INCOME TAXATION CORPORATION

1. The normal tax of an ordinary corporation starting a. P 315,000 c. P270,000

January b. P 288,000 d. P231,000
1, 2009 is:
10. Aside from the ordinary corporate income tax of 30%
a. 30% b. 32% (effective January 1, 2009), what other tax may be
b. 33% d. 35% imposed on corporations under the income tax law?
a. Minimum corporate income tax
2. Taxable income received during the year from all b. Capital gains tax
sources is the tax base for income tax purposes of this c. Passive income tax
class of taxpayer: d. All of these
a. Domestic corporation
b. Non-resident alien Items 11 and 12 are based on the following information:
c. Resident foreign corporation In 2009, Jaguar Inc., a branch of a foreign company
d. Non-resident foreign corporation doing business in the Philippines, had the following
income and expenses:
3. One of the following is subject to final tax on gross Gross income P100,000,000
income: Business expenses 60,000,000
a. Domestic corporation Dividend from domestic 500,000
b. Non-profit cemetery corporation
c. Resident foreign corporation Interest on Philippine currency 100,000
d. Non-resident foreign corporation bank deposit
Capital gain on sale directly to
Items 4 through 6 are based on the following buyer of stock investment
information: in domestic corporation 150,000
A corporation, in its first year of operations, had the
Quarterly income taxes paid 10,000,000
following data in 2009:
In early 2010, the branch earmarked for remittance to
Philippines Foreign
its head office abroad the dividend received, the capital
Gross income P400,000 P300,000
gain and P10 million of its net income in 2009.
Expenses 200,000 200,000
11. The income tax still due at the end of 2009 is:
4. If the taxpayer is a domestic corporation and the data
are on business, the taxable income is: a. P2.00 million c. P2.96 million
a. P 200,000 b. P300,000 b. P3.01 million d. P4.00 million
b. P 100,000 d. P400,000
12. The branch profits remittance tax and the total amount
5. If the taxpayer is a resident foreign corporation and the to be remitted to its head office abroad are:
data are on business, the taxable income is: Branch profits Amount to be
a. P 200,000 c. P300,000 remittance tax Remitted
b. P 100,000 d. P400,000 a. P1.275 million P8.500 million
b. P1.597 million P9.053 million
6. If the taxpayer is a non-resident foreign corporation and c. P1.500 million P9.140 million
the income and expenses are on an isolated transaction, d. P1.371 million P7.769 million
the gross income subject to final tax is:
a. P 200,000 c. P 300,000 13. A mother corporation is abroad, with a branch office in
b. P 100,000 d. P 400,000 the Philippines. Which of the following statements is
wrong?
7. A corporation, engaged in business in the Philippines a. In a year, the branch in the Philippines is
and abroad, has the following data in its first year of subject to a profit remittance tax on its remittance
operations in 2009:
of profits to the mother company abroad, even if
Gross income, Philippines P975,000
Expenses, Philippines 750,000 the profits from which the remittance was made
Gross income, U.S.A. 770,000 was a prior years profits.
Expenses, U.S.A. 630,000 b. The profit remittance tax is fifteen percent
Interest on bank deposit, Philippines 25,000 (15%) final tax of the amount of profit for
remittance, as applied for with the bank.
The income tax payable if the corporation is: c. The bank with which the application for
Domestic Resident foreign Non-resident foreign remittance was filed would be the
a. P116,800 P 72,000 P320,000
withholding agent of the Bureau of
b. 127,750 78,750 350,000
c. 109,500 67,500 300,000 Internal Revenue.
d. 120,450 74,250 330,000 d. Even activities registered with the
Philippine Economic Zone Authority
Items 8 and 9 are based on the following information: (PEZA), from the profits from which remittance is
A domestic corporation had the following data for 2009 applied for, will be subject to the profit remittance
(first year of operations): tax.
profit from sales
nd from domestic corporation 14. The following may elect optional standard deduction or
gain on land in the Philippines held for two years itemized deduction, except:
P1,000,000) a. Taxable estates and trusts
gain on shares of domestic corporation held for two b. Domestic Corporation
(direct sale to buyer) c. Foreign corporation
ss expenses d. General Professional Partnership
8. The total capital gains taxes for the year:
a. P64,000 b. P54,000 15. Which of the following statements is not correct?
a. When the co-owners invest the income of the
9. The normal tax of the corporation at the end of the year: property co-owned in a business or in any income

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 INCOME TAXATION CORPORATION

producing properties or activities constituting

Capital gains on direct sale to buyer of shares of domestic corporation
themselves into a business partnership, such
partnership is consequently subject to tax as a
corporation. Gross Profit from Sales
b. As a rule, a co-ownership is not subject to income
tax because the activities of Ontheaco-owners
loss by fire are
of warehouse where the insurance company carted away the scrap:
limited to the preservation and enjoyment of the
property and the collection of the income Depreciation
Accumulated
therefrom.
Insurance recovery
c. A co-owner is subject to income tax on his share in
On a loss by embezzlement of a bonded cashier, where there is a P50,000 loss
the net income of the co-ownership actually or
coverage by a bonding company, and where a case was filed in court for the entire
constructively received.
amount of embezzlement of
d. All partnerships, no matter how created or
On a loss by accident of a delivery equipment, with the following data:
organized, are considered as corporations subject
to corporate income tax. Cost of the delivery equipment
Accumulated Depreciation
16. The following information are from the recordCost to restore to normal operating condition
of Central
Mindanao University, Inc., a proprietary educationalRecovery
Insurance
institution, for fiscal year ended March 31, 2013:
19. Deduction for total loss
Income:
a. P 600,000 c. P2,000,000
Tuition Fees P 5,000,000
b. P 1,500,000 d. P500,000
Miscellaneous Fees 2,500,000
Income from rental 150,000
20. Deduction for partial loss
Net Income, canteen 350,000
a. P 250,000 c. P 70,000
Intercorporate Dividends 750,000
b. P 320,000 d. P700,000
Interest on time Deposit 100,000
Expenses:
21. Net operating loss carry-over for 2014
General and Administrative
a. P 150,000 c. P230,000
expenses 1,500,000
b. P 185,000 d. P210,000
Interest expenses, bank loan 50,000
Depreciation, for the year of
22. Taxable income for 2014 (3000-1200-500-70-185)
the new building costing 1M,
a. P1,045,000 c. P1,213,000
completed 6 months ago
b. P959,240 d. P1,245,000
(est. useful life of 20 years) 50,000
23. Gulaver Co. and Cayna Co. formed a joint venture for a
The income tax due of CMU for the fiscal year if it opts
to claim deduction expense from the new building is: construction project of the government. The companies
a. P646,600 c. P721,400 agreed that they share profit equally. The joint venture
b. P646,700 d. P645,800 received the total contract price of P 10,000,000. The
cost of the project amount to P 6,000,000. Operating
17. Medellin Poultry employs the cash basis of accounting expenses incurred by Gulaver Co. and Cayna Co.
for its poultry business. For the taxable year 2013, it related to the joint venture were P670,000 and
has the following data: Cash sales on livestock raised, P360,000, respectively. How much is the income tax
P500,000; Sales of livestock purchased, P250,000; due of the joint venture?
Cost of sales, P300,000; Other income, P100,000. a. P891,000 c. P1,200,000
The gross income in 2013 is b. P720,000 d. -0-
a. P450,000 c. P750,000
b. P550,000 d. P850,000 24. Where the taxpayer is a corporation, the following rules
as to recognition of capital gains or losses from the
18. Indio Inc., a domestic corporation, had the following disposition of property classified as capital asset shall
data for 2013: apply. Which is the exception?
Taxable Income, Philippines P a. The holding period does not apply to
1,000,000 corporations, hence, capital gains and losses are
Taxable income, Hong Kong (in pesos) 600,000
recognized at 100%.
Taxable income, Dubai (in pesos) 400,000
b. Capital losses are deductible only to the extent of
Income tax paid to Hong Kong (in pesos) 250,000
Income tax paid to Dubai (in pesos) 100,000 capital gains
Philippines income tax paid, three c. Ordinary losses are deductible from capital gains
quarters of the year 110,000 but net capital loss cannot be deducted from
ordinary gain.
The amount of tax credit for foreign income taxes paid d. Net capital loss carry-over should not exceed the
is: net income in the year the loss was incurred.
a. P 300,000 b. 340,000
b. P 280,000 d. P330,000

For items 19-22, refer to the following information: For items 25 through 28, refer to the following given:
The Camaso, Inc., a domestic corporation has the following The records of a domestic corporation organized in
data on its operations: 2000 show:
2009 2010 2011 2012
Gross income P 2.27M P 2.3M P 2.5M P 2.8M
Sales Deductions (where
ses 5% represents
from domestic corporations Bad Debts Written
n trade notes receivable off) 2.15M 2M 2.52M 2,4M
Net Income (Loss)120,000 300,000 (20,000) 400,000

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Subsequent Recovery of Bad Debts written off: refundable of P10,000 for the previous year for which
In 2009 60,000 there is a certificate of tax credit.
In 2011 10,000 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
Gross P800,0 P1,600, P2,400, P3,100,
profit 00 000 000 000
25. The income tax payable for 2009 from
a. P36,000 c. P58,500 sales
b. P45,400 d. P40,500 Capital
gain on
26. The income tax payable for 2010 sale
a. P108,000 c. P98,600 directly
b. P68,000 d. P46,000 to buyer
of shares 50,0 50,000 50,000 100,000
27. The income tax payable in 2011 of 00
a. P0 c. P18,000 domesti
b. P50,000 d. P24,000 c
corporat
28. The income tax payable for 2012 ion
a. P73,000 c. P67,000 Dividend 10,0 10,000 20,000 20,000
b. P117,000 d. P123,000 from 00
domesti
29. If a partner, on his own transactions, is on the cash c
method of accounting while the general professional corporat
partnership is on the accrual method of accounting, in ion
Interest 5,00 10,000 15,000 20,000
the partners determination of his taxable income for the
on 0
year, he Philippin
e
a. Must convert his income from the partnership into currency
cash method bank
deposit
b. Must convert his own income into accrual method Business 600, 1,200,0 1,700,0 2,100,0
expense 000 00 00 00
c. Does not report his income from the partnership s
because the partnership is exempt from income tax Income 15,0 35,000 65,000 115,000
tax 00
d. Can consolidate his share in the net income of the withheld
partnership under accrual method with his own
32. The capital gain tax paid for the year:
income under cash method.
a. P1,250 b. P12,500

33. The final tax paid on passive income within the year:
30. In 2007, ABC Corp. paid total premiums of P1,000 for
a. P4,000 b. P10,000 c
the life insurance policy of the vice president, where the
beneficiary is the corporation. At the end of the year, 34. The income tax due at the end of the first quarter:
ABC received dividend of P100 because of the policy. a. P35,000 b. P45,000
In 2007, the corporation should indicate a claim for a
deduction for life insurance premium of 35. The income tax due at the end of the second quarter:
a. P1,000 c. P900 a. P50,000 b. P70,000 c
b. P1,100 d. zero
36. The income tax due at the end of the third quarter:
31. A domestic corporation had the following data in year a. P66,000 b. P60,000 c
2013:
Revenues: 37. The income tax due at the end of the year:
Gross Sales P 4,000,000 a. P 320,000 c. P 350,000
Interest Income, subjected to FT 100,000 b. P 55,000 d. P 40,000
Dividend Income from
another Domestic Corporation 200,000
Items 38 through 42 are based on the following
Expenses:
Cost of Sales 500,000 information:
Bad Debts Expenses 20,000 The books of a domestic corporation, in its fifth year of
Depreciation using straight-line method 100,000 operations in 2009, show the following:
Sales Cost of Sales Expenses Other Income
How much is the allowable deduction and the corporate First P P 260,000 P120,000 P 96,000
income tax payable? Quarter 500,000 Royalty, net of
a. P 600,000 and P 1,020,000 withholding tax
b. P 620,000 and P 1,014,000 of 20%
Second 450,000 220,000 100,000 150,000
c. P 100,000 and P 1,020,000
Quarter Dividend from
d. P 120,000 and P 1,014,000 domestic corp.
Third 700,000 390,000 150,000 180,000
Items 17 through 22 are based on the following Quarter Dividend from
information: foreign corp.
The following selected cumulative balances were taken Fourth 600,00 310,000 160,000 190,000
from the records of a domestic corporation in its fifth Quarter 0 Dividend from
year of operations in 2009. It had an income tax foreign corp.

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Total P2,250,00 P1,180,000 P530,000 A proprietary educational institution, in its third year of
0 operations, had the following income and expenses in
2009:
38. The final tax paid on the royalty income within the year: Gross income, tuition P5,000,000
a. P19,200 b. P34,200 Rent, net of withholding tax of 1,900,000
5%
39. The income tax due at the end of the first quarter: Dividend from domestic 4,000,000
a. P42,000 b. P36,000 company
Operating expenses 4,500,000
40. The income tax due at the end of the second quarter:
a. P80,000 b. P65,600 49. Applying the predominance test, the percentage of
unrelated income is:
41. The income tax due at the end of the third quarter: a. 66 2/3% b. 54.55% c.
a. P102,000 c. P119,000
b. P147,200 d. P188,800 50. The income tax still due at the end of the year is:
a. P650,000 b. P775,000
42. The income tax due at the end of the year:
a. P 112,000 c. P87,400 Items 51 and 52 are based on the following information:
b. P 92,900 d. P96,000 Brains University is a private educational institution
recognized by the government. The following are the
43. One of the following is wrong. Which is it? The gross financial data for its fiscal year ending October 31,
income tax on corporations is: 2009:
a. Applicable to domestic corporations only Tuition fees P12,800,000
b. Applicable to foreign corporations Miscellaneous fees 1,800,000
Interest on bank deposits 12,300
c. Based on gross profit from sales or gross receipts
Rent income of school facilities to outsiders 350,000
less sales allowances and discounts Salary and bonuses, all personnel 7,500,000
d. May begin only starting year 2000 Other operating expenses 3,500,000
Repayment of loan 400,000
44. Which statement is wrong? The gross income tax: Quarterly (three quarters) income tax paid 48.000
a. Is optional to a qualified corporation. An additional classroom building was constructed on
b. Available only if the ratio of cost of sales does not May 1, 2009 at a cost of P2,000,000 with a depreciable
exceed fifty-five percent of gross sales or receipts life of 50 years.
from all sources.
51. Assuming the cost of construction is treated as an
c. The choice shall be irrevocable for three
expense, the income tax still payable by Brains
consecutive years that the corporation is qualified
University for the year ended October 31, 2009 is:
under the scheme. a. P195,000 c. P147,000
d. Is always computed to compare with the normal b. P576,000 d. P634,500
corporate income tax and minimum corporate
income tax. 52. The income tax still payable if the cost of building
construction is capitalized:
45. Which statement is wrong? The gross income tax of a. P345,000 c. P147,000
corporation is: b. P393,000 d. P1,327,500
a. 15% of gross income
b. 15% of gross sales 53. The taxable base for income tax purposes of an
c. 15% of gross profit from sales international carrier doing business in the Philippines is:
a. Gross Philippine billings.
d. 15% of gross receipts less sales allowances and b. Gross Philippine billings minus deductible
discounts expenses.
c. Regular corporate income tax rate of 35% of its
46. In year 2009, a domestic corporation had the following taxable income.
data: d. Allocation of income from sources within and
Sales P4,000,000 without the Philippines, as well as expenses.
Cost of sales 1,500,000
Business expenses 1,000,000 54. The records of a resident foreign international air carrier
The gross income tax of the corporation is:
a. P375,000 c. P480,000 show the following data:
b. P600,000 d. P125,000 Gross receipts from passengers on:
Tickets (Manila to Hongkong) sold in the
47. Which of the following is not an income tax on Philippines to passengers originating from P10,000,000
corporations? the Philippines.
a. Normal tax Tickets (Manila to Hongkong) sold outside
b. Minimum corporate income tax the Philippines to passengers originating 6,000,000
from the Philippines
48. If the gross income from unrelated activity exceeds Tickets (Hongkong to Manila) sold in the
Philippines to passengers originating 2,000,000
50% of the total gross income derived by any private
outside the Philippines
educational institution, the normal corporate income tax Tickets (Manila to Hongkong) sold in the
rate shall be applied on the entire taxable income. This Philippines to passengers who were
1,000,000
principle is known as: endorsed to another international airline
a. Constructive receipt which airlifted them from Manila
b. Tax benefit rule Tickets (Manila to New York) sold in the 9,000,000
Philippines to passengers trans-shipped
Items 34 and 35 are based on the following information: in Japan on another airline to New York

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 INCOME TAXATION CORPORATION

a.Flight from Manila to Japan - 4 Dividend declared and paid during 500,000
hours the year
b. Flight from Japan to New York - 8
hours The improperly accumulated earnings tax is:
Expenses in connection with uplifts 12,000,000 a. P 175,300 c. P181,300
originating in the Philippines b. P 171,000 d. P166,300

The income tax payable is: Items 62 and 63 are based on the following information:
a. P500,000 b. P400,000 The records of a closely-held domestic corporation show the
b. P700,000 d. P650,000 following data for 2009:
Gross income (gross of WT of 2%) P1,500,000
55. Which of the following is subject to income tax? Business expenses 600,000
a. SSS and GSIS Gain on sale of business asset 60,000
b. Philippine Health Insurance Corporation (PHIC) Interest on deposit with Metrobank, net of tax 5,000
Sale of shares of stocks, not listed and traded:
c. Philippine Charity Sweepstakes Office (PCSO)
Selling price 150,000
d. Philippine Amusement and Gaming Corporation 115,000
(PAGCOR) Dividends from Orocan Corporation, domestic 35,000
Dividends paid during the year 120,000
56. A penalty and a form of deterrent to the avoidance Reserved
of for building acquisition 300,000
tax upon shareholders who are supposed to pay
dividends tax on the earnings distributed to them by In 2008, the corporation suffered an operating loss of
their corporation: P130,000. This amount was carried forward and claimed as
a. Minimum corporate income tax deduction from gross income in 2009.
b. Improperly accumulated earnings tax
c. Fringe benefit tax 62. The income tax due in 2009 is:
d. Gross income tax a. P250,600 b. P260,500
b. P219,000 d. P231,400
57. Improperly accumulated earnings tax is:
a. 10% of taxable income. 63. The improperly accumulated earnings tax is:
b. 10% of improperly accumulated income. a. P64,415 b. P36,425
c. 10% of net income.
d. 10% of gross income. 64. All, except one, of the following, are not subject to the
improperly accumulated earnings tax. Which is the
58. The following, except one, give rise to the presumption exception?
that a corporation is improperly accumulating profits. a. Publicly-held corporations.
Identify the exception: b. Insurance companies.
a. The corporation is a mere holding company. c. Banks and nonbank financial intermediaries.
b. The corporation is an investment company. d. Service enterprises.
c. The corporation permits its profits to accumulate
beyond the reasonable needs of the business. 65. In 2009, Family Corporation, a domestic corporation,
d. The corporation is a service enterprise. had a taxable income of P2,000,000. It paid a corporate
tax of 30% leaving a distributable income of
59. One of the following statements is wrong. Identify. The P1,400,000. If a dividend is declared by the corporation
improperly accumulated earnings tax imposed on and received by the following stockholders, which of the
corporations: following statements is false?
a. Is calculated to force corporations to pay out a. Nonresident aliens engaged in trade or business
dividends. are liable to pay 25% dividend tax.
b. Is computed on improperly accumulated income b. Nonresident aliens not engaged in trade or
over several years. business are liable to pay 25% dividend tax.
c. Is based on the net income per books after income c. Resident citizens are liable to pay 10% dividend
tax. tax.
d. Is based on a statutory formula for improperly d. Resident foreign corporations are exempt from the
accumulated income. payment of dividend tax.

60. All of the following, except one, are additions to taxable

income after income tax for purposes of computing
improperly accumulated income
a. Income subject to final taxes.
b. Income excluded from gross income.
c. Reserved for reasonable needs of the business
d. NOLCO deducted in computing taxable income.

61. A domestic corporation had the following data for 2009,

the accumulated earnings for which year the Bureau of
Internal Revenue considered to be improper:
Sales P6,000,000
Cost of sales 2,000,000
Business expenses 1,000,000
Interest on Philippine currency bank 50,000
deposit
Capital gain on sale directly to buyer 120,000
of shares of domestic corporation
Dividend income from domestic 60,000
corporation

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