Name Dehniece Aleck V.

Mangawang
Score ________

I. MULTIPLE CHOICE THEORIES. Encircle the letter of your answer.

1. An American tourist comes in and goes out of the Philippines very often. During the year
2020, he stayed in the Philippines for more than 180 days on the aggregate. For Philippine
income tax purposes, he shall be classified as:
a. resident alien
b. non-resident alien engaged in trade or business
c. non-resident alien not engaged in trade or business
d. Balikbayan
ANSWER: B

2. A Filipino citizen as defined in the Section 1 Article 3 of the Philippine Constitution are as
follows except
a. born with father and mother as Filipino citizens
b. born before January 17, 1973 of Filipino mother who elects Philippine citizenship
upon reaching the age of majority
c. is a foreign-born citizen who is not qualified to acquire Philippine citizenship by birth
or after birth
d. acquired Philippine citizenship after birth in accordance with the Philippine laws
ANSWER: C

3. A place of taxation
a. inherent limitation
b. situs
c. constitutional limitation
d. double taxation
ANSWER: B

4. Place of taxation for intangible personal property

a. bank
b. domicile of the owner
c. physical location
d. in the state where the transferor is a citizen
ANSWER: B

5. Which of the following is not an inherent limitation?

a. exemption from taxation of government entities
b. international comity
c. no appropriation for religious for religious purposes
d. territorial jurisdiction
ANSWER: C

6. The total personal exemptions of a married but legally separated individual taxpayer
supporting 4 qualified dependent children, the custody of whom was given to him by the court is:
a. P125,000
b. P150,000
c. P75,000
d. NONE
ANSWER: D

7. Which of the following transactions is subject to regular tax computation?

a. dividends received by a domestic corporation from another domestic corporation
b. dividends received by a resident foreign corporation from a domestic corporation
c. share in earnings received by non-resident alien from domestic partnership
d. share in earnings received by a resident citizen from a professional partnership
ANSWER: D

8. One of the following is not a Constitutional limitation on the power of taxation?

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 a. exemption from taxes of revenues and assets of educational institutions including
grants, endowments, donations and contributions
b. Exemption of the government from taxes
c. non-impairment of the jurisdiction of Supreme Court in tax case
d. Non-infringement of religious freedom and worship
ANSWER: B

9. The additional exemption is allowed to married and single individual taxpayers with the
following qualified dependent except:
a. natural recognized child
b. legally adopted child who is 21 years of age
c. illegitimate child
d. legitimate child
ANSWER: A

10. The total additional personal exemptions of a married but legally separated individual
taxpayer supporting 3 qualified dependent children, the custody of whom was given to him by
the court is:
a. P50,000
b. P125,000
c. P75,000
d. NONE
ANSWER: D

11. Optional standard deduction shall not be allowed to a:

a. resident citizen
b. non-resident citizen
c. domestic corporation
d. non-resident foreign corporation
ANSWER: D

12. Which of the following pertains to net operating loss?

a. capital gains minus capita losses, the excess shall be part of the taxable income if gain
b. excess of allowable deductions over gross income
c. excess of capital over the ordinary loss
d. capital gains minus capital losses, the excess shall be ignored if loss
ANSWER: B

13. Paquito Diaz died leaving behind P500,000 investment in securities to his wife and son. The
expected annual income from the investment is P600,000. By how much is gross income?
a. P560,000
b. P500,000
c. None, since all will be subject to estate tax
d. P600,000
ANSWER: D

14. Optional standard deduction shall not be allowed to a:

a. resident citizen
b. non-resident citizen
c. resident alien
d. non-resident alien
ANSWER: D

15. Which of the following taxes is deductible from the gross income?
a. real property tax
b. value added tax
c. donor’s tax
d. estate tax
ANSWER: A

16. One of the following is not within the scope of legislative taxing power?
a. the person, property or occupation to be taxed
b. the amount or rate of tax
c. the enforcement and administration of tax

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 d. the purpose of tax provided it is public
ANSWER: C

17. BIR Form 2316 pertains to

a. Certificate of Compensation Tax Withheld
b. ITR for Individuals Earning Purely Compensation Income
c. ITR for Self Employed Individuals
d. ITR for Partnership
ANSWER: A

II. MATCHING TYPE. Select the letter of your answer from the following choices and write
it beside the number.
A) INCOME U) QUALIFIED DEPENDENTS
B) EXCLUSIONS V) 6%
C) GROSS INCOME W) P25,000
D) OPTIONAL STANDARD DEDUCTION X) 2%
E) ITEMIZED DEDUCTION Y) GENERAL COPARTNERSHIP
F) GENERAL PROF. PARTNERSHIP Z) TRUSTOR
G) DEDUCTIONS AA) ESTATE
H) TAXABLE INCOME BB) P10,000
I) COMPENSATION INCOME CC) CORPORATION
J) INCOME TAX DD) JOINT VENTURE
K) BASIC PERSONAL EXEMPTION EE) GLOBAL
L) 10% FF) SCHEDULAR
M) 30% GG) RESIDENT CITIZENS
N) 20% HH) RESIDENT ALIENS
O)15% II) PASSIVE INCOME
P) 50% JJ) WITHHOLDING TAX
Q) 7.5% KK) 2.5%
R) PREMIUM PAID ON HOSP. LL) 4.5%
S) ADDITIONAL PERSONAL EXEMPTION MM) 5%
T) TOTAL PERSONAL EXEMPTION NN) 32%

1. It means the gain derived from capital, from labor or from both combined including profits
gained from dealings in property or as well as any asset clearly realized whether earned or not.
2. These are incomes that are exempt from the tax.
3. It means all income of whatever kind and derived by a taxpayer from whatever source but not
including exempt income and items of gross income subject to final income tax.
4. It is a tax on the net income or the entire income received or realized in one taxable year.
5. It is a deduction which an individual other than a non-resident alien or a corporation subject to
income tax may elect in an amount not exceeding 40% of his gross sales or gross receipts or a
corporation in an amount not exceeding 40% of its gross income
6. These are items or amounts which the law allows to be deducted under certain conditions from
the gross income of a taxpayer in order to arrive at the taxable income.
7. discounts granted to senior citizens.
8. It is a system where the tax treatment views indifferently the tax base and generally treats in
common all categories of taxable income of the taxpayer without any distinction
9. Those individuals whose residence is within the Philippines and are not citizens thereof
10. They are subject to a separate and final income tax imposed at fixed rates.

III. Identifying statements as either TRUE or FALSE. Select the letter of your answer from
the following choices and write it beside the number.

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A. 1st Statement is TRUE, 2nd Statement is TRUE
B. 1st Statement is FALSE, 2nd Statement is FALSE
C. 1st Statement is TRUE, 2nd Statement is FALSE
D. 1st Statement is FALSE, 2nd Statement is TRUE

1. A) The amount of interest paid or incurred within the taxable year on indebtedness in
connection with the taxpayer profession, trade or business shall be allowed as deduction from
gross income. Provided however, that the taxpayer’s otherwise allowable deduction for interest
expense shall be reduced by an amount equal to the following percentage of the interest income
subject to final tax: 32%
B) An expense is necessary when it is reasonable and common to the particular business of the
taxpayer.

2. A) All taxes are deductible except Amnesty Tax.

B) Deductible traveling expenses include transportation expenses and meals and lodging as
long as they are incurred solely for carrying trade, business or profession.

3. A) A taxpayer may cannot avail both OSD and ID.

B) A 10% OSD shall be allowed to a taxpayer to claim even he does not have the financial
statements.

4. A) The taxpayer must have filed a sworn declaration of loss within 30 days after the date of
the occurrence of casualty or robbery, theft or embezzlement is a requisite for deductibility of
loss.
B) Costs of materials or supplies are deductible as expense when consumed or used in the
business operation during the taxable period.

5. A) Depreciation is the exhaustion of natural resources like mines and oil and gas wells as a
result of production or severance from such mines or wells.
B) Documentary stamp tax is not allowed as deduction to be included in taxes.

6. A) Research and development treated as deferred expenses are allowable as deduction ratably
over a period of no less than 60 consecutive months.
B) Surcharges are not deductible from gross income.

7. A) Research & development expenses are allowable as deduction to be deferred ratably over a
period of no less than 30 consecutive months beginning with the month in which the taxpayer
first realizes benefits from the expenditures.
B) Juridical persons engaged in business are required to accomplish BIR Form 1702 for the 1 st
three quarters.

8. A) A taxpayer may avail of 40% OSD in lieu of itemized deduction.

B) Claim ascertained to be worthless may be due to the solvency of the debtor.

9. A) One of the requisite for deductibility of pension expense is the apportionment over a period
of ten (10) consecutive years beginning with the year in which the transfer in payment was made.
B) One of the requisite for deductibility of depreciation is that, the asset must have unlimited
useful life.

10. A) Enterprises duly registered with the Philippine Economic Zone Authority (PEZA) is
subject to Improperly Accumulated Earnings Tax.
B) Tips paid directly to the employee which is not accounted for by the employee to the
employer is considered not a taxable income.

11. A) Net Operating Loss Carry Over (NOLCO) – a business enterprise for any taxable year
immediately preceding the current taxable year which had not been previously offset as
deduction from gross income shall be carried over as a deduction from gross income for the next
three (3) consecutive years immediately following the year of such loss.
B) An expense is ordinary if it is useful or helpful to the business.

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IV. COMPUTATIONAL PROBLEMS. Show your solutions otherwise no credit. (3 PTS
EACH). The individual’s tax table is provided for your reference.

1. Chito Miranda received the following in December 2020:

13th month pay P150,000
Christmas bonus 150,000
Service incentive leave 100,000
The taxable compensation income of Chito is:

2. Mr. and Mrs. Reyes had gross income from business and compensation amounting to
P2,500,000 and P320,000 respectively. Their daughter who is in high school is a crew member
of a food chain at a nearby mall very summer vacation. What is the taxable income to be
reported by Mr. and Mrs. Reyes respectively?

3. Ivory is a 21 year-old student with earned income of P30,000 from a summer job and dividend
income of P950,000. Her parents claim her as a dependent on their tax return. What’s Ivory’s
gross income?

4. In 2020, a taxpayer obtained a business loan from Rural Bank of Tanay. The interest on the
borrowed money was P8,000. He deposited the money with Rural Bank of Cainta and earned
interest income of P10,000. How much was the deductible interest?

5. Mr. Mike Dalimot, single, is a citizen and resident of the Philippines. He has the following
data on income and expenses and withholding tax:
Salaries, net of P7,000 SSS, Philhealth, Pag-ibig contribution
P880,000
13th month pay 98,000
Transportation allowance 160,000
Creditable withholding tax on compensation income 8,900
Income tax still due?

6. DOLPHY a citizen of the Philippines had a gross income from the practice of his profession of
P500,000. His expenses in the practice was P150,000, If there was a withholding income tax of
P37,500 on his gross income, how much is the income tax still due from him, or (refundable) to
him?

7. WALANG HANGGAN is a general professional partnership of spouses Mr. DANIEL with 3

qualified dependent children, and Ms. KATARINA with 1 qualified child, participating in the
partnership net income or loss.
Data in a year: WALANG HANGGAN Mr. DANIEL Ms. KATARINA
Gross Income P700,000 P500,000 P900,000
Expenses related to the income600,000 190,000 500,000
Income tax was withheld by the partnership at 10%.
Income tax still due or (refundable) from Husband Mr. Daniel? Wife Katarina?

APPLICABLE TAX RATES UNDER TRAIN LAW OF INDIVIDUALS

P250,000 AND BELOW NONE (0%)
>P250,000 TO 400,000 20% OF EXCESS OVER P250,000
>P400,000 TO P800,000 P30,000 + 25% OF EXCESS OVER P400,000
>P800,000 TO P2,000,000 P130,000 + 30% OF EXCESS OVER P800,000
>P2,000,000 TO P8,000,000 P490,000+ 32% OF EXCESS OVER P2,000,000
ABOVE P8,000,000 P2,410,000+35%OFEXCESS OVER P8,000,000