CONTRIBUTED TEST QUESTIONS FOR INCOME TAX FOR PRE-FINAL EXAM

1. A corporation organized and created under the laws of a foreign country and is authorized to do business/ trade in the
Philippines is?
A. Domestic corporation
B. Resident foreign corporation
C. Non-resident foreign corporation
D. General co- partnership
2. The net share received by a partner in a general professional partnership is
A. Part of his taxable income
B. Exempt from income tax
C. Subject to corporate tax
D. Subject to final tax
3. Which of the following is not correct? The gross income tax
A. Is optional to qualified corporation
B. Is available if the ration of costs of sales to gross sales or receipts from all sources does not exceed 55%.
C. Shall be irrevocable for three consecutive taxable years that the corporation is qualified under the scheme.
D. Is compared with the normal income tax and minimum corporate income tax.
4. Statement 1: A CPA and a dentist may form a GPP or an ordinary partnership.
Statement 2: Partnership and corporations have separate juridical personalities distinct from the owners, as such
partners and stockholders are not liable to creditors of business.
A. True; true B. False, false C. False, true D. True, false
5. AB partnership with A and B as partners had a net professional income amounting to Php 500,000.00 Its other
income included bank interest income of Php 8,000.00 net of final withholding tax and it received dividend
income from a domestic corporation of Php 10,000.00 A single and has compensation incme of Php 200,000.00.
The net taxable income of A who share profit and loss equally with B is ?
A. Php 364,000.00 B. Php 440,000.00 C. Php 400,000.00 D. Php 444,000.00
6. It is a commercial undertaking by 2 or more persons differing from a partnership in that it relates to the disposition of
a single lot of goods or the completion of a single project.
A. Business partnership B. joint accounts C. Joint stock companies D. Joint ventures
7. It means all direct costs and expenses necessarily incurred to provide the services required by the customers and
Clients..
A. Cost of goods sold
B. Cost of goods manufactured
C. Cost of Services
D. Gross income
8. Special corporation is/are subject to what taxes?
A. Special tax base B. Preferential tax rate C. Both A and B D. None of both
9. What percentage of final withholding tax that shall be imposed on income derived by Offshore Banking Units?
A. 10% on its gross Philippine billing
B. 10% base on gross amount
C. 10% of any profit remitted by the Philippine branch of foreign corporation
D. 10% of gross rentals
10. A/An ____ doing businesses in the Philippines shall pay a tax of 2.5% of its gross Philippine billings.
A. Branch profit remittances
B. International Carrier
C. Offshore banking units
D. Regional area headquarters and regional operating headquarters of multinational companies.
11. True or False. The interest income derived by a domestic corporation from a depository bank under the expanded
foreign currency deposit system shall not be subject to any final tax rate.
12.Which of the following is subject to income tax?
A. Partnership formed for the practice of profession B. Co- ownership
C. Unregistered partnership D. Joint venture formed for the purpose of undertaking construction project
under a service contract with the gov’t
13. Rent income earned from an apartment located in Kab. City, Philippines is
A. Income within B. Income without C. Expense within D. Expense without
14. Which of the following is an example of a capital asset?
A. Fixtures used in a retail store
B. Lands for sale held by a real estate dealer
C. Agricultureal land used by the owner for his farming business
D. Land with undetermined use
15. True or False: To be classified as a capital asset, the property mush never be used for business.
16. Which of the following is not an ordinary asset?
A. Stock in trade or other property B. Property primarily for sale to customers.
C. Personal property used in business. D. All are examples of ordinary assets.
17. Statement 1: To have a capital gain, one must sell or exchange the capital asset for an amount more than its cost.
Statement 2: to have a capital loss, one must sell or exchange the capital asset for an amount more than its cost.
A. True; true B. False; false C. True; false D. False; true
18. True or false : wash sale is a sale of securities where substantially identical securities are acquired or purchased
within a ninety (90) day period beginning thirty (30) days before the sale and ending thirty (30)days after the
sale.
19. Income distributed to the beneficiaries of estates and trust, shall be subject to a creditable withholding tax of?
A. 10% B. 15% C. 20% D. 30%
20. A contract grating a person the exclusive privilege to buy or not to buy a certain objects at any time within the
agreed period at a fixed price.
A. Option B. Securities C. Dividend D. Warrants
21. True or false.Tax on improperly accumulated earnings is 10% of net income.
22. True or false. A taxable partnership is subject to the improperly accumulated earnings.
23. True or false. A resident foreign corporation may also avail of the 40% optional standard deduction.
24. True or false. Estate not under judicial settlement are taxed as mere co-ownerships or general professional
partnerships.
25. True or false. Estates are taxable only if they are under judicial settlement.
26. The tax code used the “_____” in defining capital assets.
A. Definition by exclusion approach C. Both A and B
B. Definition by inclusion approach D. None of the above
27. Other term for estate
A.I nheritance B. Fiduciary C. Trust D. Nation
28. The person who establishes the trust.
A. Trustee B. Grantor C. Heir D. Beneficiary
29. Called to the succession either by the provision of a will or by operation of law.
A. Trustee B. Grantor C. Heir D. Benificiary
30. The person for whose benefit the trust has been created.
A. Trustee B. Grantor C. Heir D. Beneficiary
31. Where the taxpayer is a corporation, which of the following statements is true?
A. The holding period does not apply to corporation, hence capital gains and losses are recognized at 50%.
B. The net capital loss can be carried over in the next succeeding year.
C. Capital loss is deductible only up to the extent of ordinary gains.
D. Ordinary loss is deductible from capital gains.
32. Capital losses are deductible from ordinary gains but net capital loss is not deductible from ordinary gains-ordinary
losses are deductible only to the extent of the capital gains but the net capital loss is not deductible from ordinary
gain.
A. true; true B. True; false C. False; true D. False; false
33. If the interest income is received by the resident foreign corporation the rate is;
A. 15% B. 7.5% C. 12% D. 7%
34. The following rules as to recognition of capital gains or losses from the disposition of personal property classified as
capital asset apply where the taxpayer is an individual. Which is the exception?
A. Depending on the holding period, the percentages of gain or loss is 100% if the capital asset has been held for
12 months or less, and 50% if the capital asset has been held for more than 12 months.
B. Capital losses are deductible only to the extent of the capital gains, hence the net capital loss is not deductible.
C. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain.
D. Net capital loss carry over in a taxable year should not exceed the capital gain in theyear the loss was incurred.
35. The term “capital assets” include
A. Stock in trade or other property included in the taxpayer’s inventory.
B. Real property not used in the trade or business of taxpayer.
C. Property primarily for sale to customers in the ordinary course of his trade or business.
D. Property used in the trade or business of the taxpayer and subject to depreciation.
36. They are taxed exactly in the same way estates under judicial settlement including exemption and rule of accrual.
A. Grantor B. Revocable C. Irrevocable D. Non of the foregoing
37. The income of this property is not included in the income of the trust for tax purpose but instead to include in
computing the net income of the grantor.
A. Grantor B. Revocable trust C. Irrevocable trust D. Trust Issue
38. It refers to all property rights and obligations which is not extinguished by his/ her dealth.
A. Legatee B. Devisee C. Estate D. Trustor
39. The following items are allowed as deductions from gross income of individual corporate tax payers which is not?
A. Bad debts B. Loan C. Taxes D. Research and development
40. The only taxpayers who cannot claim exemptions or deductions are?
A. Non resident alien who is not engage in trade or business in the Philippines
B. Non-resident citizens of the Phlippines
C. Domestic corporation
D. Resident foreign corporation
41. An individual taxpayer owns a 10-door apartment wit a monthly rental of 10,000.00 each residential unit. He sold this
property to another individual taxpayer. Which is not correct?
A. The seller is not liable to pay the capital gains tax.
B. The property sold is a capital asset.
C. The taxpayer is engaged in business
D. The rental income is subject to income tax using the graduated rates.
42. Holding period is the duration for which the taxpayer held the capital asset. A capital asset held by the taxpayer fort
more than 12 months is said to be.
A. Short term B. Medium-term C. Long- term D. No- term
43.Which of the following statement is not correct?
A. When co-owners invest the income of the property co- owned in a business or any income producing
properties or activities constituting themselves into a business partnership, such partnership is consequently
 subject to tax as a corporation.
B. As a rule, a co ownership is not subject to income tax because the activities of the co- owners are limited to
the preservation and enjoyment of the property and the collection of the income there from.
C. A co-owner is subject to income tax on his share in the net income of the co-ownership actually or
constructively received.
D. All partnerships, no matter now created or organized are considered corporations subject to corporate
income tax.
44. A domestic corporation may employ as a basis for filing its annual corporate return the;
A. Calendar year only B. Fiscal year only C. Either calendar or fiscal year D. Neither calendar or fiscal year
45. A corporation, a resident corporation, provided the following data for taxable year 2006 Philippines USA Gross
income Php 40 million, Php 20 million, Dividend from: Domestic Corp 5 Million, Foreign Corp 4Million,
Business expense 12Million, 8 million. The corporation remitted to its head office the Php 5 Million dividend
income and 40% of its net profit to its head office in USA. The corporation’s total tax liability including the tax
on the profit remitted is
A. Php 10,240,000.00 B. php 11,545,600.00 C. Php 15, 960,000.00 D. Php 12, 448,000.00
46. What is a corporation?
A. A joint stock company
B. Created by operation of law having right of succession, powers and attributes
C. An association or insurance company
D. None of the above
47. What is partnership?
A. A practice of profession. B. Created by two or more person contributes money or property.
C. Insurance company D. All of the above
48. What are the kinds of partnership?
A. Taxable partnership B. Joint venture partnership C. Exempt partnership D. Both A and C
49. A person who establishes trust?
A. Legatee B. Trustor/ grantor C. Devisee D. All of the above
50. A person who inherits personal property
A. Trustor B. Devisee C. Legatee D. None of the above
51. The portion of the decedent’s estate which the law reserves to his compulsory heirs.
A. Inheritance B. Legitime C. Free portion D. Will
52. Refers to an heirs who will succeed personal property.
A. Heirs B. Legatee C. Legitimate D. Benefactor
53. Statement 1: Business partnership may avail of optional standard deduction.
Statement 2: A business partnership is subject to the rule on minimum corporate income tax.
A. False; false B. True; true C. True; false D. False; true
54. It refers to which the ownership of undivided things or right belongs to different persons.
A. Co-partnership B. Co-ownership C. Partnership D. All of the above
55. A corporation that is subject to a special tax bases and preferential tax rates.
A. Stock corporation B. Special corporation C. Non-stock corporation D. Corporation
56. Which of the following statement is correct?
A. Estates and trusts are allowed a personal exemption of Php 32,000.00. If the executor or trustee is married.
B. The income tax rates for corporate taxpayers apply to taxable estates and trusts.
C. The taxable year of estaes and trusts maybe calendar or fiscal year.
D. For a trust to be taxable, it must be irrevocable, both as to corpus (principal) and income.
57. The property rights and obligations of a person which are not extinguished by his death and those which accrued
thereto sine the opening of succession.
A. Asset B. Capital C. Estate D. Income
58. The term applied to the person whose property is transmitted through succession, whether or not he left a will.
A. Decedent B. Transferor C. Transferee D. Grantor
59. The following statements regarding taxable partnerships are correct, except.
A. They file quarterly and year end income tax returns.
B. They are subject to the rules on corporation for capital gain tax, final tax on passive income, normal income
tax, minimum corporate income tax and gross income tax.
C. The partner’s share in the distributable net income is subject to final tax.
D. They are subject to improperly accumulated earnings tax.
60. The term “capital assets” include.
A. Stock in trade or other property included in the taxpayer’s inventory
B. Real property not used in the trade or business of taxpayer
C. Property primarily for sale to customers in the ordinary course of his trade or business.
D. property used in the trade or business or the taxpayer and subject to depreciation.
61. The person for whose benefit the trust has been created.
A. Trustor B. Beneficiary C. Fiduciary D. Heir
62. True or false. A taxable partnership is subject to the improperly accumulated earnings tax.
63. True or false. A resident citizen and domestic corporations are only taxable on income from sources within the Phil.
64. True or false. The sources of capital gains are sales or exchanges of capital assets while the sources of ordinary gains
are ordinary or business assets.
65. It is a partnership formed by persons for the sole purpose of exercising their common profession.
A. Business partnership C. General professional partnership
B. Joint-stock companies D. None of the above
66. True or false The tax base of domestic corporation is base on its gross income.
67. True or false. The minimum corporate income tax is applicable to domestic and non-resident foreign corporations.
68. True or false. If any individual taxpayer sustains in any taxable year a net capital loss, the taxpayer can carry over the
loss in the next 3 succeeding years.
69. True or false. Resident citizens are taxable on income from the Philippines.
70. True or false. Under the principle of constructive receipt, the share in the net profits to which any taxable partner
would be entitled to, shall be taxable to him only if distributed.
71. True or false. Ordinary gains are gains derived on sale or exchange of capital assets.
72. True or false The sources of capital gains are sale or exchange ordinary assets while the sources or ordinary gains are
gains are ordinary in business.
73. True or false the income of a business is subject to income tax while the income of a general professional partnership
is taxable.
74. True or false . If the partnership availed of the itemized deduction in computing its net income. The individual partners
cannot avail of deductions anymore in computing their respective income tax.
75. True or false. The minimum corporate income tax shall apply to all corporation and partnership subject to the normal
corporate income tax
76. This kind of corporation is taxable on income within and without the Philippines.
A. Joint stock corporation B. Domestic corporation
C. Foreign corporation D. Non-resident foreign corporation
77. Under the expanded foreign currency deposit, a domestic corporation from depository bank is subject to a final tax
at a rate of ?
A. 20% B. 7.5% C. 15% D. 2%
78. It refers to all property, rights, and obligation of a person which are not extinguished by his death and also those
when accrued thereto since the opening of succession.
A. Trustee B. Heir C. Estate D. Beneficiary
79. The following are the classification of income as to source except:
A. Income derived in full source within
B. Income derived from the exercise of profession.
C. Income derived in full sources without
D. Income derived partly from sources within and partly from sources without.
80. A person called to the succession either by provision of will or operation of law.
A. Heir B. Fiduciary C. Trustee D. Trustor
81. Statement 1: The minimum corporate income tax (MCIT) shall apply on all corporations.
Statement 2: The minimum corporate income tax shall apply only to corporations subject to the normal corporate tax
A. True; true B. False; false C. True; false D. False; True
82. Statement 1: A tax equivalent to 10% of the improperly accumulated taxable income shall be imposed for each
taxable year to every corporation and formed.
Statement 2: The dividends must be declared and paid or issued not later than one year following he close of the
taxable year, otherwise, the IAET, if any should be paid within 15 days.
A. True; true B. False; false C. True; false D. False; true
83. Statement 1: Regional or area headquarters shall be subject to income tax
Statement 2: Regional operating headquarters shall applu a tax of 15% of their taxable income.
A. True; true B. False; false C. True; false D. False; true
84. Statement 1: A non resident owner or lessor of vessels shall be subject to a tax of 15% of gross rentals, lease or charter
fees.
Statement 2: a cinematographic film owner, lessor distributor shall pay a tax of 25% of its gross income from all
sources within the Philippines.
A. True; true B. False;false C. True; false D. False; true
85. Is one where at any time the power to revest (return) in the grantor title to any part of the corpus (body) of the trust
vested.
A. Revocable trust B. Irrevocable trust C. Imposed Trust D. None of the above
86. A joint ventures involving foreign contractors may also be treated as a non-taxable corporation only if.
A. Those with income subject to special/ preferential tax rate.
B. Depository bans under the expands foreign currency deposit.
C. The member of foreign contractor is covered by a special license as contractor by the PCAB of the DTI.
D. Association, or insurance companies
87. A cause due to an irresistible force as by “act of God”.
A. Prolonged labor dispute B. Force Majeure
C. Legitimate business reverses D. Secretary of finance
88. Losses arising from strike staged by the employees which lasted for more than six (6) months within taxable period
and which has caused the temporary shutdown of the business operation.
A. Prolonged labor dispute B. Force Majeure
C. Legitimate Business Reverses D. Secretary of finance
89. These are considered as corporation subject to corporate tax.
A. General professional partnership B. Income taxation
C. Distributive partnership D. Taxable partnership (all other partnerships)
90. A person who establishes a trust.
A. Trustor/ grantor B. Fiduciary C. Estates D. Beneficiary
91. Taxation as distinguished from police power of eminent domain.
A. Property is taken to promote general welfare
B. Maybe exercised only by the government.
C. Operate upon the whole citizenry
D. There is generally no limit as to the amount that may be imposed.
92. It is the privilege of not being imposed a financial obligation to which others are subjected.
A. Tax incentives B. Tax exemption C. Tax amnesty D. Tax credit
93. A tax system where the greater bulk of the tax revenues is derived by direct users.
A.Schedular B. Proportional C. Progressive D. Regressive
94. They exist independent of the constiturion being fundamental powers of the state except
A. Power of taxation B. Police power C. Power of imminent domain D. Power of death
95. Basic principle of sound tax system
A. Fiscal adequacy B. Equality or theoretical justice
C. Administrative feasibility D. Intellectual sensitivity
96. The estate should be valued at the time.
A. The heirs are ascertained. C. The estate is ready for distribution to the heirs
B. The estate tax is paid D. of death of the decedent
97. Value added tax is an example of :
A. Graduated tax C. Regressive tax
B. Progressive tax D. Proportional tax
98. Gross estate includes all his property, real or personal, tangible or intangible wherever situated, except
A. Resident citizen B. Non-resident citizen C. Resident Alien D. Non-resident alien.
99. Fruits and income of exclusive property shall belong to the spouses. Donations made by the decedent during lifetime
but to take effect upon his death shall be exempt from estate tax.
A. True; true B. True; false C. False; true D. False; false
100. Which of the following is not true. A transfer in contemplation of death for less than full and adequate
consideration in money may result in a
A. Value included in the gross estate C. Value included in the net estate
B. Nothing included in the gross estate D. Value to consider as taxable income
101. Partnership formed by persons for the sole purpose of exercising their common profession.
A. Corporation B. Business partnership C. General professional partnership D. Co-ownership
102. the following are tax exempt partnership EXCEPT,
A. General professional partnership B. Joint ventures/ contracts with the government
C. Co- ownership D. Business partnership
103.A partnership is taxable as a corporation except the IAET. IAET stands for?
A. Itemized Accumulated Earning tax B. Improperly Associated Earning Tax
C. Improperly Accumulated Earnings Tax D. Improperly Availed Earnings Taxes
104. Refer to the common preservation and enjoyment of property.
A. Corporation B. Business partners C. Co-ownership D. General Professional partnership
105. Statement 1: Domestic corporation are taxable only from income within.
Statement 2: Non-resident foreign are not taxable from income within.
A. True; true B. True; false C. False; false D. False; True