BM2216

PERFORMANCE TASK: PRE-FINAL PERIOD

Read and analyze each item. Encircle the letter of the correct answer. (50 items x 2 points)

1. Which of the following is NOT a taxable corporation?

a. Ana, Lorna, and Fe agreed to contribute their money into a common fund to engage in the business
of buying and selling consumer goods. Their total investment amounted to P300,000, and they did
not bother registering their business with the DTI and the SEC.
b. Pedro, Juan, and Luna, all certified public accountants, agreed to contribute their money, property,
and industry to a common fund with the sole intention of jointly exercising their common
profession. They have registered with the SEC.
c. Victorious Bus Company and California Bus Company own separate franchises to operate a public
utility covering the area of Northern Luzon. To achieve maximum efficiency in utilizing their assets
and to avoid the adverse effects of competition, the two (2) companies agreed to pool their
resources together and operate as a single company.
d. Rody and Allan, lawyers and certified public accountants, agreed to contribute their money,
property, and industry to a common fund to render the service of business process outsourcing.

2. Which of the following is NOT treated as a corporation?

a. General professional partnership
b. A joint venture or consortium is formed to undertake construction projects.
c. A joint or consortium for engaging in petroleum, coal, geothermal, and other energy operations was
under an operating consortium agreement under a service contract with the government.
d. All of the choices.

3. Analyze the following statements:

Statement I: Partnerships, no matter how created or organized, are taxable as corporations for income
tax purposes.
Statement II: For income tax purposes, associations and mutual fund companies are excluded from the
definition of corporations.
a. Statement I is correct. c. Both statements are correct.
b. Statement II is correct. d. Both statements are incorrect.

4. Dividend income received by a domestic corporation from a non-resident foreign corporation may be
exempt from income tax, provided:
a. The dividends received or remitted into the Philippines are reinvested in the business operations of
the domestic corporation within the following taxable year from when the foreign-source dividends
were received or remitted.
b. The dividends received shall only be used to fund the working capital requirements, capital
expenditures, dividend payments, investment in domestic subsidiaries, and infrastructure projects.
c. The domestic corporation holds at least 20% directly in the value of the outstanding shares of the
foreign corporation and has held the shareholdings uninterruptedly for a minimum of two (2) years
at the time of the dividends distribution. In case the foreign corporation has existed for less than two
(2) years at the time of dividends distribution. The domestic corporation must have continuously
held at least 20% directly in the value of the foreign corporation's outstanding shares during the
entire existence of the corporation.
d. All of the choices.

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5. Analyze the following statements:

Statement I: Corporations exempt from income tax are not subject to income tax or incomes received
which are incidental or necessarily connected with the purposes for which they were organized and
operating.
Statement II: Corporations exempt from income tax are subject to income tax on income of whatever
kind and character from any of their properties (real or personal) or any other activity conducted for
profit, regardless of the disposition of such income.
a. Statement I is correct. c. Both statements are correct.
b. Statement II is correct. d. Both statements are incorrect.

6. Which of the following is EXEMPT from income tax?

a. Proprietary educational institutions
b. Private cemeteries
c. Government educational institutions
d. Mutual savings banks not having a capital stock represented by shares

7. It is essential to know the sources of income for tax purposes (i.e., from within or outside the
Philippines) because:
a. Some individual and corporate taxpayers are taxed on their worldwide income, while others are
taxable only 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.

8. During 2021, a domestic corporation derived the following items of revenues:

 Gross receipts from a trading business, P500,000
 Interests from money placements in the banks, P30,000
 Dividends from its stock investments in domestic corporations, P20,000
 Gains from stock transactions through the Philippine Stock Exchange, P50,000
 Proceeds under an insurance policy on the loss of goods,
P100,000 How much should the corporation report as taxable
income?
a. P500,000 c. P600,000
b. P550,000 d. P650,000

9. Which of the following is taxable based on income from all sources, within and outside?
a. Domestic Corporations c. Non-Resident Foreign Corporations
b. Resident Foreign Corporations d. All of the choices

10. Analyze the following statements:

Statement I: All partnerships are taxed similarly to a corporation.
Statement II: The income of a general commercial partnership is also subject to MCIT or RCIT, whichever
is applicable:
a. Statement I is correct. c. Both statements are correct.
b. Statement II is correct. d. Both statements are incorrect.

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11. Which among the following corporations shall pay a tax equal to 25% of gross from all sources within the
Philippines?
a. Domestic Corporations c. Non-Resident Foreign Corporations
b. Resident Foreign Corporations d. All of the choices

12. Analyze the following statements:

Statement I: Passive incomes are subject to separate and final tax rates.
Statement II: Passive incomes are included in taxable net income from a corporation's business operations.
a. Statement I is correct.
b. Statement II is correct.
c. Both statements are correct.
d. Both statements are incorrect.

13. The share of a co-venturer corporation in the net income after tax-exempt joint venture or consortium is:
a. Subject to final withholding tax c. Subject to capital gains tax
b. Subject to regular corporate income tax d. Exempt from income tax

14. Aside from the regular corporate income tax (RCIT), what other tax(es) may be imposed on corporations
under the Philippine income tax laws?
a. Minimum Corporate Income Tax c. Capital Gains Tax
b. Final Tax on Passive Income d. All of the choices

15. CREATE Inc., a domestic corporation and a retailer of goods, has gross sales of P1,400,000,000 with a
cost of sales of P560,000,000 and allowable deductions of 150,000,000 for the calendar year 2022. Its
total assets of P180,000,000 as of December 31, 2021, per Audited Financial Statements, includes the
land costing P50,000,000 and the building of P25,000,000 in which the business entity is situated, with
an aggregate amount of P75,000,000 as fixed assets. How much is the income tax due in 2022?
a. P125,000,000 c. P172,500,000
b. P138,000,000 d. P207,000,000

16. Maasahan Industries, a domestic corporation and a retailer of goods, has gross sales of P14,000,000 with
a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for the calendar year 2022. Its total
assets of P150,000,000 as of December 31, 2022, per Audited Financial Statements, includes the land
costing P50,000,000 and the building of P25,000,000 in which the business entity is situated, with an
aggregate amount of P75,000,000 as fixed assets. How much is the income tax due in 2022?
a. P60,000,000 c. P975,000
b. P780,000 d. P1,170,000

17. Forever Company, a resident corporation and a retailer of goods, has gross sales of P14,000,000 with a
cost of sales of P7,600,000 and allowable deductions of 2,500,000 for the calendar year 2022. Its total
assets of P150,000,000 as of December 31, 2022, per Audited Financial Statements, includes the land
costing P50,000,000 and the building of P25,000,000 in which the business entity is situated, with an
aggregate amount of P75,000,000 as fixed assets. How much is the income tax due in 2022?
a. P60,000,000 c. P975,000
b. P780,000 d. P1,170,000

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18. Matatag Corporation, a resident corporation and a retailer of goods, has gross sales of P14,000,000 with
a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for the calendar year 2022. Its total
assets of P150,000,000 as of December 31, 2022, per Audited Financial Statements, includes the land
costing P40,000,000 and the building of P30,000,000 in which the business entity is situated, with an
aggregate amount of P70,000,000 as fixed assets. How much is the income tax due in 2022?
a. P60,000,000 c. P975,000
b. P780,000 d. P1,170,000

19. A domestic corporation has the following income and expenses for the year:
Philippines Abroad
Gross sales P100,000,000 P50,000,000
Cost of sales 40,000,000 20,000,000
Operating expenses 30,000,000 12,000,000
How much is the income tax due, assuming the taxable year is 2019?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

20. Based on the problem in item #19, how much is the income tax due, assuming the taxable year was 2020?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

21. Based on the problem in item #19, how much is the income tax due, assuming the taxable year is 2021?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

22. Based on the problem in item #19, how much is the income tax due, assuming the taxable year is 2021
and the Company's total assets amounted to only P80 million?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

23. CREATIVE Corporation, a domestic corporation, has the following income and expenses for the 2022
taxable year:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Gross sales P1,000,000 P1,500,000 P2,500,000 P5,000,000
Cost of sales 600,000 800,000 1,400,000 2,200,000
Operating expenses 200,000 500,000 600,000 700,000
The Company's assets amounted to P25,000,000. How much is the income tax due?
a. P300,000 c. P600,000
b. P450,000 d. P825,000

24. Using the same data in item #23 and assuming the Company is a resident foreign corporation, how much
is the correct income tax due?
a. P300,000 c. P750,000
b. P450,000 d. P825,000

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25. The following passive income received by a domestic corporation shall be subject to 20% final
withholding tax, except:
a. Interest income from peso bank deposit
b. Yield from deposit substitutes
c. Dividend income from another domestic corporation
d. Royalties

26. Upon effectivity of CREATE Law, which dividend may be exempt from income tax?
a. Dividend income received by a resident foreign corporation from another resident foreign
corporation.
b. Dividend income received by a domestic corporation from a non-resident foreign corporation.
c. Dividend income received by a non-resident foreign corporation from a resident foreign corporation.
d. All of the other choices.

27. Interest income on a bank deposit or investment with a maturity period of at least five (5) years received
by a corporation in the 2019 taxable year is subject to the following:
DC RFC NRFC
a. 20% 20% 30%
b. Exempt Exempt Exempt
c. 20% 20% Exempt
d. 20% Exempt Exempt

28. Interest income on a bank deposit or investment with a maturity period of at least five (5) years received
by a corporation upon effectivity of the CREATE Law is subject to the following:
DC RFC NRFC
a. 20% 20% 30%
b. Exempt Exempt Exempt
c. 20% 20% 25%
d. 20% Exempt Exempt

29. On January 1, 2018, Ms. D. Nagkulang invested P1,000,000 in BDO's five (5)-year, tax-free time deposit.
The long-term deposit pays 10% annual interest every January 1. In need of cash, she pre-terminated her
investment on July 1, 2021. How much is the final tax due in 2021?
a. P6,000 c. P17,500
b. P12,000 d. P42,000

30. Assuming the same information in item #29, except that the investment was made by a domestic
corporation, how much final tax is withheld in the year of pre-termination?
a. P2,500 c. P10,000
b. P6,000 d. P12,000

31. Interest income received by corporations from their deposit under the expanded foreign currency
deposit system (FCDS) upon the effectivity of CREATE law is subject to the FWT rate of:
DC RFC NRFC
a. 20% 20% 20%
b. 7.5% 7.5% Exempt
c. 15% 15% Exempt
d. 15% 7.5% Exempt

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32. Royalty income received by a corporation before the effectivity of CREATE is subject to FWT of:
DC RFC NRFC
a. 20% 20% 30%
b. 7.5% 7.5% Exempt
c. 15% 15% Exempt
d. 15% 7.5% Exempt

33. ABC Corporation, a domestic corporation, has earned the following income during 2021:
Dividend income from:
IBM, a non-resident corporation P180,000
Fox Tech., a resident foreign corporation 325,000
(the ratio of its gross income derived in the Philippines over total income is 45%)
Isabela Corp., a domestic corporation 200,000
Interest income from:
Current Account, BPI 150,000
Savings deposit, United Overseas Bank, Singapore 410,000
US $ deposit (FCDU) – Metrobank, Makati 100,000
Royalty income from various domestic corporations 500,000
How much is the final tax on passive income, assuming the dividend income from IBM and Fox Tech were
not reinvested in ABC Corporation?
a. P145,000 c. P200,000
b. P172,000 d. P372,000

34. Analyze the following statements:

Statement I: A GPP shall not be subject to income tax.
Statement II: Income payments to a GPP shall be considered exempt from withholding tax.
a. Statement I is correct.
b. Statement II is correct.
c. Both statements are correct.
d. Both statements are incorrect.

35. The share of a co-venturer corporation in the net income after tax of a joint venture or consortium
taxable as a corporation is:
a. Subject to a final withholding tax of 20% c. Subject to capital gains tax
b. Subject to regular corporate income tax of 30% d. Exempt from income tax

36. Analyze the following statements:

Statement I: Gain on the sale of all capital assets is subject to the final tax on capital gains.
Statement II: Gain from the sale of real property classified as a capital asset located in Miami, Florida,
USA, is not subject to the final tax on a capital gain.
a. Statement I is correct. c. Both statements are correct.
b. Statement II is correct. d. Both statements are incorrect.

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For items 37-41, use the following data:

East Star, a domestic corporation, sold shares of stock of a domestic corporation for P250,000. The shares
were acquired in 2015 for investment purposes at the cost of P100,000 and were sold directly to a buyer.
37. Assuming the year was 2019, how much was the capital gains tax due?
a. P10,000 c. P22,500
b. P15,000 d. P45,000

38. How much is the capital gains tax assuming the taxable year was 2021?
a. P10,000 c. P22,500
b. P15,000 d. P45,000

39. How much is the capital gains tax assuming the shares sold were shares of a foreign corporation, and the
sale was made during the effectivity of TRAIN Law?
a. P10,000 c. P22,500
b. P15,000 d. nil

40. How much is the capital gains tax assuming the shares sold were shares of a foreign corporation, and the
sale was made during the effectivity of CREATE Law?
a. P10,000 c. P22,500
b. P15,000 d. nil

41. Assume the shares sold were from a domestic corporation but were not held for investment purposes.
Assume further that the seller is a dealer in securities. How much is the capital gains tax?
a. P10,000 c. P22,500
b. P15,000 d. nil

42. For purposes of taxation, the Partnership is:

I. Classified into two (2) major categories, Partnership in trade and general professional Partnership.
II. Trade partnership is treated as corporate taxpayer.
III. General professional Partnership is exempt from income tax.
a. I, II, and III c. I and III only
b. I and II only d. I only

43. Which of the following statements is FALSE?

a. Registered professional partnerships are subject to income tax.
b. A partner's share in the net profits of a general professional partnership is not compensation income.
c. For tax purposes, a limited partnership is considered a corporation, and the partnerships thereof are
likened to stockholders.
d. Income tax rules apply to corporations and, likewise, apply to informal partnerships.

44. Romeo and Juliet inherited five (5) hectares of land in Isabela when their parents died. They decided to
invest capital and develop the land into a subdivision sold in installments or cash.
Q1: Have they formed an unregistered partnership subject to tax?
Q2: Are they subject to final tax on their respective share in the income of the Partnership?
a. Yes, No c. Yes, Yes
b. No, Yes d. No, No

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45. Analyze the following statements:

Statement I: A CPA and a Dentist may form a GPP or an ordinary partnership.
Statement II: Partnerships and Corporations have separate juridical personalities distinct from the owners.
a. Statement I is correct. c. Both statements are correct.
b. Statement II is correct. d. Both statements are incorrect.

46. Mr. Diaz is a partner of DMZ Partnership, a general professional partnership, and owns a 25% interest.
The Partnership's gross receipts amounted to P10,000,000 for the taxable year 2021. The recorded cost
of service and operating expenses were P2,750,000 and P1,500,000, respectively. If the Partnership
availed of OSD, how much is the net income for distribution to partners?
a. P2,750,000 c. P4,350,000
b. P2,900,000 d. P5,750,000

47. Using the data in item #46, how much is the income tax due for DMZ Partnership?
a. P0 c. P1,087,500
b. P870,000 d. P1,305,000

48. Using the data in item #46, how much is the income tax due to Mr. Diaz?
a. P86,250 c. P216,250
b. P130,000 d. P321,250

49. Ms. Real is a partner of RPT Partnership, a general professional partnership, and owns a 25% interest.
The Partnership's gross receipts amounted to P10,000,000 for the taxable year 2021. The recorded cost
of service and operating expenses were P2,750,000 and P1,500,000, respectively. How much is the net
income for distribution to partners?
a. P2,750,000 c. P4,350,000
b. P2,900,000 d. P5,750,000

50. Using the data in item #49, how much is the income tax due to the Partnership?
a. P0 c. P1,087,500
b. P870,000 d. P1,305,000

Reference:
Tabag, E. (2022). CPA reviewer in taxation. EDT Books Publishing.

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