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INCOME TAXATION OF INDIVIDUALS & CORPORATION
Instruction: Select the best answer to each of the following questions.
- An exemption allowed to a taxpayer that has qualified legitimate, and/or recognized or legally adopted children: a. Additional exemption. b. Special additional personal exemption. c. Optional standard deduction. d. Personal exemption.
- A feature of ordinary gains as distinguished from capital gains: a. Gains from sales of assets not stock in trade. b. May or may not be taxable in full. c. Sources are capital assets. d. No holding period.
- The following, except one, may claim personal exemptions: a. Non-resident alien not engage in trades or business in the Philippines. b. Non-resident alien engage in trade or business in the Philippines. c. Resident alien. d. Citizen.
- On capital gain tax on real property, which of the following statements is not true? a. The tax should be paid, if in one lump sum, within 30 days from the date of sale. b. The term “initial payment” is synonymous to “down payment”. c. The installment payment of the tax should be made within 30 days from receipt of each installment payment on the selling price. d. The tax may be paid in installment if the initial payments do not exceed 25% of the selling price.
- Which of the following taxpayers whose personal exemption is subject to the law on reciprocity under the Tax Code? a. Non-resident citizen with respect to his income derived outside the Philippines. b. Non-resident alien who shall come to the Philippines and stay therein for an aggregate period more than 180 days. c. Resident alien deriving income from a foreign country. d. Non-resident alien not engage in trade or business in the Philippines whose country allows personal exemption to Filipinos who are not residing but are deriving income from said country.
- RDE was retired by his employer corporation in 2003 and paid P1,000,000 as a retirement gratuity without any deduction for withholding tax. The corporation became bankrupt in 2004. Can the BIR subject the P1,000,000 retirement gratuity to income tax?
1 st^ answer: Yes, if the retirement gratuity was paid based on a reasonable pension plan were RDE was 50 years old and has served the corporation. 2 nd^ answer: No, if the RDE was forced by the corporation to retire. a. Both answers are wrong. b. Both answers are correct. c. 1 st^ answer is correct, 2nd^ answer is wrong. d. 1 st^ answer is wrong, 2nd^ answer is correct.
- The widow of your best friend has just been paid P1,000,000 on account of life insurance policy of the decease husband. She asks you whether she should declare the amount for income taxes purposes or for estate tax purposes. 1 st^ advice: The proceeds of life insurance paid to the beneficiary upon the death of the insured are exempt from income tax and need not be declared for income tax purposes. 2 nd^ advise: The proceeds of life insurance would have to be declared for the estate tax purposes if the designation of the beneficiary was irrevocable, otherwise it need not be declared. a. Both advises are correct. b. 1 st^ advice correct, 2nd^ advice are wrong. c. Both advises are wrong. d. 1 st^ advice wrong, 2nd^ advice correct.
- Mr. Juan dela Cruz transferred his commercial land with a cost of P500,000 but with a fair market value of P 750,000 to JDC Corporation in exchange of the stocks of the corporations with par value of P1,000,000. As a result of the transfer he became the major stockholder of the corporation. As a result of the transfer,
a. The recognized gain is the difference between the fair market value of the shares of stocks and the cost of the land. b. The recognized gain is the difference between the par value of the stock and the fair market value of the land. c. No recognized gain because the land was in exchange or purely stocks and Mr. dela Cruz became the majority stockholders. d. No recognized gain because the land was in exchange of stocks of the corporation.
- Gross income is reported partially in each taxable year in proportion to collections made in such period as it bears to the total contract price refers to: a. Crop year basis method. b. Percentage of completion basis method. c. Accrual method. d. Installment sales method.
- “Schedular system of income taxation” means: a. All types of income are added together to arrive at gross income. b. Separate graduated rates are imposed on different types of income. c. Capital gains are excluded in determining gross income. d. Compensation income and business professional income are added together in arriving at gross income.
- It is important to know the source of income for tax purposes (i.e., from within or without the Philippines) because: a. Some individual and corporate taxpayers are taxed on their worldwide income while others are taxable only upon income from sources within the Philippines. b. The Philippines imposes income tax only on income from sources within. c. Some individual taxpayers are citizens while others are aliens. d. Export sales are not subject to income tax.
- In cases of deduction and exemption on income tax return doubts shall be resolved: a. Strictly against the taxpayer. b. Strictly against the government. c. Liberally in favor of the taxpayer. d. Liberally in favor of the employer.
- The term “capital assets” includes: a. Stock in trade or other property included in the taxpayer’s inventory. b. Real property not used in the trade or business of taxpayer. c. Property primarily for sale to customers in the ordinary course of his trade or business. d. Property used in the trade or business of the taxpayer and subject to the depreciation.
- Lots being rented when subsequently sold are classified as: a. Capital assets. b. Liquid assets. c. Ordinary assets. d. Fixed assets.
- The following are examples of corporate expenses deductible from gross income, except one: a. Representation expenses designed to promote business. b. Contributions to drum up business, like contributions of soft drinks to barrio fiestas. c. Expenses paid to an advertising firm in order to create a favorable image for the corporation. d. Premiums on life insurance covering the life of an employee if the beneficiary is his heirs.
- ABC Corporation took two key men insurance on the life of its President, Mr. X. In one policy, the beneficiary is the corporation to compensate it for its expected loss in case of death of its president. The other policy designates Mr. X’s wife as its irrevocable beneficiary.
Question 1 – Are the insurance premium paid by X corporation in both policies deductible? Question 2 – Will the insurance proceeds be treated as income subject to tax by the corporation and by the wife?
a. Yes to 1st^ and No to 2nd^ questions. b. Yes to both questions. c. No to 1st^ question and Yes to 2nd^ question. d. No to both questions.
Statement 1. If a taxpayer marries or has dependents during the year, or dies during the year, or his spouse dies during the year, he/his estate may claim personal exemption in full for such year. Statement 2. If a dependent child dies within the year, or becomes twenty-one years old within the year, the taxpayer may still claim additional exemption. a. First statement is correct while second statement is wrong. b. First statement is wrong while second statement is correct. c. Both statements are wrong. d. Both statements are correct.
Statement 1. An illegitimate child dependent upon the taxpayer is a unit of additional exemption. Statement 2. A dependent who marries within the year or who becomes gainfully employed during the year is still a dependent with additional exemption for the year. a. True, true. b. True, false. c. False, false. d. False, true.
Which of the following is not an income tax on corporation? a. Normal tax. b. Minimum corporate income tax. c. Gross income tax. d. Stock transaction tax.
The normal tax of an ordinary corporation effective January 1, 2000 is: a. 34%. b. 33%. c. 32%. d. 30%.
The minimum corporate income tax of a domestic or resident trading or manufacturing corporation is: a. 2% of gross income. b. 5% of gross sales. c. 15% of gross income. d. 15% of gross sales.
The minimum corporate income tax of a domestic or resident service corporation is: a. 2% of gross receipts. b. 2% of gross income. c. 15% of gross receipts. d. 15% of gross income.
One of the following statements is correct. Which is it? The minimum corporate income tax of a corporation is computed: a. In the quarterly and annual returns of the corporation. b. In the annual income tax return only of the corporation. c. In the quarterly returns only of the corporation. d. In all the taxable years of operations of the corporation.
One of the following is wrong. Which is it? The gross income tax on corporation is: a. Applicable to domestic corporations. b. Not applicable to resident corporation. c. Applicable to non-resident corporation. d. May begin only beginning 2000.
Which statement is wrong? The gross income tax: a. Is optional to a qualified corporation. b. Available only if the ratio of cost of sales does not exceed fifty-five per cent of gross sales or receipts from all sources. c. The choice shall be irrevocable for three consecutive years that the corporation is qualified under the scheme. d. Is always computed to compare with the normal income tax and minimum corporate income tax.
Which statement is wrong? The gross income tax of the corporation is: a. 15% of gross income. b. 15% of gross sales. c. 15% of gross profit from sales. d. 15% of gross receipts.
One of the following statements is wrong. Identify. The improperly accumulated earnings tax imposed on corporations: a. Is calculated to force corporations to pay out dividends. b. Is computed on improperly accumulated income over several years. c. Is based on the net income per books after income tax. d. Is based on a statutory formula for improperly accumulated income.
All, except one, of the following, are not subject to the improperly accumulated earnings tax. Which is the exception?: a. Publicly-held corporations. b. Banks and other nonbank financial intermediaries. c. Insurance companies. d. Service enterprises.
The following, except one, give rise to the presumption that a corporation is improperly accumulating profits. Identify the exception: a. The corporation is a mere holding company. b. The corporation is an investment company. c. The corporation permits its profits to accumulate beyond the reasonable needs of the business. d. The corporation is a service enterprise.
Which of the following is not treated as a corporation? a. General partnership in trade. b. General professional partnership. c. Mutual fund company. d. Regional operating headquarters of multi national company.
Which of the following statements is wrong? a. A general partnership in trade is not taxable as a corporation. b. A joint venture for undertaking construction projects is not taxable as a corporation. c. A consortium for energy operations pursuant to an operating consortium agreement under a service contract with the government is not taxable as a corporation. d. A co-ownership where the activities of the co-owners are limited to the preservation of property and collection of income from the property is not taxable as a corporation.
As a general rule, proceeds of insurance are not taxable because they only constitute a return of capital (of what was lost). Which is the exception? a. Proceeds of life insurance. b. Proceeds of accident or health insurance. c. Proceeds of property insurance. d. Proceeds of crop insurance.
Which of the following is taxable? a. Separation pay received by a 50-year old employee due to the retrenchment program of the employer. b. Retirement pay received from a benefit plan registered with the Bureau of Internal Revenue where at the time the employee retired he was 55 years of age, retiring from employment for the first time in his life, and was employed with the employer from whom retiring for 6 years prior to retirement. c. Social security benefit received by a balikbayan from employer abroad at the age of 35. d. SSS and GSIS benefit.
Which of the following is taxable? a. Agricultural land inherited. b. Cash received as gift. c. Philippine Charity Sweepstakes winnings. d. Interest on government bonds.
Which of the following is taxable? a. Prize won in as essay contest. b. The Nobel prize. c. Prize won as member mythical team in the PBA. d. Award for being a model employee.
Which of the following items that reduce salaries of employees is not an exclusions from gross income? a. GSIS or SSS contributions. b. Pagibig contributions. c. Labor union dues. d. IOU’s.
Statement 1. The cost of leasehold improvements shall be deductible by the lessee by spreading the cost of the improvements over the life of the improvements or remaining term of the lease, whichever period is shorter. Statement 2. Deprecation expense can be a deduction for both tangible and intangible property with limited useful life. a. True, true. b. False, false. c. True, false. d. False, true.
Statement 1. Contributions by the employer to a pension trust for past service cost is deductible in full in year that the employer made the contributions, if he is on the cash basis of accounting. Statement 2. Contributions or donations given directly to individuals cannot be deducted from gross income. a. True, true. b. False, false. c. True, false. d. False, true.
Which statement is not correct? a. The deduction of an individual for contribution subject to limitation should not exceed ten percent (10%) of his taxable income from business, trade or profession before deduction for contributions. b. The deduction of a corporation for contributions subject to limitation should not exceed five percent (5%) of its taxable income from business or trade before deduction for contributions. c. Contributions to media in its fund drive for the relief of the calamity victims are deductible from gross income. d. Contributions of canned goods to student organizations during the Christmas season for distribution to Muntinglupa inmates are deductible from gross income.
Which statement is wrong/ research and development costs: a. When related to the acquisition and/or improvement of land and building, must be capitalized. b. If not related to land and building, may be treated as an outright deduction. c. If not related to land and building, may be treated as a deferred expense which may be amortized. d. Cannot be deducted because it has unlimited life.
Which statement is wrong? The deduction for premiums on hospitalization and health insurance is: a. Not to exceed P2,400 a year per family. b. Not to exceed P200 per month. c. Not allowed if the family income exceeds P250,000. d. In the case of married persons, can be claimed by either spouse.
Which statement is wrong? Deduction for premiums on hospitalization and health insurance is: a. Allowed a citizen with a gross compensation only. b. Allowed a citizen with business or professional income only. c. Allowed a citizen with mixed income. d. Only if the taxpayer is taking itemized deduction from gross income.
The Optional Standard Deduction is ten percent (10%) of the gross income. Choose the correct and best answer: For purposes of the Optional Standard Deduction of an individual (other than non- resident alien) gross income means: a. If a trading concern, gross profit from sales. b. If a service concern, gross receipts lee direct cost of services. c. Means gross profit from sales, or gross receipts or revenues less direct cost of services, plus all other items of gross income. d. Includes the net capital gain of an individual.
Which statement is wrong? The rule that capital losses are deductible only to the extent of capital gains is applicable: a. To a corporation. b. To an individual. c. To the individual taking the Optional Standard Deduction. d. To the individual taking the itemized deduction from gross income.
Which statement is wrong? The fringe benefit tax is: a. Imposed on the employer. b. Imposed on the employee. c. Withheld at source. d. Deductible by the employer.
Which statement is wrong? The amount on which the fringe benefit tax rate is applied is: a. The monetary value of the fringe benefit. b. The grossed-up monetary value of the fringe benefit. c. The amount deductible by the employer from his/its gross income. d. Reflected in the books of accounts in the two account of fringe benefits expense and fringe benefit tax expense.
Which of the following fringe benefit is not subject to the fringe benefits tax? a. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans. b. Housing. c. Expense account. d. Vehicle of any kind.
Statement 1. A fringe benefit which is subject to the fringe benefit tax is taxable income of the employee. Statement 2. A fringe benefit which is not subject to the fringe benefit tax is taxable income of the employee. a. First statement is true while second statement is false. b. First statement is false while second statement is true. c. Both statements are true. d. Both statements are false.
Statement 1. The fringe benefit tax is deductible from the gross income of the employer. Statement 2. The fringe benefit tax is withheld by the employer. a. The first statement is true while second statement is false. b. The first statement is false while second statement is true. c. Both statements are true. d. Both statements are false.
Statement 1: A corporation cannot deduct a loss arising from a sale between the corporation and the controlling individual stockholders. Statement 2: A corporation cannot deduct a loss arising from a sale between the corporation and the controlling parent corporation. a. First statement is correct, but the second statement is wrong. b. First statement is wrong, but the second statement is correct. c. Both statements are correct. d. Both statements are wrong.
The family of an individual shall include his brothers and sisters, whether by whole or half blood, spouse, ancestors and lineal descendants. In which of the following does the concept not apply? a. Non-deductible loss from sales or exchange of property between members of the family. b. Non-deductible bad debts on transaction between members of the family. c. Non-deductible interest expense between members of the family. d. Deductible premiums on hospitalization and health insurance of the family.
Which of the following losses is deductible? a. Loss on wash sale. b. Loss on merger. c. Loss on a transfer of property to a corporation solely stock resulting in control. d. Loss on a transfer of property to a controlled corporation solely for stock.
Which interest expense can be deducted from gross income? a. Interest expense on money borrowed to buy government bonds. b. Interest expense on money borrowed to finance petroleum operations. c. Interest expense between a corporation and the controlling individual. d. None of the above.
Which statement is wrong? The net operating loss carry-over (NOLCO) is: a. Available to a domestic corporation. b. Available to a registered general partnership in business in the Philippines. c. Available to an individual in business in the Philippines. d. Not available to a general professional partnership in the Philippines.
Which statement wrong? Research and development cost: a. On land and building acquired for research and development purposes is not deductible as research and development cost. b. May be claimed as an outright deduction from gross income. c. May be treated as a deferred expense to be amortized over the period which will benefit from the expenditure. d. May be treated as a deferred expense to be amortized over a period of not less than sixty months from the date benefit from expenditure is derived.
Deferred payment method of reporting income on an installment sale is available to a taxpayer if, there being a requirement of the law on the ratio of initial payments to the selling price, the initial payments on the sale: a. Exceed 25% of the selling price. b. Do not exceed 25% of the selling price. c. Regardless of the ratio of initial payments to the selling price. d. Do not exceed 25% of the contract price.
Which is wrong? The net worth-expenditure method of investigation which is used by the Bureau of Internal Revenue to determine taxable income that was fraudulently concealed by an individual is based on: a. The statutory authority of the Commissioner of Internal Revenue to promulgate rules and regulations. b. The statutory authority of the Commissioner of the Internal Revenue to determine the taxable income of a taxpayer from the best evidence obtainable. c. The statutory authority of the Commissioner of Internal Revenue to have the income of a taxpayer computed under such method as in his opinion clearly reflects the income. d. All of the above.
Under the net worth-expenditure method of investigation, unexplained increase in net worth is attribute to undeclared income. Statement 1. The finding of the Bureau of Internal Revenue of undeclared income is presumed correct, unless the taxpayer proves otherwise. Statement 2. The underdeclaration of income is presumed to be fraudulent and the assessment of the tax by the Bureau of Internal Revenue will imposed a surcharge of fifty percent. a. The first statement is true, the second statement is false. b. The first statement is false, the second statement is true. c. Both statements are true. d. Both statements are false.
Which method of inventory valuation is not recognized for income tax purposes? a. Cost. b. Cost or market, whichever is lower. c. Farm price method. d. Base stock method.
Statement 1. The Commissioner of Internal Revenue can, if he makes a finding that the nature of stock on hand (e.g., scarcity, liquidity, marketability or price movements) is such that inventory gains should be considered realized for tax purposes, require a change in the inventory valuation method of a taxpayer. Statement 2. The accrual method of accounting is required of trading, manufacturing and service enterprises. a. First statement is correct, second statement is wrong. b. First statement is wrong, second statement is correct. c. Both statements are correct. d. Both statements are wrong.
If a general professional partnership is on the accrual method of accounting, and a partner, on his own transactions, is on the cash method of accounting, in the partner’s determination of his taxable income for a year: a. He can consolidate his share in the net income of the partnership, determined by the partnership under the accrual method, with his own income determined under the cash method. b. He must convert his income from the partnership into cash method before consolidating it with his own income on the cash method. c. He must convert his own income into accrual method before consolidating it with his own income from the partnership under the accrual method. d. He does not have to report his income from the partnership because the partnership is exempt from income tax.
An individual making a casual sales or disposition of property involving deferred payment, not in the course of trade or business, must report his income: a. On the cash method. b. On the accrual method. c. On the installment method. d. Any of the above.
Statement 1. Where different enterprises or corporation are owned by the same taxpayer, the Commissioner of Internal Revenue may make an allocation of income and expenses among them so as to clearly reflect the income of each enterprise or corporations. Statement 2. In the interest of determining the correct taxable income, it is legal for the Commissioner of Internal revenue to determine the revenue and gross income of a taxpayer based on industry standards developed by the Bureau of Internal Revenue from an industry study. a. Both statements are correct. b. Both statements are wrong. c. First statement is correct, but second statement is wrong. d. First statement is wrong, but second statement is correct.
Which statement is wrong? When a taxpayer controls a manufacturing corporation and a marketing corporation, sales made by the manufacturing corporation to the marketing corporation, as recorded, in the books of account, may be considered by the Bureau of Internal Revenue as not reflective of correct selling price. a. Under the rule of “piercing the veil of corporate fiction”. b. Under the provision of the National Internal Revenue Code which authorizes the Commissioner of Internal Revenue to allocate revenues and expenses of corporations controlled by the same interests, so as to clearly reflect the income of the taxpayers. c. Under the provision of the National Internal Revenue Code which authorizes the Commissioner of Internal revenue to determine the correct taxable income from the best evidence obtainable. d. Cannot be done by the Bureau of Internal revenue.
Which is correct? When it takes more than one year from the time of planting to the time of harvesting and selling, income may be reported under the crop year method, under which, deductions for expenses shall be allowed in the year that the income from the crop is realized. a. This is an accounting period of more than twelve months. b. This is still an accounting period of twelve months. c. There are two accounting periods, one, a one-year period, and the other, a less-than-one-year accounting period. d. There is no definite accounting period.
Statement 1. There can be an accounting period of less than twelve months. Statement 2. There cannot be an accounting period of more than twelve months. a. Both statements are correct. b. Both statements are wrong. c. The first statement is correct, while the second statement is wrong. d. The first statement is wrong, while the second statement is correct.
Statement 1. A change in the method of accounting requires a prior approval of the Commissioner of Internal Revenue. Statement 2. A change in accounting period does not require prior approval of the Commissioner of Internal Revenue as long as the necessary income tax returns for the different accounting periods (old, interim and new) are filed. a. Both statements are correct. b. Both statements are wrong. c. First statement is correct, while second statement is wrong. d. First statement is wrong, wile second statement is correct.
Which statement is wrong? In income tax allocation: a. Permanent difference is an item of revenue in the books of accounts but which is not a taxable income. b. Permanent difference is an item of taxable income which is not revenue in the books of accounts. c. Timing difference is an item of revenue in the books of accounts in one accounting period but which is taxable income in another accounting period. d. Timing difference is an item of expense in one accounting period and is not a deduction for income tax purposes.
One of the following is correct: a. Income from long-term contracts may be reported on the completed contracts method of accounting. b. Income from long-term contracts must be reported only on the percentage of completion method of accounting. c. Income from deferred payment sales may not be reported on the accrual method. d. Where in a deferred payment sales the initial payments exceed twenty-five percent of he selling price, the income from the sales must be reported on the accrual method.
Which statement is wrong? When an individual, notwithstanding withholding income tax during the year on his compensation income, is required to file an income tax return at the end of the year, he: a. May pay the income tax into two installments if the income tax on his taxable income for the year, before credit for withholding income tax, exceeds P2,000. b. May pay the income tax into two installments if the income tax on his taxable income for the year, after credit for withholding income tax exceeds P2,000. c. May credit the income tax withheld against the first installment tax due. d. May still pay the income tax in one lump sum even if it exceeds P2,000 and credit the withholding income tax against it.
Which of the following withholding income tax should be remitted to the Bureau of Internal Revenue as a final tax? a. Withholding income tax and compensation income. b. Withholding income tax on certain passive income. c. Withholding income tax under the Expanded Withholding Tax System. d. All of the above.
Dividend received from a foreign corporation shall be subject to withholding income tax if: a. In all cases where the foreign corporation had business in the Philippines. b. In all cases where the foreign corporation engaged in business in the Philippines had more than fifty percent of its world gross income for the three-year period preceding the declaration of dividend derived from Philippine sources. c. In all cases where the foreign corporation engaged in business in the Philippines had more than eighty-five percent of its world gross income for the three-year preceding the declaration of dividend derived from Philippine sources. d. None of the above.
Which is not a creditable withholding income tax? a. Expanded withholding income tax. b. Withholding income tax on passive income on passive income.] c. Withholding income tax at source. d. None of the above.
One of the following statements is correct. A choice by an individual of the Optional Standard Deductions means that: a. His income tax return need not be accompanied by financial statements. b. He need not keep books of accounts. c. He need not have records of gross income. d. His choice can still be changed by filing an amended return.
Which of the following is a taxpayer required to file an income tax return? a. An estate which is under administration. b. A trust where the fiduciary must accumulate the income of the trust. c. A trust where the fiduciary may accumulate or distribute the income of the trust, at his discretion. d. All of the above.
Which is correct? The income tax return shall be accompanied by the following: a. Statement of Net Worth and Operations, if the gross receipts from business or profession do not exceed P50,000 in any one quarter. b. Balance Sheet and Income Statement, if the gross receipts from business or profession exceed P50,000, but do not exceed P150,000 in any one quarter. c. Balance Sheet and Income Statement certified by an independent Certified Public Accountant if the gross receipts from business or profession exceed P150,000 in any one quarter. d. All of the above.
Statement 1. A donation on which the donor’s tax was not paid is not a valid donation. Statement 2. Title to the donated real property cannot be transferred to the donee in the Register Deeds unless the donor’s tax on the donation had been paid. a. Both statements are correct. b. Both statements are wrong. c. The first statement is correct while the second statement is wrong. d. The first statement is wrong while the second statement is correct.
One of the following is not an excise tax in the Tax Code. a. Value-added tax. b. Community tax. c. Income tax. d. Percentage tax.
One of the following statements is wrong: books of accounts are required to be kept, as follows: a. Where the quarterly gross sales, earnings, receipts or output do not exceed P50,000, a simplified set of bookkeeping records. b. Where the quarterly gross sales, earnings, receipts or output exceed P50,000 journal and ledger, or their equivalent. c. Where the gross quarterly sales, earnings or output exceed P150,000, the books shall be examined and audited by independent Certified Public Accountants. d. May be in language other than native, English or Spanish as long as it is in the language of the taxpayer.
Statement 1; Books of accounts shall be preserved for a period beginning from the last entry in such books until the expiration of the period of assessment (on transactions recorded there) that may be made by the Bureau of Internal Revenue. Statement 2: In the case of the taxpayers whose gross sales, earnings or receipts in any quarter exceed P150,000, the books of account should be audited and examined by independent Certified Public Accountants and their income tax returns accompanied with certified financial statements. a. Both answers are correct. b. Both answers are wrong. c. First statement is correct but second statement is wrong. d. First statement is wrong but second statement is correct.
Mr. Araki, a non-resident alien stockholder, received a dividend income of P300,000 in 2004 from a foreign corporation doing business in the Philippines. The gross income of the foreign corporation within and without the Philippines for three years preceding 2004 are as follows:
Sources of Income 2001 2002 2003 From within the Philippines P16,000,000 P12,000,000 P14,000, From without the Philippines 18,000,000 14,000,000 16,000, How much of the dividend income received by Mr. Araki is considered income from sources within the Philippines? a. Zero. b. P150,000. c. P270,000. d. Answer not given.
- The following information are from the records of the Central Plain University, Inc., a private educational institution, for the fiscal year ended May, 31, 2003: Income: Miscellaneous fees P 362, Tuition fees 2,843, Income from rents 60, Net income, school canteen 36, Net income, book store 24, Dividends 15, Interest on time deposits 45, Expenses: Payroll and administrative salary 1,452, Other operating expenses 762, Interest on P750,000 bank loan 82, Depreciation, new six-room building 37, In the first month of the fiscal year, the school secured a loan from a bank in the amount of P750,000. The proceeds of the loan were spent in the construction of a new six-room building. How much is the income tax due from the Central Plain University, Inc. for the fiscal year ended May 31, 2003? a. P101,935. b. P 26,935. c. P105,685. d. P30,685.
- The West Central College, Inc. is a private educational institution recognized by the Government. It submitted the following data for the fiscal year ending April 30, 2004:
Tuition fees P 9,500, Miscellaneous fees 1,200, Cash dividends from domestic corporation 80, Income from book store 350, Interests on bank deposit 70, Income of school canteen 180,
- On different dates as listed below, Mr. Santos purchased common stock of ABC Corporation. On May 31, 2004, he received a 50% stock dividend.
Lot Date No. of Cost Total No. Purchased Shares Per Share Cost 1 Oct. 15, 2003 400 P 100.00 P40,000. 2 Jan. 15, 2004 300 120.00 36,000. 3 Mar. 15, 2004 200 140.00 28,000. 4 May. 15,2004 100 150.00 15,000. On June 30, 2004, Mr. Santos sold 1,400 shares at P100.00 per share. Using the first-in-first-out method, the gain or (loss) of Mr. Santos is: a. P31,000. b. P(26,600). c. P28,938. d. Answer not given.
Mr. Rivera leased his land to Mr. Gomez. The terms of the contract of lease is for fifteen (15) years and the rental fee is P36,000 a year. The contract provides that Mr. Gomez, the lessee, will construct a building and at the end of the term of the contract, the building will be owned by Mr. Rivera, the lessor. The building was constructed at a cost of P600,000 and has a useful life of 30 years. Assuming Mr. Rivera will spread his income over the term of the contract of lease, for income tax purposes, his yearly income is: a. P40,000. b. P56,000. c. P76,000. d. P20,000.
Mr. Pascual bought a 200 square meter land at a cost of P500,000. He leased the land to Mr. Franco at an annual rental of P40,000. The term of the contract of lease is 15 years. The contract of lease provides that Mr. Franco will construct a building which will belong to the lessor at the end of the term of the lease or at the termination of the lease, the building was constructed at a total cost of P400, and has an estimated useful life of 20 years which is the basis of a straight-line method of depreciation. Assuming that Mr. Pascual will spread his income over the term of the contract of lease, the annual income of Mr. Pascual is: a. P46,666.66. b. P26,666.66. c. P66,666.66. d. P40,000. Assuming the contract of lease was terminated after the tenth (10th) year or at the beginning of the eleventh (11th) year due to the fault of the lessee, the income of Mr. A Pascual in the eleventh (11th) year is; a. P173,333.34. b. P200,000. c. P133,333.34. d. P400,000.
Mr. B, married, is a citizen and resident of the Philippines. He had the following data on income and expenses: Salaries, net of P7,000 SSS, Philhealth, Pagibig contributions, and labor union dues P88, Thirteen month pay 8, Allowances 16, Gain on sale of asset 10, The income tax withheld on compensation income: a. P11,015. b. P8,900. c. P7,975. d. P9,875.
In question 126, if the income tax was withheld correctly by the employer, income tax still due at the end of the year is: a. P2,640. b. P14,203. c. P2,000. d. P1,900.
Mr. Richard Conception, a citizen and resident of the Philippines, married to Mrs. Dawn Sese- Conception, with the mother of Mrs. Conception living with the spouses, had the following data for 2004: Mr. Mrs. Mr. & Mrs. Gross income from business P220, Gross income from profession, net income of a 10% withholding tax P180, Rent income from land and building P48, Dividend from domestic corporation 10, Interest on notes receivable 2,000 1, Interest on Philippine currency bank deposit 3,000 2,000 8, Capital gain on sale directly to buyer at P280,000 of shares of domestic corporation 80, Capital gain on sale directly to buyer at P2,000,000 of land in the Philippines 300, Interest on government bonds 5, Capital loss thru the Philippine Stock exchange at P60,000 of shares of domestic corporation 5, Income tax withheld on rent at 5% 2, Income tax withheld on professional fees at 10% 20, Expenses, business/profession 150,000 120,000 10, The capital gain taxes paid within the year; a. P 8,150. b. P108,000. c. P124,000. d. P108,150.
In Question 128, the final tax paid on passive income within the year: a. P2,500. b. P2,600. c. P3,200. d. P4,600.
In Question 128, the taxable income before personal exemption of Mr. Concepcion: a. P54,000. b. P73,000. c. P91,000. d. P92,000.
In Question 128, the taxable income after personal exemption of Mr. Concepcion is: a. P59,000. b. P91,000. c. P75,000. d. P73,000.
In Question 128, the taxable income before personal exemption of Mrs. Concepcion: a. P68,000. b. P63,000. c. P105,000. d. P100,000.
In Question 128, the taxable income after personal exemption of Mrs. Concepcion: a. P73,000. b. P82,000. c. P68,000. d. P80,000.
Mr. A married, had the following data for a taxable year:
Gross income, Philippines P380,600. Gross income, United States 255,304. Expenses, Philippines 194,269. Expenses, United States 193,248.
In 2002, a domestic corporation was in its sixth year of operations. The following data are for the years 2001 and 2002: 2001 2002 Gross profit from sales P600,000 P700, Business expenses 580,000 650, The income tax for 2001 is: a. P12,000. b. P6,800. c. P4,000. d. P20,400.
In Question 142, the income tax due fro 2002 is: a. P10,400. b. P16,500. c. P11,300. d. P17,000.
In year 2002, a domestic corporation had the following data:
Sales P4,000, Cost of sales 1,500, Business expenses 1,000, The gross income tax of the corporation is: a. P375,000. b. P480,000. c. P600,000. d. P125,000.
- D. Co. is a domestic corporation with the following data for 2002 (first year of operations):
Gross profit from sales P2,000, Dividend from domestic corporation 20, Capital gain on sale of land in the Philippines held for two years (sold at P1,000,000) 200, Capital gains on sale of shares of domestic corporation held for two months (direct sale to buyer) 120, Business expenses 1,100, Capital loss on bonds of domestic corporation held for 6 months 30, The total capital gains taxes for the year: a. P64,000. b. P54,000. c. P67,000. d. P0.
- In Question 145, the normal tax of the corporation at the end of the year: a. P327,000. b. P1,070,000. c. P288,000. d. P900,000.
- Selected cumulative balances were taken from the records of ABC Co., Inc., a domestic corporation, of its fourth year of operations in 2002, which had an income tax refundable of P10,000 for a preceding year for which there is a certificate of tax credit: 1stQ 2ndQ 3rdQ Year Gross profit from sales 800,000 1,600,000 2,400,000 3,100, Capital gain on sale directly to buyer of shares of domestic corporation 50,000 50,000 50,000 100, Dividend from domestic corporation 10,000 10,000 20,000 20, Interest on Philippine currency bank deposit 5,000 10,000 15,000 20, Business expense 600,000 1,200,000 1,700,000 2,100, Income tax withheld 15,000 35,000 65,000 115,
The income tax due at the end of the first quarter: a. P39,000. b. P45,000. c. P55,000. d. P60,000.
- In Question 147, the income tax due at the end of the second quarter: a. P50,000. b. P70,000. c. P140,000. d. P44,000.
- In Question 147, the income tax due at end of the third quarter:] a. P66,000. b. P50,000. c. P75,000. d. P140,000.
- In Question 147, the income tax due (or refundable) at the end of the year: a. P245,000. b. P350,000. c. (P10,000). d. P46,000.
- A domestic corporation had the following data for 2002, the accumulated earnings for which year the Bureau of Internal Revenue considered to be improper:
Sales P6,000, Cost of sales 2,000, Business expense 1,000, Interest on Philippine currency bank deposit 50, Capital gain on sale directly to buyer of shares of domestic corporation 120, Dividend income from domestic corporation 60, Dividend declared and paid during the year 500,
The improperly accumulated earnings tax is: a. P175,300. b. P221,000. c. P171,000. d. P323,000.
- AB is a general professional partnership, with A, married, and B, single, participating equally in the income and expenses. The following are data for the partnership and the partners in a calendar year:
AB A B Gross income P600,000 P150,000 P200, Expenses 350,000 70,000 120,
The gross income of A from the partnership is: a. P300,000. b. P125,000. c. P600,000. d. None.
- In Question 152, the taxable income of A is: a. P80,000. b. P205,000. c. P173,000. d. Some other amount.
- The YZ & Co. is a general partnership in trade, in its fifth year of operations. In one calendar year it had a gross profit from sales and business expenses of P2,000,000 and P1,000,000, respectively. Y and Z share equally in the profits and losses of the partnership.
The income tax of the partnership is: a. P40,000. b. P320,000. c. P640,000. d. P0.
