income-taxation-cpar-test-bank.pdf

lOMoARcPSD|40026582 Income Taxation - Cpar test bank Marketing (Adamson University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by melo cotones ([email protected]...

lOMoARcPSD|40026582 Income Taxation - Cpar test bank Marketing (Adamson University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 TAXATION 1 – Income Taxation General Principles of Taxation 1. Taxation as distinguished from police power and power of eminent domain. A. Property is taken to promote the general welfare. B. Maybe exercised only by the government. C. Operates upon the whole citizenry. D. There is generally no limit as to the amount that may be imposed. 2. The following are constitutional limitations, except A. No imprisonment for non-payment of poll tax. B. Non-impairment of the obligation of contracts. C. Rule of uniformity and equity in taxation. D. Exemption from income tax of charitable institutions, cemeteries, churches, personage or convents appurtenant thereto, as well as all lands, buildings and improvements actually, directly and exclusively used for religious, charitable and educational purposes. 3. Which of the following statements is correct? A. The President is authorized to increase or decrease national internal revenue tax rates. B. One of the nature of taxation is the reciprocal duties of protection and support between the state and subjects thereof. C. Every sovereign government has the inherent power to tax. D. Income tax in an indirect tax. 4. A tax must be imposed for public purpose. Which of the following is not a public purpose? A. National defense B. Public education C. Improvement of the sugar and coconut industries. D. Improvement of a subdivision road. 5. Which is not an essential characteristic of a tax? A. It is unlimited as to amount. B. It is payable in money. C. It is proportionate in character. D. It is an enforced contribution. 6. Special assessment is an enforced proportional contribution from owners of land especially benefited by public improvement. Which one of the following is not considered as one of its characteristics? A. It is levied on land. B. It is based on the government’s need of money to support its legitimate objectives. C. It is not a personal liability of the persons assessed. D. It is based solely on the benefit derived by the owners of the land. 7. It is the privilege of not being imposed a financial obligation to which others are subject. A. Tax incentive B. Tax exemption C. Tax amnesty D. Tax credit 8. As to scope of the legislative power to tax, which is not correct? A. Where there are no constitutional restrictions, and provided the subjects are within the territorial jurisdiction of the state, Congress has unlimited discretion as to the persons, property or occupations to be taxed. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 2 B. In the absence of any constitutional prohibition, Congress has the right to levy a tax of any amount it sees fit. C. The discretion of Congress in imposing taxes extends to the mode, method or kind of tax, unless restricted by the constitution. D. The sole arbiter of the purpose or which taxes shall be levied is Congress, provided the purpose is public and the courts may not review the levy of the tax to determine whether or not the purpose is public. 9. Which of the following is a nature of taxation? A. The power is granted by legislative action. B. It is essentially an administrative function. C. It is generally payable in money. D. Without it the state can continue to exist. 10. Which of the following is not a determinant of the place of taxation? A. Source of the income B. Citizenship of the taxpayer C. Residence of the taxpayer D. Amount of tax to be imposed 11. Which of the following statements is not correct? A. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation. B. The property of an educational institution operated by a religious order is exempt from property tax, but its income is subject to income tax. C. The prohibition of delegation by the state of the power of taxation will still allow the BIR to modify the rules in time for filing of returns and payment of taxes. D. The power of taxation is shared by the legislative and executive departments of the government. 12. Statement 1 – The point on which tax is originally imposed is impact of taxation. Statement 2 – Eminent domain is inferior to non-impairment clause of the constitution. Statement 3 – As a rule, taxes are subject to set-off or compensation. Statement 4 – As a rule, provisions on the validity of tax exemptions are resolved liberally in favor of the taxpayer. Statement 1Statement 2Statement 3Statement 4 A. True False False True B. False True True False C. True True False False D. False False True True 13. A tax system where the revenues are supplied mostly by indirect taxes. A. Schedular C. Progressive B. Proportional D. Regressive 14. A tax system where the greater bulk of the tax revenues is derived by direct taxes. A. Schedular C. Progressive B. Proportional D. Regressive 15. This is an inherent limitation on the power of taxation. A. Rule on uniformity and equity in taxation. B. Due process of law and equal protection of the laws. C. Non-impairment of the jurisdiction of the Supreme Court in tax cases. D. Tax must be for the public purpose. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 3 16. This is a constitutional limitation on the power of taxation. A. Tax laws must be applied within the territorial jurisdiction of the state. B. Exemption of government agencies and instrumentalities from taxation. C. No appropriation of public money for religious purposes. D. Power to tax cannot be delegated to private persons or entities. 17. They exist independent of the constitution being fundamental powers of the state, except A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 18. The power to acquire private property upon payment of just compensation for public purpose A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 19. The power to regulate liberty and property to promote the general welfare. A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 20. The power to demand proportionate contributions from persons and property to defray the expenses of the government. A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 21. Basic Principles of a sound tax system, except A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice D. Intellectual sensitivity 22. The tax imposed should be proportionate to the taxpayer’s ability to pay. A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice D. Intellectual sensitivity 23. The sources of revenue as a whole, should be sufficient to meet the demands of public expenditures. A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice D. Intellectual sensitivity 24. The tax laws must be capable of convenient, just and effective administration. A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice D. Intellectual sensitivity 25. Persons or things belonging to the same class shall be taxed at the same rate. A Simplicity in taxation C. Equality in taxation B. Reciprocity in taxation D. Uniformity in taxation 26. The tax should be proportional to the relative value of the property to be taxed. A Simplicity in taxation C. Equality in taxation B. Reciprocity in taxation D. Uniformity in taxation 27.The following are the nature of taxation, except A. Inherent in sovereignty B. Essentially legislative in character C. Subject to inherent and constitutional limitation D. Subject to approval by the people. 28. It literally means “place of taxation”; the country that has the power and jurisdiction to levy and collect the tax. A. Basis of taxation C. Scope of taxation Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 4 B. Situs of taxation D. Theory of taxation 29. The existence of the government is a necessity and that the state has the right to compel all individuals and property within its limits to contribute A. Basis of taxation C. Scope of taxation B. Situs of taxation D. Theory of taxation 30. The reciprocal duties of support and protection between the people and the government. A. Basis of taxation C. Scope of taxation B. Situs of taxation D. Theory of taxation 31. Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme, plenary, unlimited and comprehensive. A. Basis of taxation C. Scope of taxation B. Situs of taxation D. Theory of taxation 32. Our National Internal Revenue Laws are A. Political in nature C. Criminal in nature B. Penal in nature D. Civil in nature 33. The levying or imposition of tax and the collection of the tax are processes which constitute the taxation system. A. Basis of taxation C. Nature of taxation B. Aspects of taxation D. Theory of taxation 34. The process or means by which the sovereign, through its law-making body raises income to defray the expenses of the government. A. Toll C. Taxation B. License fee D. Assessment 35. Enforced proportional contributions from persons and property levied by the state by virtue of its sovereignty for the support of the government and for all public needs. A. Toll C. Taxes B. License fee D. Assessment 36. An escape from taxation where the tax burden is transferred by the one on whom the tax is imposed or assessed to another. A. Shifting C. Transformation B. Exemption D. Capitalization 37. An escape from taxation where the producer or manufacturer pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units of products at a lower cost. A. Shifting C. Transformation B. Exemption D. Capitalization 38. An escape from taxation where there is a reduction in the price of the taxed object equal to the capitalized value of future taxes which the taxpayer expects to be called upon to pay. A. Shifting C. Transformation B. Exemption D. Capitalization 39. The use of illegal or fraudulent means to avoid or defeat the payment of tax. A. Exemption C. Avoidance B. Shifting D. Evasion 40. The use of legal or permissible means to minimize or avoid taxes. A. Exemption C. Avoidance Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 5 B. Shifting D. Evasion 41. Synonymous to tax evasion. A. Tax dodging C. Tax exemption B. Tax minimization D. Tax evasion 42. Synonymous to tax avoidance. A. Tax dodging C. Tax exemption B. Tax minimization D. Tax evasion 43. In every case of doubt, tax statutes are construed A. Strictly against the government and the taxpayer. B. Liberally in favor of the government and the taxpayer. C. Strictly against the government and liberally in favor of the taxpayer. D. Liberally in favor of the government and strictly against the taxpayer. 44. In every case of doubt, tax exemptions are construed A. Strictly against the government and the taxpayer. B. Liberally in favor of the government and the taxpayer. C. Strictly against the government and liberally in favor of the taxpayer. D. Liberally in favor of the government and strictly against the taxpayer. 45. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS). A. PAS shall prevail over the Tax Code. B. Tax Code shall prevail over PAS. C. PAS and Tax Code shall be both disregarded. D. The taxpayer may choose between the PAS or the Tax Code.. 46. Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to their property or occupation they may be engaged. A. Personal, poll or capitation C. Excise B. Property D. Regressive 47. Tax imposed on personal or real property in proportion to its value or on some other reasonable method of apportionment. A. Personal, poll or capitation C. Excise B. Property D. Regressive 48. Tax imposed upon performance of an act, the enjoyment of privilege or the engaging in an occupation. A. Personal, poll or capitation C. Excise B. Property D. Regressive 49. Tax which is demanded from the person whom the law intends or desires to pay it. A. Direct C. Excise B. Indirect D. Percentage 50. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another. A. Direct C. Excise B. Indirect D. Percentage 51. Tax which imposes a specific sum by the head or number or by some standard of weight or measurement and which requires no assessment other than a listing or classification of the objects to be taxed. A. Specific C. Excise B. Ad-valorem D. Income Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 6 52. Tax of a fixed proportion of the amount or value of the property with respect to which the tax is assessed. A. Specific C. Excise B. Ad-valorem D. Percentage 53. Tax based on a fixed percentage of the amount of property, income or other basis to be taxed. A. Proportional C. Regressive B. Progressive D. Indirect 54. Tax where the rate decreases as the tax base increases. A. Proportional C. Regressive B. Progressive D. Indirect 55. Tax where the rate increases as the tax base increases. A. Proportional C. Regressive B. Progressive D. Indirect 56. Which of the following statements is not correct? A. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government. B. Tax exemptions, tax amnesty tax condonations and their equivalent provisions are not presumed and, when granted are strictly construed against the taxpayer because such provisions are highly disfavored by the government. C. Exemptions from taxation are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right. D. The House of Representatives has the duty and the exclusive power of constructing and interpreting tax laws. 57. The strongest of all inherent powers of the state because without it, the government can neither survive nor dispense any of its other powers and functions effectively. A. Police Power C. Power of Taxation B. Power of Eminent Domain D. Power of Recall 58. This power is superior to the non-impairment clause and is broader in application because it is a power to make and implement laws. A. Power of Taxation C. Power of Eminent Domain B. Power of Recall D. Police Power 59. Which of the following statements is not correct? A. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation. B. Income tax liabilities shall be paid by the inhabitants even if foreign invaders occupy our country. C. Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes must only be imposed prospectively. D. Tax laws are either political or penal in nature. 60. Which of the following is not a constitutional limitation on the Power of Taxation? A. No person shall be deprived of life , liberty or property without due process of law. B. No person shall be denied the equal protection of the law. C. No person shall be imprisoned for debt or non-payment of tax. D. No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 7 61. The distinction of a tax from permit or license fee is that a tax is: A. Imposed for regulation. B. One which involves an exercise of police power. C. One in which there is generally no limit on the amount that maybe imposed. D. Limited to the cost of regulation. 62. Police power as distinguished from the power of eminent domain: A. Just compensation is received by the owner of the property. B. Maybe exercised by private individuals. C. May regulate both liberty and property. D. Property is taken by the government for public purpose. 63. A tax wherein both the incidence of or the liability for the payment of the tax as well as the burden of the tax falls on the same person. A. Direct tax C. Indirect tax B. Value added tax D. Percentage tax 64. Which one of the following is not a characteristic or element of a tax? A. It is an enforced contribution. B. It is legislative in character. C. It is based on the ability to pay. D. It is payable in money or in kind. 65. Tax as distinguished from license fees: A. Limited to cover cost of regulation. B. A regulatory measure. C. Non-payment does not necessarily render the business illegal. D. Imposed in the exercise of police power. 66. The power of taxation is exercised by A. The President C. Bureau of Internal Revenue B. The Supreme Court D. Congress 67. One of the characteristics of internal revenue laws is that they are: A. Criminal in nature C. Political in nature B. Penal in nature D. Generally prospective in application. 68. Which of the following is not an example of excise tax: A. Transfer tax C. Real property tax B. Sales tax D. Income tax 69. The following are similarities of the inherent power of taxation, eminent domain, and police power, except one: A. Are necessary attributes of sovereignty B. Superior to the non-impairment clause of the constitution. C. Compensation is received. D. Are legislative in character. 70. Which of the following is not a scheme of shifting the incidence of taxation? A. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold; B. The purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to the tax he will pay; C. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines; D. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 8 71. Which of the following statements is not correct? A. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the state; B. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax. C. For the exercise of the power of taxation, the state can tax anything at any time. D. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers. 72. License fee as distinguished from tax: A. Non-payment does not necessary render the business illegal. B. A revenue raising measure C. Imposed in the exercise of taxing power. D. Limited to cover cost of regulation. 73. Value-added tax is an example of: A. Graduated tax C. Regressive tax B. Progressive tax D. Proportional tax 74. Which tax principle is described in the statement “ the more income earned by the taxpayer, the more tax he has to pay.” A. Fiscal Adequacy C. Administrative feasibility B. Theoretical justice D. Inherent in sovereignty 75. The most superior and least limitable among the fundamental powers of the state: A. Power of recall C. Power of taxation B. Police power D. Power of eminent domain 76. One of the characteristics of a tax is that: A. It is generally based on contact. B. It is generally payable in money. C. It is generally assignable. D. It is generally subject to compensation. 77. The following are the characteristics of our internal revenue laws except: A. Political in nature. B. Civil in nature. C. Generally prospective in application. D. May operate retrospectively if congress so provides. 78. Which of the following has no power of taxation? A. Provinces C. Barangays B. Cities D. Barrios 79. Which of the following statements is wrong? A revenue bill: A. Must originate from the House of Representatives and on which same bill the Senate may propose amendments. B. May originate from the Senate and on which same bill the House of Representatives may propose amendments. C. may have a House version and a Senate version approved separately, and then consolidated, with both houses approving the consolidation version. D. May be recommended by the President to Congress. 80. Tax as distinguished from special assessment: Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 9 A. not as a personal liability of the person assessed. B. based wholly on benefits C. exceptional as to time and place D. based on necessity and is to raise revenues 81. Under this basic principle of a sound tax system, the Government should not incur a deficit: A. Theoretical justice C. Fiscal Adequacy B. Administrative feasibility D. Uniformity in taxation 82. Which of the following may not raise money for the government? A. Power of taxation C. Eminent Domain B. Police power D. License fee 83. No person shall be imprisoned for non-payment of this: A. Excise tax C. Income tax B. Value added tax D. Poll tax 84. This is a demand of ownership: A. License fee C. Toll B. Tax D. Customs duties 85. Income tax is generally regarded as A. an excise tax C. a property tax B. a tax on persons D. tax on profits 86. Which of the following is not acceptable for legally refusing to pay the tax? A. That the right of the state to collect the tax has prescribed. B. That there is no jurisdiction to collect the tax. C. That the tax law was declared as unconstitutional. D. That there is no benefit derived from the tax. 87. It is important to know the source of income for income tax purposes, i.e. from within or without the Philippines because A. The Philippines imposes income tax on income from sources within and without of a non-resident citizen. B. Some individual taxpayers are citizens while others are aliens. C. Separate graduated rates are imposed on different types of income. D. Some taxpayers are taxed on their worldwide income while others are taxable only upon income from sources within the Phils. 88.A law granting tax exemption requires the concurrence of A. Majority vote of members of congress B. 2/3 vote of members of Congress. C. 3/4 vote of members of Congress. D. Unanimous vote of members of Congress. 89. No person shall be imprisoned for debt or non-payment of poll tax. This is a(an) A. Inherent limitation C. International limitation B. Constitutional limitation D. Territorial limitation 90. The Department of Finance thru its officers entered into a contract with foreign investors granting them exemption from all forms of taxes to encourage investments in the Phils. The contract is A. Void, unless the President ratifies B. Void, because the power to grant tax exemption is vested in Congress. C. Valid, if the President has authorized the officers to enter into such contract. D. Valid, because the purpose is to promote public welfare. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 10 91. Tax as distinguished from debt A. no imprisonment for non-payment C. based on contract B. may be paid in kind D. based on law 92. Congress can impose a tax at any amount and at anytime shows that A. Taxation is an inherent power of the state. B. Taxation is essentially a legislative power. C. Taxation is a very broad power of the state. D. Taxation is based on taxpayers’ ability to pay. 93. The amount required is dictated by the needs of the government in: A. License fee C. Toll B. Tax D. Debts 94. A charge imposed on land for special benefits derived resulting from public improvements. A. Tax C. License B. Toll D. Special assessment 95. Which of the following are National Internal Revenue Taxes? I. Income tax III. Donor’s tax V. Other percentage tax II. Estate tax IV. Value Added tax VI. Excise Tax VII. Documentary stamp tax A. I, II, III, IV C. I, II, III, IV, V, VI B. I, II, III, IV, V D. I, II, III, IV, V, VI, VII 96. The Bureau of Internal Revenue shall have a chief and four (4) assistant chiefs to be known as A. Secretary and Assistant Secretaries B. Secretary and Undersecretaries C. Commissioner and Assistant Commissioners D. Commissioners and Deputy Commissioners 97. The three fundamental powers of the state are I. Inherent in the state and may be exercised by the state without need of any constitutional grant. II. Not only necessary but indispensable. A. True; True C. False; true B. True; false D. False; false 98. The three fundamental powers of the state are I. Methods by which the state interfere with private rights. II Exercised primarily by the legislature. A. True; True C. False; true B. True; false D. False; false 99. I. Police power regulates both liberty and property while the power of eminent domain and the power of taxation affect only property rights. II Police power and the power of taxation may be exercised only by the government while the power of eminent domain may be exercised by some private entities. A. True; True C. False; true B. True; false D. False; false Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 11 100. I. The property taken in police power is destroyed while the property taken under the power of eminent domain and power of taxation are not destroyed. II. In power of taxation, the compensation received is the protection afforded to the citizens; in police power the compensation received is the altruistic feeling that somehow you contributed to the promotion of the general welfare; in power of eminent domain, the compensation received is the just compensation paid for the property taken. A. True; True C. False; true B. True; false D. False; false 101. I. The point on which a tax is originally imposed is impact of taxation. II. The point on which a tax burden finally rests or settles down is incidence of taxation. A. True; True C. False; true B. True; false D. False; false 102. I. Police power is superior to the non-impairment clause of the constitution. II. Power of taxation is superior to the non-impairment clause of the constitution. A. True; True C. False; true B. True; false D. False; false 103. I. No person shall be imprisoned for debt or non-payment of tax. II. Tax laws are civil and penal in nature because there are penalties provided in case of violation. A. True; True C. False; true B. True; false D. False; false 104. I. Tax may be collected in an unlimited amount. II. License fee may be collected in an unlimited amount. A. True; True C. False; true B. True; false D. False; false 105. I. Tax is imposed to raise revenue. II. License fee is imposed to raise revenue. A. True; True C. False; true B. True; false D. False; false 106. I. Tax is a demand of sovereignty. II. Toll is a demand of sovereignty. A. True; True C. False; true B. True; false D. False; false 107. I Tax is imposed on persons, property, and property rights. II. Special assessment is imposed on persons, property, and property rights. A. True; True C. False; true B. True; false D. False; false 108. I. Collection of tax is a legislative act. II. Imposition of tax is an administrative act. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 12 A. True; True C. False; true B. True; false D. False; false 109. I. A state has the power to tax even if not granted by the constitution. II. A state cannot exercise police power if not granted by the constitution. A. True; True C. False; true B. True; false D. False; false 110. I. There can only be a tax even if there is a law imposing the tax. II. The power to tax may include the power to destroy. A. True; True C. False; true B. True; false D. False; false 111. I. Due process of law in taxation under the constitution is a grant of power. II. Provisions in the Philippine constitution on taxation are grants of power. A. True; True C. False; true B. True; false D. False; false 112. I. In the Philippines, there may be double taxation. II. Taxation may be used to implement the police power of the state. A. True; True C. False; true B. True; false D. False; false 113. I. License fee is a charge imposed under police power. II. Special assessment is levied on lands only. A. True; True C. False; true B. True; false D. False; false 114. I. Tax is imposed regardless of public improvement. II. Special assessment is imposed regardless of public improvements. A. True; True C. False; true B. True; false D. False; false 115. I. Tax avoidance is the use by the taxpayer of legal or fraudulent means to avoid or defeat taxes. II. Tax evasion is the use by the taxpayer of illegal or fraudulent means to avoid or defeat taxes. A. True; True C. False; true B. True; false D. False; false 116. I. One of the essential characteristics of a tax is it is unlimited in amount. II. A tax is generally unlimited because it is based on the needs of the state. A. True; True C. False; true B. True; false D. False; false 117. I. The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not mentioned in the constitution the state can still exercise the power and is essentially a legislative function. II. Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 13 A. True; True C. False; true B. True; false D. False; false 118. I. The President has the power to veto a revenue bill even if such bill was already approved by Congress. II. The President is superior to Congress as he/she can veto any bill even if already approved by Congress. A. True; True C. False; true B. True; false D. False; false INDIVIDUAL TAXPAYERS 1. The National Internal Revenue Code of 1988 is A. RA 9337 B. CA 466 C. RA 9504 D. RA 8424 2. Which of the following statements is not correct? A. An individual citizens of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable on income from sources within and without the Philippines. B. A seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of vessel engaged exclusively in international trade shall be treated as a resident citizen. C. A non- resident citizen who is not engaged in business in the Philippines is treated as non-resident alien who is not engaged in business in the Philippines D. An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources in the Philippines 3. Which of the following statements is not correct? A. In the case of married individuals, where only one of the spouses is deriving gross income, only such spouse shall be allowed the personal exemption. B In the case of married individuals, the additional exemptions maybe claimed by only one of the spouses C. As a rule, the husband shall be the head of the family and proper claimant of the additional exemption D. In the case of legally separated spouses, additional exemption maybe claimed by the spouses who has custody of the children but shall not exceed four(4) for each spouse 4. A resident citizen is taxable on all income derived from sources A. Within the Philippines only B. Without the Philippines only C. Partly within and partly without D. Within and without the Philippines 5. A non-resident citizen is taxable on all income derived from sources A. Within the Philippines only B. Without the Philippines only C. Partly within and partly without D. Within and without the Philippines 6. A resident alien is taxable on all income derived from sources Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 14 A. Within the Philippines only B. Without the Philippines only C. Partly within and partly without D. Within and without the Philippines 7. A non-resident alien is taxable on all income derived from sources A. Within the Philippines only B. Without the Philippines only C. Partly within and partly without D. Within and without the Philippines 8. The following taxpayers are allowed to claim additional exemptions, except A. Resident citizens B. non- resident citizens C. Resident aliens D. Non-resident aliens 9. Which of the following statements is not correct? A. If only one spouse is deriving taxable income, only said spouse may claim the additional exemption B. If both spouses earn taxable income only one of the spouses can claim additional exemption C. If legally separated from the spouse, the husband can claim the additional exemption unless he waives the right in favor of his wife D. An unmarried individual with a child out of wedlock can claim a personal exemption as a head of the family plus exemption 10. A citizen of the Phils. who works and derives income from abroad is a resident if he stayed outside the Phils. A. For less than 180 days B. For more than 180 days C. For 183 days or more D. For less 183 days 11. A citizen of the Phils. Who works abroad and whose employment requires him to be physically present abroad most of the time during taxable years A. Taxable on income within and without the Phils. B. Taxable on income from without the Phils. C. Exempt from income tax D. Taxable income from within the Phils. 12. A citizen of a foreign country is considered a non-resident alien engaged in business in the Phils. If he stayed inside the Phils. A. For 183 days or more B. For less than 183 days C. For more than 180 days D. For less than 180 days 13. Which of the following dependents is not qualified to entitle a taxpayer additional persona exemption? A. Recognized natural son who celebrated his 21st birthday during the taxable year. B. Legitimate natural son, 21 years old who got married on December 31, of the year. C. Legally adopted son, 21 years old son who became employed December 30, of the taxable year. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 15 D. Widowed mother, who celebrated her 59th birthday during the taxable year. 14. For income tax purposes, which of the following is considered head of the Family? A. Married individual who has dependent minor child. B. Married but legally separated individual with a dependent mother who is 59 years old C. Single individual with a common law life D. Married individual even if he has no children 15. Which of the following dependents will qualify a single taxpayer as head of the family? A. Taxpayer’s brother, 22 years old, unemployed, unmarried, living with him and dependent upon him for support B. Taxpayer’s sister, 18 years old, unemployed, unmarried living with parents, but dependent upon him for chief support C. Taxpayer’s illegitimate son, 12 years old, unemployed, single, living with him and dependent upon him for support D. Taxpayer’s godchild, 10 years old, dependent upon him for chief support 16. Mr. A with a dependent minor legitimate child became a widower in January of 2009. In February of the following year, he got married to Ms. B and subsequently in November of the same year, the latter gave birth to three (3) boys. For calendar year 2010, Mr. A’s basic and additional personal exemption is: A. P 75,000 B. P100, 000 C. P125, 000 D. P150, 000 17. A German citizen residing in Germany, married is doing business in the Phils. His country allow non- resident Filipino with income from Germany a basic personal exemption of P30,000 as head of the family, P40, 000 as married and P15, 000 as single. The allowe personal exemption he can claim is? A. P50. 000 B. P30, 000 C. P32, 000 D. P40, 000 18. Which of the enumerated taxpayers below can claim personal exemption only if there exist a reciprocity clause/law between the Philippines and his country/ A. Non-resident B. Resident alien C. Non-resident alien not engaged in business in the Philippines D. Non-resident alien engaged in business in the Philippines 19. A legally married couple had the following data in year 20010? A. Two qualified legitimate dependent children B. Two dependent nephews C. One illegitimate child of husband D. One of legitimate child died in December 2010 E. Both spouses are gainfully employed. The claimable personal and additional exemptions of the couple: A. H-P 50, 000, W-P 125, 000 B. H-P 100,000, W-P 50, 000 C. H-P 100, 000, W-P 75, 000 D. H-P 150, 000, W-P 50, 000 20. A, who became a widower in February of taxable year 2010 had the following dependents: A. Two legitimate children B. Recognized natural child with current common law wife C. B, his common law wife D. Illegitimate child with another woman Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 16 The total basic personal and additional exemption in 2009 is: A. 150, 000 B. P100, 000 C. P125, 000 D. P75, 000 21. A married, earned P225, 000 (net of P40, 000 w/tax) compensation income from employment from July to December 2010. He has a legally adopted child as qualified dependent and paid P3,000 as health and hospitalization insurance premiums. For 2010, he can deduct premiums for health and hospitalization insurance of: A. P3, 000 B. P2, 400 C. P1, 200 D. P0 22. Using the preceding number, his personal and additional exemption is A. P40, 000 B. P75, 000 C. P77,400 D. P78,000 23. Which of the following individual taxpayers cannot avail of the allowed deductions for health and hospitalization insurance premiums? A. Non-Resident citizen B. Resident alien C. Non-resident alien engaged in business in the Phil. D. Non-resident alien not engaged in business in the Phil. 24. Taxable on income from all sources within and without the Phil. A. Resident citizen B. Non-resident citizen C. Resident alien D. Non-resident alien 25. Taxable only on income from sources within the Phil. except A. Resident citizen B. Non-resident citizen C. Resident alien D. Non-resident alien 26. May not claim personal exemption A. Non-resident citizen B. Non-resident alien engaged in trade or business in the Phil. Under certain conditions C. Resident alien D. Non-resident alien who stayed in the Phil. For 175 days 27. Exemption which is determined according to the status of the taxpayer A. Personal exemption B. Additional Exemption C. Optional standard deduction D. Special additional personal exemption 28. Exemptions allowed based on presence of qualified dependent children A. Personal exemption B. Additional Exemption C. Optional standard deduction D. Special additional personal exemption 29. Will not qualify as dependent A. Legitimate child B. Brother C. Mother D. Nephew 30. Personal exemption, if single A. P20, 000 B. P25, 000 C. P32, 000 D. P50, 000 31. Personal exemption, if married but judicially declared as legally separated with no dependent. A. P20, 000 B. P25, 000 C. P32, 000 D. P50, 000 32. Personal exemption, if married but living separately without judicial decree of separation Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 17 A. P20, 000 B. P25, 000 C. P32, 000 D. P50, 000 33. Personal exemption, if married but judicially declared as legally separated with dependent A. P20, 000 B. P25, 000 C. P32, 000 D. P50, 000 34. Personal exemption, if head of the family A. P20, 000 B. P25, 000 C. P32, 000 D. P50, 000 35. Amount of additional exemption each qualified dependent child is A. P8, 000 B. P100, 000 C. P50, 000 D. P25, 000 36. The number of dependent children who will qualify for additional exemption purposes shall not exceed. A. 3 children B. 4 children C. 5 children D. 6 children 37. An unmarried or legally separated man or woman with one or both parents, or with one more brothers and sisters, or with one or more legitimate, illegitimate, or legally adopted children living with and dependent upon him or her for their chief support, where such brothers, or sisters, or children, regardless of age are incapable of self-support because of mental physical defect. A. Good father of a family B. Married C. Single D. Head of the family 38. A non-resident alien is deemed doing business in the Phil. If he A. Is an individual whose residence is within the Phil. B. Is an individual whose father or mother is an alien who is engaged in business in the Phil. C. Is an individual who is naturalized in accordance with law D. Shall come to the Phil. And stay therein for an aggregate period of more than 180 days during a calendar year. 39. One is not correct A. If the taxpayer marries during the taxable year, he may claim the personal exemption in full as a married person for such year. B. If the taxpayer dies during the taxable year, his estate may still claim the personal and additional exemption for himself and his dependents as if he died at the close of such year. C. If the spouse of the taxpayer or any of the dependents dies during the taxable year, the taxpayer may still claim the same exemptions as if death occurred at the close of such year. D. If the taxpayer should have additional dependent children during the taxable year, he can always claim the additional exemptions for such year. 40. One is correct A. Where both husband and wife receive compensation income, the additional exemption shall be claimed by wife unless she explicitly waives her right in favor of her husband in the withholding exemption certificate. B. Husband and wife shall be treated as separate taxable units and each shall be allowed to claim personal exemption C. If the gross income does not exceed P20, 000, a special additional personal exemption of P4, 000 may be claimed by the taxpayer. D. Husband and wife shall be treated as separate taxable units and shall be allowed to claim only one personal exemption either for the husband or wife at their option. 41. A. The term “chief support” means more than one-half of the requirements for support B. If two children contribute equal amounts for the support of dependent, neither one of them may be qualify as head of the family Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 18 A. True, true B. True, false C. False, true D. False, false 42. A. If any of the qualified dependents becomes 21 years old during the taxable year, the taxpayer may claim the same exemptions as if such dependent became 21 years old at the close of such year. B. Parents living with and dependent upon the taxpayer for their support regardless of their age will qualify as dependents A True, true B. True, false C. False, true D. False, false 43. A. If the dependent child marries during the taxable year, the taxpayer may still claim the same exemption as if the marriage occurred at the close of such year. B. In the case of married individuals, the additional exemptions shall be claimed by only one of the spouses A True, true B. True, false C. False, true D. False, false 44. Who is non-resident alien not engaged in business in the Phil.? A. An alien who comes in the Phil. For a definite purpose which in its nature may be promptly accomplished.. B. An alien who comes to the Phil. For definite purpose which in its nature would require an extended stay of more than 180 days. C. An alien who has required residence in the Phil. D. An alien who lives in the Phil. With no definite intention as to his stay 45. The personal exemption of the non-resident alien engaged in trade or business in the Phil. is equal to that allowed by. A. The income tax law of his country to a citizen of the Phil. not residing there B. The income tax law of his country to a citizen of the Phil. not residing there or the amount provided by the NIRC to a citizen or resident whichever lower. C. The NIRC to a citizen or resident D. The income tax law of his country to a citizen of the Phil. not residing there or the amount provided by the NIRC to a citizen or resident whichever is higher. 46. A. If a taxpayer marries during the year, he may claim the personal exemption for married individuals in full for such year. B. A dependent child who marries within the year may still qualify as dependent for the year. A. True, true B. True, false C. False, true D. False, false 47. Z, married, had the following data for the taxable year: Gross income, Philippines P400,000 Gross income, China 300,000 Expenses, Philippines 200,000 Expenses, China 150,000 If the taxpayer is a resident citizen, married, his taxable income is A. P309, 000 B. P318, 000 C. 350, 000 D. P300,000 48. If the taxpayer is a non-resident citizen, married, his taxable income is A. P 300, 000 B. P159, 000 C. P150, 000 D. P200, 000 49. If the taxpayer is a resident alien, married his taxable income is A. P 300, 000 B. P159, 000 C. P150, 000 D. P200, 000 50. If the taxpayer is a non-resident alien engaged in business in the Phil. married and his country allows a reciprocity P30, 000 as personal exemption for married individuals, his taxable income is? A. P370, 000 B. P170, 000 C. P200, 000 D. P150, 000 Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 19 51. If the taxpayer is non-resident alien not engaged in business in the Phil. married and his country grants P35, 000 as personal exemption for married individuals, his taxable income is? A. P370, 000 B. P170, 000 C. P200, 000 D. P400, 000 52. With regard to deduction for premiums on hospitalization and health insurance, which of the following statements is wrong? A. Allowed as deduction even if income is from compensation only B. Allowed as deduction even if income is from business or practice of Profession C. Allowed as deduction even if mixed income D. Allowed as deduction only if the taxpayer is taking itemized deductions from gross income. 53. Which of the following statements is wrong? The premiums on hospitalization and health insurance may be deducted A. Not exceed P2, 400 a year per family B. Not exceed P200 per month C. If the family income doesn’t exceed P250, 000 D. By either spouse in the case of married individuals 54. A resident, single with qualified dependent illegitimate children had the following during the calendar year. Gross compensation income P250, 000 Expenses related to his employment 120, 000 SSS premium contributions 3, 600 Philhealth contribution 2, 400 Pag-ibig contributions 2, 000 Union dues 1, 000 Premiums on health insurance 4, 000 The taxable income before personal and additional exemption is A. P237, 000 B. P241, 000 C. P238, 600(?) D. P117, 000 55. In which of the following should additional exemption not be allowed to the taxpayer? A. An alien, whose dependent child is living with him in the Phil. B. A resident citizen, who has 25 years old mentally retarded son C. A resident citizen, who has a 50 years old mother as his dependent D. a resident alien with an illegitimate child, 7 years old. CORPORATION 1. For income taxation purposes, the term “corporation ” excludes one of the following : A. Ordinary partnership B. An incorporated business organization C. General professional partnership D. Business partnership 2. Which of the following is subject to the corporate income tax? A. a non- stock and non profit educational institution B. Public educational institution C. Private cemeteries D. Civic league or organization not organized for profit and operated exclusively for the promotion of social welfare 3. A corporation organized and created under the laws of a foreign country and is authorized to do business/ trade in the Phil. is: A. Domestic corporation C. Non-resident foreign corporation B. Resident foreign corporation D. General co-partnership Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 20 4. One of the general principles of income taxation: A. A foreign corporation engaged in business in the Phil. is taxable on all income derived from sources within and without the Phil. B. A foreign corporation engaged in business in the Phil. is taxable on all income derived from sources within the Phil. only. C. A domestic corporation is taxable on income derived from sources within the Phil. only. D. A domestic corporation is taxable on income derived from sources without the Phil. only. 5. One of the following doesn’t fall under the definition of a “corporation” for income tax purpose: A. General partnership B. Joint stock company C. Insurance company D. Sole partnership 6. Which of the following is classified as Special Corporation subject to preferential corporate income tax rate? A. Social security System C. Phil. Charity Sweepstakes Office B. Proprietary Educational Institution D. Government Service Insurance System 7. A corporation which may be classified as either a resident corporation or non-resident Corporation is A. Domestic corporation C. Government owned and controlled corporation B. Foreign corporation D. Non-profit hospital 8. The Phil. Health Insurance Corporation, a government owned corporation is: A. Exempt from the corporate income tax B. Subject to the preferential corporate income tax for special corporations. C. Subject to the basic corporate income tax. D. Subject to final tax. 9. Public educational institutions, like the University of the Philippines is deemed by law: A. subject to preferential corporate income tax for special corporations. B. Subject to the basic corporate income tax C. Subject to both the preferential income tax and the basic corporate income tax. D. Exempt from the corporate income tax. 10. Which is not correct? The following are exempt from the corporate income tax: A. Philippine Charity Sweepstakes Office C. Gov’t. owned or controlled corp. B. Bureau of Internal Revenue D. Social Security System 11. Which of the following maybe subject to the corporate income tax? A. A non-profit educational institution C. A private educational Institution B. A public educational Institution D. Government Service Insurance System 12. A domestic corporation may employ, as a basis for filing its annual corporate return the: A. Calendar year only C. Either calendar or fiscal year B. Fiscal year only D. Neither calendar nor fiscal year 13. A corporation files a quarterly return within A. 30 days after the end of each of the 3 quarters B. 60 days after the end of each of the first 3 quarters C. 30 days after the end of each of the first 4 quarters D. 60 days after the end of each of the first quarters 14. A final or annual return is filed on or before the 15th day of the? Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 21 A. Month following the close of the taxable year B. 2nd month following the close of the taxable year. C. 3rd month following the close of the taxable year. D. 4th month following the close of the taxable year 15. A corporation on a fiscal year ending March 31, should file its annual return A. On or before April 15 of the same year C. On or before July 15 same year B. On or before April 15 of the following year D. on or before July 15 of the ff. year 16. The improperly accumulated earnings tax shall apply to A. Publicly held corporation C. Insurance companies B. Banks and other non-bank financial D. Private corporations 17. 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. C. Resident foreign corporations would be taxed on net income from within the Phil only D Non-resident foreign corporations are taxed on gross income from within and without the Phils.. 18. The following income are subject to final tax, except? A. Royalty income received by a domestic corporation from a domestic corporation B. Cash dividends received by a non-resident foreign corporation from a domestic corp. C. Cash dividends received by a domestic corporation from a domestic corporation. D. Interest income received by resident foreign corporation from a Phil. bank. 19. The MCIT shall not apply to the following resident foreign corporations, except A. RFC engaged in business as int’l carrier subject to 2 ½ 0/0 of their Gross Phil billings B. RFC engaged in business as offensive Banking Units on their income from foreign currency transactions with local commercial banks. C. RFC engaged in business as regional operating headquarters D. RFC engaged in hotel, motel and resort operations 20. Which of the following is not correct? The gross income tax A. Is optional to qualified corporation B. Is available if the ratio of costs of sales to gross sales or receipts from all sources does not exceed 55% C. Shall be irrevocable for three consecutive taxable years that the corporation is qualified under the scheme D. Is compared with the normal income tax and minimum corporate income tax (?)21. A Corporation’s records show: Normal Taxes Excess MCIT Express withholding Quarter Income Tax MCIT Withheld Prior Year Tax Prior Year First P100, 000 P80, 000 P20, 000 P30 000 P10, 000 Second 120, 000 250,000 30, 000 Third 250, 000 100, 000 40, 000 Fourth 200, 000 100, 000 35, 000 The income tax due for the second quarter is A. P100, 000 B. P80, 000 C. P50, 000 D. P40, 000 22. The income tax due for the second quarter is A. P120, 000 B. P250, 000 C. P150, 000 D. P230, 000 23. The income tax due for the third quarter is Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 22 A. P250, 000 B. P100, 000 C. P140, 000 D. P70, 000 24. The income tax due for the year is A. P200, 000 B. P100, 000 C. P135, 000 D. 165, 000 25. Using the preceding problem except that the normal income tax for the fourth quarter is P50, 000 (instead of P200, 000), the income tax due for the year is A. P120, 000 B.P55, 000 C. P45, 000 D.P75, 000 26. One of the following is not acceptable as basis of relief from the MCIT A. Prolonged labor dispute C. Legitimate business reverse B. Force majeure D. Law suits filed by the company 27. Which is not one of the characteristics of corporate income tax A. Progressive tax C. Direct tax B. General tax D. National tax 28. CPA University, a private educational institution organized in 2000, had the following data For 2007. Tuition fees P 850, 000 Rental income 150, 000 School related expenses 820, 000 The income tax due for 2007 is A. P 57, 000 B. P 9, 600 C. P 18, 000 D. P 20, 000 29. CPA college, a private educational institution organized in 2000, had the following data for 2007. Tuition fees P 480 000 Rental income 520, 000 School related expenses 450, 000 The income tax due for 2007 is A. P 17, 600 B. P 5, 500 C. P 100, 000 D. P 165, 000 30. CPA Airlines, a resident foreign international carrier has the following records of income for the period. (The income represents gross Phil. billings) A. Continuous flight from Manila to Tokyo=1, 000 tickets at P 2, 000 per ticket B. Flight form Manila to Singapore ; transfer flight from Singapore to Tokyo=2, 000 Tickets at P 2, 000 per ticket C. Continuous flight from Manila to Singapore= 3, 000 tickets at P1,000 per ticket The income tax due is A. P225, 000 B. P125, 000 C. P100, 000 D. P 175, 000 31-46 The A corporation provided the following data for calendar year ending December 31, 2009 ($ 1= P50). Philippines Abroad Gross income P4, 000, 000 $ 40, 000 Deductions 2, 500, 000 $ 15, 000 Income Tax Paid $ 3, 000 31. If it is a domestic corporation, its income tax after tax credit is A. P675,000 B. P832, 000 C. P962, 500 D. P480, 000 32. If it is a resident corporation, its income tax is Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 23 A. P730, 000 B. P1, 280, 000 C. P480, 000 D. P450, 000 33. If it is a non-resident corporation, its income tax is A. P370, 000 B. P1,280,000 C.P880,000 D.P1,200,000 34. Under No. 31, but it opts to claim the tax paid abroad as deduction from gross income, its income tax is A. P780,000 B.P832, 000 C.P275,000 D.P150,000 35. If it is private educational institution, its income tax due after tax credit A. P730, 000 B.P832, 000 C.P275,000 D.P150,000 36. If it is a non-profit hospital, its income tax credit is A. P730, 000 B.P832,000 C.P275,000 D.P150,000 37. If it is a resident international carrier, its income tax is A.P100,000 B.P10,000 C.37,000 D.P125,000 38. If it is a non-resident cinematographic film owner/lessor, its income tax is A.P1,000,000 B.P100,000 C.P300,000 D.P128,000 39. If it is a non-resident lessor of vessels,its income tax is A.P100,000 B.P180,000 C.P300,000 D.P128,000 40. If it is a non-resident lessor of aircrafts, machineries and equipments, its income tax is A. P100,000 B.P180,000 C.P300,000 D.P128,000 41. If it is a resident corporation but its expenses within and outside the Philippines is P3M, Unallocated (disregard original data on expenses), its income tax is A.P640,000 B.P700,000 C.P480,000 D.P128,000 42. If it is a resident corporation and remitted 60% of its net profit to its head office abroad, its total tax liability is (Original data). A. P480,000 B.P571,800 C. P196,000 D.P612,750 43. If it is a private educational institution but P3.5M of its total gross income is from lease and restaurant business, its income tax is A.P730,000 B.P275,000 C.P150,000 D.P812,500 44. If it is a domestic corporation, but its total expenses is P5,800,000 (disregard original data on expenses), its income tax is A.P730,000 B.P64,000 C.P120,000 D.P85,000 45. Under No.44, but the domestic corporation is non-profit hospital (disregard tax paid abroad ), Its income tax is A.P20,000 B.P64,000 C.P10,909 D.P120,000 46. If the corporation is a non-stock educational; institution, which uses all its revenues or income for educational and charitable purposes , its income is A. P0 B.P730,000 C.P120,000 D.P64,000 (?)47. A domestic corporation organized in 1998 provided the following information: 2003 2004 2005 2006 2007 Net Sales P4,000,000 P5,000,000 P6,000,000 P7,000,000 P8,000,000 Cost of sales 2,000,000 2,500,000 2,800,000 4,000,000 5,200,000 Business Expenses 1,900,000 2,350,000 2,900,000 3,100,000 2,300,000 Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 24 The tax due after tax credit, if any for 2005 A.P86, 000 B. P95, 000 C.P87,500 D.P97,500 48. Using the above data, the tax due after tax credit, if any for 2007 A. P115,000 B.P140,000 C.P175,000 D.P80,000 49. A corporation , a resident corporation, provided the following data for taxable year 2006 Philippines USA Gross income P40M P20M Dividends from: Domestic corporation 5M Foreign corporation 4M Business expenses 12M 8M The corporation remitted to its head office the P5M dividend income and 40% of its net profit to its head office in USA. The corporation’s total tax liability including the tax on the profit remitted is A.P10,240,000 B.P11,545,600 C.P15,960,000 D.P12,448,000 50. In the foregoing problem, if it is registered with PEZA, its total tax liability is A.P10,240,000 B. P0 C.P11,200,000 D.P15,960,000 51. A corporation has the following data for the year 2007: Gross Income, Philippines P1,000,000 Gross income, USA 500,000 Gross income, Japan 500,000 Expenses, Philippines 300,000 Expenses, USA 200,000 Expenses, Japan 100,000 Other Income: Dividend from San Miguel Corp 70,000 Dividend from Ford Motors, USA 120,000 Gain, sale of San Miguel shares directly to buyer 150,000 Royalties, Philippines 50,000 Royalties, USA 100,000 Interest (other than from banks) 60,000 Rent, land USA 250,000 Other rent income 100,000 Prize, contest in Manila 200,000 Land sold in the Philippines (selling prize) 2,000,000 The cost of the land which is not used in business is P1M, while FMV is P3M, Its total tax liability as a domestic corporation is: A. P780,500 B. P913,600 C. P963,600 D. P980,500 52. Based on the above problem, its total tax liability if it is a resident corporation is A. P721,000 B. P679,200 C. P659,200 D.P741,000 53. And if it is a non-resident corporation, its total tax liability is A. P843,500 B.791,700 C. P791,200 D.P846,000 54. A domestic corporation had the following data: Gross income Deductions 1998 P1,000,000 P1,200,000 1999 2,000,000 1,900,000 2000 3,000,000 2,950,000 2001 1,000,000 1,100,000 Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 25 2002 980,000 500,000 The taxable income in 2002 is: A. P380,000 B. P330,000 C. P100,000 D. P50,000 Partnership 1. If a partner on his own transactions, is on the cash method of accounting while the general professional partnership is on the accrual method of accounting, in the partner’s determination of his taxable income for the year, he A. Must convert his income from the partnership into cash method B. Must convert his own income into accrual method C. Does not report his income from the partnership because the partnership is exempt from income tax D. Can consolidate his share in the net income of the partnership under accrual method with his own income under cash method 2. The net share received by a partner in a general professional partnership is A. Part of his taxable income B. Exempt from income tax C. Subject to corporate tax D. Subject to final tax 3. The net shares received by a partner in a general co-partnership is A. Part of his taxable income B. Exempt from income tax C. Subject to corporate tax D. Subject to final tax 4. Which of the following statements is not correct? A. When the co-owners invest the income of the property co-owned in a business or any income producing properties or activities constituting themselves into a business partnership, such partnership is consequently subject to tax as a corporation. B. As a rule, a co ownership is mot subject to income tax because the activities of the co- owners are limited to the preservation and enjoyment of the property and the collection of the income there from. C. A co-owner is subject to income tax on his share in the net income of the co-ownership actually or constructively received. D. All partnerships, no matter how created or organized are considered corporations subject to corporate income tax. 5. The following statements regarding taxable partnerships are correct, except A. They file quarterly and year-end income tax returns. B. They are subject to the rules on corporation for capital gain tax, final tax on passive income, normal income tax, minimum corporate income tax and gross income tax. C. The partners’ share in the distributable net income is subject to final tax. D. They are subject to the improperly accumulated earnings tax. 6. Which of the following statements is correct? A. Partners of a taxable partnership are considered as stockholders and profits distributed to them by the partnership are considered as dividends. B. The share of each partner in net income of a taxable partnership shall be based on their capital contribution. C. The share of an individual partner in the net income of taxable partnership shall be equal to the share of a capitalist partner with the least capital contribution. D. The industrial partner shall contribute money and or property but not services. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 26 7. Statement 1- A CPA and a Dentist may form a GPP or an ordinary partnership Statement 2- Partnership and Corporations have separate juridical personalities distinct from the owners, as such partners and stockholders are not liable to creditors of business A. True, true C. False, true B. False, false D. True, false 8. Statement-1 The share of the partner in the net income of an OP is added on his own gross income. Statement-2 The share of the partner in the net income in GPP is also considered as passive Income. A. True, true C. False, true B. False, false D. True, false 9. As regards a general professional partnership, which of the following statements is correct? A. Treated like a corporation, hence it is subject to the corporate income tax B. It is exempt from income tax, hence it need not file an ITR C. Partners’ share are subject to final tax D. Partners’ share will be included in their respective ITRs whether distributed or not 10. As regards an ordinary partnership, which of the following statements is correct? A. Partners’ share are subject to final tax, hence it not file an ITR B. Subject to improperly accumulated earnings tax C. Treated like corporations, hence partners have limited liability D. Partner’s share even if distributed will not be included in their ITR 11. AB partnership with A and B as partners had a net professional income amounting to P500,000. Its other income included bank interest income of P8,000, net of final withholding tax and it received dividend income from a domestic corporation of P10, 000. A is single and has compensation income of P200, 000. The net taxable income of A who shares profit and loss equally with B is A.P364, 000 C. P400,000 B.P440, 000 D. P 444, 000 12. Using the preceding number, but it is a business partnership, the taxable income of the partnership is A. P518, 000 C. P510, 000 B. P500, 000 D. P508, 000 (?)13. Using the preceding number, the net distributable share of A is A. P162, 500 C. P171, 500 B. P146, 250 D. P154, 350 14. A and B are partners in a Partnership which realized a gross income of P800, 000 with a Corresponding P350, 000 expenses in the year 2007. A is married with 2 qualified dependent children , he earned P400,000 in his own business, incurring P230,000 allowable expenses while B, single had P450,000 and P250,000 gross income and expenses respectively. They share profits and losses at 4:6. If the partnership is a GPP, the taxable income of A subject to 5-32% is A. P276, 000 C. P250,000 B. P180, 000 D. P320, 000 15. And the taxable income of B subject to 5- 32% is A. P435, 000 C. P420,000 B. P270, 000 D. P 470, 000 Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 27 (?)16. If the partnership is an OP, its tax due is A. P144, 000 /135,000 C. P153, 000 B. P148, 000 D. P108, 000 17. And the total tax liability of A is A. P12, 240 C. P31, 140(?)/48,600 B. P18, 900 D. P32, 500 18. The total tax liability of B is A. P32, 500 B. P8, 360 C. P50, 860(?) D. P31, 140 19. A, B, and C are partners sharing profits and losses 30%, 30% and 40%, respectively. The following data pertain to the partnership and the individual account of the members in their own business for the taxable year 2004: A B C Partnership Gross income P400, 000 P300, 000 P350, 000 P900, 000 Deductions 100, 000 70, 000 160, 000 420, 000 Drawing Account 5, 000 3, 000 2, 000 10, 000 Civil Status Single Married Head of the family If the partnership is a GPP, the taxable income of C is A. P424, 000 B. P342, 000 C. P357, 000 D. P382, 000 20. The taxable income of B is (GPP) A. P424, 000 B. P342, 000 C. P357, 000 D. P382, 000 21. The taxable income of A is (OP) A. P280, 000 B. P198, 000 C. P165, 000 D. P424, 000 22. The taxable income of B is (OP) A. P180, 000 B. P198, 000 C. P165, 000 D. P424, 000 23.The taxable income of C is (OP) A. P180, 000 B. P198, 000 C. P165, 000 D. P424, 000 24. The income tax due of the partnership if OP A. P 153, 600 B. P57, 000 C. P37, 000 D. P28, 750 25. If B opts to claim the 10% OSD (OP), his taxable income is A. P367, 600 B. P238, 000 C. P280, 000 D. P399, 600 26. A and B are co-owners by virtue of a property given to them by their father. The co- ownership had a gross rental income of P500,000 (gross of 5% tax) and expenses related to rental activity of P200,000 but 10% is not deductible for the year 2007. A and B share in the profits at 75% and 25%, respectively. A withdrew P50,000 from the co-ownership net income for the year, B did not withdraw any amount. A and B are both single. The income tax liability of the co-ownership A. P102,400 B. P76,800 C. P80,000 D. P0 27. The taxable income of A before exemption A. P320,000 B. P240,000 C. P80,000 D. P0 28. Suppose A and B did not divide but instead invested the entire profit in another business venture where they earned a net income after deductions of P450,000, the tax due of the co- ownership is A. P102,400 B. P144,000 C. P157,500 D. P0 Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 28 Estates and Trusts 1. Which of the following statements is correct? A. Estates and trusts are allowed a personal exemption of P32,000 if the executor or trustee is married. B. The income tax rates for corporate taxpayers apply to taxable estates and trusts. C. The taxable year of estates and trusts maybe calendar or fiscal year D. For a trust to be taxable, it must be irrevocable, both as to corpus (principal) and income 2. The property, rights and obligations of a person which are not extinguished by his death and those which accrued thereto since the opening of succession. A. Assets B. Capital C. Estate D. Income 3. The term applied to the person whose property is transmitted through succession, whether or not he left a will A. Decedent B. Transferor C. Transferee D. Grantor 4. The term applied to the answer in No. 3 if he left a will A. Transferor B. Grantor C. Donor D. Testator 5. The person called to the succession either by the provision of a will or by operation of law A. Heir B. Devisee C. Legatee D. Trustor 6. The person to whom a gift of real property is given by virtue of a will A. Heir B. Devisee C. Legatee D. Trustor 7. The person to whom the gift of personal property is given by virtue of a will A. Heir B. Devisee C. Legatee D. Trustor 8. The person who establishes a trust A. Heir B. Devisee C. Legatee D. Trustor 9. The person in whom confidence is reposed as regards property for the benefit of another person A. Devisee B. Trustee C. Legatee D. Heir 10. The person for whose benefit the trust has been created A. Legatee B. Heir C. Beneficiary D. Trustee 12. For income tax purposes, any person or corporation that holds in trust an estate of another person or persons A. Beneficiary B. Fiduciary C. Legatee D. Devisee GROSS INCOME 1. All of the following statements are correct, except one. Which is the exception? A. The source of interest income is the country where the debtor resides B. The source of dividend income is the country where the corporation was incorporated C. Rents are considered derived from the country where the property is located D. Income from personal services is considered derived from the country where the services were rendered. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 29 2. – A gain from sale of shares of a domestic corporation shall be considered derived from the Philippines regardless of where the shares were sold. - A gain from sale of shares of a foreign corporation shall be considered derived from the country where the corporation was created or organized. A. True; True C. False; True B. True; False D. False; False 3. Which is not a creditable withholding income tax? A. Expanded withholding income tax B. Withholding income tax on passive income C. Withholding income tax at source D. Withholding income tax on compensation income 4. As a rule, this is not part of taxable income A. Profit sharing C. Overtime pay B. Hazard pay D. 13th month pay 5. This is taxable income A. Retrenchment pay C. Separation pay due to resignation B. SSS/GSIS benefits D. Refund of Philippine Income tax 6. Which of the following is taxable income? A. Prizes and awards as an awardee of Ramon Magsaysay Award Foundation B. Damages awarded as a consequence of a libel and slander suits C. Interest on Philippine lotto winnings D. Amounts received as returns of premiums 7. One of the following is taxable income A. Gifts, bequests and devices B. Amounts received as rewards for giving information instrumental in the discovery of violation of the Tax Code and seizure of smuggled goods C. Proceeds from life insurance D. Separation pay received by an employee due to a cause beyond his control 8. As a rule, the following are taxable income, except A. Cash dividend C. Scrip dividend B. Property dividend D. Stock dividend 9. The following items are exclusions from gross income, except A. Labor union dues C. IOU’s B. SSS/GSIS premiums contributions D. Pag-ibig premiums contributions 10. Which of the following is part of gross income? A. PCSO & Phil Lotto winnings B. Bank interest on long-term deposit C. Proceeds of life insurance D. Raffle prize not exceeding P10,000 11. If refunded, this is taxable A. Estate tax C. Special assessment B. Donor’s tax D. Fringe benefit tax 12. Income tax payments to a foreign country, in the case of a resident citizen may be claimed as A. Tax credit and deduction from gross income B. Tax credit only Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 30 C. Tax credit or deduction from gross income D. Deduction from gross income only 13. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except A. if received by a resident citizen B. if received by a resident alien C. if received by a non-resident corporation D. if received by another domestic corporation 14. Which of the following statements regarding dividends is wrong? A. Exempt from income tax if received by a domestic corporation from another domestic corporation B. Exempt from income tax if received by a resident corporation from a domestic corporation C. Taxable subject to year-end tax if received by a resident citizen from a non-resident corporation D. Taxable subject to final tax if received by a non-resident citizen from a non- resident corporation 15. X works as a secretary in an advertising firm in Manila. During the year, she received P10,000 a month as salary or a total of P120,000. In addition she also received 13th month pay, Christmas bonus, productivity bonus, mid year bonus and 14th month pay amounting to P40,000. The total deductions for her SSS premiums, Medicare, Pag-ibig, and Union dues contributions amounted to P5,000. X’s taxable income, if single is A. P 90,000 C. P 75,000 B. P105,000 D. P100,000 16. Which of the following statements is correct? A. The power of taxation reaches even the citizens abroad and his income earned from sources outside the Philippines B. Priests and religious institutions are exempt from income and property taxes. C. Separation benefits received by terminated employees resulting from a deadlock in their collective bargaining agreement are exempt from income tax. D. The value of a property received as a gift, or under a will or testament or through legal succession is exempt from taxation. 17. Which of the following statements is not correct? A. Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are excluded from gross income regardless of whether the proceeds are received as a single sum or in installments. B. In case of transfer for a valuable consideration by assignment or otherwise of a life insurance, endowment or annuity contract or any interest therein, only the actual value of such consideration and the amount of the premium and the sums subsequently paid by the transferee are exempt from income tax. C. Marriage fees, baptismal offerings, sums paid for saying masses for the dead and other contributions received by a clergyman, evangelist or religious worker for services rendered is taxable income. D. Monetization of leave credits of employees who were unable to go on leave due to exigencies of the service constitute taxable income. 18. – PCSO and Phil lotto winnings are excluded from gross income because they are subject to final tax. - Prizes, awards and winnings are excluded from gross income because they are subject to final tax. A. Both are true C. True; False B. Both are False D. False; True Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 31 19. Which statements is correct? A. Incomes from illegal activities are taxable. B. Tax refunds constitute taxable income to the taxpayer. C. Recovery of bad debts previously written off is part of taxable income D. As a rule, contest awards and prizes are subject to 20% final tax if they amount to P10,00 or more, otherwise they will be exempt from income tax. 20. One of the following is taxable income A. Compensation for damages B. The share of a partner in the undistributed net income of a general professional partnership C. Living quarters and meals furnished and given to an employee for the convenience of the employer D. Facilities or privilege of relatively small value offered by the employer as a means of promoting the health, goodwill, contentment, or efficiency of the employee. 21.Which of the following is taxable? A. P100,000 interest on long-term deposit or investment B. P200,000 gain on sale of 10-year bonds C. P12,000 prize in a supermarket raffle D. P1 M winnings from Phil. lotto 22. Gain realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness is excluded from gross income if with a maturity of A. 5 years or more C. More than 8 years B. More than 7 years D. More than 10 years 23. Gross benefits received by officials and employees of public and private entities as 13th month pay and other benefits such as productivity bonus, service incentive pay and Christmas bonus shall be excluded from taxable income up to A. P20,000 C. P40,000 B. P30,000 D. P50,000 24. Exclusions from gross income, except: A. Interest on the price of the land covered by the Presidential Decree on land reform. B. Interest payments on proceeds of life insurance held by the insurer C. GSIS/SSS, Philhealth and Pag-ibig contributions and Union dues of individuals D. Gains realized by an investor upon redemption of shares of stock in a mutual fund company. 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 is on the cash method of accounting B. Taxable income of the lessor in the year received whether he is on the cash or accrual method of accounting C. Taxable income of the lessor in the year received whether he is on the cash or accrual method of accounting D. Taxable income of the lessor up to the amount earned in the year the rental is received 26. Which payments made by the lessee under such terms of the lease contract should be considered as additional rent income of the lessor? 1. If a lessee paid directly to the government a real tax on the property of the lessor 2. If the amount received by the lessor is in the nature of a security deposit for the faithful compliance by the lessee of the terms of the contracts 3. If the amount received by the lessor is in the nature of a loan extended by the lessee to the lessor. Downloaded by melo cotones ([email protected])  lOMoARcPSD|40026582 32 A. Only 1 C. Only 2 and3 B. Only 1 and 3 D. 1, 2 and3 27. One of the following represents taxable income: A. Refund of overpaid rental expense in prior year B. Refund of donor’s tax paid in prior year C. Refund of income tax in prior year D. Refund of special assessment paid in prior year 28. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation of indebtedness may amount to A. A gift C. A capital contribution B. A donation inter-vivos D. A payment of income 29. This is not part of gross compensation income A. Salary of P 20,000 a month B. Fringe benefits of P10,000 of an employee C. Salary of P10,000 a month of a partner in a general professional partnership D. Honorarium and allowances of P10,000 of a member of the board of directors of a Corporation 30. Mr Z, a farmer, had the following data for the year: Sales of livestock and farm products raised P270,000 Sales of livestock and farm products purchased 160,000 Cost of raising livestock and farm products 190,000 Cost of livestock and farm products purchased and sold``` 140,000 Rental income of farm equipment 105,000 Inventory of livestock and farm products, January 1 110,000 Inventory of livestock and farm products, December 31 113,000 Using the cash method of accounting, the income is: A. P205,000 C. P395,000 B. P208,000 D. P202,000 31. Using the same information above, but the accrual method of accounting is used, the income is A. P205,000 C. P395,000 B. P208,000 D. P202,000 FRINGE BENEFITS TAX 1. In 2010, X Corporation allows its Sales Manager to incur expenses subject to reimbursement, as follows: Electricity- 70% in the name of X Corporation P20,000 Water – 70% in the name of X Corporation 2,000 Grocery (PONES)