TAX 321 PRELIM QUIZ 1-KEY

1. Statement 1: A Professional also refers to a person who engages in some art or sport for money,
as a means of livelihood, rather than as a hobby.
Statement 2: A Professional is a person formally certified by a professional body belonging to a
specific profession by virtue of having completed a required examination or course of studies
and/or practice, whose competence can usually be measured against an established set of
standards.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

Use the following data for the next three (3) questions:
Ana operate a pet shop and at the same time, offers interior design services to her clients. The following
data were provided by Ana for 2018 taxable year:
Pet Shop: P1,800,000
Gross sales 600,000
Cost of sales 200,000

Interior design services: 1,150,000

Gross receipts 120,000
Operating expenses 80,000

2. How much is her income tax liability for the year?

a. P216,000
b. P345,000
c. P475,000
d. P540,000
3. Assuming Ana signified her intention to be taxed at 8% income tax rate on her initial quarterly
income tax return, how much is her income tax liability for the year?
a. P216,000
b. P300,000
c. P430,000
d. P540,000
4. Assume Ana is a vat registered taxpayer, how much is her income tax liability for the year under
the 8% income tax regime?
a. P216,000
b. P345,000
c. P475,000
d. P540,000

Use the following data for the next two (2) question:
Pedro started to operate his taxi business in 2018. He provided the following data for tax purposes:
Gross receipts P2,500,000
Cost of direct services 750,000
Operationg expenses 400,000

5. Assuming Pedro signified his intention to be taxed at 8% income tax rate on his initial quarterly
income tax return. How much is his income tax for the year?
a. P216,000
 b. P300,000
c. P430,000
d. P540,000
6. Assuming instead that Pedro is engaged in the business of transporting goods or cargoes and he
signified his intention to be taxed at 8% income tax rate on his initial quarterly income tax
return. How much is his income tax for the year?
a. P180,000
b. P300,000
c. P430,000
d. P540,000

Use the following data for the next four (4) qustions:
Kardo owns a nightclub and a videoke bar, with gross receipts of P2,500,000. His cost of direct services
and operating expenses are P1,000,000 and P600,000 respectively, and with non-operating income of
P200,000.

7. Which of the following statements is correct?

a. Kardo has no option to avail the 8% income tax rate.
b. Kardo’s income tax shall be computed using the graduated tax rate.
c. Aside from income tax computed using the graduated income tax, Kardo is liable to
prescribed business tax, which, under this case, is Amusement Tax under Sec. 125 of the
Tax Code, as amended.
d. All of the above
8. Kardo’s income tax due for the year shall be:
a. P188,000
b. P208,000
c. P220,000
d. P250,000
9. Kardo’s business tax due for the year shall be:
a. P196,000
b. P216,000
c. P480,000
d. P486,000
10. Kardo’s total tax due for the year shall be :
a. P706,000
b. P486,000
c. P216,000
d. P188,000

Use the following data for the next three (3) questions:
Ador, an executive of Ang Probinsyano Promotions, earned in 2018 P1,200,000 compensation income,
inclusive of 13th month pay and other benefits amounting to P120,000. Aside from employment, he
owns a farm, with gross sales of P5M. His cost of sales and operationg expenses are P2,000,000 and
P600,000 respectively, and with non-operating income of P100,000.

11. Which of the following statements is incorrect?

a. Ador has no option to avail the 8% income tax rate.
b. Ador’s income tax shall be computed using the graduated tax rate.
c. Aside from income tax computed using the graduated income tax rate, Ador is liable to
prescribed business tax, which, under this case, is value added tax, since his gross
sales/receipts and other non-operationg income exceeded the vat threshold of P3M.
d. All of the above
 12. Andor’s income tax due for the year shall be:
a. P490,000
b. P515,200
c. P1,005,200
d. P1,200,000
13. Ador’s business tax due for the year shall be:
a. P150,000
b. P153,000
c. P612,000
d. Pnil

Use the followng data for the nex four (4) questions:
Lorna, a self-employed resident citizen provided the following data for 2018 taxable year:
Sales P2,800,000
Cost of sales 1,125,000
Business Expenses 650,000
Gain on sale of shares of foreign corporation 50,000
Interest income from peso bank deposit 80,000
Interest income from bank deposit under FCDS 120,000
Gain on sale of shares of DC (non-listed) 150,000
Gain on sale of land in the Philippines held as capital asset with cost
of P1,500,000 when the zonal value is P1,200,000 500,000

14. How much is the total income tax expense of Lorna for the year?
a. P321,500
b. P351,500
c. P374,000
d. P389,000
15. How much is the total income tax of Lorna assuming she opted to be taxed at 8%?
a. P321,500
b. P342,500
c. P358,000
d. P384,500
16. Assuming Lorna is a vat-registered taxpayer, how much is her total income tax expense
assuming she opted to be taxed at 8% income tax rate?
a. P321,500
b. P351,500
c. P384,500
d. P389,000
17. Using the same data except that her gross sales for the year was P3,800,000, how much is her
total income tax expense assuming she opted to be taxed at 8% income tax rate?
a. P321,500
b. P351,500
c. P352,000
d. P690,500
18. Statement 1: The provision of the Tax Code, as amended, which allows an 8% income tax rate on
gross sale/receipts and other non-operation income in excess of P250,000 is available only to
purely self-employed and/or professionals.
Statement 2: The P250,000 mentioned in the 1st statement is not applicable to mixed income
earners since it is already incorporated in the first tier of the graduated income tax rates
applicable to compensation income.
a. Only statement 1 is correct
 b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
19. The income tax due of a mixed income earner who opted to be taxed at 8% income tax rate shall
be:
a. The tax due from compensation, computed using the graduated tax rate.
b. The tax due from self-employment and/or practice of profession, resulting from the
multiplication of the 8% income tax rate with the total of the gross sales/receipts and other
non-operating income.
c. Either “a” or “b” , at the option of the self-employed and/or professional
d. The sum of “a” and “b”
20. Juan is a MIXED INCOME EARNER. He is a self-employed resident citizen and currently the
Finance manager of Omega Corporation. The following data were provided for 2018 taxable
year.

Compensation Income P1,800,000

Sales 2,800,000
Cost of sales 1,125,000
Business Expenses 600,000
Interest income from peso bank deposit 80,000
Gain on sale of land in the Philippines held as capital asset with cost of
P1,500,000 when the zonal value is P1,200,000 500,000
How much is his total income tax expense assuming he opted to be taxed at 8%?
a. P321,500
b. P788,500
c. P808,000
d. P358,000
21. Statement 1: Individual taxpayers who are not allowed to avail the 8% preferential income tax
rate is not required to submit/attach Financial Statements (FS)
Statement 2: Individual taxpayers who are allowed to avail the 8% preferential income tax rate
is not required to submit/attach Financial Statements (FS)
a. Only Statement 1 is correct
b. Only Statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
22. When Pedro registered in the BIR, he initially presumed that his gross sales/receipts and other
non-operating income for the taxable year will not exceed the P3,000,000 vat threshold.
However, his actual gross, sales/receipts amounted to P4,000,000 during the taxable year.

Statement1: Pedro shall pay the required percentage tax covering the sales/receipts and other
non-operationg income, from the beginning of the taxable year or commencement of
business/practice of profession until the time he becomes liable to vat, without imposition of
penalty of timely paid in the immediately succeeding month/quarter.

Statement 2: Pedro has to file two (2) business tax returns during the month/quarter
(percentage tax and vat)
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
Use the following data for the next 3 questions:

23. Lorna is a newly registered non-vat taxpayer engaged in merchandising of cellphone accessories
on February 1, 2018. In September 2018, her cumulative gross sales/receipts reached
P3,500,000. Assume further that she availed 8% income tax rate upon her registration with the
BIR on February 1, 2018 or upon filing of her first quarterly income tax return. Which of the
following statements is correct?
a. Lorna is required to register under the vat system on or before October 31, 2018, one
month from the time she exceeded the P3,000,000 vat threshold.
b. She is required to file Percentage return covering the sales/receipts and other non-
operating income from February 1 to September 30, 2018 due on or before October 20,
2018, without imposition of penalty if timely paid.
c. She is liable to vat beginning October 1, 2018.
d. All of the above
24. Statement 1: Lorna shall be automatically subjected to graduated income tax rates from the
time the gross sales/receipts and other non-operationg income exceeded the vat threshold.
Statement 2: The 8% income tax rate paid by Lorna shall be credited/deducted from her annual
income tax due using the graduated income tax regime.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements is correct
d. Both statements is incorrect
25. Assume that Lorna did not avail the 8% income tax rate upon her registration with the BIR on
February 1, 2018 or upon filing of her first quarterly income tax return. Which of the following
statements is correct?
Statement 1: She is subject to the graduated income tax rate.
Statement 2: The last quarterly percentage return that she needs to file should cover the period
from July 1 to September 2018, which is due on or before October 20, 2018.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements is correct
d. Both statements are incorrect

Use the following data for the next two (2) questions:

26. In 2018, Pedro signified his intention to be taxed at 8% income tax rate on gross sales in his 1st
quarter income tax return. His gross sales during the year exceeded the vat threshold of P3M as
follows:

Q1 Q2 Q3 Q4/Annual
(8% tax) (8% tax) (8% tax) (Graduated)
Sales P500,000 P500,000 P2,000,000 P3,500,000
Cost of sales (300,000) (300,000) (1,200,000) (1,200,000)
Gross Income 200,000 200,000 800,000 2,300,000
Operating Expenses (120,000) (120,000) (480,000) (720,000)
Net taxable income P80,000 P80,000 P320,000 P1,580,000

how much is Pedro’s annula income?

a. 220,000
b. 289,200
c. 509,200
 d. 2,060,00
27. How much us Pedro’s total business due for the year?
a. P90,000
b. P195,000
c. P510,000
d. nil
28. Juan initially presumed that his gross sales/receipts and other con-operating income for the
taxable year will not exceed P3,000,000 vat threshold. Consequently, he registered an a non-vay
taxpayer, However, his acually gross sales/receipts and other non-operating income exceeded
the vat treshold during the taxable year. Which of the following statments is correct?
a. He shall immediately update his/her registration to reflect the change in tax profile from
non-vat to vat taxpayer.
b. He shall be required to update registration immediately within the month following the
month s/he exceeded the vat threshold.
c. He shall be liable to vat prospectively starting on the first day of the month following the
month when the threshold is breached.
d. All of the above.
29. When Ana registered in the BIR, she initially presumed that his gross sales/receipts and other
non-operating income for the taxable year will exceed the P3,000,000 vat threshold . Hence, she
registered under the vat system. However, her actual gross sales/receipts for the immediately
preceding 3-year period did not exceed the vat threshold.
Statement 1: She shall update the registration records on or before the first quarter of a taxable
year to reflect the change in the registration
Statement 2: She shall remain liable for vat as long as there is no update of registration and vat
registered invoices/receipts are conticously issued.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement is correct
d. Both statement is incorrect
30. G.I. Joe, an alien employed in Pan Pacific Petroleum, a Petroleum Service Contractor, received
compensation income of P5M in 2018, inclusive of P400,000 13th month pay and other benefits.
G.I. Joe’s Income tax due for the year shall be:
a. P490,000
b. P931,000
c. P1,421,200
d. nil
31. Which of the following statements regarding minimum wage earner (MWE) is correct?
a. The MWE is exempt from income tax on his basic statutory minimum wage (SMW).
b. The MWE is exempt from income tax on his overtime pay, holiday pay, night shift
differential, and hazard pay.
c. The MWE is subject to income tax on income other than those mentioned in “a” and “b”.
d. All of the above
32. What is the correct treatment of overtime pay, holiday pay, night shift differential, and hazard
pay received by those whose basic pay is more than the SMW?
a. Exempt from income tax
b. Subject to income tax, and consequently, to the withholding tax on compensation
income
c. Considered as fringe benefit subject to fringe benefit tax, provided the employee is holding
management or supervisory position.
d. Non of the above.
33. Minimum Wage Earners (MWEs) receiving “other benefits” exceeding P90,000 limit shall be
 a. Taxable on the excess benefits only
b. Taxable on the excess benefits as well as his salaries, wages and allowance, just like an
employee receiving compensation income beyond the statutory minimum wage.
c. Exempt from income tax
d. None of the above.
34. Pedro, single, is a minimum wage earner of Makibaka Corporation. In addition to his basic
minimum wage of P180,000 for the year, he also received the following benefits:
 Holiday pay, P32,000
 Overtime pay, 25,000
 Night shift differential, 18,000
The income subject to tax should be
a. P57,000
b. P75,000
c. P255,000
d. nil
35. Pedro’s taxable income assuming the taxable year is 2017 should be:
a. P60,000
b. P110,000
c. P192,000
d. nil
36. How much is the income tax due of Pedro assuming the taxable year is 2018?
a. P80,000
b. P102,000
c. P192,000
d. Nil
37. How much is the income tax due of Pedro in 2018 assuming he also earned P450,000 derived
from his business of buying and selling various consumer products?
a. P30,000
b. P38,000
c. P68,000
d. nil
38. Partnership is formed by persons for the sole purpose of exercising their common profession, no
part of the income of which is derived from engaging in any trade or business.
a. Joint venture
b. General professional partnership
c. Trading Partnership
d. Joint accounts
39. A general professional partnership is exempt from income tax, but is required to file an income
tax return
a. For statistical purposes
b. Because the net income of the partnership will be traded into the income tax return of
the partners.
c. Because all income earners are required to file income tax returns.
d. None of the above
40. For purposes of taxation, partnership is
I. Classified into two major categories, partnership in trade and general professional
partnership
II. Partnership in trade is treated as corporate taxpayer.
III. General professional partnership is exempt from income tax
a. I, Ii and III
b. I and II only
 c. I and III only
d. I only
41. Statement 1: All partnerships are taxed in the same manner as corporation.
Statement 2: The income of a general commercial partnership is also subject to MCIT or Regular
Corporate Income Tax whichever is applicable.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
42. Which of the following statements is false?
a. Registered general professional partnerships are subject to income tax.
b. A partner’s share in the net profits of a general professional partnership is not
compensation income.
c. A limited partnership is considered, for tax purposes, a corporation and the partnerships
thereof likened to stockholders
d. Tax income taxation rules application to corporations likewise apply to informal
partnerships.

43. A taxable partnership may be subject to the following taxes:

I. Minimum corporate income tax
II. Regular corporate income tax
III. Improperly accumulated earnings tax.
a. I, II and III
b. I and II only
c. I and III only
d. I only
44. 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.
45. Pedro and Ana contributed money and purchased five (5) hectares of land in 2017. In the same
year, they sold the land a higher price. In 2018 they bought a bigger parcel of land and sold it
after three (3) months at double the price. They paid the corresponding capital gains taxes.
Q1: Have they formed an unregistered partnership subject to tax?
Q2: Are their respective shares in the income taxable to them?
a. Yes, Yes
b. No, Yes
c. Yes, No
d. No, No
46. When their parents died, Romeo and Juliet inherited five (5) hectares of land in Isabela, They
decided to invest capital and developed the land into a subdivision, with small lots being sold
either on installment or cash basis
 Q1: Is a partnership created by Romeo and Juliet?
Q2: Are they subject to final tax on their respective share in the income
a. Yes, No
b. No, Yes
c. Yes, Yes
d. No, No
47. Statement 1: A CPA and Dentist may from a GPP or an ordinary partnership.
Statement 2: Partnership and Corporation have separate juridical personalities distinct from the
owners:
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 1 and 2 are true

48. Statement 1: A Partner of a GPP is not required to include in his personal gross income his share
in the distribute income of the GPP.

Statement 2: Corporations may form a taxable partnership but not a GPP

a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is trues
d. Statements 1 and 2 are true
49. Statement 1: The distributive share of a partner in the net income of a taxable partnerships
equal to each partner’s distributive share of the net income declared by the partnership for a
taxable year after deduct their respective shares in the net operating loss from their individual
gross income.

Statement 2: If a taxable partnership sustains net operating loss, the partners shall be entitled to
deduct their respective shares in the net operating loss from their individual gross income.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 2 is true
50. Statement 1: For purpose of computing the distributive share if the partners of a general
professional partnership, the net income of the partnership shall be computed in the same
manner as a corporation.
Statement 2: Partners of a taxable partnership are considered as shareholders and profits
distributed to them by the partnership are considered as dividends.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
51. The partner’s share in the profits of a general professional partnership is regarded as received
by the partners although not yet distributed. This concept of income reporting under the Tax
Code is known as:
a. Installment basis of reporting income
 b. Accrual basis of reporting income
c. Constructive receipt basis of reporting income
d. Hybrid method of reporting income

52. Statement 1: If the amount to be distributed to a partner of GPP is more than P720,000, it is
subject to 15% creditable withholding tax.
Statement 2: The share of a partner in a commercial partnership is subject to final withholding
tax of 10% if the amount is below P720,000.
Statement 3: The distributive share of a partner is a commercial partnership is subject to final
tax.
a. Statements 1,2 and 3 are false
b. Only statement 3 is false
c. Only statement 2 is false
d. Statements 1, 2 and 3 are true
53. Statement 1: A GPP shall not e subject to Income Tax.
Statement 2: Income payments to a GPP shall be considered exempt from withholding tax.
a. Statements 1 & 2 are false.
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 1 and 2 are true
54. Which of the following options is correct?
Part of distributable Returnable Subject
income of the income of the CWTX
SHARE IN THE INCOME OF
GPP.
a. From its operations Yes Yes No
b. From its passive income Yes Yes No
c. From its capital gains subject to No No No
CGT
d. From its tax exempt income Yes No No
55. Which of the following options Is correct?
Part of distributable Returnable Subject to
income of the income of the FWTX
partner partner
SHARE IN THE INCOME OF
COMMERCIAL PARTNERSHIP
a. From its operations Yes No No
b. From its passive income Yes No No
c. From its capital gains subject to No No No
CGT
d. From its tax exempt income Yes No No

56. Statement 1: The share of the partner in the gross income of the GPP is added to his own gross
income.
 Statement 2: The share of the partner in the net income of a GPP is also considered passive
income
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
57. Statement 1: Co-ownership and partnership are similar as to taxability.
Statement 2: Corporations and ordinary partnerships are similar as to taxability
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
58. Prior to the effectivity of the TRAIN Law, If the GPP chooses itemized deductions, the partners
comprising it must also claim itemized deductions under RR 2-2010, which are in the nature of
ordinary and necessary expenses for the practice of profession that were “not claimed by the
GPP” during the year such as:
a. Representation expenses incurred by the partner where the covering receipt or invoice
is issued in his name.
b. Travelling expenses while away from home which were not liquidated by the
partnership
c. Depreciation of a car used in the practice of profession where said car is registered in
the name of the partner
d. All of the above
59. Which of the following statements is incorrect assuming the taxable year is prior to 2018?
a. If the GPP avails of the OSD in computing its net income, the partners can no longer
claim further deductions from their share in the net income of the GPP
b. OSD covers or in lieu of the itemized deductions allowed to both the GPP and the
“partner(s)
c. Both “a” and “b”
d. Neither “a” nor “b”
60. Statement 1: Under RA10963, an individual partner of a GPP applying optional standard
deduction is not allowed for any deduction on his distributive shares.
Statement 2: Under RA10963, an individual partner of a GPP may avail of 8% tax on his
distributive share,. In lieu of graduated tax rate.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
61. Statement 1: GPP’s may claim the 40% OSD in the determination of distributable income.
Statement 2: A GPP is subject to income tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

Use the following data for the next four (4) questions:
Bobadilla, Trinidad and Company (BTC) is a general professional partnership, with Bobadilla,
married, and Trinidad, single, participating equally in the income and expenses. The following
are the data for the partnership and the partners during 2017 taxable year:
BTC Partnership Bobadilla Trinidad
Gross Revenue/ sales P1,000,000 P400,000 P350,000
 Cost of direct service/sales 400,000 250,000 150,000
Expenses 350,000 70,000 120,000

Additional Information:
Bobadilla uses his personal car in going to meetings with various clients. His expenses to
such meetings amounted to P35,000. The said amount was not included in the expenses
claimed by the partnership

62. The distributive share of Bobadilla from the partnership profit is :

a. P300,000
b. P125,000
c. P640,000
d. P30,000
63. The taxable income of Bobadilla is:
a. P220,000
b. P120,000
c. P155,000
d. P30,000
64. The taxable income of Bobadilla if the Partnership is engaged in trade or business is:
a. P220,000
b. P120,000
c. P155,000
d. P30,000
65. The taxable income of Bobadilla if the Partnership opted to use Optional Standard Deduction is :
a. P220,000
b. P120,000
c. P155,000
d. P370,000
66. How much is the distributable income of the GPP?
a. P992,667
b. P1,019,333
c. P2,578,000
d. P2,978,000
67. How much is the distributable share of each partner in the total income of the GPP?
a. P992,667
b. P1,019,333
c. P2,578,000
d. P2,976,000
68. How much is the taxable income of Ramos in 2018?
a. P860,000
b. P1,510,000
c. P1,560,000
d. P2,580,000
69. How much is the taxable income of Ramos in 2018 assuming GRT & Co. opted to use Optional
Standard deduction?
a. P1,376,000
b. P1,426,000
c. P1,692,000
d. P1,860,600
70. How much is the taxable income of Ramos in 2018 assuming the GPP and the partner opted to
use Optional Standard deduction?
a. P1,376,000
b. P1,426,000
c. P1,692,000
d. P2,176,000