1. A taxpayer is employed by a shipping company touching Philippines and foreign ports.

In 2023, he received a gross payment

for services rendered at P450,000. In the year, the vessels on board of which he rendered services had a total stay in Philippine
ports of five months. His gross income from the Philippines was _______________
a) P450,000
b) P225,000
c) P187,500
d) P262,500
Answer: P450,000 * 5/12 = P187,500

2. A nonresident alien earned the following interest income:

Interest income from peso savings deposit P600,000
Interest from expanded foreign currency deposit 1,500,00
Interest from yield deposit and other deposit substitutes 400,000
How much of the above income is nontaxable? ___________________
a) P600,000
b) P1,500,000
c) P1,000,000
d) P2,500,000
` Answer: P1,500,000. The interest income from expanded foreign currency deposit

3. Bernielyn took out a life insurance policy for P2,000,000 naming her son as beneficiary. Under the terms of the policy, the
insurer, Malayan Insurance Corporation will pay Bernielyn the amount of P2,000,000 after the 25th year of the policy, and her
beneficiary, should she die before that date. Bernielyn outlived the policy and received the proceeds. The premiums paid on the
policy was P1,200,000.
How much of the proceeds from the insurance policy is taxable? ___________________
a) P2,000,000
b) P1,200,000
c) P500,000
d) P800,000
Answer: Taxable Proceeds = P2,000,000 - P1,200,000 = P800,000

4. A resident alien had the following in 2023:

Gross Income, Philippines P2,000,000
Business Expenses 1,200,000
Dividends received:
From domestic corporation (net)
60% of its income came from the Philippines 160,000
40% of its income came from the Philippines 20,000
From Resident foreign corporation (gross)
60% of its income came from the Philippines 50,000
40% of its income came from the Philippines 40,000
How much is the final withholding tax? _________________
a) P36,000
b) P20,000
c) P18,000
d) P10,000
Final Tax Withheld on dividend income from domestic corp. = (P160,000 +20,000) /90% x 10% = P20,000

5. Lenovo, Inc., a resident foreign corporation, has earned the following income during 2023 taxable year:
Dividend Income from:
Microsoft, a non-resident corporation 500,000
Intel, a resident foreign corporation 500,000
IBM, a domestic corporation 300,000
Interest Income from:
Current account, BDO 800,000
Savings deposit, ABN-AMRO bank, UK 700,000
US dollar deposit (FCDU)- BPI Makati 900,000
Royalty income from various domestic corporations 100,000
Additional information:
•The ratio of Microsoft's gross income in the Philippines Over worldwide income for the past three years was 40%.
•The ratio of Intel's gross income in the Philippines over worldwide income for the past three years is 60%.
•The ratio of IBM's gross income in the Philippines over worldwide income for the past three years was 80%.
How much is the total income tax expense of Lenovo in 2023? ______________________
a) P940,000
b) P500,000
c) P1,240,000
d) P440,000
Resident Foreign Corporation
 DI-Microsoft; NRFC; foreign-sourced dividend based on RMC 62-2021 Non-taxable
DI-Intel (P500,000 ×25% RC/7); RMC 62-2021 P125.000
DI - IBM, a domestic corp. Exempt
Interest income - BDO @20% 160,000
Interest Income from FCDS deposit @ 15% - CREATE Act 135,000
Royalty income @ 20% 20.000
Total income tax expense P440.000

6. Tris leased a facility from Divergent Company on January 1, 2021. Terms of the lease were a s follows:
Annual rental P240,000
Annual real property tax assumed by Tris 60,000
Security deposit 300,000
Lease term 12 years
Tris agreed to pay the entire amount of the fees above including the annual rental for 2022. In addition to annual rental and real
property taxes, part of the lease agreement was for Tris to improve the facility. The improvement was completed on January 1, 2023.
Details of the improvements were as follows:
Cost of leasehold improvement P3,000,000
Estimated useful life of improvement 15 years
Determine the following the income to be reported by Divergent in 2021
a) P540,000
b) P500,000
c) P480,000
d) P440,000
2021 income = (P240,000 x2) +60.000 = P540,000

7. Lenovo, Inc., a resident foreign corporation, has earned the folLowing income during 2023 taxable year:
Dividend Income from:
Microsoft, a non-resident corporation 500,000
Intel, a resident foreign corporation 400,000
IBM, a domestic corporation 300,000
Interest Income from:
Current account, BDO 600,000
Savings deposit, ABN-AMRO bank, UK 700,000
US dollar deposit (FCDU)- BPI Makati 800,000
Royalty income from various domestic corporations 200,000
Additional information:
•The ratio of Microsoft's gross income in the Philippines Over worldwide income for the past three years was 40%.
•The ratio of Intel's gross income in the Philippines over worldwide income for the past three years is 60%.
•The ratio of IBM's gross income in the Philippines over worldwide income for the past three years was 80%.
Assuming Lenovo is a domestic corporation classified as MSME, how much is its total income tax expense in 2023? _____________________
a) P1,040,000
b) P500,000
c) P520,000
d) P840,000
Domestic Corporation
Dividend income from Microsoft; NFC; considered as foreign-sourced dividend under P100.000
RR 5-2021 and RMC 62-2021; subject toRCIT unless exempt if certain conditions are
met; P500,000x20%RCIT for MSME
Dividend income from Intel - exempt under RMC 62-2021 exempt
Dividend income from IBM, a DC exempt
Interest income- BDO @20% 120,000
Interest income UK.. @20%RCITfor MSME 140,000
Interest Income From FCDS deposit @15% 120,000
Royalty income @ 20% 40,000
Total income tax expense P520.000

8. Juan Dela Cruz presented to you the following income for the year:
Basic salary (net of withholding tax) P1,000,000
Withholding tax on basic salary 500,000
Director's fee 300,000
Business income:
Retail business 450.000
Apartment rental (net of 5%) 570,000
Business expenses 125,000
Cash dividend:
from a domestic corporation 50,000
 from a resident corporation 100,000
Stock dividend from a domestic corporation 25,000
Interest from savings deposit 20,000
Royalties from book publications 50,000
Prizes from contest won 50,000
PCSO winnings 50,000
13th month pay 90,000
Christmas bonus 30,000
Mid-year bonus 50,000
Damages received from injuries and sickness 85,000
Proceeds from the life insurance coverage of his deceased father 300,000
Determine the Gross Income subject to Graduated Rate. ____________________
a) P2,500,000
b) P3,025,000
c) P2,530,000
d) P2.940,000
Income Subject to Basic Tax
Basic salary (P1,000,000+500,000) P1,500,000
Director's fee 300.000
Business income:
Retail business 450.000
Apartment rental (P570,000/95%) 600.000
Dividend income from a resident corporation 100,000
Taxable 13h, Xmas and Mid-Year Bonus 75.000
(P170,000 - 1st 5,000 as de minimis - P90,000 exclusions)
Gross Income subject to basic tax P3,025,000

9. Juan Dela Cruz presented to you the following income for the year:
Basic salary (net of withholding tax) P900,000
Withholding tax on basic salary 300,000
Director's fee 200,000
Business income:
Retail business 250.000
Apartment rental (net) 190,000
Business expenses 125,000
Cash dividend:
from a domestic corporation 50,000
from a resident corporation 50,000
Stock dividend from a domestic corporation 25,000
Interest from savings deposit 20,000
Royalties from book publications 50,000
Prizes from contest won 50,000
PCSO winnings 100,000
13th month pay 100,000
Christmas bonus 30,000
Mid-year bonus 50,000
Damages received from injuries and sickness 85,000
Proceeds from the life insurance coverage of his deceased father 300,000
Determine the total final taxes on passive income. ___________________
a) P44,000
b) P49,000
c) P30,000
d) P40,000
Income Subject to Final Tax
Cash dividend from a domestic corporation @10% P5,000
Interest from savings deposit @20% 4,000
Royalties from book publications @10% P5,000
Prizes from contest won @20% 10,000
PCSO winnings @20% (TRAIN Law) 20,000
Total final taxes on passive income P44,000

10. Juan Dela Cruz presented to you the following income for the year:
Basic salary (net of withholding tax) P900,000
Withholding tax on basic salary 300,000
Director's fee 200,000
 Business income:
Retail business 250.000
Apartment rental (net) 190,000
Business expenses 125,000
Cash dividend:
from a domestic corporation 50,000
from a resident corporation 50,000
Stock dividend from a domestic corporation 25,000
Interest from savings deposit 20,000
Royalties from book publications 50,000
Prizes from contest won 50,000
PCSO winnings 50,000
13th month pay 100,000
Christmas bonus 30,000
Mid-year bonus 50,000
Damages received from injuries and sickness 85,000
Proceeds from the life insurance coverage of his deceased father 800,000
Determine the total income not subject to tax (exclusions to Gross Income). _____________________
a) P910,000
b) P1,049,000
c) P959,000
d) P1,005,000
Income Exempt from Tax:
Xmas Bonus and other benefits (P5k de minimis + 90,000) 95,000
Stock dividend from a domestic corporation 25,000
Damages received from injuries and sickness 85,000
Proceeds-life insurance coverage of his father 800,000
Total income exempt from tax P1,005,000

11. JJ Bibo, a national athlete, received the following during 2022:

Ramon Magsaysay award P150,000
Athlete of the year award 100,000
Prize - KFC raffle 5,000
Prize mandated by law for winning an Olympic Medal 400,000
Gift from Mayor Erap 250,000
Car from Honda Cars Philippines, as a gift 2,000,000
Winnings - Philippine lotto 100,000
Gambling winnings 500,000
Determine the total amount exempt from income tax. _____________________
a) P3,500,000
b) P2,905,000
c) P3,005,000
d) P2,900,000
Ramon Magsaysay award P150,000
Athlete of the year award 100,000
Prize mandated by law for winning an Olympic Medal 400,000
Gift from Mayor Erap 250,000
Car from Honda Cars Philippines, as a gift 2,000,000
Total Amount Exempt from Income Tax 2,900,000
NOTE: The gifts received are subject to Donor's Tax. The donor's tax return shall be filed and paid by the donors, not the donee

12. Mario retired at the end of 2023 taxable year after rendering twenty five (25) years of continuous service for ABC Corporation which
employed him immediately after his graduation from college. He was then twenty (20) years old. He earned the following income in
2023:'
Salary for the first quarter P180,000
Honorarium as speaker in one of ABC's team building activities 50,000
Retirement pay 2,500,000
Commissions 30,000
Fee as a member of ABC's board of directors 50,000
10 days monetized vacation leave 12,000
Interest income from time deposit 15,000
Productivity incentive pay 20,000
13th month pay 60,000
Determine the gross "compensation" income of Mario. _____________________
a) P2,830,000
 b) P3,000,000
c) P2,810,000
d) P2.917,000
Salary for the first quarter P180.000
Honorarium as speaker in one of ABC's team building activities 50,000
Retirement pay; (Taxable; failed to meet theage requirement) 2.500,000
Commissions 30.000
Free As a member of ABC's board of directors (compensation income since he is at the same 50.000
time an employee of the company)
10 days monetized vacation leave Exempt
Interest income from time deposit FW Tax/E
***Productivity incentive pay and 13TMmonth pay (refer ot explanation below) (However, Exempt
the total of the productivity bonus amounting to P20,000 +60,000 bonus is not more than
P90,000, hence tax exempt)
Total compensation income subject to tax P2,810,000
NOTE: for Productivity incentive pay - refer to BIR Ruling No. 293-2015
if not more than 10k =exempt de minimis
if more than 10k =the entire amount is considered part of "other benefits" subject to the P90,000 limit.

13. Tris leased a facility from Divergent Company on January 1, 2021. Terms of the lease were a s follows:
Annual rental P240,000
Annual real property tax assumed by Tris 60,000
Security deposit 300,000
Lease term 12 years
Tris agreed to pay the entire amount of the fees above including the annual rental for 2022. In addition to annual rental and real
property taxes, part of the lease agreement was for Tris to improve the facility. The improvement was completed on January 1, 2023.
Details of the improvements were as follows:
Cost of leasehold improvement P3,000,000
Estimated useful life of improvement 15 years
Determine the income to be reported by Divergent in 2023 assuming the company opted to report income from improvement using the
spread-out method.
a) P3,300,000
b) P750,000
c) P400,000
d) P191,700
2023 income (spread-out) =P400,000 computed as folows:
Annual rental P240,000
Annual real property tax 60,000
Annual income from leasehold improvement:
Cost 3,000,000
X 5/10
Remaining BV after lease term P1,000,000
Divide By remaining lease term 10 years P100,000
Total income 2018 P400,000

14. ABC Corporation had the following data ni 2022:

Gross Income, Philippines P15,000,000
Allowable itemized deductions/expenses 5,000,000
Dividend income FROM:
a. Diaz Corporation, a domestic corporation 1,000,000
b. Tokyo Corporation, a resident foreign corporation, 80% of its gross 800.000
income were derived from the Philippines
c. Olympiad Corporation, a resident foreign corporation, 50% of its 800,000
gross income were derived from the Philippines
d. Nonresident foreign corporation, 25% of its gross income were 400,000
derived from the Philippines
Assume ABC Corporation is a resident foreign corporation, how much is the taxable income in 2022? ________________
a) P11,830,000
b) P11,600,000
c) P11,210,000
d) P11.817,000
Resident Foreign Corp = Taxable on income from Philippine sources only
Gross Income P15.000.000
Allowable deductions (5.000,000)
Dividend income from Diaz- DC exempt
Dividend income fromTokyo, RFC (exempt; RMC 62-2021); (derived entirely from 800.000
 the Phils. based on RMC 62-2021)
Dividend income from Olympiad, RFC (exempt; RMC 62-2021): (derived entirely 800,000
from the Phils. based on RMC 62-2021)
Dividend income from NFC (taxable -RCIT; foreign-sourced dividend based on Non-taxable
RR5-2021 andRMC 62-2021)
Taxable income P11,600.000

15. Which of the following Is not a characteristic of income?

a. Increase in taxpayer's wealth
b. Realization or receipt of gain.
c. Earningsconstructively received.
d. Return of taxpayer's wealth.

16. Which Is not a valid definition of Income?

a. Income is the return from capital invested.
b. Income is a fund at one distinct point of time.
c. Income means all wealth which flows into the taxpayer other than a mere return of capital.
d. Income means cash or its equivalent unless otherwise specified.

17. Which of the following is considered or construed as an example of constructive receipt?

a. Retirement benefits, pensions, gratuities
b. Fees paid to a public official
c. Interest coupons that have matured and are payable but have not been cashed
d. Deposits For rentals to answer for damages, restricted as to use

18. Constructive receipt occurs when the money consideration or its equivalent is placed at the control of the person who
rendered the service without restrictions by the payor. The following are examples of constructive receipts, except.
a. A Security deposit to insure the faithful performance of certain obligations of the lessee to the lessor.
b. Deposit Banks Which are made available to the seller of services without restrictions;
c. Issuance By The debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for
services rendered;
d. Transfer of the amounts retained by the payor to the account of the contractor.

19. There Is Constructive Receipt Of Income When:

a. Payment Is Credited To Payee's Account
b. Payment is set aside for the payee,or otherwise made available so the payee may draw up on it at any time,or so the
payee could have drawn upon it during the taxable year notice of intention to withdraw had been given without
substantial limitations.
c. Both"a" and “b”
d. Neither "a"nor "b"

20. When different types of income are subjected to common tax rate,the tax system is described as
a. Global tax system
b. Scheduler tax system
c. Final tax system
d. Mixed income tax system

21. Situs of taxation on income from sale of property purchased.

a. Place of the seller
b. Place of sale
c. Place of buyer
d. As determined by the Commissioner

22. Which of the following tests of source of income is incorrect?

a. Interest income - residence of the debtor
b. Income from services - place of performance
c. Royalties - place of use of intangible
d. Gain on sale of real property - place o f sale

23. For tax purposes, income:

I. Refers to all earnings from any origin, be it legal or illegal, unless explicitly exempted by the Tax Code.
II. Encompasses all financial gains received by the taxpayer, excluding the return of initial investments.
III. Is considered as received in the tax year when it is either physically received or made available to the
taxpayer,
IV. Is in the form of compensation for services, interest, or profits from investments, during a defined period.
a. I, II and III only
b. I and IV only
c. I, II, III and IV
d. None of the above
24. The sources from which income is derived
a. Labor
b. The use of capital
c. Profits derived from sale or exchange of capital assets
d. All of the above

25. The sources from which income is derived

A B C D
Labor True True True False
Gifts and inheritance True False False False
Use of capital True True False False

26. Which of the following is a characteristic of income?

A B C D
Increase in taxpayer's wealth True True True False
Realization of gain True False False False
Return on taxpayer's wealth True True False False

27. Which of the following is a requisite for an income to be taxable?

a. There must be gain
b. The gain must be realized or received
c. The gain must not be excluded by law from taxation
d. All of the above

28. Which of the following is not an income for income tax purposes?
a. Gain derived from labor
b. Return on capital
c. Excess of selling price over cost of assets sold
d. Gift received

29. Which of the following is not an income for income tax purposes?
a. Collection of Loans Receivable
b. Condonation of Debt For Services Rendered
c. Excess of Selling Price Over the cost of an asset sold
d. None of the above

30. Situs of taxation on income from sale shares of a domestic corporation.

a. Always treated as income derived from within the Philippines
b. Always treated as income derived from without the Philippines
c. May be treated as income within or without the Philippines depending on the place of sale
d. May be treated as income within or without thePhilippines depending where the shares are kept

31. Situs of taxation on income from sale shares of a foreign corporation.

a. Always treated as income derived from within the Philippines
b. Always treated as income derived from without the Philippines
c. May be treated as income within or without the Philippines depending on the place of sale
d. May be treated as income within or without the Philippines depending where the shares are kept
32. Pedro earned Interest Income from a Promissory Note issued to him by Juan, a resident of California, U.S.A. Assuming that
Pedro is a nonresident citizen, the interest income is
a. Subject to basic income tax
b. Subject To Final Tax
c. Not subject to income tax
d. Partly subject ot scheduler and partly subject to final tax

33. It is important to know the source of income for tax purposes (i.e., from within or without the Philippines) because:
a. Some individual and Corporate taxpayers are taxed on their worldwide income while others are taxable only upon
income from sources within the Philippines
b. The Philippines Imposes income tax only on income from sources within
c. Some individual taxpayers are citizens while others are aliens
d. Export sales are not subject to income tax

34. Situs, for taxation purposes will depend upon various factors, including
I The nature of the tax and the subject matter thereof.
II. The possible protection and benefit that may accrue both to the government and the taxpayer.
III. Domicile Or Residence
IV. Citizenship
V. Source of income
 a. I and V only
b. I, III and IV only
c. I, III, IV and V
d. I, II, III, VI and V

35. Which of the following is NOT true about the source of income?
a. Incase of income derived from labor, source is the place where the labor is performed.
b. In case of income derived from use of capital, source is the place where the capital is employed.
c. In case of profits from the sale or exchange of capital assets, source is the place or transaction occurs.
d. None of the above.

36. All of the following are correct except one. Which is the exception?
a. The source of interest income is the country where the debtor resides
b. The source of interest income is the country where the creditor resides.
c. Rents or royalties are considered derived from the country where the property is located.
d. Income from personal services is considered derived from the country where the services were rendered

37. Statement 1: Again from sale of shares of a domestic corporation shall be considered derived from the Philippines Regardless
Where The shares were sold.
Statement 2: A gain from a sale of shares of a foreign corporation shall be considered derived from the country
where the corporation was created or organized.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

38. Which of the following is not an income derived from sources within the Philippines for income tax purposes?
a. Interests derived from bonds issued by a foreign corporation
b. Interest on notes or other interest-bearing obligations of residents c.
c. Both "a" and "b"
d. Neither "a" nor"b"

39. The taxpayer received a cash dividend of P50,000 in 2023 from a foreign corporation residing in the Philippines, and this
corporation derived 40% of its total income from Philippine sources.
Statement 1: Partly taxable if he is a resident citizen.
Statement 2: Partly taxable if he is a non-resident alien

a. Statements 1 and 2 are false

b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true,
d. Statements 1 and 2 are true

Statement 1 is wrong. If the taxpayer is RC, it must be taxable in full Statement 2 is wrong. If the taxpayer is
NRA, it is not taxable because dividend income is considered derived purely from without the Philippine

40. Which of the following is correct? A cash dividend of P100,000 received by a taxpayer in 2022 from a resident foreign
corporation whose income from Philippine sources was 40% of its total income. The cash dividend is
a. Exempt from income tax if he is a resident citizen.
b. Partly Taxable if he is a resident alien.
c. Taxable in full if he is a nonresident citizen.
d. Exempt from income tax if he is a nonresident alien.