PHINMA- University of Iloilo

College of Accountancy
BAM 031- Income Taxation

1. Which of the following statements is correct?

a. Interest income on bank deposit or investment with maturity period of at least
five years is exempt from income tax
b. Interest income on treasury-bond with maturity period of at least five years is
exempt from income tax
c. The tax exemption on long term bank deposit or investment extends to all types of
taxpayers.
d. All of the above.

2. Which of the following income of an individual taxpayer is subject to final tax?

a. 10,000 prize in Manila won by a resident citizen.
b. Dividend received by a resident citizen from a resident foreign corporation.
c. Shares in the net income of a general professional partnership received by a resident
citizen.
d. Dividend received by a non-resident alien from a domestic corporation.

3. Which of the following interest income derived within the Philippines is subject to basic
(regular) income tax?
a. Interest income from bank deposits
b. Interest income from loans
c. Interest income from deposit substitutes
d. Interest income from trust funds.

4. Which of the following interest income by a resident taxpayer is subject to 15%?

a. Interest income from peso bank deposits
b. Interest income from deposit substitutes
c. Interest income trust funds
d. Interest income on dollar deposits

5. Statement 1– All royalty income derived from sources within the Philippines are subject
to final withholding tax.
Statement 2 – All royalty income derived from sources outside of the Philippines
received by resident citizens are subject to basic income tax.
a. Only statement 1 is correct.
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect.

6. Which of the following transactions is subject to 6% capital gains tax:

a. Sale of condominium units by a real estate dealer
b. Sale of real property utilized for office use
c. Sale of apartment houses
d. Sale of vacant lot by an employee

7. Which of the following sale transactions will be subject to capital gains tax?
 a. Sale of shares of stock by a dealer in securities
b. Sale of shares of stock during an Initial Public Offering
c. Sale of shares of stock not through the local stock exchange by a person
who is not a dealer in securities
d. Sale of shares of stock through the local stock exchange by a person who is
not a dealer in securities

8. 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.
c. Property primarily for sale to sale customers in the ordinary course of trade or
business.
d. Property used in the trade or business of the taxpayer and subject to depreciation.

9. Lots being rented when subsequently sold are classified as

a. Capital assets
b. Liquid assets
c. Ordinary assets
d. Fixed assets

10. Which of the following is a requisite for an income to be taxable?

A. There must be gain
B. The gain must be realized or received
C. The gain must not be excluded by law from taxation
D. All of the above.

11. Active income is subject to

a. Regular tax c. final tax
b. Capital gains tax d. any of these

12. Which is not the feature of regular income tax?

a. Net income tax
b. Final withholding tax
c. Annual tax
d. Creditable withholding tax

13. Proportional regular income tax is applicable to

a. Corporations only
b. Compensation earners only
c. Individuals engaged in business
d. Both individuals and corporations

14. Which of the following individual taxpayers is not subject to tax on taxable income?
a. Non-resident citizen
b. Resident alien
c. NRA-NETB
d. Non-resident alien engaged in business

15. A purely engaged in business individual taxpayer shall use

a. BIR Form 1701A
b. BIR Form 1701
 c. BIR Form 1700
d. BIR Form 1702

16. BIR Form 1701 is not intended for

a. Estate
b. Pure professional income earner
c. Trust
d. Mixed income earner

17. Interest income from foreign currency deposit system of individual resident citizen shall
be subject to final tax of?
a. 7.5%
b. 15%
c. 20%
d. 35%

18. PCSO and lotto winnings are:

a. exempt from tax
b. subject to 20% final tax
c. exempt from tax not exceeding 10,000, any in excess will be subject to 20% final
tax.
d. Half will be exempt half will be tax.

19. To a non-resident citizen, interest income on Peso currency deposit in the

Philippines is
a. Subject to 20% final tax
b. Subject to Regular tax
c. Subject to 15% final tax
d. Exempt from tax

20. To a non-resident citizen, interest income on foreign currency deposit in the

Philippines is
a. Subject to 20% final tax
b. Subject to regular tax
c. Subject to 15% final tax
d. Exempt from tax

21. Dividend income received from the domestic corporation going to another
domestic corporation is subject to?
a. 20% final tax
b. 10% final tax
c. Regular Income Tax
d. Exempt from tax

22. A taxpayer earned the following interest income from various time deposits:

6-month time deposit P 8,000

2-year time deposit 12,000
5-year time deposit (annual interest) 40,000
Total interest income P 60,000

What if the taxpayer pre-terminated the investment on the 3.5 years of the 5 year time
deposit, how much is the final tax?
a. P0
b. P1,600
c. P4,000
d. P20,800

SOLUTION:
Year 1- 40,000
Year 2- 40,000
Year 3- 40,000
Year 3.5- 20,000
Total Interest Income - 140,000 x 12%= P16,800

23. Taxpayer sold land for P560,000 which was bought for P450,000. For capital
gains tax purposes, the following values was provided:

Fair Market Value P 575,000.00

BIR Zonal Value 600,000.00
Assessed Value 350,000.00

How much of the capital gain subject to CGT?

a. P 575,000
b. P 600,000
c. P 350,000
d. P1,525,000

24. How much is the CGT?

a. P34,500
b. P36,000
c. P21,000
d. P91,500

25. Taxpayer sold share of stock of a corporation directly to a buyer for P50,000.
Cost of the shares is P40,000. How much is subject to CGT?
a. P0
b. P10,000
c. P40,000
d. P50,000

26. Refer to number 11, how much is the Capital Gains Tax?
a. 0
b. 1,500
c. 6,000
d. 7,500
27. Mrs. Sanchez Mira had a gross taxable compensation income of P400,000. She also
earned an additional P2,000 by investing her money in time deposits plus P3,000
interest income from lending money to a friend. Compute her taxable income.

a. P303,000 b. P302,000 c. P300,000 d. P403,000

Use the following data for the next 5 questions

A taxpayer had the following data during the year 2022:

Gross sales P 2,500,000

Sales return and Allowances 200,000
Beginning inventory 600,000
Net Purchases 1,900,000
Freight-in 200,000
Ending inventory 600,000
Allowable Deduction 100,000

28. Compute the Net sales

a. P2,300,000
b. P2,500,000
c. P2,700,000
d. None of the above

29. Cost of Goods sold

a. P0
b. P2,100,000
c. P2,700,000
d. P1,850,000

30. Gross Income

a. P0
b. P2,300,000
c. P200,000
d. P450,000

31. Income Tax Due if the Taxpayer is an individual.

a. exempt
b. P42,500
c. P586,000
d. Cannot be determined

32. Income Tax Due if the Taxpayer is an corporation.

a. Exempt
b. P575,0000
c. P112,500
d. P50,000

A resident citizen taxpayer provided the following information in the taxable year 2023:

Gross business income, Philippines P 2,000,000

Gross business income, Canada 3,000,000
Business expenses, Philippines 1,400,000
Business expenses, Canada 2,050,000
Interest income- BDO Philippines 100,000
Interest income- BDO in Canada 50,000
Dividend income from a domestic corporation 125,000
Dividend income-resident foreign corporation 75,000
Dividend income-nonresident foreign corporation 102,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Philippine lotto winnings 10,000
Philippine Charity Sweepstakes winnings 500,000
Singapore sweepstakes winnings 200,000
Other winnings-Philippines 50,000
Prizes - Robinsons Manila 8,000
Prizes-SM Manila 20,000
Prizes-SM "Shanghai, China" 30,000
Gain on selling of shares directly sold to the buyer 200,000
Principal residence sold replaced by new principal residence
(all amount used in acquiring the new principal residence) 1,000,000

33. How much is the taxable income?

a. P1,940,000
b. P1,997,000
c. P2,015,000
d. P2,025,000

SOLUTION:
Gross business income, Philippines P 2,000,000
Gross business income, Canada 3,000,000
Business expenses, Philippines (1,400,000)
Business expenses, Canada (2,050,000)
Interest income- BDO in Canada 50,000
Dividend income-resident foreign corporation 75,000
Dividend income-nonresident foreign corporation 102,000
Singapore sweepstakes winnings 200,000
Prizes - Robinsons Manila 8,000
Prizes-SM "Shanghai, China" 30,000
TAXABLE INCOME 2,015,000

34. How much is the income tax due/payable?

a. P387,500
b. P401,750
c. P407,000
d. P410,000

SOLUTION:
TAXABLE INCOME 2,015,000
Less: Lowest 2,000,000----------------- 402,500
Excess 15,000 x .30---------------4,500
Tax Due 407,000
35. Assume the taxpayer is a non-resident, how much is the taxable income?
a. P0
b. P608,000
c. P1,940,000
d. P1,997,000

SOLUTION:
Gross business income, Philippines P 2,000,000
Business expenses, Philippines (1,400,000)
Prizes - Robinsons Manila 8,000
TAXABLE INCOME 608,000

36. Refer to previous question, how much is the income tax due/payable?
a. P0
b. P64,100
c. P387,500
d. P401,750

SOLUTION:
TAXABLE INCOME 608,000
Less: Lowest 400,000----------------- 22,500
Excess 208,000 x .20---------- 41,600
Tax Due 64,100

37. How much is the total passive income (disregard question 3 and 4)?

a. P845,000
b. P720,000
c. P853,000
d. P700,000

SOLUTION:
Interest income- BDO Philippines 100,000
Dividend income from a domestic corporation 125,000
Interest income received from a depository bank under FCDS, Philippines 50,000
Philippine Charity Sweepstakes winnings 500,000
Other winnings-Philippines 50,000
Prizes-SM Manila 20,000
TAXABLE INCOME 845,000

38. How much is the final taxes?

a. P154,000
b. 108,000
c. 85,300
d. 140,000

Interest income- BDO Philippines (20%) 20,000

Dividend income from a domestic corporation (10%) 12,500
Interest income received from a depository bank under FCDS, Philippines(15%) 7,500
Philippine Charity Sweepstakes winnings (500,000x 20%) 100,000
Other winnings-Philippines (50,000x 20%) 10,000
Prizes-SM Manila (20,000 x20%) 4,000
TAXABLE INCOME 154,000

39. How much is subject to CGT?

a. 0
b. 200,000
c. 1,000,000
d. 1,200,000

40. Compute the capital gains tax due (CGT)?

a. P0
b. P30,000
c. P60,000
d. P90,000

SOLUTION:
Gain on selling of shares directly sold to the buyer 200,000