Tax Test Bank

QUESTION BANK

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CEC, CPA 2017 Difficulty; Learning Objective

In which of the following following circumstances is the non-impairment clause of contracts violated?

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I. Tax exemption bilaterally agreed by the government and the taxpayer subsequently withdrawn by the government II. Tax exemption unilaterally granted by law subsequently withdrawn by virtue of another law III. Tax exemption granted under a franchise subsequently withdrawn by the government A. B. C. D.

I only I and III only I and II only I, II and III

Answer: A 1

Which of the following is not a member member of the Regional Evaluation Board? A. B. C. D.

Regional Director Assistant Regional Director Revenue Collection Officer having jurisdiction of the taxpayer Heads of the Legal, Assessment and Collection Div.

Answer: C Regional Evaluation Board is composed of: i. Regional Director as Chairman ii. Asst. Regional Director iii. Heads of the Legal, Assessment and Collection Div. iv. Revenue District Officer having jurisdiction over the taxpayer 1

In tax exemption, the taxpayer has immunity from I. Criminal liability II. Civil liability III. Administrative liability A. B. C. D.

I and II only II and III only II only I, II and III

Answer: C In tax exemption, the taxpayer has immunity from civil liability only arising from non-payment of taxes. 1

Who issues the Letter of Authority (LOA)? A. B. C. D.

Revenue District Officer Regional Director Commissioner Revenue Collection Officer

Answer: B 1

The following are the criteria in imposing income tax except A. B. C. D.

Citizenship principle Residence principle Source principle Place of consumption principle

Answer: D Place of consumption principle is a VAT criterion. 1

A non-resident alien engaged in trade or business is an individual who is not a citizen of the Philippines and whose residence is not within the Philippines who stayed in the Philippines for an aggregate period of A. B. C. D.

At least 180 days More than 180 days At least 183 days More than 183 days

Answer: B 1

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A non-resident citizen is a citizen of the Philippines Philippines who (choose the incorrect incorrect statement)

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A. establishes the fact of his/her physical presence abroad with the definite intention to reside therein B. leaves the country to reside abroad, either as an immigrant or for employment on a permanent basis C. works and derives income from abroad and who has been out of the Philippines for more than 180 days D. was previously a non-resident citizen and who arrives in the Philippines at anytime during the taxable year to reside permanently in the Philippines with respect to his income abroad until the date of his arrival in the Philippines Answer: C Correct statement - works and derives income from abroad and who has been out of the Philippines for at least 183 days 1

Regional or area headquarters are subject to A. B. C. D.

10% income tax on taxable income 15% income tax on taxable income 25% income tax on taxable income Exempt from income tax

Answer: D 1

A trust will be taxable when Statement 1 - The income of which is to be accumulated. Statement 2 - In which the fiduciary may, at his discretion, either distribute or accumulate the income. A. B. C. D.

True, False False, True True, True False, False

Answer: C 1

Which of the following may be subject to tax imposed by the local government units? A. B. C. D.

A GOCC Local water districts Cooperatives duly registered under RA No. 6938 Non-stock and non-profit institutions

Answer: A Unless otherwise provided in the Local Government Code (LGC), tax exemptions granted to all persons, whether natural or juridical, including GOCC, except local water districts, cooperatives duly registered under RA No. 6938, non -stock and non-profit institutions, are withdrawn u pon effectivity of the LGC. (Sec. 193, LGC) 1

Which of the following is not always exempt from income tax? A. 13th month pay mandated by RA 6686 and Presidential Decree (PD) No. 851, as a mended and other benefits not covered by PD 851 and benefits such as productivity incentives and Christmas bonus which should not exceed PhP82,000.00 B. GSIS, SSS, Medicare and Pag-IBIG contributions, and union dues of individuals C. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness, with a maturity of more than five (5) years D. Interest on bonds, debentures with a maturity of more than 5 years Answer: B Only mandatory contributions are exempt from income tax. Any excess will be taxable to the payee of contributions.

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The following are different types of compensation except A. B. C. D.

Hazard Pay Taxable 13th month pay and other benefits Other remunerations received from an employee-employer relationship None of the above

Answer: D 2

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Cash and property dividends received by a non-resident alien engaged in trade or business in the Philippines from a resident foreign corporation is subject to A. B. C. D.

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15% final tax 20% final tax 25% final tax 5-32% tax on individuals

Answer: D 1

Capital gains tax on on sale of real property classified as capital asset A. B. C. D.

6% of zonal value 6% of selling price 6% of fair market value 6% of selling price, FMV and zonal value whichever is higher

Answer: D 1

A Co., engaged in trading of goods, sold its shares of stock in B Co. to C Co. the following following facts were present in the sale: No. of stocks sold – Selling price per stock – Book of value of stocks sold –

10,000 P70.00 P450,000

A Co.’s stocks are traded in the stock exchange while B Co. and C Co.’s stocks are not. Compute for the capital gains tax due A. B. C. D.

25,000 20,000 3,500 1,250

ANSWER: B Tax on 100,000 = 5,000 Tax on excess = 15,000 (150,000*.10) 1

Amount of loss loss to be recognized recognized in case of of partial loss from casualty A. Replacement cost B. Net book value before the loss C. Excess of replacement cost over the net book value immediately before the casualty recognized immediately D. Excess of replacement cost over the net book value immediately before the casualty to b e amortized over the remaining life of the asset Answer: D

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If a taxpayer is under cash basis, interest paid in advance on indebtedness that is payable lump sum is deductible A. B. C. D.

In the year the indebtedness is incurred In the year the indebtedness is paid A or B at the option of the taxpayer A or B at the option of the BIR.

Answer: B 1

Which of the following following is not subject subject to limitation on amount amount deductible? deductible? A. B. C. D.

Interest Interest Interest Interest

on on on on

unpaid business tax intercompany loans loans from banks loans from non-banks

Answer: A 1

Filinvest Development Corporation extended advances advances in favor of its affiliates affiliates and supported the same with instructional letters and cash and journal vouchers. The BIR assessed Filinvest for deficiency income tax by imputing an “arm’s length” interest rate on its advances to affiliates. Is the BIR correct?

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A. Yes, the power of the CIR to distribute, apportion and allocate gross income under (now) Section 50 of the Tax Code includes the power to impute theoretical interests even with regard to controlled taxpayers’ transactions. B. Yes, if proven that interest expense was claimed by Filinvest on its loans from affiliates. C. No, no interest shall be due unless expressly stipulated in writing. D. No, cash and journal vouchers do not qualify as loan agreements. Answer: C 1

Which of the following is deductible? A. B. C. D.

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Excess electric consumption tax Final taxes Business tax Foreign income tax

Answer: C 1

Statement 1 – Ordinary loss is deductible from capital gain. Statement 2 – Capital loss is deductible only to the extent of capital gain. A. B. C. D.


Answer: C 1

*A, a buyer and seller of ready-to-wear clothes, sold a dress on installment basis amounting to P900 *B, also a buyer and seller of ready-to-wear clothes, sold an office equipment used i n its operations amounting to P1,000 Income from the above sales will be recognized on installment basis by A. B. C. D.

A only B only A and B only Neither A nor B

Answer: A Installment Basis Under rules and regulations prescribed by the Sec. of Finance, a person who regularly sells or otherwise disposes of personal property on the i nstallment plan may return as income the re from in any taxable year that proportion of the installment payments actually received in that year, which the gross profit realized or to be realized when payment is completed, bears to the contract price. Casual sale or other casual disposition of personal property (other than inventory on hand of the taxpayer at the close of the taxable year) for a price > P1,000. Sale or other disposition of real property, if in either case the initial payments do not exceed 25% of the selling price 1

One of the following is subject to IAET A. B. C. D.

Closely held corporations Banks and other non-banks Financial intermediaries Insurance companies Enterprise registered with the PEZA

Answer: A The following are also exempt from IAET: 1. Publicly held corporations 2. GPPs 3. Taxable partnerships (deemed to have actually or constructively received the taxable income under Sec. 73D) 4. Non- taxable joint ventures 5. Foreign corporations 1

Deadline for filing and payment of individual annual income tax returns

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A. B. C. D.

on on on on

or or or or

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before before before before

15th day 15th day 15th day 15th day


of of of of

April of the year succeeding the taxable year April of the preceding the taxable year the 4th month succeeding the taxable year the 4th month preceding the taxable year

Answer: A 1

1- The amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income due from the payee on the said income. 2- Taxes withheld on certain income payments are intended to equal or at least approximate the tax due from the payee on the said income. 3- The income recipient is still required to file an income tax return and/or pay the difference between the tax withheld and the tax due on the income. 4- The liability for payment of the tax rests primarily on the payor or the withholding agent. The payee is not required to file an income tax return for the particular income. A. B. C. D.

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1 and 4 pertain to the final withholding tax system 2 and 3 pertain to the creditable withholding tax system A and B are correct A and B are incorrect

Answer: C 1

Deadline for filing and payment of BIR Form 1600 for manual filers A. 10th day of the month following the month the withholding was made B. 10th day of the month following the month the withholding was made for the months January to November and on the 15 th for the month of December C. 11th to 15th day of the month following the month the withholding was made D. 11th to 15th day of the month following the month the withholding was made for the months January to November and on the 15th for the month of December Answer: A

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In general, who are required to file BIR Form 1601-E? 123456-

Individuals engaged in business or practice of profession All juridical persons engaged in trade or business All juridical persons not engaged in trade or business Government agencies LGUs All individuals, juridical persons and political parties, with respect to their income payments made as campaign expenditures and/or purchase of g oods and services intended as campaign contributions.

A. B. C. D.

1 and 2 only 1, 2 and 4 only 1, 2, 3 and 4 only 1, 2, 3, 4, 5 and 6

Answer: D 2

Which of the following statements is true? I. Taxes are personal to the taxpayer. II. Stockholders may be held liable for unpaid taxes of a dissolved corporation. III. Tax delinquency of un-dissolved corporation cannot be enforced against its stockholders. A. B. C. D.

I only I and II only I and III only I, II and III

Answer: D Taxes are personal to the taxpayer. A corporation’s tax delinquency cannot be enforced against its stockholders. (Corporate Entity Doctrine) Exception: Stockholders may be held liable for unpaid taxes of a dissolved corporation: a. if it appears that the corporate assets have passed into their hands or b. when the stockholders have unpaid subscriptions to the capital of the corporation 2

Which of the following statements is true?

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A. There is due process when taxpayers are t reated alike under like circumstances and conditions. B. Uniformity in applying tax laws is observed when the tax imposed is based on the taxpayer’s ability to pay. C. Theoretical justice requires that taxes are determined based on reasonable rule of apportionment. D. Equal protection is when taxable articles are taxed at the same rate. Answer: C 2

A grant of immunity to particular persons or corporations from the obligation to pay taxes A. B. C. D.

Tax Tax Tax Tax

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amnesty exemption avoidance evasion

Answer: B 2

Which of the following powers of the Commissioner may be delegated? A. Power to recommend the promulgation of rules and regulations by the Sec. of Finance B. Power to issue rulings of first impression or to reverse, revoke modify any existing rule of the BIR C. Power to compromise tax liability D. Power to assign or reassign internal revenue officers t o establishments where articles subject to excise tax are kept. Answer: C Exception: The regional evaluation board may compromise: 1. assessments issued by regional offices involving deficiency taxes of P500,000 or less and 2. minor criminal violations as may be determined by the rules and regulations 3. discovered by regional and district officials

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Who can be a qualified dependent for purposes of claiming additional personal exemption? A. B. C. D.

Parents Brothers or sisters Illegitimate child None of the above.

Answer: C 2

Who of the following taxpayers can avail of deductions from gross income? A. B. C. D.

Resident alien whose income is purely compensation income Non-resident citizen whose income is purely compensation income Non-resident alien engaged in trade or business in the Philippines Non-resident foreign corporations

Answer: C 2

Tax base of a resident citizen is computed as follows (choose the incorrect one)

A.

Type of Income Compensation Income

B.

Business Income

C.

Business income

D.

Passive income

Formula Gross compensation income – deductions – basic personal exemption – additional exemption Gross business income – itemized deductions or OSD equivalent to 40% of gross sales/receipts – basic personal exemption – additional exemption Gross business income – itemized deductions or OSD equivalent to 40% of gross business income – basic personal exemption – additional exemption Gross amount

Answer: C All applicable for NRC, RA, NRAETB (except additional exemption) except those employed by regional or area headquarters and regional operating headquarters of multinational corporations, offshore banking units, or service contractors or subcontractors engaged in petroleum operations in the Philippines 2

Statement 1 – A general professional partnership is exempt from i ncome tax. Hence, it is not required to file an income tax return. Statement 2 – The share of each partner in the net gain or profit of a general co-partnership shall be

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included in his individual return. A. B. C. D.


Answer: D A GPP although exempt from income tax is still required to file an income tax return to determine the share in the gain of the partners. The share of each partner in the net gain or profit of a general co-partnership has already been subjected to 10% final tax on dividends; hence, it shall no longer be included in his individual return. 2

Statement 1 - If the heirs contribute to the estate money, property, or industry with intention to divide the profits between/among them, an unregistered partnership is created and the estate becomes liable for the payment of corporate income tax. Statement 2 - If the heirs, without contributing money, property or industry to improve the estate, simply divide the fruits thereof between/among themselves, a co-ownership is created, and individual income tax is imposed on the income received by each of the heirs, payable in their separate and individual capacity. A. B. C. D.

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Answer: C 2

Which of the following taxes are non-stock non-profit educational institutions exempt? A. B. C. D.

Income tax Customs duties Property tax All of the above.

Answer: D 2

Which of the following is not exempt from income tax? A. B. C. D.

Proceeds of life insurance policies Amount received by the insured as return on premium Value of property acquired by gratuitous transfer Interest on life insurance policy paid to the heirs or beneficiaries

Answer: D 2

The following are different types of compensation except A. B. C. D.

Profit Sharing Monetized Vacation and Sick Leave Fringe benefits received by rank & file employees Fringe benefits received by non-rank & file employees

Answer: D 2

The following are income received by a resident citizen and the applicable tax. One is incorrect A. B. C. D.

Interest from currency deposits, trust funds and deposit substitutes – 20% FWT Royalties (on books as well as literary & musical composition) – 10% FWT Prizes in excess of P10k – 20% FWT Winnings P10k or less – subject to tabular tax rates

Answer: D Winnings regardless of amount are subject to 20% FWT. 2

The fair market value (FMV) of the sale of shares not traded but listed in the stock exchange when no sale is made is A. B. C. D.

the the the the

highest closing price on the day the shares were sold, transferred or exchanged. lowest closing price on the day the shares were sold, transferred or exchanged. highest selling price on the day nearest to the day of sale, transfer or exchange. lowest selling price on the day nearest to the day of sale, transfer or exchange. 7

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Answer: C 2

Statement 1 – The taxpayer shall notify the Commissioner within 45 days from the date of sale or disposition of his/her principal residence through a prescribed return of his intention to avail the tax exemption. Statement 2 – The exemption can only be availed once every 5 years. A. B. C. D.

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Answer: D 30 days, 10 years 2

Depreciation is deductible only when property is located within the Philippines if the taxpayer is a A. B. C. D.

Non-resident citizen Resident alien NRAETB Resident citizen

Answer: C 2

Who can claim tax deductions? DC Yes Yes Yes Yes

A. B. C. D.

RFC Yes Yes Yes No

NFC Yes Yes No No

Answer: D 2

Which of the following is a research and development cost? A. Any expenditure for the acquisition or improvement of land or for the improvement of property to be used in connection with research and development subject to depreciation and depletion. B. Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent or quality of any deposit of ore or other mineral including oil or gas. C. A and B D. None of the above. Answer: D

2


Income tax Estate and donor’s tax Business tax Special assessments

Answer: C 2

Which of the following analogies is incorrect? A. B. C. D.

Failure to exercise call or put option: capital sale or exchange Liquidating dividends: ordinary sale or exchange Readjustment of interest in a general professional partnership: capital sale or exchange Securities becoming worthless: capital sale or exchange

ANSWER: B 2

A resident citizen has the following income and losses during the year: Ordinary gain – Ordinary loss – Short term capital gain – Short term capital loss – Long term capital loss –

50,000 5,000 10,000 5,000 20,000

Net taxable income during the year before personal exemption is A. 45,000 8

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B. 40,000 C. 50,000 D. 30,000 ANSWER: A 10,000 – 5,000 -20,000/2 = 5,000 net capital loss Net taxable income = ordinary gain – ordinary loss + net capital gain NTI = 50,000 – 5,000 = 45,000 Using the facts above, the net capital loss during the year is A. B. C. D.

15,000 20,000 5,000 0

ANSWER: C Using the facts above, the net capital loss carry over in the succeeding year is A. B. C. D.

15,000 20,000 5,000 0

ANSWER: C Using the facts above but assuming the taxpayer is a corporation, the net capital loss during the year is A. B. C. D.

15,000 20,000 5,000 0

ANSWER: A Using the facts above but assuming the taxpayer is a corporation, the net capital loss carry over in the succeeding year is A. B. C. D.

15,000 20,000 5,000 0

ANSWER: D Using the facts above but assuming the taxpayer is a corporation, the net taxable income during the year is A. B. C. D.

45,000 40,000 50,000 30,000

ANSWER: A 2

Tax RCIT MCIT Previous quarters tax payments

Year 6 40,000 50,000 10,000

Year 7 55,000 40,000 10,000

Year 8 40,000 45,000 10,000

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One is incorrect A. B. C. D.

Tax still due for year 6 is 40,000 Tax still due for year 7 is 45,000 Tax still due for year 8 is 35,000 Unapplied excess MCIT as of year 8 is 5,000

Answer: B 55,000 – 10,000 – 10,000 (excess MCIT) – 35,000 2

Country Net Income

Actual Foreign Tax Paid

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USA CHN PHL

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100,000 50,000 200,000


27,000 18,000 -0-

Income tax due A. B. C. D.

105,000 60,000 45,000 42,000

Answer: A 350,000* 30% = 105,000 Using the facts above, foreign tax credit amounts to A. 105,000 B. 60,000 C. 45,000 D. 42,000 Answer: D Limit A = 42,000 Limit B = 45,000 2

Deadline for filing of the IAET return is A. B. C. D.

Within Within Within Within

15 20 30 45

days days days days

after after after after

the the the the

close close close close

of of of of

the the the the

taxable taxable taxable taxable

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year year year year

Answer: A 2

Which of the following is incorrect on tax treatment of income earned within the Philippines by a non-resident foreign corporation? A. It is subject to 30% final tax on gross income. B. The finality of the withholding tax is limited only to the payee’s income tax liability and does not extend to other taxes that may be imposed on said income. C. The liability for the payment of the tax rests primarily on the payor as withholding agent. D. The payee is still required to file an income tax return for th e particular income subjected to FWT. Answer: D

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Deadline for filing of BIR Form 1601-C, 1601-E, 1601-F and 1602 for eFPS filers A. 11th to 15th day of the month following the month the withholding was made B. 11th to 15th day of the month following the month the withholding was made for the months January to November and on the 15th for the month of December C. 15th day of the month following the month the withholding was made for the months January to November and on the 15 th for the month of December D. 15th day of the month following the month the withholding was made for the months January to November and on the 20th for the month of December Answer: A

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In general, who are required to file BIR Form 1601-C 12345-

Individuals engaged in business or practice of profession All juridical persons engaged in trade or business All juridical persons not engaged in trade or business Government agencies LGUs

A. B. C. D.

1 and 2 only 1, 2 and 4 only 1, 2, 3 and 4 only 1, 2, 3, 4 and 5

Answer: D 3

I. The principle of international comity limits the authority of the government to effectively impose taxes on a sovereign state and its instrumentalities as well as on its property h eld and activities

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undertaken in that capacity. II. International comity may not apply when one enters the territory of another. A. B. C. D.

True; False False, True True: True False; False

Answer: A Even where one enters the territory of another, there is an implied understanding that the former does not thereby submit itself to the authority and jurisdiction of the other. 3

Which of the following statements on the power of the courts of judicial review in taxation is true?

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A. It is within the province of the courts to inquire into the wisdom or policy of the exaction, the motives behind it, the amount to be raised or the persons, property or other privileges to be taxed. B. The court’s power in taxation is limited only to the application and interpretation of the law. C. The principle of judicial non-interference does not extend to the administrative realm. D. All of the above. ANSWER: B It is not within the province of the courts to inquire i nto the wisdom or policy of the exaction, the motives behind it, the amount to be raised or the persons, property or other privileges to be taxed. The principle of judicial non-interference extends to the administrative realm. 3

In tax amnesty, the taxpayer has immunity from I. Criminal liability II. Civil liability III. Administrative liability A. B. C. D.

I and II only II and III only II only I, II and III

Answer: D In tax amnesty, the taxpayer has Immunity from all criminal, civil and administrati ve liabilities arising from non-payment of taxes. 3

The BIR Commissioner has the authority to inquire into bank deposits I. In case of a decedent to determine his gross estate II. In case a taxpayer who has filed an application to compromise payment of tax liability by reason of financial incapacity A. B. C. D.

I only II only I and II Neither I or II

Answer: C 3

Who can claim basic personal exemption?

A. B. C. D.

RC Yes Yes Yes Yes

NRC Yes Yes Yes Yes

RA NRAETB NRANETB Yes Yes Yes Yes Yes No Yes No No No No No

Answer: B 3

Who can claim additional personal exemption?

A. B. C. D.

RC Yes Yes Yes Yes

NRC Yes Yes Yes Yes

RA Yes Yes Yes No

NRAETB NRANETB Yes Yes Yes No No No No No 11

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Answer: C 3

Tax base of a NRANETB is computed as follows (choose the incorrect one) Type of Income Compensation Income Compensation income Business income Passive income

A. B. C. D.

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3.2.2

Formula Gross compensation income – deductions Gross income Gross income Gross income

Answer: A 3

Statement 1 – A partner of a general professional partnership may avail of itemized or optional standard deduction with respect to his distributive share in the net income of the GPP. Statement 2 – The share of each partner in the net gain or profit of a general professional partnership shall be subject to creditable withholding tax of 10/15%. A. B. C. D.


Answer: C 3

Which of the following statements is incorrect? A. An estate under judicial settlement is subject to income tax in the same manner as individuals. B. For income tax purposes, the estate is entitled to personal exemption amounting to 50,000 pesos. C. For purposes of computing the income tax due of an estate, no additional exemption is allowed. D. The distribution to the heirs during the taxable year of estate income is deductible from the taxable income of the estate. Such distribute d income shall form part of the respective heirs’ taxable income. Answer: B. The entitlement to personal exemption is limited only to P20,000.

3

Consider the following facts:

Net income (loss) before write off for bad debts Less: Accounts written off as bad debts Final Net Income (Loss) Bad debts recovery in the subsequent year

Case A P10,000

Case B (P 9,000)

Case C P 5,000

Case D P 6,000

4,000 P 7,000 3,000

2,000 (P11,000) 1, 000

6,000 (P1,000) 6, 000

3,000 3,000 1,000

The taxable bad debt recovery in the subsequent taxable year is A. B. C. D.

Case Case Case Case

A – 4,000 B – 0 C – 6,000 D – 2,000

Answer: B Case A – P 3,000 (the actual amount recovered in subsequent year) Case B – P 0 (since taxable income is negative, no tax benefit was realized from write-off of bad debt.) Case C – P 5,000 (6,000 – 1000) Case D – P 1,000 3

Which of the following is not exempt from income tax? A. Income derived by foreign governments, financing i nstitutions owned, controlled or enjoying financing from foreign governments, and international or regional financing ins titutions established by foreign governments, from their inv estments in loans, stocks, bonds or other domestic securities or from interest on their deposits in banks in the Philippines. B. Income derived from any public utility or from the exercise of any essential government function accruing to the Philippine government or to any political subdivision C. Prizes and awards made primarily in recognition of religious, charitable, scientific,

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educational, artistic, literary, or civic achievement but only if the recipient was selected without any action on his part to enter the contest or proceeding, and is not required to render substantial future services as a condition to receiving the prize or award D. Prizes and awards granted to athletes in local and international sports competitions and tournaments held in the Philippines or abroad and whether or not sanctioned by their respective national sports associations Answer: D 3

Cash and property dividends received by a non-resident alien engaged in trade or business in the Philippines from a domestic corporation is subject to A. B. C. D.

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3.2.5

1.5

3.2.6

2

3.2.6

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3.3.1

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3.3.1


Answer: B 3

Which of the following statements is incorrect? A. Cash and property dividends received by a domestic corporation from a foreign corporation are subject to 30% corporate income tax. B. Cash and property dividends received by a domestic corporation from another domestic corporation are exempt from income tax. C. Cash and property dividends received by a resident foreign corporation from a domestic corporation are subject to 10% final tax. D. Cash and property dividends received by a non-resident foreign corporation from a domestic corporation are subject to 30% final tax which may be reduced to 15% if the tax sparing provision applies. Answer: C Cash and property dividends received by a resident foreign corporation from a domestic corporation are exempt from income tax.

3

The person liable and deadline of filing and payment of other percentage tax on sale of shares of stock listed and traded in the stock exchange A. B. C. D.

Seller, 5 days from sale Seller, 5 days from payment Stockbroker, 5 days from sale Stockbroker, 5 days from collection

Answer: D 3

Statement 1 – If the capital asset sold is located within the Philippines, the transaction is subject to capital gains tax. Statement 2 – If the capital asset sold is located outside the Philippines, the gai n/loss are considered in determining the taxable income subject to regular income tax. A. B. C. D.


Answer: C 3

Amount of loss to be recognized in case of total loss from casualty A. B. C. D.

Replacement cost Net book value before the loss Replacement cost or net book value before the loss, whichever is lower Replacement cost or net book value before the loss, whichever is higher

Answer: C 3

If the taxpayer opted to claim research and development costs on a deferred basis, the taxpayer may claim the amount capitalized over a period of A. B. C. D.

60 60 36 36

months months months months

beginning beginning beginning beginning

the the the the

month month month month

the the the the

taxpayer taxpayer taxpayer taxpayer

paid such expenditures realized benefits from such expenditure paid such expenditures realized benefits from such expenditure 13

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Answer: B 3

Which of the following is not a requisite for business expense to be deductible? A. B. C. D.

2

3.3.1

1.5

3.3.2

2

3.3.2

3

3.3.2

3

3.6.0

Must have been subjected to withholding taxes Substantiated with official receipts or other adequate records If not previously subjected to withholding tax, at least settled during BIR audit Not lavish, extravagant or excessive under the circumstances

Answer: C. Even if withholding is paid at the time of BIR audit, the expense will still be disallowed. 3



on scrip dividends on indebtedness incurred to finance petroleum exploration on preferred stock on unpaid salaries and bonuses

Answer: A 3

Statement 1 – Loss on wash sales of stocks is deductible. Statement 2 - Loss on account of shrinkage in value of the stock through fluctuation in the market or otherwise can be deducted from gross income. A. B. C. D.

True; False False; True True; True False; False

Answer: D 3

A Co. and B Co. decided to merge with A Co. as the acquirer. As a result of the merger, A Co. will own 80% of the shares of stock of B Co. Stockholders of A Co. will have to t ransfer shares of stocks to stockholders of B Co. and vice versa. The merger also resulted to A Co. transferring some of its properties to B Co. Using the above facts, what transactions are taxable? A. B. C. D.

Transfer of A Co. of assets to B Co. Transfer of shares of stocks of stockholders of A Co. for shares of stocks of B Co. A and B Neither A nor B

Answer: D TAX FREE EXCHANGES Sales or exchanges resulting in non-recognition of gains or losses: 1. Exchange solely in kind in legitimate mergers and consolidation; includes: a. Between the corporations which are parties to t he merger or consolidation (property for stocks); b. Between a stockholder of a corporation party to a merger or consolidation and the other party corporation (stock for stock); c. Between a security holder of a corporation party to a merger or consolidation and the other party corporation (securities for securities) 2. Transfer to a controlled corporation – exchange of property for stocks resulting in acquisition of corporate control by a person, alone or together with others not exceeding four. “Control” means ownership of stocks in a corporation amounting to at least 51% of the total voting power of all classes of stocks entitled to vote. 3

Net taxable income before NOLCO– Dividend received from another domestic corporation – Dividend received from non-resident foreign corporation – Interest income subjected to final tax – NOLCO from previous year carried forward this year –

400,000 50,000 30,000 20,000 100,000

Compute for the improperly accumulated income tax A. B. C. D.

40,000 50,000 38,000 28,000

Answer: C 14

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Taxable income for the year Add: Income exempt from tax; Income excluded from gross income; Income subject to final tax; Net operating loss carry-over (NOLCO) Total Less: Income tax paid/payable for the taxable year Dividends actually or constructively paid/issued from the applicable year’s taxable income Amount reserved for the reasonable needs of the business as defined in the Regulations Tax base of improperly accumulated earnings tax 3

One cannot claim foreign tax credit A. B. C. D.

1.5

3.6.4

1.5

3.6.6

1.5

3.7.0

1.5

3.7.4

1.5

3.7.9

2

1.1.0

Resident citizen Non-resident citizen Resident alien with income from within and without the Philippines (subject to reciprocity) Beneficiaries of estates and trusts

Answer: B. 3

Deadline for filing and payment of annual income tax returns of partnerships and corporations A. B. C. D.

on on on on

or or or or

before before before before

the the the the

15th day 15th day 15th day 15th day

of of of of

April of the year succeeding the taxable year April of the preceding the taxable year the 4th month succeeding the taxable year the 4th month preceding the taxable year

Answer: C 3

Consequence of failure to withhold 1. Liable for surcharge, interest and penalties 2. Liable for amount not withheld 3. Disallowance of expense claimed A. B. C. D.

1 only 1 and 2 only 1, 2 and 3 2 only

Answer: C 3

Deadline for payment of BIR Form 1601-C, 1601-E, 1601-F and 1602 for manual filers A. 10th day of the month following the month the withholding B. 10th day of the month following the month the withholding to November and on the 15 th for the month of December C. 15th day of the month following the month the withholding D. 15th day of the month following the month the withholding to November and on the 20 th for the month of December

was made was made for the months January was made was made for the months January

Answer: B 3

The staggered filing of returns allowed for withholding agents/taxpayers enrolled in the EFPS facility of the Bureau shall not apply in the case of the A. B. C. D.

National government agencies Local government units GOCCs None of the above.

Answer: A RR No. 1 -2013 4

I. A tax law adopting a regressive system of taxation is unconstitutional. II. Income tax on individual is an example of a progressive system of taxation.

15

QUESTION BANK

A. B. C. D.

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Statement I is true; Statement II is false Statement I is false; Statement II is true Both statements are true Both statements are false

Answer: B The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. The Constitutional provision means simply that indirect taxes shall be minimized. The mandate to Congress is not to prescribe, but to evolve, a progressive tax system. 4

Which of the following statements on construction of tax laws is false?

2

1.7.0

2

2.1.1

2.5

2.2.2

1.5

3.1.1

2.5

3.1.1

A. A statute will not be construed as imposing a tax unless it does s o clearly, expressly and unambiguously. B. In case of doubt, it is construed most strongly against the Government, and liberally in favor of the taxpayer. C. Tax laws are special laws and prevail over a general law. D. Retroactive application of tax laws is not permitted. ANSWER: D Retroactive application of tax laws is permitted in certain circumstances. Tax laws operate prospectively unless the purpose of the legislature to give retrospective effect i s expressly declared or may be implied from the language used. 4

Jamili, Inc. filed its annual income tax return on April 17, 2017. Jamili, Inc. is in a calendar year basis for accounting and tax purposes. When is the last day the BIR can assess th e tax liabilities of Jamili, Inc.? A. B. C. D.

April 15, 2020 April 17, 2020 April 15, 2022 April 17, 2022

Answer: B The statute of limitation for assessment of tax if a return is filed is within three (3) years from the last day prescribed by law for the filling of the return or if filed after the last day, within three years from date of actual filling. 4

I. Income tax returns are confidential. II. Only the taxpayer himself may authorize the production or inspection of his/her income tax returns. A. B. C. D.


Answer: A General Rule: income tax returns are confidential. Exception: inquiry into income tax returns may be authorized1. inspection is authorized upon written order of the President of the Philippines; 2. inspection is authorized under Finance Regulations No. 33 of the Secretary of Finance; 3. production of the tax return is material evidence in a criminal case wherein t he government is interested in the result; or 4. production or inspection thereof is authorized by the taxpayer himself. 4

Additional personal exemption is allowed to a

A. B. C. D.

RC Yes Yes Yes Yes

NRC Yes Yes Yes Yes

RA Yes Yes Yes No

NRAETB Yes Yes No No

NRANETB Yes No No No

Answer: C 4

Carl got an offer to work in Canada for 2 years (renewable). On June 29, 2017, Carl departed from the Philippines to Canada with the intention to reside therein. Carl has income from sources within and without the Philippines. Which of the following statements is correct?

16

QUESTION BANK

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A. For taxable year 2017, Carl will be considered a non -resident citizen for income tax purposes. B. For taxable year 2017, Carl’s income from sources within and without th e Philippines will be subject to income tax. C. Carl’s income from sources without the Philippines from January 1 to June 29, 2017 will be subject to income tax. D. Carl’s income from sources within the Philippines from July to December will not be subject to income tax. Answer: A Overseas contract workers must be physically present abroad most of the time during the calendar year to qualify as nonresident citizens. Thus, for taxable year 2017, Carl is already considered a non -resident citizen since he has been out of the country for most of the time during the year (185 days). 4

I. Although the government is tax exempt, it can however tax itself. II. GOCCs’ income is taxable at special rates. A. B. C. D.

2.5

3.1.2

2.5

3.1.3

2.5

3.1.7

2

3.2.1

2

3.2.2

1.5

3.2.5


Answer: A. GOCCs General Rule: Income is taxable at t he rate imposed upon corporations or associations engaged in a similar business, industry, or activity. 4

Statement 1 - Share of a partner in the loss of a taxable or business partnership maybe taken by the individual partner in his return of income. Statement 2 - Share of a partner in the loss of a general professional partnership maybe taken by the individual partner in his return of income. A. B. C. D.


Answer: C 4

I. Donations in favor of governmental institutions are considered as income on the part of the donee. II. However, it is not considered as taxable income because it is an exclusion from the computation of gross income. A. B. C. D.


Answer: C 4

Which of the following benefits given by a private employer to its employees is taxable? A. B. C. D.

Unused sick leave credits maximum of 10 days per year converted to cash Medical cash allowance to dependents of employees amounting to P1,500 during the year Rice subsidy of P1,500 per month given in cash Uniform and clothing allowance amounting to P5,000 per annum

ANSWER: A Only unused vacation leave credits not exceeding to 10 days are non-taxable for private employees. 4

One of the following is taxable A. B. C. D.

Gain from liquidation of shares Proceeds of life insurance paid by reason of the death of the insured to his beneficiary Gift, bequest or device Compensation for personal injuries or sickness

Answer: A 4

Cash and property dividends received by a non-resident alien not engaged in trade or business in the

17

QUESTION BANK

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Philippines from a domestic or resident foreign corporation is subject to A. B. C. D.


Answer: C 4

Interest income from foreign currency bank deposits in a bank located within the Philippines is taxable if received by RC Yes Yes Yes Yes

A. B. C. D.

NRC Yes No Yes No

RA No Yes No No

NRAETB No No No No

2.5

3.2.5

1.5

3.2.6

3

3.3.0

1.5

3.3.1

1.5

3.3.1

NRANETB No No No No

Answer: B 4

For shares not listed in the exchange, the FMV shall be A. the book value nearest the valuation date B. the highest closing price of similar stocks on the day nearest to the day of sale, transfer or exchange C. the lowest closing price of similar stocks on the day nearest to the day of sale, transfer or exchange D. the lowest closing price of similar stocks on the day the shares were sold, transferred or exchanged Answer: A

4

Anna has three sons as follows: A – 4 months old. Born on December 31, 2016 B – turned 21 years old on July 22, 2017 C – illegitimate child, turned 21 years old on January 1, 2017 D – 18 years old, died due to vehicular accident on December 31, 2016 For the taxable year 2016 and 2017 respectively, how much can Anna claim as personal and additional exemption? A. B. C. D.

P75,000; 50,000 P100,000; 75,000 P125,000; 100,000 P150,000; 125,000

Answer: D 2016 – A, B, C and D (qualified dependents) 2017 – A, B and C (qualified dependents) 2016 – 50,000 + 100,000 = 150,000 2017 – 50,000 + 75,000 = 125,000 4

Consider the following facts: Cost – Salvage value – 3,000 Life –

15,000 4 years

Depreciation in year 2 using double declining balance method A. B. C. D.

3,750 3,000 7,500 2,400

Answer: A 4

Depreciation is deductible only when property is located within the Philippines if the taxpayer is a A. Resident foreign corporation B. Non-resident foreign corporation C. A & B

18

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D. None of the above Answer: B 4

Limit for charitable and other contributions:

2

3.3.1

2

3.3.2

2

3.3.2

1.5

3.3.3

2

3.6.0

1.5

3.6.4

Statement 1 - 10% of tax able income before contribution for corporations Statement 2 - 5% of taxable income before contribution for individuals A. B. C. D.


Answer: D 4

The following are taxes paid by a corporation during the taxable year. Which of the following is deductible for income tax purposes? I. Taxes of shareholder upon his interest as such and paid by the corporation without reimbursement from him. II. A corporation paying the tax for the holder of bonds or other obligation containing a tax -free covenant clause. A. B. C. D.

I – deductible; II – not deductible I – not deductible; I – deductible Both are deductible Both are not deductible

Answer: A 4

Statement 1 – Income from illegal activities is taxable. Statement 2 – Illegal expenses can be claimed as deduction against illegal income. A. B. C. D.


Answer: A 4

OSD is allowed to a RC Yes Yes Yes Yes

A. B. C. D.

NRC Yes Yes Yes Yes

RA Yes Yes Yes No



Answer: B 4

Statement 1 – MCIT does not apply to non-resident foreign corporations. Statement 2 – MCIT will only apply when there is 0 or negative taxable income. A. B. C. D.


Answer: A MCIT is imposed on domestic and resident foreign corporations 1. Whenever such corporation has zero or negative taxable income; or 2. Whenever the amount of MCIT is greater than the normal income tax due from such corporation determined under Section 27[A]. 3. In computing for the MC IT due from a resident foreign corporation, only the gross income from sources within the Philippines shall be considered for such purpose. 4

One cannot claim foreign tax credit A. B. C. D.

Domestic corporations General professional partnerships Resident alien with income from within and without the Philippines (subject to reciprocity) Members of beneficiaries of local partnerships 19

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Answer: B. 4

Oscar – employee, employed by two employers during the taxable year. No other source of income. Joan – wife of Oscar, employee, employed by one employer during the taxable y ear. No other source of income.

2

3.6.9

1.5

3.7.4

1.5

3.7.4

1.5

3.8.2

2

1.1.0

2

1.7.0

Statement 1 – Joan is qualified for substituted filing of income tax return. Statement 2 – Oscar is not qualified for substituted filing of income tax return. A. B. C. D.


Answer: B Both Oscar and Joan are not qualified for substituted filing of income tax return. Individuals receiving purely compensation income from a single employer, a lthough the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing is not entitled to substitute filing of income tax return. 4

Deadline for filing of BIR Form 1601-C, 1601-E, 1601-F and 1602 for manual filers A. 10th day of the month following the month the withholding B. 10th day of the month following the month the withholding to November and on the 15 th for the month of December C. 15th day of the month following the month the withholding D. 15th day of the month following the month the withholding to November and on the 20 th for the month of December

was made was made for the months January was made was made for the months January

Answer: B 4

Deadline for filing and payment of BIR Form 1603 for manual filers A. 10th day of the month following were granted to the recipient B. 10th day of the month following to the recipient C. 15th day of the month following were granted to the recipient D. 15th day of the month following to the recipient

the end of the calendar quarter in which the fringe benefits the end of month in which the fringe benefits were granted the end of the calendar quarter in which the fringe benefits the end of month in which the fringe benefits were granted

Answer: A 4

Account Information Form (AIF) or the Certificate of the independent CPA with Audited Financial Statements is required to be attached to the income tax return when the A. B. C. D.

gross gross gross gross

quarterly sales, earnings, receipts or output exceed P 150,000.00 quarterly sales, earnings, receipts or output exceed P 100,000.00 annual sales, earnings, receipts or output exceed P 150,000.00 annual sales, earnings, receipts or output exceed P 100,000.00

Answer: A 5

Which of the following statements is false? A. Tax legislation may be delegated to administrative agencies. B. The power of taxation is peculiarly and exclusively exercised by the legislature. C. The President has the authority to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. D. Local government units have the power to levy taxes, fees, and charges. Answer: A

5

Which of the following statements on the rules of tax amnesty is correct? I. II.

III.

Like tax exemption, it is never favored nor presumed The government is estopped by mistakes or errors of its agents. Thus, the government may no longer question the tax liability of a taxpayer when amnesty tax payments are already received. Defense of tax amnesty, like insanity, is a personal defense. It relates to the circumstances of a particular accused and not the character of the acts charged in the information.

A. I only 20

QUESTION BANK

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B. I and II only C. I and III only D. I, II and III Answer: C The government is never estopped by mistakes or errors of its agents. Thus, the government may still question the tax liability of a taxpayer even if amnesty tax payments are already received. 5

Jamili, Inc. filed its annual income tax return on April 17, 2017. Jamili, Inc. is in a calendar year basis for accounting and tax purposes. On June 30, 2022, the BIR found out th ru its investigation that the return filed by Jamili, Inc. was fraudulent. When is the last day the BIR can assess the tax liabilities of Jamili, Inc.? A. B. C. D.

2

2.1.1

1.5

2.2.4

1.5

3.1.1

2.5

3.1.1

1.5

3.1.2

2.5

3.1.3

April 15, 2027 April 17, 2027 June 30, 2032 April 17, 2020

Answer: C If no return is filed or the return filed is false or fraudulent, the period to assess is within ten years from discovery of the omission, fraud or falsity. 5

Which of the following is a requisite of a taxpayer’s suit? A. The tax money is being extracted and spent in violation of specific constitutional protections against abuses of legislative power B. That public money is being deflected to any improper purpose C. That the petitioner seeks to restrain respondents from wasting public funds through the enforcement of an invalid or unconstitutional law D. All of the above Answer: D

5

Who can be a qualified dependent for purposes of claiming additional personal exemption? A. B. C. D.

Recognized natural child Legally adopted child Illegitimate child All of the above.

Answer: D 5

Carl applied as an immigrant in Canada. On January 1, 2017, Carl departed from the Philippines to Canada with the intention to reside therein. Carl has income from sources within and without the Philippines. Which of the following statements is correct? A. For taxable year 2017, Carl will be considered a non -resident citizen for income tax purposes. B. For taxable year 2017, Carl’s income from sources within and without the Philippines will be subject to income tax. C. Carl’s income from sources without the Philippines from January 1 to June 29, 2017 will be subject to income tax. D. Carl’s income from sources within the Philippines from July to December will not be subject to income tax. Answer: A Immigrants and employees of a foreign entity on a permanent basis are treated as nonresident citizens from the time they depart from the Philippines.

5

Which of the following is subject to 10% income tax on net taxable income provided that the gross income from unrelated trade, business or other activi ty does not exceed 50% of the total gross income A. B. C. D.

Proprietary educational institution Non-stock, non-profit hospitals A and B None of the above.

Answer: C 5

Statement 1 - Payments made to a partner of a business or taxable partnership for services rendered

21

QUESTION BANK

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shall be considered as ordinary business income. Statement 2 - Payments made to a partner of a general professional partnership for services rendered shall be considered as compensation income. A. B. C. D.


Answer: D Payments made to a partner of a business or taxable partnership for services rendered shall be considered as compensation income. Payments made to a partner of a general professional partnership for services rendered shall be considered as business ordinary income. 5

I. Property actually, directly and exclusively used for educational purposes by government educational institutions are exempt from property or real property tax. II. Income of whatever kind and character from any properties of government educational institutions, real or personal, regardless of the disposition, is taxable. A. B. C. D.

2.5

3.1.7

1.5

3.2.1

2

3.2.2

2.5

3.2.5

1.5

3.2.6

3

3.2.6


Answer: C 5

Which of the following taxes, when refunded, will be included in gross income? A. B. C. D.

Income tax Estate and donor’s tax Documentary stamp tax Special assessments

Answer: C 5

Which of the following is not exempt from income tax? A. B. C. D.

Compensation for injuries or sickness including damages received Income exempt under treaty Retirement benefits, pensions, gratuities, etc. under certain conditions Income on property acquired by gratuitous transfer

Answer: D 5

Interest income from foreign currency bank deposits in a bank located outside the Philippines is taxable if received by RC Yes Yes Yes Yes

A. B. C. D.

NRC Yes No Yes No

RA No Yes No No

NRAETB No No No No

NRANETB No No No No

Answer: D 5

The person liable and deadline of filing and payment of other percentage tax on sale of shares of stock not listed and traded in the stock exchange A. B. C. D.

Seller, 30 days from sale Seller, 30 days from payment Stockbroker, 30 days from sale Stockbroker, 30 days from collection

Answer: A 5

A sold his principal residence at a selling price of P5M but with a FMV of P6M. The property sold was acquired for P3M. He purchased his new principal residence at a cost of P7M. The capital gains tax is A. P360,000 B. P300,000

C. P240,000 D. P 0

Answer: D 22

QUESTION BANK

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How much is the basis (cost) of the new principal residence? A. P7M C. P5M B. P6M D. P4M Answer: C 3M + (7M – 5M) = 5M If only P4M out of P5 M was utilized in acquiring his new principal residence, the capital gain tax is A. P60,000 C. P300,000 B. P72,000 D. P360,000 Answer: B 1M/5M * 6M * 6% = 72,000 Using the preceding number, the basis (cost) of the new principal residence? A. P3.2M C. P2.4M B. P4M D. P3M Answer: C 4/5 * 3M = 2.4M 5

Statement 1 - Premium payments on health and/or hospitalization insurance can be claimed as deductions against gross income from business or practice of profession. Statement 2 – Optional standard deduction can be availed of by an individual whose income i s purely compensation income. A. B. C. D.

2

3.3.0

1.5

3.3.1

1.5

3.3.1

2

3.3.1

2

3.3.2


Answer: A 5

Donation to the following with priority activities is deductible in full except A. B. C. D.

Department of Health Barangay Fully owned government corporation Non-stock, non-profit religious institutions

Answer: D 5

It is a method of borrowing without entering into a debtor/creditor relationship, often to resolve financing and exchange control problems. In tax cases, back-to-back loan is used to take advantage of the lower of tax on interest income and a higher rate of tax on interest expense deduction. A. B. C. D.

Tax Tax Tax Tax

sparing arbitrage avoidance minimization

Answer: B 5

Statement 1 - The Bureau of Internal Revenue and the taxpayer may agree in writing on the useful life of the property to be depreciated. Statement 2 - The change in useful life shall be effective retrospectively. A. B. C. D.


Answer: A The change in useful life shall be effective prospectively. 5

As a rule, gains from these transactions are taxable but losses are not deductible, except one A. B. C. D.

Sale or exchange between related parties Wash sales by dealers of securities Exchanges not solely in kind in merger and consolidation Sales or exchanges that are not in arm’s length

Answer: B 23

QUESTION BANK

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Loss from wash sales by dealers of securities are considered ordinary loss, thus, deductible. 5



2

3.3.2

2.5

3.3.4

1.5

3.6.0

1.5

3.6.5

2

3.6.9

1.5

3.7.4

on loan from a first cousin paid when there is no stipulation for the payment thereof on loan between grantor & fiduciary of any trust calculated for cost keeping on account of capital or surplus investe d in business

Answer: A Limitation is between brothers & sisters, spouse, ancestors, & lineal descendants 5

Premium payments on health and/or hospitalization not exceeding PhP2,400 a year are deductible from (choose the incorrect one) A. Gross compensation income provided taxpayer availing of said deduction has a family income of not more than PhP250,000 for the taxable year and is the one claiming f or additional exemptions for dependents B. Business income provided taxpayer availing of said deduction has a family income of not more than PhP250,000 for the taxable year and is the one claiming for additional exemptions for dependents C. Professional income provided taxpayer availing of said deduction has a family income of not more than PhP250,000 for the taxable year and is the one claiming for additional exemptions for dependents D. Passive income provided taxpayer availing of said deduction has a family income of not more than PhP250,000 for the taxable year and is the one claiming for additional exemptions for dependents Answer: D

5

MCIT can be credited against A. B. C. D.

Other taxes Regular corporate income tax MCIT All of the above

Answer: B 5

Deadline for filing and payment of quarterly income tax returns for individuals, one is correct A. B. C. D.

April 15 of the same year for the first quarter July 15 of the same year for the second quarter On or before 60th day following the close of the taxable quarter December 15 of the same year for the third quarter

Answer: A Deadlines • April 15 – for the first quarter • August 15 – for the second quarter • November 15 – for the third quarter 5

Philip – employee, employed by only one employer during the taxable year. Earned interest income from his local bank deposits. Such interest income was subjected to final tax. Beverly – employee, employed by only one employer during the taxable year. Received rental income from sub-renting her apartment to her friend, Joan. Who is qualified for substituted filing? A. B. C. D.

Philip only Beverly only Philip and Beverly None

Answer: A Individuals deriving other non-business, non -professional related income in addition to compensation income not otherwise subject to a final tax are required to file income tax returns. 5

Deadline for payment of BIR Form 1601-C, 1601-E, 1601-F and 1602 for eFPS filers A. 11th to 15th day of the month following the month the withholding was made B. 11th to 15th day of the month following the month the withholding was made for the months January to November and on the 15th for the month of December

24

QUESTION BANK

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C. 15th day of the month following the month the withholding was made for the months January to November and on the 15 th for the month of December D. 15th day of the month following the month the withholding was made for the months January to November and on the 20 th for the month of December Answer: D Filing Via EFPS Group Group Group Group Group

A - Fifteen (15) days following end of the month B - Fourteen (14) days following end of the month C - Thirteen (13) days following end of the month D - Twelve (12) days following end of the month E - Eleven (11) days following end of the month

Payment via eFPS 15th – January to November 20th - December 5

Deadline for filing and payment of BIR Form 1600 for eFPS filers

1.5

3.7.4

2

4.1.1

1.5

1.1.0

1.5

1.7.0

2

2.1.2

A. 10th day of the month following the month the withholding was made B. 10th day of the month following the month the withholding was made for the months January to November and on the 15 th for the month of December C. 11th to 15th day of the month following the month the withholding was made D. 11th to 15th day of the month following the month the withholding was made for the months January to November and on the 15th for the month of December Answer: A Deadline is the same for manual and eFPS filers. 5

Shares, obligations or bonds by any foreign corporation are only includible in the gross estate of a resident decedent when A. B. C. D.

50% 70% 85% 90%

of the business of the business of the business of the business

of the foreign of the foreign of the foreign of the foreign

corporation is corporation is corporation is corporation is

located in the Philippines located in the Philippines located in the Philippines located in the Philippines

Answer: C. 6

Which of the following is not an inherent limitation of the power to tax? A. B. C. D.

Non-delegability of the taxing power Public purpose of taxes Tax exemption of the government Equal protection of tax laws

Answer: D is a constitutional limitation INHERENT LIMITATIONS 1. 2. 3. 4. 5. 6

Territoriality or Situs of taxation Public purpose of taxes International comity Non-delegability of the taxing power Tax Exemption of the government

Vote needed in Congress to grant tax exemption A. B. C. D.

1/3 of all the members of Congress 2/3 of all the members of Congress Majority of all the members of Congress Unanimous vote of all members of Congress

Answer: C 6

Which of the following statements about tax assessments is correct? I. It is discretionary on the part of the Commissioner. II. The authority of the Commissioner to assess taxes may be delegated, except the power to make final assessments. A. Statement I is true; Statement II is false B. Statement I is false; Statement II is true

25

QUESTION BANK

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C. Both statements are true D. Both statements are false Answer: C 6

The following are tests on the taxability of income except A. B. C. D.

1.5

3.0.0

1.5

3.1.1

2.5

3.1.1

1.5

3.1.2

2

3.1.3

1.5

3.1.7

Flow of wealth test Realization test Economic-benefit principle test Residence test

Answer: D Residence is a criterion in imposing income tax. 6

Basic personal exemption is allowed to a RC Yes Yes Yes Yes

A. B. C. D.

NRC Yes Yes Yes Yes

RA Yes Yes Yes No



Answer: B For NRAETB, Personal Exemption is subject to reciprocity. 6

Who of the following taxpayers is a non-resident alien engaged in business in the Philippines for income tax purposes? 









Carl - Russian, came to the Philippines to work for a Philippine Company. Le ngth of stay is 181 days. Jisryl - Indian, came to the Philippines to work for a Philippine Company. Length of stay is 180 days. Lyndon – Nigerian, came to the Philippines to work with the functions of a public office. Length of stay is 181 days. Lord - French, came to the Philippines to work with the functions of a public office. Length of stay is 180 days. Dan – American, came to the Philippine without specific purpose. Length of stay is 200 days. A. B. C. D.

All five of them Only Carl and Lyndon and Dan Only Carl, Lyndon, Lord and Dan Only Lyndon and Dan

Answer: B Carl – engaged; Jisryl – not engaged; Lyndon – engaged; Lord – not engaged; Dan – engaged A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a non-resident alien doing business in the Philippines Section 22(G) notwithstanding [Sec. 25(A)(1)] 6

Regional operating headquarters are subject to A. B. C. D.

10% income tax on taxable income 15% income tax on taxable income 25% income tax on taxable income Exempt from income tax

Answer: A 6

Which of the following statements is incorrect? A. A general co-partnership is subject to corporate taxation. B. The individual partners in a general co -partnership are considered stockholders and, therefore, profits distributed to them by the partnership are taxable as dividends. C. The taxable income for a taxable year, after d educting the corporate income tax imposed therein, shall be deemed to have been actually or constructively received by the partners in the same taxable year and shall be taxed to them in their individual capacity whether actually distributed or not. D. None of the above. Answer: D

6

Which of the following taxes are religious, educational, charitable institutions exempt?

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QUESTION BANK

A. B. C. D.

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Income tax Customs duties Property tax All of the above.

Answer: C Religious, educational, and charitable institutions are exempt from property tax only. 6

Which of the following is taxable? A. B. C. D.

1.5

3.2.2

3

3.2.2

1.5

3.2.5

1.5

3.2.6

3

3.2.6

Christmas bonus amounting to P5,000 Flowers, fruits, books or similar items given to employees under special circumstances Daily meal allowance for overtime work not exceeding 25% of the basic minimum wage. None of the above.

Answer: B B has been removed in the new list of tax exempt benefits. 6

A private employee received the following during the year: *Award for length of service – P5,000 in cash and P2,000 worth of gift certificates *Award for safety achievement – P7,000 worth of groceries Assuming the awards were received by th e employee under an established writt en plan which does not discriminate highly paid employees, how much of the awards received is not taxable? A. B. C. D.

7,000 9,000 10,000 5,000

Answer: A Only the award received which is not in cash or gift certificates is covered by the de minimis limit on employee achievement awards of 10,000 per annum 6

Cash and property dividends received by a resident alien from a domestic corporation is subject to A. B. C. D.

10% 15% 20% 25%

final final final final

tax tax tax tax

Answer: A From Domestic Corporations • RC, NRC, RA – 10% (Sec. 24A) • NRAETB – 20% (Sec. 25A2) • NRANETB – 25% on gross income (Sec. 25B) 6

The fair market value (FMV) of the sale of shares not traded but listed in the stock exchange is A. B. C. D.

the the the the

highest closing price on the day the shares were sold, transferred or exchanged. lowest closing price on the day the shares were sold, transferred or exchanged. highest selling price on the day nearest to the day of sale, transfer or exchange. lowest selling price on the day nearest to the day of sale, transfer or exchange.

Answer: A 6

A Co., engaged in trading of stocks, sold its shares of stock in B Co. to C Co. the following facts were present in the sale: No. of stocks sold – Selling price per stock – Book of value of stocks sold –

10,000 P70.00 P450,000

A Co.’s stocks are traded in the stock exchange while B Co. and C Co.’s stocks are not. Compute for the capital gains tax due A. 25,000 B. 20,000 27

QUESTION BANK

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C. 3,500 D. 0 ANSWER: D It is subject to income tax not CGT. 6

Who can claim tax deductions? RC Yes Yes Yes Yes

A. B. C. D.

NRC Yes Yes Yes No

RA Yes Yes No No

NRAETB Yes No No No

1.5

3.3.1

1.5

3.3.1

1.5

3.3.1

3

3.3.1

2

3.3.2

2

3.3.2


Answer: B RA, is subject to reciprocity. 6

If a taxpayer is under cash basis, interest paid in advance on indebtedness that is payable in installments, the interest deductible is A. B. C. D.

amount of interest which corresponds to the amount of the principal amortized or paid total amount of interest in the year the indebtedness is paid total amount of interest in the year the indebtedness is incurred None of the above

Answer: A 6

Consider the following facts: Cost – Salvage value – 3,000 Life –

15,000 4 years

Depreciation in year 3 using sum of the years digit method A. B. C. D.

3,750 3,000 7,500 2,400

Answer: D 6

An employer has a retirement plan for its employees. It’s a reasonable retirement p lan registered with the BIR. The following are the data for year 1: Contribution to the plan – Current service cost per actuarial valuation report – Actual benefits paid –

1,000,000 750,000 500,000

Deductible expense in year 1 and year 2 respectively A. B. C. D.

1,000,000; 0 750,000; 0 500,000; 0 775,000; 25,000

Answer: D Year 1: 750,000 + (1,000,000-750,000)/10 = 775,000 Year 2: 250,000/10 = 25,000 6

The following are transactions where gain is recognized but not the loss except A. Transactions between related taxpayers B. Illegal transactions C. Exchanges of property, not solely in kind, i n pursuance of corporate mergers and consolidations D. Wagering gains and losses ANSWER: D

6

Statement 1 – Wagering gains are taxable. Statement 2 – Wagering losses can be deducted from wagering gains.

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QUESTION BANK

A. B. C. D.

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Answer: C 6

Statement 1 – An individual taxpayer may elect a fiscal accounting period. Statement 2 - Fiscal year is accounting period of 12 months ending on the last day of any month other than December. A. B. C. D.

2

3.4.0

1.5

3.6.0

1.5

3.6.5

2

3.6.9

1.5

3.7.4

2

3.7.9


Answer: B 6

MCIT is imposed A. B. C. D.

On On On On

the the the the

fourth year of operations third year of operations fourth year immediately following the year of operations fifth year immediately following the year of operations

Answer: C 6

Deadline for filing and payment of quarterly income tax returns for partnerships and corporations, one is correct A. B. C. D.

April 15 of the same year for the first quarter July 15 of the same year for the second quarter On or before 60th day following the close of the taxable quarter December 15 of the same year for the third quarter

Answer: C 6

Who are not required to file income tax return? I. An individual who is a minimum wage earner II. An individual whose gross income does not exceed his total personal and additional exemptions III. An individual whose compensation income derived from one employer does not exceed P 60,000 and the income tax on which has been correctly withheld IV. An alien employee as well as Filipino employee occupying the same position as that of the alien employee of regional headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors and offshore-banking units, non resident aliens not engaged in trade or business A. B. C. D.

I and II only I, II and IV only I, II and III only I, II, III and IV

Answer: D 6

Deadline for filing and payment of BIR Form 1603 for manual filers A. 10th day of the month following were granted to the recipient B. 10th day of the month following to the recipient C. 15th day of the month following were granted to the recipient D. 15th day of the month following to the recipient

the end of the calendar quarter in which the fringe benefits the end of month in which the fringe benefits were granted the end of the calendar quarter in which the fringe benefits the end of month in which the fringe benefits were granted

Answer: C 6

Which of the following is not an attachment to BIR Form 1601-C? A. For Private Sector, copy of the list of MWEs who received hazard pay submitted to the DOLE Regional/Provincial Offices-Operations Division/Unit, for the return period March, June, September and December, if applicable. B. For Public Sector, copy of Department of Budget and Management (DBM) circular/s or equivalent on MWEs allowed to receive ha zard pay, for the return period March, June,

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Tax Test Bank

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