WESLEYAN UNIVERSITY – PHILIPPINES

  Mabini Ext., Cabanatuan City

COLLEGE OF BUSINESS AND ACCOUNTANCY

Tax
Taxation
First Preboards A.Y. 2022-2023
  
     
NAME      SCORE
        
  
COURSE/YEAR/BLOCK     
        
DATE & TIME     70

GENERAL DIRECTION. Read the following questions carefully and

answer each question correctly. Don’t forget to follow
necessary direction in every test given on this questionnaire.
Unethical actions will not be tolerated. Anyone caught doing
such things will be marked zero or his/her questionnaire will
be invalidated. You can use pencil or permanent ink to answer
the questionnaire provided that your final answers are
visible. 

1. Which of the following statement/s is/are correct?

Statement A : Non-resident citizens are taxable on all income derived from sources
within the Philippines.

Statement B : Resident citizens and domestic corporations are taxable on all

income derived from sources within or without the Philippines.

Statement C : Foreign corporations, whether engaged or not in trade or business in

the Philippines are taxable from sources within or without the Philippines.

Statement D : Aliens, whether residents or not of the Philippines, are taxable only
from sources within the Philippines.

a.Statements C and D are correct

b.Statements A, B and D are correct
c.Statements B, C and D are correct
d.Statements A and D are correct
2. Which of the following are basic principles of a sound tax system?

a. Fiscal Adequacy, Economic Feasibility and Theoretical Justice

b. Fiscal Adequacy, Administrative Feasibility and Theoretical Justice
c. Progressive Taxation, Ability to Pay, Symbiotic Relationship
d. Fiscal Deficit, Administrative Feasibility and Ability to Pay
 3. Which of the following statements is/are CORRECT?

I. The power to license includes the power to tax.

II. The power to tax may not include the power to
destroy
III. The power to tax includes the power to
exempt.

a. II and III
b. I and II
c. III only
d. I only

4. Gorbachev, married, resident citizen had the following for 2021:

a.) Business Income
1.) Rental income from real property, net of 5% W/T P 285,000
Real property tax paid by the lessor 50,000
Note: The lessee reimbursed 50% of the tax, as per agreement in the
lease contract
Deductible expense 120,000

2.) Rental income from real property, net of 5% W/T P 142,500

Real property tax paid by the lessor 20,000
Note: The lessee reimbursed 100% of the tax, as per agreement in
the lease
contract
Deductible expense 40,000

b.) Sale of capital assets:

1.) Shares of ABC (domestic) not traded:
Selling Price P 300,000 Cost (2004): P180,000
2.) Shares of DEF (domestic), traded:
Selling Price P 100,000 Cost (2012): P150,000
3.) Shares of XYZ (foreign)
Selling Price P 500,000 Cost (2000): P100,000
4.) Vacant lot
Selling Price P 800,000 Cost (2000): P200,000
5.) Toyota Car
Selling Price P 100,000 Cost (2000): P300,000

c.) Other transactions:

1.) In 2000, he purchased shares of A Corporation for P50,000 which
became worthless and was written off in 2021.
2.) In 2021, he received liquidating dividend from B Corporation in the
amount of P450,000. The investment in 2000 was P300,000.

Determine the operational net income of Gorbachev:

A. 265,000
B. 290,000
C. 245,000
D. None of the above
1. A
 Gross receipts
Rentals 450,000 RPT paid by lessee
45,000 495,000

Itemized deductions:
Expenses 160,000
RPT paid to LGU 70,000 (230,000)

NI from operations
Add: Non-operating income:
Capital gains
1) Foreign shares 200,000
2) Liquidating div. 75,000 275,000

Capital losses
1) Toyota car 100,000
2) Worthless shares 25,000 (125,000)
Taxable net income

5. Determine the Net Capital Gains of Gorbachev:

A. 150,000
B. 125,000
C. 175,000
D. None of the above.

6. Determine the net taxable income of Gorbachev in his Annual Income Tax Return for
2021.

A. 415,000
B. 689,000
C. 440,000
D. 690,000

7. A, a real estate dealer sold a house and lot for P600,000 on November 20, 2021. The
cost of the property is P375,000. Terms are: a) Down payment of P100,000 and b)
Balance payable in monthly instalments of P25,000 beginning December 20, 2021. The
income to be reported in 2021 is

a. P225,000
b. P125,000
c. P46,875
d. P37,500

Gain (600,000 – 375,000) 225,000

Multiply 125,000/600,000
Installment income 46,875
8. Using the preceding number, except that the asset above is a capital asset, the capital
gains tax payable in 2021 is

a. P36,000 b. P7,500 c. P6,000 d. P3,750

CGT 6% 36,000
Multiply 125,000/600,000
CGT 7,500

9. On December 1, 2021, a real estate dealer sold a residential land for P6M (cost is
P3.6M) receiving P2M as down payment and a promissory note for the P4M balance
payable at P400,000 a month beginning January 1, 2021. The promissory note has fair
market value equal to 75% of its face value. If the income is to be reported under the
deferred payment method, the income in 2021 is

a. P2,400,000 b. P1,400,000 c. P800,000

d. P1,200,000

10. On June 1, 2020, A sold shares of stocks of a resident foreign corporation held as
capital assets for 24 months for P500,000 (cost of P300,000), payable as follows:
P200,000 on the date of sale and the balance is secured by a promissory note where
fair market value is 85% of its face value. Payments on the note were as follows:

January 1, 2021 P100,000

June 1, 2021 100,000
December 1, 2021 100,000

The capital gain in 2020 is

a. P200,000 b. P85,000 c. P77,500 d. P155,000

Cash down payment 2,000,000
FMV Promissory Note 3,000,000
Total 5,000,000
Less: Cost 3,600,000
Income 1,400,000

Anthony Cabe, single, an American but resident of Friendship Road, Angeles,

Pampanga, died in year 2021 left the following properties:

Gross estate in Philippines

Family Home P7,000,000
Agricultural land inherited P8,000,000
Cash and investment P15,000,000

Gross estate Foreign country

Dodge Calibre P12,000,000
Tiny House P8,000,000

Funeral expenses P200,000

Administrative expenses P2,000,000
Claims against the estate P5,000,000
 Unpaid mortgage P2,000,000

11. How much is the gross estate?

a. P50,000,000
b. P30,000,000
c. P20,000,000
d. 0

Family Home P 7,000,000

Agricultural Land 8,000,000
Cash and Investment 15,000,000
Dodge Calibre 12,000,000
Tiny House 8,000,000
Gross Estate P 50,000,000

12. How much are the total ordinary deductions?

a. P5,000,000
b. P7,000,000
c. P9,000,000
d. P9,200,000

Claims against the Estate P 5,000,000

Unpaid Mortgage 2,000,000
Total Ordinary Deductions P 7,000,000

13. How much is the special deduction?

a. P12,000,000
b. P15,000,000
c. P7,500,000
d. P7,000,000

Family Home P 7,000,000

Standard Deduction 5,000,000
Total Special Deductions P12,000,000

14. How much is the estate tax due?

a. P1,680,000
b. P1,860,000
c. P2,160,000
d. P2,610,000
Gross Estate P50,000,000
 Less: Ordinary Deductions 7,000,000
Special Deductions 12,000,000
Net Estate P31,000,000
Tax Rate 6%
Estate Tax Due P 1,860,000

The tax records of Donor B, a resident alien, show

the following information during the year:

Net gifts, Philippines

₱600,000
Net gifts, U.S.A. 160,000
Net gifts, Hong Kong 40,000
Donor's tax paid in U.S.A. 9,200
Donor's tax paid in Hong Kong 1,050

15. Compute Limit (A) for the foreign tax credit.

(A) ₱6,600
(B) ₱7,650
(C) ₱1,650
(D) None of the above.

16. Compute Limit (B) for the foreign tax credit.

(A) ₱ 8,250
(B) ₱10,250
(C) ₱ 7,650
(D) None of the above.

17. Compute the donor’s tax payable after

foreign tax credits.

(A) ₱25,350
(B) ₱33,000
(C) ₱24,750
(D) None of the above.
 18. Statement 1: A separate return shall be filed by each donor for each gift or
donation made on different dates during the year. Any previous gifts made in the
same calendar year shall be reflected in each return. The tax due shall be
computed based on the total net gifts made during the calendar year.
Statement 2: There shall be as many tax returns filed as there are donees for
several gifts or donations made on the same date.

(A) Both statements are true.

(B) Statement 1 is true. Statement 2 is false. (C) Statement
1 is false. Statement 2 is true.
(D) Both statements are false.

19. Statement 1: If the gift or donation involves conjugal/community property, each spouse
shall file a separate return corresponding to his/her respective share in the conjugal/community
property.

Statement 2: If the gift or donation involves co-owned property, each co-owner shall
file a separate return corresponding to his/her respective share in the co-owned
property.

(A) All statements are true.

(B) Statement 1 is true. Statement 2 is false. (C) Statement 1
is false. Statement 2 is true.
(D) All statements are false.

20. What is the rule on the taxability of income that a government educational institution
derives from its school operations? Such income is

a. Subject to 10% tax on its net taxable income as if it is a propriety educational institution.
b. Exempt from income taxation if it is actually, directly and exclusively used for
educational purposes.
c. Subject to the ordinary income tax rates with respect to incomes derived from
educational activities.
d. Exempt from income taxation in the same manner as government-owned and controlled
corporations.
21. A corporation may change its taxable year to calendar or fiscal year in filing its annual
income tax return, provided

a. It seeks prior BIR approval of its proposed change in the accounting period.
b. It simultaneously seeks BIR approval of its new account period.
c. It should change its accounting period two years prior to changing its taxable year.
d. Its constitution and by-laws authorizes the change.

22. 1st Statement: The Commissioner, the Deputy Commissioners, the Revenue Regional
Directors, the Revenue District Officers and other internal revenue officers shall have
authority to make arrest and seizures for the violation of any penal law, rule or regulation
administered by the Bureau of Internal Revenue pursuant to the Tax Code.

2nd Statement: An internal revenue officer assigned to establishments where articles

subject to excise tax are produced or kept shall in no case stay in his assignment for
more than two (2) years.

a. True, False c. False, True

b. True, True d. False, False
23. 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 is vested with

a. The Commissioner of Internal Revenue, subject to the exclusive appellate

jurisdiction of the
Court of Tax Appeals;
b. The Secretary of Finance, subject to the review of Office of the President;
c. The Court of Tax Appeals, subject to the exclusive appellate jurisdiction of the Supreme
Court;
d. The Regular Courts, subject to exclusive appellate jurisdiction of the Court of Tax
Appeals.

24. 1st Statement - The BIR is authorized to collect estate tax deficiency through the summary
remedy of levying upon and sale of real properties of a decedent, without the cognition and
authority of the court.

2nd Statement - The CIR may examine the bank records of the deceased in order to
determine the latter's taxable net estate.

a. True; False c. False; True

b. True; True d. False; False

25. 1st Statement: Real property is subject to taxation in the place in which it is situated
regardless of whether the owner is a resident or a non-resident therein.

2nd Statement: As far as personal property is concerned. The ancient rule of mobilia sequntur
personam applies. This mean that the thing follows the law of the owner thereof.

a. True; False c. False; True

b. True; True d. False; False
26. ABC, is a domestic corporation engaged in merchandising business. For the calendar year
2012, it had a net income per books of P500,000, after considering, among others, the
following:

a. Dividend received from a domestic corporation P30,000

b. Provision for doubtful accounts 10,000
c. Dividend received from a foreign corporation 20,000
d. Portion of P150,000 advance rental already earned 100,000
e. Recovery of receivables previously written off (included as part of net income above):
Allowed by the BIR as deduction 10,000
Disallowed by the BIR as deduction 30,000
f. Refund of taxes (included as part of net income above):
Allowed by the BIR as deduction 25,000
Disallowed by the BIR as deduction 15,000
g. Bank interest income:
Philippine Bank 80,000
USA Bank 100,000

The taxable income is

a. P485,000
b. P365,000
c. 375,000
d. P405,000

The records of a domestic corporation organized in 2000 show:

2019 2020 2021
Gross income P2,000,000 P3,000,000 P4,000,000
Other Income:
Capital gain from sale of
Commercial land 400,000 500,000
Interest income from
bank deposit 80,000 96,000
Capital gain from sale of
Shares of stock – not listed 60,000 70,000
Allowable deduction 1,940,000 3,100,000 3,500,000

27. The income tax payable in 2019 is

a. P138,000
b. P40,000
c. P42,000
d. P18,000
28. The taxable income in 2021 is

a. P400,000
b. P900,000
c. P1,000,000
d. P500,000

29. The income tax payable in 2021 is

a. P67,000
b. P38,000
c. P33,000
d. P68,000

30. Statement 1: One of the sumptuary/secondary purposes of the power to tax is the
regulation/restriction/control of human activity.
Statement 2: The President, thru the DOF, may suggest proposals for tax reforms
addressed to both houses of Congress, but the revenue bill embodying
those reforms must originate from the House of Representatives.

a. Both are true.

b. Both are false.
c. Only Statement 1 is true.
d. Only Statement 2 is true.

31. A non-resident foreign corporation (NRFC) shall generally be subject to a 25% final tax on
gross income received from all sources within the Philippines. However, a NRFC shall be
exempt from tax on:

a. Philippine Charity and Sweepstakes Office (PCSO) winnings less than ₱10,000.
b. De minimis prizes of less than ₱10,000.
c. Interest income paid by a depositary bank under the foreign currency deposit
system.
d. Interest income from a long-term deposit or investment certificate issued by a bank in the
Philippines, and held for a period exceeding 5 years.

32. If refunded, the amount of refund does not constitute taxable income:

a. Estate tax
b. Local taxes
c. OPT
d. Fringe Benefit tax

33. One of the following represents taxable income:

a. Refund of 3% OPT paid in a prior year.

b. Refund of donors’ tax paid in prior year
c. Refund of income tax in prior year
d. Refund of special assessment paid in prior year
34. Clarissa, resident citizen, 25 years of age, is an employee of ABSCBN Inc. from which
she received the following employment income:

Less SSS
Gross pay Less CWT Less Loan Paid premiums and Net Pay
union dues
₱850,000 ₱60,000 ₱15,000 ₱6,000 ₱769,000

The amount she received from ABSCBN is inclusive of 13th Month Pay and other
benefits of ₱165,000, and de minimis fringe benefits of ₱4,800. Her taxable
compensation income is:

a. ₱749,200
b. ₱755,200
c. ₱850,000
d. None of the above.

Gross compensation income 850,000

Less: Exempt compensation:
SSS premiums, Pag-ibig, and union dues 6,000
13th month pay and other benefits 90,000
Fringe benefits 4,800 (100,800)
Taxable Compensation income 749,200

35. The following are the features of the 8% optional income tax in the ITR, except:

a. A qualified individual taxpayer who avails of the 8% tax option is still required
to file his financial statements with his Annual ITR.
b. A VAT-registered taxpayer is not qualified to avail of the 8% tax.
c. The qualified taxpayer must signify his choice of the 8% tax rate in the first quarterly
ITR before he can avail of the same.
d. The qualified taxpayer who avails of the 8% tax option is exempt from paying the 3%
OPT under Section 116 of the Tax Code.

36. Mariotte Hotel Corporation operates a hotel in Global City, Taguig. The hotel offers
single rooms at ₱8,500 per night, and suite rooms at ₱15,000 per night. Pat Medina, the
manager, was asked by the CEO of Mariotte to occupy one of the suite rooms so as to avoid
traffic and so that he could immediately respond to any problems that may arise in the hotel.
Pat, single, was more than happy to accept the arrangement since he could entertain his friends
in his suite room after work.

Compute the daily FBT to be paid by Mariotte Hotel Corporation.

a. ₱4,577
b. ₱8,077
c. ₱4,038
d. None of the above
This is Housing (Case 6) in the list of fringe benefits given to managerial or
supervisory employees. These benefits are not taxable to the employee. Though
they may benefit the employee, they are primarily given for the benefit and
convenience of the employer.
37. Lee Min Ho, a non-resident alien, came to the Philippines to perform project
management services for Green View Corporation, a domestic corporation engaged in
mining. The contract fee for Lee’s services was ₱600,000. He stayed in the Manila
Mandaring Hotel for 10 days, and upon completion of the service, left for Korea. Green
View paid for Lee’s hotel bills in the amount of ₱75,000.

Compute the final taxes to be remitted by Green View to the BIR.

a. ₱168,750
b. ₱150,000
c. ₱175,000
d. None of the above

(a) FWT on service fee

Service fee
600,000
FT rate 25% 150,000

(b) FBT
Hotel bills 75,000
Grossed up value (÷ 75%) 100,000
FBT rate 25% 25,000
175,000

38. Which of the following benefits received by an employee may be subject to the regular
income tax rates in the ITR?

(1) Use of employer’s bus for its drivers’ summer outing

(2) Uniform and clothing allowance of ₱6,000 per year
(3) Payment of tuition fee of eldest child of a rank-and-file employee
(4) Housing provided to a rank-and-file employee

a. All except (1)

b. All except (3)
c. All except (2)
d. None of the above

39. The Municipality of Oslob in the Province of Cebu imposes a Butanding tax on the
residents of the municipality. This will be used to cover the expenses incurred in the
protection of the
“butanding” or whale shark which visit its shores in the summer
months. Is the imposition a tax or a license?

a. It is a tax.
b. It is a license fee.
c. It is both.
d. None of the above.
40. Statement 1: Life insurance premiums paid by an employer to insure the life of a
manager where the employer is the designated beneficiary under the policy, is an
allowable deduction of the employer.
Statement 2: In general, insurance premiums paid in connection with the conduct of the
business of a taxpayer may be deducted by the taxpayer.

a. Only Statement 1 is true. c. Both statements are true.

b. Only Statement 2 is true. d. Both statements are false.

41. Statement 1: Property dividend received by a resident foreign corporation from a non-
resident foreign corporation is not subject to final tax but is includible in the income tax
return of the resident foreign corporation.

Statement 2: Dividends received by individuals from domestic corporations are subject to

creditable withholding taxes.

a. Statement 1 is true. c. Both statements are false.

b. Statement 2 is true. d. Both statements are true.

42. The following are the requirements for retirement benefits under R.A. No. 7641 to be
exempt from income tax, except:

a. There must be a reasonable private benefit plan approved by the BIR.

b. The employee must be at least 60 but not more than 65.
c. The retiree must have served the same employer for at least 5 years.
d. None of the above.

43. Sally Rafa, an MWE, works for McDonny’s, Inc. She has no other source of income.
For the taxable year, her total regular compensation income, inclusive of the 13 th month
pay, amounted to ₱180,000. During the year, she received a 13 th month pay
equivalent to ₱10,000, and contributed to SSS, Philhealth, and Pag-ibig a total amount
of ₱3,000.

In addition to the abovementioned amounts, she received the following amounts: ₱90,000
for overtime pay, ₱10,000 for night shift differential pay, ₱25,000 for hazard pay, and
₱35,000 for holiday pay. The tax due from her compensation income is:

a. P10,000
b. P13,200
c. P15,400
d. None.
Solution:
Total compensation income 180,000
Add: Overtime, night shift differential,
hazard, and holiday pay 160,000
340,000
Less: Mandatory contributions 3,000
13th month pay 10,000 (13,000)
Compensation income, net 327,000

Note: Net compensation income is still exempt even if it exceeded the

₱250,000 non-taxable income threshold as the same was received by the
taxpayer as a minimum wage earner.
 Pong Pagong is the CEO of Sesame Zoo Corporation. In 2019, he received total
compensation of ₱3,000,000 inclusive of 13th month pay and other benefits in the amount of
₱800,000.

He also owns a VAT-registered farm producing fighting cocks. Its gross sales totalled
₱2,000,000. The farm’s cost of sales and operating expenses amounted to
₱300,000 and ₱180,000, respectively. Its non-operating income amounted to
₱230,000.

44. Compute his income tax due if he chooses to itemize deductions in his ITR.

a. ₱1,341,200
b. ₱1,370,000
c. ₱1,114,000
d. None of the above.

Total compensation income 3,000,000

Less: Exclusionary amount of the
13th month pay and other benefits (90,000)

Taxable compensation income 2,910,000 Add: Taxable income from

business:
Gross Sales 2,000,000
Less: Cost of sales (300,000)
Gross income 1,700,000
Less: Operating expenses (180,000)

Net income from operations 1,520,000

Add: Non-operating income 230,000 1,750,000
Total taxable income 4,660,000

Tax on 2,000,000 = 490,000

Tax on 2,660,000 x 32% = 851,200
4,660,000 1,341,200
45. Compute his income tax due if he chooses to avail of OSD in his ITR.

a.₱1,238,800
b.₱1,181,200
c.₱1,290,000
d.None of the above.
Total compensation income 3,000,000
Less: Exclusionary amount of the
13th month pay and other benefits (90,000)

Taxable compensation income 2,910,000

Add: Taxable income from business:
Gross Sales 2,000,000
Less: Cost of sales 0
Gross income 2,000,000
Less: OSD (800,000)
 Net income from operations 1,200,000
Add: Non-operating income 230,000 1,430,000
Total taxable income 4,340,000

Tax on 2,000,000 = 490,000

Tax on 2,340,000 x 32% = 748,800
4,340,000 1,238,800
46. Pong’s friend, Sycip G. Velayo, a partner in a prestigious accounting firm, suggested
that Pong would be better off if he chose to be taxed under the 8% tax option. Pong
asked you for a second opinion.
a. You will agree with Mr. Velayo because Pong’s tax due under the 8% tax option
would only be ₱959,600 which is lower than the tax due under the graduated rates.
b. You will disagree with Mr. Velayo because Pong is not qualified to avail of the
8% option.
c. You will have an opinion only after you become a CPA.
d. All of the above.

Gaara Sand Corporation manufactures its sand flutes, the best selling products in Canada, in
the Philippines but sells them exclusively abroad. Use the following data to answer the following
questions below:

Gross Sales, without 4,000,000

Cost of Sales, without 1,600,000
Operating expenses 1,680,000
Properties, Philippines 240,000
Properties, without 480,000

47. How much is the taxable income within? 

A. 0
B. 360,000
C. 720,000
D. 120,000

48. How much is the taxable income without?

A. 320,000
B. 360,000
C. 0
D. 600,000

49. Incidence of taxation refers to 

A. Imposition of tax
B. Shifting of tax
C. Payment of tax
D. Levying of tax

50. Mirana and Luna are sisters who are both resident citizens of the Philippines. They
invested P1,000,000 each in buying a banana plantation. The land is registered in their names
as co-owners. 

In 2021, during the fifth year of operations, the co-ownership had a gross sales of coconut
amounting to P30,000,000; gross income of P20,000,000 and expenses of P15,000,000

How much is the final tax on each co-owner share in the co-ownership’s net income?
A. 187,500
B. 175,000
C. 300,000
D. 100,000

51. IDK Corporation had the following income in 2022:

 Interest on bank deposit in PNB
i. Philippine peso deposit, Php 300,000
gross
ii. US dollar deposit, gross US $ 10,000

Royalty
iii. Philippines Php 400,000
iv. USA US $20,000

Rate of exchange 1 US  $ = P50.00

The final withholding tax if IDK corporation is a domestic corporation is 

A. 215,000
B. 415,000
C. 440,000
D. 140,00

52. Which of the following is correct under RA 11534 (CREATE Law)? 

I. Non-resident aliens engaged in trade or business are exempt from final taxes on
PCSO/Lotto Winnings amounting to 10,000 and below
II. Non-resident aliens engaged in trade or business are exempt from final taxes on
PCSO/Lotto Winnings amounting to below 10,000
III. Non-resident aliens not engaged in trade or business are exempt from 25% final taxes
on PCSO/Lotto Winnings amounting to 10,000 and below
IV. Non-resident aliens not engaged in trade or business are not exempt from 25% final
taxes on PCSO/Lotto Winnings amounting to 10,000 and below

A. All of the above

B. Only one statement is true
C. Two statements are true
D. None of the statements are true

53. Which of the following statements is correct? 

I. Beginning January 1, 2018, PCSO lotto winnings of not more than P10,000 received by
citizens and residents are exempt from income tax.
II. Beginning from the effectivity of CREATE, PCSO lotto winnings of not more than
P10,000 received by non-resident aliens engaged in trade or business are exempt from
income tax. 
III. Beginning from the effectivity of CREATE, PCSO lotto winnings of not more than
P10,000 received by non-resident aliens not engaged in trade or business are exempt
from income tax. 

A. I only
B. I and II only
C. I and III only
D. All of the above

54. Which of the following rates are correct?

A B C D

Non-resident citizen -Interest Income from long-term 20% 20 % 5% 12 %

deposit evidenced by certificates prescribed by BSP pre-
terminated 2 years before maturity
 Non-resident aliens not engaged in trade or business-  25% 25% 10% 25%
Lotto winnings amounting to P10,000

Non-resident foreign corporation - Royalties on books 10% 25% 25% 25%

Resident Domestic Corporation - Stock dividends from Exempt Exemp 20% Exempt
another domestic corporation t

55. In 2022, a domestic corporation declared and paid dividends follows

To Maribel, a resident citizen 80,000

To Goldy, a nonresident citizen 80,000

To Sai, a resident alien 80,000

To Ihor, a non-resident alien engaged in trade in the Philippines 80,000

To Salahem, a non-resident alien not engaged in trade in the Philippines 80,000

To Primordial, a domestic Corporation 80,000

To a resident foreign corporation 80,000

To a non-resident foreign corporation 80,000

To a non-resident foreign corporation (with no tax sparing) 80,000

How much final tax shall be withheld by the corporation?

A 92,000
B.100,000
C.80,000
D. 96,000

56. Peter sold his personal car which he purchased in 2020 at a cost of P 400,000. He sold
the car to Juanita on the following terms
Downpayment March 1, 2022 100,000

Installment payment December 31, 2022 100,000

February 15, 2023 200,000

February 15, 2024 400,000

For the year 2022, Peter will report a gross income of:
A. 50,000
B. 100,000
C. 200,000
D. 400,000

57. Shrinkage in value of the stock and loss from wash sale are nondeductible losses
because 
Statement 1: Loss on account of shrinkage in value of the stock through fluctuation in the
market or otherwise are not realized loss. 
Statement 2: Loss from wash sale is only an artificial loss. 
Statement 3: Loss from some wash sales can be deductible

A. Only statement 1 is correct

B. Only statement 2 is correct
C. Only statement 3 is correct 
D. All statements are correct
58. MEH Corporation employs both regular and senior citizen employees and paid the
following compensation:

Regular employee 500,000

Senior citizen employees:

 With salary grade above poverty 300,000
level 200,000
 With salary grade below poverty level 100,000
 Working for 8 months 50,000
 Working for 6 months 60,000
 Working for 4 months 80,000
 Working for 2 months

The deductible compensation expense is

A. 730,000
B. 1,290,000
C. 1,342,500
D. 1,125,000

59. Using the above information, except that 20 % of the regular employee are persons with
disability receiving a total compensation of 200,000, the deductible compensation expense of
the corporation is: 
A. 1,342,500
B. 1,349,500
C. 1,392,500
D. 1,050,000

60. R Esports incurred the following expenses in relation to its business during the taxable
year:

Provision for bad debts P 25,000

Research and development cost, treated as deferred expense 600,000

Contributions during the year:

A. To the government for priority program in sports 50,000
B. To the government for public purpose 10,000
C. To accredited NGO’s, whose total administrative expenses amounted to 100,000
to 25 % 6,000
D. To the Catholic Church for charitable purposes

Additional Information:
A. Allowance for doubtful accounts per aging of accounts receivable revealed a
beginning and ending balances of P 25,000 and P 28,000, respectively
B. Accumulated depreciation on computers at the beginning and end of the year
amounted to P 150,000 and P 160,000 respectively
C. During the year, the firm sold computers with a cost and accumulated depreciation of
P 200,000 and P 100,000, respectively
D. Taxable income before contributions amounted to  P 300,000
E. The research and development cost was incurred in the preceding year but the benefit
was received during the taxable year

If R Esports is a sole proprietorship, the allowable deductions for contributions are:

A. 116,000
B. 80,000
C. 90,000
D. 30,000
61. Furthermore, the amount of deduction from gross income including contributions is:
A. 332,000
B. 832,000
C. 368,000
D. 342,000

62. The vanishing deduction rate of 60% shall be applied where the interval of time is: 
A. Date os donation - March 01, 200A; Date of present decedent’s death - March 1, 200C
B. Date of prior decedent’s death - May 15, 200A; Date of present decedent’s death - June
1, 2000D. 
C. Date of prior donation - August 1, 200A; Date of present decedent’s death - September
200C 
D. Date of purchase by present decedent - February 01, 200A; Date of present decedent’s
death - June 30, 200C. 

63. Which of the following properties of Flowers who died on Dec 1, 2018 is subject to
vanishing deductions? 
Property 1: Rest House in Mabalacat purchased in 2017
Property 2: Commercial lot inherited from her mother in 2011 where estate tax has not been
paid
Property 3: Donation from friend in 2013
Property 4: Property won from lottery six months before death 
Property 5: Cash inherited from father on Nov 31, 2018

A. No, No, No, No, Yes

B. No, No, Yes, Yes, Yes
C. No, No Yes, No, Yes
D. Yes, No, Yes, Yes, Yes

64. Political campaign contribution are not deductible from gross income
A. If the candidates supported wins the election because of possible corruption
B.  since such amounts are not considered as income of the candidate to whom given
C.  since they do not help earn the income from which they are to be deducted
D.  If they are not reported to the Commission on Elections 

65. Mr. Cat, who lives in Angeles City, transfers inter vivos personal property to his son on
March 2020. His son, who lives in Cebu City, let his father know that he is accepting the gift on
March 31, 2020. Mr. Cat was in Baguio City when he learned of the acceptance of the donee.
However, the personal property was delivered and received on April 15, 2020. At the time of
completion, Mr. Cat was in Masbate City for a business meeting. 

When shall the last day to file the donor's tax return and pay the donor's tax? 
A. April 14, 2020
B. April 30, 2020
C. May 15, 2020
D. None of the above

66. Where shall the donor’s tax be filed? 

A. Cebu City
B. Angeles City
C. Baguio City
D. Masbate City

Axel, a resident alien, donated to a Philippine domestic corporation a property located in Spain
valued at P875,000.  He paid foreign donor’s tax to Spain’s Agencia Tributaria worth 35,000
pesos (350 euros). 
Prior to this donation, Axel had made a donation earlier in 2021 to his legitimate daughter, a
property in the Philippines valued at P525,000. He also sold a real property he is not using for
business in the Philippines for only 750,000 despite the fair market value being 400,000. 

67. How much was the total net gifts subject to tax? 
A. 1,750,000 
B. 1,400,000 
C. 1,150,000 
D. None of the choices

68. Using the same data in the preceding number, how much is the donor's tax 
payable? 
A. 69,000 
B. 17,500
C. 52,500 
D. None of the choices

69. Because of the good relations between the Philippines and China, China does not
impose transfer taxes of any kind whether estate or donor’s tax. He donates a piece of car in
Manila to Converge Philippines for use of its CEO Uy. Is he liable to pay donor’s tax in the
Philippines? 
A. Yes. He is liable to the Philippine donor's tax because the car is situated in the
Philippines. 
B. No. He is not liable to the Philippine donor's tax because he will pay the donor’s tax to
China
C. No. He has to pay fringe benefits tax because the car was given for the benefit of the
CEO. 
D. No. He is not liable to the Philippine donor's tax because his country does not impose
transfer taxes of any kind.

70. Which statement is correct? A non-stock, non-profit charitable

association that sells its idle agricultural property is
a. Not required to file an income tax return nor pay income tax on the
transaction to the BIR, provided that the sales proceeds are invested
in another real estate during the year.
b. Required to pay the six percent capital gains tax on the gross
selling price or fair market value, whichever is higher.
c. Mandated to pay the thirty percent regular corporate income tax on
the gain from sale.
d. Required to withhold the applicable expanded withholding tax rate on
the transaction and remit the same to the BIR.