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1. The proceeds of life insurance received by the heirs of the insured upon
his death is excluded in gross income.
2. The amount received in excess of the premium paid in an insurance contract
constitutes an item of gross income.
3. Donated income is included in the gross income of the donee.
4. Compensation for injuries and sickness constitutes profit; hence, an
inclusion gross income.
5. It is sufficient that the employee rendered more than 10 years of service
for his retirement benefit to be exempt.
6. An employee can secure retirement benefit exemption only once in a
lifetime.
7. It is a must that the employer maintains a reasonable pension benefit plan
for the retirement benefit to be exempt.
8. An employee must have rendered more than 10 years of service before
claiming exemption for his termination benefits.
9. The income of the Philippine government from essential public functions
exempt from any income tax.
10. Prizes paid to corporations are an inclusion in gross income
subject to final tax.
11. Only the mandatory portion of GSIS, SSS, PhilHealth, and union dues can be
excluded in gross compensation income.
12. Social security benefits, retirement gratuities, and other benefits from
foreign governments are excluded in gross income.
13. Social security benefits, retirement gratuities, and other benefits from
foreign private entities are included in gross income.
14. The gain from redemption of shares in mutual fund is an exclusion in gross
income subject to regular tax because it is an inclusion in gross income
subject to capital gains tax.
15. 13th month pay and other benefits are taxable only up to P 90,000.
True or False 2
1. GSIS and SSS benefits are included in gross income to the extent they
exceed P90,000.
2. Prizes awarded upon the condition that the recipient shall render
specified future services is an item of gross income.
3. Prizes from contests are included in gross income subject to regular
income tax.
4. The income of government-owned and controlled corporations is an item of
gross income.
5. Benefits of veterans of war or retired US army personnel are excluded in
gross income.
6. The employer's share to SSS, PhilHealth and Pag-Ibig contributions are
exclusion in gross income.
7. Compared to exclusion, deduction is included in the amount of gross income
but both exclusion and deductions are not reflected in the amount of
taxable income.
8. The interest income from any bond or debentures, short-term or long-term,
is an item of gross income.
9. Cooperatives that transact business only with members will, in no case, be
subject to income tax.
10. Cooperatives, regardless of their classification, are taxable on income
from their unrelated activities.
11. The gain on the sale of long-term bonds with a maturity of five years is
exclusion in gross income.
12. A non-stock, non-profit entity is subject to tax on income from unrelated
activities.
13. A general professional partnership can be registered as a BMBE.
14. Items of income subject to final tax or capital gains tax are exclusions
in gross income subject to regular income tax.
15. A BMBE must have a net asset not exceeding P3,000,000 to be exempt.
10. The highest marginal tax rate for individual income taxpayers’ is
a. 25% c. 35%
b. 30% d. 32%
2. Mr. Buguey was insured in a life insurance with his daughter, Ybon, as the
irrevocable beneficiary. Ybon was paid the entire proceeds when Mr. Buguey
died. The proceeds constitute
a. a taxable inheritance. c. a taxable income.
b. a taxable gift. d. an exclusion from gross income.
3. A policy holder who outlived the policy and received a cash surrender
value in excess of premiums paid is exempt upon
a. the amount representing a return of premiums.
b. the entire amount received.
c. the excess of the amount received over the premiums paid.
d. None of these
5. A widow who collected the life insurance proceeds of her decease husband
is
a. exempt to the entire amount of the proceeds.
b. taxable to the excess of the proceeds over the premiums paid by the
husband.
c. taxable to the excess of the proceeds over the premiums paid by the
widow.
d. exempt with respect to the portion of the proceeds representing returns
of premiums.
9. Termination benefits are exempt from income tax provided that the reason
for termination is
a. beyond the employee's control. c. within the employee's control.
b. within the employer's control. d. beyond the employer's control.
2. Mr. Kabacan surrendered his life insurance policy and received a cash
surrender value of P800,000 after contributing P700,000 in annual
premiums. Determine respectively the total exclusion in gross income and
the inclusion in gross income.
a. P800,000; POS c. P100,000; P700,000
b. PO; P800,000 d. P700,000; P100,000
3. Mr. Tarragoza died. His heirs collected the P2,000,000 proceeds of his
life insurance policy. Mr. Tarragoza previously paid a total payment of
P500.000 in premiums. Determine respectively the exclusion in gross income
and the inclusion in gross income.
a. P2,000,000; PO c. P2,000,000; PO
b. P500,000; P1,500,000 d. PO; P2,000,000
4. Mr. Malalag collected the P5,000,000 fire insurance proceeds of his bull
was destroyed by fire. The building had a tax basis of P4,500,000 in gross
income occurrence of the fire. Determine respectively the total exclusion
in and the inclusion in gross income.
a. P5,000,000; PO
b. P4,500,000; P500,000
c. PO; P5,000,000
d. P500,000; P4,500,000
5. Mr. Cateel insured his crops for a P1,000,000 insurance cover against
calamities. He paid and expensed P100,000 insurance premium. How much in
gross income?
a. P900,000
b. P100,000
c. P1,000,000
d. PO
a. PO
b. P5,000,000
c. P100,000,000
d. P105,000,000
11. Mr. Alvarez had the following income during the year:
a. P36,000
c. P66,000
b. P61,000
d. P71,000
a. 380, 000
b. 80,000
c. 30,000
d. 50,000
13. Mr. Tacurong has the following data during the year: n yolc
P1,200,000
Basic salary
50,000
Income tax withheld
100,000
13th month pay
o lat
2,000
1,800
SSS
PhilHealth
Pag-Ibig
1,700
IT 271
Chapter 8 - Regular Income Tax Exclusion from Gross Income
500
2,000
om gross income:
Union dues
Capital build up contribution in a social fund
Compute the total exemptions and exclusions from gross in
a. P 106,000
c P 96,000
b. P100,000
d. P 88,000
14. Mang Antonio collected P2.000.000 from the fire insura
curred. During
when the fire occu
his building which had a tax basis of P1.800,000 when
the same period, he also collected P300,000 crop insurance
his crops destroyed by frost. The total item of gross inc
a. P2,300,000.
c. P300,000
b. P200,000
d. P500,000.
e fire insurance company that insure
000 crop insurance proceeds pertaining
of gross income is
3. Ms. Henson retired from her job after 25 years of service. She
joined the company at the age of 23 and was promoted from an
accounting clerk to VP Finance. She was paid P2,000,000 total
retirement pay from the employer's contributory pension plan which was
duly registered with the BIR. Out of the total proceeds, Ms. Henson
contributed P600,000. This was Ms. Henson's first retirement from
employment. How much is excluded from gross income?
a. P600,000 c. P2,000,000
b. P1,400,000 d. PO
9. Ms. Sibuco invested in the mutual fund and savings deposit of BCBC
Bank. She acquired a 100,000 participation shares when the net asset
value per unit of the fund was P98.00. She pulled out her investment
when the net asset value per unit was P101.00. Ms. Sibuco also had
P100.000 accrued interest in her savings deposit.
Which statement is incorrect?
a. The P300,000 gain is an exclusion in gross income.
b. The P100,000 interest income is an exclusion in gross income
subject to regular tax.
c. The P100,000 interest income is an inclusion in gross income
subject to final tax
d. The P300,000 is an inclusion in gross income subject to regular
tax, but the P100,000 is an exclusion in gross income subject to final
tax.
15. Mr. Santiago purchased a life annuity for P100,00 which will pay
him P10,000 a year. The life expectancy of Mr. Santiago is 12 years.
Which of the following can Mr. Santiago exclude from his gross income?
a. P10,000 c. P120,000
b. P. 20,000 d. P1,300,00