Professional Documents
Culture Documents
a. An alien who comes to the Philippines for a definite purpose which in its nature may
be promptly accomplished.
b. An alien who comes to the Philippines for a definite purpose which in tis nature
would require an extended stay.
c. An alien who has acquired residence in the Philippines.
d. An alien who lives in the Philippines with no definite intention as to his stay.
2. Christopher, a staff auditor of the Sycip, Gorres, Velayo& Co. took and passed the
examination for Certified Internal Auditor (CIA). The following year, he resigned from
his job and left the Philippines on April 10, 2010 to work as an internal auditor in a big
establishment in Melbourne, Australia. For income tax purposes, which of the following
statements is correct with respect to Christopher’s classification?
3. Who among the following individual taxpayer’s is taxable on income within and without?
4. Which of the following taxpayers whose personal exemption is subject to the law on
reciprocity under the tax code? (RPCPA)
a. Non-resident citizen with respect to his income derived from outside the Philippines.
b. Non-resident alien who shall come to the Philippines and stay herein for an aggregate
period of more than 180 days during any calendar year.
c. Resident alien deriving income form a foreign country.
d. Non-resident alien not engaged in trade or business in the Philippine whose country
allows personal exemption to Filipinos who are not residing but are deriving income
from said country.
5. The personal exemption of the non-resident alien engaged in trade or business in the
Philippines is equal to that allowed by: (RPCPA)
a. The income tax law of his country to a resident citizen of the Philippines not residing
there;
b. The income tax law of his country to a citizen of the Philippines not residing there or
the amount provided by the NIRC to a citizen or resident, whichever is lower,
c. The National Internal Revenue Code to a citizen or resident;
d. The income tax law of his country allows to a citizen of the Philippines not residing
there or the amount provided by the NIRC to a citizen or resident alien, whichever is
higher.
6. The taxpayer is married non-resident alien engaged in business in the Philippines with
two qualified dependent children. His country gives a non-resident Filipino with income
therefrom a basic personal exemption. (If married) of P20,000 and additional exemption
of P4,000. He is entitled to a personal exemption of (RPCPA)
a. P 28,000 c. P 24,000
b. 26,000 d. 20,000
8. An exemption provided by law to take care of personal living and family expenses of the
taxpayers and the amount of which is determined according to the status of the taxpayers
are? (RPCPA)
a. Additional exemption
b. Special additional personal exemption
c. Optional standard deductions
d. Personal exemption
10. A man has three wives under his tribal customs and practice. He is entitled to a personal
exemption appertaining to (RPCPA)
a. A single individual
b. A married individual
c. A married individual plus additional exemption for dependents pertaining to each of
the 2 extra wives.
d. A head of the family plus additional exemption for dependents pertaining to each of
his three wives.
11. As a rule, who of the spouses is the proper claimant of the additional exemption with
respect to any of the dependent children?
a. The husband if his income is higher than the income of the wife
b. The spouse who has a higher income
c. The husband;
d. The wife
14. Who among the following qualifies as dependent for purpose of additional exemption?
a. Sister-in-law c. Granfather
b. Stepmother d. Illegitimate daughter
15. Nena, aged 70 years old, who lives with her unmarried son Mario, received P60,000
which was used for her support during the year. The sources of support were as follows:
16. Who of the following is not a qualified dependent for purposes of claiming additional
exemptions?
17. Mr. Maasikaso, single, the following dependents who are living with and entirely
dependent upon him for chief support:
18. A native of Naga City, supporting his brother, 18 years old, unmarried not gainfully
employed, studying Bachelor of Science in Accountancy at the University of Santo
Thomas, is entitled to a basic personal exemption of –
a. P 20,000 c. P 50,000
b. 25,000 d. 75,000
21. Taxpayers are husband and wife. The gross compensation income of the wife if P260,000
while the gross business income of the husband is P200,00. They have six (6) qualified
dependent children but within the year one child died. Their total exemptions is (RPCPA)
a. P 200,00 c. P 64,000
b. 96,000 d. None
22. Eliza’s husband died in April 2011 leaving seven (7) unmarried children living with and
wholly dependent of Eliza for support. The ages of the children are as follows:
For purposes of taxable year 2011, how much exemption would Eliza be entitled
to? (RPCPA)
a. P 150,000 c. P 64,000
b. 57,000 d. 73,000
23. In 2011, Padolino’s wife died of a car accident. His dependents are as follows:
24. For taxable year 2012, Padolino can claim additional exemptions of
a. P 8,000 c. P 25,000
b. 16,000 d. 100,000
25. Mdm. I, widow, earning an annual gross compensation income of P300,000 has the
following dependent children in 2011.
a. P 120,000 c. P 95,000
b. 225,000 d. 87,000
27. Which of the following income derived from within the Philippines by a resident
individual is not subject to the rates in Section 24(A) of the NIRC? (RPCPA)
Prizes amounting to P10,000 or less are subject to the rates in the tax table
Gain on sale of motor vehicle of a compensation income earner is a capital gain
which is also subject to the graduated rates in the tax table.
A real property for privates use of the family of the taxpayer is a capital asset. Its sale
or exchange is subject to 6% final tax. Therefore, any income derived from the sale is
not subject to he graduated rates for income tax.
28. Which of the following income is subject to final tax received by an individual taxpayer?
I. Share of a partner in the net income of a business partnership
II. Cash dividend received by a stockholder from domestic corporation
III. Winnings in lotto
IV. Raffle prizes amounting to P6,000
a. I and II c. I, II and IV
b. III and IV d. I,II, III and IV
29. Which of the following is not a requisite for deductibility of health insurance?
30. Statement 1: Health and/or hospitalization insurance premiums paid by an individual are
deductible only if the taxpayer is a pure compensation income earner.
Statement 2: A taxpayer who has paid a monthly health insurance premiums of P400 for
six months in a year can claim a total deductive amount of P2,400
31. Maliksi, single, supporting his 58 year old mother, is a business income earner. During
the year, his net income was P15,000. He also paid a total premium of P3,000 to an
insurance company for his health insurance. How much is his taxable income?
a. P97,600 c. P122,000
b. 97,000 d. 122,600
32. All of the following except one, are taxable on income within only:
33. In 2011 Rustom, Filipino, legally separated from is wife, Mina, left for the United States
with his daughter, Robina, to permanently reside therein. In 2011 he earned P 2 million as
income from his beauty parlor in that country.
34. Case 1: Pepe, a CPA, had signed a legally enforceable agreement with his wife, Pilar, that
the earnings from the exercise of his profession would be shard equally between them for
purposes of computing the income to be reported in their respective individual income
tax return. Is the agreement valid?
Case 2: Lorenzo advised his daughter, Lorena that rent income the dormitory owned by
Lorenzo will accrue to the latter. Lorena collected the income and reported it on her own
return. Were the actions taken by Lorenzo and Lorena valid?
Case 1 Case 2
a. Yes No
b. Yes Yes
c. No Yes
d. No No
a. Lotto winnings in the United States of a Filipino residing in the Philippines is taxable
in the Philippines
b. Lotto winnings sponsored by the Philippines Charity’s Sweepstakes Office is not
taxable to a resident citizen.
c. Winnings of brand new in raffle draw sponsored by a shoppings mall is taxable.
d. Winnings in a raffle draw sponsored by a cigarette company is subject to tax based on
the schedule or rates in the tax table if the amount involved does not exceed P10,000
a. P 261,000 c. P 291,000
b. 334,000 d. 306,000
38. The taxable income if Sharon is a non-resident alien ETB, married with five (5)
dependent children –
a. P 243,000 c. 74,000
b. 56,000 d. None
39. The income tax due on Sharon assuming she is a nonresident alien NETB, single is –
a. P 83,500 c. P 18,500
b. 63,500 d. 334,000
a. P 3,000 c. P (5,500)
b. 10,200 d. 8,700
a. P 27,500 c. P 11,600
b. 37,500 d. None
a. P 14,000 c. None
b. 7,000 d. No answer
a. Resident alien
b. Nonresident alien engaged in trade or business
c. Nonresident alien not engaged in trade or business
d. Nonresident foreign corporation
45. The income tax payable by Rodil if he availed of the itemized deductions
46. The income tax payable by Rodil if he availed of the optional standard deductions –
a. P 4,500 c. P 51,050
b. 50,225 d. 51,650
47. The income tax payable by Carlo is –
a. P 1,031.32 c. P 363,16
b. 18,277.72 d. 8,687.85
a. P 448.29 c. P (983.19)
b. 1,431,45 d. None
49. Mrs. Evangelista owns a parcel of land worth P500,000 which she inherited from her
father in 2011 when it was worth P300,000. Her father purchased in 2006 for P100,000.
If Mrs. Evangelista transfers this parcel of land to her wholly owned corporation in
exchange for shares of stocks of said corporation worth P450,000, Mrs. Evangelita’s
taxable gain is (RPCPA) –
a. Zero c. P 150,000
b. P 50,000 d. 350,000
50. Mr. Juan de la Cruz transferred his commercial land with a cost of P500,000 but with a
fair market value of P750,000 to JDC Corporation in exchange of the stocks of the
corporation with par alue of P1,000,000. AS a result of the transfer he became the major
stockholder of the corporation.
51. Mr. Santiago purchased a life annuity for P100,00 which will pay him P10,000 a year.
The life expectancy of Mr. Santiago is 12 years. Which of the following will Mr.
Santiago be able to exclude from his gross income? (RPCPA)
a. P100,000 c. P 20,000
b. 10,000 d. 120,000
52. If an individual performs services for a creditor who in consideration thereof cancels the
debt. The cancellation of indebtedness may amount: (RPCPA)
53. Mr. Anakin, an employee of Fuerte Corporation is receiving a monthly salary (net of 10%
withholding tax) of P 18,00. Due to an outstanding accomplishment in July, 2011. Due to
an outstanding accomplishment in July 2011, the corporation gave him 200 shares of
stock of the corporation with a par value of P100 per share and a fair market value of
P150. The fair value on the date of receipt is P152 per share.
54. Carandang is indebted to Dacuycuy. Due to his inability to pay the debt, he was asked to
clean the piggery of the latter for three months. Thereafter Dacucuy gave him P5,000
cash and condoned the debt amounting to P10,000.
How much income should be declared by Carandang?
a. P 5,000 c. P 15,000
b. 10,000 d. None
55. Rewards given to person instrumental in the discovery of violations of the National
Internal Revenue Code are subject to
56. In 2010, Alonte received from his employer a promissory note with a face value of
P50,00 for services rendered. The note will mature in 2011. However, it can be sold to a
bank at a discount of 25%. The employer paid the promissory note in 2011. How much
taxable income is to be declared by Alonte on the promissory note in 2010 and 2011?
57. Using the same data in Number 56, except that 50% of the face value of the note is pay
able in 2010 while the remaining 50% is pay able in 2011.
How much income is taxable to Alonte in 2010, 2011 and in 2012?
58. The taxable amount on the recovery of bad debt previously deducted is
59. Which of the following statement is correct with respect to a leasehold contract?
I. Security deposits are reportable as income of the lessor in the year of receipt
II. The depreciation on the improvement is to be computed by dividing the cost by
the life of the asset or the remaining term of the lease, whichever is longer.
III. Prepayment of rentals by the lessee are to be recorded by the lessor using cash
method even if it is ordinarily using accrual method of accounting.
a. The amount of the improvement is not taxable to the lessor if he will pay the lessee
whatever is the book value of the improvement at the expiration of the lease contract.
b. The amounts du e on the lessor such as realty taxes shall be deductible expenses to
the lessee if they are assumed by the latter.
c. As a general rule, the lessor will pay lesser income tax if he avail of the spread-out
method rather than take the outright method in reporting income on the improvement.
d. A lessor shall consistently apply accrual method of accounting regardless of the
prepayments in rents received from the lessee.
61. Assuming that on January 1, 2010. Jose paid P214,000 to Bryant covering the lease
contract for two years, how much incomes is to be reported by Bryant in 2010?
a. P 12,000 c. P 24,000
b. 13,500 d. 25,500
62. How much income is to be reported by Bryant in 2012 under the outright method?
a. P 13,500 c. P 1,013,500
b. 1,500 d. 1,000,000
63. How much income is to be reported by Bryant in 2012 under the spread-out method?
a. P13,500 c. P 1,013,500
b. 1,500 d. 88,500
a. P 138,500 c. P 125,000
b. 63,500 d. 13,500
65. Assuming that due to the fault of the lessee, the lease contract was terminated on January
1, 2015, how much income is to be reported by the lessor in 2014?
a. P 763,500 c. P 88,500
b. 750,000 d. 1,013,500
a. P 60,000 c. P 120,000
b. 123,000 d. 63,000
67. The rent income to be reported by Artemio in 2012 under outright method is –
a. P 60,000 c. P 1,860,00
b. 63,000 d. 1,863.000
a. Effective January 1, 2010, the land shall be exempt from real estate tax.
b. Effective January 30, 2012, the land shall be exempt from real estate tax
c. Effective January 1, 2013, the land and the building shall be exempt from real estate
tax.
d. Effective June 30, 2012 the land and the building shall be exempt from real estate tax.
a. P 165,857 c. P 114,429
b. 162,857 d. 84,429
a. P 105,857 c. P 114,429
b. 102,857 d. 84,429
72. The income to be reported by Artemio in 2013 under spread-out method is –
a. P 1,443,000 c. P 1,440,000
b. 1,485,857 d. 1,482,857
73. On January 1 ,2010, Atutubolesed a lot of Bengbeng with a building erected thereon for a
period of 10 years. The lease contract provides that Bengbeng will pay the following:
The lessee will construct a concrete fence surrounding the lot of a cost of
P1,2000,000 with a useful life of 20 years, shall belong to the lessor at the expiration
of the lease. The fencing was finished on June 30, 2012.
In 2012, Atutubo shall report as income from lease (spread-out method) an amount of
a. P 75,000 c. P 140,000
b. 740,000 d. 190,000
74. In number 73 above, the lese can claim a deductible expense in 2012 of
a. P215,000 c. P 215,000
b. 220,000 d. 190,000
76. Corco Corporation took tow life insurance policies on the life of its EVP, Mrs. Lopez, in
one policy, the beneficiary is the corporation and the other, designates her husband as the
revocable beneficiary. The insurance premium paid by Corco Corporation is (RPCPA)
a. Is exempt from income tax upon the death of the insured if the beneficiary is not the
estate, executor or the administrator.
b. Is not subject to income tax if taken by a person other than the insured such as the
employer.
c. Are subject to income tax its entirely, if he insured outlives the policy regardless of
the amount of premiums paid by the insured.
d. Are exempt from income tax upon the death of the insured because other than the
estate, executor or administrator is applicable only to estate tax and not to income tax.
78. Mrs. Lucena was insured under on endowment policy with a value of P500.00. Total
premiums paid by her during the team of premium payments on the policy was P490,000
from which there was a return of premiums of P40,000. At the maturity of the policy,
Mrs. Lucena received P500.00. The income of Mrs. Lucena under the policy is (RPCPA)
a. Zero c. P 10,000
b. P 500,000 d. 50,000
79. Assuming that the policy matured when Sonia reached 50 years old and she received the
entire P500,00 from the insurer, how much income should she report?
a. P 500,000 c. P 300,00
b. 200,000 d. None
80. Assume that Sonia and died after 10 years of paying premium. How much income should
be reported to the BIR?
a. P500,00 c. P 400,000
b. 100,000 d. None
81. If Paulo dies on the 5th year, his beneficiary will report on income of
a. P500,000 c. P260,000
b. 150,000 d. Exempt
82. Suppose Paulo dies on the 5th year and his beneficiary was offerd to receive the P150,000
in lump sum or to receive it at P20,000 a month for ten (10) months and the beneficiary
chose the 2nd option, he will report an income of
a. P 500,000 c. P 50,000
b. 150,000 d. Exempt
83. Suppose Paulo survived the policy and was able to receive P500,000 he will report an
income of –
a. P 500,000 c. P 150,000
b. 260,000 d. None
84. Andrew is the owner and beneficiary of a P500,000 policy on the life of his father.
Andrew sells the policy to his brother Rolly for P150,000. Rolly subsequently pays
premiums of P50,000. Upon his father’s death Rolly must.
85. Mr. Basilio insured his life with his estate as beneficiary. In 2011, after Mr. Basilio had
paid P65,000 in premium, he assigned the policy to Mr. Jose Llamado for P60,000 and
Mr. Llamado continued paying the premiums. Mr. Basilio died and Mr. Llamado
collected the total proceeds of P200,000. Mr. Llamado, after the assignment and before
Mr. Basilio’s death, paid total premiums of P90M000. As a result of the above
transaction, Mr. Llamado (RPCPA)
86. Binatay Reyes won the international Billard Championship held in Madrid Spain. The
tournament was sanctioned by a national sports association which is recognized by the
Philippine Olympic Committee. He was awarded U.S. $60,000 by the sponsor of the
tournament. He was also given P250,000 cash by San Miguel Corporation as prize or
award.
If the same year, he entered into a control with the same company to advertise
their product for P1,5000,000
If the exchange rate of every U.S. $1 is P45. Binata Reyes should report an
income of –
a. P 4,750.000 c. P 1,750.000
b. 1,5000,000 d. 3,250.000
87. While crossing along the intersection of Legarda St. and Recto Avenue is Sampaloc,
Manila, Miss Mina Malas was bumped by a passenger jeepney. As a consequences of the
accident, she was hospitalized for 20 days. The driver and the operator of the passenger
jeepney paid her a total amount of P135,000 for the following expenses that she incurred;
She also received P20,000 as settlement of a libel case that she filed against a
television station which announced that she was pregnant at the time off the
accident and that the fetus was aborted.
88. Mr. Monte was injured in a vehicular accident in 2011. He incurred and paid medical
expenses of P20,000 and legal fees of P10,000 during the year. In 2012, he received
P70,000 as settlement from the insurance in the accident. From the above payments and
transactions, the amount of taxable income of Mr. Monte in 2011 is (RPCPA)
a. Zero c. P 70,000
b. P 40,000 d. 50,000
89. An accident attributed to the negligence of the drive of Superman Lines resulted in the
death of Richard’s wife, physical injuries to Richard that prevented him form working for
two (2) months and the total wreck of his brand new car which he had bought for
P450,000.
90. Lenny was hit by a wayward bus while on her way home. She survived but had to pay
P150,000 for her hospitalization. She was unable to work for six (6) months which meant
the she did not receive her usual salary of P10,000 a month or a total of P60,000. She
sued the bus company and was able to obtain a final judgment awarding her P150,000 as
reimbursement for her hospitalization, P60,000 for the salaries she failed to receive while
hospitalized, and P250,000 as moral damages for her pain and suffering. She was able to
collect in full from the judgment. How much income did she realize when she collected
from the judgment?
a. P 460,000 c. P 60,000
b. 250,000 d. 400,000
91. Samsona was injured in a vehicular accident in 2010. She incurred and paid hospital
expenses of P30,000 and legal fees of P15,000 during that year. In 2011, she recovered
P40,000 as settlement from the insurance company which insured the car owned by
Dimar, the other party involved in the accident. From the above payments and
transactions, the amount of income taxable to Samsona is:
93. Mrs. Cruz and recently joined the MMC as sales, executive. She was advised to be
retrenched because the company was losing heavily, but that she would be given a
substantial separation pay. The general manager, however, suggested to Miss Cruz to file
a letter of resignation from the company, instead of having been involuntarily separated
as the latter would have implications of inefficiency on her part. Miss Cruz chose to
resign from the company and received the sum of P100,000 as separation pay. The above
amount is (RPCPA)
94. Sharmaine, on official of Sampaguita Corporation asked for an earlier retirement because
she was emigrating to Canada. She was paid P 1 million as a separation pay in
recognition of her valuable services to corporation.
Shane, another official of the same company was separated for occupying a
redundant position. She was given P500,000 as separation pay.
Sheila was separated due to her failing eyesight. She was given P250,000 as
separation pay.
Life of the three (3) were not qualified to retire under the BIR approved pension
plan of the corporation.
95. During the year, Bata received a coconut land form his mother by way of an inter vivas
donation. The land had a market value of P700,000 and earning an average annual
income of P50,000.
In the same year, his mother died. He inherited a passenger bust valued at
P400,00 and resident house worth P2,000,000. The bus earned a total income of
P30,000 in the hands of Bata.
As a consequences of his mother’s death, he received P400,000 form an insurance
company as proceeds of an insurance policy taken by his mother who appointed
him as the beneficiary. The total premium paid was P150,000.
96. After working for 30 years at Sto. Domingo Corporation, Miss Tilapia Nilotica retired
from employment at the age of 60. She received P600,000 as retirement pay from the
private retirement plan maintained by the employer.
Other than her retirement benefits she also received her endowment insurance
policy in the amount of P400,000 which she was paying for 20 years at an annual
premium of P5,000.
97. Anton was hired as a staff auditor of SBB and Company in 1995. On December 2002 he
transferred to Bayan and Associates. In 2004, he returned book to SBB and Company
until his retirement in 2010 at the age of 55.
Q1 Q2 Q3 Q1 Q2 Q3
a. No Yes No a. Yes No No
b. No Yes Yes b. Yes No Yes
98. On October 1, 2011, Samantha inherited properties worth P3,000,000 from her mother.
The properties are earning income of P90,000 a month.
99. Villamayor, an employee of a cooperative was regularly receiving a monthly salary and
allowance of P3,500 and P1,000 respectively. On June 1, 2011, he was retrenched by the
cooperative paying him a separation pay of P125,000. He decided to use this money in
buying a trimobile. For a six (6) month period, he earned a net income of P24,000. How
much income should Villamayor declare in 2011 for income tax purpose?
a. P 48,750 c. P 173,750
b. 46,500 d. 171,000
100. Raquel Montero was retired by her employer – corporation in 2011 and paid
P2,000,000 as a retirement gratuity without any deduction of withholding tax. The
corporation became bankrupt in 2010. Can the BIR subject the P2,000,000 retirement
gratuity to income tax? (RPCPA)
1st Answer: No, if the retirement gratuity was paid based on a reasonable pension plan
where Montero was 60 years old and has several the corporation for 9 years.
2nd Answer: Yes, if Montero was forced by the corporation to resign due to
retrenchment.
a. Both answers are wrong
b.Both answers are correct
c. First answer is correct, the second is wrong
d. First answer is wrong, the second is correct.
103. 1st Semester: Laundry allowance not exceeding P300 per month is not an exempt de
minimis benefit if given to rank-and-file employees.
2nd Semester: Rice subsidy of P1,500 per month is an exempt de minimis benefit
regardless of whether the recipient employee is occupying a managerial position or not.
104. After working for 30 years and due to old age. Rufino retired from his employment on
December 31, 2011 as a rank-and-file employee to Tumagay Corporation. As a
consequences of is retirement, he received the following from is employer.
105. The portion of compensation which is excluded from the gross compensation income if
Mulry is a rank-and-file employee is –
a. P 5,100 c. P 29,000
b. 34,100 d. None
a. P 144,000 c. P 109,900
b. 150,000 d. 138,900
107. Which of the following a compensation paymentsto a minimum wage earner is subject
to income tax?
a. Alcanzo only
b.Alcanzo and Barrientos
c. Alcanzo, Barrietnos and Corporal
d.Barrientos and Corporal
109. For purpose of income taxation which f the following is not considered as a
corporation?
a. Andrea, Barbara and Criselda contributed P500,00 each and opened up a department
store in the downtown. They agreed that whatever net profit is earned will be
distributed equally to them. They did not bother to register the business with the
Securities and Exchange Commission.
b. Gigi and Jayjay, tow senior staff auditors of a big accounting and auditing firm,
resigned from their job and organized a new firm which they named as Gigi. Jayjay
and Company. CPAS.
c. Lovinia, Dorina, Rosa Mia and Capical formed a business organization with the
following agreed features. (1) They are deprived of their general agency to act on
behalf of their ventures (2) The power of management are vested in the Board of
Trustees (3) The ownership is represented in transferable certificates (4) The business
continues for its fixed term not with standing the death or disability of one of them;
and (5) The liability of the partnership is not limited to their contributions.
d. A group of live entrepreneurs had organized, filed and registered the articles of
incorporation of Cojangkuha Corporation. It has an authorized capital stock of P10
million divied in 100,00 shares each share having a par value of P100
a. Domestic corporations
b. Resident corporations
c. Resident foreign corporations engaged in trade or business in the Philippines
d. Resident foreign corporations not engaged in trade or business in the Philippines.
a. Domestic corporation
b. Resident foreign corporation
c. Non-profit cemetery
d. Nonresident foreign corporation
114. Equipment’s Corporation, a domestic corporation has the following records of income
and expenses in 2011.
a. P 214.020 c. P 803,400
b. 219,320 d. 259,490
115. Based on the data in Number 114 above, the total final taxes payable on Equipments
Corporation is –
a. P 19,000 c. P 33,250
b. 21,500 d. 3,000
116. Alliance Corporation, a corporation engaged in business in the Philippines and abroad,
has the following data in 2011;
a. Domestic corporation are taxable in the Philippines on income derived from Japan
and Philippines sources.
b. Resident foreign corporation are taxable in the Philippines on income earned in the
United States.
c. Nonresident foreign corporation are taxable in the Philippines on income derived
form sources in the Philippines only
d. Domestic corporation are taxable in the Philippines on income earned from business
operation in the United States.
118. Tralala Corporation, a domestic corporation has the following record of income and
expenses during the year.
a. P 51,475 c. P 103,120
b. 2,600 d. 148,100
a. P 40,800 c. P 28,300
b. 36,720 d. 21,500
121. The income tax payable at the end of the second quarter is –
a. P 26,000 c. P 31,800
b. 28,320 d. 75,600
122. The income tax payable at the end of the third quarter is –
a. P 52,000 c. P 12,640
b. 62,400 d. None
a. P 25,090 c. P 75,900
b. 62,750 d. 68,610
For the 1st quarter of 2011, the corporation will report: (RPCPA)
a. Excess tax credit of P6,000
b. Tax payable of P7,000
c. Excess tax credit of P8,000
d. Tax payable of P2,000
125. A domestic corporation has the following data:
How much is the income tax still due and payable in the second quarter?
(RPCAPA)
a. P 21,000 c. P 10,400
b. 14,000 d. 29,440
126. If the gross income from unrelated activity exceeds 505 of the total gross income
derived by any private educational institution, the rate shall be 30% based on the entire
taxable income. This principle is known as
128. Assuming the cost of construction is treated as an expense. The income tax payable by
the school for the year ended June 30, 2011 is
a. P 343,000 c. P 576,000
b. 147,000 d. 160,000
129. The income tax payable if the cost of building construction is capitalized:
a. P346,000 c. P1,203,200
b. 147,000 d. 345,667
a. Nonresident aliens engaged n trade or business are liable to pay 300% dividend tax
b. Nonresident aliens not engaged in trade or business is liable to pay 25% dividend tax.
c. Resident citizens are liable to pay 10% dividend tax.
d. Resident foreign corporations are exempt from the payment of dividend tax.
132. Dividends from a domestic corporation and/or share in the net income of a taxable
partnership received by a citizen during the year 2011 is subject to a final tax of (RPCPA)
a. Zero c. 20%
b. 30% d. 10%
133. The TY Corporation is an international carrier doing business in the Philippines. Its
taxable base for income tax purposes is (RPCPA) –
134. A resident international carrier has the following data for the current year: Gross
income of P700,00 and expenses P200,000 from the Philippines. Gross income of
P500,00 and expenses of P10,000 from Hongkong. How much is the tax payable of the
corporation? (RPCPA)
a. P 288,000 c. P160,000
b. 17,500 d. 30,000
136. On February 5, 2011, Zurich Corporation declares 20% stock dividend and issued
shares of stocks amounting to P100,000. On March 20, 2011 the corporation redeemed
the stock dividend by virtue of which the stockholders surrendered their stock certificates
in return for the cash paid to them by Zurich Corporation in the amount of P1000,000.
a. The stock dividends declared are taxable because generally stock dividends are subject
to income tax.
b. The dividends are taxable to the stockholders because they are actually property
dividends.
c. The redemption of the stock dividend is essentially equivalent to the distribution of a
taxable dividend. Hence, the amount to distributed in redemption shall be considered
as taxable income.
d. The distribution and the redemption of the stocks are not taxable because stock
dividends are exempt from income tax.
137. If a corporation distributes its assets to its stockholders upon dissolution this kind of
corporate distribution will result in (RPCPA)
138. If a corporation to which the stockholders is indebted forgives the debt, the transaction
has the effect of a payment of what kind of dividend? (RPCPA)
140. The following statements relate to the rules on minimum corporate income tax. Which
of them is false?
142. Which of the following corporation is subject to the minimum corporate income tax?
143. The imposition of minimum corporate income tax shall not be suspended whenever the
corporation suffers losses due to
144. A corporation which was registered with the Bureau of Internal Revenue in May, 2007
shall be covered by MCIT in
a. 2010 c. 2013
b. 2011 d. 2014
145. Watchout Corporation which commenced business operations ion 2000 has a gross
income of P632,000 and allowable deductions of P610,000 in 2011. Its income tax
payable during the year is –
a. P 7,700 c. P 6,660
b. 7,040 d. 12,640
a. P 117,750 c. P 116,000
b. 17,500 d. 137,500
148. In number 146 above, the journal entry in 201 to record excess MCIT is –
149. In number 146 above, the accounting entry in 2012 to record the carry forward of
excess MCIT normal income tax liability in 2011 is –
150. Statement 1: If the quarterly income tax is based on MCIT, the excess MCIT from the
previous taxable year/s shall not be allowed to be credited.
Statement 2: Expanded withholding tax, quarterly corporate income tax payments under
the normal income tax, and the MCIT paid in the previous taxable quarters are allowed to
be applied against the quarterly MCIT due.
151. Agency Corporation has the following data during the year
1st 2nd
Quarter Quarter
Normal income tax P 10,000 P 12,000
Minimum corporate income tax 8,000 25,000
Taxes withheld during the quarter 2,000 3,000
Excess MCIT prior year 3,000
Excess w/ Tax prior year 1,000
The income tax payable by Agency Corporation for the 1st quarter is –
a. P 7,000 c. 3,000
b. 4,000 d. 2,000
152. If number 151, the income tax payable for the 2nd quarter is –
a. P 15,000 c. 27,000
b. 20,000 d. 23,000
153. Meldy Corporation had the following items of income and expenses during the year.
154. Joyce Corporation, a domestic corporation organized in 2006 has the following records
of computation of tis income tax during the three (3) consecutive taxable years:
a. The MCIT shall not be applied on Joyce Corporation until 2009. It shall only be applied
effective in 2010.
b. The excess MCIT in 2011 can e carried to the succeeding year even if the corporation
suffers a loss in 2012.
c. The term “gross income” includes other incomes.
d. The excess MCIT of 6,700 in 2011 can be carried over until 2012 only
2010 2011
Gross income P 3,5000,00 P 2,400,00
Taxable income 125,000 500,000
The income tax due on the Irene Corporation for 2010 is:
a. P 43,750 c. P 26,250
b. 70,000 d. 40,000
156. The income tax payable by Irene Corporation for 2011 is:
a. P 150,000 c. P148,750
b. 48,000 d. 124,750
157. A penalty and a form of a deterrent to the avoidance of tax upon shareholders who are
supposed to pay dividends tax on the earnings distributed to them by the stockholders.
160. Which of the following corporation is subject to the improperly accumulated earnings
tax?
161. All of the following except one, are additions to taxable income tax purposes of
computing improperly accumulated taxable income –
a. P 234,000 c. P275,500
b. 265,600 d. 249,000
a. P 64,415 c. P 36,425
b. 34,765 d. 32,275
a. P 81,800 c. P 301.00
b. 93.000 d. 70,000
a. P 81,500 c. P 91,500
b. 93,800 d. None
167. Ann Corporation has the following data during the year
Gross Sales P 1,540,000
Cost of Sales 645,000
Expenses 460,460
If Ann Corporation availed of the optional standard deduction, the taxable income shall
be –
a. P 537,000 c. P 741,000
b. 434,540 d. 279,000
168. When Dina Mathay died, she left real properties to her husband and three (3) small
children. The husband administered the property, the rental income of which he
accumulated and later used in buying a passenger bus.
Are the income of the inherited properties and the bus subject to tax?
Inherited Bus
a. Yes Yes
b. Yes No
c. No Yes
d. No No
169. Andok and Baliwag contributed money and purchased five (5); hectares of land in
2010. In the same year, they sold the land of a higher price. In 2011, they bought a bigger
parcel and sold it after three (3) months at double the price. They paid the corresponding
capital gain taxes.
170. When their parents died. Cherry and Gil inherited five (5) hectares of land in Antipolo
City. They decided to invest capital and developed the land into a subdivision which they
named as Cherry-Gil Subdivision with small being sold either on installment in cash
basis
Question 1: Is partnership created by Cherry and Gil?
Question 2: Are they subject to final tax on their respective share in the income?
Question 1 Question 2
a. Yes No
b. No Yes
c. Yes Yes
d. No No
Question 2: Are they subject to final tax on their respective share in the income?
Question 1 Question 2
a. Yes No
b. No Yes
c. Yes Yes
d.No No
171. 1st Q: Is a co-ownership taxable? No, because the activities of the co-owners are limited
to the preservation of the properly and the collection of income therefrom.
2nd Q: Is the share of a co-owner in the net income of a co-ownership taxable? Yes,
because each co-owner is taxed individually on his distributive share in the income of he
co-ownership. (RPCPA)
173. The share of partner in the profits of a general professional partnership is regarded as
received by him an thus taxable although not yet distributed. This principle is known as
174. Under the NIRC, income is received not only when it is actually or physical transferred
to a person but even when it is merely constructively received by hm. An example of
income constructive received is (RPCPA)
a. Rental payments refused by the lessor, when the lessee tendered payment and the latte
made a judicial deposit of the rental due.
b.Interest coupons not yet due and payable
c. Interest on savings deposit not yet credited to the account to the depositor
d. Advances deposit made by the lessee.
a. P 218,750 c. P 165,000
b. 187,500 d. 192,500
177. The final taxes on the respective share of Bim and Bam in the partnership income –
Bim Bam
a. P 25,240.00 P 21,060.00
b. 31,157.50 25,495.50
c. 24,227.50 19,822.50
d. 30,250.00 55,045.00
a. P 72,600 c. P 44,550
b. None d. 45,900
a. P 20,500 c. P 11,500
b. 18,500 d. 59,000
a. P 12,500 c. P 16,500
b. 48,000 d. 24,000
a. P 3,000 c. P 7,000
b. 4,000 d. 22,000
a. P 17,000 c. P 22,200
b. 14,600 d. 15,200
184. The property, rights and obligations of a person which are not extinguished by his death
and also those with have accrued thereto since the opening of the succession –
a. Estate c. Trust
b. Legacy d. Will
a. Legatee c. trustor
b. Devisee d. beneficiary
a. Legatee c. trustor
b. Devisee d. beneficiary
187. Tinong died on Janaury 1, 2011. He left a gross estate with a cost of P4,000,000 but
valued at P3,500,000 under an administrator. During the year, the gross income derived
from the business of the estate was P400,000 while the relate expenses amounted to
P150,000 beneficiaries Felipe and Khadafi were given P100,000 each.
188. An arrangement under which title to property is passed to another for investment, with
the income and ultimately the principal to be distributed in accordance with the direction
of the creator is –
a. Will c. an inheritance
b. A trust d. pacto de retro
a. P 143,000 c. P 175,000
b. 23,250 d. 300,000
191. The income taxes payable by trustee Caipas and Trustee Judas are
Caipas Judas
a. P 24,375 P 24,375
b. 24,375 40,625
c. 26,000 39,000
d. 65,000 23,250
a. Real property initially acquired by a taxpayer engaged in real estate business but
subsequently abandoned or become idle.
b.Real property transferred through succession or donation to the heir or donee who is not
engaged in the estate business with respect to the real properly inherited or donated
and who does not subsequently use such property in trade or business.
c. Real properties of the real estate lessor, whether land and/or improvements, which are
for lease or being offered for lease, or otherwise for use or being used in the trade or
business.
d. Real properties acquired in the course of trade of business by a taxpayer habitually
engaged in the sale of real estate.
194. Under Section 39 (b) of the Tax Code, how much small be taken into account in
computing net income, if a gain is realized by an individual taxpayer from the sale or
exchange of capital assets (other than real properties and shares of stocks) held for more
than 12 months? (RPCPA)
195. Lots being rented when subsequently sold are classified as (RPCPA)
196. A feature of ordinary gains are distinguished from capital gains (RPCPA)
197. Which of the following taxpayers is allowed to observe the “no holding period and no
carry over of net capital loss”
a. Individual c. Corporation
b. Estates d. Trusts
198. Which of the following statements is true?
a. The sale by a corporation of its office building shall not result to a capital gain even if it
derived a gain on P240,000 on the sale.
b. A corporation with a net capital loss of (50,-000 and a net income of P40,000 in 2011
can carry over only a maximum amount of P40,000 I n2012.
c. A corporation which sold for P120,000 in 2011 an equipment which it acquired in
2008 to P180,000 shall report only a capital gain of P30,000 in 2011.
d. A corporation which sold for P120,000 in 2011 an equipment which it acquired in
2008 for P180,000 shall report only a capital gain of P30,000 in 2011.
a. Capital gains and losses are recognized to the extent of 100% regardless of he holding
period.
b.The net capital loss carry over is not applicable
c. Capital losses are deductible only to the extent of capital gains
d. There is a final tax of 5% on real property sold
200. Statement 1: Capital looses are deductible only from ordinary gains
Statement 2: Corporation are not allowed to observe the holding period and to carry over
net capital loos.
201. Joahna Corporation realized an ordinary gain of P400,00. Its capital asset transactions
during the year are as follows:
202. Jose Sese, single, had the following data on income and losses:
2010 2011
Ordinary business income P 56,7000 P 60,800
Interest on time deposit with PNB 2,000 3,000
Short – term capital gain 5,000 8,500
Long – term capital gain 3,600 5,200
Short – term capital loss 8,000 2,900
Long – term capita loss 4,400
a. P 15,600 c. P 36,000
b. 69,000 d. 45,600
204. Santos qualified as head of a house for 2010 tax purposes. Antos 2011 taxable income
was P200,00 exclusive of capital gains and losses. Santos had a net long-term loss of
P8,000 in 2011. What amount of this capital loss can Santos offset against 2011 ordinary
income? (RPCPA)
a. P 0 c. P 4,000
b. 3,000 d. 8,000
205. Rose, single, had the following data on income and losses:
2010 2011
Net income P 25,000 P 95,000
Capital gains 8,000 40,000
Capital losses 40,000 5,000
a. P 5,000 c. P (25,000)
b. 0 d. (57,00)
a. P 68,999 c. P 115,000
b. 55,000 d. 10,000
207. All of the following except one, results to a capital gain or loss
208. A transaction in which the specular sells securities which he does not own (he merely
borrows the stock certificate through or from his stock broker) in participation of a
decline in its pride, and within a reasonably short period of time busy or cover the stock
to complete the transaction.
209. A bought from B Corporation ten shares of stock. Sixty days therafter, the corporation
was adjudged bankrupt and its stock as worthless. The loss of A to be reported for
income tax purpose is classified as (RPCPA)
a. A wagering loss
b. Non-deducible loss for income tax purposes
c. Short-term capital loss
d. Casually loss
210. On capital gains tax on real property, which of the following statements is not correct?
(RPCPA)
a. The tax should be paid, if in one lump sum, within 30 days from the date of the sale.
b. The term “initial payment” is synonymous to “downpayment”.
c. The installment payment of the tax should be made within 30 days from receipt of each
installment payment on the selling price.
d. The tax may be paid in installment if the initial payments do not exceed 25 of the
selling price.
211. Janel sold her principal residence for P5,000,000 when its fair market value was
P6,000,000. The house was purchased five (5) years ago for P3,000,000. Out of the
proceeds of P5,000,000. Janel utilized the P4,000,000 for the purchase of a new
residential house.
The capital gains tax on the sale is -
a. P 360,000 c. P 72,000
b. 300,000 d. 60,000
212. Based on the problems in number 211 above, what is the cost boss of the new
residence?
a. P3,000,000 c. P 4,000,000
b. 2,400,000 d. 5,000,000
214. Assuming that the net income of Malou in 2011 is P130,00 which incudes a capital gain
of P6,000. the taxable income before personal exemption in 2011.
a. P 126,000 c. P 124,200
b. 130,000 d. 120,000
a. P 180,000 c. P 150,000
b. 120,000 d. 210,000
216. The capital gains tax of Mr. Cruz if the proceeds of sale was utilized in acquiring a new
residence.
a. P 210,000 c. P 180,00
b. 150,000 d. None
217. The amount to be deposited in escrow if the processed of the sale shall be utilized in
acquiring a new residence –
a. P 210,000 c. P 180,00
b. 150,000 d. None
218. The capital gains tax payable assuming that Mr. Cruz will utilize only P1,5000,000 of
the proceeds in acquiring a new residence”
a. P 90,000 c. None
b. 210,000 d. P105,000
219. Mr. Julio Canlas is not engaged in real estate business. He sold a 100 square meter
residential land for P300,000 on March 15, 2011. The land was acquired by purchase on
March 5, 2008 for P120,000. For acquisition the land was fenced at a cost of P30,000. A
commission of 5% of the sales price was paid to the sales agent.
221. Atty .MoisesDondoyano sold to Jess Abaluyan not traded shares of stocks for a
consideration of 2,200.00. At the time of the sale, its fair market value was P500,000.
Atty .MoisesDondoyano should pay –
222. In the preceding problem, if later on Jess Abaluyan sells the same shares of stocks to Ed
del Rosario for P400,000, the gain subject to tax shall be determined b y deducting the –
223. Rolly sold 1,5000 shares of stocks of achievers corporation. The par value per share
was P85 but were acquired by him at P90. On the date of sale, the shares had a selling
price of P120 share.
The capital gains tax on the sale if the shares are not listed and traded in the
Philippines Stock Exchange.
a. P 2,250 c. P 14,000
b. 2,265 d. 11,375
224. Ronal sold 1,000 shares of not listed and traded shares of stocks. The data of which are
as follows:
Selling price P 600,000
Fair market value 620,000
Expenses on the sale 10,000
Purchase price 440,000
Expenses upon acquisition 3,000
226. The capital gains tax on the February 13, 2011 sale –
a. P 2,750 c. P 657
b. 1,375 d. 55,000
a. P 10,400 c. P 5,200
b. 5,400 d. None
228. The capital gains tax/refund on the July 20, 2011 sale is –
a. P 3,000 c. P 1,500
b. (3,00) d. None
229. The final capital gains tax / refund at the end of the year is –
How much is the deductible loss and non-deductible loss on January 2, 2012
sales?
Deductible Non-deducible
a. P 1,000 P 0
b. 0 1,000
c. 125 0
d. 250 750
232. The net capital gain/capital loss (before carry over) in 2011 is –
a. P 17,000 c. P 2,000
b. 9,000 d. (7,000)
a. P 7,500 c. P 9000
b. None d. 5,000
234. In computing or loss from the sale or other disposition of property acquired as gift or
donation, the basis of cost shall be: (RPCPA)
235. Shaolo received a residential house valued at P2,5000,000 from his parents as a gift.
After a month, he sold it to Rudy for P2,000,000 only. How much is the tax liability of
Shaolo on the sale?
a. P150,000 c. P100,000
b. 120,000 d. None
236. It is important to know the source of income for tax purposes (i.e. from within or
without the Philippines) because (RPCAPA)
a. Some individual and corporate taxpayers are taxed on their worldwide income while
others are taxable only upon income from sources while the Philippines.
b.The Philippines imposes income tax only on income from sources within
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
237. Mr. Shin, a non-resident alien stockholder, received a dividend income of P300,000 in
2011 from a foreign corporation doing business in the Philippines. The gross of the
foreign corporation from within and without the Philippines for three years preceding
2011 are as follows: (RPCPA)
How much of the dividend income received by Mr. Shinn is considered income
from sources within the Philippines.
a. Zero c. P f150,000
b. P 157,500 d. 300,000
238. The widow of your best friend has just been paid P1,000,000 on account of the life
insurance policy of the deceased husband. She asks you whether she should declare the
amount for income tax purposes for estate tax purposes.
1st Advice – The proceeds of life insurance paid of the beneficiary upon the death of the
insured are exempt from income tax and need not be declared for income tax purposes.
2nd Advice – The proceeds of life insurance would have to be declared for estate tax
purposes if the designation of the beneficiary was irrevocable, otherwise it need not be
declared.( RPCPA)
a. Both advice are correct
b.1st advice is correct, 2nd advice is wrong
c. Both advice are wrong
d.1st advice is wrong 2nd advice is correct
239. An ordinary and necessary expenses which is fully documented and supported by
receipts may be fully deducted for income tax purposes over and above the limit set by
law (RPCPA)
240. Which of the following statement is wrong with respect to deductible expenses incurred
by an individual taxpayer?
a. A resident citizen of the Philippines who is earning business income abroad is entitled
to claim the expense incurred abroad as a deduction from his total gross income.
b.A nonresident citizen of the Philippines who earning income as an overseas Filipino
worker abroad is entitled to claim the expenses incurred therein as deduction from
total gross income.
c. A resident citizen of the Philippines who is earning business income abroad, aside from
his income in the Philippine’s, is entitled to claim the 40% optional standard
deduction as a deduction from his gross income within and without the Philippines.
d.A mixed income earner in entitled only to claim the 40% optional standard deduction as
a deduction from the business and/or professional income to the exclusion of the
compensation income.
242. Lahgai Corporation incurred the following expenses. Which of these expenses is non-
deductible?
243. Which of the following is a deductible expense for income for purposes (RPCPA)
245. All of the following, except one, are not deductible from gross income
246. In 2011, Enzo Corporation paid the following premiums to an insurance company in
insuring the life of its officials and employees.
a. P 60,000 c. P 5,000
b. 45,000 d. 15,000
247. The following are examples of corporate expenses deductible from gross income,
except one: (RPCPA)
a. Representative expenses designed to promote business
b. Contributions to drum up business like contribution of soft drinks to barrio fiestas.
c. Expenses to an advertising firm inorder to create a favorable image for the corporation.
d. Premiums on life insurance covering the life of an employee if the beneficiary is his
heirs.
248. Flores Corporation took two keymen insurance on the life of the President Mr. Chan. In
one policy, the beneficiary is the corporation to compensate it for its expected loss in case
of death of its President. The other policy designates MR. Chan’s wife as its irrevocable
beneficiary.
Q1: Are the insurance premiums paid by Flores Corporation in both policies deductible?
Q2: Will the insurance proceeds be treated as income subject to tax by the corporation
and by the wife? (RPCPA)
a. Yes to 1st question and No to 2nd question
b. Yes to both questions
c. No to 1st question and Yes to 2nd question
d. No to both questions
249. The entry in the books of Lexor to record the expenses incurred for minor repair is –
a. Building P 30,000
Cash P 30,000
b. Lese expense – Leslie 30,000
Cash 30,000
c. Reparis expense 30,000
Cash 30,000
d. No entry
250. The entry in the books of Lexor to record the expenses incurred for major repair
a. Building P 60,00
Cash P 60,000
b. Repairs expenses 60,000
Cash 60,000
c. Allowance for depreciation 60,000
Cash 60,000
d. No entry
251. Suppose the major repair increased the value by P40,00 and it also prolonged the life o
asset, the accounting entry to record the repair in the books of Lexor Corporation is –
252. Choose the best answer: Regina Monde College, Inc. – a proprietary educational
institution, spent P10 million for the construction of a new school building. The amount
spent for the construction –
253. Allowance Corporation is engaged in sales of goods and services with net sales/net
revenue of P400,000 and P200,00 respectively. The actual entertainment, amusement and
recreation expense for the taxable quarter amounted to P6,000.
254. The following statements relate to a senior citizen. Which statement is true?
a. An American citizen who visits the Philippines on a vacation trip in Boracay may be
entitled to claim 20% discount on hotel rates and other establishments.
b.As a rule, a senor citizen is exempt from income tax and shall not be required to file an
income tax return.
c. The amount of sales discounts granted to senior citizens shall be allowed as deduction
in computing the taxable income of the establishment.
d. All compensation payments made to a senior citizen employee shall entitle the
employer to an additional deduction of 15% of the total amount paid as salaries and
wages.
255. The following characters are senior citizens. Which statement is correct?
a. Snape, a part-time faculty member of the University of Santo Thomas. Manila earning a
salary and allowances of P30,000 a month is required to pay income tax on his salary.
b.Hagrid, 80 years old, a retired government employee, is a part-time accounting teacher
of Hogwarts School. If his only source of income is his monthly wage from the
University of P2,500 a month, he is not exempt from the payment of income tax.
c. Dobby is part-time faculty member of Wesleyan University Philippines, Cabanatuan
City earning a monthly income of P3,000. If he also owns a small space which is
being leased at a monthly rental of P1,000, he shall be required file return and pay
income tax if his only dependent is a small while dog name blackie.
d. Ron Weasly who is earning a monthly rental income of P5,000 is not taxable on his
income because he is a minimum wage earner.
256. Lolo Daddy, 70 years old, had the following income during the year. Which of them is
not taxable?
a. Salary, P60,000
b. Interest on bank deposit with Banco de Oro, P 500
c. Royalties on books authored by Lolo, P 50000
d. Winnings in lottery, P 20,000
258. Interest on business is deductible for income tax purposes. However, one of the
following is not deductible (RPCPA) –
261. On January 2, 2011 MangOtang contracted a 1 – year P100,000 loan from Metrobank
for the purchase of computers. The equipments which had a depreciable life of eight (8)
years were acquired on April 1, 2011. The interest expense for one (1) year amounted
P15,000.
In the same year, his bank deposit with PNB earned an interest income of P2,000.
During the year, he incurred an interest expense on unpaid business tax of P600.
a. P 14,375.00 c. P 10,7814.25
b. 15,000.00 d. None
263. In December 2008, a taxpayer donated to his son 3,000 shares of stock of San Manuel
Corporation. For failure to file a donor’s tax return on the donation within the statutory
period, the taxpayer was assessed the sum of P100,000 as donor’s tax plus 25% surcharge
of P25,000 and 20% interest or P20,000 which he paid January 2010.
On June 20, 2011 he filed his income tax return fro 2010 claiming, among others, a
deduction for interest amounting to P1,500.
On June 5, 2011, the taxpayer filed an amended income tax return for the same calendar
year 2010, claiming therein on additional deduction in the amount of P20,000
representing interest paid on the donor’s tax.
A certain for refund of alleged overpaid income tax for taxable year 2010 was filed
with the Commissioner which was subsequently denied.
The commissioner pointed out that a tax is not indebtedness and that there is a
fundamental distinction between a “Tax” and a “debt”. According to the Commissioner,
the deductibility of interest on indebtedness from a person’s income tax cannot extend to
interest on taxes.
264. If a stockholder receives a taxable tock dividend, what is the measure of income
applicable to him? (RPCPA)
265. Generally, sales of real property are subject to tax. Which of the following sales of land
is not allowed by the law to be subjected to tax? (RPCPA)
a. Resident aliens
b. Domestic corporation
c. Nonresident aliens with reciprocity
d. Non-resident citizens
269. One is entitled to tax credit for taxes paid to foreign country (RPCPA)
a. Non-resident aliens
b. Foreign corporations
c. Resident aliens with income derived solely from sources within the Philippines.
d. Beneficiaries of the estates and trusts.
270. The following taxpayers an claim tax credit except one (RPCPA)
a. Domestic corporations
b. Members or beneficiaries of partnership or trust
c. Resident Filipino citizens
d.Nonresident aliens
271. In 2011, Vicor Co., a domestic corporation has net income from which the Philippines,
P200,00 and from the U.S.A P300,00. Income tax paid on income from USA is P95.000.
The tax credit on income tax paid to US government is (RPCPA)
a. P105,000 c. P 90,000
b. 60,000 d. 110,000
272. International Corporation, a domestic corporation, has the following data for the
calendar year. The corporation signified its intention to claim tax credits on income taxes
paid to the foreign countries:
Gross Allowable
Country Income Deductions Tax Paid
Philippines P1,000,000 P 800,00 P–
United State 400,00 200,00 80,000
Japan 300,00 200,00 25,000
273. Peñafrancia D. Caceres, single has the following data during the year:
If the foreign tax paid is claimed as deduction, the income tax due is –
274. In Numbers 273, if you are the taxpayer will you out to claim the foreign tax paid as tax
credit or as a deduction?
a. Loss due to removal or demolition of old building, the scrapping of old machinery or
equipment to renewal or replacement.
b. Loss due to removal of building or real estate purchased when the purchase was for the
acquisition of the land and without intending to use the building.
c. Loss in value of securities of such extent that the securities have become worthless and
are written off.
d. Loss in usefulness in business of an asset so that the business in discontinued or the
asset. Discarded.
276. Max and Jess are business competition. Max purchased a land beside the business
premises of Jess with the intention of erecting a new 4 storey building. The land which
was valued at P1,000,000 had an almost dilapidated building thereon assessed at
P150,000. He spent P40,000 for it s demolition and sold its scrap for P25,000. The
construction of the new building cost him P10,000,000.
When Jess knew the intention of Max, he decided also to demolish his 20 year old
building and to put a new one. The demolition cost him P80,000 but raised P35,000 from
the scrap, and the construction cost of the new 6-storey building was P15,000,000.
A between Max and Jess, who is entitled to claim loss as deduction from gross
income?
277. Bravo Company purchased a piece of land with a building thereon for P1,500,00
allocated under a contract of sale of P1,000,000 for the land and P500,000 for the
building it had no use for the building at the time of purchase and it was its intention to
remove the building in order to build its factory. It incurred demolition the company
P2,500,000.
278. Gina Company had an old warehouse which had a cost of P1,2000,000. The company
demolished the warehouse when it had a book value of P200,000inorder to construct a
new and bigger warehouse. The demolition cost amounted to P25,000 while the scrap
were sold for P10,000. In its accounting entry. Gina Company should debit a loss on
retirement of old building of
a. None c. P 185,000
b. P 200,000 d. 215,000
279. A building was partially destroyed by fire in 2010, it had a book value of P4,000,000.
The insurance company was willing to pay P3,000,000 which was refused by the owner
of the building. Finally, the claim was settled in 2011 for P3,500,000 proceed is (RPCPA)
280. Refer to item 279 data/ The taxpayer can claim a deductible loss at (RPCPA)
a. P 0 c. P 8,600
b. 8,500 d. 10,000
282. In 2009, Violeta constructed on office building worth P2,000,000 in 2011 when it had
on accumulated depreciation of P72,000 the building was totally destroyed by fire.
Assuming that the amount recoverable from Stan Insurance Company is P500,000. The
deductible loss of Violeta is –
a. P 1,928,000 c. None
b. 2,000,000 d. P1,428,000
283. Based on the data in No. 282 above, the accounting entry in the books of Violeta
284. The following properties were burned in a fire which broke out in the company
premises:
Property A Property B
Type of loss Total Partial
Cost P800,00 P1,200,000
Accumulated depreciation 550,000 600,000
Insurance recovery 200,000 150,000
Replacement cost of damaged portion - 500,000
285. Based on the data in Number 284 above, the deductible loss on property B is –
a. P 600,000 c. P 5000,00
b. 350,000 d. 1,200,000
286. Carla Construction Corporation, a domestic corporation had the following data:
Year 2010:
Gross income from services P 3,200,00
Operating expenses 3,450,000
Rent income of heavy equipment 70,000
Dividend received from Johna Corporation 36,500
Capital gain on sale of shares of stocks (not listed) 12,250
Year 2011
Gross income from services 3,560.000
Operating expenses 1,250,000
a. P(131,250) c. P(180,000)
b. (119,000) d. (250,000)
a. P 1,335.00 c. P 1,400.00
b. 2,150.00 d. 1,435.00
a. P238,500 c. P132,462.50
b. 278,250 d. 97,387.50
290. Jun a sales agent on commission basis of Contract Enterprises which is engaged in the
sale of paper and proper products. While in the course of his travel towards Bicol
Regiopn was apprehended by members of the New Peoples Army (NPA) under
MelitoGlor Command along Quezon Province. His service car owned by Contrade
Enterprises was seized. The next day, he learned that the NPAs and the members of the
Philippine Army under 5 1st Brigade had a chance encounter. Using heavy weapons, the
military fired at the NPAs that tried to escape with the use of his car. All the members of
the NPA were killed and the car was total wreck. Is the value of the car deductions as
casualty loss?
a. Yes, it is deduction to Jun begin in possession of the car at the time it was seized.
b. Yes, it is deductible to Comrade Enterprises provided that the other requisites for
deductibility must be satisfied.
c. No, casualty loss refers only to fire, earthquake, volcanic eruption and other non-man
mode calamities.
d. No, because it was intentionally wrecked by the members of the Philippine Army.
292. Floriano had the following records of income, expenses and losses during the year.
293. All of the following, except one, are requisites in the carry over of net operating loss
294. Statement 1: The term “net operating loss” shall meant the excess of allowable
deduction over gross income of the business in a taxable year.
Statement 2: Nonresident foreign corporation are not entitled to deduct NOLCO from the
gross income.
Statement 3: The NOLCO which had not been offset as deduction from gross income
shall be carried over as a deduction from gross income for the next taxable year
immediately following the year of such loss.
a. P (575,000) c. P (427,000)
b. (407,000) d. 1,068,000
a. P 0 c. P (132,600)
b. 274,400 d. 254,400
a. P 261,400 c. P 274,400
b. Zero d. 1,286.400
a. P 190,700 c. P 248,200
b. 935,500 d. 232,500
300. Divine Word Company purchased shares of stock of Nueva Caceres Company for
P60,000 and of Ateneo Company for P30,00. At the end of the taxable year. It
ascertained that its Nueva Caceres Company stock was worthless because of the complete
insolvency of the corporation, and its Ateneo Company had declined in value of P28,000.
Divine Word Company should recognize a loss on its investment in Nueva Caceres and
Ateneo Company shares of –
a. None c. P60,000
b. P 62,000 d. 90,000
301. Neneng Company was merged into Totoy Company. Neneng Company transferred all
its properties with a book value of P4,000,000 to TotoyCompnay for which it received
shares of the latter with a fair market value of P23,6000,000. Sanko was stockholder of
Neneng Company (which he acquired at a cost of P500,000) when the manager was
effected and received shares of stock of Totoy Company with a fair market value of
P360,00. The amount of loss deductible by Neneng Company is
a. P 400,000 c. P 140,00
b. 3,000,000 d. None
a. P400,000 c. P500,000
b. 140,000 d. None
a. P1,000,000 c. P40,000
b. 960,000 d. None
304. Sharon, single, has the following data in 2010 and 2011;
2011
Bad debt recovered 70,000 60,000 30,000
In 2011, the taxable amounts before personal exemption are:
Case 1 Case 2 Case 3
a. P 50,000 P 50,000 P 50,000
b. 50,000 42,000 30,000
c. 70,000 68,000 30,000
d. (20,00) (8,000) 20,000
305. The following were taken the income statement of ABC Corporation for the taxable
year 2011
Additional information:
a. Accounts written-off during the year and changed to allowance for bad debts –
P50,000
b. Recoveries on accounts receivable previously written-off in 2010 and credited to
allowance for bad debts.
Allowed as deduction by the BIR – P30,000
Disallowed by the BIR as deduction – P20,000
The net income before income tax of ABC Corporation is (RPCPA)
a. P 280,000 c. P 330,000
b. 260,000 d. 340,000
306. Which of the following methods of depreciation is not expressly allowed under the
law?
307. Which of the following assets is subject to depreciation for income tax purpose?
(RPCPA)
308. A store building was constructed on January 2, 2006 with a cost of P570,00. Its
estimated useful life is 60 years with scrap value of P70,000 after 16 years. In January
2011, replacement of some worn-out pars of the building costing of P50,00 was spent.
After the repairs, the building was appraised with a fair market value of P770,00. The
allowable deduction for depreciation for the year 2011 is (RPCPA)
a. P35,795.45 c. P49,431.82
b. 43,750.00 d. 31,250.00
309. Which of the following is deductible from gross income even if the payment is not
connected with business?
310. The amount of charitable contribution of property other than money shall be based on
311. Angel is a cash basis sell-employed air-conditioning repairman with 2011 gross
business receipts of P200,00 Angel’s cash disbursement were as follows:
a. P151,000 c. P141,000
b. 149,000 d. 139,000
312. What would be the allowable deduction for P10,000 contribution made by a resident
citizen to a charitable institution, from his P60,00 net income before contributions?
a. P 6,000 c. P3,000
b. 7,000 d. 10,000
a. P550,000 c. P560,00
b. 600,00 d. 570,000
315. In number 314 data, how much is the taxable income if Eugene is a corporation
(disregard compensation income) –
a. P 670,000 c. P 580,000
b. 640,000 d. 570,000
316. Santy made a contribution of P15,000 to t. Jude Parish Church. He had a gross income
from business of P500,000 and deductions (excluding contribution) of P400,000. From
this contribution, how much will be allowed as deduction from is gross income?
a. P 15,000 c. P 10,000
b. None d. 100,000
317. An individual taxpayer made the following contributions:
a. P 20,000 c. P 55,000
b. 30,000 d. 55,500
318. The Cancer Hospital of the Philippines is a charitable institution. Mr. Biglang-awa
visited the hospital on is 60th birthday. He donated P500,000 to the hospital and P10,000
to a cancer within who is only ten (10) years old. He also brought with him a chain
restaurant mascot that played with the children patients while eating the popular
production of the restaurant. It had cost him P15,000.
319. Using the same data in Number 318 above, which of the contribution is/are qualified as
deduction to Biglang-awa if he is engaged in business?
If the taxpayer is single, with one dependent child, the taxable income if he
availed of the optional standard deduction is –
a. P 870,000 c. P 475,320
b. 814,500 d. 503,400
a. P550,320 c. P542,520
b. 814,500 d. 889,500
a. The method under which expenses in the production of crops are deducted in the year
in which the gross income from the crop has been realized.
b. A method under which the taxpayer reports his income and expenses by employing the
combination of cash and accrual method.
c. Also known as cash receipts and disbursements method.
d. A method in which the taxpayer reports income in the year it is earned.
323. Taxpayer is required to report income for the tax year in which payments are actually or
constructively received while expense are deducted in the year paid
a. Accrual basis
b. Cash basis or cash receipts and disbursements method
c. Hybrid method
d. Crop year basis
324. Under this method of accounting income is reported in the year it is earned
325. Ester uses accrual method of accounting. She owns a land which she leased to Gordon
for 2 years at an annual rental of P10,000. On July 1, 2009, she received P200,00 from
Gordon representing the rental covering the period July 1, 2009 to June 30, 2011.
326. Based on the data in No. 325 above, Gordon, using cash method can deduct an expense
of –
a. P 50,000 c. P 100,00
b. 200,000 d. 150,000
327. All of the following except one, are considered as “constructive receipts” for income
tax purposes. Which is the exception?
328. Under this method of reporting income, the taxpayer reports a percentage of the gross
income from a long-term contract based on the portion of work that has been completed.
a. Accrual basis
b. Cash basis
c. Percentage of completion method
d. Hybrid method
329. All of the following, except one, are not taken into account in determining the correct
amount of initial payments.
a. Commissions
b.Other selling expenses
c. Installment payments in the year of sale
d. Gross profit
330. All of the following except one, are not taken into account in determining the correct
amount of initial payments.
a. Commissions
b.Other selling expenses
c. Installment payments in the year of sale
d. Gross profit
331. Which of the following statements is false? In installment method of reporting income
a. If the property sold is not a subject of mortgage, the selling price is equivalent to the
amount of contract price.
b. The initial payment includes the excess of mortgage over cost, if any.
c. The gain on sale is computed by subtracting the book value from the selling price of
the property if the property is a capital asset.
d. An installment payment of tax may also be made even if the asset is subject to capital
gains tax.
332. Under installment method of reporting income tax, the amount of tax payable in the
year of sale of a vacant lot is computed by applying the following formula:
a. P 50,000 c. P300,000
b. 100,000 d. 400,000
a. P50,000 c. P 37,500
b. 25,000 d. 12,500
a. P 50,000 c. P 37,500
b. 25,000 d. 12,5000
336. The following statements, except one, are wrong. Which statement is correct?
a. The installment method of reporting income is allowed if the initial payment does not
exceed 25% of the contract price.
b. In installment method, if the seller of the property is an individual the holding period
of the capital asset is still applied even if the property is a real property
c. If the amount paid at the time of purchase does not exceed 25% of the selling price, of
the selling price, the installment method of reporting income may be applied even if
the entire price is paid in the year of sale.
d. Reporting of income under the installment method is based on the percentage of
collection of the selling price.
337. The following statements about installment method of reporting income are wrong.
Which is the receptionist?
a. If the buyer assumes an unpaid mortgage on the property sold the contract price is les
than the selling price.
b. The excess of mortgage over cost is added to the initial payment in computing the
amount of cash paid as downpayment.
c. If a mortgage has been assumed by the buyer but the acquisition cost of the property is
more than the mortgage, the amount of selling price is equal to the contract price.
d. If the initial payment exceeds 25% of the selling price, the sale shall be reported under
cash method of reporting income.
a. P100,000 c P 15,000
b. 250,000 d. 200,000
a. P 150,000 c. P 700,00
b. 550,00 d. 250,000
a. P 150,000 c. P 700,000
b. 550,00 d. 250,000
a. P 42,000 c. P 9,000
b. 25,200 d. None
a. P42,000 c. P 16,800
b. 25,200 d. None
a P 45,000 c. P200,000
c. 90,000 d. None
a. P 200,000 c. P 45,000
b. 155,000 d. None
345. Jose San Jose sold a commercial building on October 15, 2010 for P2,000,000. The cost
of the property was P1,2000,000 while the accumulated depreciation was P400,000. The
terms of the sale were:
Downpayment P 3000,000
Balance is payable in monthly installment of P 100,000
Beginning November 15, 2010 until fully paid
349. The following statements bout fringe benefits are false. Whish is the exception?
350. The following earnings are subject to fringe benefit tax, except: (RPCPA)
351. Ditso is employed by Holy Cross Hospital as an ambulance drier with a salary of
P4,000 a month. In addition, he is given free meals with a monthly value of P1,500 and
living quarters within the hospital compound with an equivalent value of P1,000 a month.
352. If the benefits given to Ditso in Number 351 above is furnished by his employer so that
his services could easily be availed of whenever some patients will need the urgent
services of an ambulance, his monthly compensation income is –
a. P6,500 c. P5,000
b. 4,000 d. 5,500
a. Fringe benefit tax shall be treated as a final income tax on the employee withheld and
paid by the employer on a quarterly basis.
b. The grossed-up monetary value of the fringe benefits is the actual amount received by
the employee.
c. The grossed-up monetary value of the fringe benefit shall be determined by dividing
the monetary value of the fringe benefit by the gross monetary value factor.
d. The person liable for fringe benefit tax is the employer, whether he is an individual,
professional partnership or a corporation regardless of whether the corporation is
taxable or not or the government and its instrumentalities.
354. Statement 1: A fringe benefit that is exempt from fringe benefit tax is likewise exempt
from any other form of income tax.
355. Sarah, married with three (3) qualified dependent children, a regular employee of
Confederate Inc. receiver on Luly 6, 2011 P300,000 as regular monthly salary and half of
his 13th month pay amounting to P15,000 plus other benefits such as rice allowance for
July of P2,000 incentive pay of P20,000 hazard pay of P1,000 overtime pay of P4,000
and night shift differential of P2,000.
356. Mayaman Company owns a fleet of motor vehicles. In 2011, one of the cars which was
acquired at a cost of P400,000 was allowed as service vehicle by one of its officials.
During the year, its book value amounted to P37,5000. How much was the fringe benefit
tax due thereon?
a. P96,969 c. P17,767
b. 18,823 d. 88,235
357. Based on the data in Number 356 above, suppose Mayaman Company is just leasing
the car that is being used partly for personal and for business purpose and is paying an
annual rental of P100,000. The annual fringe benefit tax is –
a. P 28,229 c. P 73,529
b. 23,529 d. 25,760
358. In May 2011, a non-stock, non-profit university provided a 3-day vacation to Boracay
Island to the University’s Executive Vice-President. The total expense incurred by the
school was P20,000. The fringe benefit tax is –
a. P 6,400 c. P 10,303
b. 9,412 d. None
359. XYZ Corporation assigned Mr. Passo one of its employees in the head office in Manila
to Manage their branch office in Dagupan. The company provided for the residential
house of the manager paying to monthly rental of P34,000.
360. Based on the same data in No. 39 above, the deductible expense from the gross income
of XYZ Corporation is –
a. P 8,000 c. P 42,000
b. 25,000 d. 34,000
361. Xtra Corporation furnished and granted the use of its condominium unit to its Executive
Vice-President. The fair market value of the property is P4,8000,000 while the
acquisition cost is P3,000,000.
362. Based on the data in Number 361 above the deductible expense from the gross income
of Xtra Corporation is –
a. P 14,705.88 c. P 12,4132.35
b. 4,705.88 d 2,941.18
363. Bernard Company provided fringe benefit to its managed employees in the amount of
P136,000 and its rank and file employees amounting to P500,00. The deductible expense
by Bernard Company is –
a. P 186,000 c. P 50,000
b. 136,000 d. 250,000
364. The corporation gave a brand new car to its sales manager. The fringe benefit given is –
a. Subject to fringe benefit tax based on the provisions of the tax code.
b. Subject to fringe benefit tax it was given to a rank-and-file employee
c. Exempt from the fringe benefit tax because it is required by the nature of or necessary
to the trade or business of the employer.
d. Exempt from the fringe benefit tax because it was given for the convenience of the
employer.
365. Frances Corporation gave the following fringe benefits to its employees:
366. Ivy Corporation has the following journal entry on fringe benefits:
367. Adrian, a supervisory employee of Nagnog Corporation borrowed P50.00 from the
company pay able in four (4) months thru salary deduction. If the corporation is charging
4% interest per annum on the loan, the finger benefit tax expense is –
a. P 2,000,000 c. P 627,45
b. 666.67 d. 313.73
a. Individual taxpayers shall file their income tax returns on or before April 15 of each
year.
b. Extension of time for filing income tax returns may be granted by the Commissioner of
Internal Revenue.
c. Second installment in the payment of income tax must be paid on or before July 1 of
the same year.
d. Inplaces were there are no accredited banks, the return can be filed with the Municipal
Treasurer where the place of business is located.
a. Duplicate c. Quadruplicate
b. Triplicate d. Quintuplicate
370. One of the following is not an attachment to the income tax return of a company whose
gross quarterly sales if P1,500,000.
371. The income subject to this withholding tax is not includible in the computation of
taxable income –
372. Which of he following individual taxpayers is not required to file on income tax return?
373. One of the following individuals is not subject to withholding tax on compensation
a. An individual who derives compensation from two or more employers at any time
during the taxable year.
b. An individual who has compensation and business income
c. An individual whose gross income in a year is more than P220,000
d. An individual whose monthly gross compensation income is P8,000
374. Miss May Pag-asa believes in the honesty and capability of mayoralty candidate Cora
P. Tu, to lead their town. She, therefore, donated P100,0000 cash to help her admitted
candidate win in the May 2010 elections.
375. In Question 374, suppose Miss Pag-asa decides to use the P100,000 in purchasing
campaign material from Nakamra Merchandise for candidate Tu, what will be the
consequences this action of Miss Pag-asa?
376. The books of accounts or records of the taxpayer must not be kept in the following
language (RPCPA)
a. Filipino c. English
b. Chinese d. Spanish
377. The signature of the following persons must appear in the income tax return of a
corporation except
a. President
b.General Manager
c. Treasurer
d. Independent certified public accountant
379. Statement 1: Where donor’s tax has been paid on properly receive by a minor from a
living parent, income on such property shall be included in the income tax return of the
parent.
Statement 2: The income tax return of a disabled person may be made by a person
charged with the care of his property.
Statement 1 Statement 2
a. True True
b. False False
c. False True
d. True False
380. How long must the books of account be kept?
a. The taxable income for purposes of income taxation is always equal to the net income
in accounting.
b. The deductible bad debt in accounting is not necessarily deductible in income taxation
c. The deductible expenses in accounting are deductible also in income taxation.
d. All recognizable income in accounting are taxable in income taxation.
382. Beauty Trixie Corporation had a net income per books on December 31, 2011 of
P220,000. Include in the net income are the following items: Divided income from a
domestic corporation, P50,000; Interest on bank deposit (net of tax), P5,00 and provision
for bad debts, P35,000. The Taxable income of Beauty Trixie Corporation for the year
ended December 31, 2011.
a. P130,000 c. P220,000
b. 200,000 d. 165,000
383. The following 2011 data pertains to Analyze Company, a domestic corporation.
Additional Information:
1.Included in the sundry income are the following:
a. Dividends from domestic corporations P 42,500
b. Dividends received from resident foreign corp. 15,000
c. Proceeds from sale of company assets 4,750
3.The company wrote off in 2010 against allowance for bad debts uncollectible
receivables amounting to P15,000 which was allowed as deduction from gross
income. This amount was recovered in 2011.
4.In October 2010 one of the company’s buildings was totally destroyed by fire when the
book value was P260,000. The liability of the insurance company was settled in 2011
and Analyze Company was paid P150,000.
385. The income Tax Return (ITR) of Janet, single, for taxable year 2011 reported a taxable
income of P520,240. A careful scrutiny revealed that some items included as income and
expenses are the following.
Income:
Compensation income P 180,000
Cash dividend 122,800
Stock dividends 73,500
Property dividends 27,000
Gambling winnings 23,100
Donation received 16,000
Gain on sale of capital assets – 15 months 8,000
Gain on sale of his vacant lot 120,000
Income on rice land 60,000
Total 630.40
Expenses:
Red estate tax P 3,500
Community tax 945
Surcharge – late filing of 2010 income tax return 12,000
Interest on personal loan 24,000
Gambling losses 32,000
Personal and living expenses 50,000
Loss on sale of capital assets – 81/2 months 5,000
Loss on crops due to flood 27,250
Total 154,695