INCOME TAXATION

QUIZ 1

QUIZ 2 (Introduction to income taxation)

1. Taxes that cannot be shifted by the statutory taxpayer are referred to as.  Direct taxes
2. Which is a local tax? Professional tax  Professional tax
3. As to subject matter, taxes do not include. Poll tax Regulatory tax 
4. A tax that is imposed upon the performance of an act, the enjoyment of a privilege or the
engagement in a profession is known as. Excise tax 
5. Which is a national tax?  Income tax
6. Which of the following distinguishes license from tax? Pre-activity in application 
7. Which is correct?  Special assessment applies only when public improvement is made 
8. Tax as to determination of amount is classified as. Specific or ad valorem tax
9. Tax classifications as to object do not include. Regulatory tax 
10. A. Tax must not violate constitutional and inherent limitation, B. Tax must be uniform and
equitable, C. Tax must be for public purpose, D. Tax must be levied by the lawmaking body, E.
Tax must be proportionate in character, F. Tax is generally payable in money
Which of the above is/are not an essential characteristic of a valid tax?  None of the above 
11. The Commissioner of Internal Revenue is not authorized to. Promulgate Revenue Regulations 
12. Which is not a power of the Commissioner of Internal Revenue? To prescribe assessed value of
real properties
13. The principles of a sound tax system exclude. Economic efficiency
14. Which of the following best describes the effect of tax condonation? It only covers the unpaid
balance of a tax liability 
15. By which principle of a sound tax system is the elasticity in tax rates is justified? Fiscal adequacy
16. Ben received a total sum of P42,000 from his employer consisting of the following : P5,000
reimbursement for employer’s expenses paid by Ben, P15,000 payment of Ben’s computer set
purchased by the employer which cost him P12,000, P22,000 monthly salary, Compute the total
return on capital which can be subject to income tax.  P25,000
17. Roger paid P20,000 annual premiumon a life insurance contract which would pay him
P1,000,000 in case of his death. After paying for 4 years, Roger assigned the policy toCarl for
P120,000. Compute the return on capital. P40,000
18. Vince purchased a P 1,500,000 life insurance policy for P100,000. During the year, Vince died
and his heirs collected the entire proceeds. How much of the proceeds is a return of capital?
P1,500,000
19. Rammel purchased the P1,000,000 life insurance policy of Dan for P120,000. Rammel paid the
P20,000 annual premium on the policy for 4 years after which Dan died. Compute the total
return on capital for Rammel. P800,000
 20. Frank sells hot chili-flavored pancakes using a secret formula he patented. He sued a competing
pancake house for alleged patent infringement and claimed a total indemnity of P1,200,000. *
P1,000,000 for loss of profit from loss of sales,  P200,000 as Attorney’s fee reimbursement.
Frank wins the case and awarded the total indemnity. Compute his total return of capital.
P200,000
QUIZ 3

1. A Filipino who has been abroad for more than 183 days is classified as a. . Non-resident citizen
2. A non-resident citizen is an international financier who earned P400,000 interest income from
resident debtors and P300,000 from foreign debtors, how much is subject to Philippine income
tax? P400,000
3. Alex Company insured the life of its president for P2,000,000, A total of P500,000 in premiums
was paid before the president died, The company collected the total proceeds, Compute the
return on capital. P0
4. All of the following are taxable only on income earned from sources within the Philippines,
except. Domestic corporation
5. An alien received P200,000 compensation income in the Philippines and P300,000 rental income
from abroad, how much will be subject to Philippine income tax? P200,000
6. Andrew received a total sum of P42,000 from his employer consisting of the following, P5,000
reimbursements for employer’s expenses paid by Andrew, P15,000 payment of Andrew’s
computer set purchased by the employer, P22,000 monthly salary, Andrew’s computer set cost
him P12,000, Compute the total return on capital which can be subjected to income tax.
P25,000
7. Benny paid P20,000 annual premium on a life insurance contract which would pay her
P1,000,000 in case of her death, After paying for 4 years, Benny assigned the policy to Karl for
P120,000, Compute the return on capital. P40,000 
8. Cate negotiated a P1,000,000 non-interest bearing promissory note to Kenny, Kenny paid Cate
P950,000, On due date, Cate paid Kenny P1,000,000 Which is true? Kenny earned P50,000
return on capital 
9. Karl paid P20,000 annual premium for a P1,000,000 life insurance policy, After 7 years, Karl
surrendered the policy and was paid by the insurance company P200,000 which represents the
cash surrender value of the policy, Compute the return on capital. P60,000
10. Luke purchased the P1,000,000 life insurance policy of Ben for P120,000, Luke paid the P20,000
annual premiums on the policy for 4 years after which Ben died, Compute the total return on
capital for Luke. P800,000
11. Mickey purchased a P1,500,000 life insurance policy for P100,000, During the year, Mickey died
and her heirs collected the entire proceeds, How much of the proceeds is exempt from income
tax? P1,500,000
12. Mike used to bet in PCSO lotto, On June 3, 2014, he won the P20,000,000 jackpot prize from the
6/45lotto, One P20-ticket out of 10 bets took the prize, how much is Mike’s total income subject
to tax? P0
13. Resident alien naturalized in accordance with Philippine laws is a. Resident citizen
14. The place of taxation is.  Situs 
15. The total consideration received from the sale of goods at a gain represents. Return on
capital /Return of capital
16. The total consideration received from the sale of service constitute .  Return on capital
17. Transfers for insufficient consideration are subject to. Income tax/ Transfer tax
18. When paid for, which of the following items may involve a return on capital? House and lot
19. Which is not a requisite of gross income? Not exempted by law
20. Which is not an item of gross income because of the absence of an undertaking from the
taxpayer? Forgiveness of indebtedness as an act of gratuity

PRELIM EXAM ( income tax schemes ,accounting periods , accounting method and reporting , final
income taxation

1. A concerned government employee furnished the BIR a statement detailing the improper tax
practices of a corporate taxpayer. The information was instrumental to the collection of
P500,000 tax. How much informer’s tax reward after tax shall be released to thein formant? P0 
2. A corporation reporting on a fiscal year ending every March 31 shall file its 2017 income tax
return not later than. July 15, 2017
3. A dividend declaration in 2019issubject to final tax of 10%
4. A taxpayer received a notice from the BIR to file his 2016 income tax return not later than
January 15, 2018. The tax due per his return is P100,000. What is the total surcharge penalty?
P50,000
5. A taxpayer wants to manually file his Monthly Remittance Return of Final Income Tax Withheld
for the month of February 2017. What is the deadline for the return? March 10,2017
6. Capital assets means any property, real or personal, not used in business.
7. Carl Inc., owns 20% of the stocks of Brad Corp. Carl and Brad are both domestic corporations.
Brad declared P120,000 dividends in 2018. How much is dividend income any application tax will
Brad receive? 24,000
8. Dividends declared by a resident foreign corporation is Subject to regular income tax.
9. During 2017, Klein Corporation changed its accounting period to the calendar year. The
adjustment return shall be filed on or before. April 15, 2018
10. Effective March 1, 2017, Jonah Inc. changed its calendar year to fiscal year ending every June 30.
An adjustment return shall be filed covering the period. January 1 to June 30, 2017 
11. Exquisite Corporation sold its old warehouse with carrying amount (tax basis) of P600,000 for
P1,000,000. A downpayment of 15% was collected on July 1, 2019. Additional P150,000
installment payments were received as of December 31, 2019.Compute the gross profit to be
reported for the year 2019. P400,000
12. In 2019, Bright Inc. sold its parking lot for P2,400,000 payable on installment. The lot was
previously acquired or P1,500,000. The buyer has an outstanding unpaid balance of P1,800,000
as of December 31, 2019, Bright’s year-end.Compute Exquisite’s gross income in 2019 using the
installment method. P225,000 
13. Income is recognized when earned regardless of when received. Accrual basis
14. Income is recognized when received rather than when earned. Cash basis
15. Income is reported by reference to the extent of project completion in. Percentage of
completion method
16. Interest income from which of the following sources is subject to final income tax. Money
market placements
17. Leasehold income is recognized over the lease term in Spread out method 
18. Lon Inc., is the only corporate stockholder of Son Company owning 60% of its outstanding voting
shares. During the year Sun declared a P1,000,000 dividend. Compute the final income tax to be
withheld by Sun? P40,000
19. Mr. Radang submitted a sworn statement regarding the alleged tax evasion practices of Chity
corporation. This led the BIR to recover P50M unpaid taxes. How much net tax informer’s
reward shall be paid to Mr. Radang? 900,000
20. Mr. Taco, a resident citizen, won P10,000,000 from the USA lottery. The lottery winning is
Subject to regular tax
21. Mr.Lumba won a gold medal and P50,000 cash prize for chess competition in the Palarong
Pambansa. How much withholding tax should be withheld from the prize? P0
22. Ms. Bobski published book abroad for international market. During the first quarter, he earned a
gross royalty of P1,000,000. How much withholding tax will be withheld by the foreign
publisher? P0
23. Ray owns 20% of the capital and profits of a general professional partnership. The partnership
reported P500,000 profits in 2018. How much final tax will be withheld from Ray? P0
24. Rich Goma Corporation failed to file its income tax return for the fiscal year ending August 31,
2019. On June 6, 2020, it filed an income tax return with a basic tax still due and payable for the
fiscal year amounting to P500,000. Compute the interest penalty to be imposed by the BIR.
P28,603
25. Rod, a non-resident citizen, deposited his $5,000,000 savings in a two-year time deposit in
Green Bank, a depository bank under the expanded foreign currency deposit system. The
deposits pays annual interest of 8%. Compute the final tax to be withheld in dollars in the first
year. $0
26. Roy invested P1,000,000 in the “tax free” corporate bonds of ABC corporation. The bond pays
8.75% interest annually net of any taxes. How much final tax must ABC withhold from the
annual interest payment to Roy? P37,500
27. The exemption on final tax on interest from long-term deposits is not applicable to Corporations
28. The final Tax does not apply to interest on; Promissory notes
29. The final tax rates on pre-termination of long-term deposits is relevant to Any corporation.
30. The interest income from long-term deposits made with foreign banks is Subject to regular tax.
31. The winnings of a resident alien from abroad is Not subject to Philippine income tax .
32. There are accounting techniques or conventions used to measure income. Accounting methods
33. Under which of the following will short accounting period not arise? Change of accounting
period by an individual taxpayer
34. Which interest income is not subject to any income tax. Imputed interest 
 35. Which is an incorrect statement regarding the use of accounting period? Individuals can either
choose the calendar year or fiscal year accounting period
36. Which is correct regarding the crop year method? Crop year method matches cropping
expenses with the income upon harvest
37. Which is correct with regard to the final income taxation? Taxpayers need not file an income
tax return
38. Which is not a feature of final tax? Covers certain passive income
39. Which is not a scheme in taxing income?  Ordinary gain taxation
40. Which is not a special feature of regular income taxation? Final withholding tax at source
41. Which is not an item of passive income? Professional income
42. Which is not subject to 10% final tax? Royalties from a business trademark
43. Which is not subject to 20% final tax? Royalties from musical composition 
44. Which of the following accounting methods is most consistent with the lifeblood doctrine?
Accrual method 
45. Which of the following properties when classified as capital asset is subject to capital gains tax?
Domestic stocks sold directly to buyer /Real property
46. Which of the following recipients is exempt from final tax on dividends? Resident corporation
47. Which statement is correct regarding final income tax? Final tax applies only on certain passive
income earned within Philippines
48. Son Inc. is the only corporate shareholder of Siargao Inc, owning 60% of its outstanding voting
shares. During the year, Siargao Inc, declared a P1,000,000 dividend. Compute the final income
tax to be withheld by Siargao. P40,000
49. Herbert, resident resident citizen, won $1,000,000 from the US lottery. The lottery winning is
Subject to regular tax
50. A concerned government employee furnished the BIR a statemnt detailing the improper tax
practices of a corporate taxpayer. The information was instrumental to the collection of
P500,000 tax. How much informer's tax eward  after tax shall be released to the informant? P0

QUIZ ( Capital gain tax)

1. Which is an ordinary asset? Delivery truck
2. Which is not an ordinary asset? Personal laptop  of the taxpayer
3. Which is a capital asset to a realty developer?  Vacant lot held for future development 
4. Which is an ordinary asset? Office supplies
5. Which of the following assets, if not used in business, is subject to regular tax? Taxpayer's
personal car 
6. Which is a capital asset for a security dealer? Real property held for speculation
7. Which is subject to the 5%-10% capital gains tax? Sale of domestic stocks directly to a buyer
within or outside the Philippines
8. Who is not subject to capital gains tax on the sale of domestic stocks directly to a buyer? Dealer
of securities
9. Which of the following when sole, is not subject to capital gains tax? Boarding house ware
house
10. Which is not subject to the 6% capital gains tax? Donation of property
11. I. Capital gains may arise from sale, exchange, and other disposition of movable properties used
in business. II. Ordinary gains may arise from sale, exchange, and other disposition of real
properties not used in business. Both statements are false
12. I. The gain on sale of domestic stocks directly to a buyer is presumed. II. The gain on sale of real
properties is presumed. Only II is true
13. Which of the following properties when sold may be subject to capital gains tax? Domestic stock
14. I. Only depreciable assets of business qualifies as ordinary assets. II. Land used in business is a
capital asset since it is not subject to depreciation . Which of the following is correct? both
correct
15. i. Ordinary gains may arise from sale, exchange, and other dispositions of real properties used in
business. II. Capital gain may arise from sale, exchange, and other dispositions of real properties
not used in business. Which is false? Both are false
16. Mr. Gil sold domestic stocks directly to a buyer at a mark-up on cost of P200,000. He paid
P5,000 broker's commission and P8,000 documentary stamp tax on the sale. Compute
the capital gains tax. P28,050
17. Vlad, a non-resident alien, sold domestic stocks directly to a buyer at a net gain of P70,000.
Compute the capital gains tax. P10,500
18. Pringle, a non-resident citizen, sold domestic stock rights directly to a buyer at a net gain of
P320,000. Compute the capital gains tax. P48,000
19. Aron sold shares of a resident foreign corporation directly to a buyer. The shares were
purchased for P100,000 and were sold at a ner selling price of P210,000. Compute the capital
gains tax . P0
20. Go sold domestic shares directly to buyer. The following relates to the sale: Fair market value of
shares P400,000. Selling price 300,000. Cost 150,000. Compute the capital gains tax.
P22,500
21. Quezon Inc. exchanged its investments representing domestic shares for a piece of land owed
by Falcon, Inc. Fair market value of shares P400,000, Fair market value of land 500,000, Par
value of shares 300,000, Cost of shares 350,000 . Compute the capital gains tax.  P22,163
22. Dustin Inc. exchanged its share investment from Dee Inc., as payment of its P350,000 long
outstanding loan from the latter. Dustin acquired the shares for P300,000. Ignoring
documentary stamp tax, compute the capital gains tax on the transaction. P7,500
23. On January 5, 2020, Val, a stock dealer, disposed the following shares directly to a buyer: Stock
rights   P200,000  (selling price) P170,000 ( cost) , Common stocks       100,000   (selling price)   
110,000 (cost) . Ignoring the documentary stamp tax, the capital gains tax payable on the sale is.
P0 
24. Xavier, Inc., a domestic service company, has the following transactions on the sale of another
domestic corporation. P0

Transaction                Quantity               Net price

Purchase                    20,000                  P40,000
Purchase                    30,000                   63,000
Sale                             40,000                   92,000
Assuming the first-in, first-out method, compute the capital gains tax on the sale
 25. Assuming the moving average method, compute the capital gains tax on the sale .  P400

QUIZ ( REGULAR INCOME TAX)

1. The proceeds of an insurance policy received by the corporation as beneficiary on the life insurance
of its officer is exempt from income tax
2. Mr. Baldo was insured in a life insurance with his daughter, Jean as irrevocable beneficiary. Jean was
paid the entire proceeds when Mr. Baldo died. The proceeds constitute. an exclusion from gross
income
3. A policy holder who outlived the policy and received a cash surrender value in excess of premiums
paid is exempt upon.  the amount representing a return of premiums
4. The assignment of an insurance policy at an amount in excess of the premiums paid on the policy is
subject to income tax.
5. The policy holder of a life insurance contract outlived his insurance policy. He was paid P3,000,000
upon maturity of the policy. He paid P2,500,000 total premiums. What is the inclusion in gross
income? P500,000
6. Which is not requisite of exemption of a retirement benefit plan? he retiree must be a senior citizen
7. Termination benefits are exempt from income tax provided that the reason for termination is
Beyond the employee’s control
8. Mrs. Beauty retire from the government after 30 years of service at the age of 55. He received a
total retirement pay of P1,800,000 plus P400,000 GSIS benefits. How much will be excluded in gross
income? P2,200,000 
9. Mr. Yuno collected P1,000,000 insurance proceeds of Mr. Jaime which he bought from the latter for
P400,000. Before the death of Mr. Jaime, Mr. Yuno paid total premiums of P200,000. Determine
respectively the exclusion in gross income and the inclusion in gross income. P600,000; P400,000
10. Mr. Kabacan surrendered his life insurance policy and received a cash surrender value of P800,000
after contributing P700,000 in annual premiums. Determine respectively the total exclusion in gross
income and the inclusion in gross income. P700,000; P100,000
11. Mr. Tarragoza died. His heirs collected the P2,000,000 proceeds of his life insurance policy. Mr.
Tarragoza previously paid a total payment of P500,000 in premiums. Determine respectively the
exclusion in gross income and the inclusion in gross income. P2,000,000; P0
12. The Professional Regulations Commission collected a total sum of P100,000,000 from professional
license fees. It also collected P5,000,000 from rentals of government properties. What is the total
exclusion in gross income? P100,000,000
13. The following income relates to a proprietorship registered as a BMBE; P15,800
Gross Income from sales                                P 400,000
Dividend income – domestic                                 9,000
Interest on deposits                                              6,800
Compute the total exclusion in gross income subject to regular tax.
14. In the immediately preceding problem, compute the total inclusions in a gross income subject to
final tax. P15,800
15. KKB, a multi-purpose credit cooperative, had the following income in 2015: 438,000 
Income from related activities                                  P 400,000
Income from unrelated activities:
- Dividends from stocks                                                    20,000
- Income from time deposits                                           18,000
- Rent Income                                                             60,000
Compute the total exclusion from gross income subject to regular tax of the
cooperative.

16. Diony sold domestic shares of stock directly to a buyer at a mark-up on cost of P200,000. He paid
brokers commission of P13,000 on the sale. Compute the capital gains tax. 20,050
17. Mr. Adol a non-resident citizen alien, sold domestic shares directly toa buyer at a net gain of
P70,000. Compute the capital gains tax. 10,500
18. Mr. Panay, a non-resident citizen, sold a domestic stock right directly to a buyer at a net gain of
P320,000. Compute the capital gains tax. 48,000
19. Mr. Digs sold shares of a resident foreign corporation directly to a buyer. The shares were purchased
for P100,000 and were sold at a net selling price of P210,000. Compute the capital gains tax. 0 
20. Grace sold domestic shares directly to buyer. The following relates to the sale: 22,500

Fair market vale of the shares                                   P400,000     

Selling price                                                                      300,000
Cost                                                                                    150,000
Compute the capital gains tax

21. On January 5, 2020, Mers a stock dealer, disposed the following shares directly to a buyer. P0

 Selling price                                     P300,000

               Cost                                                      280,000
Compute the capital gains tax.

22. JR a resident citizen, purchased 100,000 shares of AVC Company for P200,000. He disposed through
PSE for P250,000. Compute the capital gains tax.  P0 
23. Andrew sold domestic shares directly to a buyer on October 1, 2019 under the following terms:
45,000

Selling price                                      P500,000

Cost                                                      200,000
Downpayment                                     10%
Installment                                          100,000
Compute the capital gains tax.

24. Beb sold a vacant lot for P3M. The lot has a zonal value of P3,200,000 and a fair market value of
P2,800,000. Compute the capital gains tax. 192,000
25. Princess Company sold its parking lot for P2,000,000. The lot has a zonal value of P2,500,000 and
appraisal value of P1,800,000. The capital gains tax on the sale of the lot is . P0
QUIZ

1. Which of the following will not be reported in gross income? Receipt of inheritance
2. Which is not a reportable type of gross income? Capital gains from the sale of a domestic
stocks from PSE
3. Which of the following is included in gross income subject to regular tax? Farming income
4. All income abroad that wold otherwise be subject to final tax if earned within the Philippines
shall be subject to progressive tax of a. resident citizen
5. All items of passive income earned abroad are subject to regular tax to a resident citizen and
domestic corporation.
6. Which individual taxpayer is not subject to regular income tax? NRA-ETB
7. Which corporate taxpayer is not subject to regular tax? Non- resident Foreign corporation
8. Individual taxpayer shall report their income on a calendar year
9. Corporations are allowed are allowed their income on Either calendar or fiscal year
10. Which is subject to a progress tax to an individual taxpayer? Amounts received by the insured
in excess of premium paid
11. Which of these is subject to Philippine regular income tax to a foreigner? Interest income from
domestic bonds
12. Corporations and individual engaged in business or in the exercise of a profession are required
to report their regular income. Quarterly and annually
13. Dividends subject to regular tax includes. Foreign dividends
14. Which is an item of gross income subject to regular tax? Gain on sale of lot by a realty dealer
15. Which is an income exempt from income tax? Taxes collected by the government
16. Mr. Sunjo had the following data for the income tax return in 2018: 340,000
Sales                                                                  P980,000
Cost of sales                                                      400,000
Gross compensation income                        240,000
Non-taxable compensation                             60,000
Administrative & selling expenses               240,000
Personal expenses                                           140,000
What is the net income?

17. Compute the taxable compensation income. 180,000

18. Compute the taxable income. 520,000
19. Shown below is a compilation of the gain on the sale of real properties: 2,600,000
Real Properties classified as                        Philippines           Abroad
Ordinary assets                                              P600,000            
P1,600,000
Capital assets                                                    800,000                 
400,000
What is the gain to be included in gross income subject to regular income
tax assuming the taxpayer is a domestic corporation?
20. A taxpayer collected the following passive income during the year: P3,000,000
 Passive Income                                                              Philippines           Abroad
Interest income from banks                                       P600,000             P1,600,000
Royalties from books                                                     400,000                  200,000
Rent of properties                                                           800,000                  400,000
What is the amount to be reported in gross income if the taxpayer is a resident citizen?

21. In the immediately preceding problem, what is the reportable gross income assuming that the
taxpayer is a resident alien? P800,000
22. A non-VAT taxpayer collected P450,000, net of P50,000 withholding tax. Compute the gross
income subject to regular income tax. 500,000
23. A taxpayer collected P792,000 ,, net of 1% withholding tax. What is the amount subject to
regular income tax? 800,000
24. A taxpayer received P8,000 interest income, net of 20% final withholding tax. Compute the
amount subject to regular income tax. P0
25. A taxpayer received P180,000 dividend, net of 10% withholding tax. Compute the amount
subject to regular income tax. P0

QUIZ

1. which is not an element of an employer-employee relationship? Payment of fixed wages

2. Which is not an employee classification as to function? Special employee
3. Which is not an employee classification as to taxability? Managerial employee
4. Which is usually an employee? A director at the same time the Chief Executive office
5. Which is not a supplemental compensation income? De minimis benefits
6. The term De minimis benefits does not include Christmas bonus
7. Which is taxable as compensation? Termination benefits from resignation
8. Which is subject to income tax? Voluntary contributions to SSS, PHIC and HDMF
9. All of these are exempt benefits of a minimum wage earner except vacation pay
10. Rice allowance is taxable when paid given more than P2,100 amonth
11. Which is not subject to P90,000 exemption threshold for a private employee? Profit sharing
bonus
12. The P90,000 treshold is applicable to All employees
13. Which of the following remuneration is an itme of compensation income? commissions to a
minimum wage earners
14. The excess of 13th month pay and other benefits is subject to income tax
15. Meal allowance is taxable when given as incentive to all employees 
16. The following relates to ab annual payroll of the employee 1,069,000
Gross compensation income before P44,000 contribution to SSS, phic & hdmf      p1,068,000
Additional compensation                                                                                                              
45,000
13 th month pay and other benefits                                                                                          
89,000
Compute the taxablecompensation income ?

17. A managerial employee received the following remunerations: 1,335,000

 Gross salaries net, of SSS, PHIC, HDMF                                   p1,090,000
Sss MATERNITY BENEFITS                                                                 30,000
Profit sharing bonus                                                                           240,000
13th month pay                                                                                     95,000
Determine the taxable compensation income.

18. An employee had the following details of compensation income in 2019: 836,000
Regalar compensation                                                               P780,000
13th month pay                                                                                 65,000
Overtime pay                                                                                    43,000
De minimis benefits:
        Medical assistance toemployee                                           22,000
        Total of other de minimis benefits                                      32,000
Compute the taxable compensation income if the employee is a managerial
employee.
19. An employee received the following remunerations aside formhis bsic pay: 56,000 
Fixed transportation allowance                                               P 24,000
Night-shift differential pay                                                           12,000
Hazard pay                                                                                        12,000
Honoraria                                                                                            8,000
Profit sharing                                                                                   24,000
13th month pay                                                                                18,000
Compute the supplementary compensation if the employee is a regular
employee.

20. Compute the supplementary compensation if the employee is a minimum wage earner 32,000
21. A managerial employee received the following benefits during the year: . 1,445,000
Compensation income, net of mandatory contribution                    P 1,080,000
Housing allowance in addition to his regular pay (P30,000 x 12; actual rental is
P25,000 a month ) 360,000.
13th month pay                                                                                                  95,000
What is the taxable compensation income?
22. A government employee received the following benefits in 2019: 1,009,200

Gross salaries                                                                                P1,044,000

RATA                                                                                                      12,000
PERA                                                                                                       24,000
Additional compensation                                                                  24,000\
Christmas bonus                                                                                  87,000
Christmas gift                                                                                        5,000
Laundry allowance                                                                              4,800
Contribution to SSS, Philhealth and HDMF                                   62,000
Determine the taxable compensation income

23. A private employee had the following remunerations in 2019:  350,000

 Gross salaries net, of mandatory contributions                                  PP314,000
Fixed RATA                                                                                                         12,000
Cost of living allowance                                                                                  24,000
13th month pay                                                                                                  28,000
Christmas gift                                                                                       5,000
Laundry allowance                                                                                             8,000
 Answer the following questions:
What is the taxable compensation income?

24. What is the total exempt de minimis benefits? 8,600

25. What is the total exempt benefits? 41,000

MIDTERM EXAM

1. Which is not subject to income tax?

a. gain from sale of shares in mutual funds by the investor
b. prizes in recognition of civic, religious, and artistic achievements
c. PCSO and lotto winnings, not exceeding P20,000
d. All of these

2. Which is an item of gross income subject to regular tax? gain on sale

3. Which is not an item of gross income subject to final tax? share in the income of a general
professional partnership
4. Which of these employee benefits is subject to final tax? fringe benefits to supervisory and
managerial employees
5. All of these are items of gross income subject to regular tax except one.  Select exception

a. compensation income
b. interest income from long-term bank deposits
c. ordinary gain on sale of properties
d. interest on notes receivables

6. Which is an income exempt from income tax?

a. income of a general professional partnership
b. foreign dividends
c. taxes collected by the government
d. income of government-owned and controlled corporation

7. All of these are subject to regular income tax, except

a. professional fees
b. wages and commission
c. business income
d. capital gain from the sale of real property located in
the Philippines
8. Which is exempt from regular tax? income from qualified pension plans
9. Which item of gross income is not subject to regular tax?  capital gain on the sale of bonds with
more than 5 years maturity
10. Which is not part of compensation income subject to regular tax? portion of salary contributed
to SSS
11. Which is not a supplemental compensation income? De minimis benefits
12. Fringe benefits includes De minimis benefits
13. De minimis benefits are generally exempt from tax
14. Which do not form part of other benefits of rank and file employees? Salaries and wages
15. The term “de minimis benefits” does not include Christmas bonus
16. Select the most accurate statement the benefits of rank and file employee are not subject to
fringe benefit tax
17. Which is taxable as compensation? Termination benefits from resignation
18. Which of the following is subject to income tax? Voluntary contribution to SSS, PHIC and HDMF
19. All of these are exempt benefits of a minimum wage earner except vacation pay 
20. Which is correct when a minimum wage earner derives other income outside his employment?
he is exempt from withholding tax, but subject to income tax
21. The free usage of which of the folloing items is exempt from fringe benefit tax? Helicopter
22. What percentage of the fair value of the yacht is considered in measuring depreciation value? 5%
23. Which is subject to fringe benefit tax? Housing for the family members of an employee
24. To which of the following is the tax benefit rate is not applied? The monetary value of the fringe
benefit
25. Which fringe benefit is subject to fringe benefit tax? If given for the convenience or advantage
of the employee
26. Which is not part of de minimis benefits?  month day
27. The de minimis benefits not exceeding their thresholds are exempt from income tax
28. Select the answer which more accurately completes the statement. The taxable fringe benefit of
a supervisory employee is subject  to fringe benefit tax
29. Who is subject to the fringe benefit tax? managerial or supervisory employees
30. Which of these items is subject to fringe benefit tax? fringe benefits of managerial or
supervisory employees
31. Mrs. Kalm has several interests in various businesses and partnerships. She received the
following income during the year: P180,000
Dividends from a domestic corporation                          P120,000
Dividends from resident foreign corporation                     80,000
Share in net income of a business partnership                 200,000
Share in the net income of a professional partnership    100,000
What is the total income to be reported in gross income?

32. Ms. Win received a total P200,000 from her father for her support. During the year, she also
received a P150,000 total distribution from the trust irrevocably designated by her grandfather in
 her favor. She also received P120,000 income distribution from the estate of her grandmother
undergoing judicial settlement.
What is the total amount to be includd in her gross income? P270,000
33. A non-VAT taxpayer collected P45,000 net of P5,000 withholding tax. Compute the gross income
subject to regular tax.  P50,000
34. A VAT taxpayer collected P66,600, inclusive of P7,200 VAT and net of P600 withholding tax.
Compute the gross income subject regular income tax. P60,000
35. A non-VAT taxpayer colelcted P79,200, net of 1% withholding tax. What is the amount subject to
regular income tax? P80,000
36. A supervisory employee has the following benefits: P76,923 

13th month pay and other benefits                                          P40,000

De minimis within their limits                                                     35,000
Excess de minimis benefits                                                          10,000
Other fringe benefits                                                                    40,000
Compute the amount of fringe benefits subject to the fringe benefit tax rate.
37. An employer pays the P10,000 monthly residential rental of his managerial employee. Compute
the quarterly monetary value. P15,000
38. XYX Company designated a residential property for the use of its managerial employee.  The lot
has zonal value of P3,500,000 and P2,000,000 value per tax declaration. The assessed value on
the improvement on the lot was P1,500,000.  The lot was purchased at a cost of P2,000,000. 
Compute the monetary value to be reported in the quarterly fringe benefit tax return. P31,250
39. Kalibo Company purchased a residential unit for P3,000,000 and transferred ownership to its
supervisory employee. The property has a zonal value of P3,500,000. Compute the monetary
value. . P3,500,000
40. Celeste Inc., owns a residential property it acquired for P2,000,000. It transferred ownership
thereto to its managerial employee for P1,200,000 when its fair value was P3,00,000. What is the
monetary value of benefit? P1,800,000
41. Mr. Jules had the following income in 2019: P330,000

Compensation income, net of P77,000 SSS,

        PhilHealth, HDMF and union dues                                  P300,000
Supplemental compensation income                                         30,000
13th month pay and other benefits                                              25,000
What is the taxable compensation income?

42. The following relates to an annual payroll of the employee: P1,069,000 

Gross compensation income, before P44,000
      Contribution to SSS, PHIC and HDMF                               P1,068,000
Additional compensation                                                                   45,000
13th month pay and other benefits                                                  89,000
 Compute the taxable compensation income.
43. Coolong, a government employee, receives a full 13th month pay of P20,000 exclusive of P14,000
other benefits. He was deducted P18,000 during the year for premium for his SSS, PHIC, and
HDMF contributions. Compute Coolong taxable compensation income. P222,000
44. An employee received the following compensation during the year: P138,800
Gross compensation (P11,000 x 13 months)                                        P143,000
Overtime pay                                                                                                   12,000
Less:
               SSS,PHIC, HDMF and union dues                P  5,200
               Withholding tax                                              10,000               P  
15,200           

Net pay                                                                                                          P139,800

45. Johnson received a salary of P73,000 during the year consisting of : P60,000 basic salary, P8,000
overtime pay and P5,000 13th month pay. Compute Johnson’s taxable income using
contemporary tax regulations: P0
46. Mak reimbursed the following expense liquidation of its managerial employee:
Purchase of office supplies P20,000
Personal meals and groceries 15,000
Gasoline for transportation (1/2 for business) 8,000
Office electricity, water, and telephone bills 12,000

47. In the immediately preceding problem, what is the fringe benefit tax if the managerial employee
is a resident citizen? P10,231
48. Danny bought a car worth P800,000 and registered it in the name of its supervisory employee. It
was agreed that the same will be used partially for the business of Danny. Compute the
monetary value. P800,000
49. In the immediately preceding problem, what is the fringe benefit tax assuming the employee is a
non-resident alien?  P266,667
50. Lito Company grants its managerial employees the privilege to select a car of their choice with
value not exceeding P1,000,000 a unit or be given P1,000,000 cash benefit to acquire their own
cars. It also grants supervisory employees car benefits if they actually purchase their cars.
P3,600,000
Car benefits given to a manager, net of
  withholding tax on compensation                                     P900,000
Value of cars purchased for two other managers            2,000,000
Cash payments to various car suppliers for
   supervisory employees                                                      1,600,000

Compute the monetary value.

QUIZ 1 FINAL

1. Who are not related parties for purposes of the NIRC? A partner and the partnership
2. Which is a deductible expense?  marketing and advertising expense
3. The transactions involving an insured property is said to be closed and completed when  final
settlement by the insurer is made 
4. Which is a deductible expense? acquisition cost of a business franchise
5. Which is a deductible business expense? selling commission to agents
6. A repair expense is deductible in the period paid or incurred unless it.  increases the value of the
property 
7. A non-resident alien not engaged in business incurred business expenses of P100,000 and
personal expenses of P20,000. How much is deductible from his gross income? P0 
8. A taxpayer paid the following salaries during the year:  P150,000
Salaries of administrative employees             P 80,000
Salaries of sales and marketing employees  P70,000
Salaries of factory production workers            120,000
Compute the deductible salaries expense.
9. A taxpayer under the cash basis had the following expenditures: P300,000

Acquisition of office equipment at the middle

    of the year ( 5 years useful life)                      P200,000
Payment of employee salaries                              40,000
Payment for office utilities expenses                    60,000
How much is claimable as deductible business expense for the year?

10. Bandex Corporation and office supplies valued at P40,000 on January 1, 2020. At the end of the
first calendar quarter, it had P80,000 worth of office supplies. Total supplies purchased were
P250,000 during the period. Compute the supplies expense to be deducted during the first
quarter. P210,000 
11. Baxia Merchandising paid P400,000 to employees, net of P60,000 total withholding tax on
compensation. What is the deductible amount of expense by the employer? P460,000
12. Cash basis and accrual basis taxpayers differs in the treatment of. Current period accrued
expense
13. Losses on insured properties are not deductible. To the extent compensated by insurance
14. Losses on property are not deductible unless Sustained in an actual or completed transaction
15. On July 1, 2018, a taxpayer purchased equipment for P500,000 which was estimated to useful
until July 1, 2013, with an expected P100,000 residual value. Compute the 2018 depreciation
expense using the straight line method.  P40,000
16. On September 30, 2020 a taxpayer borrowed P1,000,000 at 10% annual interest to finance his
acquisition of a luxury car. Compute the deductible interest expense in 2020. P0
17. The following relates to a taxpayer: P400,000
Interest expense                                  P400,000
Interest income – promissory note    100,000
Compute the deductible interest expense
18. The following relates to a taxpayer’s warehouse: P100,000 
Cost                                                 P2,000,000
Accumulated depreciation             600,000
Residual value                                   200,000
Current fair market value              2,500,000
Remaining useful life                        12 years
Compute the deductible depreciation expense.
19. The taxpayer has the following losses: P200,000
Net Operating loss Carry Over – last year                                        P200,000
Net capital loss – current                                                                        80,000
Net capital loss – last year                                                                      70,000
Ordinary loss                                                                                              50,000
Taxable income before losses                                                              400,000
Compute the total deductible losses in the current year.

20. Which is a correct statement? Gains between related parties are taxable 
21. Which is a deductible tax expense? Real property tax on business properties 
22. Which is deductible in the measurement of net income from business or profession? Mandatory
payroll deduction
23. Which is deductible tax expense against gross income? Foreign income tax claimed as tax credit
24. Which is not a requisite of a deductible loss? It must be compensated by insurance or indemnity
contracts
25. Which is not deductible against gross income? Depreciation value of fringe benefits given to
managerial employee
26. Which of the following can be deducted by a VAT taxpayer? Interest on tax delinquency
27. Which of the following can treat capital expenditures as outright deduction? Private educational
institutions
28. Which of the following cannot be deducted against gross income of non-VAT taxpayers?
Philippine income tax
29. Which statement is the most accurate? Prepaid expense is deductible in the future period it
relate without regard to the basis of accounting employed by the taxpayer
30. Losses on capital assets are deductible against gross income to the extent compensated for by
insurance

QUIZ 2

1. A FITNESS GYM Catering to senior citizens recorded a total gross receipts of P345,000 from senior
citizens, The gym provides 24% discount, What is the deductible amount of senior citizen’s
discount?  P69,000
2. Xyz Company declared a property dividend with book value of P1,000,000 and the fair value of
P1,200,000, The total dividends withheld on the dividends were P60,000, Compute the total
deductible expense.  P0
3. A real investment trust earned P4,100,000 from property rentals and incurred total expenses of
P2,100,000, Assume the REIT declared the mandatory required dividend distribution, What is the
amount of deductible dividend against gross income? . P1,800,000
4. A RESTAURANT GRANTED 25% discounts to senior citizens, During the year, The restaurant
reported receipts of P93,750 from senior citizens customer, Compute the deduction for senior
citizens discount. P25,000
5. ABC paid P400,000 to employees net of P60,000 total withholding tax on compensation, What is
the deductible amount of expense by the employer? P460,000
6. Aldo a resident citizen, reported a world taxable income of P500,000 and a tax due on world
income of P125,000, P150,000 of the taxable income was earned in Japan out of which he paid
P45,000 in income tax, Compute Aldo’s foreign tax credit. 37,500
7. Deductions can be claimed against. Talent fees
8. Securities becoming worthless is considered as ordinary loss to. Banks, Trusts , Security dealers
9. The following relates to a taxpayer Interest expense P400,000 Interest income – promissory
notes 100,000 .Compute the deductible interest expense.  400,000
10. The required reserve for an insurance company was P3,200,000 as of December 31, 2019 and
P3,500,000 as of December 31, 2020, What is the deductible amount of transfer to the reserve
fund? P300,000
11. The taxpayer has the following losses: 250,000
NOLCO last year P200,000
Net capital loss- current 80,000
Net capital loss – last year 70,000
Ordinary loss 50,000
Taxable income before losses 400,000
Compute the deductible losses of the taxpayer.

12. Wagering losses are deductible. Up to the extent of gains on wagering transactions
13. Which is correct statement? Gains between related parties are taxable 
14. Which is deductible expense? Real property tax on business properties
15. Which is deductible in the measurement of net income from business or profession? Mandatory
payroll deduction 
16. Which is deductible tax expense against gross income?  Documentary stamp tax
17. Which of the following can be deducted by a VAT taxpayer? Interest on tax delinquency
18. Which of the following can be deducted by an individual taxpayer not engaged in business? None
of these
19. Which of the following can not be deducted from gross income of non-Vat taxpayer? Philippine
income tax
20. Which of the following can treat capital expenditures as outright deduction? Private educational
institutions
21. Who cannot claim foreign income tax credit? Resident aliens
22. The following relates to a taxpayer’s warehouse .  100,000
Cost                                                                  P2,000,000
Accumulated depreciation                                600,000
Residual value                                                      200,000
Current fair value                                             2,500,000
Remaining useful life                                                   12 years
Compute the deductible depreciation expense.
23. The following relates to a taxpayer. 367,000

Intrest expense                                               P400,000

Interest income- time deposit                      199,999
Compute the deductible interest expense.

24. An individual taxpayer reported the following: 120,000

Capital loss- current year                                            P50,000

Capital gain current year                                            200,000
Net capital loss- last year                                            70,000
Compute the total  capital loss deductible against capital gain in the current year.

25. Suppose the taxpayer in the immediately preceding problem is a corporation. Compute the
deductible capital loss against capital gain.  50,000

QUIZ 3

1. Corporate income taxpayers must indicate their options to claim OSD on. The first quarter return
during the year
2. Corporate OSD is in lieu of all expenses such as the following except. Cost of sales or cost of
services 
3. Cost of services of banks exudes the following except. Interest expense on depositors accounts 
4. For purposes of the OSD, which is not deducted in the determination of gross receipts? Cost of
services
5. In the determination of the distributive net income of the general professional partnership.
partners cannot claim OSD on their share in the net income of a general professional
partnership
6. Individual income taxpayer must indicate his or share option to claim OSD on. The annual
income tax return
7. Individual OSD is in lieu of all expense, such as but not including. Net capital loss carry over
8. Non-operating income subject to regular tax is excluded in the OSD base of. Neither individual
taxpayers nor corporate taxpayers
9. One of the following can claim OSD, which is it? A self-employed individual taxpayer 
10. The option to elect OSD is irrevocable.  In the year it was made 
11. The optional standard deduction for corporate taxpayer is. 40% of gross income
12. The optional standard deduction for individual taxpayer is? 40% of gross sales or gross receipts 
13. The OSD individuals under the cash basis is based on. Gross receipts 
14. The OSD of corporations under the accrual basis is based on. Total gross income
15. The OSD of corporations under the cash basis is based on.  Total gross income
16. When purely employed, who of the following can claim OSD? None of these (Resident citizen,
Non-resident citizen, Resident alien)
17. Which can claim deduction by itemized deduction only? Non-resident alien engaged in trade or
business
18. Which is correct with optional standard deduction? It replaces itemized deduction 
19. Which is correct with respect to the deduction claimable by a partner against his share in the
distributive net income of a general professional partnership? The partner can claim itemized
deduction provided the general professional partnership also uses itemized deductions
20. Which is not covered by the optional standard deduction?  Premium for health and
hospitalization insurance
21. Which is not deducted in the determination of gross sales? Bad debts expense
22. Which is not included in corporate OSD? Creditable withholding tax
23. Which is not part of cost of services for a manufacturing concern?  Interest expense 
24. Which is presented as operating income in the income tax return? Gross profit from the sale of
goods
25. Which of the following individuals engaged in business cannot claim optional standard
deduction? NRA-NETB 
26. Mrs. Kune had the following in 2020: P880,000 

Sales                                                                                 P3,400,000
Cost of sales                                                                     1,200,000
Administrative expenses                                                  300,000
Selling expenses                                                                 500,000
Other taxable income from operations                        120,000
Other non-operating income                                            80,000
Passive income, net of final taxes                                   70,000
 Assuming Mrs. Kune elects to deduct OSD, compute the OSD.
27. In the immediately preceding problem, compute the OSD assuming the taxpayer is a corporation.
P960,000
28. A self-employed practitioner and part-time employee derived the following income in 2020:
P320,000

Gross receipts                                                                                              P800,000

Compensation income                                                                                300,000
Dividend income from a Real Estate Investment Trust                         20,000
 Assuming the taxpayer opted to avail of OSD, what is the OSD?
Dividend income from a Real Estate Investment Trust 20,000

29. The following relate to collection upon billings, receipts and unpaid billings of a practitioner
during the year. P368,000

Receipts from current year billings                           P800,000

Receipts from last year’s billings                                 200,000
Current year uncollected billings                                100,000
Reimbursement for out-of-pocket expenses             20,000
Compute the OSD if the taxpayer is under the accrual basis. 
30. Compute the OSD if the a taxpayer is under the cash basis. P408,000