* 1/1

QUIZ 1 - Introduction to Taxation Total points 29/30

The respondent's email ([email protected]) was recorded on submission of

this form.

Only statement 1 is correct.

Which of the following statements is incorrect? * 1/1
Only statement 2 is correct.

Both statements are correct.

Taxes are the revenues raised in the exercise of the police power of the State.
Both statements are incorrect.
One of the special characteristics of tax is it is unlimited in amount.

The three fundamental powers of the State are inherent in the State and may be
exercised without the need of any constitutional grant.

All of the above. The primary purpose of taxation is to raise revenue for the support of the *1/1
government. However, taxation is often employed as a device for
regulation by means of which, certain effects or conditions envisioned by
the government may be achieved such as:

The State having sovereignty can enforce contributions (tax) upon its *1/1
citizens even without a specific provision in the Constitution authorizing Taxation may be used to provide incentive to greater production through grant of
it. Which of the following will justify the foregoing statement? tax exemptions.

Taxation can strengthen weak enterprises by creating conditions conducive to their

growth through grant of tax exemptions.
It is so because the State has the supreme power to command and enforce
obedience to its will from the people within its jurisdiction.
Tax may be increased in periods of prosperity to curb spending power and halt
inflation or lowered in periods of slump to expand business and ward off
Any provision in the Constitution regarding taxation does not create rights for the
depression.
sovereignty to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
All of the above.
Both a and b

Neither a nor b

Which of the following statements is correct? * 1/1 On a theoretical basis of taxation, which of the following statements is *1/1
true?

The purpose of taxation may also be compensatory meaning it may be used to

make up for the benefit received. People pay taxes which their government uses to expand its powers and territorial
domination.
Taxes may be imposed for the equitable distribution of wealth and income in
society. People demand from their government certain responsibilities and then provide this
government with the means to carry them out.
Both a and b
State needs taxation to exist, while people must support taxation because they
Neither a nor b need the presence of the state.

B and C

Which theory in taxation states that without taxes, a government would *1/1
be paralyzed for lack of power to activate and operate it, resulting in its
Incidence of taxation means * 0/1
destruction?

Shifting of tax
Power to destroy theory

Refunds of tax
Lifeblood theory

Payment of tax
Sumptuary theory

Imposition of tax
Symbiotic doctrine

Correct answer

Imposition of tax
The actual effort exerted by the government to effect the exaction of *1/1 A law was passed by Congress which granted tax amnesty to those who *1/1
what is due from the taxpayer is known as have not paid income taxes for a certain year and at the same time
providing for the refund of taxes to those who have already paid them.
The law is
Assessment

Levy
Valid because there is a valid classification.

Payment Not valid because those who did not pay their taxes are favored over those who
have paid their taxes.
Collection
Valid because it was Congress that passed the law and it did not improperly
delegate the power to tax.

Not valid because only the President with the approval of Congress may grant
amnesty.
* 1/1

Congress passed a new law imposing taxes on income earned out of *1/1
particular activity that was not previously taxed. The law, however, taxed
incomes already earned within the fiscal year when the law took effect. Is
the law valid?

No, because the laws are intended to be prospective not retroactive.

No, the law is arbitrary in that it taxes income that has been already spent.

Only Statement 1 is correct. Yes, since the tax laws are the lifeblood of the government.

Only Statement 2 is correct. Yes, tax laws are an exception; they can be given retroactive effect.

Both statements are correct.

Both statements are incorrect.

Being a legislative in nature, the power to tax may not be delegated *1/1 The following are the aspects of taxation * 1/1
except

To local governments or political subdivisions

When allowed by constitution

When delegation related merely to administrative implementation that may call for
some degree of discretionary powers under a set of sufficient standards expressed
by law or implied from the policy and purpose of the act.
I, II & III
All of the above
I & II only

I & III only

* 1/1 II & III only

Which of the following is incorrect? * 1/1

Only Statement 1 is correct.

Only Statement 2 is correct.

Both statements are correct. A

Both statements are incorrect. B

D
Which of the following is correct? * 1/1 The following are the characteristics of the State’s power to tax except * 1/1

The strongest of all inherent powers of the State

Involves power to destroy

Both a and b

Neither a nor b
A

C
Levying of local government taxes may be exercised by: * 1/1
D

The local executive only

The legislative branch of the local government only

* 1/1
The local executive and the legislative branch of the local government unit

Neither the local executive nor the legislative branch of the local government can
exercise the power.

Where does taxing power of provinces, municipalities and cities precede *1/1
Statements I & II are false. from?

Statement I & II are true.

Constitutional grant
Statement I is true but Statement II is false.
Legislative enactment
Statement I is false but Statement II is true.
Presidential decree or executive act

Local legislation

* 1/1 The power to tax involves power to destroy means: * 1/1

The power to tax is viewed as the power to destroy in the sense that a lawful tax
cannot be defeated just because its exercise would be destructive or would bring
about insolvency to a taxpayer.

The principle applies that an imposition of lawful regulatory taxes would be

destructive to the taxpayers and business establishments because the government
can compel payment of tax and forfeiture of property through the exercise of police
power.

Both a and b
Statements 1 & 2 are false.
Neither a nor b
Statement 1 is true but statement 2 is false.

Statement 1 is false but statement 2 is true.

Statements 1 & 2 are true. There can be no tax unless there is a law imposing the tax is consistent *1/1
with the doctrine of

Uniformity in taxation
The following are the nature of taxation except * 1/1
Due process of law

Non-delegation of the power of tax

Inherent and sovereignty

All of the above

Essentially a legislative function

Subject to inherent and constitutional limitation

Subject to the approval of the people

The tax should be based on the taxpayer's ability to pay. In relation to this, *1/1 Progressivity of taxation is also mandated in the Constitution. * 1/1
which of the following is not correct?

No person shall be imprisoned for non-payment of tax.

A graduated tax table is in consonance with this statement.

As a theory of taxation, ability to pay theory.

As a basic principle of taxation, this is called “theoretical justice”

Rule of “no estoppel against the government” means * 1/1 Statements 1&2 are false.

Statement 1 is true but statement 2 is false.

Rule of law that in the performance of its governmental functions, the state cannot
be estopped by the neglect of its agents and officers. Statement 1 is false but statement 2 is true.

The government is not estopped by the mistakes or errors of its agents; erroneous Statements 1&2 are true.
application and enforcement of law by public officers do not block the subsequent
correct application of statutes.

Both a and b

Neither a nor b One of the characteristics of our internal revenue law is that they are * 1/1

Political in nature

Penal in nature

Generally prospective in operation although the tax statute may nevertheless

operate retrospectively provided it is clearly the legislative intent.

Criminal in nature

Which of the following distinguishes tax from license fee? * 1/1

Non-payment does not necessarily render the business illegal

A regulatory measure

Imposed in the exercise of police power

Limited to cover cost of regulation

This form was created inside of Batangas State University. Report Abuse

Forms
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: [email protected] | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

Use a separate sheet of paper for your solutions and final answer.

A. Determine the taxable income and income tax due on each situation. (5
points each item, 20 points)

1. Juan is a resident citizen, earning purely business income for 2020 taxable year:
Gross Sales P2,800,000
Cost of Sales 1,200,000
Operating expenses 650,000
Creditable withholding taxes 80,000

2. Use the same data in #1 but assume that Juan opted to be taxed using 8% income tax
rate.

3. Lorna is a resident citizen, earning compensation and business income for 2020 as
follows:
Compensation income P1,400,000
Gross sales 2,800,000
Cost of sales 1,200,000
Operating expenses 650,000
Withholding tax on compensation income 310,000
Other creditable withholding taxes 80,000

4. Can Lorna choose to be taxed at 8% instead of the graduated income tax rate in #3? If
yes, how much is her total income tax payable for the year?

B. Computation of Basic Income Tax on Passive Income and Capital Gains Tax
CJ, single, had the following data for 2020 taxable year:
Gross business income, Philippines P1,000,000
Gross business income, USA 500,000
Business expenses, Philippines 700,000
Business expenses, USA 430,000
Compensation income, Philippines 600,000
Dividend income from a domestic corporation 50,000
Dividend income from a foreign corporation 40,000
Interest income from peso bank deposit- Philippines 20,000
Interest income from bank deposits abroad 30,000
Interest income from FCDS deposits 40,000
Royalty income from composition 25,000
Raffle draw winnings 10,000
PCSO winnings 200,000
Creditable withholding taxes on business income 125,000

1. Determine the following assuming the taxpayer is a resident citizen: (5 points each, 20
points)
a. Taxable net income
b. Income tax payable
c. Total final taxes on passive income
d. Total income tax expense

2. Determine the following assuming that taxpayer is resident alien: (5 points each, 20
points)
a. Taxable net income
b. Income tax payable
c. Total final taxes on passive income
d. Total income tax expense
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: [email protected] | Website Address: http://www.batstate-u.edu.ph

College of Accountancy, Business, Economics and International Hospitality Management

Name: ____________________________________ Course and Section: __________ SR Code__________

C. Capital Gains Tax

1. A resident citizen taxpayer sold a vacant lot (held as investment) in the Philippines. Other
data regarding the sale are as follows:
Selling price P5,500,000
Fair market value 6,000,000
Zonal value 5,850,000
Expenses on the sale 275,000

Required: compute the capital gain tax. (5 points)

2. The taxpayer is a resident alien:

Selling price on a direct sale to buyer of shares of stock of a domestic corp.
P310,000
Expenses on sale 10,000
Cost of shares sold
200,000
Required: Compute the capital gains tax. (5 points)

D. Quarterly Income Tax Return

The following cumulative balances during the year on income and expenses were
provided by Juan Dela Cruz, a resident citizen:
1st Q 2nd Q 3rd Q 4th Q
Gross Profit from Sales P300,000 P650,000 P910,000 P1,200,000
Business expenses 120,000 262,000 405,890 426,000
Dividends-domestic corp. 20,000 20,000 30,000
30,000
Interest income from,
BPI 4,000 8,000 12,000 16,000
UCPB 8,000 12,000 16,000 18,000
Metro Bank 5,000 10,000 15,000 30,000
Capital gain on sale of Land: 150,000 150,000 150,000 150,000
Selling price: P600,000; Cost: P450,000

REQUIRED: Using the above information, compute the following: (5 points each, 30
points)
1. Income tax payable, first quarter
2. Income tax payable, second quarter
3. Income tax payable, third quarter
4. Income tax payable, fourth quarter
5. Total final taxes (for the year) on passive income
6. Total capital gain tax

Leading Innovations, Transforming Lives, Building the Nation

A. Determine taxable income and tax due
1 Gross Sales 2,800,000.00 5
Cost of Sales (1,200,000.00)
Operating Expenses (650,000.00)
Taxable income 950,000.00

Tax Due 175,000.00

2 Gross Sales 2,800,000.00 5

Less: Exemptions (250,000.00)
Taxable Income 2,550,000.00

Tax Due at 8% 204,000.00

3 Compensation Income 1,400,000.00 5

Gross Sales 2,800,000.00
Cost of Sales (1,200,000.00)
Operating Expenses (650,000.00)
Taxable income 2,350,000.00

Tax Due 602,000.00

4 Compensation Income 1,400,000.00 5

Tax Due on Compensation 310,000.00

Less: Withholding tax on compensation (310,000.00)
Income Tax Payable on Compensation -

Gross Sales 2,800,000.00

Less: Exemptions
Taxable Income 2,800,000.00

Tax Due at 8% 224,000.00

Less: Other creditable withholding taxes (80,000.00)
Income Tax Payable on Business 144,000.00

TOTAL Income Tax Payable 144,000.00

B. Computation of Basic Income Tax on Passive Income and Capital Gains Tax
Problem 1 and 2
subject to income tax Resident Citizen Resident Alien
Gross business income, Philippines 1,000,000.00 1,000,000.00
Gross business income, USA 500,000.00
Business expenses, Philippines (700,000.00) (700,000.00)
Business expenses, USA (430,000.00)
Compensation income, Philippines 600,000.00 600,000.00
Dividend income from a foreign corporation 40,000.00
Interest income from bank deposits abroad 30,000.00
Taxable Income (Answer 1a and 2a) 1,040,000.00 900,000.00
5 5
Income Tax Due 202,000.00 160,000.00
Less: Creditable withholding taxes on business income (125,000.00) (125,000.00)
Income Tax payable (Answer 1b and 2b) 77,000.00 35,000.00
5 5

subject to final tax Resident Citizen Final Tax Rate Final Tax
Dividend income from a domestic corporation 50,000.00 10% 5,000.00
Interest income from peso bank deposit- Philippines 20,000.00 20% 4,000.00
Interest income from FCDS deposits 40,000.00 15% 6,000.00
Royalty income from composition 25,000.00 10% 2,500.00
Raffle draw winnings 10,000.00 20% 2,000.00
PCSO winnings 200,000.00 20% 40,000.00
Final Taxes (Answer 1c) 59,500.00
5

subject to final tax Resident Alien Final Tax Rate Final Tax
Dividend income from a domestic corporation 50,000.00 10% 5,000.00
Interest income from peso bank deposit- Philippines 20,000.00 20% 4,000.00
Interest income from FCDS deposits 40,000.00 15% 6,000.00
Royalty income from composition 25,000.00 10% 2,500.00
Raffle draw winnings 10,000.00 20% 2,000.00
PCSO winnings 200,000.00 20% 40,000.00
Final Taxes (Answer 2c) 59,500.00
5

Resident Citizen Resident Alien

Income Tax - regular 202,000.00 160,000.00
Final Tax on Passive Income 59,500.00 59,500.00
TOTAL Income Tax Expense (Answer 1d and 2d) 261,500.00 219,500.00
5 5
C. Capital Gains Tax
1 Selling Price 5,500,000.00
Expenses on the Sale (275,000.00)
Capital Gains 5,225,000.00

There is Capital Gains, so there is Capital Gains Tax.

Selling Price 5,500,000.00

FMV of lot 6,000,000.00
whichever is higher 6,000,000.00
CGT Rate 6%
Capital Gains Tax 360,000.00 5

2 Selling Price of shares 310,000.00

Expenses on sale (10,000.00)
Cost of shares sold (200,000.00)
Capital Gains 100,000.00
Multiply by CGT Rate 15%
Capital Gains Tax 15,000.00 5
D. Quarterly Income Tax Return (presented data are cumulative amounts)
1st Q 2nd Q 3rd Q 4th Q
Gross Profit from Sales 300,000.00 650,000.00 910,000.00 1,200,000.00
Business Expenses (120,000.00) (262,000.00) (405,890.00) (426,000.00)
Taxable Income 180,000.00 388,000.00 504,110.00 774,000.00

Income Tax Due - 27,600.00 56,027.50 123,500.00

Less: Income Tax Credits
Paid 1st Q - - -
Paid 2nd Q 27,600.00 27,600.00
Paid 3rd Q 28,427.50
Income Tax Payable per quarter - 27,600.00 28,427.50 67,472.50
(1) (2) (3) (4)
5 5 5 5
Dividends - domestic corp 30,000.00 10% 3,000.00
Interest Income:
BPI 16,000.00 20% 3,200.00
UCPB 18,000.00 20% 3,600.00
Metrobank 30,000.00 20% 6,000.00
Total final taxes on passive income Required (5) 15,800.00
5

Selling Price 600,000.00

Cost (450,000.00)
Capital Gains 150,000.00

There is Capital Gains, so there is Capital Gains Tax.

Selling Price 600,000.00

FMV of lot
whichever is higher 600,000.00
CGT Rate 6%
Capital Gains Tax (Required 6) 36,000.00
5
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Tax 301 – Income Taxation
Quiz 2

General Directions: Never cheat. Attach all your solutions, and encircle or
highlight your final answer. Late submissions will have demerits. All amounts should
be rounded to the nearest peso.

1. X established a revocable trust, where ABC Bank is the trustee, in favor of X

Jr., his son. During 2017, the trust earned P1,230,000, of which P150,000 was
given to his X Jr., and incurred expenses amounting to P580,000. Out of the
trust, cash of P340,000 was transferred to X Jr. How much is the taxable
income of the trust?

Zero. Trust is revocable, taxable will be the trustor.

2. This is the use of a taxpayer of illegal or fraudulent means to defeat or lessen

the payment of tax.

Tax Evasion

3. Goliath National Bank owns a residential house with a fair market value of
P10,000,000 and a carrying amount of P8,000,000 for 2018. Barney Stinson,
a US citizen assigned to work in the Philippines for a 5-year contract, was
allowed to use the same. How much is the FBT due for the year 2020 on the
said housing benefit, if any?

Fair market value of the house 10,000,0

00
Depreciation rate 5%
Value of the benefit 500,000
No transfer of ownership 50%
Monetary value 250,000
Divide by 65%
GUMV 384,615
FBT rate 35%
FBT 134,615

4. Which of the statements are true?

Statement 1: A revenue bill must originate from the House of
Representatives.
Statement 2: A bill granting tax exemption must originate from the Senate.

Only Statement 1 is true.

5. Which type of double taxation is expressly prohibited by the 1987

Constitution of the Republic of the Philippines?

None.

6. Industrious as he is known, Arthur, a non-VAT registered resident citizen,

works as a government employee at daytime and accepts clients for
accounting work after office hours. At the same time, Arthur maintains a t-
shirt printing shop to earn more. For the taxable year ending December 31,
2021, Arthur earned the following amounts:
Taxable compensation income 850,000
Gross receipts from accounting 1,500,00
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
work 0
T-shirt printing shop
Gross Sales 1,400,00
0
Cost of sales 800,000
Operating expenses 400,000

Upon filing of his income tax return, he availed of the 8% income tax option.
Assuming that the availment of the 8% income tax option is proper, how
much is Arthur’s income tax due?

Income tax on compensation 145,000

Income tax on business 232,000
Total income tax due 377,00
0

For items 7 to 10
A taxpayer received the following items of income during the taxable year 2021:
Interest income from BPI – Pateros branch from 62,000
checking account
Interest from BDO – Intramuros branch from savings 38,500
account
Interest income from PNB – Quiapo branch from foreign 42,000
currency deposit account under the expanded currency
deposit system
Interest income from dollar deposits on Bank of New 130,000
Jersey in the United States
Interest income from promissory note of Mr X, 58,400
Philippines
Interest income from promissory note of Mr X, United 62,000
States
Yield from deposit substitute, Philippines 87,000
Interest from Philippine government securities 21,000
Interest income from long-term deposits, Philippines 57,000
Interest income from long-term deposits, Egypt 62,500
Royalties from books, Philippines 16,000
Royalties from paintings, Philippines 60,000
Royalties from musical compositions, Japan 50,000

7. If the taxpayer is a resident citizen, how much is the final withholding tax?

Passive Final Tax Final Tax

Income rate
Interest income from BPI – Pateros branch 62,000 20% 12,400
from checking account
Interest from BDO – Intramuros branch from 38,500 20% 7,700
savings account
Interest income from PNB – Quiapo branch 42,000 15% 6,300
from foreign currency deposit account
under the expanded currency deposit
system
Yield from deposit substitute, Philippines 87,000 20% 17,400
Interest from Philippine government 21,000 20% 4,200
securities
Royalties from books, Philippines 16,000 10% 1,600
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Royalties from paintings, Philippines 60,000 20% 12,000
61,600

8. If the taxpayer is a resident citizen, how much income is subject to regular

income tax?

Interest income from dollar deposits on Bank of New Jersey in the 130,000
United States
Interest income from promissory note of Mr X, Philippines 58,400
Interest income from promissory note of Mr X, United States 62,000
Interest income from long-term deposits, Egypt 62,500
Royalties from musical compositions, Japan 50,000
362,900

9. If the taxpayer is a non-resident citizen, how much is the final withholding

tax?

Passive Final Tax Final Tax

Income rate
Interest income from BPI – Pateros branch 62,000 20% 12,400
from checking account
Interest from BDO – Intramuros branch from 38,500 20% 7,700
savings account
Yield from deposit substitute, Philippines 87,000 20% 17,400
Interest from Philippine government 21,000 20% 4,200
securities
Royalties from books, Philippines 16,000 10% 1,600
Royalties from paintings, Philippines 60,000 20% 12,000
55,300

10.If the taxpayer is a non-resident citizen, how much is subject to regular

income tax?

Interest income from promissory note of Mr X, Philippines 58,400

11.How much prize (maximum) income from within of a citizen or resident alien
is subject to ordinary income tax of 20%-35%?

P10,000

12.What is the final tax rate on royalty income from music and literary
compositions received by Resident Citizens from within Philippine sources?

10%

13.During 2020, First Metro Pacific was able to persuade Francis to join the
company as its Assistant Vice President for Finance which included a car plan
worth P3,000,000 in its compensation package. First Metro Pacific purchased
the vehicle and registered the same in favor of Francis. Assuming further that
Francis is a non-resident alien not engaged in trade or business, how much is
the fringe benefits tax?

FBT = 3M/75% x 25% = P1,000,000

14.During 2020, Alpha Corporation gave the following fringe benefits to its
employees:
Salaries to rank-and-file employees 1,000,0
00
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Salaries to managerial employees 1,800,0
00
De minimis benefits to rank-and-file 54,400
employees
De minimis benefits to managerial 27,200
employees
Fringe benefits to rank-and-file 102,000
employees
Fringe benefits to managerial employees 170,000

How much is the total allowable deduction from business income of Alpha
Corporation?

Salaries to rank-and-file employees 1,000,0

00
Salaries to managerial employees 1,800,0
00
De minimis benefits to rank-and-file 54,400
employees
De minimis benefits to managerial 27,200
employees
Fringe benefits to rank-and-file 102,000
employees
Fringe benefits to managerial employees 170,000
Fringe benefit tax (170K/65%*35%) 91,538
3,245,1
38

15.Ana, a resident citizen, provided the following data for year 2021:
Gain on direct sale to buyer of shares of a 70,000
domestic corporation held as capital
asset
Gain on sale of land in the Philippines 500,000
held as capital asset with a zonal value of
P1,200,000 and selling price of
P1,000,000

How much is the total capital gains tax?

CGT on shares (P70,000 x 15%) 10,500

CGT on real properties (P1.2M x 6%) 72,000
82,500

16. Which of the inherent powers maybe exercised even by public utility
companies?

Eminent Domain

17.Which is the strongest among the inherent powers of the state?

Power of Taxation

18.Kind of tax that is based on a fix percentage of the amount of property,

income or other basis to be taxed

Proportional
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
19. If the amount of prize did not exceed P10,000, and was received by a non-
resident alien not engaged in trad or business, what type of income tax will
apply?

Final withholding tax

20.If the amount of PCSO/Philippine lotto winnings received by a resident citizen

in 2019 did not exceed P10,000, what type of income tax will apply?

Exempt from income tax

For items 21 and 22

Namahinga Nah died living an estate worth P10,000,000. The estate is under
administration. In 2020, the properties in the estate earned a gross income of
P1,200,000 and the estate incurred expenses of P600,000. Felipe, the only heir,
received P200,000 from the income of the estate.

21.How much is the income tax due of the estate?

Gross income 1,200,0

00
OpEx (600,00
0)
Income distributed to Felipe (200,00
0)
Estate’s taxable income 400,000
Income tax due P30,00
0

22.Assume that Felipe also earned net income of P500,000 from his trading
business. What amount should Felipe report as his taxable income for the
year?

Gross income from trading business 500,000

Amount received from estate 200,000
Taxable income of Felipe 700,00
0

For items 23 and 24

Mr. Nag-aalangan created a trust naming his eldest son, Kadudaduda as
beneficiary. If the eldest son could not abide with the terms provided in the trust
instrument, Mr. Nag-aalangan has the power to cancel the trust agreement.

For the current taxable year, the trust earned a net income of P1,000,000. On the
other hand, Mr. Nag-aalangan earned a compensation income of P1,500,000 and
business income of P1,000,000.

23.The taxable income of the trust is _____

Zero. The trust is revocable. Its income shall be taxable to the

trustor/grantor.

24.Based on the given data, how much is the taxable income of Mr. Nag-
aalangan?

Gross income – trust 1,000,0

00
Compensation income 1,500,0
 Republic of the Philippines
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COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
00
Business income 1,000,0
00
Taxable income of Grantor/Trustor 3,500,0
00

25.Mapagpala Corporation paid for the monthly rental of the residential house
off a branch manager amounting to P204,000. How much is the fringe benefit
tax expense for the month?

FBT = (P204,000x50%)/65% x 35% = P54,923

26.Vincent sold his residential house and lot for P10,000,000 to his friend. Its
FMV when he inherited it from his father was P12,000,000 although its
present FMV is P15,000,000. The capital gains tax to be paid, if any, is _______

CGT = P15M x 6% = P900,000

27. What is the basis for computing fringe benefits tax?

Grossed-up monetary value

For items 28 to 30
Describe the Philippine taxation system and indicate some suggestions on how to
achieve a sound tax system.
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Name: ________________________________ Score: ______________________________
SR Code: ______________________________ Class Schedule: ______________________

MIDTERM EXAMINATION
TAX 301: INCOME TAXATION
1st SEM 2022-2023

General Directions: Read and analyze each item carefully. Answer sheet is
provided at the last page. Write your answers on the space
provided.

1. All of the following are inherent powers of the government, except:

a. Taxation
b. Eminent domain
c. Police power
d. Anti-terrorism

2. The Philippine government recently passed RA No. 14023, otherwise known

as Bardagulan to Heal as One Act, which penalized, among others, violation
of community quarantine rules in light of the prevailing pandemic. This is an
example of the exercise of the government of which inherent power?
a. Taxation
b. Eminent domain
c. Police power
d. Corruption

3. Statement 1: Income of religions from their proprietary activities are

exempted from taxes.
Statement 2: Due to the separation of Church and State, taxes cannot be
used for the establishment of a cathedral.
a. Only Statement 1 is true
b. Only Statement 2 is true
c. Both statements are true
d. Both statements are not true

4. In 2020, Mapagpala Corporation paid for the monthly rental of the

residential house of its branch manager amounting to P204,000. How much
is the fringe benefit expense for the month?
a. P0
b. P48,000
c. P102,000
d. P204,000

5. Which fringe benefit may be subjected to fringe benefits tax?

a. De minimis fringe benefits given to rank and file employees
b. De minimis fringe benefits given to supervisory or managerial
employees
c. Fringe benefits in excess of de minimis fringe benefits given to rank
and file employees
d. Fringe benefits in excess of de minimis fringe benefits given
to supervisory or managerial employees

6. Taxes must be proportionate. This means that:

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a. The tax to be imposed must be based on the needs of the
government
b. The tax to be imposed must be based on the income of the taxpayer
c. The tax to be imposed must be based on the ability of the
taxpayer to pay
d. The tax to be imposed must be based on the willingness of the
taxpayer to pay

7. The Bureau of Internal Revenue is under which department of the

Executive Branch of the Government?
a. Department of Agriculture
b. Department of Finance
c. Department of Public Works and Highways
d. Department of Environment and Natural Resources

8. Statement 1: Meal allowance and lodging furnished by the employer to the

employees are exempt from tax if furnished for the advantage or
convenience of the employer.
Statement 2: Tax exempt meal allowance should be furnished within the
premises of the employer
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

9. Which of the following is an inherent limitation on the power of taxation?

a. Uniformity of taxation
b. Progressivity system of taxation
c. International comity
d. Free speech

10. Which government agency has the power to declare a tax law
unconstitutional?
a. President
b. Supreme Court
c. Commission on Audit
d. Commission on Human Rights

11. Sana is a resident citizen, Tzuyu is a non-resident citizen, while Mina is a

resident alien. Who among them is subject to income tax on income derived
from sources within and outside the Philippines?
a. Sana only
b. Sana and Tzuyu only
c. Sana and Mina only
d. Sana, Tzuyu, and Mina

Vincenzo earned the following items of income for the calendar year ending
2021:
Interest income, debtor resides in 420,000
Hong Kong, payment made in
the Philippines
Interest income, debtor resides in the 330,000
Philippines, payment made in
 Republic of the Philippines
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China
Gain from sale of real property, real 440,000
property situated in America
Gain from sale of personal property, 290,000
sale made in UK, property Is in
the Philippines
Gain from sale of shares of stock of a 225,000
domestic corporation, residence
of buyer is Taiwan, sale made in
Argentina
TOTAL 1,705,000

12. If Vincenzo is a resident citizen, how much of his income is subject to

Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000

13. If Vincenzo is a resident alien, how much of his income is subject to

Philippine income tax?
a. 330,000
b. 555,000
c. 845,000
d. 1,705,000

14. Statement 1: Income tax is an excise tax

Statement 2: Income tax is a personal tax
a. Only Statement 1 is true
b. Only Statement 2 is true
c. Both statements are true
d. Both statements are not true

15. The situs of income from sale of real property is determined by:
a. The place where the real property is located
b. The place where the registered owner of the real property resides
c. The place where the current possessor of the real property has
citizenship
d. The place where the deed of sale of real property was notarized

16. The valuation of the CIR of real properties is called:

a. Zonal value
b. Assessed value
c. Fair market value
d. Appraised value

17. On January 1, 2020, Pedro established a trust fund for the benefit of his
daughter, Ana. Pedro appointed Mr. Abugado as the trustee. The property
transferred to the trust is a piece of land with a dormitory earning rental
income. During the year, the trust earned P40,000,000 revenues and
incurred expenses of P10,000,000. Out of the trust’s income, Mr. Abugado
transferred P10,000,000 to Ana. During the year, Ana earned compensation
income of P2,500,000. How much is the taxable income of the trust?
 Republic of the Philippines
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a. P30,000,000
b. P29,980,000
c. P19,980,000
d. P20,000,000

18. During 2020, Alpha Corporation gave the following fringe benefits to its
employees:
Salaries to rank and file employees 1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file 54,400
employees
De minimis benefits to managerial 27,200
employees
Fringe benefits to rank and file 102,000
employees
Fringe benefits to managerial 170,000
employees

How much is the fringe benefit tax?

a. P48,000
b. P80,000
c. P91,538
d. P166,400

19. How much is the total allowable deduction from business income of Alpha
Corporation?
a. P3,153,600
b. P3,233,600
c. P3,245,138
d. P3,271,600

Industrious as he is known, Arthur, a non-VAT registered resident

citizen, works as a government employee at daytime and accepts
clients for accounting work after office hours. At the same time, Arthur
maintains a t-shirt printing shop to earn more. For the taxable year
ending December 31, 2021, Arthur earned the following amounts:
Taxable compensation income 850,000
Gross receipts from accounting 1,500,00
work 0
T-shirt printing shop
Gross sales 1,400,00
0
Cost of sales (800,000
)
Gross income 600,000
Operating expenses (400,000
)
Net income (t-shirt 200,000
printing shop)

Upon filing his first quarter income tax return, Arthur availed of the 8%
income tax option.
 Republic of the Philippines
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Rizal Avenue, Extension, Batangas City

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20. Assuming that the availment of the 8% income tax option is proper, how
much is Arthur’s income tax due?
a. 232,000
b. 300,000
c. 357,000
d. 377,000

Taravel Industries, a non-VAT registered sole proprietorship engaged in the

transport of passengers, operates two liners: Philippine Cheetah Bus Lines
is engaged in the domestic transport of passengers by land while Philippine
Dolphin Ferries is engaged in the domestic transport of passengers by sea.
During the taxable year 2021, the following revenues and expenses were
presented to you:
Philippine Philippin
Cheetah e Dolphin
Gross receipts 4,000,000 2,000,000
Less: Cost of services (3,200,000) (1,400,000
)
Gross income 800,000 600,000
Less: Allowable (500,000) (400,000)
Deductions
Taxable income 300,000 200,000

21. How much is income tax due?

a. 31,500
b. 55,000
c. 125,000
d. 460,000

22. Which of the following inherent powers of the state is inferior to

constitutional right of non-impairment clause of obligations or contracts?
a. Power of taxation
b. Police power
c. Power of eminent domain
d. None of the above

23. Pedro, Juan and Antonio are heirs of Luna who died on November 1, 2018.
The properties of Luna comprised solely of real property valued at P50M at
the time of his death. The property is subject to lease earning rental
income. During 2019, the property remained undivided and it derived a net
rental income of P15M.
For income tax purposes, the heirs will be the tax on net rental income from
the inherited property for the year 2019 as:
a. Partners in a commercial partnership
b. Partners in a general professional partnership
c. Partners in an unregistered co-partnership
d. Co-owners

24. Based on the above problem, what amount should be reported as taxable
income of the co-ownership in 2019?
a. P50,000,000
b. P15,000,000
c. P14,980,000
 Republic of the Philippines
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d. P0

25. What is the final tax rate on cash dividend received by Resident Citizens
from domestic corporation?
a. 10%
b. 20%
c. 7.5%
d. 25%

26. Which of the following individual income taxpayers is taxable for his
income from within and without Philippine sources?
a. Resident citizen
b. Nonresident citizen
c. Resident alien
d. Nonresident alien

A taxpayer received the following items of income during the taxable year
2021:
Interest income from BPI – Pateros branch from 62,000
checking account
Interest from BDO – Intramuros branch from savings 38,500
account
Interest income from PNB – Quiapo branch from foreign 42,000
currency deposit account under the expanded currency
deposit system
Interest income from dollar deposits on Bank of New 130,000
Jersey in the United States
Interest income from promissory note of Mr X, 58,400
Philippines
Interest income from promissory note of Mr X, United 62,000
States
Yield from deposit substitute, Philippines 87,000
Interest from Philippine government securities 21,000
Interest income from long-term deposits, Philippines 57,000
Interest income from long-term deposits, Egypt 62,500
Royalties from books, Philippines 16,000
Royalties from paintings, Philippines 60,000
Royalties from musical compositions, Japan 50,000

27. If the taxpayer is a resident citizen, how much is the final withholding tax?
a. 57,400
b. 61,600
c. 63,200
d. 66,600

28. If the taxpayer is a resident citizen, how much income is subject to regular
income tax?
a. 300,400
b. 312,900
c. 304,500
d. 362,900
 Republic of the Philippines
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BACHELOR OF SCIENCE IN ACCOUNTANCY
29. If the taxpayer is a non-resident citizen, how much is the final withholding
tax?
a. 37,900
b. 51,100
c. 55,300
d. 61,600

30. If the taxpayer is a non-resident citizen, how much income is subject to

regular income tax?
a. 58,400
b. 100,400
c. 108,400
d. 120,400

31. Taxation is an inherent power of the State

a. Same as Police Power
b. Same as power of eminent domain
c. Same as a and b
d. None of the above

32. The power of taxation is also

a. Legislative because all the incidents of taxation are within the
control of Congress
b. Exercise by the Executive Department being the department tasked
to implement tax laws
c. Judicial because the Court is also tasked to interpret tax laws
d. None of the above.

33. Under which basic principle of sound tax systems will the Government not
incur any deficit
a. Fiscal adequacy
b. Administrative feasibility
c. Theoretical justice
d. Benefits Received Principle

34. The legal way of reducing tax liability is called

a. Tax avoidance
b. Tax exemption
c. Tax evasion
d. Tax amnesty

35. Which of the following is not a requisite in order that a sale of principal
residence would be excluded from taxation?
a. The tax exemption must be availed only by the individual for
the first time
b. The proceeds of the sale will be used to purchase or construct a new
principal residence
c. The property should be the principal residence of the taxpayer
d. The taxpayer should apply for the exemption within a period of 30
days from the time of sale.

36. Which of the inherent powers maybe exercised by public utility

companies?
 Republic of the Philippines
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a. Police power
b. Eminent Domain
c. Tax evasion
d. A and C

37. In case of ambiguity, tax laws imposing a tax shall be interpreted

a. Strictly against the taxpayer
b. Liberally in favor of the taxpayer
c. Liberally in favor of the government
d. None of the above

38. Sarah, a resident citizen, received PCSO winnings in 2021 amounting to

P10,000. What type of income tax will apply?
a. Final Withholding tax on passive income
b. Capital Gains Tax
c. Basic Income Tax
d. Exempt

39. Share in the net distributable income of a general co-partnership by a

resident citizen is subject to:
a. 10% Final Withholding tax
b. 20% Final Withholding tax
c. 6% Capital Gains Tax
d. Basic Income Tax

40. On January 2021, Snowy sold the following shares of stock of a domestic
corporation which he bought for investment purposes:

Listed and Traded Not Listed and Traded

Selling Price 300,000 160,000
Cost 192,000 50,000

How much is the capital gains tax?

a. 13,080
b. 16,500
c. 32,700
d. 6,600

41. Assume that Snowy is a dealer in securities, the capital gains should be
a. 6,000
b. 6,480
c. 0
d. 6,600

42. Statement 1: The determination of 6% capital gains tax on sale of real

property is based on net capital gains realized by the seller of real property.
Statement 2: Sale of shares of stocks listed in the stock exchange is subject
to 15% capital gains tax.
a. Only Statement 1 is true
b. Only Statement 2 is true
c. Both statements are true
d. Both statements are not true
 Republic of the Philippines
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43. Kelly sold a parcel of lot for P5,000,000 to her friend. The FMV when she
inherited it from her mother was P4,500,000 although is present FMV is P
6,000,000. The tax on the above transaction is:
a. 270,000 capital gains tax
b. Value Added Tax
c. 360,000 capital gains tax
d. 30% donor’s tax

44. Which of the following will disqualify a taxpayer in using the 8% income
tax option?
a. The taxpayer has gross sales/receipts of P3,500,000.
b. The taxpayer is a registered self-employed individual
c. The taxpayer has a gross compensation income for the year.
d. The taxpayer is registered as professional.

45. The minimum wage earners are exempt from income tax on:
a. hazard pay
b. overtime pay
c. holiday pay
d. all of the above.

46. In general, the applicable rate in computing the fringe benefit tax
beginning January 1, 2018 is
a. 35%
b. 25%
c. 32%
d. 30%

47. The following are the requirement for substituted filing of income tax
return, except
a. He/ She had one employer only.
b. His/ Her income was purely compensation income.
c. He/ She had consecutively filed his/her income tax return for
the past three years.
d. Income tax withheld by the employer is correct.

48. Income received by the estate during the period of administration or

settlement of the estate for tax purposes is knows as
a. income of the estate
b. income of the heirs
c. income of the devisee / legatee
d. income of testator

49. As a general rule, collection of taxes cannot be estopped by injunction

except:
a. The Regional Trial Court grants injunction to restrain collection of
internal revenue tax.
b. The Supreme Court grants injunction to restrain collection of internal
revenue tax.
c. The Court of Tax Appeals grants injunction to restrain
collection of internal revenue tax.
d. The President grants injunction to restrain collection of internal
revenue tax.
 Republic of the Philippines
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BACHELOR OF SCIENCE IN ACCOUNTANCY

50. The following are elements of direct double taxation except

a. Taxing twice by the same authority, jurisdiction or taxing district
b. Taxing twice same kind or character of tax
c. Taxing twice the same rate
d. Taxing twice in the same year

51. Which among the sources of tax laws is given the highest priority?
a. Tax Treaties
b. 1987 Constitution
c. Tax Laws
d. Judicial Decisions

52. All of the following are considered Resident Aliens except

a. An alien who shall come to the Philippines with no definite intention
as to his/her stay.
b. An alien actually present in the Philippines who is not a sojourner or
mere transient.
c. An alien who comes to the Philippines for a definite purpose, which,
by its nature, would require an extended stay making his home
temporarily in the Philippines
d. An alien who marries a Filipino citizen

53. The following are considered as De Minimis Benefits except

a. Actual yearly medical benefits not exceeding P10,000 per annum.
b. Uniform and clothing allowance not exceeding P6,000 per annum
c. Monetized unused vacation leave credits of private employees
not exceeding twenty(20) days during the year.
d. Rice subsidy not exceeding P2,000 per month

54. Which of the following is not required to filed an Income Tax Return
a. Individuals deriving compensation from two or more employers during
the taxable year.
b. Individuals engaged in the practice of profession
c. An individual whose sole income has been subject to final
withholding tax
d. Individuals deriving other non-business non-profession related income
not otherwise subject to final tax.

55. Which of the following is subject to 15% final withholding tax on interest
from a depositary bank under the expanded foreign currency deposit
system?
a. Non-Resident Citizen
b. Non-Resident Alien Not Engaged in Trade or Business
c. Overseas Filipino Workers
d. Resident Citizen

56. The following taxpayers who received dividend income from a domestic
corporation will receive net of 10% final withholding tax except
a. Resident Citizen
b. Non-resident alien engaged in trade or business
c. Non-resident citizen
d. Resident alien
 Republic of the Philippines
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57. The following are the allowed deductions to the income of the estate
subject to income tax
a. ordinary business expenses related to the income of the estate
b. basic personal exemption
c. the amount of the income of the estate distributed to the beneficiary
d. A and C

58. The following are considered ordinary asset except

a. Principal residence of the business owner
b. stock in trade included in the inventory if on hand at the close of the
taxable year
c. Property primarily for sale to customers in the ordinary course of
business
d. Property used in the trade or business, which are subject to
depreciation

59. Being a legislative in nature, the power to tax may not be delegated
except
a. To local governments or political subdivisions
b. When allowed by constitution
c. When delegation related merely to administrative implementation
that may call for some degree of discretionary powers under a set of
sufficient standards expressed by law or implied from the policy and
purpose of the act.
d. All of the above

60. Due to his expertise, Architect Princess Choi (freelancer) was hired by a
railways contractor in Spain to provide technical assistance for two months
from February to march. She was hired again for the months of June-July
and October-December of the same taxable year. Arch. Princess is a
a. Resident Citizen
b. Non Resident citizen
c. Resident Alien
d. None of the above
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Name: ________________________________ Score: ______________________________
SR Code: ______________________________ Class Schedule: ______________________

MIDTERM EXAMINATION
TAX 301: INCOME TAXATION
1st SEM 2022-2023

ANSWER SHEET

Multiple Choice

1 16 31 46

2 17 32 47

3 18 33 48

4 19 34 49

5 20 35 50

6 21 36 51

7 22 37 52

8 23 38 53

9 24 39 54

10 25 40 55

11 26 41 56

12 27 42 57

13 28 43 58

14 29 44 59

15 30 45 60
 Republic of the Philippines
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END OF EXAM

Prepared by:

MARK PAUL I. RAMOS, CPA

Lecturer I, Tax 301

Reviewed by:

ASST. PROF. MA. CONCEPCION P. MANALO, CPA

Department Chair, Accountancy and Management Accounting

Approved by:

DR. BENDALYN M. LANDICHO

Dean, CABEIHM
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Name: ________________________________ Score: ______________________________
SR Code: ______________________________ Class Schedule: ______________________

FINAL EXAMINATION
TAX 301: INCOME TAXATION
1st SEM 2022-2023

General Directions: Read and analyze each item carefully. Answer sheet is provided at
the last page. Shade the circle which corresponds to your final answer.
Erasures are not allowed in the answer sheet.

1. Mr. Pompy was injured in a vehicular accident in 2020. He incurred and paid
medical expenses of P20,000 and legal fees of P10,000 during the year. In 2021,
he received P70,000 as settlement from the insurance company which insured the
car owned by the other party involved in the accident. From the above payments
and transactions, the amount of taxable income to Mr. Monte in 2021 is
a. Zero
b. P40,000
c. P70,000
d. P110,000

2. 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.

3. If an individual performs services for a creditor who in consideration thereof

cancels the debt, the cancellation of indebtedness may amount:
a. To a gift.
b. To a capital contribution.
c. To a donation intervivos.
d. To a payment of income.

4. 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 multinational company.

5. 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.

6. Which of the following is not gross compensation income?

a. Salary of P50,000 of an employee.
b. Bonus of P50,000 of an employee.

`
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c. Salaries of P40,000 of a partner of a general partnership in trade.
d. Honorarium of P40,000 of an employee who is a member of the board of
directors of a corporation

7. One of the following is not correct for deductibility of losses from gross income:
a. It must arise from fire, storm, or other casualty, robbery, theft, or
embezzlement.
b. It must not be compensated by insurance or any form of indemnity.
c. A declaration of loss by casualty should be filed with the Bureau of Internal
Revenue.
d. It is of property owned by the taxpayer, whether used in business
or not.

8. 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 traced into the
income tax return of the partners.
c. Because all income earners are required to file income tax return.
d. None of the above.

9. Which of the following items are not taxable?

a. Income from jueteng
b. Gains arising from expropriation of property
c. Income taxes paid and subsequently refunded
d. Gains on the sale of a car used for personal purposes

10.A domestic proprietary educational institution improved its library facilities by

adding a new wing to its old library building. The capital outlay on library
improvement, for income tax purposes, may be
a. Deducted in full at the time of completion of the improvement
b. Capitalized or expensed outright at the option of the school owner
c. Capitalized and depreciated over the estimated life of the improvement
d. Capitalized or expensed outright at the option of the government

11.As a rule, which of the following is subject to 10% tax on net income?
a. Dividend received by a resident citizen from a domestic corporation
b. Royalty income from musical composition received by a resident alien
c. Off-shore banking units
d. Proprietary educational institutions

12.Optional Standard Deduction cannot be availed by

a. Andrew E, an OFW in Taiwan for 5 years.
b. Foren Noy, a resident and citizen of Spain engaged in the tobacco
industry in the Philippines
c. Jolibee Corporation, a domestic corporation engaged in food industry abroad
d. Jean Sapoles, a Filipino residing in California, USA

13.Which statement does not properly refer to a general professional partnership? A

general professional partnership is one
a. Registered as such with SEC and the BIR
b. That is composed of individuals who exercise a common profession
c. That exclusively derives income from the practice of profession
d. That derives professional and rental income from property owned
by it

14.The following cannot avail of deductions from gross income except:

a. Citizens and resident alien whose income is purely compensation income

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
b. Non-resident foreign corporation
c. Non-resident alien not engaged in trade or business in the Philippines
d. Resident foreign corporation

15.The following organizations shall not be taxed in respect to income received by

them as such except
a. Non-stock and non-profit educational institution
b. Government education institution
c. Non-profit hospitals
d. Cemetery company owned and operated exclusively for the benefit of its
members

16.Income from performance of service is treated as income within the Philippines, if

a. The payment of compensation for the service is made in the Philippines
b. The contract calling for the performance of service is signed in the
Philippines
c. The service is actually performed in the Philippines
d. The recipient of service income is a resident of the Philippines

17.Which statement is correct? A non-stock, non-profit charitable association that

sells its idle agricultural property is
a. Not required to file an income tax return, nor pay income tax on transaction
to the BIR provided the sales proceeds are invested in another real estate
during the year
b. Required to pay the 6% capital gains tax on gross selling price or
fair market value whichever is higher
c. Mandated to pay the 30% regular corporate income tax n the gain from sale
d. Required to withhold the applicable expanded withholding tax rate on the
transaction and remit the same to the BIR

18. The optional standard deduction for individuals is

a. 10% of the gross income
b. 10% of the gross sales/receipts
c. 40% of the gross income
d. 40% of the gross sales/receipts

19.Which of the following statements is not correct?

a. MCIT is not applicable to non-resident foreign corporations
b. The corporate quarterly return shall be filed within 60 days following the
close of each of the first three quarters of the taxable year.
c. Resident foreign corporations would be taxed on net income from within the
Philippines only
d. Non-resident foreign corporations are taxed on gross income from
within and without the Philippines

20.The following income are subject to final tax, except?

a. Royalty income received by a domestic corporation from a domestic
corporation
b. Cash dividends received by a non-resident foreign corporation from a
domestic corporation
c. Cash dividends received by a domestic corporation from a domestic
corporation
d. Interest income received by resident foreign corporation from a Philippine
bank

21.CPA University, a private educational institution organized in 2000, had the

following data for 2021.
Tuition fees P 480, 000

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
Rental income P 520, 000
School related expenses P 450, 000

The income tax due for 2021 is

a. P137, 500
b. P 55,000
c. P 48, 000
d. P 100, 000

22.The net shares received by a partner in a general co-partnership is

a. Part of his taxable income
b. Exempt from income tax
c. Subject to corporate tax
d. Subject to final tax

23.ABC Corp. had a net sales of P1M. The actual entertainment, amusement and
recreation expense amounted to P20,000. The deductible “EAR” expense is
a. P20,000
b. P10,000
c. P 6,000
d. P 5,000

24.Paandar Industries, a non-VAT registered sole proprietorship engaged in the

transport of passengers, operates two liners: Tarsier Bus Lines is engaged in the
domestic transport of passengers by land while Butanding Ferries is engaged in
the domestic transport of passengers by sea. During the taxable year 2021, the
following revenues and expenses were presented to you:
Tarsier Butanding
Gross receipts 4,000,000 2,000,000
Less: Cost of services (3,200,000) (1,400,000)
Gross income 800,000 600,000
Less: Allowable (500,000) (400,000)
Deductions
Taxable income 300,000 200,000

How much is income tax due?

a. 31,500
b. 55,000
c. 125,000
d. 460,000

25.Advance rental in the nature of prepaid rental, received by the lessor under a
claim or right and without restriction as to use is
a. Taxable income of the lessor in the year received if he/she is on the cash
method of accounting
b. Taxable income of the lessor in the year received whether he/she is on the
cash or accrual method of accounting
c. Taxable income of the lessor in the year received whether he/she is
on the cash or accrual method of accounting
d. Taxable income of the lessor up to the amount earned in the year the rental
is received

26.Gross benefits received by officials and employees of public and private entities as
13th month pay and other benefits such as productivity bonus, service incentive
pay and Christmas bonus shall be excluded from taxable income up to
a. P30,000
b. P82,000

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
c. P90,000
d. P50,000

27.One of the following is not acceptable as basis of relief from the MCIT
a. Lawsuits filed by the company
b. Prolonged labor dispute
c. Legitimate business reverse
d. Force majeure

28.Which of the following statements is correct?

a. Partners of a taxable partnership are considered as stockholders
and profits distributed to them by the partnership are considered
as dividends.
b. The share of each partner in net income of a taxable partnership shall be
based on their capital contribution.
c. The share of an individual partner in the net income of taxable partnership
shall be equal to the share of a capitalist partner with the least capital
contribution.
d. The industrial partner shall contribute money and or property but not
services

29.The share of a co-venturer corporation in the net income after tax of a joint
venture or consortium taxable as corporation is
a. Subject to final withholding tax of 20%
b. Subject to regular corporate income tax of 30%
c. Exempt from income tax
d. Subject to capital gains tax

30.Which of the following will disqualify a taxpayer in using the 8% income tax
option?
a. The taxpayer has gross sales/receipts of P3,500,000.
b. The taxpayer is a registered self-employed individual
c. The taxpayer has a gross compensation income for the year.
d. The taxpayer is registered as professional.

Dalagang Pilipina Company was incorporated on June 12, 1898. It uses the fiscal year
which begins from May 1 and ends on April 30 of the next year. For the years ending
April 30, 2022 and April 30, 2023, the following are the results of operations:

2022 2023
Sales 14,000,000 16,000,000
Less: Cost of (8,000,000) (9,000,000)
sales
Gross profit 6,000,000 7,000,000
Less: Expenses (5,930,000) (3,500,000)
Net income 70,000 3,500,000

Dalagang Pilipina Company has assets amounting to P240,000,000 which includes a

parcel of land amounting to P50,000,000.

31.How much is the income tax payable in 2022?

a. P17,500
b. P21,000
c. P60,000
d. P120,000

32.How much is the income tax payable in 2023?

a. P832,500

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
b. P875,000
c. P951,000
d. P1,041,000

33.The payments by their clients to which type of partnership are exempted from
creditable withholding tax?
a. General professional partnership
b. Commercial or business partnership
c. Both a and b
d. Neither a nor b

34.Who shall pay the income tax on the taxable income of general professional
partnership?
a. General professional partnership
b. Clients of general professional partnership
c. Partners of general professional partnership in their separate
income tax returns
d. None of the above

YNTCD Partnership is a domestic partnership duly registered with the Securities and
Exchange Commission. Its total liabilities amounted to P2,000,000, and its total partners’
equity amounted to P3,300,000. Its primary purpose as stated in its Articles of Co-
Partnership, is the selling of cat food. The partners, Katy and Taylor, share equally in the
profits. For the year ended December 31, 2021, the income statement of YNTCD
Partnership showed the following:
Sales 1,480,000
Less: Cost of sales (650,000)
Gross profit 830,000
Less: Expenses (360,000)
Earnings before 470,000
tax

35.Compute for the income tax due of YNTCD Partnership.

a. 0
b. P94,000
c. P117,500
d. P141,000

36. Net of any applicable withholding taxes, how much will Katy receive assuming she
is a resident alien?
a. P131,600
b. P148,050
c. P188,000
d. P169,200

37. Net of any applicable withholding taxes, how much will Taylor receive assuming
she is a non-resident alien engaged in trade or business?
a. P131,600
b. P148,050
c. P188,000
d. P150,400

38.Chromatica Corporation was incorporated in 2020. SEC issued its Certificate of

Incorporation on June 30, 2020. Chromatica Corporation follows the calendar year.
When will the imposition of the minimum corporate income tax commence?
a. First quarter of 2023
b. Third quarter of 2023
c. First quarter of 2024

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
d. Third quarter of 2024

39.Minimum corporate income tax is carried froward:

a. For the three immediately succeeding taxable years
b. For the four immediately succeeding taxable years
c. For the five immediately succeeding taxable years
d. For the one hundred seventy eight immediately succeeding taxable years

40.Statement 1: A one-person corporation is taxed in a similar way as a sole

proprietorship.
Statement 2: Due to their relatively small size, a one-person corporation is always
subject to 20% regular corporate income tax.

a. Only Statement 1 is true

b. Only Statement 2 is true
c. Both statements are true
d. Both statements are not true

41.Statement 1: All proprietary educational institutions are not subject to minimum

corporate income tax.
Statement 2: Domestic corporations engaged in business as depository banks
under the expanded foreign currency deposit system on their income from foreign
currency transactions with local commercial banks are not subject to minimum
corporate income tax.

a. Only Statement 1 is true

b. Only Statement 2 is true
c. Both statements are true
d. Both statements are not true

42.Angkas Corporation is a resident foreign corporation with branches nationwide,

including the Philippines. Its Philippine branch had an income of P10,000,000 in
2020, and it earmarked P8,000,000 for remittance. It actually remitted P7,000,000.
How much is the branch profit remittance tax due of the Philippine branch?
a. 0
b. 1,050,000
c. 1,200,000
d. 1,500,000

43. Which individual taxpayer is taxable for his income from within and from without
Philippine sources?
a. Resident citizen
b. Nonresident citizen
c. Resident alien
d. Nonresident alien

44. Bad debts, as an allowable deduction:

a. Requires proof of worthlessness and uncollectibility
b. Is an estimate of worthless and uncollectible accounts
c. Is determined by the lapse of time at which accounts remain uncollected
d. Is determined by materiality of the amount on uncollected accounts

45. Net operating loss carry over

a. Can be deducted against income tax due to arrive at taxable income
b. Can be deducted against income tax due to arrive at income tax payable
c. Can be deducted against gross income to arrive at income tax payable
d. Can be deducted against gross income to arrive at taxable income

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
46.What is the maximum entertainment and recreational expenses that may be
claimed by provider of services?
a. 2% of gross service revenues
b. 0.5% of gross sales
c. 1% of gross service revenues
d. 1.5% of gross sales

47.Which of the following taxes is not allowed to be claimed as allowable deductions

from gross income?
a. Capital gains tax
b. Documentary stamp tax
c. Other percentage tax
d. Local business tax

48.All of the following are not entitled to any deduction for NOLCO, except
a. Resident foreign corporations
b. PEZA registered entities
c. SBMA registered entities
d. International carriers

Fearless Corporation, a dealer in sugar under the brand Mr. Perfectly Refined Sugar, has
gross sales of P1,400,000,000 with cost of sales of P560,000,000 and allowable
deductions of P150,000,000 for calendar year 2020. Fearless Corporation began
operating in 1989.

Fearless Corporation’s total assets of P180,000,000 includes the land and building in
which the business is situated, amounting to P50,000,000 and P25,000,000, respectively.

49.Applying CREATE Law, how much is Fearless Corporation’s income tax due?
a. P172,500,000
b. P189,750,000
c. P193,500,000
d. P207,000,000

50.Compute for Fearless Corporation’s minimum corporate income tax.

a. P4,200,000
b. P8,400,000
c. P12,600,000
d. P16,800,000

51.During 2020, Tsunayoshi Corporation gave the following fringe benefits to its
employees:
Salaries to rank and file employees 1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file 54,400
employees
De minimis benefits to managerial 27,200
employees
Fringe benefits to rank and file employees 102,000
Fringe benefits to managerial employees 170,000

How much is the fringe benefit tax?

a. P48,000
b. P80,000
c. P91,538
d. P166,400

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY
The University of Saint Augustine Philippines (USAP)was a domestic educational
institution established in 1432. It is the first to offer Accountancy, Law, and Medicine in
Asia. It has produced many distinguished alumni including presidents, statemen, and
saints. For the taxable year ending December 31, 2025, USAP had the following results of
operations:
Gross receipts
From tuition fees 14,000,000
From rentals 2,500,000
From sale of school 6,300,000
merchandise
Total gross receipts 22,800,000
Less: Cost of services (13,450,000)
Gross profit 9,350,000
Less: Operating profit (5,240,000)
Net income 4,110,000

52. If USAP is a non-stock non-profit educational institution, how much is income tax
due?
a. P1,233,000
b. P411,000
c. P822,000
d. 0

53. What is the tax rate of Branch Profit Remittance Tax?

a. 10%
b. 15%
c. 5%
d. 20%

54. Which corporation is subject to the minimum corporate income tax?

a. Proprietary educational institution
b. Nonprofit hospital
c. Nonresident foreign corporation
d. Resident foreign corporation

55.Before the passage of CREATE Law, which of the following corporations is subject
to 10% preferential corporate income tax rate?
a. Proprietary hospitals
b. Nonstock nonprofit educational institutions
c. Both A and B
d. Neither A nor B

56.Statement 1: Meal allowance and lodging furnished by the employer to the

employees are exempt from tax if furnished for the advantage or convenience of
the employer.
Statement 2: Tax exempt meal allowance should be furnished within the
premises of the employer
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

57.Under the CREATE Law, the rate of withholding tax on ordinary income derived by
nonresident foreign corporations in the Philippines is:
a. 20%
b. 25%
c. 20% or 25% depending on the taxpayer’s taxable income and assets
d. 30%

`
Leading Innovations, Transforming Lives, Building the Nation
 Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University College
Pablo Borbon Campus Logo
Rizal Avenue, Extension, Batangas City

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND INTERNATIONAL HOSPITALITY MANAGEMENT

BACHELOR OF SCIENCE IN ACCOUNTANCY

58. Which of the following should be included as part of gross income subject to
regular income tax of a resident citizen taxpayer?
a. Royalties from literary compositions earned in the Philippines
b. Royalties from films showed in France
c. Prizes amounting to P40,000
d. PCSO winnings amounting to P6,000

59. A domestic corporation organized and operated as a non-stock non-profit

educational institution received P200,000 from tuition fees and P300,000 from
rentals to private concessionaires. The educational institution used the P500,000
in order to buy books as part of its program of upgrading the library. Which of the
following statements is true?
a. The entire amount of P500,000 is subject to 30% income tax
b. The entire amount of P500,000 is subject to 10% income tax
c. Only the amount of P300,000 is subject to 30% income tax
d. The entire amount of P500,000 is exempt from income tax

60.All of the following can be deducted from a purely compensation income earner’s
income except:
a. Union dues
b. Mandatory PAGIBIG Contributions
c. Private health insurance contributions
d. Mandatory SSS contributions

61.A. The holding period does not apply to corporations, hence, capital gains and
losses are
62.recognized at 100%.
63.B. Capital losses are deductible only to the extent of capital gains.
64.C. Ordinary losses are deductible from capital gains but net capital loss cannot be
deducted
65.from ordinary gain.
66.D. Net capital loss carry-over should not exceed the net income in the year the
loss was
67.incurred.
68.X Corp. had a net sales of P1M. The actual entertainment, amusement and
recreation
69.expense amounted to P20,000. The deductible “EAR” expense is
70.A. P20,000 C. P10,000
71.B. P 6,000 D. P 5,000

`
Leading Innovations, Transforming Lives, Building the Nation