Income Taxation Preliminary Examination Income Tax On Individuals Multiple Choices

INCOME TAXATION
PRELIMINARY EXAMINATION
INCOME TAX ON INDIVIDUALS
MULTIPLE CHOICES
1. Who among the following is a non-resident alien? (May 1996 CPALE)
a. An alien who comes to the Philippines for a definite purpose which in its
nature may be promptly accomplished.
b. An alien who comes to the Philippines for a definite purpose which in its
nature would require an extended stay.
c. An alien who has acquired residence in the Philippines.
d. An alien who lives in the Philippines with no definite intention as to his
stay.
2. OLD RULING: An exemption allowed to a taxpayer who has qualified legitimate,

illegitimate, or legally adopted children (May 1998 CPALE)
a. Additional exemption
b. Special additional personal exemption
c. Optional standard deduction
d. Personal exemption
3. OLD RULING: The wife can claim additional exemptions if (October 2006 CPALE)
a. The husband’s income is lower than her income.
b. The husband is a non resident citizen with income from within and without
the Philippines.
c. The husband is a pure business income earner.
d. The husband has no income of his own.
4. All of the following, except one, are taxable on income within only:
a. Resident alien c. Resident citizen
b. Non resident citizen d. Non resident alien
5. Passive income includes income derived from an activity in which the earner does
not have any substantial participation. This type of income is
a. usually subject to a final tax
b. exempt from income taxation
c. taxable only if earned by a citizen
d. included in the income tax return
6. The final tax on passive income does not apply to interest on (select the best
answer)
a. Long-term deposit c. Deposit substitute
b. Promissory notes d. Trust funds
7. What is the final tax on interest income on 6-year deposit pre-terminated less
than 2-years before maturity?
a. 20% b. 12% c. 5% d. 0%
8. A dividend declaration is subject to a final tax of

a. 6% b. 8% c. 10% d. 20%
9. Lots being leased out when subsequently sold are classified as (May 1996 CPALE)
a. capital asset c. ordinary asset
b. liquid asset d. fixed asset
10. The term “capital assets” includes (October 1992 CPALE)
a. Stock in trade or other property included in the taxpayer’s inventory
b. Real property not used in the trade or business of taxpayer
c. Property primarily for sale to customer in the ordinary course of trade or
business
d. Property used in the trade or business of the taxpayer and subject to
depreciation.
STRAIGHT PROBLEM NO. 1

A citizen and resident of the Philippines had the following data within a calendar
year:
Gross Income from business 800,000
Expenses of the business 350,000
Interest on Philippine Currency Bank Deposit 10,000
Dividend from a domestic corporation 8,000
Capital gain on direct sale to buyer of shares of
a domestic corporation (on a selling price
of P100,000) 20,000
Capital loss on sale of land in the Philippines 200,000
REQUIRED:
Compute for the following:
1. Capital gains tax, final tax, and basic income tax (GRADUATED TAX TABLE -
SEC24A IS PROVIDED ON THE LAST PAGE)
2. Total tax to be paid during the year
STRAIGHT PROBLEM NO. 2

The following cumulative information was taken from the records of Antonio Sanchez:
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
Net sales 480,000 795,900 995,000 1,167,000
Dividend income from:
Domestic corporation 2,000 2,000 4,000 4,000
Foreign corporation 2,000 4,000 4,000
Interest income from:
Local bank deposit 500 1,000 1,500 2,000
Trade notes receivable 1,500 1,500 3,000 3,500
Royalties - Bangladesh 45,000 45,000
Winnings from PCSO 100,000 200,000

Capital gains on direct sales 30,000 30,000 120,000 120,000
to buyer of shares of domestic
corporation
Cost of Sales 90,000 180,000 240,000 297,000
Operating Expenses 110,000 184,100 245,000 320,900
REQUIRED:
As a tax consultant,
1. What tax planning option would you suggest to Sanchez among 8% Optional
Income Tax, 40% Optional Standard Deduction, and Graduated Tax Table? How
much is the total tax savings? (Substantiate by showing your
computations).
2. How much will be his total income tax expense for the year?
REVISED TAX TABLE as amended by TRAIN Law:
OVER BUT NOT OVER TAX SHALL BE
0 250,000 0
250,000 400,000 20% of excess over 250,000
400,000 800,000 30,000 + 25% of excess of 400,000
800,000 2,000,000 130,000 + 30% of excess over 800,000
2,000,000 8,000,000 490,000 + 32% of excess over 2,000,000
8,000,000 2,410,000 + 35% of excess over 8,000,000

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INCOME TAXATION

INCOME TAX ON INDIVIDUALS

2. OLD RULING: An exemption allowed to a taxpayer who has qualified legitimate,

8. A dividend declaration is subject to a final tax of

STRAIGHT PROBLEM NO. 1

STRAIGHT PROBLEM NO. 2

Royalties - Bangladesh 45,000 45,000

Winnings from PCSO 100,000 200,000

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