INCOME TAXATION

01. Which of the following individual taxpayers is taxed on income from the sources within and outside
the Philippines?
a. A citizen of the Philippines residing therein.
b. A non-resident citizen.
c. An individual citizen of the Philippines who is working and deriving income abroad as an
overseas contract worker.
d. An alien individual, whether a resident or not of the Philippines.

02. “Taxable net income received each year from all sources” is the tax base for income tax
purposes of this class of taxpayers
a. Domestic corporations
b. Resident corporations
c. Resident foreign corporations engaged in trade or business in the Philippines.
d. Resident foreign corporations not engaged in trade or business in the Philippines.

03. Statement 1: If the quarterly income tax is based on MCIT, the excess MCIT from the previous
taxable year/s shall not be allowed to be credited.

Statement 2: Expanded withholding tax, quarterly corporate income tax payments under the
normal income tax, and the MCIT paid in the previous taxable quarters are
allowed to be applied against the quarterly MCIT due.
a. False, False c. True, False
b. False, True d. True, True

04. A tax imposed in the nature of a penalty to the corporation to deter tax avoidance of shareholders
who avoid paying the dividends tax on the earnings distributed to them by the corporation.
a. Minimum corporate income tax c. Improperly accumulated earning tax
b. Optional corporate income tax d. Capital gains tax

05. The optional standard deduction on individual is

a. 40% of taxable income.
b. 40% of business and/or professional income including compensation income.
c. 40% of business and/or professional income.
d. 10% of business and/or professional income excluding compensation income.

06. For purposes of income taxation, which of the following is not considered as a corporation?
a. General professional partnership c. Unregistered partnership
b. Business partnership d. Joint stock corporation

07. The following statements relate to the rules on minimum corporate income tax. Which of them is
false?
a. It does not apply to non-resident foreign corporation.
b. If the corporation has commenced with its business operation in 2016, it shall be covered by the
rule effective 2020.
c. It shall be imposed whenever the operation of the corporation has resulted to a zero or negative
taxable income.
d. The imposition rate is 2% of taxable income under the TRAIN law and 1% under the CREATE
law.

08. Who among the following individual taxpayers is taxable on his income on income within and
outside
of the Philippines?
a. Pedro Reyes, a native of General Santos City, working as overseas contract worker in Saudi
Aabia.
b. Rey Cruger, naturalized Filipino citizen and married to a Filipina. He has been living in Cebu
City since 1990.
c. Rodrigo de la Hoya, a Spanish citizen, a resident of Madrid Spain, spent a one week vacation in
Boracay.
d. Deng Shi Lun, a Taiwanese, a singer, held a 3-day concert in Manila
09. Passive income includes income derived from an activity in which the earner does not have any
substantial participation. This type of income is
a. Usually subject to a final tax c. taxable only if earned by a citizen
b. Exempt from income tax d. included on the income tax return

10. Which of the following is not a basic principle of a sound taxation system?
a. It should be capable of being effectively enforced. (administrative feasibility)
b. It must be a progressive tax. (equality and theoretical)
c. It must be sufficient to meet government expenditures and other public needs. (fiscal
adequacy)
d. It should be exercised to promote public welfare.

11. Mallet Corporation, on its tenth and eleventh years of operations has the following data:
2018 2019
Sales P1,700,000 P2,300,000
Cost of sales 1,050,000 1,425,000
Operating expenses 615,000 480,000

Based on the above, how much is the income tax due in [1] 2018; [2] 2019?
a. [1] P0; [2] P118,500 c. [1] P13,000; [2] P105,500
b. [1] P13,000; [2] P118,500 d. [1] P0; [2] P105,500

12. A domestic corporation has a gross profit from sales of P1,000,000, interest from bank deposits in
the Philippines of P10,000 and dividend from a domestic corporation or P10,000. If choosing
optional standard deduction, the taxable income is:
a. P600,000. B. P606,000. C. P900,000. D. P909,000

13. Equipment Corporation, a domestic corporation has the following records of income and expenses
in 2019:
Gross income, net of 1% withholding tax P1,435,500
Expenses 756,000
Rent income, net of 5% withholding tax 136,800
Expenses on rent 34,600
Dividend from domestic corporation 25,000
Royalty 80,000
Interest from bank deposit with PNB, gross of tax 15,000

The income tax payable by Equipment Corporation is

a. P241,020 b. P219,320 c. P803,400 d. P259,490

14. Using the same information in no. 7, how much is the total final taxes payable on Equipment
Corporation?
a. P19,000 b. P21,500 c. P33,250 d. P3,000

15. The record of a closely held corporation, already in operation since 2010, reveals the following:
2018: Gross income P 3,400,000
Less: Expenses 3,800,000
Net operating loss (P 800,000)

2019: Gross income P 3,960,000

Expenses 3,100,000
Royalty 340,000
Inter-corporate dividends received 56,000

How much is the improperly accumulated earnings in 2019?

a. P81,500 b. P93,800 c. P91,500 d. P0
16. A domestic corporation has the following data:
Excess tax credit from 2018 P15,000
For the year 2019: 1st Quarter 2nd Quarter
Income ,net of 1% withholding tax P495,000 P792,000
Deductions P460,000 P700,000

How much is the income tax still due and payable in the second quarter?
a. P21,000 b. P14,000 c. P10,400 d. P29,440

17. The following data pertain to the operation of a single taxpayer:

Gross revenue from services P400,000
Capital gain on sale of asset 5,000
Dividend from resident corporation 15,000
Direct costs of the services 100,000
Operating expenses 20,000

How much is the taxable income if the taxpayer chose optional standard deductions?
a. P110,000 b. P142,000 c. P190,000 d. P210,000

18. Mr. Reyes, is an employee, with gross compensation income of P500,000 and the following
data on his business operations:
Sales P2,900,000
Non-operating income 50,000
Costs and expenses 1,450,000

How much is the income tax due of Mr. Reyes if he avails of the itemized deductions?
a. P395,000 b. P340,000 c. P476,000 d. P287,000

19. Using the same information in no. 18, how much is the income tax due of Mr. Reyes if he avails of
the optional standard deductions?
a. P395,000 b. P340,000 c. P476,000 d. P287,000

20. Mr. Alinas, is an employee, with gross compensation income of P300,000 and the following
data on his business operations:
Sales P2,900,000
Non-operating income 50,000
Costs and expenses 1,450,000

How much is the income tax due of Mr. Alinas if he avails of the 8% tax rate?
a. P256,000 b. P236,000 c. P246,000 d. P226,000