Midterm Exam For Print
Midterm Exam For Print
Instruction: Choose the correct answer and write it before the number.
2. DEF, a corporation registered in Germany, operates a 1,000-ton steel milling plant in Quezon province. Which among the
following shall be taxable under the Tax Code?
a. Its income from a steel-forging plant located in the Netherlands
b. Its gain from the sale of its non-operational smelting plant in Indonesia.
c. Royalties from the use in the Philippines of its proprietary software which was developed and patented in Germany.
d. Interest income from a Euro deposit with a French bank in Paris.
e. None of the above.
3. ABC Inc., a corporation registered and holding office in Australia, not operating in the Philippines, may be subject to
Philippine income taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the proceeds converted to
pesos.
b. Gains it derived from sale in Australia of shares of stock of Philex Mining Corporation, a Philippine corporation.
c. Dividends earned from investment in a foreign corporation that derived 40% of its gross income from Philippine
sources.
d. Interest derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency Deposit System.
6. Beginning July 1, 2020, the RCIT rate for domestic corporations shall be 25%. However, a lower RCIT rate of 20% shall be
imposed if the following conditions is/are present:
a. The domestic corporation’s net taxable income is not more than ₱5.0 Million
b. The domestic corporation’s net assets (excluding the land on which its office, plant, or equipment are situated) are
not more than ₱100 Million.
c. All of the above.
d. None of the above.
PROBLEM 7-9
Panalo Corporation had the following data for calendar year 2022 (MCIT – 1%), its 5th year of operations:
The corporation’s latest audited financial statements include the following accounts:
Land, Philippines ₱ 50,000,000
Building, Philippines 25,000,000
Total Assets 180,000,000
8. Compute the income tax due if the taxpayer is a foreign corporation with a branch in the Philippines (RFC).
a. ₱ 500,000
b. ₱ 850,000
c. ₱ 175,000
d. None of the above
9. Compute the income tax if the taxpayer is a foreign corporation with no branch or office in the Philippines (NRFC).
a. ₱1,700,000
b. ₱1,975,000
c. ₱1,175,000
d. None of the above
PROBLEM 10-11
The records of Jester Corporation, domestic, organized in 2014, engaged in retail, show the following in calendar years 2021,
2022, 2023:
2021 2022 2023
Sales, gross of CWT 1,800,000 1,740,000 2,100,200
Cost of Sales 430,000 110,000 510,100
Operating Expenses 1,740,200 1,600,000 1,300,400
Non-operating income 400,000 70,000 230,000
CWT on sales per BIR Form 2307 18,000 7,400 21,002
Taxes paid in previous 3 quarters 5,500 1,250 31,900
MCIT Rate 1% 1% 1.5%
The corporation chooses to credit in future years any excess tax credits it may have in a taxable year.
11. What would be the tax payable of Jester Corporation for taxable years 2022?
a. ₱300
b. ₱6,440
c. ₱30,500
d. ₱0
12. Any income from transactions with depository banks under the expanded foreign currency deposit system shall be exempt
from income tax if derived by a
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. Resident alien
PROBLEM 13-14
GILI Inc., a domestic corporation, had the following financial information for CY 2022:
Gross income, Philippines 3,895,000
Gross income, abroad 1,300,000
Business expenses, Philippines 878,000
Business expenses, abroad 340,000
Dividend income from a domestic corporation 40,000
Dividend income from a foreign corporation* 30,000
Interest income, BPI Manila 50,000
Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty income (Phils.), copyright (book) 450,000
Royalty income (Phils.), patent 1,350,000
Raffle draw winnings 60,000
*Note: 2/3 of the foreign corporation’s income in the last 3 years was earned in the Philippines.
13. What is the total amount of final taxes to be withheld from GILI’s income in 2022?
a. ₱375,100
b. ₱346,100
c. ₱379,600
d. None of the above
14. Compute GILI’s income tax payable in its Annual ITR for CY 2022.
a. ₱1,023,000
b. ₱623,650
c. ₱813,250
d. None of the above
18. The records of ABC Corporation, organized in 2007 showed the following data for 2024.
Gross Income P2,000,000
Less: Allowable business expenses
(other than bad debts) P1,850,000
Bad debts written off 100,000 1,950,000
Taxable net income P 50,000
21. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except
a. If received by a resident citizen
b. If received by a non-resident corporation
c. If received by a resident alien
d. If received by another domestic corporation
22. Chan, Chinese national, arrived in the Philippines on January 1, 2012 to visit his Filipina paramour. He planned to stay in
the country until December 31, 2016, by which time he would go back to his legal wife and family in China. Chan derived
income during his stay here in the Philippines. For the taxable year 2012, Chan shall be classified as a:
a. Resident alien
b. Non-resident alien engaged in trade or business in the Philippines
c. Non-resident alien not engaged in trade or business in the Philippines
d. Special alien employee
23. Passive income includes income derived from an activity in which the earner does not have any substantial participation.
This type of income is
a. Usually subject to a final tax.
b. Exempt from income taxation.
c. Taxable only if earned by a citizen.
d. Included in the income tax return.
24. Which of the following items is not part of gross income to be reported in the income tax return?
a. Increase in value of land
b. Gambling winnings
c. Prize of P10,000
d. Gain from sale of store’s air conditioner
27. A domestic corporation, in its fifth (5th) year of operations, had the following data for the year:
Net sales 2,000,000
Capital gain on direct sale to a buyer of shares of a
domestic corporation for P500,000 200,000
Capital gain on sale thru a real estate broker of
land and building outside the Philippines for P5,000,000 1,000,000
Dividend from a domestic corporation 50,000
Interest on bank deposit 40,000
Cost of sales 600,000
Quarterly corporate income tax paid 190,000
Operating expenses 500,000
The income tax payable upon filing of the annual income tax return is:
a. 475,000
b. 285,000
c. 380,000
d. 190,000
28. In which of the following cases will the dividend income from a foreign corporation be classified as “income without”
a. Less than 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend
declaration was derived from sources within the Philippines.
b. 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend declaration was
derived from sources within the Philippines.
c. More than 50% of the foreign company’s gross income for the preceding three (3) years prior to the dividend
declaration was derived from sources within the Philippines.
d. Always classified as income without”.
29. The minimum corporate income tax does not apply to a corporation, if
a. Imposition was suspended by the Secretary of Finance due to a corporations’ heavy losses arising from prolonged
labor dispute;
b. Corporation is in its initial year of operation
c. Corporation is exempt from income tax by virtue of tax holidays granted to it by the Board of Investment;
d. All of the above
a. I only
b. II only
c. II and III
d. I, II, III
31. X took a life insurance policy of P5 million where the monthly premium is P10, 000. The proceeds will be paid to X after 25
years to the X’s estate should X die before completing the equivalent of 25 years payment. If the X outlived the policy,
which of the following is correct?
a. The proceeds will be part of X’s gross estate.
b. The proceeds will be part of X’s taxable income.
c. The proceeds will be party taxable estate and partly exempt.
d. The proceeds will be party taxable income and partly exempt.
Which is TRUE?
a. Only S1
b. Only S2
c. Both are true
d. Both are false
a. I and II only
b. II and III only
c. I, II, III
d. None of the above
34. The following entities shall be exempt from corporate income taxes because of their exclusion from the definition of
“corporation” for income tax purposes:
a. Business partnerships, domestic corporations
b. One-person corporations, foreign corporations
c. General professional partnerships, licensed JVs in the construction business
d. All of the above
35. Pedro, single received the following during the taxable year:
Proceeds of his life insurance paid at an annual premium
of 15,000 within 25 years 2,000,000
Proceeds of his mother’s life insurance paid at an annual
Premium of 10,000 within 20 years 1,000,000
House and lot inherited from his mother 4,000,000
Rent income from inherited properties 200,000
For income tax purposes, how much of the above items must be included in his gross income?
a. 7,200,000
b. 1,625,000
c. 200,000
d. 1,825,000
36. Kris Inc. sold vacant lot to Moca Corporation for 10,000,000 which it acquired at a cost of 5,000,000. The fair market value
of the said property per tax declaration is 12,000,000, while its zonal value is 15,000,000. How much is the income tax
applicable on the transaction?
a. 600,000
b. 720,000
c. 900,000
d. 1,500,000
37. A domestic corporation had the following data on income and expenses during the year 2022:
Gross Income, Phil. 10,000,000
Business Expense, Phil. 2,000,000
Gross Income, China 5,000,000
Business Income, China 1,500,000
Interest Income, Metrobank, Phil. 300,000
Interest Income, Shanghai Bank, China 100,000
Rent Income 200,000
38. A domestic corporation, already on its 3rd year of operation as of 2022 (MCIT – 1%), has the following data:
2021 2022
Sales 1,700,000 2,300,000
Cost of Sales 1,050,000 1,425,000
Operating Expenses 675,000 480,000.
PROBLEM 39-40
Angel Mae Corporation, a domestic corporation, had the following selected data for his first 5 years in operation:
YEAR GROSS INCOME EXPENSES RCIT MCIT
2016 1,000,000 1,200,000 30% 2%
2017 2,000,000 1,900,000 30% 2%
2018 3,000,000 2,950,000 30% 2%
2019 1,000,000 1,100,000 30% 2%
2020 980,000 500,000
PROBLEM 41-45
Cabasag Corporation has the following information for the current year taxable year:
QUARTER RCIT MCIT CWT
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional Information:
MCIT carry-over from prior year amounts of 60,000;
41. How much was the income tax payable for the first quarter?
a. 200,000
b. 160,000
c. 120,000
d. 100,000
42. How much as the income tax payable for the second quarter?
a. 660,000
b. 460,000
c. 200,000
d. 160,000
43. How much as the income tax payable for the third quarter?
a. 860,000
b. 120,000
c. 600,000
d. 140,000
45. Using the same data in the preceding problem except that the MCIT on the 4 th Quarter is 500,000, how much was the
annual income tax payable?
a. 330,000
b. 1,310,000
c. 380,000
d. 360,000