2nd Midterm Departmental Examinations Reviewer

A.Y. 2023 - 2024

Subject Code: ACCO 208

Course Subject: Business Taxation

1. Which of the following is taxed on gross income?

a) Domestic corporation
b) Resident foreign corporation
c) Nonresident foreign corporation
d) Non-profit cemetery

2. The BIR is under the supervision of the

a) Bangko Sentral ng Pilipinas
b) Department of Budget
c) Bureau of Customs
d) Department of Finance

3. Royalty income derived within the Philippines by a nonresident foreign

corporation shall be subject to:
a) 7.5% final tax
b) 2% minimum corporate tax
c) 25% final tax
d) 25% normal corporate tax

4. The following are correct income tax rate, except

a) 7.5% on gross income within earned by nonresident foreign cinematographic film
owner
b) 2.5% on gross receipts within received by foreign international carrier.
c) 4.5% on gross income within earned by nonresident lessor of vessel chartered by
Philippine nationals
d) 7.5% on gross income within earned by nonresident foreign lessor of aircraft

5. The minimum corporate income is applicable in determining the tax liability of

a corporation except when the corporation
a) Is in its fourth year
b) Is in its third year
c) Incurred net loss or zero taxable income
d) Has normal income tax which is lesser than minimum income tax
6. Statement I: Minimum Corporate income tax or MCIT is 2% of taxable income
Statement II: If the regular income tax is higher than the MCIT, then the
corporation must pay the MCIT.
a) Both statements are true.
b) Both statements are false.
c) Only statement I is correct.
d) Only statement II is correct.

7. If the gross income from unrelated activity exceeds 50% of the total gross
income derived by any private educational institution, the rate shall be 25%
based on the entire taxable income. This principle is known as
a) Predominance test
b) Constructive receipt
c) Tax benefit rule
d) End result doctrina

8. Proprietary education institutions and hospital which are nonprofit shall pay
tax of how much on their taxable income what percent?
a) 25%
b) 20%
c) 10%
d) 2%

9. Which of the following statements is correct?

a) A foreigner who has acquired residency in the Philippines shall only become a
non-resident alien when he actually departs with the intention of abandoning his
residency in the Philippines.
b) An alien who shall reside in the Philippines with no definite intention as to his stay is
a resident of the Philippines.
c) Both A and B are correct
d) Only B is correct

10. Any income of nonresidents, whether individuals or corporations, from

transactions with depositary banks under the expanded system shall be:
a) Subject to 7½ final tax
b) Subject to 10% final tax
c) Subject to 25% final tax
d) Exempt from income tax

11. Which of the following is exempt from income tax?

 a) Building and loan associations
b) A club organized and operated exclusively for pleasure, recreation, and other
non-profitable purposes, no part of the net income of which inures to the benefit of
any private stockholder or individual
c) Cemetery company owned and operated exclusively for the benefit of its members
d) None of the above

12. When exempt corporations are taxable?

a) Their income from their activities conducted for profit regardless of the disposition
made of such income
b) Their income from their properties, real or personal.
c) A and B are correct.
d) Only B is the correct statement.

13. Which of the following passive income is not subject to final tax when
received by corporations?
a) Interest on Philippine currency bank deposit
b) Royalties
c) Prizes and winnings
d) Yield or monetary benefit from deposit substitute

14. Statement I: All non-residents are exempt from final tax on foreign currency
deposits.
Statement II: NRA-NETB and NFRC are subject to final tax only to passive
income from sources in the Philippines
a) Both statement are false
b) Both statement are true
c) Only statement I is true
d) Only statement II is true

15. One of the following dividends received from a domestic corporation is not
subject to final tax
a) Cash dividend received by a resident foreign corporation
b) Property dividend received by a nonresident alien engaged in trade or business
c) Property dividends received by a nonresident foreign corporation
d) Cash dividend received by a resident citizen

16. Which is subject to the 5%-10% capital gains tax?

a) None of the choices are subject to capital gains tax
b) Sale of domestic stocks through the Philippine Stock Exchange
c) Sale of domestic bonds directly to a buyer within the Philippines
 d) Sale of domestic stocks directly to a buyer within or outside the Philippines

17. Statement I: Income tax credits are directly added from the income tax due to
arrive at income tax payable
Statement II: The option to carry-over is revocable
a) Both statement are false
b) Both statement are true
c) Only statement I is true
d) Only statement II is true

18. One of the following is included in the “Gross Philippine Billings” for income
tax purposes of an international air carrier.
a) Passage documents sold in the Philippine for cargoes originating from outside the
Philippines
b) Passage document sold outside the Philippines for excess baggage originating from
the Philippines
c) Ticket sold in the Philippines for passengers originating from the Philippines but are
not actually flown
d) Tickets sold outside the Philippines for passengers originating from outside the
Philippines

19. Which of the following are exempt from income tax even if they conducted
activity for profit?

I - Government Service Insurance System (GSIS)

II - Social Security System (SSS)
III - Philippine Health Insurance Corporation (PHIC)
IV - Local water districts (LWDs)
a) I and II
b) I only
c) II, III and IV
d) I, II, III, IV

20. Which of the following is not a taxable corporation?

a) Mikha, Aiah and Colet, all certified public accountants, agreed to contribute their
money, property and industry to a common fund with the sole intention of jointly
exercising their common profession. They have registered with the SEC.
b) Staku Bus Company and Jhoanna Bus Company own separate franchises to operate
a public utility covering the area of Pampanga. To achieve maximum efficiency of
utilizing their assets and to avoid the negative effects of competition, the two
companies agreed to pool their resources together and operate as a single company
 c) Gwen and Sheena, lawyer and certified public accountants, respectively, agreed to
contribute their money, property and industry to a common fund to render service
of business process outsourcing.
d) Maloi, Lim, and Arceta agreed to contribute their money into a common fund to
engage in the business of buying and selling consumer goods. Their total
investment amounted to P1,000,000 and they did not bother to register their
business with DTI and the SEC.

21. Generally, the income tax payable shall be paid at the time the return is filed. This
system is known as ___________.
a) Pay as you file system
b) Immediate taxation system
c) Real-time tax payment scheme
d) Instant tax settlement method

22. For quarterly tax returns, when is the due date for filing income tax returns
for the third quarter?
a) September 15
b) October 15
c) November 15
d) December 15

23. A is a practicing CPA. Which of the following is correct?

a) A is required to file quarterly and annual income tax returns.
b) A is required to file annual income tax returns only.
c) A is required to file quarterly income tax returns only.
d) A is required to file neither quarterly nor annual income tax returns.

24. Statement 1: Partnership has a juridical personality separate and distinct from
that of each of the partners.
Statement 2: A partnership formed by persons for the purpose of exercising
their common profession is a General Partnership.
a) True, True
b) True, False
c) False, True
d) False, False

25. Income payments made periodically or at the end of the taxable year made by
a GPP to the partners is subject to ___ creditable withholding tax if the
amount of income payment is more than P720,000, otherwise, ____.
a) 5%; 3%
 b) 10%; 5%
c) 15%; 10%
d) 20%; 15%

26. Statement 1: Partners are considered shareholders, and therefore, profits

distributed to them are considered as dividends subject to final withholding
tax.
Statement 2: Partnerships, for income taxation purposes, are considered as
corporations and are therefore taxed as such.
a) True, True
b) True, False
c) False, True
d) False, False

27. Statement 1: The tax-exempt joint venture may include those who are mere
suppliers of goods, services, or capital to a construction project.
Statement 2: In general, a joint venture is not considered as corporation.
a) True, True
b) True, False
c) False, True
d) False, False

28. A joint venture formed for the purpose of undertaking construction projects is
not considered as corporation under Section 22 of the Tax Code provided,
except:
a) The joint venture was formed for the purpose of undertaking a construction project;
and
b) Should involve joining/pooling of resources by licensed local contracts; that is,
licensed as general contractor by the PCAB of the DTI
c) The local contractors are engaged in the construction business; and
d) The Joint Venture itself is encouraged to be duly licensed as such by the PCAB of
the DTI

29. X, Y, and Z bought a parcel of land for improvement before leasing it out to
interested tenants. What was formed?
a) Co-ownership
b) Partnership
c) Joint Venture
d) Consortium
30. Statement 1: Article 848 of the Civil Code provides that there is a partnership
whenever the ownership of an undivided thing or right belongs to different
persons.
Statement 2: Incomes from such are subject to income tax
a) True, True
b) True, False
c) False, True
d) False, False

31. Bingo Corporation, a manufacturer, has a gross sales of P200,000,000 for

corporate year 2023, its 2nd year of operation. Its total assets amounted to
P70,000,000, net of value of the land of P6,000,000 where its manufacturing
plant and business operations are situated. Its cost of sales and allowable
operating expense amounted to P100,000,000 and P40,000,000, respectively.
Compute its income tax due for 2023.

a) P5,000,000
b) P10,000,000
c) P15,000,000
d) P20,000,000

32. Mabenta Corporation, a manufacturer, has a gross sales of P130,000,000 for

2023, its 2nd year of operation. Its cost of sales and allowable operating
expense amounted to P80,000,000 and P46,000,000, respectively. Its total
assets amounted to P50,000,000, net of value of the land of P6,000,000 where
its manufacturing plant and business operations are situated. Compute its
income tax due for 2023.
a) P800,000
b) P750,000
c) P1,000,000
d) P1,750,000

33. Ling Corp., a domestic corporation, has a taxable net income of P7,000,000
and total assets of P70 million. What is the income tax due?
a) P1,400,000
b) P1,750,000
c) P1,650,000
d) P1,500,000

34. Mariano Corporation, a domestic corporation and a retailer of goods has gross
sales of P13,000,000 with a cost of sales of P8,310,000 and allowable
 deductions of 2,500,000 for the calendar year 2021. Its total assets of
P180,000,000 as of December 31, 2021 per Audited Financial Statements
includes the land costing P80,000,000 and the building of P40,000,000 in
which the business entity is situated.

How much is the income tax due in 2021?

a) P547,500
b) P938,000
c) P780,000
d) P438,000

35. Snoop Corp. incurred a net loss of P1,350,000 in its ninth year of operation,
2025. It reported sales of P5,000,000, cost of sales of P2,550,000, and
operating expenses of P3,800,000. Compute its income tax due assuming the
taxable year is 2025.
a) P49,000
b) P27,000
c) P24,500
d) P36,750

36. Evermore , a resident foreign corporation, reported the following for the year
2025 (4th year of business operation):

Gross Income. Philippines P975,000

Expenses, Philippines 950,000
Grosses income. Singapore 700,000
Expenses, Singapore 720,000
Interest on Bank Deposit 25,000

What is the income tax due?

a) P19,500
b) P9,750
c) P7,500
d) P17,950

37. Poets Corporation, a private educational institution, with total assets of P19
million, had the following data in 2022: Tuition fees of P5,000,000; Rental
revenue, P7,000,000; Cost of services, P3,000,000; Operating expenses,
P8,800,000. How much is the income tax due of Poets Corporation in 2022?
a) P190,000
b) P180,000
 c) P90,000
d) P80,000

38. Folklore Learning Center (FLC), a non-profit, non-stock school, has a gross
income of P4,000,000, only 40% of which was contributed by related
activities, and total expenses of P3,000,000, 50% of which was incurred in
connection with non-related activities. FLC has total assets of P101 million.
The income from unrelated activities was used actually, directly, and
exclusively used for educational purposes. Compute the income tax due.
a) P62,500
b) P49,500
c) P27,500
d) P0

39. Tiu Corporation is a resident foreign corporation with branches worldwide,

including the Philippines. Its Philippine branch had an income of P10,000,000
in 2025, and it earmarked P8,000,000 for remittance. It actually remitted
P7,000,000. How much is the branch profit remittance tax due of the
Philippine branch?
a) P1,200,000
b) P1,500,000
c) P2,000,000
d) P0

40. A resident international carrier has the following data for the current year:
Gross income of P700,000 and expense of P200,000 from the Philippines;
Gross income of P500,000 and expense of P100,000 from Malaysia. How much
is the tax payable of the corporation?
a) P160,000
b) P30,000
c) P288,000
d) P17,500

41. Kate Corporation, a non-resident foreign corporation, purchased 10,000

unlisted shares of Peter Corp., a domestic corporation, amounting to
P1,200,000. After 6 months, it sold the shares for P2,000,000. Then, utilized
the entire proceeds to purchase shares of stock of another domestic
corporation. Compute the capital gains tax due.
a) P120,000
b) P375,000
c) P160,000
 d) P255,000

42. Jennie Corp. sold a building, which is used as its principal office, for
P50,000,000. At the time of the sale, the fair market value of the building was
P40,000,000. The office was constructed six years ago for P35,000,000.
Jennie Corp. utilized the entire proceeds to construct a new building as its
principal office. How much is the capital gains tax on the sale?
a) P1,500,000
b) P750,000
c) P2,250,000
d) P0

43. Aiah corporation has the following income:

Interest income derived from depositary under Expanded Foreign Currency

Deposit System, P200,000
Capital gain from the sale of shares of stock not traded in the local stock
exchange, P300,000
Dividend from a domestic corporation, P500,000

How much is the total final tax on passive income and capital gains tax under
CREATE assuming the corporation is a resident foreign corporation?
a) P125,000
b) P75,000
c) P150,000
d) P225,000

44. Bini Corporation has the following data:

Income net of 5% withholding tax, P475,000

Deductions, P270,000
Prior year’s excess tax credits, P25,000

How much is the income tax payable (excess payments) for the year using
25%?
a) P26,250
b) P32,500
c) P27,500
d) P0
45. During the taxable year, A Christian Church in Manila received P2 million from
its members in the form of tithes and offerings. Moreover, it received rental
payments amounting to P1 million in relation to the land and building it leased
to Blooms Corp. Such rental payments were used actually, directly, and
exclusively used for religious purposes. How much is the income tax due using
25%?
a) P250,000
b) P500,000
c) P750,000
d) P1,000,000

46. The Calinog Indigenous People's Organization, a non-stock, non-profit

corporation, organized and operated exclusively to preserve and showcase
Philippine cultural practices, music, dances, and fold arts, deriving funding
mostly from donations, had the following data for the taxable year:

Donations received from domestic and foreign sources, P25,000,000

Total Assets, P45,000,000
Interest income from bank deposits, P250,000
Rent income from real estate received as donation, net of 10% withholding
tax, P540,000
Expenses related to its rent income, P35,000

How much is the taxable income of the corporation for the year assuming its
income is subject to 20% income tax rate?
a) P53,000
b) P565,000
c) P410,000
d) P45,000

47. In 2024, KIOF Corporation had taxable income of P3,000,000 from within the
Philippines and P5,000,000 from the USA. The income tax paid on income
from the USA was P1,300,000. How much was the allowable tax credit on
income tax paid to the US Government?
a) P1,250,000
b) P1,300,000
c) P750,000
d) P0

48. UNIS, an international air carrier, establishes an office outlet in Cavite. It has
no flights originating from or coming to the Philippines and does not operate
 any airplane in the Philippines. During the taxable year, it had the following
data:
Ticket Sales, P15,000,000
Operating Expenses, P8,000,000

All the related flights occurred outside the Philippines. How much is the
income tax due of the corporation?
a) P1,000,000
b) P1,250,000
c) P1,500,00
d) P1,750,000

49. In 2024, Ma Corporation, a branch of a foreign company doing business in the

Philippines, earmarked for remittance to its head office in Canada, some of its
income as follows:

Branch profit, P30,000,000;

Dividends, P8,000,000.

How much is the branch profit remittance tax?

a) P3,300,000
b) P2,500,000
c) P4,500,000
d) P3,700,000

50. Colet Corp., a domestic corporation, invested P5,000,000 in a 6-year time

deposit issued by BPI. The investment earns 7% per year. How much is the
final income tax arising from this investment?
a) P70,000
b) P87,500
c) P17,500
d) P5,600

51. Z is a mixed-income earner, a self-employed resident citizen, and currently the

finance manager of ABC Corporation. The following data were provided for the
taxable year 2023:

Compensation income, P1,800,000

Sales, P2,800,000
Cost of sales, P1,125,000
Business expenses, P650,000
 Interest income from peso bank deposit, P80,000
Interest income from bank deposit under FCDS, P120,000
Creditable withholding tax on compensation income, P448,000
13th month pay and other benefits, P150,000
Creditable withholding tax on sale of goods, P28,000

How much is the total income tax expense of Z, assuming he opted to be

taxed at 8%?
a) P321,500
b) P788,500
c) P610,500
d) P672,000

52. Based on question no. 57, how much is the income tax payable of Z for the
year?
a) P28,000
b) P196,000
c) P448,000
d) P672,000

53. If a resident citizen taxpayer died and left an undivided property to the heir
veiled at P60,000,000. The property is income-producing primarily through
rentals. In 2021, the property earned gross rentals amounting to P20,000,000
while expenses necessary to carry out the operations were P5,000,000.

On the other hand, the heirs - X, Y, and Z who are all engaged in businesses in
their individual capacity, provided the following data for the 2021 taxable
year, respectively.

Gross business income: P10,000,000; P5,000,000; P8,000,000

Business expenses: P7,000,000; P2,500,000; P6,000,000
Income subject to final taxes (net): P200,000; P320,000; P500,000

How much is the taxable income of X in 2021?

a) P0
b) P6,000,000
c) P7,000,000
d) P8,000,000

54. Based on question no. 53, how much is the taxable income of the
co-ownership?
 a) P0
b) P6,000,000
c) P7,000,000
d) P8,000,000

55. Eric and Zayne formed a partnership, Eazy Partnership, with equal ratio in
income and expenses. The following are the data provided by the partnership
and the partners in 2021:

E Z E
a a r
z y i
y n c
P e
a
r
t
n
e
r
s
h
i
p

GP P P
r 6 5 4
o 0 0 0
s 0 0 0
s , , ,
I 0 0 0
n 0 0 0
c 0 0 0
o
m
e

O 3 2 2
p 5 0 2
e 0 0 0
r , , ,
 a 0 0 0
t 0 0 0
i 0 0 0
n
g
E
x
p
e
n
s
e
s

Assuming the partnership is a GPP, how much is distributive share of Zayne in

the income of partnership?
a) P125,000
b) P180,000
c) P300,000
d) P425,000

56. Based on question no. 55, how much is the taxable income of Zayne?
a) P125,000
b) P180,000
c) P300,000
d) P425,000

57. Based on question no. 55, how much is the taxable income of Zayne,
asssuming the partnership is a general partnership?
a) P125,000
b) P180,000
c) P300,000
d) P425,000

58. Two entities joined and formed a joint venture for construction project of the
government. The P&L has been agreed to be equal. The joint venture received
a total contract price of P33,547,000. The cost of the project amounted to
P20,128,200. Operating expenses related to the joint venture amounted to
3,354,700. Compute the income tax due of the joint venture.
a) P0
b) P94,140
 c) P110,000
d) P700,000

59. ABACA Partnership had the following data.

Gross income, P754,683

Cost and Expenses, P283,981
Dividends from DC, P16,871
Interest Income from BPI, P10,000

Compute the income tax due of the partnership. Use 20%

a) P0
b) P94,140
c) P110,000
d) P700,000

60. CPA of Carlo, Pamela, and Arthur is a general professional partnership with
assets valued at P25,000,000. The agreed P&L is 1:1:1. The following are the
data for the partnership and the partners during taxable year:

CPA Carlo Pamela Arthur

Gross Income P4,000,000 P1,500,000 P3,000,500 P2,500,450

OPEX 2,500,000 750,000 1,500,000 1,110,000

Taxable Income 800,000 200,000 600,000 400,000

How much is the taxable income of the partnership?

a) P0
b) P94,140
c) P110,000
d) P700,000
 Summary of Answers

1. C 31. C
2. D 32. A
3. D 33. B
4. A 34. D
5. B 35. A
6. B 36. A
7. A 37. C
8. C 38. D
9. C 39. A
10. D 40. D
11. C 41. A
12. C 42. D
13. C 43. B
14. C 44. C
15. A 45. A
16. D 46. B
17. A 47. A
18. B 48. D
19. D 49. C
20. A 50. A
21. A 51. C
22. C 52. B
23. A 53. D
24. B 54. A
25. C 55. A
26. A 56. D
27. D 57. C
28. D 58. A
29. B 59. B
30. C 60. A
 Summary of Answers – Explained

1. (C)
2. (D)
3. (D)
4. (A) The correct income tax rate earned by nonresident foreign cinematographic film
owner is 25% on gross income within.
5. (B)
6. (B) Statement I: Minimum Corporate income tax or MCIT is 2% of GROSS income;
Statement II: If the RCIT is higher than MCIT, the corporation does NOT pay the MCIT
but the amount of the regular income tax.
7. (A)
8. (C)
9. (C)
10. (D) Any income of nonresidents, whether individuals or corporations, from transactions
with depository banks under the expanded system shall be exempt from income tax.
11. (C)
12. (C) Notwithstanding the provisions in the preceding paragraphs, the income of the
foregoing organizations from (1) their properties, real or personal, or from (2) their
activities conducted for profit regardless of the disposition made of such income, shall be
subject to tax imposed under the NIRC.
13. (C)
14. (C) NRA-NETB and NFRC are subject to Philippine tax not only on passive income but
also on certain types of active income sourced within the Philippines.
15. (A) Cash dividends from the domestic corporation by RFC are exempt.
16. (D)
17. (A) Income tax credits are directly deducted from the income tax due to arrive at income
tax payable. The option to carry-over is irrevocable
18. (B)
19. (D)
20. (A)
21. (A)
22. (C)
23. (A)
24. (B) It should be General Professional Partnership (GPP). It is different from General
Partnership (Commercial Partnership.
25. (C)
26. (A)
27. (D) The correct statements are:
Statement 1: The tax-exempt joint venture shall not include those who are mere
suppliers of goods, services, or capital to a construction project.
Statement 2: A joint venture, in general, is taxable as a corporation. Only when it is
formed for the purpose of undertaking construction projects shall not be considered as
corporation provided that all of the requirements under Section 22 of the Tax Code are
present.
28. (D) The correct statement is: The Joint Venture itself must likewise be duly licensed as
such by the PCAB of the DTI
29. (B) Though the property may be undivided, it was acquired by the owners not through
gratuitous transfer but by purchase. Hence, it forms a partnership, not a co-ownership.
30. (C) Statement 1 is false. The correct statement is: Article 484 of the Civil Code
provides that there is a co-ownership whenever the ownership of an undivided thing
or right belongs to different persons.
31. (C)
Gross Sales P200,000,000

Cost of Sales (100,000,000)

Operating Expense (40,000,000)

Taxable Income P60,000,000

Rate 25%

Regular Corporate Income Tax P15,000,000

32. (A)
Gross Sales P130,000,000

Cost of Sales (80,000,000)

Operating Expense (46,000,000)

Taxable Income P4,000,000

 Rate 20%

Regular Corporate Income Tax P800,000

33. (B)
Taxable Income P7,000,000

Rate 25%

Regular Corporate Income Tax P1,750,000

34. (D)
Gross Sales P13,000,000

Cost of Sales (8,310,000)

Allowable Deductions (2,500,000)

Taxable Income P2,190,000

RCIT rate 20%

Income Tax Due P438,000

The Company is classified as MSME, hence, subject to the revised RCIT rate of 20%
under CREATE Law. The company's assets excluding the land is P60M only (P180M less
the cost of the land amounting to P80M and P40M, respectively). The net income is not
more than P5M; AND The amount of its assets is not more than P100M, excluding land.

35. (A)
Sales P5,000,000

Cost of Sales (2,550,000)

Gross Income P2,450,000

MCIT Rate 2%
 Income Tax Due P49,000

36. (A)
Gross Income, Philippines P975,000

Expenses, Philippines (950,000)

Taxable Income P25,000

Tax Rate 25%

Regular Corporate Income Tax P6,250

Minimum Corporate Income Tax

P19,500
(975,000 x 2%)

37. (C)
Tuition Fees P5,000,000

Rental Revenues 7,000,000

Cost of Service (3,000,000)

Gross Income P9,000,0000

Operating Expenses 8,800,000

Taxable Income P200,000

Rate 20%

Regular Corporate Income Tax P40,000

Minimum Corporate Income Tax

P90,000
(9,000,000 x 1%)
MCIT rate of 1% was used because it is from 2020 (which is within July 1, 2020 - June
30, 2023). MCIT is imposed because MCIT is higher than Regular Corporate Income Tax
(RCIT).
38. (D) P0
According to Section 30 of the NIRC, "All revenues and assets of non-stock, non- profit
educational institutions used actually, directly and exclusively for educational purposes
shall be exempt from taxes and duties."
39. (A)
Remittance of operating income P8,000,000

Multiply by 15%

Branch Profit Remittance Tax P1,200,000

40. (D)
Gross Income, Philippines P700,000

Tax Rate 2.5%

Special Corporate Income Tax P17,500

41. (A)
Selling Price P2,000,000

Purchased cost (P1,200,000)

Net Capital Gain P800,000

x Tax Rate 15%

Donor's tax due P120,000

42. (D) Note that there is no capital gains tax when the land/building sold by a corporation
is held as an ordinary asset. Here, the building is treated as an ordinary asset since it is
used as its principal place of business.
43. (B)
Interest income P200,000 x 15% = P30,000
Sale of shares of stock P300,000 x 15% = P45,000
P75,000
44. (C)
 Gross Income (475k/95%) P500,000

Less: Deductions (P270,000)

Taxable Income P230,000

Rate of tax 25%

Income Tax Due P57,500

Less: CWT (P500k-475k) (P5,000)

Excess Tax Credit (P25,000)

Income tax payable P27,500

45. (A) P1,000,000 x 25% = P250,000
46. (B)

Rent income from real estate (540k/90%) P600,000

Expenses related to its rent income (P35,000)

Taxable Income P565,000

47. (A)
Philippine Income Tax Due (8m x 25%) P2,000,000

Limit Per Country

(5M/8M) x 2M P1,250,000

Compare actual payment vs. limit (P1.3M vs 1.250M) P1,250,000

48. (D) P15,000,000 - P8,000,000 = P7,000,000 x 25% = P1,750,000
49. (C) P30,000,000 x 15% = P4,500,000
50. (A) P5,000,000 x 7% x 20% = P70,000
Interest from currency deposits, trust funds, deposit substitutes and similar
arrangements received by domestic corporations - 20%
Interest Income from a Depository Bank under Expanded Foreign Currency Deposit
System - 15%
51. (C)
1st 800,000 P102,500

Excess (1,000,000 x 25%) 250,000

Basic Income Tax on Compensation Income 352,500

8% on Income from Self-employment (2.8M x 8%) 224,000

Final Tax on Peso Deposit (80,000 x 20%) 16,000

Final Tax on Peso Deposit (120,000 x 15%) 18,000

Total Income Tax Expense P610,500

52. (B)
Basic Income Tax (224,000 + 448,000) P672,000

Creditable withholding tax on compensation income (448,000)

Creditable withholding tax on sale of goods (28,000)

Income Tax Payable P196,000

53. (D)
Gross Income of X P10,000,000

Allowable business expense of X (7,000,000)

Share in net income of the co-ownership 5,000,000

[(P20,000,000 - 5,000,000)/3]

Taxable Income P8,000,000

54. (A)
A co-ownership is not a taxable person or entity. Its income, however, is distributed or
shared by the heirs/donees, thus, taxable to them in their individual capacity.
55. (A)
GPP’s Gross Income P600,000
 OPEX (350,000)

GPP’s Distributable income 250,000

Profit and Loss % 50%

Share in the net income of the GPP P125,000

56. (D)
Gross Income - Zayne P500,000

OPEX (200,000)

Net income 300,000

Share in the net income of the GPP 125,000

Total taxable income of Zayne P425,000

57. (C)
Gross Income - Zayne P500,000

OPEX (200,000)

Taxable income of Zayne P300,000

58. (A) It is a non-taxable joint venture.
Unincorporated joint ventures formed to undertake construction projects, or those
engaged in petroleum, coal, geothermal, or other energy operations under a
government service contract, are not taxable entities. Meanwhile, profits distributed by
the joint venture or consortium members are taxable.
59. (B)
Gross Income P754,683

OPEX (283,981)

Taxable income 470,702

Income tax rate 20%

 Income tax due P94,140
60. (A) GPP is not subject to income tax.