Take-home-quiz-income-taxation

1. In 2018, ABC Corporation, a Philippine corporation, sold through the local stock exchange 10,000 PLDT shares that it bought 2 years ago. Keyrand sold the shares for P2 million and realized a net gain of P200,000.00. How shall it pay tax on the transaction? a. It shall declare a P2 million gross income in its income tax return, deducting its cost of acquisition as an expense. b. It shall report the P200,000.00 in its corporate income tax return adjusted by the holding period. c. It shall pay 5% tax on the first P100,000.00 of the P200,000.00 and 10% tax on the remaining P100,000.00 d. It shall pay a tax of 6/10 of 1% of the P2 million gross sales. 2. Federico, a Filipino citizen, migrated to the United States some status or green card. He should pay his Philippine income taxes on a. The gains derived from the sale in California, U.S.A of jewelry he purchased in the Philippines b. The proceeds he received from a Philippine insurance company as the sole beneficiary of life insurance taken by his father who died recently c. The gains derived from the sale in the New York Stock Exchange of shares of stock in PLDT, a Philippine corporation. d. Dividends received from a two-year-old foreign corporation whose gross income was derived solely from Philippine sources. 3. Alain Descartes, a French citizen permanently residing in the Philippines, received several items during the taxable year. Which among the following is NOT subject to Philippine income taxation? a. Consultancy fees received for designing a computer program and installing the same in the Shanghai facility of a Chinese firm. b. Interests from his deposits in a local bank of foreign currency earned abroad converted to Philippine pesos. c. Dividends received from an American corporation which derived 60% of its annual gross receipts from Philippine sources for the past 7 years. d. Gains derived from the sale of his condominium unit located in The Fort, Taguig City to another resident alien. 4. Exclusions from gross income, except: a. Interest on the price of land covered by the Presidential Decree on land reform b. Interest payments on proceeds of life insurance held by the insurer. c. GSIS, SSS, Philhealth and Pag-ibig contributions and union dues of individuals. d. Gains realized by an investor upon redemption of shares of stock in a mutual fund company. 5. Which of the following statements is correct? a. The power of taxation reaches even the citizens abroad and their income earned from sources outside the Philippines. b. Priests and religious institutions are exempt from income and property taxes. c. Separation benefits received by terminated employees resulting from a deadlock in their collective bargaining agreement are exempt from income tax. d. The value of property received as gift, or under a will or testament or through legal succession is exempt from taxation. 6.

One of the following is taxable income: a. Gifts, bequests and devices b. Amounts received as rewards from giving information instrumental in the discovery of violations of the Tax Code and seizure of smuggled goods. c. Proceeds from life insurance d. Separation pay received by an employee due to a cause beyond his control

7.

Which of the following statements is not correct? a. Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are excluded from gross income regardless of whether the proceeds are received as a single sum or in instalments. b. In case of transfer for a valuable consideration by assignment or otherwise of a life insurance, endowment or annuity contract or any interest therein, only the actual value of such consideration and the amount of the premium and the sums subsequently paid by the transferee are exempt from income tax. c. Marriage fees, baptismal offerings, sums paid for saying masses for the dead and other contributions received by a clergyman, evangelist or religious worker for services rendered is taxable income. d. Monetization of leave credits of employees who were unable to go on leave due to exigencies of the service constitutes taxable income.

8.

Which of the following statements is correct as regards a resident citizen? a. Income from illegal activities are subject to final tax. b. Income tax refunds constitute taxable income to the taxpayer. c. Recovery of bad debts previously written off is part of the taxable income. d. As a rule, contest awards and prizes are subject to 20% final tax if they amount to more than P10,000, otherwise they will be part of taxable income.

9.

Which of the following statements is not correct? a. Minimum wage earners shall be exempt from the payment of income tax on their SMW. b. Holiday pay, overtime pay, night shift differential and hazard pay shall be exempt from income tax. c. Prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad, and sanctioned by their national sports associations are exclusions from gross income. d. Benefits received from or enjoyed under the Social Security System are exclusions from gross income.

10. One of the following is part of taxable income subject to schedular (graduated/progressive)rates: a. Compensation for damages b. The share of a partner in the undistributed net income of a general co-partnership c. Living quarters and meals furnished and given to a rank and file employee for the convenience of the employee d. Facilities or privilege of relatively small value offered by the employer as a means of promoting the health, goodwill, contentment, or efficiency of the employee. 11. Which is not a creditable withholding income tax? a. Expanded withholding income tax b. Withholding income tax at source c. Withholding income tax on passive income d. Withholding income tax on compensation income 12. As a rule, this is not part of taxable income a. Profit sharing b. Hazard pay

c. Overtime pay d. 13th month pay

13. This is taxable income a. Retrenchment pay b. SSS/GSIS benefits

c. Separation pay due to resignation d. Refund of Philippine income tax

14. Which of the following is taxable income? a. Prizes and awards as an awardee of Ramon Magsaysay Award Foundation b. Damages awarded as a consequence of libel and slander suits c. Interest on Philippine lotto winnings d. Amount received as returns of premiums 15. Which of the following statements regarding dividends is correct? a. Exempt from tax if received by a resident citizen from a domestic corporation b. Exempt from tax if received by a resident alien from a domestic corporation c. Taxable subject to year-end tax if received by a resident citizen from a non-resident foreign corporation d. Taxable subject to final tax if received by a non-resident citizen from a non-resident foreign corporation 16. The following items are exclusions from gross income, except a. Labor union dues b. SSS/GSIS premiums contribution c. IOUs d. Pag-ibig premium contribution 17. Basic rules on fringe benefits tax, except a. Fringe benefits given to rank and file employees are not subject to fringe benefit tax b. Fringe benefits given to a supervisory or managerial employee are subject to fringe benefit tax c. De minimis benefits whether given to rank and file employee or to a supervisory or managerial employee are not subject to fringe benefit tax d. The fringe benefit tax imposed on the managerial or supervisor 18. Which of the following statements are correct? a. Fringe benefits given to employees is subject to fringe benefit tax b. Fringe benefits given to employees is exempt from fringe benefit tax c. If the fringe benefits is taxable, the tax will be paid by the employer d. Fringe benefits may be given to managerial, supervisory and rank and file employees 19. The following is concepts denotes exemption from the fringe benefits tax, except a. Convenience of the employer c. Welfare and benefit of the employees b. Necessity to the business or trade d. De minimis benefits 20. Statement 1: Income derived from investments in the Philippines in loans, stocks, bonds, 0r other domestic securities, or from interest on deposits in banks in the Philippines, including sale of investments, by foreign governments and financial institutions wholly-owned, controlled, or enjoying financing from foreign governments, shall be exempt from income tax, and consequently from withholding tax. Statement 2: Gains realized from the sale or exchange or retirement of bonds, debentures, or other certificates of indebtedness with a maturity of a t least 5 years, shall not be taxable to the investor-seller. a) b) c) d) 1.

Statement 1 is true Statement 2 is true Both statements are false Both statements are true

Mr. A, a farmer, had the following data for the year: Sales of livestock and farm products raised Sales of livestock and farm products purchased Cost of raising livestock and farm products

P 270,000 160,000 190,000

Cost of livestock and farm products purchased and sold 140,000 Rental income of farm equipment 105,000 Inventory of livestock and farm products, January 1 110,000 Inventory of livestock and farm products, December 31 113,000 A. Using cash method of accounting, the income is: a. P205,000 c. P395,000 b. P208,000 d. P202,000 B. Using accrual method of accounting, the income is: a. P205,000 c. P208,000 b. P395,000 d. P202,000 2.

Give the income tax due (refund) for the taxable year 2018: a. A, a resident alien, single had the following during the year: 1. 2. 3. 4. 5. 6.

7. 8.

Salaries (net of payroll deduction), P200,000 Allowances. P25,0000 13th month pay, P26,000 Christmas cash gift P10,000 14th month pay, P26,000 Payroll Deductions a. Withholding tax on salary, P16,500 b. Contributions for SSS, PHIC, PAG-IBIG, and labor union dues, P16,000 c. Advances/Loans, P30,000 7. Premium on health and hospitalization insurance, P2,750 Bank interest income, net of 20% WT, P1,400

b. A, resident citizen, single had the following during the year 2018: Gross compensation income Deduction from compensation income: SSS contributions Pag-ibig Contributions Union dues Premium payments on health insurance (P250/month) Other income: Prizes and awards received as best athlete in the Palarong Pambansa Prizes and awards received for the silver medal in the South East Asian games Prize won in a supermarket raffle Prize won as a Luck Home Viewer 13th month pay Christmas cash gift Mid-year bonus Interest on bank deposit (net of 20% WT) Interest on foreign currency deposit (net of 15% WT)

P480,000 P3,600 1,200 2,400 3,000 10,000 25,000 10,000 20,000 45,000 10,000 45,000 16,000 10,000

c. D, resident citizen, married, with 2 qualified dependent children, had the following: Professional fees P400,000 Gross Income from rental of conjugal properties 600,000 Expenses connected with profession 180,000 Expenses connected with rental properties 200,000 Tax withheld on professional fees 40,000 Tax withheld on rental of properties 30,000 d. D, married with 4 qualified dependent children, had the following: Salary (net of P19,000 SSS, Philhealth and Pag-ibig contributions & Php 80,000 CWT) 13th month pay Productivity bonus Premium payments on health insurance Personal, family and living expenses 3.

P400,000 42,000 42,000 2,400 200,000

Pong Pagong is the CEO of Sesame Zoo Cooperation. In 2018, he received total compensation of ₱10,000,000 inclusive of 13th month pay and other benefits in the amount of ₱800,000. He also owns a poultry farm which supplies the wet market in his province. Its gross sales totalled ₱5,000,000. The farm’s cost of sales and operating expenses amounted ₱2,300,000 and ₱580,000, respectively. Its non-operating income amounted to ₱230,000. Compute his income tax due in 2018.

4.

Amyjo Perez owns a pet store specializing in reptiles which is her only source of income. She signified her intention to be taxed at 8% of gross sales in her 1st Quarterly ITR of the taxable year. Her sales, cost of sales, and operating expenses for the 4 quarters are as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Sales 400,00 600,000 2,000,000 3,500,000 Cost of sales (100,000) (200,000) (600,000) (800,000) Gross income 300,000 400,000 1,400,000 2,700,000 Operating expenses (170,000) (190,000) (500,000) (820,000) Net income 130,000 210,000 900,000 1,880,000 Compute her income tax payable in her 1st, 2nd, 3rd Quarterly ITRs and in her Annual ITR. 5.

“A” leased his land as follows Lessee Agreed annual rental Start of lease Rentals received by the lessor on 1-1-19(for 3 year’s rent) Security deposit Improvements introduced by the lessee(will belong to the lessor upon expiration/termination) Estimated useful life of improvements Date of completion of improvements Term of lease

“X” P200,000 1-1-19 600,000 200,000 10M 25 years 1-1-20 16 years

a) Income to be reported by the lessor in 2019 and 2020 assuming he will spread his income on the improvement over the term of the lease. b) Income to be reported by the lessor in 2019 and 2020 assuming he will outright method 6.

In 2018, ABC Corp. hired Miss A as sales manager for cosmetics. She was given the following compensation and fringe benefits: Salary P200,000/month Three maids 4,000 per maid/month Personal driver 8,000/month Home owner’s Association dues 1,200/year Determine the annual fringe benefit tax due for the year. Answers:

7.

Romella has the following data for the year 2018: Gross income, Philippines Gross income, USA Gross income, Japan Expenses, Philippines Expenses, USA Expenses, Japan

P1,000,000 500,000 500,000 300,000 200,000 100,000

Other Income: Dividend from San Miguel Corp. 70,000 Dividend from Ford Motors, USA 120,000 Gain, sale of San Miguel shares directly to buyer 150,000 Royalties, Philippines 50,000 Royalties, USA 100,000 Interest income (other than from bank deposit) 60,000 Rent, land in USA 250,000 Other rental income (Phils.) 100,000 Prize, contest in Manila 200,000 Interest income ($ deposit in BDO) 50,000 a. Income tax payable if Romella is Resident Ctizen b. Income tax payable if Romella is Non Resident Ctizen c. Total Final Tax on passive Income if he is Non Resident Alien Engaged in Trade and Business d. Total Tax if he is non resident alien not engaged in trade and business