Republic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT Score: Class Schedule: FINAL EXAMINATION ‘TAX 301: INCOME TAXATION 1" SEM 2022-2023 General Directions: Read and analyze each item carefully. Answer sheet is provided at the last page. Shade the circle which corresponds to your final answer. Erasures are not allowed in the answer sheet. 1. Mr. Pompy was injured in a vehicular accident in 2020. He incurred and paid medical expenses of P20,000 and legal fees of P10,000 during the year. In 2021, 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 2021 is a. Zero b. P40,000 ©, P70,000 d, P110,000 2. The term “capital assets" 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. ©, Property primarily for sale to customers in the ordinary course of his trade or business. 4. Property used in the trade or business of the taxpayer and subject to the depreciation. 3. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation of indebtedness may amount a. Toagit. b, Toa capital contribution. ©, Toa donation intervivos. d. Toa payment of income. 4. Which of the following is not treated as a corpor General partnership in trade. General professional partnership. Mutual fund company. Regional operating headquarters of multinational company. eose 5. Which of the following is taxable? ‘a. Separation pay received by a 50-year old employee due to the retrenchment program of the employer. b. Retirement pay received from a benefit plan registered with the Bureau of Internal Revenue where at the time the employee retired he was 55 years of age, retiring from employment for the first time in his life, and was employed with the employer from whom retiring for 6 years prior to retirement. ©, Social security benefit received by a balikbayan from employer abroad at the age of 35. d, SSS and GSIS benefit 6. Which of the foll not gross compensation income?Republic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT It must arise from fire, storm, or other casualty, robbery, theft, or embezzlement. It must not be compensated by insurance or any form of indemnity. A declaration of loss by casualty should be filed with the Bureau of Internal Revenue. It is of property owned by the taxpayer, whether used in business or not. pose 8. A general professional partnership is exempt from income tax, but is required to file an income tax return: a. For statistical purposes. b. Because the net income of the partnership will be traced into the income tax. return of the partners. Because all income eamers are required to file income tax return. None of the above. 9, Which of the following items are not taxable? a. Income from jueteng b, Gains arising from expropriation of property ¢. Income taxes paid and subsequently refunded d. Gains on the sale of a car used for personal purposes 10. A domestic proprietary educational institution improved its library facilities by adding a new wing to its old library building, The capital outlay on library improvement, for income tax purposes, may be ‘a. Deducted in full at the time of completion of the improvement b. Capitalized or expensed outright at the option of the school owner ©. Capitalized and depreciated over the estimated life of the improvement 4. Capitalized or expensed outright at the option of the government 11. As a rule, which of the following is subject to 10% tax on net income? ‘a. Dividend received by a resident citizen from a domestic corporation b. Royalty income from musical composition received by a resident alien ©. Offshore banking units d. Proprietary educational institutions 12. Optional Standard Deduction cannot be availed by ‘a. Andrew E, an OFW in Taiwan for 5 years. b. Foren Noy, a resident and citizen of Spain engaged in the tobacco industry in the Philippines Jolibee Corporation, a domestic corporation engaged in food industry abroad Jean Sapoles, a Filipino residing in California, USA 13. Which statement does not properly refer to a general professional partnership? A general professional partnership is one a. Registered as such with SEC and the BIR b, That is composed of individuals who exercise a common profession , That exclusively derives income from the practice of profession . That derives professional and rental income from property owned by it 14. The following cannot avail of deductions from gross income except a. Citizens and resident alien whose income is purely compensation income b. Non-resident foreign corporation ©, Non-resident alien not engaged in trade or business in the Philippines, d. Resident foreign corporationRepublic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT 16. Income from performance of service is treated as income within the Philippines, if a, The payment of compensation for the service is made in the Philippines b, The contract calling for the performance of service is signed in the Philippines ¢. The service is actually performed in the Philippines d. The recipient of service income is a resident of the Philippines 17. Which statement is correct? A non-stock, non-profit charitable association that sells its idle agricultural property is a, Not required to file an income tax return, nor pay income tax on transaction to the BIR provided the sales proceeds are invested in another real estate during the year b. Required to pay the 6% capital gains tax on gross selling price or fair market value whichever is higher ©, Mandated to pay the 30% regular corporate income tax n the gain from sale d, Required to withhold the applicable expanded withholding tax rate on the transaction and remit the same to the BIR 18. The optional standard deduction for individuals is a. 10% of the gross income b, 10% of the gross sales/receipts ©, 40% of the gross income d. 40% of the gross sales/receipts 19. Which of the following statements is not correct? a. MCIT is not applicable to non-resident foreign corporations b, The corporate quarterly return shall be filed within 60 days following the close of each Of the first three quarters of the taxable year. , Resident foreign corporations would be taxed on net income from within the Philippines only d._ Non-resident foreign corporations are taxed on gross income from within and without the Philippines 20. The following income are subject to final tax, except? ‘a. Royally income received by a domestic corporation from a domestic corporation b. Cash dividends received by a non-resident foreign corporation from a domestic corporation c. Cash dividends received by a domestic corporation from a domestic corporation d._Interest income received by resident foreign corporation from a Philippine bank 21. CPA University, a private educational institution organized in 2000, had the following data for 2021 Tuition fees P 480, 000 Rental income P 520, 000 School related expenses P 450, 000 The income tax due for 2021 is P137, 500 P 55,000 P48, 000 P 100, 000Republic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT 23. ABC Corp. had a net sales of P1M. The actual entertainment, amusement and recreation expense amounted to P20,000, The deductible "EAR" expense is a. 20,000 b. P10,000 c. P6,000 d. P5000 24, Paandar Industries, a non-VAT registered sole proprietorship engaged in the transport of passengers, operates two liners: Tarsier Bus Lines is engaged in the domestic transport of passengers by land while Butanding Ferties is engaged in the domestic transport of passengers by sea. During the taxable year 2021, the following revenues and expenses were presented to you! Tarsier Butanding Gross receipts 4,000,000 2,000,000 Less: Cost of services Gross income 800,000 600,000 Less: Allowable (00,000) (400,000) Deductions Taxable income 300,000 200,000 How much is income tax due? a. 31,500 b. 55,000 c, 125,000 d. 460,000 25, Advance rental in the nature of prepaid rental, received by the lessor under a claim or right and without restriction as to use is ‘a. Taxable income of the lessor in the year received if he/she is on the cash method of accounting b, Taxable income of the lessor in the year received whether he/she is on the cash or accrual method of accounting ¢. Taxable income of the lessor in the year received whether he/she is on the cash or accrual method of accounting d. Taxable income of the lessor up to the amount eared in the year the rental is received 26. Gross benefits received by officials and employees of public and private entities as 13° month pay and other benefits such as productivity bonus, service incentive pay and Christmas bonus shall be excluded from taxable income up to a. P30,000 b. 82,000 c. P90,000 4. P50,000 27. One of the following is not acceptable as basis of relief from the MCIT a. Lawsuits filed by the company b. Prolonged labor dispute ©. Legitimate business reverse , Force majeure 28. Which of the following statements is correct? a. Partners of a taxable partnership are considered as stockholders and profitsRepublic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT 29, The share of a co-venturer corporation in the net income after tax of a joint venture or consortium taxable as corporation is, a, Subject to final withholding tax of 20% b. Subject to regular corporate income tax of 30% c. Exempt from income tax d. Subject to capital gains tax 30. Which of the following will disqualify a taxpayer in using the 8% income tax option? a. The taxpayer has gross sales/receipts of 3,500,000. b. The taxpayer is a registered self-employed individual c. The taxpayer has a gross compensation income for the year. d. The taxpayer is registered as professional. Dalagang Pilipina Company was incorporated on June 12, 1898. It uses the fiscal year which begins from May 1 and ends on April 30 of the next year. For the years ending April 30, 2022 and April 30, 2023, the following are the results of operations: 2022 2023 Sales 14,000,000 16,000,000 Less: Cost of (8,000,000) (9,000,000) sales Gross profit 6,000,000 7,000,000 Less: Expenses (6,930,000) _ (3,500,000) Net income 70,000 3,500,000 Dalagang Pilipina Company has assets amounting to P240,000,000 which includes a parcel of land amounting to P50,000,000. 31. How much is the income tax payable in 20227 a, P17,500 b. P21,000 c. 60,000 d. P120,000 32. How much is the income tax payable in 20237 a, P832,500 b. P875,000 c. P951,000 d. P1,041,000 33. The payments by their clients to which type of partnership are exempted from creditable withholding tax? a. General professional partnership b. Commercial or business partnership ©, Bothaandb d._ Neither anor b 34, Who shall pay the income tax on the taxable income of general professional partnership? a. General professional partnership b. Clients of general professional partnership c. Partners of general professional partnership in their separate income tax returnsRepublic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT Sales 7,480,000 Less: Cost of sales (650,000) Gross profit 830,000 Less: Expenses (360,000) Earnings before tax 470,000 35. Compute for the income tax due of YNTCD Partnership. a0 b. P94,000 ©. P117,500 d, P141,000 36. Net of any applicable withholding taxes, how much will Katy receive assuming she is a resident alien? a. P131,600 b. P148,050 c, P188,000 d. P169,200 37. Net of any applicable withholding taxes, how much will Taylor receive assuming she is a non- resident alien engaged in trade or business? a. P131,600 b, P148,050 , P188,000 d. 150,400 38. Chromatica Corporation was incorporated in 2020. SEC issued its Certificate of Incorporation on June 30, 2020. Chromatica Corporation follows the calendar year. When will the imposition of the minimum corporate income tax commence? a, First quarter of 2023 b, Third quarter of 2023 ¢. First quarter of 2024 d. Third quarter of 2024 39, Minimum corporate income tax is carried froward: a. For the three immediately succeeding taxable years b, For the four immediately succeeding taxable years ©. For the five immediately succeeding taxable years d. For the one hundred seventy eight immediately succeeding taxable years 40. Statement 1: A one-person corporation is taxed in a similar way as a sole proprietorship. Statement 2: Due to their relatively small size, a one-person corporation is always subject to 20% regular corporate income tax. a. Only Statement 1 is true b. Only Statement 2 is true ©, Both statements are true d. Both statements are not true 41. Statement 1: All proprietary educational institutions are not subject to minimum corporate income tax. ‘Statement 2: Domestic corporations engaged in business as depository banks under theRepublic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT 42. Angkas Corporation is a resident foreign corporation with branches nationwide, including the Philippines. Its Philippine branch had an income of P10,000,000 in 2020, and it earmarked 8,000,000 for remittance. It actually remitted P7,000,000. How much is the branch profit remittance tax due of the Philippine branch? a0 b. 1,050,000 . 1,200,000 d, 1,500,000 43. Which indi sources? a. Resident citizen b. Nonresident citizen ¢, Resident alien d, Nonresident alien ual taxpayer is taxable for his income from within and from without Philippine 44, Bad debts, as an allowable deduction: a. Requires proof of worthlessness and uncollecti b. Is an estimate of worthless and uncollectible accounts ©. Is determined by the lapse of time at which accounts remain uncollected d. Is determined by materiality of the amount on uncollected accounts 45. Net operating loss carry over a. Can be deducted against income tax due to arrive at taxable income b, Can be deducted against income tax due to arrive at income tax payable ©, Can be deducted against gross income to arrive at income tax payable d. Can be deducted against gross income to arrive at taxable income 46. What is the maximum entertainment and recreational expenses that may be claimed by provider of services? a, 2% of gross service revenues b, 0.5% of gross sales ©. 1% of gross service revenues d._ 1.5% of gross sales 47. Which of the following taxes is not allowed to be claimed as allowable deductions from gross income? a. Capital gains tax b. Documentary stamp tax ©. Other percentage tax d. Local business tax 48. Alll of the following are not entitled to any deduction for NOLCO, except a. Resident foreign corporations b, PEZA registered entities c. SBMA registered entities d. International carriers Fearless Corporation, a dealer in sugar under the brand Mr. Perfectly Refined Sugar, has gross sales of P'1,400,000,000 with cost of sales of P560,000,000 and allowable deductions of P150,000,000 for calendar year 2020, Fearless Corporation began operating in 1989.Republic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT cc. P193,500,000 4, P207,000,000 50. Compute for Fearless Corporation's minimum corporate income tax. a. 4,200,000 b. P8,400,000 ¢. 12,600,000 d. P16,800,000 51. During 2020, Tsunayoshi Corporation gave the following fringe benefits to its employees: Salaries to rank and file employees 1,000,000 Salaries to managerial employees 1,800,000 De minimis benefits to rank and file employees 54,400 De minimis benefits to managerial employees 27,200 Fringe benefits to rank and file employees 102,000 Fringe benefits to managerial employees 170,000 How much is the fringe benefit tax? a. P48,000 b. P80,000 c, P91,538 d, P166,400 ‘The University of Saint Augustine Philippines (USAP)was a domestic educational institution established in 1432. Its the first to offer Accountancy, Law, and Medicine in Asia. It has produced many distinguished alumni including presidents, statemen, and saints. For the taxable year ending December 31, 2025, USAP had the following results of operations: Gross receipts From tuition fees 14,000,000 From rentals 2,500,000 From sale of school 6,300,000 merchandise Total gross receipts 22,800,000 Less: Cost of services (13,450,000) Gross profit 9,350,000 Less: Operating profit (5,240,000) Net income 4,110,000 52. If USAP is a non-stock non-profit educational institution, how much is income tax due? a, 1,233,000 b. 411,000 c. P822,000 a0 53. What is the tax rate of Branch Profit Remittance Tax? a, 10% b. 15% c. 5% d. 20% 54. Which corporation is subject to the minimum corporate income tax? a. Proprietary educational institutionRepublic of the Philippines BATANGAS STATE UNIVERSITY ‘The National Engineering University Pablo Borbon Campus Rizal Avenue, Extension, Batangas City COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT b. Nonstock nonprofit educational institutions. c, Both AandB d. Neither A nor B 56. Statement 1: Meal allowance and lodging fumished by the employer to the employees are exempt from tax if furnished for the advantage or convenience of the employer. Statement 2: Tax exempt meal allowance should be furnished within the premises of the employer a. Only statement 1 is correct b. Only statement 2 is correct ¢. Both statements are correct d. Both statements are incorrect 57. Under the CREATE Law, the rate of withholding tax on ordinary income derived by nonresident foreign corporations in the Philippines is: a, 20% b. 25% ©. 20% or 25% depending on the taxpayer's taxable income and assets d 30% 58. Which of the following should be included as part of gross income subject to regular income tax of a resident citizen taxpayer? a. Royalties from literary compositions eamed in the Philippines b. Royalties from films showed in France ©. Prizes amounting to P40,000 d. PCSO winnings amounting to P6,000 59. A domestic corporation organized and operated as a non-stock non-profit educational institution received 200,000 from tuition fees and P300,000 from rentals to private concessionaires. The educational institution used the P500,000 in order to buy books as part of its program of upgrading the library. Which of the following statements is true? a, The entire amount of P500,000 is subject to 30% income tax b, The entire amount of P500,000 is subject to 10% income tax . Only the amount of P300,000 is subject to 30% income tax d. The entire amount of P500,000 is exempt from income tax 60. All of the following can be deducted from a purely compensation income earner's income except: a. Union dues b. Mandatory PAGIBIG Contributions ¢. Private health insurance contributions d_ Mandatory SSS contributions 6, Rianne IR te etoposide at toestiecte