BSBA FM – 3A INCOME TAX FINALS

1. These must be for personal services actually rendered by employees

under an employer-employee relationship.
a. Fringe benefits
b. Travel expense
c. Compensation payments
d. Rentals

2. Which of the following is not included to elect instalment basis of

reporting income?
a. Those who regularly sell or otherwise dispose of personal property on the
instalment plan
b. Those who make a casual sale or other casual disposition of personal
property on the instalment plan provided requisites are present such as
sale or disposition is casual and selling price exceeds P10,000
c. Those who make sale or disposition of real property on installment if the initial
payments do not exceed 25% of the selling price
d. All of the above

3. William leased a piece of land for a period of three years. Subsequently, he

made improvement thereon for P600,000. If the estimated useful life of the
improvement in eight years. How much shall he be allowed as deduction?
a. P75,000.00
b. P150,000.00
c. P54,545.45
d. P200,000.00

4. Deficiency tax is computed

a. From the date prescribed for payment of the tax until full payment thereof
b. From the date of the late payment
c. From the due date appearing in the assessment notice until full payment
thereof
d. All of the above
e. A and C only

5. The following deductions are called itemized deduction. This item is only
available to individual taxpayers.
a. Pension Trusts
b. Premium payments on health
c. Bad debts
d. Charitable and other contributions
6. Generally, the following individuals are required to file an income tax
return. Who is not?
a. Every Filipino citizen residing in the Philippines
b. Every Filipino citizen residing outside the Philippines, on his income from
sources within the Philippines
c. Every alien residing in the Philippines on income derived from sources within
the Philippines
d. Every non-residing alien engaged in trade or business or in the exercise of
profession in the Philippines
e. All of the above
f. None of the above

7. The following are not deductible from gross income of farmer except for:
a. Cost of farm machinery, equipment and farm buildings.
b. Cost of gasoline or fuel, repairs and upkeep of transportation equipment,
used for pleasure or convenience of the farmer or his family.
c. Amounts expended in purchasing work, breeding, diary animal unless such
animals are included in an inventory.
d. Cost of gasoline or fuel and upkeep of the transportation equipment.

8. Which of the following taxpayers are not entitled to Deduct NOLCO.

a. Domestic and resident foreign corporations subject to the normal income tax.
b. An enterprise registered with the Philippine Economic Zone Authority,
pursuant to R.A. 7916, as amended, with respect to its PEZA- registered
business activity.
c. Any individual in trade or business or in exercise of his profession.
d. Domestic and resident foreign corporations subject to the preferential tax
rates under the Code.

9. Statement 1. Under the final withholding system, the amount of income tax
withheld by the withholding agent is constituted as a full and final payment
of the income tax due from the payee on the said income.

Statement 2. Under the creditable withholding tax system, taxes withheld

on certain income payments are not intended to equal or at least
approximate the tax due of the payee on said income.

a. Both statements are true.

b. Both statements are false.
c. The first statement is true while the second statement is false.
d. The first statement is false while the second payment is true.
10. Who is not required to file income tax return?
a. Individual deriving compensation currently from two or more employers
at any time during the taxable year
b. Individual receiving a combination of compensation and business income
(mixed income)
c. Employee whose total compensation income, regardless of the amount, the
income tax of which has not been withheld correctly
d. All of the above
e. None of the above

11. What total amount of gross sales/ receipts should any taxpayer have to be
classified as candidate to be a large taxpayer?
a. P1,000,000.00
b. P2,000,000.00
c. P1,000,000,000.00
d. P2,000,000,000.00

12. The Top 5000 Individual Taxpayers shall refer to individual taxpayers
engaged in trade or business or exercise of profession who have been
determined and notified by the Bureau of Internal Revenue (BIR) as having
satisfied any of the following criteria. Which one is not included?
a. Gross sales of ₱10,000,000 and above for the preceding year
b. Gross purchases of ₱10,000,000 and above for the preceding year
c. Total excise tax payment of at least ₱100,000 for the preceding year
d. Total percentage tax paid of at least ₱100,000 for the preceding year

13. Which statement is true?

a. There are prescribed methods of accounting for taxpayers, hence, the
taxpayer may not adopt an accounting system without approval by the
Commissioner of Internal Revenue
b. Cash basis is the method under which income, gains and profits are included
in gross income when earned, whether received or not, and expenses are
allowed as deductions when incurred, although not yet paid
c. In general, the taxable income shall be computed in accordance with the
method of accounting regularly employed in the books of the taxpayer
d. All of the above
e. None of the above

14. Which is not exempted from Withholding Tax on Compensation?

a. Income payment under Treaty
b. Amount received by the insured as a return of premium
c. Proceeds of life insurance
d. None of the above
15. The following are the criteria to be a large taxpayer. Which is not?
a. Any taxpayer with annual withholding tax payment, remittance of all kind of
withholding taxes of at least P1,000,000
b. Any taxpayer with total annual gross sales/receipts of P1,000,000,000 for the
preceding year
c. Any taxpayer with total net worth of at least P300,000,000 at the close of
each calendar year
d. All of the above
e. None of the above

16. These are all remuneration paid to an employee not otherwise exempted
by law from income tax and consequently from withholding tax.
a. Compensation
b. Regular compensation
c. Taxable income
d. Non-taxable income

17. It refers to suppliers with whom the taxpayer-buyer has transacted at least
six transactions, regardless of the amount per transaction, either in the
previous or the current year.
a. Local supplier
b. Foreign supplier
c. Regular Supplier
d. Nonresident supplier

18. Which of the following cases is subject to a surcharge of 25% of the tax
due
a. Wilful neglect to file the return within the period prescribed by the Tax Code or
by rules and regulations
b. In case a false or fraudulent return is wilfully made
c. Failure to file any return and pay the amount of tax or instalment due on
or before the due date
d. All of the above
e. A and B only

19. Buyers of metallic minerals are required to withhold ___ of gross

payments made and remit the same to the Government.
a. 2%
b. 5%
c. 10%
d. 20%
20. A calendar year
a. A period of 12 months ending on the last day of any month other than
December
b. A period of 12 months beginning January 31 and ending December 31, of
every year
c. A period of 6 months beginning January 1 and ending June 30
d. None of the above

21. Which of the following statement is false?

a. Initial payments mean the payments received in cash or property excluding
evidences of indebtedness of the purchaser during the taxable year in which
the sale or other disposition is made
b. Initial payments include the down payment plus all other payments received
by the seller during the taxable year of sale
c. The initial payments also include excess of the mortgage assumed over the
cost or other basis of the property sold
d. All of the above
e. None of the above

22. Who among the following individuals are exempt from filing their income
tax return?
a. An individual whose gross income does not exceed his total personal and
additional exemptions for dependents, except a citizen of the Philippines and
an alien individual engaged in business or practice of profession in the
Philippines
b. An individual whose sole income has been subjected to final withholding tax
c. An individual who exempt from income tax
d. All of the above
e. None of the above

23. It shall mean persons or entities with which the taxpayer has direct
business relations, such as but not limited to, clients/customers or
prospective client/customers.
a. Guests
b. Employees
c. Officers
d. Stockholders

24. I. Cost of farm machinery, equipment, and farm buildings

II. Amounts expended in purchasing work, breeding or dairy animals

unless such animals are included in an inventory

III. Amounts expended in the development of farms, orchards, and ranches,

prior to the time when the productive state is reached.
 Which of these are not deductible from the Gross Income of Farmers?
a. I only
b. II only
c. All of the above
d. None of the above

25. Which is not a requisite for deductibility?

a. There must be an indebtedness
b. The interest must be legally due
c. The interest expense must have been paid or incurred during the taxable year
d. In case of interest incurred to acquire property used in trade, business
or exercise of profession, the same must be treated as a capital
expenditure.

26. Which of the following are not included in the Principal method?
a. Cash basis
b. Accrual Basis
c. Crop-year basis
d. Hybrid method

27. If the taxpayer is entitled to a foreign tax credit and he did not choose to
exercise such right,
a. Such tax credit may be allowed as deduction from his gross income
b. No portion of such tax shall be allowed as a deduction form gross income
c. It is understood that it shall apply to income taxes paid to all foreign countries
d. The basis shall be his proportionate share of any such tax of the partnership,
estate, or trust paid or incurred during the taxable year to a foreign country

28. Which of the following cases is subject to a surcharge of 50% of the tax or
of deficiency tax
a. Wilful neglect to file the return within the period prescribed by the Tax Code or
by rules and regulations
b. In case a false or fraudulent return is wilfully made
c. Failure to file any return and pay the amount of tax or instalment due on or
before the due date
d. All of the above
e. A and B only

29. The fines to be imposed for any violation of the Code shall
a. Shall be P20,000 or twice the amount of taxes, interest and surcharges due
from taxpayer
b. Shall not be lower than P20,000 or twice the amount of taxes, interest and
surcharges due from taxpayer, whichever is higher
c. Shall be P40,000 or twice the amount of taxes, interest and surcharges due
from taxpayer
 d. Shall not be lower than P30,000 or twice the amount of taxes, interest
and surcharges due from taxpayer, whichever is higher
e. None of the above

30. In case of associations, partnerships or corporations, the penalty shall be

imposed on
a. Partner
b. President
c. General manager
d. Branch manager
e. Responsible for the violation