INCOME TAXATION LONG QUIZ

NAME OF STUDENT

YEAR/SECTION

ANSWER THE FOLLOWING (PLEASE SHOW YOUR SOLUTIONS)

1. Which of the powers of the state is the most superior? Which is regarded as
the most important?
a. Taxation, eminent domain
b. Police power, taxation
c. Eminent domain, police power
d. All the powers are equally superior and important

2. Which of the following is not a constitutional limitation of the power to tax?

a. Non impairment of obligation or contracts
b. Due process and equal protection of the law
c. Non appropriation for religious purposes
d. Non delegation of the taxing power

3. Select the incorrect statement

a. The power to tax includes the power to exempt
b. Exemption is construed against the taxpayer and in the form of the
government
c. Tax statues are construed against the government in case of doubts
d. Taxes should be collected only for public improvement

4. Which of the following is not an inherent limitation of the power to tax?

a. Tax should be levied for public purpose
b. Taxation is limited to its territorial jurisdiction
c. Tax laws shall be uniform and equitable
d. Government agencies and instrumentalities are exempt from tax

5. Which of the following powers is inherent or co existent with the creation of

the government?
 a. Police power
b. Eminent domain
c. Taxation
d. All of the above

6. Which is not a nature of tax?

a. Enforced proportional contributions
b. Enforced within the territorial jurisdiction of the taxing authority
c. Levied by the lawmaking body
d. Generally payable in kind

7. MS. ABANILLA has a tax obligation to the government amounting to 80,000.

Since she is leaving the country, she entered into a contract with MS. AGA
wherein MS. AGA shall pay the 80,000 tax in her behalf. On due date MS. AGA
failed to pay the tax. the BIR sent a letter of demand to MS. ABANILLA which
she refused to pay.
Which of the following statements is correct?

a. The government cannot enforce collection charges against MS. ABANILLA

since she had validly transferred the obligations to MS. AGA under the
contract
b. The government can no longer run after MS. ABANILLA because she is
already outside the Philippine territory
c. The government should wait until MS. AGA becomes solvent again
d. The government should force MS. ABANILLA to pay because taxes are non
assignable

8. Statement 1 Taxes are voluntary contributions to the government

Statement 2 taxes are mandatory contributions to the government
Which is correct?
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Neither statement is correct

9. Select the incorrect statement

a. Tax maybe unlimited in amount
b. Nonpayment of license renders the business illegal
 c. Special assessment is not a liability of the person owning the property
d. Special assessment can be imposed on building and other real right
attaching or pertaining to land

10.Which is not an application of a principle of sound tax system?

a. Taxes should be based on government needs
b. Taxation should be progressive
c. Taxation should encourage convenient compliance
d. None of these

11. MS. ALQUIROZ a resident alien and MS. BRIONES a non resident alien
executed a contract of sale in Japan whereby MS BRIONES shall purchase the
lot owned by MS. ALQUIROZ in the Philippines. MS. ALQUIROZ gains
1,000,000 in the exchange. which is true?
a. The gain is exempt since the gain is derived outside the Philippines
b. The gain is not subject to Philippine tax since MS. ALQUIROZ is a resident
alien
c. The gain is subject to Philippine tax because MS. ALQUIROZ is a resident
alien.
d. The gain is subject to Philippine tax because the property is in the Philippines

12.MS. CASTILLO, a resident alien bought a car manufactured in the Philippines

and exported the same at a gain to MR. CORTEZ, a non resident citizen.
Which is correct?
a. The gain is subject to tax in the Philippines since the commodity involved
is manufactured in the Philippines
b. The gain is subject to tax in the Philippines since the buyer is a citizen of
the Philippines
c. The gain is both subject to tax in the Philippines since the buyer is a
citizen of the Philippines
d. The gain is taxable abroad it is sold abroad

13.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
14.Which is not an item of gross income because of the absence of an
undertaking from the taxpayer?
a. Proceeds of a life insurance
 b. Forgiveness of indebtedness as an act of gratuity
c. Revaluation surplus on cooperatives
d. Service fees

15.Which is not subject to income tax ?

a. Donation
b. Sale of service
c. Sales of goods
d. Barter of goods

16. MR. CORTEZ sold its old warehouse with carrying amount (tax basis) of
600,000 for 1,000,000. A down-payment of 15% was collected on July 1, 2019
. additional 150,000 installment payments were received as of December 31,
2019.

Compute the gross profit to be reported for the year 2019

a. 60,000
b. 120,000
c. 400,000
d. 450,000

17.MS . DAVID accepted a 1,000,000 construction contract in early 2020. As of

December 31, MS. DAVID incurred total construction costs of 600,000 and
estimates additional 200,000 to bring the project to completion. For
independent appraisal the building is at its 80% stage of completion.
Compute MS. DAVID 2020 construction income using the percentage of
completion method.
a. 40,000
b. 200,000
c. 160,000
d. 400,000

18.MS. DELA MINEZ leases an office space from MS . DELOS SANTOS in a non
renewable 10 year lease contract . just after the second year of the lease .
MS. DELA MINEZ renovated the premises and made improvements at a cost
of 1,200,000. These improvements are expected to last for 12 years .
Compute MS DELOS SANTOS annual income from the leasehold improvement
using spread out method .
a. 50,000
 b. 37,500
c. 30,000
d. 20,000

19. Mr. ESGUERRA , a farmer uses the crop year method in reporting his income
from long term crops . The following data are relevant to his farming
operation in 2020.
- Sale of crops harvested 900,000
- Expenses on harvested crops 400,000
- Expenses on maturing crops 200,000
- Expenses on newly planted corps 100,000
- Sale of tree branches for firewood 50,000

Mr. ESGUERRA uses the crop year method in reporting crop income. Compute MR .
ESGUERRA’s total income subject to tax

a. 240,000
b. 340,000
c. 540,000
d. 550,000

20. DIMACALI CONSTRUCTION COMPANY constructs residential properties for

clients and reports income by the percentage of completion method. In 2019,
DIMACALI CONSTRUCTION COMPANY started a 2,000,000 construction
contract . Details of his 2019 and 2020 construction follow:

2019 2020

Annual construction costs 200,000 800,000

Estimated cost to finish 800,000 250,000

Extent of completion 20% 80%

Compute the construction income in 2019 and 2020

a. 200,000 ; 560,000
b. 200,000 ; 400,000
c. 400,000 ; 400,000
d. 400,000 ; 560,000
21.MS. EVARISTO submitted a sworn statement regarding the alleged tax
evasion practices of FABIAN CORPORATION. This led the BIR to recover
20,000,000 unpaid taxes . How much net tax informer’s reward shall be paid
to MS. EVARISTO ?
A. 1,800,000
B. 1,600,000
C. 1,000,000
D. 900,000

22.MS FAJARDO invested 1,000,000 in the tax free corporate bonds of GALANG
CORPORATION . The bond pays 8.75% interest annually net of any taxes. How
much final tax must GALANG CORPORATION withheld from the annual
interest payments to MS. FAJARDO?
A. 36,000
B. 16,800
C. 37,500
D. 0

23. MS. GARCIA owns a mining property in PALAWAN. She allowed a mining
company to operate under a condition that he will paid 10% royalty on the
gold production . the mining company produced 8,000,000 worth of gold
during the year. How much net royalties will be paid to MS. GARCIA?
A. 800,000
B. 640,000
C. 720,000
D. 160,000

24.MS. GONZALES earned the following prizes from 2 different competitions

DATE EVENT GROSS PRIZE

January 4, 2017 singing competition 12,000
February 14, 2017 painting competition 10,100

Compute the total final tax that should have been withheld from the above
prizes

a. 5,500
b. 4,420
c. 3,000
d. 2,400
 25. MS LACDANG is the only corporate shareholder of CEBU INC. owning 60% of
the outstanding voting shares . during the year, CEBU INC. declared a
1,000,000 dividends . Compute the final income tax to be withheld by CEBU
INC.
A. 100,000
B. 60,000
C. 40,000
D. 0

26. MS. LAYAG sold domestic stocks directly to a buyer at a markup on cost of
200,000. He paid 5,000 brokers commission and 8,000 documentary stamp
tax on the sale. Compute the capital gains tax.
a. 28,050
b. 14,500
c. 14,200
d. 13,700

27. MS. MALONG a resident citizen ,purchased 100,000 shares of PAMPANGAS

BEST a domestic listed company. The shares were acquired at 200,000. She
disposed the shares through the Philippine stock exchange at a fair value of
250,000.

Compute the capital gains tax

a. 0
b. 2,500
c. 7,500
d. 10,000

28. MANDANI’s CORPORATION realized the following gains or losses in selling

various securities

Gain on sale of domestic stocks 300,000

Par value of domestic stocks sold 200,000
Gain on the sale of interest in a partnership 200,000
Gain on the sale of stocks of foreign
Corporations 150,000

Compute the capital gains tax

 a. 45,000
b. 44,775
c. 35,000
d. 25,000

29. MS. MATUTINO purchased a building to be used as a future plant site .The
building remained unused for 3 years due to a significant decline in
customers demand in the product of the taxpayer. The taxpayer eventually
disposed the property. What is the classification of the property?
a. Ordinary asset
b. Capital asset
c. Either a or b at the discretion of the BIR
d. Either a or b depending on the intent of the buyer

30. MS MAUN sold a residential land for 4,000,000. The land had a fair value of
3,500,000 and an assessors fair value of 2,000,000. What is the total income
tax and documentary stamp tax due?
a. 0
b. 300,000
c. 400,000
d. 450,000

31.The general rule in income taxation

a. Final income taxation
b. Capital gains taxation
c. Regular income taxation
d. Fringe benefit taxation

32. Which is true with the final withholding tax

a. The taxpayer still needs to file an annual consolidated return
b. It applies to all items of gross income
c. It constitutes a partial payment of income tax
d. It applies to certain passive income

33.The following maybe relevant in the determination of taxable income

a. Gross income subject to regular tax
b. Gross income subject to final tax
c. Deductions from gross income
d. Personal exemption
 34.The distinction between operating and non operating income is not required
in the income tax return of
a. Self employed individuals in business
b. Mixed income earners
c. Self employed professionals
d. Purely employed individuals

35.The taxable income of corporate taxpayers is the

a. Net income from business
b. Net income from business less personal exemptions
c. Taxable compensation income
d. Net income from business

36. MS. MANABAT has the following data during the year

Basic salary 1,200,000

Income tax withheld 50,000

13th month pay 100,000

SSS 2,000

PHILHEALTH 1,800

PAGIBIG 1,700

Union dues 500

Capital build up contribution in a social fund 2,000

Compute the total exemptions and exclusions from gross income

a. 106,000
b. 100,000
c. 96,000
d. 88,000
 37.MS. MANALAC collected 2,000,000 from the fire insurance company that
insured his building which had a tax basis of 1,800,000 when the fire
occurred. During the same period, he also collected 300,000 crop insurance
proceeds pertaining to his crops destroyed by frost. The total item of gross
income is
a. 2,300,000
b. 200,000
c. 300,000
d. 500,000

38.At the age of 54, MS. SANTOS was awarded a retirement gratuity of
2,000,000 for her 30 years of service in OCAMPO’s COMPANY . The
employer’s retirement benefit plan was with an employee participation
feature where MS. SANTOS contributed a total premium of 800,000 in the
fund . MRS. SANTOS also received 500,000 benefit from SSS.

Compute the total exclusion in gross income

a. 1,700,000
b. 1,300,000
c. 800,000
d. 2,500,000

39. MS. PINEDA received a condominium including its accrued income as

inheritance from her deceased grandfather on April 1, 2014. The following
data relates to the property.

Fair value of property 125,000

Rent income earned before death of decedent 4,000,000

Rent income earned after death of decedent 6,000,000

Interest on deposit of rentals

40% accruing after death 100,000

How much of the above income will be included in the gross income of MS
PINEDA and in the gross income of the decedent?
 a. 6,040,000 ; 4,060,000
b. 6,000,000 ; 4,000,000
c. 4,060,000 ; 6,040,000
d. 4,000,000 ; 6,000,000

40.Which is not a requisite of exemption of a retirement benefit plan?

a. 10 years of employment
b. The employee maintains a reasonable pension benefit plan
c. The retiree must be a senior citizen
d. First time availment of retirement exemptions

41. DON LOUIE QUIROZ has the following income in 2015

Sales from vegetables 400,000

Sales from fruits 200,000

Sales of carabao (acquired for 30,000 in 2015) 35,000

Interest income from tenants on the sale of

Agricultural land pursuant to the agrarian

Reform program 12,000

The gross income subject to progressive tax is

a. 647,000
b. 617,000
c. 600,000
d. 605,000

42.A taxpayer under the cash basis wrote off 50,000 receivables in 2010. In
2015, 30,000 of the receivables was recovered.

Determine the amount to be included in gross income in 2015 assuming that the
taxpayer incurred a net operating loss of 40,000 in 2010.

a. 0
 b. 10,000
c. 30,000
d. 40,000

43. Shown below is a compilation of the gain on sale of properties

Real properties classified as Philippines abroad

Ordinary assets 300,000 800,000

Capital assets 400,000 200,000

What is the amount of income to be included in gross income subject to regular

income tax assuming the taxpayer is a domestic corporation?

a. 1,300,000
b. 1,100,000
c. 1,700,000
d. 300,000

44. MR SAMPANG received a total of 200,000 from her father for the support.
During the year she also received a 150,000 total distribution from the trust
irrevocably designated by her grandfather in her favor. She also received
120,000 income distribution from the estate of her grandmother undergoing
judicial settlements.

What is the total amount to be included in her gross income?

a. 200,000
b. 270,000
c. 350,000
d. 470,000

45.A non VAT taxpayer collected 45,000 net of 5,000 witholding tax . compute
the gross income subject to regular tax.
a. 5,000
b. 40,000
c. 45,000
d. 50,000
46. The statutory minimum wage is
a. The amount fixed by the regional tripartite wage and productivity board
b. The rate fixed by the regional tripartite wage and productivity board which
must not exceed 5,000 a month or 60,000 annually
c. The higher between 5,000 a month or 60,000 annually or the rate fixed by
the regional tripartite wage and productivity board
d. 5,000 a month or 60,000 annually unless it exceed the rate fixed by the
regional tripartite wage and productivity board

47.Which is a correct statement ?

a. The compensation income of a managerial or supervisory employees is
subject to fringe benefit tax
b. The taxable fringe benefit of rank and file employees are subject to fringe
benefit tax
c. The taxable fringe benefit of managerial and supervisory employee are
subject to regular tax
d. The compensation income of rank and file employees is subject to regular tax

48.Which of the following remuneration is an item of compensation income?

a. Retainer fee of an outside director
b. Customer tips
c. Commissions to a minimum wage earner
d. Referral fee to a customer

49.Which is an exempt de minimis benefit?

a. 9 day monetized sick leave
b. 15 days monetized vacation leave
c. Rice subsidy of half sack a month valued at 1,000
d. Uniform allowance of 5,500

50. The 90,000 exemption threshold is applicable to

a. Regular employees
b. Rank and file employees
c. Managerial or supervisory employees
d. All employees
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