MULTIPLE CHOICE

1. Bobby Fishing an American student, went to the Philippines in 2018 as part of a 5-month student
exchange program. During his stay from January 1, 2018 to May 31, 2018, he worked as a teaching
assistant to a professor in a university. He also fell in love with a Filipina whom he promised marriage
after he graduated from college. For tax purposes, Bobby in 2018 is classified as a

a) Resident alien

b) Non-resident alien engaged in trade or business

c) Non-resident alien not engaged in trade or business

d) None of the above.

2. Before leaving the Philippines, does Bobby (in number 1 above) need to file an income tax return with
the BIR?

a) No.

b) Yes.

c) It depends whether the employer withheld taxes from his compensation.

d) None of the above.

3. Among the following taxpayers: i) Foreign managers in Philippines regional area headquarters of
multinational companies; ii) Aliens employed with foreign petroleum service contractors engaged in
petroleum operations in the Philippines; iii) Aliens employed with offshore banking units in the
Philippines; or iv) Filipinos occupying non-managerial technical positions in Philippine regional operating
headquarters of multinational companies, who under the Tax Code as amended by R.A No. 10963, is
subject to a preferential 15% tax rate on gross compensation income?

a) All except (iv)

b) All of them.

c) Only (i) and (ii).

d) None of them.

4. An individual taxpayer has the following income and expense item in 2018:

Gross income (rental), Philippines P1,600,000

Expenses, Philippines 1,000,000

Gross income, business, US 6,000,000

Expenses, US 2,400,000

Compensation income, US 1,000,000

Compute the income tax due under the graduated rates if taxpayers is a resident citizen, single,
supporting his grandmother.

a) P1,514,000

b) P1,194,000

c) P370,000

d) None of the above.

5. Compute the income tax due under the graduated rates if the taxpayer is a non-resident citizen
supporting his mother.

a) P370,000

b) P80,000

c) P50,000

d) None of the above.

6. Compute the income tax due under the graduated rates if the taxpayer is a resident alien, single ,
supporting his sister, 30 years old and mentally defective.

a) P370,000

b) P80,000

c) P50,000

d) None of the above.

7. Compute the income tax due under the graduated rates if the taxpayer is a non-resident alien
engaged in trade or business in the Philippines, married.

a) P370,000

b) P80,000

c) P50,000

d) Non of the above.

8. Compute the income tax due if the taxpayer is a non-resident alien not engaged in trade of business
in the Philippines, married.

a) P500,000

b) P400,000

c) P650,000

d) None of the above.

9. Freddie, Aguila, a resident citizen, opened a bank account with bank of America in Anaheim, California
when he vacationed there 2 years ago. As part of its 200 th year anniversary in 2018, the bank conducted
a raffle in which Freddie won a brand new Mustang Cobra automobile. Which among the following is
subject to the final tax of 20%?

a) None

b) Only the interest income from his bank account in California.

c) Only the Mustang which he won.

d) Both the interest income from the bank deposit in California and the Mustang which he won.

10. Which the following does not belong to the group>

a) 6/10 of the 1% stock transaction tax on the selling price of domestic shares traded in the stock
exchange.

b) 10% final tax on dividends received by citizens and resident aliens from domestic corporations

c) 25% final tax on income received by non-resident aliens not engaged in trade or business in the
Philippines.

d) 6% capital gains tax on the sale of real property classified as capital assets

11. Statement 1: Under the final withholding tax system, the amount of tax withheld is constituted as a
full and final payment of the tax. The payment thereof rests primarily on the payor of the income as
withholding agent.

Statement 2: Under the creditable withholding tax system, the income recipient is not relieved from
paying the tax based on the pay-as-you-file system if the withholding agent either fails to withholds but
does note remit the tax to the BIR.

a) Statement 1 is true.

b) Statement 2 is true,

c) Both statements are false.

d) Both statements are true.

12. Statement 1: Under the final withholding tax system in case of failure to withhold the tax, any
deficiency tax shall be collected from the payor/withholding agent. Therefore, it is a type of indirect tax.

Statement 2: In withholding taxes, the incidence and burden of taxation fall on the same entity, the
statutory taxpayer. The burden of taxation is not shifted of the withholding agent who merely collects
the tax by withholding it from the income payment.

a) Statement 1 is true.

b) Statement 2 is true.

c) Both statements are false.

d) Both statements are true.

13-15: Allan Zantos, resident citizen with 2 dependent children, has the following date for the current
taxable year:

Gross income from business, Philippines P4,350,000

Gross income from business, Singapore 3,200,000
Business expenses, Philippines 1,000,000
Business expenses, Singapore 750,000
Interest income from P deposit in BPI (Manila) 15,000
Interest income from S deposit in Bank America (New York) 55,000
Dividend income from Jollibee Foods Corporation 65,000
Dividend income from Microsoft Corporation 83,000
PCSO Lotto winnings 1,500,000
Net winnings in New York Lottery 1,000,000
Prize won in ABS-CBN contest 4,500
Prize won in GMA 7 contest 30,000
Prize won in raffle contest in Malaysia 12,000
Gain on sale of domestic shares not traded in the stock 2,870,000
exchange
Price= P3,000,000
Cost= P130,000
Gain on sale of domestic shares traded in the stock 180,000
exchange
Prize= P230,000
Cost= P50,000
Capital gain on sale of condominium unit in India 119,000
Prize= P325,000
Cost= P206,000
13. What is the net taxable income of this taxpayer in his ITR of the current taxable year?

a) P7,073,500

b) P6,973,500

c) P5,800,000

d) None of the above.

14. If the taxes in the amount of P250,000 were withheld from his gross income in the Philippines, what
would be his tax payable reflected in the ITR?

a) P1,863,520 c) P2,071,520

b) P2,113,520 d) None of the above

15. What are his total final taxes paid in the current taxable year?
a) P1,049,255 c) P1,051,130

b) P751,130 d) None of the above

16. Alma sold her principal residence to Bobby as evidenced by a Deed of Absolute Sale executed on
September 10, 2018. The Deed of Absolute Sale was notarized on September 13, 2018. Alma also
acquired a new principal residence from Carlo which was evidenced by another Deed of Sale executed
on September 9, 2018. Is the sale of Alma’s principal residence exempt from the 6% capital gains tax.

a) Yes, Alma bought a new principal residence even before selling her old principal residence.

b) Yes, Alma utilized the proceeds form the sale of her old principal residence in buying a new principal
residence within 18 months from the sale of her old residence.

c) No. The sale of the old principal residence must precede the acquisition of the new principal
residence.

d) None of the above.

17. Upon retirement, Kaitlynn Gabriel planned to sell a parcel of idle land (capital asset) in Calamba,
Laguna which she inherited from her father 20 years ago. Before selling. She discovered that other
parcel of land of the same size and in the same area sold for P2.8 M. She even hired a professional
appraiser who estimated the value of her land at P3.0 M.

She eventually sold the parcel of idle land to her friend for P2.4 M. The zonal value at the time of sale
was P2.6 M, and the assessor’s value was P2.7 M.

What is the capital gains tax (‘’CGT”) on the sale?

a) 6% of P3.0 M

b) 6% of P2.8 M

c) 6% of P2.4 M

d) None of the above.

18. The City Government of Pasig City, through its City Council, enacted a resolution authorizing the
Mayor to pay just compensation to several landowners for the acquisition of their real properties which
would be converted into a public road. The landowners are now claiming exemptions from capital gains
taxes. Are they correct?

a) Yes. The City Government has the authority to give such exemption.

b) No. There is no legal basis for a capital gains tax exemption.

c) It depends on the reasonableness of the just compensation to be paid by the Mayor.

d) None of the above.

19. To comply with the decision of the court in their annulment case, former spouses Allan and Bessy
submitted a Compromise Agreement involving the partition of their properties. Shal the partition and
eventual transfer of the real properties based on such Compromise Agreement be subject to capital
gains tax?

a) Yes. Partition of conjugal properties pursuant to a court order is included in the term “disposition of
real property”.

b) No. The partition of conjugal properties is not a pursuant to a sale, and hence without any monetary
consideration

c) It depends on the reasonableness of the partition.

d) None of the above.

20. Which of the following criteria should be satisfied before an individual taxpayer can qualify for and
avail of the 8% income tax rate opinion?

(a) Individual is earning income from self-employment and/or practice of profession;

(b) Gross sales/receipts and other non-operating income of such individual does not exceed the
P3,000,000 VAT threshold during the taxable year;

c) Taxpayer is registered and subject only to the percentage tax under Section 116 of the Tax Code, or is
exempt from VAT or other percentage taxes;

(d) Such taxpayer must have signified his intention to elect the 8% income tax rate in his Registration
Application or in his initial quarterly Income Tax Return (“ITR”) or Percentage Tax Return (for a new
business registrant); or in his Application for Registration Update or in the First Quarterly ITR or
Percentage Tax Return (for an existing business registrant);

(e) All of the above

Page 350:

MULTIPLE CHOICE

1. Maan, resident citizen, operates a kindergarten school in Cavite. She operates the school as a single
proprietorship. If she is able to obtain a permit from the Department of Education, at what rate of tax
will her taxable income be subject

a) Graduated rates or 8% tax

b) 30%

c) 10%

d) 25%

2. Which corporation is taxable on income within and without the Philippines?

a) Resident foreign corporation

b) Non-resident foreign corporation

c) Any foreign corporation

d) Domestic corporation

3. Which corporation is taxable on income within and without the Philippines?

a) Proprietary education institutions

b) International carriers doing business in the Philippines

c) Offshore banking units (“OBUs”)

d) Regional operating headquarters of multinational corporations

4. The following shall be taxed on a net income basis on their ordinary income except:

a) Resident foreign corporation

b) Non-resident foreign corporation

c) Government owned and controlled corporation

d) Domestic corporation

5. When a non-resident foreign corporation earns royalty income sourced within the Philippines, such
income shall be subject to a final tax rate of:

a) 30%

b) 20%

c) 7.5%

d) 2%

6) Johnny Carlos., a resident foreign corporation sold its office building in Manila (which it had been
renting out to lessees) for a gain of P2.5 Million. This gain shall be subject to:

a) Regular corporate tax rate of 30%

b) Final tax rate of 30%

c) Final tax rate of 6%

d) None of the above

7. If the same corporation in number 6 above sells its idle building for P2,000,000. Resulting in a capital
gain of P500,000. what shall be the tax consequence to the corporation?
a) The capital gain shall be included in the ITR, and shall be taxed at the regular corporate tax rate of
30%

b) Capital gains tax of 6% of the selling price

c) Final tax of 30% of the capital gain

d) None of the above.

8-10 American Corporation a domestic corporation has the following data for the current taxable year:

Gross income from business. Philippines P15,000,000

Operating expenses 12,400,000
Other income:
Rental income. Net of 5% CWT 2,375,000
Commission income 150,000
Interest income form P deposit (BDP) 75,000
Interest income earned from investments in corporate
bonds 20,000
Interest income on S deposit (BPI) 40,000
Dividend income received from Jollibee Foods Corp. 125,000
Dividend income received from Microsoft Corp (U.S.) 45,000
Gain on sale of domestic shares not traded in the
stock exchange 230,000
Gain on sale of idle land (Cebu) held as a capital asset.
It was bough 5years ago for P6,000,000 500,000
Gain on sale of real estate investment in Belgium. The
ordinary asset was bought 2 years ago for
P35,000,000 1,000,000
Taxes withheld on the rental income 125,000
Income taxes paid in the first 3 Quarterly Returns 200,000

8. What is the income tax payable of this corporation in its annual income tax return?

a) P1,888,500

b) P1,563,000

c) P1,993,500

d) – 0 –

9. In number 8 above, what are the corporation’s total final taxes on its passive income?

a) P430,000

b) P25,000

c) P 105,000

d) P408,000
10. In number 8 above, what are the corporation’s total capital gains taxes ?

a) P430,000

b) P25,000

c) P394,000

d) P424,500

11. Statement 1: A duly registered cooperative is exempt from income tax and VAT if it transacts
business only with its members.

Statement 2: A registered cooperative transacting business with both members and non-members,
however, is still tax-exempt if it has accumulated reserves and undivided net savings of not more than
P10,000,000.

a) Only Statement 1 is true.

b) Only Statement 2 is true.

c) Both Statements are true.

d) Both Statements are false.

12. Trustor Allan Pineda opened a Trust Account by entering into a Trust Agreement with XYZ Bank, a
domestic corporation. Pursuant to the trust Agreement, XYZ Bank purchased 3 condominium units using
the funds previously conveyed to it by Allan. The condominium units were all placed in the name of XYZ
Bank as trustee. After 5 years, Allan terminated the Trust Account. The condominium units were then
transferred in the name of Allan as the beneficial owner.

Is the transfer of the condominium units by the bank subject to the final capital gains tax (“CGT”)

a) Yes. Mr. Pineda shall withhold 6% of the higher of the condominium units zonal or assessor’s value
since the transferor is domestic corporation.

b) No. The transfer is not subject to the CGT nor to the creditable withholding tax because the same was
not motivated by a valuable consideration, but merely confirms and consolidates the legal title and
beneficial ownership over the properties in the name of the trustor.

c) No. But Mr. Pineda shall be liable for the 20% final ta on the benefit derived from the trust fund under
Section 24(B)(I) of the Tax Code.

d) None of the above.

13. Dante Company is a hotel company registered as a local economic enterprise (“LEE”) of the City of
Dapitan. The company is asserting that, as an LEE owned and operated by a local government unit
(“LGU”), it should no longer be required to pay income taxes to the BIR. It argues that all avenues
collected by it must accrue exclusively to the city government of Dapitan. Is the company correct?

a) Yes. Since the company is owned by an LGU which itself us exempt from taxes imposed by the Tax
Code, the same privileges must also be accorded to it.

b) Yes, Under Section 18 of the Local Government Code, LGUs are authorized to generate their own
sources of revenues, and the allocation of the same shall accrue exclusively to them.

c) No. The company is not one of those corporations exempt from taxes under Section 30 of the Tax
Code or under any special laws. Besides, the acts of an LGU in its corporate capacity and for the purpose
of economic gain may be subject to tax just like any other private or government corporation.

d) None of the above.

14. The Privatization Man Office (“PMO”), a government agency organized under the Department of
Finance by virtue if E.O. No. 323, holds listed shares of stock as one of its transferred assets for
privatization and disposition. It recently disposed of some of the listed shares by way of a block sale
through the Philippine Stock Exchange (“PSE”). Is the PMO exempt from the 6/10 of 1% stock
transaction tax?

a) Yes. Disposition of listed shares of stock by way of “block sale” through the stock exchange is exempt
from the stock transaction tax.

b) No. The PMO is not one those GOCCs which are tax-exempt by law.

c) It depends on the Revise Trading Rules of the PSE.

d) None of the above.

15. Kawang Gawa Corporation, a domestic non-stock, non-profit corporation, applied for a Certificate of
Tax Exemption pursuant to Section 30(E) of the Tax Code. For the past 3 years, it has been receiving
donations from various sources and using these to help victims of calamities. To attract competent
people to its Board of Trustees, its by-laws provide that the members of its Board of Trustees shall
receive reasonable honoraria in the performance of their duties and responsibilities. Is Kawang Gawa
entitled to a Certificate of Tax Exemption?
a) Yes. It has complied with the Organizational Test in that it is a non-stock corporation, and with the
Operational Test in that it is exclusively devoted to charitable work.

b) No. The giving of honoraria to members of the Board of Trustees constitutes private inurement which
violates the requirement that no part of the net income or assets of the corporation shall inure to the
benefit of any individual of specific person.

c) Yes. The BIR should encourage the formation of such entities engaged of charity work.

d) None of the above.

16. Association dues and income derived from rentals of a homeowners’ association shall be exempt
from tax provided:

a) the homeowners’ association is duly registered with the HLURB;

b) such income or dues shall be used for the provision of basic community services such as cleanliness,
safety, and other basic services needed by the members, including the maintenance of the facilities of
the subdivision of village;

c) the local government unit having jurisdiction over the homeowners’ association has issued a
Certificate that it lacks the resources to provide for such basic community services;

17. X Bank shares issued in the name of various corporate shareholders were sequestered by the
Government. The Supreme Court ordered the shares cancelled, and new share were issued in favor of
the Government. Is the transfer of share subject to CGT?

a) Yes. There was an effective sale of the shares for the former corporate shareholders to the
Government.

b) No. The transfer is not pursuant to a sale, barter, or exchange of shares contemplated under Section
27(D)(2) of the Tax Code.

c) It depends on Government’s use of the dividend income from the shares.

d) None of the above.

Page 237

MULTIPLE CHOICE

1. Which of the following statement is false?

a) Generally, the fringe benefits tax (“FBT”) rate is 35%

b) The base for the FBT is the grossed-up monetary value of the fringe benefit

c) Fringe benefits which are taxed the fringe benefits tax (“FBT”) are those benefits furnished or granted
in cash or in kind to any individual employee.

d) None of the above.

2. Which of the following fringe benefits is not subject to the fringe benefits tax (“FBT”)?

a) Contributions of the employer for the benefit of the employee to retirement, insurance, and
hospitalization benefits plans.

b) Benefits given to the rank and file.

c) Benefits which are give for the convenience or advantage of the employer.

d) All of the above.

3. The following are de minimis fringe benefits except:

a) Monetized value of unused sick leave credits of private employees not exceeding 10 days during the
year.

b) Monetized value of leave credits of government employees.

c) Uniform and clothing allowance not exceeding P6,000 per annum.

d) Annual medical benefits not exceeding P10,000 per annum.

4. The following are exempt fringe benefits, except:

a) Medical cash allowance to dependents of employees not exceeding P1,500 per semester, or P250 per
month.

b) Laundry allowance of P300 per month.

c) Employee achievement awards in the form of tangible personal property with a monetary value not
exceeding P10,000.

d) Flowers, fruits, books, or similar items given to employees under special circumstances, e.g. on
account of illness, marriage, birth of a baby, etc.

5. Statement 1: The fringe benefit tax is a final income tax on the employee to be withheld by the
employer.

Statement 2: All types of fringe benefits given to managerial or supervisory employees are subject to the
fringe benefit tax.

a) Statement 1 is true. c) Both statement are false.

b) Statement 2 is true. d) Both statement are true.

6. As a general rule, if the fringe benefit is granted or furnished by the employer in property, and
ownership thereof is transferred to the employee, what shall be the value of the fringe benefit?

a) Fair market value (“FMV”) of the property

b) Book value of the property

c) Adjusted basis of the property

d) Acquisition cost of the property

7. As a general rule, if the fringe benefit is granted or furnished by the employer in property, but the
ownership thereof is not transferred to the employee, what is the value of the fringe benefit?

a) Depreciation value

b) Adjusted basis of the property

c) Acquisition cost

d) Zonal or assessor’s value, whichever is higher

8. GGG corporation (“GGG”), a domestic manufacturing company, is leasing a residential house in an

exclusive village for the use of its CEO. The rental paid by GGG is P100,000 per month. What is the
annual fringe benefit tax (“FBT”) to be paid by GGG?

a) P282,353 c) P564,706

b) P323,077 d) None of the above.

9. In number 8, GGG decides, in the beginning of the next taxable year, to purchase the house in an
exclusive village for the use of its CEO. The rental paid by GGG is P100,000 per month. What is the
annual fringe benefit tax (“FBT”) to be paid by GGG?

a) P282,353 c) P564,706

b) P323,077 d) None of the above.

9. In number 8, GGG decides, in the beginning of the next taxable year, to purchase the house being
used by its CEO for P25.0 Million. The zonal value of the house is P30.0 Million, while the assessor’s
value is P28.0 Million. Compute the annual FBT to be paid by GGG.

a) P369,231 c) P564,706

b) P403,846 d) None of the above.

10. In number 9, if the purchase of the house is on the installment basis, what is the annual FBT to be
paid by GGG?

a) P564,706 c) P352,941

b) P336,538 d) None of the above.

11. In the number 9, if the title of the house is transferred to the CEO, how much FBT will be paid by
GGG?

a) P11,764,706 c) P14,117,647

b) P16,153,846 d) None of the above.

12. In number 9, if GGG transfers the title of the house to its CEO for P20,000,000, what FBT shall GGG
be paying?

a) P4,705,882 c) P5,384,615

b) P9,411,765 d) None of the above.

13. Patrick Medina, general manager of Arrow Hotel in Makati City, is required by the owners of the
hotel to live in one of the hotel suites. This is to make sure that Patrick will be able to oversee the
operations of the hotel with more energy and efficiency, as he would be avoiding the early commute to
work due to heavy traffic.

If the hotel typically charges P16,500 per night for a hotel suite, how much is the monthly FBT due from
Arrow hotel?

a) P133,269 c) P7,765

b) P266,538 d) P0

14. In the beginning of the taxable year, Fig Newton Company, a domestic corporation, purchased an
SUV in the name of its CEO. The SUV was worth P2.0 Million, and the terms of the purchase were the
following: No down payment; payable over 60 months; interest at 1% per month. Compute the fringe
benefit tax in the year of purchase.

a) P188,235 c) P215,385

b) P941,176 d) None of the above.

15. In number 14, if Fig Newton purchased the SUV in the name of its CEO, and immediately paid the car
dealer 100% of the purchase price, what would be the fringe benefit tax, if any, for the taxable year?

a) P1,076,923 c) P1,054,118

b) P 941,176 d) None of the above.

18. HariReyna Corporation, a real estate company, owned certain parcels of land which where
accounted for as investment properties. The planned development for the properties did not
materialize, and as such were not used in its business. After a few years, the corporation eventually sold
the properties to Belboy Foundation, a non-stock, non-profit corporation.

What is the tax consequence of the sale of the parcels of land?

a) The sale is subject to the 6% CGT

b) The sale is subject to the 30% regular corporate income tax, and to the CWT

c) All of the above.

d) None of the above.