CPA Review School of the Philippines

Manila

FIRST PRE-BOARD EXAMINATION

TAXATION

Instructions: Choose the BEST answer for each of the following items.

For the taxable year 2022, Chris, single, Filipino with 1 dependent child, received the following
professional fees as an independent consultant to Acme Philippines Corporation.
Monthly Fees Less 10% CWT = Net Monthly Fees Received

₱250,000 ₱25,000 =₱225,000

His business expense amounted to the following:

Monthly expense Less 1% CWT = Net Monthly
₱50,000 ₱500 ₱49,500

He is not VAT-registered.

Aside from his CPA/consultancy business, he is a faculty member of Belt University from
Which he received the following employment income for the same year:

Gross Pay Less CWT Less SSS premiums Net Pay

and union dues
Belt University ₱900,000 ₱75,000 ₱5,600 ₱819,400

The amount he received from Belt University is inclusive of 13th Month Pay and other benefits
of ₱65,000.

During the year he also received ₱3,000 interest income from his BPI deposit, and ₱250,000 in
royalties from the publication of his book entitled “The Hungry Eyes”.

1. Calculate his tax payable in the 1st Quarter ITR.

a. 27,000
b. 10,500
c. 5,000
d. 80,000

2. Calculate his tax payable in the 2nd Quarter ITR.

a. 132,500
b. 250,000
c. 95,000
d. 59,000

3. Calculate his tax payable in the 3rd Quarter ITR.

a. 142,500
b. 105,000
c. 75,000
d. 430,000

1|Page
4. Calculate his tax payable in the Annual ITR.
a. 303,408
b. 340,908
c. 883,408
d. None of the above.

5. Calculate his tax payable in the 1st Quarter using Gross Receipt Tax 8%.
a. 60,000
b. (15,000)
c. 7,000
d. 40,000

6. Calculate his tax payable in the 2nd Quarter ITR.

a. 100,00
b. 22,500
c. (45,000)
d. (30,000)

7. Calculate his tax payable in the 3rd Quarter ITR.

a. 120,000
b. 160,000
c. (45,000)
d. (90,000)

8. Calculate his tax payable in the Annual ITR.

a. 378,408
b. 3,820
c. 138,820
d. None of the above.

9. What is the rule on the taxability of income that a government educational institution derives
from its school operations? Such income is
a. Subject to 10% tax on its net taxable income as if it is a propriety educational institution.
b. Exempt from income taxation if it is actually, directly and exclusively used for educational
purposes.
c. Subject to the ordinary income tax rates with respect to incomes derived from educational
activities.
d. Exempt from income taxation in the same manner as government-owned and controlled
corporations.

10. A corporation may change its taxable year to calendar or fiscal year in filing its annual income
tax return, provided
a. It seeks prior BIR approval of its proposed change in the accounting period.
b. It simultaneously seeks BIR approval of its new account period.
c. It should change its accounting period two years prior to changing its taxable year.
d. Its constitution and by-laws authorizes the change.

2|Page
11. 1st Statement: The Commissioner, the Deputy Commissioners, the Revenue Regional
Directors, the Revenue District Officers and other internal revenue officers shall have authority
to make arrest and seizures for the violation of any penal law, rule or regulation administered
by the Bureau of Internal Revenue pursuant to the Tax Code.
2nd Statement: An internal revenue officer assigned to establishments where articles subject to
excise tax are produced or kept shall in no case stay in his assignment for more than two (2)
years.
a. True, False c. False, True
b. True, True d. False, False

12. It is the official action of an administrative officer determining the amount of tax due from a
taxpayer, or it may be a notice to the effect that the amount stated therein is due from the
taxpayer with a demand for payment of the tax or deficiency stated therein
a. Tax investigation c. Tax assessment
b. Tax audit d. Tax mapping

13. The power to interpret the provisions of National Internal Revenue Code and other tax laws
shall be under the exclusive and original jurisdiction of the
a. The Commissioner of Internal Revenue, subject to the review by the Secretary of Finance
b. The Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals;
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Court of
Appeals
d. The Regular Courts, subject to the review by the Court of Tax Appeals.

14. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under the Tax Code or
other laws is vested with
a. The Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals;
b. The Secretary of Finance, subject to the review of Office of the President;
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Supreme
Court;
d. The Regular Courts, subject to exclusive appellate jurisdiction of the Court of Tax Appeals.

15. 1st Statement - The BIR is authorized to collect estate tax deficiency through the summary
remedy of levying upon and sale of real properties of a decedent, without the cognition and
authority of the court.
2nd Statement - The CIR may examine the bank records of the deceased in order to determine
the latter's taxable net estate.
a. True; False c. False; True
b. True; True d. False; False

16. 1st Statement: Real property is subject to taxation in the place in which it is situated regardless
of whether the owner is a resident or a non-resident therein.
2nd Statement: As far as personal property is concerned. The ancient rule of mobilia sequntur
personam applies. This mean that the thing follows the law of the owner thereof.
a. True; False c. False; True
b. True; True d. False; False

3|Page
17. 1st Statement: Internal revenue laws are civil in nature. They are not political and as such were
continued in force during the period of enemy occupation and in effect were actually enforced
by the occupation government, such tax laws being deemed to be laws of the occupied territory
and not of the occupying enemies.
2nd Statement: Internal revenue laws are not penal in nature; thus the principle of ex post facto
does not apply to them; however, for violations of the internal revenue laws penalties may be
provided.
a. True; False c. False; True
b. True; True d. False; False

18. A suit questioning the validity of a tax statute or law is:

a. Taxpayer's suit
b. Derivative suit
c. Class suit
d. Representative suit

19. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue,
issued a Revenue Regulation using gross income as the tax base for corporations doing
business in the Philippines. Is the Revenue Regulation valid?
a. Yes, the Secretary of Finance has the power to issue rules and regulations.
b. Yes, gross income taxation over corporations is valid.
c. No. Secretary of Finance has virtually amended the NIRC.
d. No, only the Commissioner of the BIR has the authority to make revenue rules and
regulations.

20. A store in the Cartimar market in Pasay City was discovered by the BIR agents selling luxury
items worth P500,000.00 suspected to have been smuggled into the country by the storeowner.
May the Commissioner of Internal Revenue put under "preventive embargo” said luxury
items?
a. Yes, it is like constructive distraint.
b. Yes, because of anti-smuggling law.
c. No, violative of search and seizure clause of the Constitution.
d. No, violative of the due process clause of the Constitution.

21. An internal revenue officer (IRO), having been reliably informed from unimpeachable source
that articles subject to excise taxes were kept in the house of Y entered said house to look for
and to seize the aforementioned articles over the objection of Y. Since said officer was not
armed with a search warrant, Y invoked the sanctity of his home. Is the internal revenue
officer's actuation described above sanctioned by law or not?
a. Yes, because of primary jurisdiction of the BIR over excisable goods pursuant to the
lifeblood doctrine.
b. Yes, the IRO is exempted from obtaining a search and seizure warrant.
c. No, violative of search and seizure clause of the Constitution.
d. No, violative of the right to privacy and abode.

22. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and private
international banks (as lenders), it is stipulated that all payments of interest by the Central
Bank to the lenders shall be made free and clear from all Philippine taxes which may be
imposed thereon. Is the stipulation valid?
a. Yes, based on international comity.
b. Yes, based on the doctrine of non-taxability of the government
c. No, violative of the inherent limitations.
d. No, violative of the constitutional limitations.

4|Page
23. Basis of Taxation?
a. Lifeblood theory c. Benefit-protection theory
b. Necessity theory d. Reciprocal theory

24. One of the following is the least principle of sound tax system.
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Economic consistency

25. Which of the following is not an element of double taxation?

a. Two taxes c. Same year
b. Same subject matter d. Same amount

26. Which statement is wrong?

a. A tax is a demand of sovereignty
b. A toll is a demand of ownership
c. A special assessment is a tax
d. Customs duty is a tax

27. Taxation, just like other fields of human learning is dynamic, not static, keeps on changing;
so we must all study, otherwise we might be facing the battles of today with the antiquated
weapons of yesterday.
Regardless of economic and business conditions, a sound tax system should provide for the
collection of sufficient revenue to run the government.
a. True, true c. False, false
b. True, false d. False, true

28. “Global system of income taxation” means:

a. All types of income except those subject to final tax are aggregated to arrive at gross
income.
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income.
d. Compensation income and business/professional income are taxed at different places in the
world.

29. A domestic corporation provided the following data:

2018 2019 2020 2021
Gross sales P2,040,000 2,800,000 3,000,000 4,000,000
Sales returns 40,000 100,000
Cost of goods 1,000,000 700,000 1,500,000 1,500,000
sold
Business 950,000 2,100,000 1,200,000 1,200,000
expenses

The income tax due after tax credit, if any for taxable year 2020 is:
a. P5,000
b. P10,000
c. P15,000
d. P55,000

5|Page
30. Lessor had the following information for the given taxable year.

Cost of leasehold improvement P1,000,000

Annual rent 100,000

The estimated life of leasehold improvement is 50 years. The term of the lease is 40 years. At
the end of the twentieth (20th) year, the lease was terminated for valid causes done by the
lessee.

What is the taxable income to be reported by the lessor at the end of the 20th year?
a. P500,000
b. P600,000
c. P605,000
d. P700,000

31. What is the allowable deduction of lessee on the 20th year?

a. P600,000
b. P625,000
c. P100,000
d. P500,000

32. ABC, is a domestic corporation engaged in merchandising business. For the calendar year
2012, it had a net income per books of P500,000, after considering, among others, the
following:
a. Dividend received from a domestic corporation P30,000
b. Provision for doubtful accounts 10,000
c. Dividend received from a foreign corporation 20,000
d. Portion of P150,000 advance rental already earned 100,000
e. Recovery of receivables previously written off (included as part of net income above):
Allowed by the BIR as deduction 10,000
Disallowed by the BIR as deduction 30,000
f. Refund of taxes (included as part of net income above):
Allowed by the BIR as deduction 25,000
Disallowed by the BIR as deduction 15,000
g. Bank interest income:
Philippine Bank 80,000
USA Bank 100,000

The taxable income is

a. P485,000
b. P365,000
c. 375,000
d. P405,000

6|Page
The records of a domestic corporation organized in 2000 show:
2019 2020 2021
Gross income P2,000,000 P3,000,000 P4,000,000
Other Income:
Capital gain from sale of
Commercial land 400,000 500,000
Interest income from
bank deposit 80,000 96,000
Capital gain from sale of
Shares of stock – not listed 60,000 70,000
Allowable deduction 1,940,000 3,100,000 3,500,000

33. The income tax payable in 2019 is

a. P138,000
b. P40,000
c. P42,000
d. P18,000

34. The taxable income in 2021 is

a. P400,000
b. P900,000
c. P1,000,000
d. P500,000

35. The income tax payable in 2021 is

a. P67,000
b. P38,000
c. P33,000
d. P68,000

36. A tax is classified as ____________________, if it is a fixed amount measured by the head or

number, or by some standard of weight or measurement, and requires no assessment other
than a listing or classification of the subjects to be taxed.
a. ad valorem
b. specific
c. direct
d. indirect
e. None of the above

7|Page
37. Statement 1: One of the sumptuary/secondary purposes of the power to tax is the
regulation/restriction/control of human activity.
Statement 2: The President, thru the DOF, may suggest proposals for tax reforms
addressed to both houses of Congress, but the revenue bill embodying those
reforms must originate from the House of Representatives.
a. Both are true.
b. Both are false.
c. Only Statement 1 is true.
d. Only Statement 2 is true.

38. A non-resident foreign corporation (NRFC) shall generally be subject to a 25% final tax on
gross income received from all sources within the Philippines. However, a NRFC shall be
exempt from tax on:
a. Philippine Charity and Sweepstakes Office (PCSO) winnings less than ₱10,000.
b. De minimis prizes of less than ₱10,000.
c. Interest income paid by a depositary bank under the foreign currency deposit system.
d. Interest income from a long-term deposit or investment certificate issued by a bank in the
Philippines, and held for a period exceeding 5 years.

39. If refunded, the amount of refund does not constitute taxable income:
a. Estate tax
b. Local taxes
c. OPT
d. Fringe Benefit tax

40. One of the following represents taxable income:

a. Refund of 3% OPT paid in a prior year.
b. Refund of donors’ tax paid in prior year
c. Refund of income tax in prior year
d. Refund of special assessment paid in prior year

41-47) Jedi M. Aster, single, 25 years old, resident citizen is employed as a professor in Iskul
University. At the end of taxable year 2021, Iskul University provided him with BIR Form
No. 2316. However, he discovered that his dog, Jackie, played with this form, and he could
only make out the following information:
Total Gross Compensation Income received 13th month pay and other benefits - ₱14,062
from Iskul - ₱385,162
SSS, PHIC, Pag-ibig Contributions and
Union Dues - ₱3,980
De minimis fringe benefits - ₱4,732
Taxes withheld by Iskul University -
₱22,477

Jedi also works as an independent consultant for a large real estate development firm
receiving the following:
Monthly Fees Less 10% CWT Net Monthly Fees
₱200,000 ₱20,000 ₱180,000

8|Page
 The monthly rental expenses related to his consultancy services amounted to ₱20,000, gross
of the 5% CWT.
He is not VAT-registered and instead pays 3% OPT on his gross receipts under Section 116
of the Tax Code.
He went to the casino 4 times in 2021 with the following results: March 2, winnings of
₱25,000; June 4, losses of ₱35,000; September 15, losses of ₱2,000; and December 25,
winnings of ₱34,000.
He has excess tax credits from the prior year of ₱17,000.
In his 1st Quarterly ITR for 2021, he chose to be taxed under the graduated rates.

41. Calculate his tax payable/(overpayment) in the 1st Quarterly ITR for 2021.
a. ₱5,750
b. ₱16,500
c. ₱10,250
d. None of the above.

42. What can Jedi do if indeed there is an overpayment of taxes in his 1st Quarterly ITR for 2021?
a. He can use the amount of overpayment as a tax credit against the tax due in the succeeding
taxable quarters.
b. He can apply for a tax refund and/or tax credit certificate.
c. He shall not pay anything upon filing the 1st Quarterly ITR for 2021.
d. None of the above.

43. Calculate his tax payable in the 2nd Quarterly ITR for 2021.
a. ₱77,000
b. ₱66,200
c. ₱66,000
d. None of the above.

44. Calculate his tax payable in the 3rd Quarterly ITR for 2021.
a. ₱ 85,500
b. ₱ 96,600
c. ₱112,800
d. None of the above.

45. For his annual ITR, he chose to file BIR Form No. 1701 (Annual ITR for Individuals (including
MIXED Income Earners). What is the correct amounts to be placed on Part VII Lines 3, 4,
and 5 in page 4 of BIR Form No. 1701?
a. ₱17,000; ₱162,800; ₱180,000
b. ₱162,800; ₱180,000; ₱60,000
c. ₱180,000; ₱60,000; ₱22,477
d. None of the above.

46. What is the correct amount to be placed on Part V, Schedule 3A, Line 24 in page 2 of BIR
Form No. 1701?
a. ₱22,000
b. ₱2,110,000
c. ₱2,472,388
d. None of the above.

9|Page
47. Calculate his tax payable in the Annual ITR for taxable year 2021.
a. ₱198,887
b. ₱641,164
c. ₱442,277
d. None of the above.

48) Clarissa, resident citizen, 25 years of age, is an employee of ABSCBN Inc. from which she
received the following employment income:

Less SSS premiums

Gross pay Less CWT Less Loan Paid Net Pay
and union dues
₱850,000 ₱60,000 ₱15,000 ₱6,000 ₱769,000

The amount she received from ABSCBN is inclusive of 13th Month Pay and other benefits
of ₱165,000, and de minimis fringe benefits of ₱4,800.
Her taxable compensation income is:
a. ₱749,200
b. ₱755,200
c. ₱850,000
d. None of the above.

49. Angelo Bato is an MWE employed with the Philippine National Police. He was assigned in
the National Capital Region from January 1, 2018 to April 30, 2018, earning the Statutory
Minimum Wage (SMW) of ₱492 per day. Beginning May 1, 2018, he was transferred to PNP-
Region V, receiving the same rate of ₱492 per day. The SMW in Region V for the period May
2018 to December 2018 was just ₱450 per day.
Should PNP-Region V withhold tax from the salary of Angelo?
a. I don’t know.
b. No. He is considered an MWE for the entire year.
c. Yes. His daily wage rate is above the prevailing SMW in Region V which makes it taxable
and subject to withholding.
d. None of the above.

50. Mario is a minimum wage earner (“MWE”) employed in a fast food restaurant in Metro
Manila. Aside from this, he also earns income from the operation of a small “barbeque stand”
in front of his house. Which statement is correct?

a. Both his minimum wage and his income from the barbeque stand are exempt from tax.
b. Both his minimum wage and his income from the barbeque stand are subject to income
tax.
c. Only the income from the barbeque stand is taxable in the ITR. If he qualifies and chooses
the 8% tax, he can also avail of the ₱250,000 deduction.
d. None of the above.

10 | P a g e
51-58) Karlita Kabayo, resident citizen, is a real estate lessor in the Philippines
She has the following financial information in the current taxable year 2021:
(a) Interest income on receivable from her mother ₱ 25,000
(b) Interest expense on loan owed to cousin 15,000
(c) Royalty income from book, net of FT 75,000
(d) Loss on sale of rental property to grandfather 350,000
(e) Gain on sale of personal car bought in 2018 90,000
(f) Rental receipts from real property, gross of 5% CWT 600,000
(g) Cost of revenues related real property leasing 100,000
(h) Liquidating dividend paid by X Corporation 187,000
Cost of investment made in January 2021 in X Corporation 200,000
(i) Dividend received from Microsoft Corporation with
headquarters in Seattle, Washington, USA 75,000
(j) Dividend from Jollibee Corporation, net of FT 5,000
(k) Expenses for boxing lessons taught by Senator Pacquiao 50,000
(l) OPT paid 18,000
(m) Taxes paid in her first 3 quarterly ITRs for 2021 16,700

51. Compute the final taxes withheld from her incomes.

a. ₱ 8,889
b. ₱19,306
c. ₱ 8,000
d. None of the above.

52. Which of the following expenses may she deduct in her ITR?
a. Interest expense on loan owed to cousin in the amount of ₱15,000
b. Loss on sale of rental property to grandfather in the amount of ₱350,000
c. Expenses for boxing lessons taught by Sen. Pacquiao in the amount of ₱50,000
d. None of the above.

53. If Karlita chose to be taxed under the graduated rates with OSD in her 1st Quarterly ITR, what
BIR form shall she file for her annual return?
a. BIR Form No. 1700 – Individuals Earning Purely Compensation Income (including Non-
Business/Non-Profession Related Income)
b. BIR Form No. 1701 – Individuals (including Mixed Income Earners), Estates, and Trusts
c. BIR Form No. 1701A – Individuals Earning Purely From Business/Profession [Those
under the graduated income tax rates with OSD as mode of deduction OR those who opted
to avail of the 8% flat income tax rate].
d. None of the above.

54. If Karlita chose to be taxed under the graduated rates with OSD, what is the correct amount
that shall be placed on Line 44 of Part IVA on page 2 of BIR Form No. 1701A?
a. ₱177,000
b. ₱145,000
c. ₱132,000
d. None of the above.

55. If Karlita chose to be taxed under the graduated rates with OSD, what is the correct amount
that shall be placed on Line 45 of Part IVA on page 2 of BIR Form No. 1701A?
a. ₱505,000
b. ₱492,000
c. ₱537,000
d. None of the above.

11 | P a g e
56. If Karlita chose to be taxed under the graduated rates with OSD, what is the correct amount
that shall be placed on Line 56 of Part IVB on page 2 of BIR Form No. 1701A?
a. ₱56,250
b. ₱53,000
c. ₱64,250
d. None of the above.

57. If Karlita chose to be taxed under the graduated rates with OSD, what is the correct amount
that shall be placed on Line 64, Part IVC on page 2 of BIR Form No. 1701A?
a. ₱30,000
b. ₱45,200
c. ₱46,700
d. None of the above.

58. If Karlita chose to be taxed under the graduated rates with OSD, what is the correct amount
that shall be placed on Line 30, Part II on page 1 of BIR Form No. 1701A?
a. ₱ 6,300
b. ₱36,300
c. ₱17,550
d. None of the above.

59. The following are the features of the 8% optional income tax in the ITR, except:
a. A qualified individual taxpayer who avails of the 8% tax option is still required to file his
financial statements with his Annual ITR.
b. A VAT-registered taxpayer is not qualified to avail of the 8% tax.
c. The qualified taxpayer must signify his choice of the 8% tax rate in the first quarterly ITR
before he can avail of the same.
d. The qualified taxpayer who avails of the 8% tax option is exempt from paying the 3% OPT
under Section 116 of the Tax Code.

60. Mariotte Hotel Corporation operates a hotel in Global City, Taguig. The hotel offers single
rooms at ₱8,500 per night, and suite rooms at ₱15,000 per night. Pat Medina, the manager,
was asked by the CEO of Mariotte to occupy one of the suite rooms so as to avoid traffic and
so that he could immediately respond to any problems that may arise in the hotel. Pat, single,
was more than happy to accept the arrangement since he could entertain his friends in his suite
room after work.
Compute the daily FBT to be paid by Mariotte Hotel Corporation.
a. ₱4,577
b. ₱8,077
c. ₱4,038
d. None of the above

61. Lee Min Ho, a non-resident alien, came to the Philippines to perform project management
services for Green View Corporation, a domestic corporation engaged in mining. The contract
fee for Lee’s services was ₱600,000. He stayed in the Manila Mandaring Hotel for 10 days,
and upon completion of the service, left for Korea. Green View paid for Lee’s hotel bills in
the amount of ₱75,000.
Compute the final taxes to be remitted by Green View to the BIR.
a. ₱168,750
b. ₱150,000
c. ₱175,000
d. None of the above

12 | P a g e
 62. Which of the following benefits received by an employee may be subject to the regular
income tax rates in the ITR?
(1) Use of employer’s bus for its drivers’ summer outing
(2) Uniform and clothing allowance of ₱6,000 per year
(3) Payment of tuition fee of eldest child of a rank-and-file employee
(4) Housing provided to a rank-and-file employee
a. All except (1)
b. All except (3)
c. All except (2)
d. None of the above

63. The Municipality of Oslob in the Province of Cebu imposes a Butanding tax on the residents
of the municipality. This will be used to cover the expenses incurred in the protection of the
“butanding” or whale shark which visit its shores in the summer months.
Is the imposition a tax or a license?
a. It is a tax.
b. It is a license fee.
c. It is both.
d. None of the above.

64. Statement 1: Life insurance premiums paid by an employer to insure the life of a manager
where the employer is the designated beneficiary under the policy, is an
allowable deduction of the employer.
Statement 2: In general, insurance premiums paid in connection with the conduct of the
business of a taxpayer may be deducted by the taxpayer.
a. Only Statement 1 is true. c. Both statements are true.
b. Only Statement 2 is true. d. Both statements are false.

65. Statement 1: Property dividend received by a resident foreign corporation from a non-resident
foreign corporation is not subject to final tax but is includible in the income tax
return of the resident foreign corporation.
Statement 2: Dividends received by individuals from domestic corporations are subject to
creditable withholding taxes.
a. Statement 1 is true. c. Both statements are false.
b. Statement 2 is true. d. Both statements are true.

66. The following are the requirements for retirement benefits under R.A. No. 7641 to be exempt
from income tax, except:
a. There must be a reasonable private benefit plan approved by the BIR.
b. The employee must be at least 60 but not more than 65.
c. The retiree must have served the same employer for at least 5 years.
d. None of the above.

13 | P a g e
67. Sally Rafa, an MWE, works for McDonny’s, Inc. She has no other source of income. For the
taxable year, her total regular compensation income, inclusive of the 13th month pay, amounted
to ₱180,000. During the year, she received a 13th month pay equivalent to ₱10,000, and
contributed to SSS, Philhealth, and Pag-ibig a total amount of ₱3,000.
In addition to the abovementioned amounts, she received the following amounts: ₱90,000 for
overtime pay, ₱10,000 for night shift differential pay, ₱25,000 for hazard pay, and ₱35,000 for
holiday pay. The tax due from her compensation income is:
a. P10,000
b. P13,200
c. P15,400
d. None.

68-70. Pong Pagong is the CEO of Sesame Zoo Corporation. In 2019, he received total
compensation of ₱3,000,000 inclusive of 13th month pay and other benefits in the amount
of ₱800,000.
He also owns a VAT-registered farm producing fighting cocks. Its gross sales totalled
₱2,000,000. The farm’s cost of sales and operating expenses amounted to ₱300,000 and
₱180,000, respectively. Its non-operating income amounted to ₱230,000.
68. Compute his income tax due if he chooses to itemize deductions in his ITR.
a. ₱1,341,200
b. ₱1,370,000
c. ₱1,114,000
d. None of the above.

69. Compute his income tax due if he chooses to avail of OSD in his ITR.
a. ₱1,238,800
b. ₱1,181,200
c. ₱1,290,000
d. None of the above.

70. Pong’s friend, Sycip G. Velayo, a partner in a prestigious accounting firm, suggested that
Pong would be better off if he chose to be taxed under the 8% tax option. Pong asked you
for a second opinion.
a. You will agree with Mr. Velayo because Pong’s tax due under the 8% tax option would
only be ₱959,600 which is lower than the tax due under the graduated rates.
b. You will disagree with Mr. Velayo because Pong is not qualified to avail of the 8% option.
c. You will have an opinion only after you become a CPA.
d. All of the above.

14 | P a g e
 Beginning 1 January 2018:

Taxable Income (PHP)

Tax on column 1 (PHP) Tax on excess (%)
Over Not Over

0 250,000 - 0

250,000 400,000 - 20

400,000 800,000 30,000 25

800,000 2,000,000 130,000 30

2,000,000 8,000,000 490,000 32

8,000,000 2,410,000 35

The End.

15 | P a g e