Reviewer in Taxation (Book 1) Asser S.

Tamayo (2012 Edition)

CHAPTER 4
SOURCES OF INCOME
Multiple choices:

1. As to source, the Tax Code classifies income into:

a. Income which is derived in full from sources within the Philippines.
b. Income which is derived in full from sources outside the Philippines.
c. Income which is derived partly from sources within and partly from sources
outside the Philippines.
d. All of the choices.

2. Which of the following dividends shall be considered as income not from sources
within the Philippines?
a. Dividends from a domestic corporation
b. Dividends from a foreign corporation where less than fifty percent (50%) of the
gross income of such foreign corporation for the three-year period preceding the
declaration of such dividends was derived from sources within the Philippines.
c. Dividends from a foreign corporation where more than eighty percent (80%) of
the gross income of such corporation for the three-year period preceding the
declaration of such dividends was derived from sources within the Philippines.
d. None of the choices.
3. Which of the following interests shall be considered as income from sources within
the Philippines?
a. Interest derived from sources within the Philippines.
b. Interests on bonds and notes of residents, corporate or otherwise.
c. Interests on other interest-bearing obligation of residents, corporate or otherwise.
d. All of the choices.
4. Mr Arai Nakurot, a Japanese engineer residing in Tokyo, Japan< was contracted by a
domestic corporation to assemble in Philippines an equipment it bought in Japan. He
started the work in Japan and spent 10 days there. The assembling job was completed
in the Philippines for another 20 days. He was paid P300, 000 for his job.

How much was the income from Philippine source?

a. P300, 000
b. P200, 000
c. P100, 000
d. None
5. Rentals and royalties are considered income from sources within the Philippines if:
I. From property located in the Philippines.
II. From any interest in such property, including rentals or royalties from
intangible personal property in the Philippines.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

6. Gains, profits and income from the sale of real property are from sources within the
Philippines if:
a. The real property sold is located in the Philippines.
b. The real property is sold in the Philippines.
c. The real property sod is located outside the Philippines.
d. The real property sold is owned by a resident citizen.
7. Gains, profits and income from the sale of personal property, purchased without and
sold within the Philippines shall be treated as income which is derived:
a. In full from sources within the Philippines
b. In full from sources outside the Philippines
c. Partly from sources within and partly from sources outside the Philippines.
d. None of the choices.
8. Which of the following statement is correct?
a. From the items of gross income derived from sources within the Philippines, there
shll be deducted the expenses, losses, and other deductions properly allocated of
such income from source within.
b. From the items of gross income derived from sources within the Philippines, there
shall be deducted a rateable part of expenses, interests, losses, and other
deductions effectively connected with the business or trade conducted exclusively
within the Philippines which cannot definitely be allocated to some items or class
of gross income.
c. Items of deductions shall be allowed only if fully substantiated by all the
information necessary for his calculation.
d. All of the choices.
9. Which of the following shall be considered income from sources outside the
Philippines?
a. Compensation for labor or personal services performed outside the Philippines.
b. Rentals or royalties from property located outside the Philippines or from any
interest in such property including rentals or royalties for the use of or for the
privilege of using outside the Philippines, patents, copyrights, secret processes
and formulas, goodwill, trademarks, trade brands, franchises and other like
properties.
c. Gains, profits and income from the sale of real property located outside the
Philippines.
d. All of the choices.
10. Which of the following shall be considered as income partly within and partly
without the Philippines?
a. Gains, profits and income from the sale of personal property produced (in whole
or in part) by the taxpayer within and sold without the Philippines.
b. Gains, profits, and income from the sale of personal property produced (in whole
or in part) by the taxpayer without and sold within the Philippines.
c. Income from services performed partly within and partly without the Philippines.
d. All of the choices.
11. Which of the following shall be treated as derived entirely from sources without the
Philippines?
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a. Gains, profits and income derived from the purchase of personal property within
and its sale without the Philippines.
b. Gains, and profits, and income derived from the purchase of personal property
without and its sale within the Philippines.
c. Gain from the sale of shares of stock in a domestic corporation regardless of
where the said shares are sold.
d. All of the choices.
12. A resident foreign corporation has the following income and expenses for the current
year:
Gross income, Philippines P1
600, 000
Gross income, USA
400, 000
Business expenses, Philippines 500, 000
Business expenses, USA 200, 000
Unallocated business expenses 150, 000
Interest expenses, USA 50, 000
Interest expenses, Philippines 100, 000
Unallocated interest expenses 80, 000

How much is the taxable net income?

a. P1, 100, 000
b. P1, 000, 000
c. P816, 000
d. P770, 000
13. A corporation manufactures goods in the Philippines, which are sold exclusively I
foreign countries. The following data are taken from the records of the corporation:
Gross sales, without P5,
000, 000
Gross income from sales, without 3, 000, 000
Operating expenses 2,
100, 000
Value of properties, Philippines 300, 000
Value of properties, without 600, 000

How much is the taxable income from sources within and from sources without
assuming no independent factory or production price can be established to the
satisfaction of the commissioner?
a. P590, 000; None
b. P750, 000; P150, 000
c. P150, 000; P750, 000
d. None of the choices
14. A non-resident alien individual engaged in business in the Philippines has the
following data on income and expenses in 2011:

1. Gross income, Philippines P220, 000

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

2. Rent on building, Philippines, net of 5% withholding tax 95,

000
3. Rent on commercial building, USA 70, 000
4. Interest income, debtor resides in Hong Kong 10,
000
5. Dividends from Ford Motors, foreign company, declared in 2011 50,
000

Note: Gross income of Ford Motors follows:

Within Without
2008 P300, 000 P500, 000
2009 400, 000 100, 000
2010 500, 000 200, 000
2011 350, 000 150, 000
6. Royalties received from Ford Motors for use of patents in USA 30,
000
7. Dividend from Walmart Corp., USA declared in 2011 80,
000

Note: Gross income of Walmart for the preceding 2 years prior

to declaration of dividend follow :
Within Without
2009 P 400, 000 P600, 000
2010 400, 000 400, 000

8. Gain on sale, Philippines, land located in Japan 300, 000

9. Gain on sale, Philippines, car purchased in Japan 50,
000
10. Expenses:
a. business expenses, Philippines 100,000
b. Depreciation building in Philippines 20,
000
c. Depreciation building, USA 10,
000
d. Expenses, sale of car in the Philippines 10, 000
e. Expenses, sale of land in the Philippines 50, 000
f. Unallocated expenses 60,
000

Question 1: How much is the income from sources within?

a. P630, 000
b. P600, 000
c. P450, 000
d. P400, 000
Question 2: How much is the income from sources without?
a. P630, 000
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b. P600, 000
c. P450, 000
d. P400, 000
Question 3: How much is the taxable net income assuming the taxpayer is single and the
country where he is a citizen allows P30, 000 basic personal exemptions to single
taxpayers who are not residing therein?
a. P246, 000
b. P216, 000
c. P196, 000
d. None of the choices