1. Which is not a requisite of gross income?

a. Return on capital c. exempted by law

b. Realized benefit d. not exempted by law
2. Which is taxable item of income?
a. Increase in numbers of a herd of animals
b. Compensation for personal injuries
c. Moral damages
d. Interest on moral damages
3. Which is not subject to income tax?
a. Donation c. sales of goods
b. Sale of service d. barter of goods
4. The total consideration received from the sale of service constitute
a. Return on capital c. either a or b
b. Return of capital d. both a and b
5. When paid for, which of the following items may involve a return on capital?
a. House and lot c. dignity
b. Life d. health
6. The total consideration received from the sale of goods at a gain represents
a. Return on capital c. either a or b
b. Return of capital d. both a and b
7. The total consideration received from the sale of goods at a loss represents
a. Return on capital c. either a or b
b. Return of capital d. both a and b
8. Why is income subject to taxation?
a. Income is the most prevalent source of a taxpayer’s wealth
b. Income is the best measure of taxpayer’s ability to pay tax
c. Rich people tend to have more income than the poor
d. Any of these
9. Which is not an item of gross income because of the absence of an undertaking from the taxpayer?
a. Proceeds of a life insurance policy
b. Forgiveness of indebtedness as an act of gratuity
c. Revaluation surplus on properties
d. Service fees
10. Which is subject to income tax?
a. Proceeds of life insurance policy received by the family of the insured
b. Excess of proceeds over the premiums paid received by the taxpayer
c. Life insurance proceeds received by the corporation from the insurance of the deceased officer
d. None of these
11. Which of the following is exempted from income taxation because of the absence of the ability to pay?
a. Damages received from patent infringement suit
b. Unrealized income from investments
c. Gain on sale of goods
d. Inheritance
12. Income tax may be imposed for the following purposes, except
a. To provide large amounts of revenues
b. To limit corruption
c. To offset regressive sales and consumption taxes
d. To mitigate the evils arising from the inequalities in the distribution of income and wealth
13. Which of the following constitutes taxable income?
a. Return of premium on life insurance received by the insured
b. Moral damages received from slander
c. Proceeds of crop insurance
d. Compensation for personal injury
14. Which of the following is not a constructive receipt of income?
a. Forgiveness of indebtedness in consideration of service
b. Matured detachable interest coupons
c. Deposit of income to taxpayer’s bank accounts
d. Cash salary of an employee
15. A resident alien naturalized in accordance with Philippine laws is a
a. Resident citizen
b. Resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
16. Who is not a resident alien?
a. An alien who stayed in the Philippines for more than two years
b. An alien who married and stayed in the Philippines for one year
c. An alien who stayed in the Philippines for more than one year
d. An alien who established his intention before the CIR to stay in the Philippines for an extended period of time
17. Which taxpayer is not a natural person?
a. Resident citizen
b. Taxable estate
c. Non-resident alien engaged in trade or business
d. non-resident alien not engaged in trade or business
18. A Filipino who has been abroad for more than 183 days is classified as a
a. Resident alien
b. Non-resident alien
c. Non-resident citizen
d. Non-resident citizen not engaged in trade or business
19. Which of the following is not an income taxpayer classification?
a. Resident citizen c. resident foreign corporation
b. Non-resident alien d. general professional partnership
20. An American who showed proof to the satisfaction of the Commissioner of Internal Revenue of his intention to stay in
the Philippines as an immigrant is classified as a
a. Resident citizen c. NRA-ETB
b. Resident alien d. NRA-NETB
21. A Japanese who is staying in the Philippines for 183 days is a
a. Resident alien
b. Non-resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
22. A Canadian who is staying in the Philippines for more than one year is a
a. Resident alien
b. Non-resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
23. An alien who stayed less than one year in the Philippines is classified as a non-resident alien not engaged in trade or
business if he stayed herein for less than
a. 180 days c. 183 days
b. 1 year d. 2 years
24. A corporation incorporated according to Philippine laws is a
a. Domestic corporation c. non-resident corporation
b. Resident corporation d. de jure corporation
25. A foreign corporation which operates a branch in the Philippines is a
a. Domestic corporation c. non-resident corporation
b. Resident corporation d. de jure corporation
26. Which is required to pay income tax?
a. Revocable trusts c. co-ownership
b. Estates under extrajudicial settlement d. business partnership
27. Which is not an income taxpayer?
a. Non-resident foreign corporation
b. non-resident alien not engaged in trade or business
c. joint venture engaged in energy operation pursuant to a service contract with the government
d. irrevocable trusts
28. which of the following taxpayers is taxable only on income earned from the Philippines?
a. Resident corporation c. resident citizen
b. Domestic corporation d. all of these
29. All of the following are taxable only on income earned from sources within the Philippines, except
a. Resident alien c. non-resident corporation
b. Non-resident citizen d. domestic corporation
30. Which is taxable on world income?
a. Resident corporation c. resident citizen
b. Non-res citizen d. resident alien
31. The place of taxation is
a. Situs rule c. territoriality
b. Situs d. gross income
32. Which is not a scheme in taxing income?
 a. ordinary gain taxation c. capital gains taxation
b. regular income taxation d. final income taxation
33. Which of the following properties when classified as capital asset is subject to capital gains tax?
a. Domestic stocks sold directly to buyer
b. Real property
c. Both a or b
d. None of these
34. Capital asset means
a. Real properties used in business
b. Personal properties used in business
c. Real properties not used in business
d. Any property, real or personal, not used in business
35. Income is recognized when received rather than when earned
a. Cash basis c. accrual basis
b. Installment basis d. deferred payment basis
36. Income is recognized when earned regardless of when received
a. Cash basis c. installment method
b. Accrual basis d. percentage of completion

Sarah has the following items of income:

Philippines Abroad
Business income P200,000 P100,000
Professional fees 100,000 50,000
Compensation income 400,000 -
Rent income 300,000 200,000
Interest income 30,000 40,000

37. Assuming Sarah is a resident citizen, compute the total income subject to Philippine income tax
a. P390,000 c. P1,030,000
b. P1,180,000 d. P1,420,000
38. Assuming Sarah is a resident alien, compute the total income subject to Philippine income tax
a. P1,420,000 c. P1,030,000
b. P1,180,000 d. P390,000
39. Assuming Sarah is a resident corporation, compute the total income subject to Philippine income tax
a. P1,420,000 c. P1,180,000
b. P1,030,000 d. P390,000
40. Assuming Sarah is a domestic corporation, compute the total income subject to Philippine income tax
a. P390,000 c. P1,180,000
b. P1,030,000 d. P1,420,000