1) Security issue costs are not deductible from gross income.
True – Page 459
2) Immaterial capital expenditures should be capitalized upon acquisition just like any other capital
expenditures. False – Page 457
3) Intangible assets that do not lose their value such as PUV franchise shall not be amortized. True –
Page 456
4) Payments made by taxpayer to a general professional partnership is subject to 0% withholding tax.
True – Page 470
5) Rental payments on finance lease that transfers ownership are part of current year’s expenses. False
– Page 453
6) Self-employment is a business but employment is not a business. True – Page 450
7) Business expenses are deductible against gross income in the current period. True – Page 451
8) Bribes, kickbacks to government officials, payment to police officers for protection and revolutionary
taxes to rebels are non-deductible from gross income for tax purposes. True – Page 464
9) If the fair value of property increases due to repairs, improvements or additions, the actual costs
should all be capitalized regardless of amount. False – Page 457
10) Amortizable intangible assets should be amortized over the legal life or expected usage of life
whichever is shorter. True - Page 455
11) Repairs that significantly increase the value or prolong the useful life of properties are capital
expenditures. True – Page 457
12) Prepayments of expenses are deducted in the future period as they expire or used in business of
taxpayer. True – Page 457
13) Cost of a non-depreciable asset used in business shall be deducted from the selling price when the
asset is sold. True – Page 453
14) The useful life of a property is the length of time it is expected to be serviceable or its legal life,
whichever is longer. False – Page 453
15) Cost of removing an old building to give way for its replacement is to be capitalized as additional
cost of the land. False – Page 459
16) If the fair value of the property after repairs is not determinable, the entire repair costs should be
expensed outright. False - Page 457
17) Expenses that are intended for both business and personal use can be deducted in full from business
income. False – Page 451
18) Regular allowable itemized deductions pertain to necessary & ordinary expenses paid or incurred
during the year. True – Page 473
19) On March 15, 2018... 110,723
20) Expenses incurred to create or maintain some form of goodwill for the taxpayer’s trade are
deductible outright as expense. False – Page 452
21) Local taxes and permits are examples of business expenses. True – Page 451
22) Deductions from gross income pertain to all business expenses incurred by a taxpayer engaged in
business without limit. False - Page 450
23) As to timing, withholding of taxes should only be done when there is actual income payment. False –
Page 472
24) Optional standard deduction is in lieu of cost of goods sold & operating expenses for corporate
taxpayers. False – Page 475
25) Acquisition of franchise is an example of business expense. False – Page 452
26) For a VAT taxpayer, all costs directly related to the acquisition of property, plant and equipment
(PPE) excluding VAT should be capitalized. True – Page 459
27) Loss on properties fully covered by insurance is deductible for tax purposes. False – Page 466
28) SYD depreciation method is acceptable to the Bureau of Internal Revenue. True – Page 453
29) An expense is “ordinary” when it is normally incurred by other taxpayers under the same line of
business. True – Page 464
30) Inventory includes merchandise for sale, as well as supplies used by taxpayer in his business. True -
Page 456
31) When using declining balance method, salvage value is ignored entirely throughout the period the
asset is depreciated. False – Page 455
32) Personal living expenses are not deductible from business income. True - Page 451
33) The taxpayer and CIR may enter into a written agreement on the estimated useful life and rate of
depreciation. True – Page 453
34) Any change in the agreed rate and useful life shall be applied retrospectively from the date of
acquisition of the property. False – Page 453
35) If the property is disposed of before it gets fully depreciated, its original cost is deducted against the
selling price to arrive at the gain. False – Page 455
36) Cost of goods sold shall include the purchase price or cost to produce & all expenses directly
incurred in taking them to their present location and use. True – Page 456
37) The inventory method is applicable only to taxpayers using the accrual basis of accounting. False –
Page 456
38) Repairs that merely restore the functionality of property w/o increasing FV or useful life is
deductible as expense outright. True – Page 457
