ST.

PAUL UNIVERSITY SURIGAO

Cor. San Nicolas & Rizal Streets
8400 Surigao City, Philippines

COLLEGE OF BUSINESS & TECHNOLOGY

REMOVAL/QUALIFYING EXAMINATION

Subject: INCOME TAXATION

Name: Date:
INSTRUCTION: Read the questions carefully. Use the bubble sheet and shade the circle that corresponds to your
answer for each question. Avoid erasures.

1. The taxpayer is a domestic corporation:

Gross sales P9,350,000
Sales return and allowances 250,000
Sales discounts 100,000
Interest income on trade notes receivable 150,000
Other income 50,000
Cost of sales 3,000,000
Operating expenses with vouchers and receipts 4,000,000
Operating expenses without vouchers and receipts 500,000
Interest income from saving deposit 80,000
Interest income from deposit under FCDS 125,000
Royalty income 100,000
Taxable income using itemized deduction
A. P1,675,000 B. P2,200,000 C. P2,175,000 D. P1,700,000

2. Tax violation may not be compromised:

I. Except those already filed in court II. Except those involving fraud
A. True, true B. False, true C. False, false D. True, False

3. This is not an administrative remedy available to a taxpayer in connection with collection of taxes.
A. Filing a petition for reconsideration or reinvestigation
B. Filing a claim for tax refund or credit
C. Filing a criminal complaint against erring BIR officials or employees
D. Entering into a compromise

4. A compromise for a tax liability on the ground of financial incapacity to pay shall involve a payment of tax
from the taxpayer at a minimum compromise rate, with regard to compromises other than on the ground of
financial incapacity to pay, the compromise shall involve a minimum compromise rate of
A. 10% of the basic assessed tax C. . 50% of the basic assessed tax
B. 20% of the basic assessed tax D. 30% of the basic assessed tax

5. Statement 1: The CIR is authorized to inquire into the bank deposit of a taxpayer who has filed an application
for compromise of his tax liability by reason of financial incapacity to pay.
Statement 2: The CIR is authorized to look into the bank deposit of a decedent to determine his gross estate.
A. False, true B. True, true C. True, false D. False, false

6. Relevant supporting documents must also be presented to the BIR, from filing the protest on the assessment
within
A. 30 days B. 90 days C. . 180 days D. 60 days

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 7. The taxpayer is a domestic corporation:
Gross sales P9,350,000
Sales return and allowances 250,000
Sales discounts 100,000
Interest income on trade notes receivable 150,000
Other income 50,000
Cost of sales 3,000,000
Operating expenses with vouchers and receipts 4,000,000
Operating expenses without vouchers and receipts 500,000
Interest income from saving deposit 80,000
Interest income from deposit under FCDS 125,000
Royalty income 100,000
Taxable income using OSD
A. P3,755,000 B. P5,470,000 C. P3,695,000 D. P3,720,000
8. Statement 1: The taxpayer shall respond to a pre-assessment notice, and if he fails to respond, an assessment
shall be issued.
Statement 2: An assessment issued may be questioned administratively with the BIR
A. False, true B. True, true C. True, false D. False, false

9. Where any national internal revenue taxis alleged to have been erroneously or illegal collected. as a remedy,
the taxpayer should first file an action for refund with the
A. BIR B. Regional Trial Court C. Court of tax Appeals D. Court of Appeal

10. Date of payment of tax erroneously paid April 15, 2017

Date a claim for refund was filed January 15, 2018
Date decision of denial by the BIR was received September 15, 2018
Last day to appeal to the CTA is
A. April 15, 2019 B. November 15, 2018 C. October 15, 2018 D. January 15, 2019

11. Date assessment was received March 8, 2018

Date petition for reconsideration was filed with the BIR March 18,2018
Date filing of documents to support the petition May 8, 2018
Date decision of denial of the petition was received September 28, 2018
The last day to appeal to the CTA is
A. April 15, 2019 B. December 8, 2018 C. October 28, 2018 D. November 8, 2018

12. No holding tax shall be required where the total compensation income
A. Does not exceed the statutory minimum wage P5,000 a month whichever is higher
B. Does not exceed the statutory minimum wage or P5,000 a month whichever is lower
C. Does not exceed the statutory minimum wage or the total basic personal exemptions whichever is higher
D. Does not exceed P5,000 month or the total basic personal exemptions whichever is higher

13. Which of the following will not interrupt the running of the prescriptive period for assessment and collection of
taxes:
A. When the taxpayer is out of the Philippines
B. When the Commissioner is prohibited from making the assessment or beginning distrait and levy
or a proceeding in curt and for thirty (30) day thereafter.
C. When the taxpayer requests for reinvestigation which is granted by the Commissioner.
D. When the taxpayer cannot be located in the address given by him in the return.

14. The power decides disputed assessments, refunds of internal revenue taxes, fees or other changes, penalties
imposed in relation thereto, or other matters arising under the Tax Code or other laws administered by the BIR
is vested with
A. The Secretary of Finance C. The Commissioner of the BIR
B. The Court of Tax Appeals D. The Regular Courts

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 15. Which is the following is not a remedy of the government in the tax collection?
A. Tax lien B. Forfeiture C. Compromise D. Protest

16. ABC Corporation won a tax refund case for P50 Million. Upon execution of the judgment and when trying to
get the Tax Credit Certificates (TCC) representing the refund, the bureau of Internal Revenue (BIR) refused to
issue the TCC on the basis of the fact that the corporation is under audit by the BIR and it has a potential tax
liability. Is there a valid justification for the BIR to withhold the issuance of the TCC?
A. Yes, power of the BIR to make assessment and collection of all national internal revenue taxes, fees and
charges.
B. Yes, power of the BIR to enforce all national taxis, fees and charges including forfeitures, penalties and
fines connected therewith.
C. No, BIR is only in the assessment stage and not yet in the collection stage.
D. No, the BIR is inferior to the courts.

17. Mr. Abraham Eugenio, a pawnshop operator, after having been required by the Revenue District Officer to pay
value added tax pursuant to a Revenue Memorandum Order of the Commissioner on Internal Revenue, where
will Mr. Eugenio file an action questioning the validity of the RMO?
A. Regional Trial Court C. Court of Tax of Appeals
B. Commissioner of the BIR D. Supreme Court

18. CDE Corporation filed its income tax return for the calendar year 2013 on April 10, 2014. The return was not
false or fraudulent, the last day for the BIR to assess is
A. April 10, 2017 B. April 10, 2019 C. April 15, 2017 D. April 15, 2019

19. The period of limitation for assessment of taxes is not suspended

A. The return filed contained inaccuracies due to omissions and mistakes
B. There is failure to the required return
C. The tax payer and the CIR agreed on the extension of the period
D. The return filed is fraudulent and made with the intent to avoid tax

20. The seizure by the government of personal property to enforce the payment of taxes to be followed by its
public sale if the taxes are not voluntary paid
A. Assessment B. Levy C. Delinquency D. Distraint

21. 1st Statement- All violations of any provisions of the NIRC shall prescribe after four (4) years.
2nd Statement- Prescription shall begin to run from the day of the commission of the violation of the law,
even if the offender is outside the Philippines.
A. True; False B. False; True C. True; True D. False; False

22. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the Tax Code or other laws or provisions thereof
administered by the BIR is vested in the
A. Secretary of Finance C. Regional Trial Court
B. Court of Tax Appeals D. Commissioner of Internal Revenue

23. The Commissioner of Internal revenue may compromise the payment of any internal revenue tax when

I. A reasonable doubt as to the validity of the claim against the tax payer exists
II. The tax or any portion thereof appears to be unjustly or excessively assessed.
III. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
A. Only I B. I and II C. I and III D. I and IV

24. Gerry was being prosecuted by the BIR for failure to pay his income tax liability for Calendar Year 2013
despite several demands by the BIR in 2015. The information was filed with the RTC only last June 2016.
What are the remedies of Gerry?
A. Gerry should file a motion to quash the information on the ground of prescription
B. Gerry should answer the information
C. Gerry should file a protest with the Commissioner of BIR
D. Gerry should appeal to the CTA
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Questions 25- 30. Taxpayer received the following income in 2018..
a.. Rent Philippines P20,000
b. Rent, Hongkong 40,000
c. Interest, peso deposit, PNB 20,000
d. Interest, US$ deposit, PNB ($2,000xP40) 80,000
e. Interest, deposit in Hongkong (HK$ 2,000xP5) 10,000
f. Prize (cash) won in a local contest 16,000
g. Prize (TV) won in a local lottery valued at 30,000
h. Prize won in contest in US 60,000
i. Lotto winning in US 20,000
j. Dividends, domestic company 120,000
Determine the taxable income if taxpayer is:
25. A resident citizen
A. P416,000 B. P296,000 C. P370,000 D. P166,000

26. A nonresident citizen

A. P36,000 B. P166.000 C. P20,000 D. P416,000

27. A nonresident alien

A . P156,000 B. 36,000 C. P66,000 D. P286,000

28. A nonresident alien (ETB

A. P156,000 B. P66,000 C. 36,000 D. P286,000

29. A nonresident alien (not ETB)

A. P66,000 B. P206,000 C. P286,000 D. P156,000

30. The prescription of check or warrant refund or tax credit shall be within:
A. 4 years from the date of issues C. 5 years from the date of issue
B. 10 years from the date of issue D. 12 years from the date of issue

31. The following are the authorities of the Commissioner reduce revenue taxes, except:
A. Compromise the payment of any internal revenue tax when reasonable doubt as to validity of claim against
the taxpayer exists.
B. Compromise the payment of any interval revenue tax when the financial condition of the taxpayer
demonstrates a clear ability to pay the assessed tax.
C. Abate tax liability when a portion thereof appears to be unjustly or excessively assessed.
D. Credit or refund taxes erroneously or illegally received or penalties imposed without authority.

32. 1st Statement- The taxpayer may claim his defense of prescription while the case is pending before the BIR or
in the CTA.
nd
2 Statement- A compromise is not permitted in cases finally decided by the courts as there is no longer any
necessity or reason for the exercise of the power.
A. True; False B. False; True C. True; True D. False; False

33. The following are the reasons which necessitates the filing of an administrative claim for refund with the BIR,
except:
A. To afford the Commissioner an opportunity to consider the claim
B. To give the Commissioner a chance to correct the errors of subordinate officers.
C. To notify the Government that such taxes have been questioned and the notice should be borne in mind in
estimating the revenue available for expenditures.
D. To give ample time to the Commissioner in preparing the cash to be disbursed for the taxpayer’s
refund.

34. 1st Statement: The Commissioner of Internal Revenue shall have the power to inquire into a taxpayer’s bank
deposit in relation to all internal revenue taxes.
2nd Statement: The Commissioner of Internal Revenue shall have the power to prescribe real property values:
A. True; False B. False; True C. True; True D. False; False
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 35. 1st Statement: A party adversely affected by a resolution of a division of the CTA has no other recourse but
to appeal to the Court of Appeals.
2nd Statement: A party adversely affected by a resolution of a division of the CTA on a motion for
reconsideration or new trial, may file a petition for review with the CTA in banc.
A. True; False B. False; True C. True; True D. False; False

36. 1st statement- The fact that an individual’s name is signed to a filed return shall be prima facie evidence for
all purposes that the return was actually signed by him.
2nd Statement- If a taxpayer is unable to make his return, the return may be made by his guardian or
representative, the latter assuming the responsibilities of making the return and incurring
penalties if the same was erroneous.
A. True; False B. False; True C. True; True D. False; False

37. Jane filed his annual income tax return on May 22, 2016 for income earned during 2015. The BIR examiner
assessed Jane for tax delinquency on October 15, 2017. jane filed a protest plus all documentary evidence on
November 8, 2017 with the Commissioner of the Internal Revenue. The Commissioner rendered its
unfavorable judgement on May 10, 2018. When is the last day to appeal the case to the Court of Tax Appeals?
A. June 8, 2018 B. May 25, 2018 C. June 10, 2018 D. May 22, 2018

38. On July 31, 2018, Esperanza received a preliminary assessment notice from the BIR demanding that she pays
P180,000 deficiency income taxes on her 2016 income. How many days from July 31, 2018 should Esperanza
respond to the notice?
A. 180 days B. 60 days C. 30 days D. 15 days

39. When a BIR decision affirming an assessment is appealed to the CTA, the BIR’s power to garnish the
taxpayer’s bank deposits.
A. Is suspended to await the finality of such decision
B. Is suspended given that the CTA can reverse BIR decisions when prejudicial to the tax payer.
C. Is not suspended because only final decisions of the BIR are subject to appeal.
D. Is not suspended since the continued existence of government depends on tax revenues

40. As a general rule, within what period must a taxpayer elevate to the Court of Tax Appeals a denial of his
application for refund of income tax overpayment?
A. Within 30 days from receipt of the Commissioner’s denial of his application for refund.
B. Within 30 days from receipt of the denial which must not exceed 2 years from payment of income tax.
C. Within 2 years from payment of income taxes sought to be refunded.
D. Within 30 days from receipt of the denial or within two years’ payment.

41. Ka tato owns a parcel of land in San Jose, Batangas declared for real property taxation, as agricultural. In 1998,
he used the land for a poultry feed processing plant but continued to declare the property as agricultural. In
March 2019, the local tax assessor discored Ka Tato’s change of use of his land and informed the local
treasurer who demanded payment of deficiency real property taxes from 1998 to 2019. has the action
prescribed?
A. No. the deficiency taxes may be collected within five years from when they fell due.
B. No. the deficiency taxes for the period 1998 to 2019may still be collected within 10 years from march
2019.
C. Yes. More than 10 years had lapsed for the period 1998 up to 2008, hence the right to collect the deficiency
taxes has prescribed.
D. Yes. More than 5 years had lapsed for the period 1998 up to 2013.

42. What is the prescriptive period for an assessment fraud?

A. 5 years from discovery;
B. 10 years from discovery;
C. 5 years from date of the return or deadline prescribe by law whichever is later;
D. 10 years from date of the return or deadline prescribed by law whichever is later;

43. Statement 1: The MCIT is only effective in the 5th year following the year in which the corporation
commenced its business.
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 Statement 2: Non resident corporations are also covered by MCIT.
A. True, True B. False, True C. False, False D. True, False

44. To record expired portion of MCIT, what account is debited?

A. Retained earnings B. Deferred charges MCIT C. Income tax payable D. Provision for income tax

45. One of the following corporations cannot claim tax credit for foreign taxes paid abroad.
A. Private Educational Institutions C. Resident International Carriers
B. Investment Companies D. Domestic Hospitals

46. It is a test use in determining the reasonable needs of a business to justify the accumulation of earnings which
will exempt the corporation from paying IAE.
A. Urgency test B. Immediacy test C. Reasonable needs test D. Control test

47. 1st Statement: MCIT shall apply to all corporations.

2nd Statement: IAET shall apply only to domestic corporation.
A. True, True B. False, False C. True, False D. False, True

48. Income derived by a depository bank under the expanded foreign currency deposit system from foreign
currency transactions with local commercial banks, shall be subject to a final tax rate of:
A. Seven and one-half percent (7 ½ %) C. Twenty percent (20%)
B. Ten percent (10%) D. Five percent (5%)

49. of the following is not exempted from improperly accumulated earnings tax?
A. Publicly –held corporations C. Bank and other non –bank financial intermediaries
B. Insurance companies D. Resident corporation

50. Aragorn, Inc. had the following items of income and expenses:
Gross Receipts P500,000
Cost of services, salary of personnel directly engaged in business 250,000
Dividends received 25,000
The dividends were received from a domestic corporation. The general and administrative expenses include
cost of utilized facilities cost of supplies of P25,000 and P15,000, respectively. What amount should be
reported as gross income for minimum corporate income tax purpose?
A. P250,000 B. P210,000 C. P235,000 D. P275,000

51. For the year ended December 31, 2018, Kelly Corp. had net income per books of P300,000 before taxes.
Included in the net income were the following items:
Dividend income from an unaffiliated domestic taxable corporation P50,000
Bad debts expense (represents the increase in the allowance for doubtful account) P80,000

What was Kelly’s taxable income for the year ended December 31, 2018?
A. P170,000 B. P345,000 C. P380,000 D. . P330,000

52. A DOMESTIC Co. provided the following data

2018 2019
Gross Income 2,000,000 1,500,000
Net Income 100,000 250,000
The domestic corporation is a proprietary educational institution. The income tax due for 2019 is:
A. P75,000 B. P32,000 C. P40,000 D. P25,000

53. Williams, a domestic corporation had the following data

Taxable Year Gross Income Deductions
2018 1,000,000 1,100,000
2019 980,000 500,000
The taxable income in 2019 is:
A. P380,000 B. P100,000 C. P 0 D. P50,000

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 54. Non-resident lessors of aircraft, machineries and other equipment are taxed on gross rentals, charter and other
fees at
A. 2 ½% B. 7 ½% C. 4 ½% D. 10%

55. 1st Statement –A resident corporation is allowed to deduct depreciation expense regardless of the
property’s location.
nd
2 Statement –A private educational institution may at its option elect either to deduct capital expenditures
during the taxable year or to deduct allowance for depreciation thereof.
A. True, False B. False, True C. True, True D. False, False

56. In connection with the preceding number, the RDO also wanted to assess the donor’s tax on the difference
between the selling price based on the zonal value and fair market value appearing in the nearby bank’s
valuation list. Should the difference in the supposed taxable value be legally subject to the donor’s tax?
A. Yes, taxable value is the difference between the selling price and fair market value at the time of
transfer.
B. Yes, taxable value is the difference between the zonal value and selling price.
C. No, there was no transfer for insufficient consideration of immovable are not subject to donor’s
tax.
D. No, there was a valid, perfect and consummated contract of sale and not donation.

57. Based on the preceding questions are the allocation and distribution of the saleable lots to Weber and Prime
subject to income tax and to expanded withholding tax?
A. Yes, allocation and distribution saleable lots are taxable income subject to withholding tax.
B. Yes, allocation and distribution saleable lots are part of the gross income and not subject to expanded
withholding tax.
C. No, allocation and distribution saleable lots are exempt income in the likings of intercorporate
dividends.
D. No, allocation and distribution of saleable lots of a joint venture engaged in construction project are
exempt from income tax.

58. Taxable on income within and with out the Philippines?

A. Resident International Carrier C. Non-resident cinematographic film makers
B. Non-stock; non-profit hospitals D. Non-resident owners or lessors of vessels

59. Zeus a Domestic Corporation has required Rent Expense amounting to Php 120,000.00 Zeus paid the lessor a
total Php 120,000.00 without withholding 5% tax there from. How much rent expense can Zeus claim as an
allowable deductions?
A. 120,000 B. 60,000 C. Zero D. None of the above.

60. Tan Torres a non-stack and non-profit charitable institution pays for its regular repairs and maintenance of its
facilities to Carmel Manpower Service Incorporated. As the accountant of the exempt entity, how much
withholding tax will you impose to its supplier (Carmel) for the repairs and maintenance expense?
A. Exempt from withholding tax. C. 1% withholding tax on its gross payments.
B. 2% withholding tax on its gross payments. D. 5% withholding tax on its gross payments.

61. JB bookstore is using cash method of accounting in recognizing its taxable income and deductions. For the
current year, JB decided to adopt the accrual method of recognizing income and expenses. The application for
permission to change the method of accounting employed and the basis upon which return is made shall be
filled to the BIR within:
A. 90 days B. 60 days C. 30 days D. 15 days

Questions 98 to 100.The following are the records of a domestic corporation:

2016 2017 2018
Gross sales P3,300,000 2,340,000 825,000
Cost of sales 2,400,000 1,010,000 380,000
Dividend-resident foreign 140,000 - 32,000
Interest income on notes receivable 28,000 16,400 -
Capital gain (short term) - 13,000 18,500

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 Capital loss (long-term) 20,000 - 22,000
Business expenses 1,475,000 1,025,000 459,000
62. The taxable income / (loss) in 2016
A. P(575,000 B. P(407,000 C. P(427,000) D. P(1,068,000

63. The taxable income /(loss) in 2017

A. P0 B. P274,400 C. P(132,600) D. P254,400

64. The taxable income /(loss) in 2018

A. P0 B. P18,000 C. P170,600 D. P28,000

65. Atty. Cahayon acquired a property for use in his business. After a devastating typhoon, the machinery suffered
partial damage. The following were made available:
Cost P500,000
Accumulated depreciation 300,000
Restoration cost 250,000
Estimated useful life 5 years
How much is the deductible loss?
A. P0 B. P200,000 C . P250,000 D. P100,000

66. In 2018, a taxpayer’s residence was totally destroyed by fire. The property had an adjusted basis and a fair
market value of P1,300,000 before the fire. During 2018, the taxpayer received insurance reimbursement of
P1,200,000 for the destruction of his home. Taxpayer’s 2018 adjusted income was P700,000. The taxpayer’s
has no casualty gains during the year. What amount of the fire loss was the taxpayer entitled to claim as an
itemized deduction in 2018 tax return?
A. P0 B. P85,000 C. P85,000 P100,000

67. A taxpayer has a business property having an adjusted basis of P1,000,000. It is completely destroyed by fire in
2018 but compensated by an insurance claim for P800,000. How much is the deductible loss?
A. P1,000,000 B. P800,000 C. P200,000 D. P100,000
68. One of the following is deductible from gross income
A. Personal living and family expenses
B. Amount paid out for new building or for permanent improvement or betterment, made to increase the
value of property or estate.
C. Losses from sales or exchanges directly or indirectly between members of the family
D. Gross-up monetary value of fringe benefits.

69. Which of the following statements regarding NOLCO is incorrect?

I. The source of operating loss carry-over (NOLCO) is from the ordinary trade and business of the
taxpayer.
II. NOLCO is not applicable against MCIT
III. The three (3) year reglementary period on the carry-over of NOLCO shall continue to run
notwithstanding the fact that the corporation paid its income tax under the Minimum Corporate
Income Tax (MCIT) computation.
A. II only B. II and III only C. All of the above D. None of the above

70. The following are requisites in the carry-over of NOLCO, except

A. There must be no substantial change in the ownership of the business
B. Carry-over is not allowed if the corporation is subject to MCIT during the taxable year
C. Even if the corporation is paid based on MCIT, the running of the prescriptive period is not interrupted.
D. The carry-over is good for one (1) year.
71. Alpha company was mere with Beta, Inc., and only the latter continues to exist. Mr. Masinop a stockholder of
Alpha company was ask to surrender his 100 shares that he acquired for P1,000,000 and received under the
merger 100 shares of Beta, Inc. with a fair market value of P1,300,000 and a cash of P300,000. The gain to Mr.
Masinop on the merger was
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 A. P300,000 B. P600,000 C. P200,000 D. P100,000

72. What would be the allowable deduction for P8,000 contribution made by a resident citizen to a religious
organization from his P70,000 net income after contribution?
A. P3,5000 B. P7,000 C. P8,000 D. P7,800
73. A Domestic corporation has the following data on income and expenses
Gross business income P6,200,000
Deduction including SSS and Philhealth contribution of P150,000 2,500,000
Contribution to Government-priority project P100,000
Contribution to foreign private foundation P100,000
Contribution to domestic charitable organization P190,000
How much is the total deductible charitable and other contributions?
A. P390,000 B. P290,000 C. P211,000 D. P285,000
74. Research and development deduction shall not be apply to
I. Any expenditure for the acquisition or improvement of land, or for the improvements of property to be used
in connection with research and development of a character which is subject to depreciation and depletion.
II. Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, quality of
any deposit or one or other mineral, including oil and gas.
A. I only B. II only C. Both I and II D. Neither I nor II

75. Which of the following taxes maybe deducted from gross income?
A. Special Assessment B. Transfer tax C. Documentary stamp tax D. Income tax
76. A Taxpayer is required by law to retain and preserve Books or Accounts and other accounting records?
A. 10 years from deadline of filling return C. 5 years from deadline of filling return
B. 3 years from deadline of filling return D. 1 year from deadline of filing return

77. In computing allowable deduction for purposes of income taxation:

1st Statement –Interest expense in connection with the taxpayer’s business shall be reduced by an amount
equal to thirty-eight percent (33%) of interest income subjected to final tax.
2nd Statement –Interest incurred to acquire property used in trade shall only be allowed to be treated as a
capital expenditure.
A. True; False B. False; True C. True; True D. False; False

78. To be allowed as a valid deduction, charitable and other contribution must not exceed:
A. 5% of taxable income after charitable contribution, income of individuals.
B. 10% of taxable income after charitable contribution, in case of individuals.
C. 5% of taxable income before charitable of contribution, in case of individuals.
D. 10% of taxable income before charitable contribution, inn case of individuals.

79. 1st Statement –The term quasi-banking activities means borrowing funds from twenty of more persons at
any one time through the insurance, endorsement or acceptance of debt instruments of any
kind other than deposits.
2nd Statement –Interest in government debt securities are exempt income.
A. True; False B. False; True C. True; True D. False; False

80. Cash dividend received by a NON-RESIDENT corporation from a domestic corporation is

A. Exempt from income tax C. Subject to final tax
B. Part of taxable income D. Partly exempt, partly taxable

81. Shares, obligations or bonds issued by a foreign corporation shall be considered as intangible personal property
situated in the Phils if, how many percent of its business is located in the Phils?
A. 33% B. 75% C. 50% D. 85%

82. Gain on sale of domestic shares of stock in New York is

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 A. Income within the Phils C. Income without the Phils
B. Income party within and without D. Exempt from income tax

83. A domestic corporation made a borrowing from ABC bank thereby incurring a business connected interest
expense of P60,000 for taxable year 2018. During the same year, the corporation earned an interest income
subject to final tax in the amount of P100,000. The deductible interest is
A. P27,000 B. P60,000 C. P33,000 D. P 0

84. Statement 1. In a total loss due to casualty, the measure of loss is the book value of the asset reduced by any
form of indemnity.
Statement 2. In a partial loss due to casualty, the measure of loss is the cost of the property, or the cost to
restore the property to its normal operating condition, whichever is lower, reduced by any form of indemnity.
Statement 3. In a wash sale, loss is not deductible.
Statement 4. In a merger or consolidation, or transfer to a controlled corporation, loss is not deductible.
A. True, true, true, true. C. False, false, false, false. C. True, false, true, false. D. False, true, false, true.

85. Statement 1. A net operating loss is the excess of allowable deductions over the gross income from
business for a taxable year.
Statement 2. A net operating loss which had not previously been deducted from gross income shall be
carried over as a deduction only in the next year immediately following the year of such loss.
A. True, true. B. False, false. C. True, false. D. False, true.

86. Mr. A, a non-resident alien stockholder, received a dividend income of P300,000 in 2018 from a foreign
corporation doing business in the Philippines. The gross income of the foreign corporation from within and
without the Philippines for three years preceding 2018 are as follows:
Source of income 2106 2017 2018
From within the P16,000,000 P12,000,000 P14,000,000
Philippines
From without the 18,000,000 14,000,000 16,000,000
Philippines
How much of the dividend income received by Mr. A is considered income from sources within the
Philippines?
A. 0 B. P150,000 C. P300,000 D. P270,000

87. Skylar sold his bachelor’s pad for P1,200,000 to acquire a two bedroom loft at Princeville condominium for
P3,200,000 with a fair market value of P3,500,000. How much is the capital gain tax?
A. 192,000 B. 210,000 C. Zero D. 72,000

88. Shares, obligations or bonds issued by a foreign corporation shall be considered as intangible personal property
situated in the Phils if, how many percent of its business is located in the Phils?
A. 33% B. 75% C. 50% D. 85%

89. What would be the allowable deduction for P8,000 contribution made by a resident citizen to a religious
organization from his P70,000 net income after contribution?
A. P7,800 B. P8,000 C. P7,000 D. P3,500

90. A corporation which is included in exempt corporation under Section 30 of the National Internal Revenue
Code. (e.g., organized and operated for charitable purposes) which did not file its article of incorporation and
by-laws with the Bureau of Internal Revenue:
A. Is required to file an income tax return and paid the income tax.
B. Is required to file an income tax return although not required to pay the income tax.
C. Needs to file only an information return and will not be required to pay the income tax.
D. Needs to file an information return and pay the income tax.

91. A general professional partnership is exempt from income tax, but is required to file an income tax return:
A. For statistical purposes.
B. Because the net income of the partnership will be traced into the income tax return of the
partners.
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 C. Because all income earners are required to file income tax return.
D. None of the above.

92. domestic corporation, in its fifth year of operations in 2002, had the following data:

Sales P2,000,000
Cost of sales 1,000,000
Business expenses 950,000

The income tax of the corporation is:

A. P20,000 B. P17,000. C. P1,000. D. P340,000

93. A corporation, in its first year of operations, had the following data:
Philippines Foreign
Gross income P400,000 P300,000
Expenses 200,000 200,000
The taxpayer is a non-resident corporation, and the income and expenses are on isolated transaction, the
taxable income is:
A. P200,000. B. P300,000. C. P400,000 D. P100,000

94. Statement 1. A net operating loss is the excess of allowable deductions over the gross income from
business for a taxable year.
Statement 2. A net operating loss which had not previously been deducted from gross income shall be
carried over as a deduction only in the next year immediately following the year of such loss.
A. True, true. B. False, false. C. True, false. D. False, true

95. A corporation bought a piece of land with a building at a cost of P4,000,000 for the land and P1,000,000 for
the building. It was not the intention of the corporation to use the building but to have it razed to make the land
available for the construction of its offices. Upon razing the old building at a cost of P200,000, the corporation
shall have a deductible loss of:
A. P0. B. P1,000,000. C. 1,200,000. D. P200,000.

96. Statement 1: Imposition of taxes is legislative act.

Statement 2: Collection of taxes is an administrative act.
A. If only the first statement is correct. C. If only the second statement is correct.
B. D. If both statements are incorrect. D. If both statements are correct.

97. . Statement 1: Provisions in the Philippine Constitution on Taxation are grants of power.
Statement 2: Due process of law in taxation in the Constitution is a grant of power.
A. If only first statement is correct. C. If only second statement is correct.
B. If both statements are correct. D. If both statements are incorrect

98. Statement 1: Estate tax is a proportional tax.

Statement 2: A progressive tax is a tax, the rate of which is directly proportional to tax base.
A. If only second statement is correct C. If only first statement is correct.
B. If both statements are correct. D. If both statements are incorrect

99. Statement 1: Taxation and power of Eminent Domain may be exercised simultaneously.
Statement 2: taxation and Police Power may be exercised simultaneously.
A. If only first statement is correct. C. If only second statement is correct.
B. If both statements are correct. D. If both statements are incorrect

100. Statement 1: Non-payment of tax makes the business illegal.

Statement 2: The non-payment of license fee makes the business illegal.
A. If only the first statement is correct. C. If only the second statement is correct.
B. If both statement are correct. D. If both statement are incorrect.

END

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 GOOD LUCK!

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