TAX QUIZ TEST BANK

1. Which of the following income of the trust is not taxable to the trust?

a) Income of the trust which is to be accumulated or held for future

distribution consisting of ordinary income or gain from the sale of
assets included in the corpus of the trust.

b) Income of the trust, whether created by will or deed, for

accumulation of income, whether for an unascertained person or
persons with contingent interest or otherwise.

c) Income of the trust, where under the terms of a will or deed, the
trustee may, in his discretion, distribute the income or accumulate it.

d) Income of a trust, which in whole or in part, is subject to

revocation by the grantor.

2. First statement: The amount of income of the estate for the taxable
year, which is properly paid or credited during such year to any
legatee, heir or beneficiary, is a special item of deduction from the
gross income of the estate.
Second statement: An allowance paid a widow or heir out of the corpus
of the estate is not deductible from the gross income of the estate
a) True, True
b) False, False
c) True, False
d) False, True

3. In which of the following cases shall the income of such part of the trust
be included in computing the taxable income of the grantor?
I-Where at any time the power to revest in the grantor title to any
part of the corpus of the trust is vested in the grantor either alone
or in conjunction with any person not having a substantial adverse
interest in the disposition of such part of the corpus or the income
there from.
II-Where at any time the power to revest in the grantor title to any
part of the corpus of the trust is vested in any person not having a
substantial adverse interest in the disposition of such part of the
corpus or the income there from
a) I and II
b) I only
 c) II only
d) None of the choices

4. The tax imposed on trust shall no apply to employee’s trust which

forms part of a pension, stock bonus or profit-sharing plan of an
employer for the benefit of some or all of his employees:
I-if contributions are made to the trust by such employer, or
employees, or both for the purpose of distributing to such
employees the earnings and principal of the fund accumulated
by the trust in accordance with such plan;
II-if under the trust instrument it is impossible, at anytime prior to the
satisfaction of all liabilities with respect to employees under the
trust, for any part of the corpus or income to be (within the
taxable year or thereafter) used for, or diverted to, purposes
other than for the exclusive benefit of his employees
a) Both I and II are correct
b) Neither I nor II is correct
c) Only I is correct
d) Only II is correct

5. A right of property, real or personal, held by one person for the benefit
of another
a) Estate
b) Trust
c) Co-ownership
d) Partnership

6. Ms. X and Mr. Y inherited from their father a piece of land with an
apartment thereon. They want to keep the property intact in memory of
their father. Ms. X was appointed in charge of the property and to
collect the income from it. Expenses to preserve the property and to
pay taxes to the government are taken from the income of the property.
In 2019, the property had a net income from rents of P200,000. Ms. X
had her personal net income of P200,000 from her business while Mr.
Y had his personal net income from the practice of his profession of
P180,000. Both of the co-owners are single.

The income tax of the co-ownership is?

A. P64,000 C. P0
B. P112,000 D. Answer not given
7. Mr. X, rich but sickly, established in December 2018 a trust for the
benefit of his son Mr. Y, 15 years old. He transferred to the trust two
income producing properties:
I. A vacant lot leased for P60,000
II. An office building with a monthly rental income of P25,000, both
gross of withholding tax. He appointed Mr. Z as the trustee.
In 2019, ordinary trust expenses total P120,000 and income
distributed to the beneficiary amounted to P144,000.

The taxable income of the trust in 2019 is?

A. P360,000 C.P76,000
B. P240,000 D. P96,000

8. Mr. X died leaving a net estate of P3,000,000. The estate is in the

hands of the executor. Mr. Y, married, is one of the heirs of the estate.
The estate had a gross income of P300,000 and expenses of P50,000
on the properties in the estate. Mr. Y had personal income and
expenses of P50,000 and P10,000, respectively. The executor
distributed the following:
From the properties (corpus) P100,000
From the current yrs income 50,000
The income tax of the estate of Mr. X is?
A. P32,000 C. P35,500
B. P37,500 D. Answer not given

9. A mass of all property, rights and obligations, which are not

extinguished by death, of a person existing at the time of his death, and
includes those which have accrued since the opening of succession
a) Estate
b) Trust
c) Co-ownership
d) Partnership

10. The tax imposed upon individuals shall apply to the income of estates
or of any kind of property held in trust, including
a) Income accumulated in trust for the benefit of unborn or
unascertained person or persons with contingent interests, and
 income accumulated or held for future distribution under the
terms of the will or trust
b) Income which is to be distributed currently by the fiduciary to the
beneficiaries, and income collected by a guardian of an infant
who is to be held or distributed as the court may direct
c) Income received by estates of deceased persons during the
period of administration or settlement of the estate
d) All of the choices

11. In 2019, Mr. X created a trust naming his eldest son, Y as a revocable
beneficiary who will receive the income of the trust. If the eldest son
could not abide with the terms provided in the trust instrument, Mr. X
could change anytime the terms of the trust. For the current taxable
year, the trust earned a net income of P1,000,000. On the other hand,
the grantor earned a compensation income of P1,500,000 and the
business income of P1,000,000. No part of the income were distributed
to the revocable beneficiary during the year. Determine the taxable
amount of the trust. 0

12. Using the above data, what is the taxable income of the grantor?
P3,500,000

Use the following data to answer three requirements:

In 2019, Mr. X created two trusts for his minor son, Y. During the year, the
two trusts earned net income as follows:
Trust 1 P4,000,000
Trust 2 P6,000,000
Each trust filed their own income tax return and paid the corresponding
income tax due as computed in their separate returns.
Determine the following:
13. Consolidated tax due of the Trust. P3,110,000
14. Income tax still due and payable of Trust 1. P114,000
15. Income tax still due and payable of Trust 2. P96,000

16. 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 c. Non-resident foreign
corporation
b. Resident foreign corporation d. General co-partnership

17. A domestic corporation may employ, as a basis for filing its annual
corporate income tax return the:
a. Calendar year only c. Either calendar or fiscal year
b. Fiscal year only d. Neither calendar nor fiscal year

18. A corporation which may be classified as either a resident corporation

or a non-resident corporation is
a. Domestic corporation c. Gov’t. owned and controlled corp.
b. Foreign corporation d. Non-profit hospital

19. Which of the following maybe subject to the corporate income tax?
a. A non-stock and non-profit educational institution
b. A public educational institution
c. A private educational institution
d. Government Service Insurance System

20. If the gross income from unrelated activity exceeds 50% of the total
gross income derived by any private educational institution, the rate
shall be for ordinary corporation based on the entire taxable income.
This principle is known as
a. Constructive receipt c. End trust doctrine
b. Tax benefit rule d. Predominance test

21. Which of the following is classified as special corporation subject to

preferential corporate income tax rate?
a. Social Security System
b. Phil. Charity Sweepstakes Office
c. Proprietary Educational Institution
d. Government Service Insurance System
22. X Corporation, a corporation registered in Norway, has a 50MW
electric power plant in San Jose, Batangas. Aside from X’s income
from its power plant, which among the following is considered as
part of its income from sources within the Philippines?
a. Gains from the sale to an Ilocos Norte power plant of
generators brought from United States.
b. Interests earned on its dollar deposits in a Philippines ban under the
Expanded Foreign Currency Deposit System.
c. Dividends received from a two-year old Norwegian subsidiary with
operation in Zambia but derived 60% of its gross income from the
Philippines.
d. Royalties from the use in Brazil of generator sets designed in the
Philippines by its engineers.

23. X Corporation is registered under the laws of the Virgin Islands. It has
extensive operations in Southeast Asia. In the Philippines, its products
are imported and sold at a mark-up by its exclusive distributor, Kim’s
Trading, Inc. The BIR compiled a record of all the imports of Kim from
X and imposed a tax on X’s net income derived from its exports to
Kim. Is the BIR correct?
a. Yes. Aplets is a non-resident foreign corporation engaged in trade
or business in the Philippines.
b. No. The tax should have been computed on the basis of gross
revenues and not net income.
c. No. Aplets is a non-resident foreign corporation not engaged in
trade or business in the Philippines.
d. Yes. Aplets is doing business in the Philippines through its exclusive
distributor Kim’s Trading, Inc.

24. X, Inc., a corporation registered and holding office in Australia, not

operating in the Philippines, may be subject to Philippine Income
taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought
from the Philippines with the proceeds converted to pesos.
b. Gains it derived from sale in Australia of shares of stock of
Philex Mining Corporation, a Philippine corporation.
 c. Dividends earned from investment in foreign corporation that
derived 40% of its gross income from Philippine sources.
d. Interests derived from its dollar deposits in a Philippine bank under
the Expanded Foreign Currency Deposit System.

Use the following data to answer for the requirements:

The A Corporation provided the following data for calendar year
ending December 31, 2012. ($1 = P50)
Philippines Abroad
Gross Income P 4,000,000 $40,000
Deductions 2,500,000 15,000
Income Tax Paid 3,000

25. If it is a domestic corporation, its income tax after credit is

a. P812,500 b. P675,000 c. P962,500 d. P480,000

26. If it is a residents corporation, its income tax is

a. P730,000 b. P450,000 c. P480,000 d. P525,000

27. If it is a non-resident corporation, its income tax is

a. P730,000 b. P1,280,000 c. P1,200,000 d. P1,400,000

28. Under No.37, but it opts to claim the tax paid abroad as deduction from
gross income, its income tax is
a. P910,000 b. P832,000 c. P275,000 d. P780,000

29. If it is a resident international carrier, its income tax is

a. P100,000 b. P10,000 c. P37,000 d. P125,000
30. If it is a non-resident cinematographic film owner/lessor, its income tax
is
a. P1,000,000 b. P100,000 c. P300,000 d. P128,000