Income Taxation PDF

1.
All of the following are income within, except

● salaries earned by Filipino overseas contract workers;
2. The gain from sale of assets used in business is an example of
● capital gain;
3. Which of the following is/are generally subject to final tax?
A. Compensation income
B. Business income
C. Passive income
D. Capital gain
● C and D only;
4. Which of the following is/are generally not included in the returnable (reportable income)?
A. Compensation income;
B. Business income;
C. Passive income;
D. Capital gain.
● All except A and B;
5. Which of the following is/are reportable (returnable) in the annual income tax return?
A. Compensation income;
B. Business income;
C. Passive income
D. Capital gain.
● All of these;
6. All of the following are passive income except;
● dividend.
7. Which of the following is not a compensation income?
● Professional fees.
8. Which of the following income is/are earned through employer-employee relationship?
A. Professional fee;
B. Wages;
C. Pension pay;
D. Capital gain.
● All except D;
9. Which of the following will result in the earning of income by the debtor?
● Cancellation of existing payable to offset equivalent amount of receivable;
10. All of the following are compensation income, except one, which is it?
● Professional fee;
11. Which of the following is a taxable compensation income?
● Separation pay due to resignation;
12. If the compensation for services rendered is in form of shares of stock, the value of income is
the
● fair value of shares on the date the service was rendered;
13. Which of the following income of a citizen may be taxed at their gross amount?
● Professional fee;
14. Which of the following is taxable income earned by a domestic corporation?
● Stock dividend received in shares of stock of domestic corporation;
15. Which of the following is taxed with creditable withholding tax at source and then finally
imposed a tax with annual income tax at the date of filing of annual tax return?
● Employee's salary.
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16. Which of the following is correct?
● All income are revenue;
17. Which of the following is not correct?
● taxable income is equal to gross income less statutory deductions;
18. Which of the following income is normally not reported in the annual income tax return?
● Compensation income;
19. Which of the following is the correct value of income to be reported?
● Fair value of shares of stocks on the date services were rendered
20. Which of the following is not considered as compensation income?
● Professional fees;
21. Which of the following is not taxable?
● P1,250 income received for 5 days unused vacation leave credits converted into
cash;
22. Which of the following passive income is subject to final tax?
● Interest income on proceeds of land disposed under the Comprehensive Agrarian
Reform Program.
23. What is the final tax rate on interest income earned from a regular savings deposit?
● 20%
24. It refers to income received or earned but is not taxable as income because it is exempted by
law or by treaty.
● Exclusions;
25. First Statement: Tax-free income is not included in the income tax return unless information
regarding it is specifically called for.
Second Statement: While exclusions are simply not taken into account in determining gross
income, deductions are subtracted from gross income to arrive at net income
● Both statements is true;
26. Mr. Santiago purchased a life annuity for P100,000 which will pay him P10,000 a year. The
life expectancy of Mr. Santiago was 12 years. Which of the following amount would Mr.
Santiago be able to exclude from his gross income?
● 100,000
27. In 2019, Mr. Santos purchased a life insurance policy paying P500,000 as premiums. The
insurance contract stipulated that Mr. Santos would receive P600,000 as annuity to be paid
in three (3) years as follows: P200,000 in 2020; P200,000 in 2021; and P200,000 in 2022.
How much would Mr. Santos report as part of his gross income in 2022?
● -0-
28. One of the following is subject to income tax, which is it?
● Income from a donated property derived from its investment or sale;
29. First Statement: Amounts received, through accident or health insurance, or under
Workmen’s Compensation Act, as compensation for personal injuries or sickness, plus the
amounts of any damages received, whether by suit or agreement, on account of such
injuries or sickness are not subject to tax.
Second Statement: Amounts received as moral damages for personal injuries which are not
physical in character, like alienation of affection, defamation, libel or slander, and breach of promise
to marry are also excluded from gross income.
● Both statements are true;
30. Mr. Little was injured in a vehicular accident in 2022. He incurred and paid medical expenses
of P20,000 and legal fees of P10,000 during the year. In 2022, he received P70,000 as
settlement from the insurance company which insured the car owned by the other party
involved in the accident. From the above payments and transactions, how much amount is to
be included as part of gross income?
● Nothing
31. Which of the following items is subject to income tax in the Philippines?
● Salaries of non-resident consultants assigned by a foreign petroleum contrctor in the
Philippines.
32. Mr. Rod De Guia was retired by his employer corporation in 2022 and was paid P1,000,000
as a retirement gratuity without deducting any withholding tax. The corporation became
bankrupt in 2023. Can the BIR subject the P1,000,000 retirement gratuity to income tax?
● Yes, if Mr. De Guia was less than fifty (50) years old at the time of his retirement
regardless of the length of his service with the same employer;
33. Which of the following separation pay is taxable?
● Separation pay received by an employee who resigned to join another company;
34. Which of the following retirement benefits received from private firms is not taxable?
● Benefits received from an employer who has a reasonable pension plan, employee is 52
years old and has served the company for 11 years.
35. An employee of Excel Co. retired at the age of 50 years old after serving the company for
10 years. He received retirement benefits from Excel Co. amounting to P2,500,000. The
following year after his retirement, he was invited by Yale Corp. to join it as its Executive
Vice President. After serving Yale Corp. for 10 years, he retired at the age of 61. Yale
Corporation gave him P3,000,000 retirement benefits. Which of the retirement benefits
that he received is subject to income tax?
● The retirement benefits from Excel only;
36. First statement: Income derived from investments in the Philippines in loans, stocks, and
bonds or other domestic securities or from interest on deposits in banks in the Philippines
by foreign governments, financing institutions owned, controlled or enjoying refinancing
from foreign governments, and international or regional financing institutions established
by foreign governments is not taxable.
Second statement: Income derived from any public utility or from the exercise of any
essential governmental function accruing to the Government of the Philippines or to any
of its political subdivision is not taxable.
● Only the second statement is true.
37. Ms. Susan Cruz entered her short story in a literary contest. She won in the Short Story
category, and received a P500,000 prize. What was the tax consequence of the literary
prize?
● Included in gross income subject to basic income tax;
38. Ms. Estrella was selected as the outstanding scientist in her province in 2022. Her name
was nominated by her peers. She received a plaque, trophy and P200,000 cash. The
amount she received is
● Exempt from income tax whether or not she is required to render any substantial services
as a condition for keeping the award and receiving the prize;
39. Pacquito “Pacman” Manuel is a professional boxer. He fought and won in a title bout when
he knocked down Tirzo “Terible” Enrique in the third round of their fight in Macau. As a result,
he received a prize totalling P2,000,000. The amount he received is
● Subject to final
40. Mr. Nanggo Gulpe, a resident citizen, is an amateur boxer. He was sent by the Amateur
Boxing Association of the Philippines(ABAP) to Seoul, South Korea to compete in the Asian
Games’ flyweight event. He won a gold medal and as a consequence received a P1,000,000
cash prize from the government. The amount he received is
● Subject to final tax
41. First Statement: Informer’s reward paid to persons instrumental in the discovery of violations
of the National Internal Revenue Code and the discovery and seizure of smuggled goods is
subject to 10% final withholding tax.
Second statement: The amount of the informer’s reward shall be equivalent to ten percent
(10%) of the amount recovered or one million peso (P1,000,000) per case whichever is lower.
●
42. Which of the following is subject to tax?
● 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.
43. A rank and file employee received the following benefits from his employer:
13th month pay, P70,000
14th month pay, P50,000
Christmas bonus, P10,000
Productivity incentives, P15,000
● P55,000
44. The following were received by a resident citizen employee, married, and with four (4)
qualified dependent children for the year 2022:
Salary (net of P75,000 withholding tax; P3,000 SSS contribution; P2,000 union dues),
P445,000
45. 13th month pay, P75,000;
14th month pay, P25,000;
How much was the taxable compensation income?
46. It means all wealth which flows into the taxpayer other than a mere return of capital, it
includes gains derived from the sale or other disposition of capital assets and those derived
from labor or capital, or both labor and capital.
● Situs of taxation.
47. One of the following is not a requisite of a taxable income, which is it?
48. One of the following is considered an income for income taxation purposes, which is it?
49. One of the following is not a distinction between capital and income
50. All remuneration for services performed by an employee for his employer, whether paid in
cash or in kind, not specifically exempted under the Tax Code are known as:
● Gross professional income;
51. One of the following is not taxable as compensation income, which is it?
● Excess of advances over actual expenses not returned by employee to employer;
52. One of the following items is not included in gross income, which is it?
53. In computing gain or loss from the sale or other disposition of property acquired as gift or
donation, the basis of cost shall be:
54. One of the following is not subject to income tax, which is it?
55. Which of the following lease arrangements will the amount received by the lessor in
consideration for the lease of his property not be considered as rent income?
56. First statement: All royalty income from Philippine sources are subject to final tax.
Second statement: Income from sale of books is subject to 10% final tax.
57. If a stockholder receives a taxable stock dividend, what is the measure of income applicable
to him?
● Fair market value of the shares on the date of declaration;
58. If a corporation received its own shares of stock in exchange for a property, which of the
following statements is correct?
● The gain or loss shall be based solely on the cost of the property;
59. If a corporation distributes its own treasury stock to its stockholders, this kind of a corporate
distribution which is recognized in the Tax Code is a:
● Stock dividend;
60. If a corporation distributes its assets to stockholders upon dissolution, this kind of corporate
distribution will result in:
● Liquidating dividend.
61. If an individual performs services for a creditor who in consideration thereof cancels the debt,
the cancellation of indebtedness may amount to a:
● Gift
62. During 2022, John Watt received the following income:
Interest from Philippine Treasury Certificates, P4,000.
Refund pertaining to 2022 income tax, P500.
The total amount of interest subject to income tax in Mr. Watt’s income tax return was:
● 4,500
63. Jose Nosila file form No. 1701 for the taxable year. In July 2022, he received an income tax
refund of P9,000, plus interest of P100, for overpayment of 2021 income tax. What amount
of the tax refund and interest were taxable in Jose’s 2022 income tax return?
● 9,100
64. An individual whose residence is not within the Philippines and who is not a citizen thereof
● Non-resident alien
65. Who is a resident citizen?
● A citizen who went on tour abroad
66. Which of the following is an individual whose residence is within the Philippines but who is
not a citizen thereof?
● Non-resident citizen
67. A non-resident alien is considered engaged in trade or business in the Philippines if he
stated therein for
● more than 180 days.
68. On which of the following dates shall a citizen who left the Philippines during the year be
classified as a non-resident citizen for the year?
● May 31
69. An alien shall be classified as resident in 2019 if he arrived in the Philippines on which of the
following dates?
● December 30, 2018
70. How long does a citizen have to stay abroad before being classified as a non-resident?
● At least 183 days
71. How long shall an alien have to stay in the Philippines before being classified as a resident
alien?
● More than 1 year
72. The length of stay of individuals for purposes of taxpayer classification is reckoned as of
● The December 31 of the current year
73. Which of the following is not subject to regular income tax?

● Non-resident alien not engaged in trade or business
74. In 2021, an alien who has been in the country since July 1, 2020 is classified as a
● Resident citizen
75. In 2021, an American who had been a resident in the Philippines since August 14, 2021 is a
● NRA-NETB.
76. A taxpayer who is both engaged in business and employment is not
● required to consolidate his quarterly mixed income for quarterly tax reporting.
77. Which of the following may be subject to final tax?
● Fringe benefits
78. Which of the following cannot claim deduction from gross income?
● Resident citizens deriving income solely from employment
79. To which of the following does the substituted filing system apply?
● Purely employed taxpayers
80. Which is not a requisite of the substituted filing system?
● The taxpayer must have only one source of business income.
81. Which of the following employees is not required to file an annual consolidated income tax
return?
● Those deriving income distribution from a general professional partnership,
taxable trusts, or taxable estates
82. Which individual income taxpayer can claim tax credit for foreign taxes paid?
● Resident citizen
83. What is the optional standard deduction claimable by individual income taxpayers who are
engaged in business?
● 40% of gross receipt or sales
84. When should individual income taxpayers submit their annual or consolidated return for the
year 2021?
● April 15, 2021
85. Which of the following taxes is a resident citizen or alien subject?
● All of these
86. A non-resident alien, not engaged in trade or business is not subject to
● Regular tax
87. Who is not required to file quarterly income tax return?
● Pure compensation income earner
88. Who is not subject to withholding tax on compensation?
● Minimum wage earner
89. An individual who want to pay the regular income tax using optional standard deductions
shall use
● Form 1701A
90. Individuals opting to be taxed under 8% income tax shall use
● Form 1701A
91. Trusts and estates shall use which tax form
● Form 1702
92. An adjustment return is least likely to be required when

● The employee receives compensation from multiple employers
93. A minimum wage earner who is subjected to withholding tax shall
● file an adjustment return and claim tax refund.
94. If husband and wife are both employed, which is correct regarding their income tax
exemption in the tax table?
● Each spouse shall be entitled to a P250,000 income tax exemption in the tax table.
95. A husband earned P450,000 taxable income. His wife also earned P100,000 taxable income.
Which is true?
● The husband pays tax while the wife is exempt.
96. If the husband is employed with P700,000 taxable income while his wife is unemployed, he
shall be actually subject to tax on
● P450,000 of income.
97. Which of the following scenario will still require an adjustment return from the employee even
if the employers correctly withheld the tax on their compensation payments?
● All of these
98. An employee who earned income from other sources shall use which annual return?
● Form 1701A
99. What is a source of tax credit against the tax due under Form 1701
● All of these
100. What is a source of tax credit against the tax due under Form 1700?
● Form 2316
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1.

All of the following are income within, except

73. Which of the following is not subject to regular income tax?

92. An adjustment return is least likely to be required when

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