign Currency Bank Account shall be in the name of the nonresident individual or
nonresident corporation.
65. A cinematographic film owner, lessor, or distributor who is a nonresident alien engaged in trade or business shall pay a tax of:
a. twenty-five percent (25%) of its gross income from all sources within the Philippines.
b. twenty percent (20%) of its gross income from all sources within the Philippines.
c. fifteen percent (15%) of its gross income from all sources within the Philippines.
d. ten percent (10%) of its gross income from all sources within the Philippines.
66. As to source, the Tax Code classifies income into:

a. income which is derived in full from sources within the Philippines.
b. income which is derived in full from sources outside the Philippines.
c. income which is derived partly from sources within and partly from sources outside the Philippines.
d. all of the choices.
67. Which of the following dividends shall be considered as income not from sources within the Philippines?
a. Dividends from a domestic corporation
b. Dividends from a foreign corporation where less than fifty percent (50%) of the gross income of such
foreign corporation for the three-year period preceding the declaration of such dividends was derived
from sources within the Philippines.
c. Dividends from a foreign corporation where more than eighty-five percent (85%) of the gross income
of such foreign corporation for the three-year period preceding the declaration of such dividends was
derived from sources within the Philippines
d. None of the choices
68. Which of the following interests shall be considered as income from sources within the Philippines?
a. Interests derived from sources within the Philippines
b. Interests on bonds and notes of residents, corporate or otherwise
c. Interests on other interest-bearing obligation of residents, corporate or otherwise
69. Rentals and royalties are considered income from sources within the Philippines if:
I - from property located in the Philippines
II - from any interest in such property, including rentals or royalties from intangible personal property in the Philippines
70. Which of the following shall be considered income from sources outside the Philippines?
a. Compensation for labor or personal services performed outside the Philippines
b. Rentals or royalties from property located outside the Philippines or from any interest in such
property including rentals or royalties for the use of or for the privilege of using outside the
Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands,
franchises and other like properties
c. Gains, profits and income from the sale of real property located outside the Philippines
71. Which of the following is not subject to tax as a corporation?

a. Business partnerships c. Insurance companies
b. Joint stock companies d. General professional partnership
72. First statement: All joint ventures regardless of the purpose these are created are exempt from income taxation.
Second statement: The term “domestic” when applied to corporation, means created or organized in the Philippines or under
the laws of a foreign country as long as it maintains a Philippine branch.
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73. The term applies to a foreign corporation engaged in trade or business within the Philippines.
a. Resident foreign corporation c. Multinational corporation
b. Nonresident foreign corporation d. Petroleum contractor
Department of
Accountancy
74. They are constituted when a group of individuals, acting jointly, establish and operate a business
enterprise under an artificial name, with an invested capital divided into transferrable shares, an elected
board of directors, and other corporate characteristics, but operating without formal governmental authority.
a. Joint stock companies c. Associations
b. Joint accounts or cuentas en participacion d. Joint ventures
75. Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of how much on their taxable income at
what percent?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%) * under CREATE 1%
76. If the gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross income derived
by such educational institutions or hospitals from all sources, what tax rate shall be imposed on the entire taxable income
starting January 1, 2009?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) updated d. Ten percent (10%)
77. Which of the following income is not from a related trade, business or activity of a domestic proprietary educational institution?
a. Income from the hospital where medical c. Income from bookstore situated within the
graduates are trained for residency school campus
b. Income from the canteen situated within the d. Income from rent of available office spaces in
school campus one of the school buildings
78. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation:
I - whenever such corporation has a zero or negative taxable income;
II - when the amount of minimum corporate income tax is greater than the normal income tax due from such corporation.
79. A domestic corporation was registered with the BIR on January 1, 2004. What year would the first MCIT be imposed on such
corporation?
a. 2004 c. 2008
b. 2007 d. 2010
80. First statement: An accumulation of earnings or profits (including undistributed earnings or profits of prior years) is
unreasonable if it is not necessary for the purpose of the business, considering all the circumstances of the case.
Second statement: The term “reasonable needs of the business” are hereby construed to mean the immediate needs of the
business, including reasonably anticipated needs.
81. To be considered physically present abroad most of the time during the taxable year, a contract worker must have been outside
the Philippines for not less than:
a. 180 days c. 185 days
b. 183 days d. 190 days
82. Which of the following individual taxpayers is taxed on income from sources within and without the Philippines?
a. A citizen of the Philippines residing therein.
b. A nonresident citizen.
c. An individual citizen of the Philippines who is working and deriving income abroad as an overseas
contract worker.
d. An alien individual, whether a resident or not of the Philippines.
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83. First Statement: The husband and wife shall compute their individual income tax separately based on their
respective total taxable income. Department of
Second Statement: If any income cannot be definitely attributed to or identified as income exclusively Accountancy
earned or realized by either of the spouses, the same shall be divided equally between the spouses for the
purpose of determining their respective taxable income.
a. Both statements are correct. c. Only the first statement is correct.
b. Both statements are incorrect. d. Only the second statement is correct.
84. An alien employee of an offshore banking unit has the following income for the current year:
Salary received from the offshore banking unit (OBU) P10,000,000
Honoraria and allowances received from the OBU 5,000,000
Interest income from a domestic bank on his peso deposits 50,000
Capital gain from sale of shares in a domestic corporation 100,000
How much is the tax from his gross income in the Philippines?
a. P2,272,500 c. P1,500,000
b. P2,250,000 d. None of the choices
85. Which of the following shall be the qualifications of a parent for head of family purposes?
I - Living with the taxpayer
II - Dependent upon the taxpayer for chief support
86. First Statement: The additional exemption for dependent shall be claimed by only one of the spouses in the case of married
individuals.
Second Statement: The husband is the proper claimant of the additional exemption for qualified dependent children unless he
explicitly waives his right in favor of his wife.
87. First Statement: If the taxpayer dies during the taxable year, his estate may still claim the personal and additional exemptions
for himself and his dependent(s) as if he died at the close of such year.
Second Statement: If the spouse or any of the dependents dies or if any of such dependents marries, becomes twenty-one(21)
years old or becomes gainfully employed during the taxable year, the taxpayer may still claim the same exemptions as if the
spouse or any of the dependents died, or as if such dependents married, became twenty-one (21) years old or became gainfully
employed at the close of such year.
a. Both statements are correct. c. Only the first statement is correct
88. How much of the premiums paid during the taxable year for health and/or hospitalization insurance for the taxpayer and his
family, shall be allowed as a deduction from his gross income?
a. Not to exceed Two thousand four hundred c. Not to exceed Three thousand four hundred
pesos (P2,400) per family or Two hundred pesos (P3,400) per family
pesos (P200) a month
b. Not less than Two thousand four hundred d. Not to exceed Two thousand four hundred
pesos (P2,400) per family or Two hundred pesos (P2,400) per spouse or Two hundred
pesos (P200) a month (P200) a month
89. First statement: Any amount actually distributed to any employee or distributee shall be taxable to him in the year in which it
was so distributed to the extent that it exceeds the amount contributed by such employee or distributee.
Second statement: The tax shall be computed upon the taxable income of the estate or trust and shall be paid by the fiduciary,
except as provided in Section 63 (relating to revocable trusts) and Section 64 (relating to income for the benefit of the grantor).
Sonnie A. Ramos | 10
90. There shall be allowed as an additional deduction in computing the taxable income of the estate or trust
the amount of the income of the estate or trust for its taxable year, which is properly paid or credited during Department of
such year to any legatee, heir or beneficiary but the amount so allowed as a deduction shall be included in Accountancy
computing the taxable income of the legatee, heir or beneficiary.
I - In the case of income received by estates of deceased persons during the period of administration or
settlement of the estate
II - In the case of income which, in the discretion of the fiduciary, may be either distributed to the beneficiary or accumulated
-End-
Answer Section
MULTIPLE CHOICE
Department of
1. ANS: B PTS: 1 46. ANS: D PTS: Accountancy
2. ANS: A PTS: 1 1
3. ANS: C PTS: 1 47. ANS: D PTS: 1
4. ANS: A PTS: 1 48. ANS: A PTS: 1
5. ANS: D PTS: 1 49. ANS: A PTS: 1
6. ANS: C PTS: 1 50. ANS: A PTS: 1
8. ANS: A PTS: 1 52. ANS: B PTS: 1
9. ANS: B PTS: 1 53. ANS: C PTS: 1
11. ANS: C PTS: 1 55. ANS: C PTS: 1
12. ANS: D PTS: 1 56. ANS: B PTS: 1
14. ANS: D PTS: 1 58. ANS: D PTS: 1
18. ANS: D PTS: 1 62. ANS: B PTS: 1
19. ANS: A PTS: 1 63. ANS: C PTS: 1
23. ANS: C PTS: 1 67. ANS: B PTS: 1
24. ANS: A PTS: 1 68. ANS: D PTS: 1
34. ANS: B PTS: 1 78. ANS: A PTS: 1
35. ANS: A PTS: 1 79. ANS: C PTS: 1
36. ANS: D PTS: 1 80. ANS: C PTS: 1
45. ANS: B PTS: 1 89. ANS: A PTS: 1
90. ANS: A PTS: 1

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Summer 2017 Comprehensive / Re-admission Examination

Tax 11 – Income Taxation

Code ___________________ Date _

1. (Phil. CPA) The term “capital asset” includes:

5. (Phil. CPA) A feature of ordinary gains as distinguished from capital gains.

14. One of the following losses is deductible:

22. Which of the following donations shall be deductible in full?

42. Fringe benefit tax is imposed on:

54. Which of the following statements is incorrect?

66. As to source, the Tax Code classifies income into:

71. Which of the following is not subject to tax as a corporation?

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