INCOME TAXATION

QUIZ SET – A

The Princess KT of Campetique reported the following items for the year 2018:
Compensation Income P10,000,000
Income from sari-sari store 20,000,000
Cost of sales P5,000,000 15,000,000
Professional income 30,000,000
Cost of service 5,000,000
Other expenses 1,000,000 24,000,000

1. Using the 0% to 35% tabular tax regime, how much of the gross income is subject to the tax? 50M
2. Using the 8% optional income tax regime, how much of the gross income is subject to the 8% tax? 50M

3. GSV and Co. reported P100,000,000 and P40,000,000 professional income and related cost of service, respectively.
The company also declared P10,000,000 worth of discounts on professional services. Assume GSV & Co. opted to be
taxed at 8%. How much is the gross income subject tax? 90M

4. There is no taxable income until such income is recognized. Taxable income is recognized when the:
a. Taxpayer fails to include the income in ITR.
b. Income has been received, either actually or constructively.
c. Income has been actually received.
d. Transaction that is the source of the income is consummated.

5. In 2018, Mr. Platon sent his sister Helen $1 ,000 via a telegraphic transfer through the Bank of PI. The bank's
remittance clerk made a mistake and credited Helen with $1,000,000 which she promptly withdrew. The bank
demanded the return of the mistakenly credited excess, but Helen refused. The BIR entered the picture and
investigated Helen. Would the BIR be correct if it determines that Helen earned taxable income under these facts?
a. No, she had no income because she had no right to the mistakenly credited funds.
b. Yes, income is income regardless of the source.
c. No, it was not her fault that the funds in excess of $1,000 were credited to her.
d. No, the funds in excess of$1,000 were in effect donated to her.

6. Which of the following income is/are earned through employee and employer relationship?
I. Professional Fee III. Pension Pay
II. Wages IV. Capital Gain

a. I, II, III only c. I and II only

b. II and III only d. II only

7. Brothers A, B and C borrowed a sum of money from their father which amount together with their personal monies
was used by them for the purpose of buying real properties. The real properties they bought were leased to various
tenants. The BIR demanded the payment of income tax on corporations, real estate dealer’s tax, and corporation
residence tax. However, A, B and C seek to reverse the letter of demand and be absolved from the payment of the
taxes in question. Are they subject to tax on corporations?
a. No, since they are partners. c. No, they are individual taxpayers.
b. No, they formed joint ventures. d. Yes, they are considered corporations.

8. Julia died leaving as heirs her surviving spouse, Lorenzo and her five children. A settlement of the estate was
instituted in the CFI. The project partition was approved by the court however, there was no attempt made to divide
the properties listed. Instead, the properties remained under the management of Lorenzo who used said properties
by leasing or selling them and investing the income derived therefrom. From said investments and properties, the
heirs derived income. The BIR decided that the heirs formed an unregistered partnership and therefore subject to
corporate income tax. They protested the assessment and asked for reconsideration alleging that they are co-
owners of the properties inherited and the profits derived from the transactions. Are the heirs of the decedent
subject to corporate income tax?
a. No, they are tax exempt. c. Yes, they are considered partners.
b. No, they are subject to income tax on their personal capacities. d. No, co-ownership is tax exempt.

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9. Pascual and Dragon bought 2 parcels of land from Bernardino and 3 from Roque. The first 2 were sold to X Co. and 3
to Reyes and Samson. They divided the profits between the 2 of them. The CIR contended that they formed an
unregistered partnership or joint venture taxable as a corporation under the Code and its income is subject to the
NIRC. Is the CIR correct?
a. Yes, the sharing of profit established the partnership.
b. Yes, there is unregistered partnership.
c. No, sharing of profit does not establish partnership.
d. No, though is joint venture, however it is tax exempt.

10. Pierre de Savigny, a Frenchman, arrived in the Philippines on January 1, 2010 and continued to live and engage in
business in the Philippines. He went on a tour of Southeast Asia from August 1 to November 5, 2010. He returned to
the Philippines on November 6, 2010 and stayed until April 15, 2011 when he returned to France. He earned during
his stay in the Philippines a gross income of P3 million from his investments in the country. For the year 2010,
Pierre’s taxable status is that of:
a. A non-resident alien not engaged in trade or business in the Philippines.
b. A non-resident alien engaged in trade or business in the Philippines.
c. A resident alien not engaged in trade or business in the Philippines.
d. A resident alien engaged in trade or business in the Philippines.

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