CPA Review & Training Center TAX-0107.

2
Urdaneta City, Pangasinan Income Tax Quizzer

Classification of Taxpayers
1. Starting January 1, 2018
a. Basic personal exemption is still P50,000 for Non-resident Aliens
b. NRA-ETBs are entitled to the additional exemption of P25,000 per child
c. NRA-ETBs are entitled to the 8% income tax rate
d. NRA-NETBs will use the graduated tax table

2. Ms. Elamparot received annual clothing allowance amounting to P10,000 and her 13 th month pay is
P86,000. No other benefits were received for the entire year. Which statement is correct?
a. 13th month pay and other benefits amount to 96,000 and the whole amount is taxable regular tax.
b. 13th month pay and other benefits amount to 96,000 and of that amount, 6,000 is taxable regular tax.
c. 13th month pay and other benefits amount to 90,000 and the entire amount is taxable regular tax.
d. 13th month pay and other benefits amount to 90,000 and the entire amount is exempt from
tax.

3. Which of the following statements is not true?

a. In general, any incentives given to employees form part of compensation subject to income tax
b. Premium on Health Card paid by employer for rank and file employees under a group insurance shall
be included as part of other benefits subject to the P90,000 threshold
c. Premium on Health Card paid by employer for managerial/supervisory employees not under a group
insurance shall be considered fringe benefits subject to fringe benefit tax.
d. None of these

4. Additional income as a result of benefits provided under the attrition law wherein employees who are
performing well will receive rewards is
a. subject to fringe benefit tax if received by a managerial employee
b. not taxable and is part of de minimis benefits
c. part of compensation income subject to withholding tax on compensation
d. Not taxable whether received by managerial or rank and file employee

5. Mr Okrayray received P15,000 commission from his employer in addition to the regular compensation
he receives. The commission received
a. shall be added to regular compensation income subject to income tax
b. shall be added to other benefits subject to the P90,000 threshold
c. shall be subject to fringe benefit tax if received by a managerial employee
d. shall be exempt from tax

6. All of the following are not qualified to avail of the 8% income tax rate except:
a. VAT registered taxpayers
b. Partners of a General Professional Partnership
c. Individual income earners who are purely earning compensation income
d. Non-Vat taxpayers with gross sales and receipts not exceeding the VAT threshold

7. Mr Marven is qualified to avail of the 8% income tax rate. However, he failed to signify his intention to
avail the same to the BIR. Which of the following statements is correct?
a. Mr Marven will be subject to the graduated tax rate for the year 2018.
b. Mr Marven will be subject to the 8% income tax rate.
c. Mr Marven is exempt from paying percentage tax
d. None of these

8. Mr Sherwin Agcipet is qualified to be taxed 8% income tax rate and has signified his intention to the
BIR before May 15, 2018. In 2019, Mr Agcipet did not notify the BIR about his intention to be taxed 8%
income tax rate. Which of the following statements is true for 2019?
a. Agcipet is still subject to the 8% tax rate as he has signified his intention last year.
b. Agcipet is still subject to the 8% tax rate as such selection is irrevocable.
c. Agcipet is subject to the graduated tax rate
d. None of these
*option to avail must be signified annually on or before may 15

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9. In 2018, Mr Afarinar has elected to be taxed 8% tax rate and was approved by the BIR. His gross
receipts for 2018 amounted to P2.5M. In 2019, Afarinar again was approved to be taxed 8% tax rate
by the BIR. In the 3rd quarter 2019, his gross receipts amounted to P4M. Which of the following is true?
a. Afarinar is still subject to the 8% tax rate as the election to use the rate is effective for 1 year.
b. Afarinar is still subject to the 8% tax rate as such selection is irrevocable.
c. Afarinar is subject to the graduated tax rate
d. None of these
*8% tax rate is no longer applicable if gross receipts exceed VAT threshold

11. Which of the following is taxable for their income earned within and outside the Philippines?
a. Overseas workers
b. Filipino citizen who stayed outside the Philippines for more than 183 days during the taxable year
c. Filipino who stayed permanently in the Philippines during the taxable year
d. Resident alien.

12. The following are taxable for their income at normal tax rate on returnable income, except?
a. Aliens who stayed in the Philippines for less than 180 days during the taxable year.
b. Aliens who are doing business in the Philippines
c. Aliens who are permanently residing in the Philippines during the taxable year
d. Resident aliens

13. Which of the following statements is not correct?

a. Individual taxpayer earning purely compensation income should report his income in form 1700.
b. Individual annual income tax return should be filed and paid on of before April 15 of the year following
the taxable year.
c. Spouses should file their income tax in a consolidated tax return.
d. Conjugal income of husband and wife should exclusively be reported as income of the husband.
*if it cannot be determined, it shall be divided equally between spouses

14. Statement no.1, if the tax due per income tax return of individual is P2,000, he may opt to pay his
income tax on installment basis.
Statement no.2, If installment payment of income tax is allowed to individual taxpayer, the second
installment payment must be paid on or before August 15.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are not correct
(old law, July 15, new law oct 15)

15. Which of the following forms should be attached to the income tax return of individual earning purely
compensation income to support his tax credit claim?
a. 1701Q (Quarterly ITR for estates, trusts)
b. 2306 (Certificate of final income tax withheld)
c. 2307 (certificate of creditable tax withheld)
d. 2316 (Certificate of compensation payment)

16. Which of the following is not a correct prescribed filing date for income tax return of individual earning
business income/
a. 1st quarter, April 15
b. 2nd quarter, August 15
c. 3rd quarter, November 15
d. Annual return, 60 days after the close of the taxable year

17. Statement 1: For the year 2017, the lowest tax rate for returnable income of individual is 5%
Statement 2: For the year 2017, the highest tax rate for the returnable income of individual is 30%
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are not correct
(under old law, 32% is the highest)

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18. Which of the following is considered a resident foreign corporation

a. Those which are created under the Philippine law
b. Those foreign corporations which earnings in the Philippines are all passive income
c. Those foreign corporation which income from within the Philippines pertain to casual gains
d. Those foreign corporations which has business income in the Philippines.

19. Gross income is reported partially in each taxable year in proportion to collections made in such period
as it bears to the total contract price refers to:
a. Crop year basis method c. Accrual method
b. Percentage of completion method d. Instalment sales method

20. In 2017, Stephanie, single mom, had the following dependents:

 Child, 22 years old, employed on July 12, 2017
 Child, 21 years old on January 2, 2017
 Child, 18 years old, married on January 31, 2017
 Child, 17 years old, gainfully employed on October 1, 2017
 Child, 15, afflicted with sore eyes on May 6, 2017
 Brother, 28 years old, paralytic.
How much can be claimed by Stephanie as additional exemption?
2017 2018
a. 100,000 25,000
b. 100,000 0
c. 50,000 0
d. 50,000 25,000

21. A resident citizen is taxable on all income derived from sources

A. Within the Philippines only C. Partly within and partly without
B. Without the Philippines only D. Within and without the Philippines

22. Acifares, a non-resident alien stockholder, received a dividend income of P300,000 in 2018 from a
foreign corporation doing business in the Philippines. The gross income of the foreign corporation from
within and without the Philippines for 3 years preceding 2018 are as follows:
Source of Income 2015 2016 2017
Within PH 16M 12M 14M
Without PH 8M 14M 16M
How much dividend income received by Acifares is considered income from sources within the
Philippines?
a. P0 b. P157,500 c. P150,000 d. P300,000
*42M/(42+38M) x P300,000
For dividend from foreign corp <50% of gross income 3 years prior is from PH = income without. If 50%
or more is GI from PH, partly within and without.PH GI 3yrs/World GI 3years x dividend = income within

23. Which of the following statements is not correct?

A. If only one spouse is deriving taxable income, only said spouse may claim the additional exemption
B. If both spouses earn taxable income only one of the spouses can claim additional exemption
C. If legally separated from the spouse, the husband can claim the additional exemption unless he
waives the right in favor of his wife
D. An unmarried individual with a child out of wedlock can claim a personal exemption as a head of the
family plus exemption

24. Which of the following dependents will qualify a single taxpayer as head of the family?
A. Taxpayer’s brother, 22 years old, unemployed, unmarried, living with him and dependent upon him for
support
B. Taxpayer’s sister, 18 years old, unemployed, unmarried living with parents, but dependent upon him for
chief support
C. Taxpayer’s illegitimate son, 12 years old, unemployed, single, living with him and dependent
upon him for support
D. Taxpayer’s godchild, 10 years old, dependent upon him for chief support
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25. Mr. Ramsky with a dependent minor legitimate child became a widower in January of 2017. In February
of the following year, he got married to Ms. B and subsequently in November of the same year, the
latter gave birth to three (3) boys. Mr. Ramsky’s total income exempt from tax for 2017 and 2018
respectively is:
2017 2018
A. 150,000 250,000
B. 75,000 150,000
C. 150,000 150,000
D. 75,000 250,000

26. In 2017, a German citizen residing in Germany, married is doing business in the Phils. His country allow
non- resident Filipino with income from Germany a basic personal exemption of P30,000 as head of
the family, P40, 000 as married and P15, 000 as single. The allowed personal exemption he can claim
is?
A. P50. 000 B. P30, 000 C. P32, 000 D. P40, 000

27. Zerimar earns an annual gross compensation income of P300,000. The following data relate to his
dependent children as of the year 2016:
Bernadette – baby, born on January 31;
Anne – celebrated her 21st birthday on June 12;
Jelly – married on January 1;
Mary –gainfully employed effective July 1;
Fanny – died of dengue fever on September 30
What is the taxable income of Zerimar for 2017 and 2018 assuming there is no change in his annual
gross compensation income?
2017 2018
a. 225,000 300,000
b. 200,000 50,000
c. 175,000 50,000
d. 225,000 50,000

28. Mr. Lawmingo, married, earned P225, 000 (net of P40, 000 w/tax) compensation income from
employment from July to December 2017. In 2018, he earned gross compensation income of P200,000.
He has a legally adopted child as qualified dependent and paid P3,000 per year as health and
hospitalization insurance premiums for 2017 and 2018. For 2017 and 2018, Lawmingo can deduct
premiums for health and hospitalization insurance of:
2017 2018
A. P3, 000 P2, 400
B. P1, 200 P0
C. P0 P0
D. P2,400 P0
*income exceeded P250,000 in 2017

29. Using the preceding number, his additional exemption for 2017 and 2018 is
2017 2018
A. P0 P0
B. 25,000 P25,000
C. P12,500 P0
D. P25,000 P0

30. Which of the following individual taxpayers subject to graduated tax rate cannot avail of the allowed
deductions for health and hospitalization insurance premiums?
A. Non-Resident citizen
B. Resident alien
C. Non-resident alien engaged in business in the Phil.
D. Non-resident alien not engaged in business in the Phil.
*Note graduated tax rate

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31. For Philippine income tax, one of the following is allowed to claim allowable itemized deductions.
a. NRA-NETB c. An employee who is a resident citizen
b. Non resident corporation d. Non resident citizen engaged in trade or business
32. For Philippine income tax, one of the following is allowed to claim allowable itemized deductions.
a. NRE-NETB c. An employee who is a resident citizen
b. Non resident corporation d. Non resident citizen engaged in trade or business

33. Which of the following could claim foreign income tax paid as its tax credit against Philippine tax due?
a. Resident alien c. Domestic corporation
b. Resident foreign corporation d. Non-resident citizen

34. The following could not be claimed as deduction from business income, except
a. Salaries of factory worker
b. Provision for doubtful accounts
c. Ordinary repair of personal service vehicle
d. Contribution to NGO, not necessary and not related in the conduct of business

35. When the gain is realized from the sale of real property, it is taxable
a. In the place of residence of the seller
b. In the place of residence of the buyer
c. In the place where the real property is located
d. In the place where the deed of sale is executed

36. A resident citizen could not claim this as his item of deduction from his business income.
a. Salaries of his supervisory employee
b. Tuition fee paid for his qualified dependent
c. Unpaid but accrued Rental of the business place
d. Transportation expense from and to the business place

INCLUSIONS IN GROSS INCOME

37. It means income in the broad sense, excluding income which is by statutory provisions or otherwise
exempt from the tax imposed by law.
a. Gross Income b. Net Income c. Net Assets d. None of these

38. It means gross income less statutory deductions

a. Gross Income b. Net Income c. Net Assets d. None of these

39. It is a fund or property existing at one distinct point of time

a. Capital b. Revenue c. Receipts d. Income

40. Which of the following statements is incorrect?

a. A mere increase in the value of the property is not income but merely an unrealized increase in
capital
b. Gain may occur as a result of exchange of property, payment, assumption, reduction or cancellation
of the taxpayer’s indebtedness (unless it amounts to a gift) or other profit realized from the completion
of a transaction.
c. If the taxpayer receives through mistake, an amount in excess of the amount agreed upon, the excess
is not taxable income unless the duty to return is not clear or is disputed.
d. None of the choices.

41. In computing gain or loss from the sale or other disposition of property acquired as inheritance, the
basis of cost shall be:
a. fair market value, date of acquisition/inheritance
b. latest inventory value
c. purchase price plus expenses of acquisition
d. same as it would be in the hands of the decedent.

42. A taxpayer receiving a non-interest bearing note as compensation shall treat as income the:

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a. face value of the note at that time

b. fair discounted value of the note at that time
c. maturity value of the note at that time
d. fair market value of the note at that time
43. If an individual performs services for a creditor who in consideration thereof cancels the debt, the
cancellation of indebtedness may amount to a:
a. gift c. donation inter vivos
b. capital contribution d. payment of income

44. The recovery of the account previously written off would constitute taxable income only if in the year of
recognition of being worthless, the write-off resulted in a reduction of a taxable income.
a. reciprocity rule c. tax benefit rule
b. equity of the incumbent rule d. materiality rule

45. Which of the following statements is incorrect?

a. a direct dividend is one where the paying corporation acknowledges that the distribution is a dividend
payment.
b. an indirect dividend is a distribution of profits disguised as payment of services, properties, etc.
c. a dividend paid in shares of stock of another corporation held as investment is a stock
dividend
d. none of the above.

46. A corporation receives its own shares of stock in exchange for the property. What is the basis of the
gain or loss?
a. the gain or loss shall be based on the fair market value of its shares only.
b. the gain or loss shall be based solely on the cost of the property.
c. the gain or loss shall be based on the fair market value of its own shares and the cost of the
property
d. there is neither a gain nor a loss.

47. Which of the following damage recovery is taxable?

a. amount recovered from libel suits
b. amount recovered in patent infringement suits
c. amount recovered from breach of promise to mary
d. amount recovered due to alienation of affection

48. During the taxable year, Neshi, a Filipino worked abroad and stayed there for 243 days. His total
income earned from his work abroad amounted to equivalent of P1,825,000. Consider 365 days in a
year, how much of his total income is taxable with Philippine Income tax?
a. P1,825,000 b. P1,215,000 c. P610,000 d. none

49. From the common property of husband and wife, they collected rent income of P237,500 for the year
2018, net of expanded withholding tax. They have 1 minor child and during the year they paid P2,000
premium for the hospitalization insurance of the family. The net income of the husband after standard
deduction and personal exemption is
a. P50,000 b. P48,000 c. P47,600 d. NIL

50. The net income of the wife after standard deduction and personal exemption is
a. 25,000 b. P23,000 c. P22,600 d. NIL

51. Mr Edagut is a lessor of real property. X entered in a 20 year lease contract with Y, allowing Y to
construct improvement on the land that is leased out. Y constructed a building on the land at cost of
P800,000 and completed when the remaining term of the lease was 15 years. Estimated life of building,
20 yrs. How much would be reported as income of X from leasehold improvement in the year of
completion of the building, when he opted for outright method of reporting income?
a. 800,000 b. 560,000 c. 266,667 d. 200,000

52. How much would be reported as income of X from leasehold improvement in the year of completion
when he opted for installment method of reporting income?

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a. 10,000 b. 13,333 c. 40,000 d. 53,333

800,000 x (5/20) / 15

GRADUATED RATE VS. 8% IT REGIME

53. Ms. Yodin is employed in Samra Corporation. She received the SMW for 2018 in the total amount of
₱175,000, inclusive of the 13th month pay. In the same year, she also received overtime pay of ₱40,000
and night-shift differential of ₱25,000. She also received commission income from the same employer
of ₱50,000, thus, total income received amounted to ₱290,000. How much is the taxable compensation
income and the income tax due respectively of Ms. Yodin?
a. P290,000; P8,000 b. P40,000; P0 c. P50,000; P0 d. P290,000; P58,000

54. Mr Yaralcu is employed in MAFD Corporation and is also a part-time real estate agent for a real estate
broker. In addition to the SMW of ₱180,000 she received from her employer, she likewise received
₱75,000 as commissions from her real estate dealings for the year 2018. How much is the taxable
income and income tax due respectively of Mr. Yaralcu if the graduated income tax regime is used?
a. P5,000; P0 b. P75,000; P0 c. P255,000; P1,000 d. P0; P0

55. A MWE received the following for 2018:

SMW P150,000 NDP P100,000
Overtime Pay 20,000 Commissions 170,000
Hazard Pay 80,000 Holiday Pay 90,000
Tips 110,000 Service Charge Received 40,000
How much is the gross taxable income subject to the prescribed tax table?
a. 760,000 b. 320,000 c. 470,000 d. 0

56. How much is the taxable income and income tax due respectively of Mr Yaralcu if he opted to use the
8% IT regime?
a. P0; P0
b. P75,000; P6,000
c. P5,000; P400
d. Mr. Yaralcu is not allowed to use 8% IT regime because he is a compensation income earner.

57. Ms Azaifo receives ₱120,000 as monthly regular compensation (net of SSS/GSIS, PHIC, HDMF- all
are employee share only) starting January 1, 2018 from CCF Corp. On June 1, 2018, he filed his
resignation effective June 30, 2018 and was subsequently re-employed in EBQ Company on July 1,
2018 with a monthly compensation of ₱130,000. He furnished his new employer with the BIR Form
2316 from CCF Corp., his old employer, which showed that the amount he received from the said
previous employer was ₱720,000 with tax withheld of ₱134,164.50. On December 15, 2018, he
received commissions of ₱15,000 from his new employer. His new employer withheld ₱178,997.40
from his income. How much is the income tax still due for December 2018?
a. P31,338.10 b. P26,838.1 c. P205,835.5 d. 210,335.5

58. Ms. Grace received the following compensation for the year 2018:
a. Monthly Basic Salary ₱ 50,000.00
b. Overtime pay for November 10,000.00
c. Thirteenth Month Pay 50,000.00
d. Other Benefits 10,000.00
e. Withholding Tax (Jan-Nov) 73,334.25
How much is the taxable compensation income and the income tax still due for December 2018?
a. P610,000; P9,165.75 c. P360,000; P22,000
b. P670,000; P24,165.75 d. None of these

59. Mr. Nivram, a MWE, works for Sanagalap Inc. He is not engaged in business nor has any other source
of income other than his employment. For 2018, Mr. Nivram earned a total compensation income of
P135,000. The taxpayer contributed SSS, Philhealth, and HDMF amounting to P5,000 and received a
13th moth pay of P11,000. In the following year, Mr. Nivram earned, aside from his basic wage,
additional pay of P140,000 which consists of overtime pay of P80,000, night shift differential of P30,000,

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hazard pay of P15,000, and holiday pay of P15,000. He also has the same benefits as 2018. How much
is his tax due?
a. 1,800 b. 15,000 c. 28,000 d. 0

60. Mr. Agcipcipet, single, with two dependent children operates a convenience store while he offers
bookkeeping services to his clients. His gross sales amounted to P800,000, in addition to his receipts
from bookkeeping services of P300,000. He incurred cost of sales and operating expenses amounting
to P600,000 and P200,000 respectively. He incurred the same amount of revenue and expenses for
2017, 2018 and 2019. How much is the taxable income and Tax due of Mr. Agcipcipet for 2017?
Taxable Income Tax Due
a. P300,000 P65,000
b. P250,000 P50,000
c. P200,000 P37,500
d. P250,000 P0

61. How much is the taxable income and Tax due of Mr. Agcipcipet for 2018?
Taxable Income Tax Due
a. P300,000 P65,000
b. P300,000 P10,000
c. P50,000 P10,000
d. P50,000 P0

62. How much is the taxable income and Tax due of Mr. Agcipcipet for 2019 if Agcipcipet opted for the 8%
IT regime?
Taxable Income Tax Due
a. P300,000 P24,000
b. P50,000 P4,000
c. P1,100,000 P88,000
d. P850,000 P68,000

63. Ms. Amor signified his intention to be taxed at 8% income tax rate on gross sales in her first quarter
income tax return for 2018. She has no other source of income other than her grocery store. The sales
for the first quarter up to the fourth quarter are as follows: (1 st) 500,000; (2nd)500,000; (3rd) 2,000,000;
(4th) 3,500,000. The cost of sales were as follows: (1st) 300,000; (2nd)300,000; (3rd) 1,200,000; (4th)
1,200,000. The operating expenses were as follows: (1st) 120,000; (2nd)120,000; (3rd) 480,000; (4th)
720,000. What is the Income tax due per quarter.
Q1 Q2 Q3 Q4
a. P6,400 P6,400 P25,600 P126,400
b. P20,000 P80,000 P220,000 P520,000
c. P20,000 P40,000 P160,000 P289,200
d. P20,000 P40,000 P160,000 P280,000
*fourth quarter should be graduated rate because it exceeded the VAT threshold

64. Don Alak, a Financial comptroller of Angel Company, earned annual compensation in 2018 of
Pl,500,000.00, inclusive of 13th month and other benefits in the amount of p120,000.00 but net of
mandatory contributions to SSS and Philhealth. Aside from employment income, he owns a
convenience store, with gross sales of P2,400,000. His cost of sales and operating expenses are
P1,000,000.00 and P600,000,00, respectively, and with non-operating income of P100,000.00. What
is the tax due if Don Alak opted to use the 8% IT regime.
a. 513,000 b. 493,000 c. 292,800 d. 164,800
*compensation income is graduated. Cannot deduct 250k for 8% because it is applied to compensation
income.

65. If Don Alak did not opt to use the IT regime, what is the tax due?
a. 589,200 b. 509,200 c. 1,101,200 d. Answer not given

CAPITAL GAINS AND LOSSES

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66. Which of the following is an ordinary asset?

a. real property acquired by banks through foreclosure sales
b. real property transferred through succession or donation to the heir or donee who is not engaged in
the real estate business with respect to the real property inherited or donated, and who does not
subsequently use such property in trade or business
c. real property received as dividend from a corporation whih is engaged in real estate business by the
stockholders who are not engaged in real estate business.
d. real property whether single detached; townhouse or condominium unit, not used in trade or business
as evidenced by a certification from the Barangay chairman or from head of administration, in case of
condominium unit, townhouse or apartment, and as validated from the existing available records of
BIR, owned by an individual engaged in business.

67. Lots being rented when subsequently sold are classified as:
a. capital assets c. ordinary assets
b. liquid assets d. fixed assets

68. Capital losses are deductible from

a. ordinary gains only c. both ordinary and capital gains
b. capital gains only d. neither ordinary nor capital gains

69. Frences, married, has taxable income of P300,000 for 2018 exclusive or capital gains and losses.
Frences had a net capital long – term loss of P80,000 in 2018. What amount of this loss can Frences
offset against ordinary income?
a. 80,000 b. 40,000 c. 30,000 d. 0

70. Under the tax code, how much shall be taken into account in computing the net income, if a gain is
realized by an individual taxpayer from the sale or exchange of capital assets (other than real properties
and shares of stock) held for more than 12 months?
a. 50% of the net capital gain c. 100% of the net capital gain
b. 5% of the net capital gain d. None of these

71. Which of the following taxpayers is allowed to observe the “no holding period and no carry over of net
capital loss”
a. Individuals b. Estates c. Trusts d. Corporations

72. Mr. Silos bought from Odacrem Corp 10 shares of stock. 60 days thereafter, the corporation was
adjudged bankrupt and its stock as worthless. The loss of A to be reported for income tax purposes is
classified as:
a. wagering loss c. non-deductible wash sale loss
b. short-term capital loss d. casualty loss

73. Adia, single, had the following data on income and losses
2017 2018
Ordinary business income 200,000 300,000
Interest income on BPI time deposit 4,000 6,000
Short-term capital gain 5,000 8,500
Long-term capital gain 3,600 5,200
Short-term capital loss 8,000 2,900
Long-term capital loss 4,400 -

How much is the taxable income of Adia for 2017?

a. 204,000 b. 150,000 c. 146,600 d. 154,000
*capital loss of 3,400 is not deductible to ordinary income (long term 50% short term 100%)

74. What is the taxable income of Adia for 2018?

a. 54,800 b. 254,800 c. 304,800 d. 310,800
*net capital loss of 3,400 is carried over

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75. AteNeg sold her principal residence for P5,000,000 when its fair market value was P6,000,000. The
house was purchased five years ago for P3,000,000. Out of the proceeds of P5,0000,000, AteNeg
utilized the P4,000,000 for the purchase of a new residential house. What is the capital gains tax on
the sale under new and old tax law?

a. P360,000; P180,000 c. P72,000; P72,000

b. P300,000; P750,000 d. P60,000; P72,000
*1/5 x 6M x 6%

76. What is the cost basis of the new residence of Ateneg?

a. 3,000,000 b. 2,400,000 c. 4,000,000 d. 5,000,000
*4M/5M x 3M

77. Mr. Yacut has the following data in 2018:

Property Sold Holding Period Gain/Loss
Apartment House 10yrs P35,000
Residential House 6yrs 120,000
Vacant lot 12yrs 72,500
Jewelry for personal use 6months 4,200
Jewelry in Jewelry store 2months 8,000
Car for personal use 4yrs (20,000)
Transportation Equipment 12months (10,000)
The proceeds from sale of residential house shall be used in acquiring a new residence. During the
year, Yacut had a net income from business (excluding the sale of properties above) in the amount of
P270,000. What is the taxable income subject to regular tax for 2018?
a. 303,000 b. 297,200 c. 287,200 d. 307,200
*4200+(20kx50%) =NCL 35+8-10=33k OG + 270k

78. On August 15, 2018, Nayabis sold a 500 square meter residential house for P3,000,000. The house
was acquired in 2006 for P2,000,000. On the date of sale, the fair market value of the house as shown
in the real property declaration was P2,500,000 and assessor’s value amounted to P2,200,000. The
zonal value was P7,000 per square meter. Nayabis used P1,500,000 of the proceeds in acquiring a
new residence. How much should be deposited in escrow?
a. P210,000 b. P150,000 c. P105,000 d. None

79. How much is the capital gains tax payable after acquiring the new residence?
a. 90,000 b. 210,000 c.105,000 d. None

80. Neblem has the following records of transactions:

Capital gains (short-term) on sale of –
Domestic shares listed and traded in stock exchange P 22,400
Residential House in New York City 100,000
Capital loss (long term) on sale of –
Land in Vancouver Canada 125,000
Family Car 50,000
How much is the net capital gain/loss of Neblem?
a. 12,500 b. (75,000) c. 148,500 d. (25,000)

81. Alym sold 1,000 of not listed and traded domestic shares of stocks. The data of which are as follows:
2017 2018
Selling price P 600,000 P 550,000
Fair market value 620,000 400,000
Expenses on the sale 10,000 20,000
Purchase price 440,000 200,000
Expenses upon acquisition 3,000 5,000

How much is the capital gains tax due if Alym is a Resident Alien?
2017 2018
a. 9,700 27,500

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b. 14,000 28,000
c. 9,700 48,750
d. 12,850 27,500

82. How much is the capital gains tax due if Alym is a Nonresident Alien?
2017 2018
a. 9,700 27,500
b. 14,000 28,000
c. 9,700 48,750
d. 12,850 27,500

83. On December 1, 2017, Aniger purchased 100 shares of common stock of Zenivaj Company for
P10,000. On December 16, 2017, she purchased 100 additional shares for P9,000. On January 3,
2018, she sold the 100 shares purchased on December 1, 2017 for P9,000. Which of the following
statements is correct for aniger?
a. She can claim a deductible loss of P1,000 in 2018.
b. She must report a taxable capital gain of P1,000 in 2018.
c. She must report a taxable capital gain of P9,000 in 2018.
d. She is not allowed to claim a deductible loss in 2018.
*this is a wash sale transaction

84. Eiram, a resident citizen, had the following transactions of unlisted and traded shares of stocks:
Date of sale Date of Acquisition Cost Selling Price
Feb. 14, 2018 January 18, 2016 80,000 135,000
April 5, 2018 November 30, 2017 256,000 360,000
July 20, 2018 September 3, 2016 175,000 115,000
Oct. 13, 2018 August 7, 2018 144,500 150,000

What is the capital gains tax on the February 14, 2018 sale?
a. 1,375 b. 4,125 c. 8,250 d. None
(135-80) x 50% bec long term x 15%
85. What is the capital gains tax on the April 5, 2018 sale?
a. 5,400 b. 7,800 c. 15,600 d. None

86. What is the capital gains tax on the July 20, 2018 sale?
a. 9,000 b. (9,000) c. 4,500 d. None

87. What is the final capital gains tax/refund at the end of the year?
a. Tax payable of P4,500 c. Tax payable of P9,000
b. Tax refund of P4,500 d. Tax refund of P9,000

88. Ms. Alegna had the following stock transactions:

 On September 20, 2017 purchased 100 shares of the common stock of Osip corporation for a total of
P5,000.
 On December 11, 2017 purchased 50 shares of substantially identical stock for a total amount of
P2,750.
 On December 26, 2017 purchased 25 additional shares of such stock for a total of P1,125.
 On January 2, 2018, she sold for P4,000 the shares purchased on September 20 or at P40 per share.
How much is the deductible loss and non-deductible loss on January 2, 2018 sales?
Deductible Non-deductible
a. P1,000 P0
b. P0 P1,000
c. P125 P0
d. P250 P750
*loss of 1,000 x 75shs(50+25)/100 shs sold = non-deductible loss

89. Nozaro has the following data for 2018:

Capital loss on 2 week option contract P5,000

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Capital gain on sale of bonds (holding period: 6 months) 6,000

Loss on sale of delivery truck held for 3 ½ years 40,000
Gain on sale of personal car held for 5 years 16,000
Capital gain on direct sale to buyers of shares of stocks 4,000
Sale of 2-year old residential house (cost P540,000) 550,000

In 2017, Nozaro had a net income of P5,000 and a capital loss of P7,500

How much net capital gain/loss (after carry over) is subject to regular tax in 2018 assuming Nozaro is
an Resident Citizen?
a. P12,000 b. P4,000 c. P9,000 d. (P3,000)
*NCLCO limit = 5k NI of 2017 which is the lowest

90. How much net capital gain/loss (after carry over) is subject to regular tax in 2018 assuming Nozaro is
an Resident Citizen?
a. P12,000 b. P4,000 c. P9,000 d. (P3,000)
*NCLCO does not apply to corporations

DEDUCTIONS FROM GI AND OSD COMPUTATION

91. NOLCO is the excess of allowable deductions over the gross taxable income. Which of the following is
correct statement?
a. NOLCO is still deductible even OSD is opted by the taxpayer
b. It can be claimed by the taxpayer whose income is from employment
c. The carry over period is extended when MCIT prevails any given period
d. It can be claimed only up to the extent of available taxable business income in any given
subsequent period.

92. Which of the following write off of receivable is deductible item from reportable business income?
a. Receivable arising from personal transaction
b. Incurred by taxpayer who is reporting income on cash basis
c. Where the right of recourse could be invoked to a third party
d. Where the receivable pertains to amount which remained uncollected after the debtor
undergone insolvency proceedings

93. Pinapaitan Corporation incurred the following expenses. Which of these expenses is non-deductible?
a. insurance premiums on the building
b. salaries of the officials and employees
c. entertaining prospective customers
d. gifts given to public officials who favoured Pinapaitan Corporation’s contract with the
government.

94. Which of the following is deductible expense for income tax purposes?
a. salaries of domestic servant c. ordinary repair of personal car
b. provision for bad debts d. none of these

95. One of the following expenses is deductible from gross income:

a. personal and living expenses
b. amount paid out for new building or for permanent improvement or betterment made to increase the
value of any property or estate.
c. premiums paid on a life insurance policy covering the life of the employee when the members
of the family of the employee are the direct beneficiary under such policy
d. none of the above.

96. Oremor Corp. paid the following premiums to an insurance company in insuring the lives of its officials
and employees:
Employee Beneficiary Premiums Paid
Rand and file Children P10,000
Sales Manager Mom and Dad 15,000
Finance Officer Corporation 20,000

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General Manager Corporation 20,000

Board Chairman Corporation 20,000
The deductible expense on the insurance premiums paid by the corporation is
a. P85,000 b. P60,00 c. P25,000 d. P10,000

97. Statement 1, OSD can be opted by the taxpayer with or without documents to substantiate his itemized
business expenses.
Statement 2, OSD is not allowed to be opted by non resident corporations
a. True, true b. true, false c. false, true d. false, false

98. A building was partially destroyed by fire in 2018. It had a book value of P4,000,000. The insurance
company was willing to pay P3,000,000 which was refused by the owner. Finally the claim was settled
for P3,500,000. The P3,500,000 proceeds is
a. exempt from income tax c. subject to final tax
b. taxable in full d. partly taxable, partly exempt

99. Jovy, married, with two dependent children, had the following income and expenses for 2017:
Salary, net of non-taxable benefits and WT of P10,000 P 220,000
13th month pay 18,000
Gross receipts from profession net of WT of P7,000 83,000
Rent income, net of 5% withholding tax 57,000
Gross receipts from business 125,000
Professional and business expenses 56,500
In 2018, Jovy resigned from her 8-5 job and concentrated on her business. Her career flourished as
she had a total gross receipts of P4,250,000 for the year. Her recorded cost of service and operating
expenses were P2,150,000 and P1,000,000 respectively. She opted for the OSD for the year 2017 and
2018. How much is her income tax due for 2017 and 2018?
2017 2018
a. 4,500 666,000
b. 50,225 204,000
c. 51,050 204,000
d. 51,650 586,000
e. Answer not given
*add WT when computing total tax then use as tax credit

TAX CREDIT
100. A resident citizen paid P2,000,000 foreign income tax on his foreign income of P6,000,000. His
entire reportable business income within and outside the Philippines is P10,000,000. His Philippine
income tax due on the entire income is P3,040,000. How much foreign income tax could he claimed as
tax credit?
a. 2,000,000 b. 1,824,000 c. 1,216,000 d. 1,000,000

101. A domestic corporation paid the following foreign income tax on its operations outside the
Philippines:
Income Tax Taxable Income
Country A P2,500,000 P10,000,000
Country B P7,000,000 P20,000,000

Its taxable business income earned in the Philippines P70,000,000. How much tax credit could it claim
for its foreign income tax payments?
a. 9,500,000 b. 9,000,000 c. 8,500,000 d. 8,000,000

102. Assume that the corporation is a resident foreign corporation, how much is the allowed tax
credit?
a. 9,500,000 b. 9,000,000 c. 8,500,000 d. NIL

FRINGE BENEFITS
103. The following are correct description of fringe benefit tax, except
a. It is intended to managerial employees c. It is withheld at source

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b. It is the liability of the employer d. It is a final income tax

104. The Early Bird Corp. provided benefits inclusive of those given to rank and file employees
amounting to P300,000 for 2017 and P500,000 for 2018. Early Bird withheld fringe benefit tax
amounting to P65,280 for 2017 and P112,000 for 2018. Its grossed up monetary value of fringe benefit
payments to managerial employees for 2017 amounted to
a. 138,720 b. 204,000 c. 216,000 d.281,280

105. Its benefit expense cash payments to its managers for 2017 amounted to
a. 96,000 b. 138,720 c. 161,280 d. 216,000

106. Its benefit expenses payment to rank and file employees for 2017 amounted to
a. 96,000 b. 138,720 c. 161,280 d. 216,000

107. What is the grossed up monetary value of fringe benefit payments to managerial employees for
2018?
a. 320,000 b. 350,000 c. 340,000 d. 325,000

108. What is the benefit expense payments to its managers for 2018?
a. 238,000 b. 231,200 c. 211,250 d. 208,000

109. What is the benefit expense payment to rank and file employees for 2018?
a. 268,800 b. 288,750 c. 292,000 d. 262,000

110. Which of the following is reportable income subject to normal tax?

a. Royalty income
b. Gain on sale over the counter of investment in stock
c. Sale of real property considered as capital asset
d. Share of partner in the general professional partnership

111. Odugar Company (a domestic employer/company) granted Ms. Nedie (a NRA-NETB branch
manager employee), in addition to her basic salaries, ₱5,000 cash per quarter for her personal
membership fees at Country Golf Club. How much is the Fringe Benefit Tax in one quarter?
a. 2,692.31 b. 2,352.94 c. 1,666.67 d. 1,250

112. Interest income earned by resident citizen from foreign currency deposit outside the Philippines
is subject to
a. 7.5 % final tax c. 20% final tax
b. 10 % final tax d. Normal tax on reportable income

113. Royalty income from musical composition is subject to

a. Final tax of 10% c. Exempt from income tax
b. Final tax of 20% d. Normal tax on reportable income

114. Zyren is employed in an advertising agency and teaches in the evening at a university. Aside
from her compensation income, she has other income from various sources. Zyren is married with one
minor child. The following are data for 2018:
Salaries (net of 13th month pay exemption) P350,000
Bonuses (net of exemption) 6,000
Allowances 24,000
Profit sharing in her work 10,000
Prize received in a supermart raffle (gross of tax) 12,000
Gain on sale of stock listed and traded in the stock exchange (cost 90,000) 10,000
Dividends from a domestic corporation (gross of tax) 6,000
Interest income on savings deposit (gross of tax) 3,000
Net capital gain on unlisted shares 120,000
Net capital gain on sale of real property (cost P350,000) 150,000
Royalty as author of a textbook (net of tax) 19,800
Winnings from Jai Alai (net of tax) 12,800
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Interest in money market placement (net of tax) 9,600

How much is the income tax on compensation?

a. 11,200 b. 13,000 c. 28,000 d. 0

115. How much is the stock transaction tax paid by Zyren?

a. P60 b. P500 c. 540 d. 600

116. How much is the capital gains tax on the sale of stocks?
a.18,000 b. 7,000 c. 7,200 d. 0

117. How much is the capital gains tax on the sale of real property?
a. 9,000 b. 21,000 c. 22,500 d. 30,000

118. How much is the total final tax (not including capital gains tax)?
a. 10,060 b. 11,400 d. 14,150 d. 12,040

119. Bart, a resident citizen taxpayer reported the following as his collections:
i. Interest on savings deposit, net of withholding tax P1,200
ii. Rent of real property, net of 5% withholding tax P171,000
iii. Cash dividend, net of withholding tax P10,800
How much is his gross reportable income?
a. 193,500 b. 183,000 c. 180,000 d. 171,000

120. How much tax credit could he claimed against his tax due in his ITR?
a. 10,500 b. 10,200 c. 9,300 d. 9,000

121. How much is his total final taxes?

a. 10,500 b. 9,000 c. 1,500 d. 1,200

“If you don’t take risk, you cannot create future”

-Monkey D. Luffy

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