Income Tax Testbankanssss

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1. Hayden Co, a resident citizen, earned the following interest income gross of applicable taxes: Interest Interest Interest Interest

income income income income

from from from from

PNB, SVB, THE, XHE,

a a a a

domestic bank domestic bank* non-resident foreign bank* resident foreign bank*

P

40,000 30,000 20,000 10,000

*in Philippine Peso equivalent

Compute the amount of final tax. a. P 11,000 c. P 8,000 b. P 10,250 d. P 0 2. If Hayden is an OFW, what compute the amount subject to regular tax. a. P 40,000 c. P 20,000 b. P 30,000 d. P 0 3. If Hayden is a resident citizen, compute the amount subject to regular tax. a. P 50,000 c. P 30,000 b. P 40,000 d. P 20,000 4. Miss Darrelle Joe is a self-published author. She printing press and a marketing distribution business which sells wildly hot like chili-flavored pizza. She anything about taxation so she consulted you about what tax she will pay.

established a for her books does not know type of income

What advice would you give her? a. You are subject to regular tax not to final tax so file three quarterly income tax returns every 60 days following the end of the first three quarters and file an annual consolidated income tax return on or before April 15 of the following year. b. You are subject to final tax on your book royalties. There is no need to file regular tax returns. c. You should pay regular income tax on your net income and 10% final tax on your royalties from your books to avoid hassle with the tax authorities. d. You are subject to regular tax. You shall file three quarterly income tax returns on or before before April 15, August 15, and November 15 respectively and file a consolidated annual income tax return on or before April 15 of the following year. 5. Which is subject to creditable withholding tax? a. Winnings b. Dividends c. Professional fees d. Royalties 6. Who is not required to file the quarterly income tax return? a. Individuals who are purely engaged in business b. Individuals who are purely engaged in profession c. Partnerships and corporations d. Individuals who are purely employed 7. Withholding taxes are the primary liability of the a. Earner or payee of income b. Payor of income c. Payee and payor of income d. Collecting agency of the government 8. NFC, Inc. is due to pay the following expenses:

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Interest expense – bank loans Royalty expense – from franchisor Rent expense – for lease of office building Salaries expense – for employees Dividends to shareholders

P

21,000 40,000 10,000 100,000 40,000

Which of the following is subject to final withholding tax? a. None c. Salaries b. Interest d. Royalties 9. Compute the final tax to be withheld by SPV. a. P 0 c. P12,000 b. P 4,000 d. P16,200 10. Which is subject to creditable withholding tax? a. Royalty c. Salaries b. Dividend d. None of these 11. Mr. Escala is a seaman se aman that operates exclusively invested all his earnings the Philippine Islands. A

employed abroad in an international vessel in international transport operations. Wako abroad in the time deposits of the Bank of summary of his investments follows:

P5,000,000 6-year non-preterminabl non-preterminable e deposit P3,000,000, 3 year deposit $100,000, 5 year preterminable deposit $50,000, 2 year deposit

10% 7.5% 10% 8%

p.a. p.a. p.a. p.a.

The applicable conversion rate is P47:$1. Compute Wako’s annual final tax.

a. P 94,350 b. P 59,100

c. P 45,000 d. P 16,875

12. Juan Company invested in the stocks of You See Corp. It purchased 10,000 shares of You See on April 2016 for P90 per share. The shares had a par value of P50/share. You See declared a 20% stock dividend in July 2016 followed by a P14/share cash dividend in October 10, 2016. In need of working capital, Juan Company sold 5,000 shares for P100.00 per share on November 12, 2016. Compute the final tax on Juan’s dividends.

a. P 28,000 b. P 16,800

c. P 14,000 d. P 0

13. Who shall remit any dividend tax to the government? What is the deadline for such remittance? a. Juan Company; November 5, 2016 b. You See Corp; November 15, 2016 c. Juan Company; November 10, 2016 d. The BIR; November 10, 2016 14. Compute the capital gains tax due of Juan Company. a. P7,500 c. P 2,500 b. P 7,406 d. P 2,453 What is the deadline on Juan Company’s capital gains tax return? 15. a. December 5, 2016 c. December 12, 2017 b. December 15, 2017 d. April 15, 2017

16. Compute the documentary stamp tax on the sale of stocks. a. P 825.25 c. P 937.50

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b. P942.50

d. P 925.00

17. What is the deadline for the documentary stamp tax? a. December 5, 2016 c. December 12, 2017 b. December 15, 2016 d. April 15, 2017 18. Mr. Digong earned the following prizes from two different competitions: Date January 4, 2011 February 14, 2011

Event Singing competition Painting competition

Gross Prize P 12,000 10,000

Compute the total final tax that should have been withheld from the above prizes. a. P5,500 c. P3,000 b. P4,400 d. P2,400 19. Mr. Quito won a gold medal and P50,000 cash prize for chess competition in the Palarong Pambansa. How much final tax should be withheld from the prize? a. P 20,000 c. P5,000 b. P 10,000 d. P 0 20. Tiong Department Store conducted a sales promotion where customers purchases exceeding P1,000 in one transaction shall be entitled to a ticket for a chance to win P500,000. Mr. Shing won the prize. How much shall Tiong withhold from the grand prize winning? a. P200,000 c. P 50,000 b. P100,000 d. P 0 21. Mr. Koronadal made the trade sales transactions during the year in the common stocks of Ipus-ti-Baka Corporation, a domestic listed company: Date 5/8/2015 8/5/2015 9/8/2015

Transaction Sale Sale Sale

Gain(Loss) P120,000 ( 20,000) 240,000

Compute the final capital gains tax on April 15, 2016. a. P29,000 c. P3,000 b. P22,000 d. P 0 22. Mrs. Joson sold a residential lot on July 1, 2014 for P2,000,000. The property had a zonal value of P2,500,000 and an assessed value of P1,000,000. On August 1, 2015, Mrs. Joson was compelled to pay the capital gains upon the request of the buyer. The compromise penalty was determined to be P20,000. Late payment to the capital gains tax is subject to a 25% surcharge plus interest of 20% p.a. based on the basic tax and compromise penalties. Compute the total tax due. a. P 150,000 c. P 217,500 b. P 180,000 d. P 237,500

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23. Basic Company paid P9,000 documentary stamp tax on the sale of a real property capital asset. Compute the capital gains tax on the sale. a. P 9,000 c. P 36,000 b. P 16,000 d. P 42,000 24. Bentong is employed by Sisiw, Lang, Bebe & Co, CPAs (SLB) as a senior audit executive. Bentong is assigned a laptop for his office use. To impress SLB’s clients, Bentong also purchased an iPhone 8

for his office use. Which is correct? a. The iphone 8 and the laptop is an ordinary asset of Bentong. b. The iPhone 8 and the laptop is an ordinary asset of SLB. c. The iPhone 8 is an ordinary asset to Bentong while the laptop is an ordinary asset of SLB. d. The iPhone 8 is a capital asset to Bentong but the laptop is an ordinary asset of SLB. 25. Mr. Bassit Unay sold a residential land for P4,000,000. The land had a zonal value of P7,500,000 and an assessed value of P4,000,000. What is the total income tax and documentary stamp tax due? a. P 0; P 60,000 c. P400,000; P 112,500 b. P 450,000; P15,000 d. P450,000; P112,500 26. On August 15, 2011, Ms. Mones sold a 500-square meter residential house and lot for P3,000,000. The house was acquired acquired in 2005 at P2,000,000. The assessed assessed fair market values values of the house and lot, respectively, were P1,500,000 and P1,000,000. The zonal value of the lot was P5,000 per square meter. What is the capital gains tax? a. P240,000 c. P180,000 b. P210,000 d. P120,000 27.

Malena has the following items of income:

Business income Professional fees Compensation income Rent income Interest income-bank Royalty

Philippines P 200,000 100,000 400,000 300,000 20,000 30,000

Abroad P 100,000 50,000 200,000 30,000 10,000

Assuming Malena is a resident citizen, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,030,000 b. P1,180,000 d. P1,390,000 28. Assuming Malena is subject to Philippine a. P1,420,000 c. b. P1,180,000 d.

a resident alien, compute the total income income tax. P1,000,000 P1,390,000

29. Assuming Malena is a resident corporation, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,000,000 b. P1,180,000 d. P1,390,000 30. Assuming Malena is a domestic corporation, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,030,000

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b. P1,180,000 31. a. b. c. d.

d. P1,390,000

A Japanese who is staying in the Philippines for 183 days is a Resident alien Non-resident alien Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business

32. A Canadian who is staying in the Philippines for more than one year is a a. Resident alien b. Non-resident alien c. Non-resident alien engaged in trade or business d. Non-resident alien not engaged in trade or business 33. a. b. c. d.

Which is a A taxpayer A taxpayer A taxpayer A taxpayer

large taxpayer? with quarterly VAT of P900,000 with annual income tax of P900,000 with annual excise tax due of P900,000 with annual withholding tax remittances of P900,000

34. a. b. c. d.

Which is an incorrect statement regarding situs of income? Interest income is earned in the residence of the debtor. Royalty is earned where the intangible is employed. Service income is earned in the domicile of the taxpayer. Rent is earned in the location of the property.

35. Excellent Company insured the life of its president for P2,000,000. A total of P500,000 in premiums was paid before the president died. The company collected the total proceeds. Compute the return on capital. a. P2,000,000 c. P500,000 b. P1,500,000 d. P 0 36. A tax that is imposed enjoyment of a privilege as a. income tax. b. license.

upon the performance of an act, the or the engagement in a profession is known c. excise tax. d. transfer tax.

37. a. b. c.

Which of the following distinguishes license from tax? Unlimited in imposition Imposed for revenue Does not necessarily renders business illegal in case of nonpayment d. Pre-activity in application

38. Tax classifications as to object do not include a. Poll tax c. Regulatory tax b. Property tax d. Excise tax 39. Mr. A has a tax obligation to the government amounting to P80,000. Since he is leaving the country, he entered into a contract with Mr. B, a tax practitioner, wherein Mr. B shall pay the P80,000 tax in his behalf. On due date, Mr. B failed to pay the tax. The BIR sent a letter of demand to Mr. A which he refused to pay. Which of the following statements is correct? a. The government cannot enforce collection charges against Mr. A since he has validly transferred his obligations to B under the contract.

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b. The government can no longer run after Mr. A because he is already outside the Philippine territory. c. The government should wait until Mr. B becomes solvent again. d. The government should force Mr. A to pay because taxes are nonassignable. 40. Which of the following is limited in application? a. Tax laws c. Tax treaties b. Revenue Regulations d. BIR Ruling 41. The principles of a sound tax system exclude a. Economic efficiency c. Theoretical justice b. Fiscal adequacy d. Administrative feasibility 42. The Bureau of Internal Revenue is authorized to do the following, except? a. Assess and collect taxes b. Issue receipts and clearances c. Enforce all forfeitures, penalties and fines d. Mete out sentence of imprisonment for violation of Tariff and Customs Code 43. a. b. c. d.

The Commissioner of Internal Revenue is not authorized to interpret the provisions of the National Internal Revenue Code promulgate Revenue Regulations. terminate an accounting period. prescribe presumptive gross receipts.

44. a. b. c. d.

The provisions in the Constitution regarding taxation are Grants of the power to tax Limitations to the power to tax Grants and limitations to the power to tax Limitations against double taxation

45. Which of the following violates Constitutional provisions? a. Payment of salaries to priests or religious ministers employed by the Armed Forces of the Philippines b. Imposing tax on properties of religious institutions which are not directly and exclusively used for religious purposes c. Imposition of license for the sale of religious literature d. Authorizing the President of the Philippines to fix the rates of tariffs or imposts 46. With the country under incessant shortage of sugar, the Philippine Congress enacted a law providing tax exemptions and incentives to cane farmers without at the same time granting tax exemptions to rice farmers who produce the staple food of the Philippines. Is the new law valid? a. Yes, since there is a valid classification of the taxpayers who would be exempted from tax. b. Yes, since sugar is more important than rice. c. No, since the grant of exemption is construed in favor of taxpayers. d. No, because there is no uniformity in the grant of tax exemption. 47. a. b. c.

Which of the following normally pays real property tax? Bantay Bata, a non-profit charitable institution Jesus Crusade movement, a religious institution University of Pangasinan, a private proprietary educational institution d. UVS Corporation, a registered trading company

48. The Korean government invested P100,000,000 in a Philippine local bank and earned P10,000,000 interest. Which is correct?

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a. b. c. d.

49.

The The The The the

income is exempt on grounds of territoriality. income is exempt due to international comity. income is subject to tax on the basis of sovereignty. income is subject to tax because the income is earned within Philippines.

Which is principally limited by the requirement of due process? a. Eminent domain c. Taxation b. Police power d. All of these

50. to a. b. c. d.

Which of the following is not an inherent limitation of the power tax? Tax should be levied for public purpose. Taxation is limited to its territorial jurisdiction. Tax laws shall be uniform and equitable. Government agencies and instrumentalities are exempt from tax.

51. a. b. c. d.

Which of the following is not within the scope of tax legislation? Fixing the imposable tax rate; Assessment of the tax; Determining the subject to be taxed; Determining the purpose of the tax.

52. of a. b.

Which of the following is not an inherent limitation of the power taxation? International Comity; c. Territoriality; Territoriality; Veto power of the President; d. Public purpose test.

53. a. b. c. d.

Which is not subject to income tax? Harvested fruits Sold crops Offset of indebtedness for services rendered Damages recovered in a patent infringement suit

54. Which is business? a. File and b. File and c. File and d. Withhold

not a tax obligation of an individual taxpayer engaged in pay pay pay and

monthly business tax monthly income tax annual income tax remit any withholding tax on income payments

55. The taxpayer realized P60,000 and P80,000 capital gains separately on the sale of domestic stocks directly to buyer. A lone capital loss of P10,000 was sustained during the year. What is the annual capital gains tax due to be filed through BIR Form 1707A? a. P 0 c. P 8,000 b. P 1,000 d. P 9,000 56. A dealer in securities made a disposition of real properties for P6,000,000. The property has a zonal value of P5,000,0000 and assessed value of P3,000,000. The same property was acquire for P7,000,000 and has a present appraisal value of P6,500,000 at the date of sale. What is the capital gains tax to be filed through BIR Form 1706? a. P 0 c. P 360,000 b. P 300,000 d. P 390,000 57. The residence of Mang Pedro is being expropriated by the government to be used in road widening. The property has a zonal value of P5,000,000. The city’s assessed value on property improvement was

P2,000,000. Mang Pedro bought the lot for P2,000,000 and incurred P1,500,000 in building his residence. What is the best alternative for Mang Pedro to save from taxes? a. He should opt to be taxed at regular tax and claim tax exemption.

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b. He should opt to be taxed at capital gains tax and claim tax exemption. c. He should enter a contract of lease with the government. d. He should question the validity of the expropriation law. 58. The Japanese government invested in the stocks of San Miguel Corporation by purchasing P1,000,000 worth of stocks from the stock market. Japan later sold the same directly to the Yuchengco group for P3,000,000 when the stocks were selling at P4,000,000. Which is correct? a. The P1,000,000 gain is subject to capital gains tax. b. The transaction is subject to capital gains tax to the excess of the higher of fair value and selling price and the cost. c. This transaction is not subject to tax. d. This transaction is subject to stock transaction tax. 59. A dealer in securities executed various trades through the Philippine Stock Exchange and realized thereon a total gain of P200,000. This transactions is a. subject to capital gains tax. b. subject to regular income tax c. not subject to income tax d. subject to final tax. 60. Mr. Tinio, not a dealer dispositions during the year. Property Land Car Laptop

in

Holding period 5 years 1year and 8 months 8 months

properties,

made

the

following

Gain (loss) P 200,000 30,000 (8,000)

Compute the net gain to be included in gross income subject to regular tax. a. P222,000 as net capital gain b. P207,000 as net capital gain c. P200,000 as ordinary gain and P7,000 as ordinary gain d. P7,000 as net capital gain 61. Ms. Charots, a realty properties in 2015:

Properties House and lot Commercial lot Personal car Personal i-Phone

dealer,

Date of acquisition 2/25/2010 8/12/2011 7/18/2014 1/14/2014

had

the

Date of sale 2/27/2015 3/14/2015 5/12/2015 7/3/2015

following

dealings

in

Gain (Loss) P 400,000400,000( 100,000) 80,00080,000( 40,000)

Compute the ordinary gain and the net capital gain subject to regular income tax. a. P480,000; P0 c. P400,000; P60,000 b. P400,000; P80,000 d. P300,000; P60,000 62. What is the amount of ordinary loss? a. P 0 c. P 100,000 b. P 40,000 d. P 140,000 63. Mr. Andonicus, a dealer of household appliances, made the following dispositions of properties during 2015:

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Properties Leasehold right Taxi franchise Electric oven Residence

Date of acquisition 12/2/2012 7/10/2010 6/15/2015 1/14/2014

Date of sale 2/27/2015 3/14/2015 7/15/2015 7/3/2015

Gain (Loss) P 50,000 100,000 80,000 800,000

Compute the net capital gains subject to regular tax. a. P955,000 c. P 155,000 b. P875,000 d. P 75,000 64. The following relate to the compensation income of a private rank and file employee during the year: Annual compensation income 13th month pay 14th month pay Total of monthly rice allowances during the year Commission from employer Christmas gift

P

540,000 45,000 45,000 20,000 12,000 8,000

Compute the total non-taxable compensation income including exempt de minimis benefits. a. P 0 c. P55,000 b. P23,000 d. P105,000 65. Compute the total supplemental compensation. a. P28,000 c. P19,000 b. P25,000 d. P13,000 66. Compute the exempt de minimis benefits. a. P18,000 c. P26,000 b. P23,000 d. P50,000 67. Compute the gross taxable compensation income. a. P570,000 c. P553,000 b. P565,000 d. P540,000 68. Mr. Cute is a top executive at The Real Company. After years of dedicated and passionate service, he met the vesting condition of his employer’s stock option plan (ESOP) where he is entitled to buy 10,000 of his employer’s share at a strike price of P100. Mr. Cute exercised

the option when the share of his employer was selling P150/share. He eventually sold this to another employee of the company for P180 per share. Compute the compensation income. a. P 0 c. P 500,000 b. P 300,000 d. P 800,000 69. In the immediately preceding problem, compute Cute’s capital gains tax. a. P 0 c. P 45,000 b. P 25,000 d. P75,000 70. Markus Ngineus, single, is a managerial employee of Microna & Softpa Company. He received the following employee benefits in 2014: Salaries Stock bonus Fixed allowances Car designated for the use of Markus House and lot, transferred in the name of Markus

P

4,000,000 800,000 200,000 2,500,000 5,000,000

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Compute the taxable income of Markus. a. P12,450,000 c. P 4,950,000 b. P7,450,000 d. P4,750,000 71. In the immediately preceding problem, compute the fringe benefit tax for the year. a. P1,176,471 c. P2,470,588 b. P2,352,941 d. P3,529,412 72. The following relate to the net income of the audit firm of Mr. Trinidad, a single taxpayer with two dependent children: Professional fees Long-term capital gain Short-term capital gain Ordinary gain Long-term capital loss Short-term capital loss Ordinary loss Other business expenses Net income

P

( ( ( ( P

500,000 80,000 45,000 20,000 90,000) 30,000) 40,000) 200,000) 285,000

Compute his taxable income. a. P 290,000 c. P 210,000 b. P 190,000 d. P 235,000 73. Shown below is the summarized result of operations of Mr. Oha’s business: Sales Cost of sales Gross profit Capital gain on the sale of land Total gross income Other deductible expenses Contributions expenses: - Government priority project - Non-accredited non-profit institution - Foreign foundation Net income

P P P

P

700,000 300,000 400,000 100,000 500,000 100,000 50,000 45,000 25,000 280,000

Compute his taxable income. a. P 230,000 c. P 170,000 b. P 255,000 d. P 270,000 74. Exempt corporations are nevertheless subject to 30% tax on income from a. related activities. b. unrelated activities. c. both related and unrelated activities. d. neither related and unrelated activities. 75. a. b. c. d.

Which is not taxable on unrelated activities? Government agencies Non-profit corporations Government-owned Government-owned and controlled corporations Non-profit schools

76. The income from properties of exempt corporations is considered income from a. related sources. b. unrelated sources.

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c. either related or unrelated activities at the discretion of the examiner. d. either related or unrelated activities depending on the nature of the properties concerned. 77. a. b. c. d.

The classification rule is not relevant to a cooperative. farmers’ association. government school. profit-oriented profit-oriented agricultural organization.

78. An allocation of common expenses between related and unrelated activities is made to properly reflect taxable income. This procedure is required only of a. domestic corporations. b. resident foreign corporations. c. exempt corporations. d. non-profit hospitals. 79.

The following relates to a taxpayer:

Sales Less: Cost of sales Gross income from operations Add: Non-operating income Dividend income – domestic Interest income – bank Gain on sale of domestic stocks Gain on sale of office equipment Total gross income Less: Expenses Interest expense Salaries expense Depreciation expense Contribution expense Pension contribution Provision for bad debts Entertainment expense Office supplies Loss on sale of patent Total Net income

P 1,000,000 450,000 P 550,000

P P

P P

50,000 20,000 30,000 20,000 670,000 40,000 150,000 50,000 80,000 50,000 15,000 10,000 12,000 40,000 447,000 223,000

Half of the contribution to pension is funding of prior service cost. There was a write-off receivables totaling P12,000 during the year. The contribution was made to an accredited civic organization. What is the total regular allowable itemized deduction? a. P 354,600 c. P 369,900 b. P 317,910 d. P371,100 80. Compute the taxable income assuming the taxpayer uses OSD. a. P 620,000 c. P 520,000 b. P 550,000 d. P 570,000 81. Compute the total deductions assuming the taxpayer is a corporation using OSD. a. P 220,000 c. P 240,000 b. P 228,000 d. P 268,000 82. An individual taxpayer with two dependents reported the following income:

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Gross taxable compensation income Gross income from operations Ordinary gain Interest income from investment in bonds Royalty Total income Ordinary loss Capital loss Contribution to a non-profit organization

P

P P

Donation to government’s priority activity  

Rent expense Interest expense Other deductions Total expenses Net income

P P

200,000 300,000 130,000 50,000 20,000 700,000 60,000 20,000 70,000 40,000 17,000 10,000 200,000 417,000 283,000

Assuming that the rent expense pertains to the rental of the residence of the taxpayer, compute the allowable deductions against gross income? a. P 327,000 c. P 351,000 b. P 331,000 d. P353,000 83. Assuming that the rent expense pertains to the rental of the residence of a managerial employee, compute the total deductions. a. P 312,000 c. P 353,500 b. P 324,500 d. P 306,300 84. Mr. Roger is a managerial employee at Curad International. He is paid the following benefits during the year: Salaries, net of P8,000 PhilHealth, P12,000 SSS and P4,000 HDMF and P10,000 withholding tax Fixed allowances 13th month pay and other benefits Fringe benefits (residential rentals)

P

970,000 40,000 98,000 102,000

Mr. Roger has a senior citizen mother and a disabled brother who are dependent upon him for chief support. Compute the taxable compensation income. a. P 1,036,000 c. P 961,000 b. P 936,000 d. P 986,000 85. Compute the fringe benefit tax. a. P 0 c. P 48,000 b. P 72,000 d. P 24,000 86.

Assuming Curad International is a regional operating headquarter of a multinational corporation, compute Mr. Roger’s income tax on compensation. a. P 155,400 c. P 117,000 b. P 259,000 d. Indeterminable

87. Using the same facts in the immediately preceding problem, compute the fringe benefits tax. a. P 34,000 c. P 17,000 b. P 18,000 d. P 9,000 88. a. b. c.

Which is not subject to final tax to a corporation? Interest income – Foreign currency deposit Royalty Prizes

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d. None of these 89.

The following data relates to a corporate taxpayer: Philippines

Gross receipts Direct cost of services Expenses Net income Income tax paid

P

Abroad

4,000,000 2,000,000 1,200,000 800,000

P

P 3,000,000 1,500,000 1,000,000 P 500,000 P 165,000

Global

P 7,000,000 3,500,000 2,200,000 P 1,300,000

Compute the income tax still due if the taxpayer is a domestic airliner. a. P 390,000 c. P 240,000 b. P 175,000 d. P 0 90. Compute the income tax due if the taxpayer is an international carrier whose country taxes international carriers 1.5%. a. P 105,000 c. P 60,000 b. P 100,000 d. P 20,000 91. A non-profit hospital which started operations in 1990 has the following results of operations in 2016: Hospital related

Gross Cost sales Gross Less:

receipts and sales of services and

income Expenses Deduction incentives Net income

 Non-hospital related

Total

P 300,000,000 280,000,000

P

200,000,000 _140,000,000

P

500,000,000 420,000,000

P

20,000,000 40,000,000 12,000,000

P

60,000,000 20,000,000 6,000,000

P

80,000,000 60,000,000 18,000,000

(P32,000,000)

P

34,000,000

P

2,000,000

Compute the income tax due. a. P 1,600,000 c. P 1,200,000 b. P 600,000 d. P 10,200,000 92. Assuming the above hospital is a government hospital, compute the income tax due. a. P 0 c. P 1,600,000 b. P 600,000 d. P 10,200,000 93. A corporate taxpayer had the following income on its fifth year of operations:

Gross receipts and sales Cost of services and sales Gross income Less: Expenses Net income

 Within the Phils.

 Without the Phils.

P

P

300,000,000 _ 180,000,000 P 120,000,000 114,000,000 P 6,000,000

Total of BIR Form 2307s Income tax paid

P

400,000 *1,500,000

P P

200,000,000 100,000,000 90,000,000 40,000,000 50,000,000 12,000,000

Total

P P P

500,000,000 280,000,000 210,000,000 154,000,000 56,000,000 400,000 13,500,000

*Paid through BIR Form 1702Q

Assuming the corporation is a domestic corporation, compute the tax still due per BIR Form 1702-RT. a. P 0 c. P 4,400,000

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b. P 2,900,000

d. P 14,900,000

94. Assuming the corporation is a resident foreign corporation, compute the income tax still due (refundable). a. P 0 c. P 500,000 b. (P 100,000) d. P 300,000 95. The Calintaan Corporation had the following historical MCIT and RCIT data:

MCIT RCIT

2013 P 120,000 P 110,000

2014 P 200,000 P 220,000

2015 P 190,000 0

P

2016 P 170,000 180,000

Basing solely on the information provided, what is the tax due and payable respectively in 2013 and 2014? a. P120,000; P220,000 c. P120,000; P210,000 b. P120,000; P100,000 d. P110,000; P220,000 96. In the immediately preceding problem, what is the tax due and payable respectively in 2015 and 2016? a. P190,000; P 0 c. P 0; P 0 b. P190,000; P180,000 d. P170,000; P 0 97.

The following relates to Gandabebe Co., a domestic corporation: Minimum corporate income tax Allowable deductions Creditable withholding tax Estimated income tax payments

P

164,000 7,600,000 52,000 87,000

What is the income tax still due to be filed through BIR Form 1702RT? a. P 0 c. P 41,000 b. P 25,000 d. P112,000 98. A corporate taxpayer had the following data on its fifth year of operation: Philippines Sales P 2,000,000 Less: Cost of services 1,200,000 Gross income from operation P 800,000 Interest on deposits 50,000 Total Income P 850,000 Less: Business expenses 800,000 Net income P 50,000

Abroad P 3,000,000 1,800,000 P 1,200,000 250,000 P 1,450,000 1,300,000 P 150,000

P P P P

Total 5,000,000 3,000,000 2,000,000 300,000 2,300,000 2,100,000 200,000

What is the tax due assuming the taxpayer is a domestic corporation? a. P 60,000 c. P45,000 b. P 46,000 d. P40,000 99. In the immediately preceding problem, what is the tax due if the corporation is a resident foreign corporation? a. P 0 c. P16,000 b. P15,000 d. P17,000 100. Hehe Inc., a domestic corporation, was assessed by the BIR for improperly accumulated earnings tax. Relevant to the determination of the IAET are the following data: Gross income Allowable deductible expenses

P 4,000,000 3,200,000

TAXATION  – TEST BANK

Interest income, net of tax Gain on sale of domestic stocks, net of tax Dividends declared Common stocks, excluding P200,000 share premium Retained earnings, end

40,000 60,000 400,000 300,000 500,000

What is the improperly accumulated earnings tax? a. P 36,000 c. P 16,000 b. P 26,000 d. P 20,000 101. La-View Trading Corporation reported the following on its fifth year of operation: Sales, net of 1% withholding tax P 4,950,000 Cost of sales 2,000,000 Interest from deposit, net of tax 75,000 Gain on sale of domestic stocks directly to buyer 150,000 Casual rent income, net of 5% creditable withholding tax 95,000 Interest income from advances to employees 50,000 Business expenses 3,100,000 Estimated quarterly tax payments 10,000 Compute the income tax still due or (refundable). a. P53,000 c. (P2,000) b. (P50,000) d. P15,000

102. Aleppo Corporation is on its fifth year of business operation when it was assessed by the BIR for improperly accumulating profits. Gross income P 2,000,000 Business expense 1,400,000 NOLCO prior years 500,000 Dividend income - domestic 30,000 Gross interest income - bank 50,000 Gain on sale of domestic stocks directly to buyer 200,000 Gain on sale of land classified as capital asset (Selling price = P2,000,000; fair value = P2,500,000) 500,000 Dividends declared 100,000 Appropriation for treasury stocks 50,000 Appropriation for plant expansion 150,000 Aleppo has P2,000,000 in common stocks, exclusive of P500,000 share premium, and beginning retained earnings of P1,900,000. Compute the improperly accumulated earnings tax. a. P 86,500 c. P 60,000 b. P76,500 d. P 74,500 103. A resident foreign corporation earning purely active reported the following since it started operation in 2015:

Profit after tax Remittance

2015 P 200,000 80,000

income

2016 P 150,000 300,000

Compute the branch profit remittance tax in 2016. a. P 12,000 c. P 45,000 b. P 38,000 d. P 40,500

104. Reek Review Center Inc. provides preparatory review services for professional examinees. Reek had the following expenses:

TAXATION  – TEST BANK

Salaries of reviewers P Administrative staff salaries Marketing salaries and other expenses Rent expense on review rooms Rent on administrative offices Printing costs of reviewee handouts Classroom & library electricity expense Office utilities Classroom supplies expense Loss on sale of old chairs Interest expense

800,000 80,000 150,000 300,000 100,000 100,000 30,000 40,000 5,000 15,000 50,000

Compute the amount of direct cost of services to be presented in the income tax return. a. P1,230,000 c. P1,235,000 b. P1,325,000 d. P1,285,000 105. Xhelsy Drugstore Inc. recorded expense and the following sales:

adopts

Consequently,

P1,200,000

total

deductible

Customers Regular Senior citizens P 5,000,000 P 1,200,000 3,000,000 800,000

Gross sales Cost of sales Xhelsy

a

a it

policy granted

of

giving

P300,000

senior total

citizens senior

a

25%

discount.

citizens’

discounts

during the period. Compute the taxable income. a. P1,200,000 c. P 960,000 b. P1,100,000 d. P 900,000

106. In 2016, Baguio Realty Corporation participated in the “ Adopt-aSchool Program” Program” by contributing its services to a public school in La

Trinidad, Benguet. The agreed value fixed in the memorandum of agreement for the construction of the public school building was P1,000,000. However, Baguio Realty was able to complete the same at a total cost of P800,000. The “Adopt -a-School Program” is a priority program in 2016. Compute the total allowable deduction from the above contribution. a. P1,200,000 c. P 1,000,000 b. P 800,000 d. P 900,000

107. An individual taxpayer compiled the following income, expense and personal exemptions.

Compensation income Business gross income Deductions Personal exemptions

P

2013 2014 2015 20,000 P 220,000 P 80,000 470,000 400,000 500,000 500,000 420,000 420,000 50,000 50,000 100,000

Compute the taxable income in 2014. a. P170,000 c. P 160,000 b. P150,000 d. P 140,000 108. Compute the taxable income in 2015. a. P10,000 c. P 70,000

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b. P20,000

d. P 60,000

109. A taxpayer had the following interest expense and interest income in 2016: Interest expense on bank loan Interest income from time deposit, gross Interest income from promissory notes

P 100,000 10,000 40,000

Compute the allowable deduction for interest expense. a. P 96,700 c. P50,000 b. P 83,500 d. P 100,000

110. The Crosby Manufacturing Corporation usually bills its foreign branch at cost; however, it entered into an advanced pricing agreement (APA) with the BIR which fixed its cross-border pricing to its foreign branch at 150% of cost. Crosby compiled the following costs and sales during the year: Sales through the foreign branch: Philippines Sales P 7,000,000 P Less: cost of sales 7,000,000 Gross income P 0 P

Branch 12,000,000 7,000,000 5,000,000

Sales to unassociated domestic enterprises: Philippines Branch Sales P 3,000,000 Less: cost of sales 1,200,000 Gross income P 1,800,000 Total gross income P 5,300,000 Using the advanced pricing agreement, compute the total gross income subject to Philippine taxation? a. P 11,300,000 c. P 8,800,000 b. P 7,800,000 d. P 6,800,000