ACCTG.

601-Integrated Course on Taxation PRELIM MOCK BOARD July 23, 2011

Multiple Choice. Identify the letter of the choice that best completes the statement or answers the question.

1. Taxation as a power may be defined as, except

[A] The authority by which the sovereign raises revenue to defray the necessary expenses of the government.
[B] The way of apportioning the cost of government among those who in some measure are privileged to enjoy its
benefits and must bear its burden.
[C] The mode by which governments make exactions for revenue in order to support their existence and carry out
their legitimate objectives.
[D] The most effective tool to realize social justice and the equitable distribution of wealth.
[E] None of the above.

2. The nature of the power of taxation maybe narrated as follows, except

[A] It is an attribute of sovereignty.
[B] It is legislative in character.
[C] It is generally not delegated to executive or judicial department.
[D] It is subject to constitutional and inherent limitations.
[E] None of the above.

3. In our jurisdiction, taxes have the following characteristics, except

[A] Taxes are pecuniary in nature.
[B] Taxes are enforced contribution.
[C] Taxes are levied by the executive branch of the government.
[D] Taxes are imposed on persons and property within the territorial jurisdiction of the state.
[E] Taxes are assessed according to a reasonable rule of apportionment.

4. The purposes and objectives of taxation are as follows, except

[A] It is a mean of reducing social inequality by preventing the undue concentration of wealth in the hands of a few
individuals.
[B] To raise revenue to promote the general welfare of its citizens.
[C] It is used as an implement of the police power to promote the general welfare of the people.
[D] It is used with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened
industry which is affected with public interest.
[E] None of the above.

5. In order to constitute double taxation in the objectionable or prohibited sense, the following must exist, except
[A] The same property must be taxed twice when it should be taxed but once.
[B] Both taxes must be imposed on the same property or subject matter and for the same purpose.
[C] It must be exercised by the same taxing authority within the same jurisdiction by the same taxing authority
within the same jurisdiction or taxing district and during the same taxing period.
[D] The tax rates must exact the same burden or charge.
[E] They must be of the same kind or character of tax.

6. The following are the basic features of the present tax system
[A] It has adopted a comprehensive tax situs by suing the nationality, residence and source rules.
[B] The individual income tax system is mainly progressive in nature that it provides graduated rates of income tax.
[C] It has retained more schedular than global features with respect to individual taxpayers but has maintained a
more global treatment on corporations.
[D] The tax process being construed strictissimi juris against the government is adhering to by the tax system.
[E] None of the above.

7. Which of the following statements is not the correct definition and description of income in taxation?
[A] An amount of money coming to a person or corporation within a specified time, whether as payment for
services, interest or profit from investment.
[B] Increase in property and net worth due to correction of errors in book entries or security deposits paid to a
lessor.
[C] A flow of service rendered by capital by the payment of money from it or any other benefit rendered by a fund of
capital in relation to such fund through a period of time.
[D] Earnings, lawfully or unlawfully acquired, without consensual recognition, express or implied, of an obligation to
repay and without restriction as to their disposition.
[E] Gain derived from capital, from labor, or from both combined, provided it be understood to include profit gained
through a sale or conversion of capital assets.
8. The National Internal Revenue Code has adopted the following criteria in imposing income tax, except
[A] Citizenship principle.
[B] Residence principle.
[C] Source principle.
[D] All of the above.
[E] None of the above.

9. The following are the requisites of a taxable income, except

[A] There is income, gain or profit.
[B] The income, gain or profit is received, accrued, or realized during the taxable year.
[C] The income, gain or profit can be measured in money.
[D] The income, gain or profit is not exempt from income tax.
[E] None of the above.

10. The following are types of nonresident citizens, except

[A] Immigrants.
[B] Employees of a foreign country on a permanent basis.
[C] Overseas contract workers.
[D] All of the above.
[E] None of the above.

11. Residence in taxation is defined as, except

[A] The actual presence in the Philippines not as mere transience or sojourn.
[B] The actual presence in the Philippines and no definite intention as to the stay.
[C] The actual presence in the Philippines for a definite purpose which in it nature maybe promptly accomplished.
[D] An extended stay in the Philippines as it is necessary for the accomplishment of the purpose though it may be
the intention at all times to return to the domicile abroad.
[E] None of the above.

12. Gross income is defined as, except

[A] Income, gain or profit subject to tax.
[B] Compensation for personal and professional services, business income, profits, and income derived from any
source whatever (whether legal or illegal), unless exempt from tax under the Constitution, tax treaty, or statute.
[C] All items of income, gain or profit, except exempt income and income subject to final tax.
[D] All of the above.
[E] None of the above.

13. The tests in determining income are as follows, except

[A] Realization test.
[B] Claim of right doctrine.
[C] Income for whatever source.
[D] Economic benefit test.
[E] None of the above.

14. Which of the following items is not taxable?

[A] Income from jueteng.
[B] Gain arising from expropriation of property.
[C] Recovery of bad debts previously charged off.
[D] Gain on the sale of a car used for personal purposes.
[E] None of the above.

15. The term “exclusions” refers to items that not included in the determination of gross income either because of the
following reasons, except
[A] They represent return of capital or are not income, gain or profit.
[B] They are subject to another kind of internal revenue tax.
[C] They are income, gain or profit that are expressly exempt from income tax under the Constitution, tax treaty, Tax
Code, or a general or special law.
[D] By the very nature and character of the income, gain or profit, it is not taxable.
[E] None of the above.

16. Which of the following is capital asset?

[A] Stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of
the taxpayer if on hand at the close of the taxable year.
[B] Property held by the taxpayer primarily for sale to customers in the ordinary course of trade or business.
 [C] Property used in trade or business, of a character which is subject to the allowance for depreciation.
[D] Real property used in trade or business of the taxpayer.
[E] None of the above.

17. Which of the following statements is most correct?

[A] From the items of gross income derived from sources within the Philippines, there shall be deducted the
expenses, losses and other deductions properly allocated to such income form sources within.
[B] From the items of gross income derived from sources within the Philippines, there shall be deducted a ratable
part of expenses, interests, losses and other deductions effectively connected with the business or trade
conducted exclusively within the Philippines which cannot definitely be allocated to some items or class of gross
income.
[C] Items of deductions shall be allowed only if fully substantiated by all the information necessary for its calculation.
[D] All of the above.
[E] None of the above.

18. The following are the conditions for deductibility of business expenses, except
[A] It must be ordinary and necessary.
[B] It must be paid or incurred during the taxable year.
[C] It must be paid or incurred in carrying on or which are directly attributable to the development, management,
operation and/or conduct of the trade, business or exercise of profession.
[D] It must not be necessarily supported by adequate invoices or receipts as long as the tax withheld on the expense
paid or payable is shown to have been remitted to the BIR.
[E] None of the above.

19. The following are the conditions for deductibility of interest expense, except
[A] There must be a valid and existing indebtedness and the indebtedness must be that of the taxpayer.
[B] The interest payment must be between related taxpayers.
[C] The interest must be legally due and stipulated in writing and must be paid or incurred during the taxable year.
[D] The indebtedness must be connected with the taxpayer’s trade business or exercise of profession and the
interest is not expressly disallowed by law to be deducted from the taxpayer’s gross income.
[E] None of the above.

20. Which of the following interests shall be considered as income from sources within the Philippines?
[A] Interests derived from sources within the Philippines.
[B] Interest on bonds and notes of residents, corporate or otherwise.
[C] Interests on other interest-bearing obligation of residents.
[D] All of the above.
[E] None of the above.

21. Which of the following statements is not included as loss?

[A] Those incurred in a trade or business for profit.
[B] Those incurred in any transaction entered into for profit, although not connected with the trade or business.
[C] Casualty losses that arise from fire, storm, shipwreck, or other casualty, or from theft or robbery, even though
not connected with the trade or business of the taxpayer.
[D] All of the above.
[E] None of the above.

22. The following are the conditions for deductibility of depreciation, except
[A] The allowance for depreciation must be reasonable.
[B] It must be for property arising out of its use in the trade or business, or out of its not being used temporarily
during the year.
[C] It must be charged off during the taxable year from the taxpayer’s books of accounts.
[D] All of the above.
[E] None of the above.

23. The following are the conditions for deductibility of charitable contribution, except
[A] The charitable contribution must actually be paid or made to the Philippine government or any political
subdivision thereof exclusively for public purposes, or any of the accredited domestic corporation or association
specified in the Tax Code.
[B] It must be made within the taxable year.
[C] It must not exceed 10% of the individual taxpayer’s income before charitable contributions (whether deductible
in full or subject to limitation).
[D] It must be evidenced by adequate receipts or records.
[E] None of the above.
24. Which of the following statements is the reason why the cost of goods sold is being deducted from gross sales in
computing for gross income?
[A] It is the amount representing return of capital.
[B] It is impliedly prescribed by RA 9504, increasing to 40% the Optional Standard Deduction.
[C] It is not an itemized deduction since the value is not reasonable for the value is normally more than 50% of gross
sales.
[D] The amount is already included in gross sales.
[E] None of the above.

25. The City of Baguio, claiming that it can impose taxes under the Local Government Code, imposed a tax on banks (in
addition to the percentage tax on banks imposed in the National Internal Revenue Code). The bank within Baguio
City can object for the various reasons given below. Which would justify the objection of the banks?
[A] The power of taxation cannot be delegated.
[B] The rule on double taxation.
[C] Uniformity in taxation.
[D] All of the above.
[E] None of the above.

26. Which is not an essential characteristic of tax?

[A] It is unlimited as to amount.
[B] It is payable in money.
[C] It is proportionate in character.
[D] It is a regular payment.
[E] None of the above.

27. Which of the following statements is most correct? Statement 1. Tax evasion is a device or the use of means to
escape a tax that is already a liability and it is prohibited and punishable by law. Statement 2. Tax avoidance is a
device or the use of means to prevent an accrual of a tax or to minimize a tax that may accrue and is permitted by
law. Statement 3. A tax compromise that lowers the delinquent tax due from a taxpayer is an executive act pursuant
to a legislative grant of power to the Executive Department of the Government.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

28. Which of the following statements is not correct? Statement 1. A tax amnesty that forgives tax delinquency of prior
years is a legislative act of the government. Statement 2. A revenue regulation must not be contrary to the provision
of the law that it implements. Statement 3. A revenue regulation cannot expand the provision of the law that it
implements by imposing a penalty when the law that authorizes the revenue regulation does not impose a penalty.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

29. Which of the following statements is most correct? Statement 1. Net capital loss carry-over is allowed to taxpayers
other than corporations, and this is carried over to the succeeding year as a short-term loss. Statement 2. The
amount of net capital loss carry-over is the net capital loss or the net income in the year the net capital loss is
sustained, which ever is lower. Statement 3. Only individual taxpayers are allowed to observe the holding period and
to carry over net capital loss.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

30. Which of the following statements is not correct? Statement 1. Gains or losses from short sales of property shall be
considered as gains or losses from sales or exchanges of capital assets. Statement 2. Gains or losses attributable to
the failure to exercise privileges or options to buy or sell property shall be considered as capital gains or losses.
Statement 3. If securities become worthless during the taxable year and are capital assets, the loss shall be
considered as a loss from the sale, barter or exchange of capital assets on the last day of each taxable year.
[A] Statement 1.
 [B] Statement 2.
[C] Statement 3.
[D] All the above.
[E] None of the above.

31. If the taxpayer is a resident citizen of the Philippines, which of the following is not considered as Taxable Income?
[A] Capital gain on sale of real property in the Philippines.
[B] Interest on bank deposit in the Philippines.
[C] Rent income from property outside of the Philippines.
[D] Capital gain on shares of stocks of a domestic corporation sold thru the Philippine Stock Exchange.
[E] None of the above.

32. Gains, profits and income from the sale of real property are for sources within the Philippines if:
[A] The real property sold is located in the Philippines.
[B] The real property is sold in the Philippines.
[C] The real property sold is located outside the Philippines.
[D] The real property sold is owned by a resident citizen.
[E] None of the above.

33. Which of the following statements is most correct? Statement 1. Interest earned on Bangko Sentral treasury notes is
subject to a final tax at 20%. Statement 2. Interest earned on customers’ trade notes is not subject to final tax.
Statement 3. The allowable deduction for interest expense shall be reduced by thirty-three percent (33%) of interest
income subject to final tax.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All the above.
[E] None of the above.

34. Which of the following is not a qualification of a dependent brother, sister or child?
[A] Living with and dependent upon the taxpayer for chief support.
[B] Not more than twenty-one (21) years of age.
[C] Unmarried and not gainfully employed.
[D] All of the above.
[E] None of the above.

35. Which of the following passive income is exempt from tax when received by resident or citizen and nonresident
aliens engaged in trade or business in the Philippines but subject to 25% final tax when received by nonresident
aliens not engaged in trade or business?
[A] Prizes of more than P10,000.
[B] Interest income from long-term deposit or instrument evidenced by certificates prescribed by Bango Sentral ng
Pilipinas.
[C] Yield or any other monetary benefit from trust funds and similar arrangements.
[D] Other winnings.
[E] None of the above.

36. Which of the following is classifiable as a taxable separation pay under compensation income?
[A] Separation pay due to optional retirement.
[B] Separation pay due to reorganization of the company.
[C] Separation pay due to company’s brink of bankruptcy.
[D] Separation pay due to death, sickness or disability.
[E] None of the above.

37. If there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been
realized from the sale or disposition of a principal residence by natural persons shall be
[A] Subject to 6% capital gains tax.
[B] Exempt from capital gains tax.
[C] Subject to ordinary income tax.
[D] Subject to 5% capital gains tax.
[E] None of the above.

38. Which of the following is not correct?

[A] A tax assessment could be done before the filing of tax return but after the expiration of prescribed period for
filing.
 [B] A tax assessment could be done after the filing of tax returns.
[C] When the business is closed, a tax assessment could be done even before the expiration of the prescribed filing
date.
[D] The BIR Commissioner and the taxpayer may agree in writing on the assessment period after the expiration of
the prescribed period for assessment.
[E] None of the above.

39. If the taxpayer failed to pay the tax demanded per final assessment, the government may exercise several
administrative remedies. Which of the following is not correct?
[A] Levy of real property of the taxpayer may be availed of only after distraint of personal property of taxpayer.
[B] Either distraint or levy may be pursued simultaneously once the assessment becomes final and demandable.
[C] If the tax assessed is P100 and below, levy or distraint may not be availed of.
[D] The remedy of distraint of personal property may be repeated if necessary until the full amount due and all
expenses are collected.
[E] None of the above.

40. Which of the following statements is most correct? Statement 1. The power to tax can be delegated to units of local
government, but with limitations as may be imposed by law. Statement 2. The power to tax cannot be delegated to
the executive department of the National Government. Statement 3. The delegation of the power to tax relates
merely to administrative implementation that may call for some degree of discretionary powers under a set of
sufficient standards expressed by law.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

41. Dina Tanggal was dismissed from her employment due to major infraction committed and received P100,000
termination pay. Under the Tax Code final pay received due to involuntary separation is not taxable. Which of the
following is true?
[A] Tanggal’s P100,000 termination pay is taxable because she was terminated due to cause within her control.
[B] Tanggal’s P100,000 termination pay is not taxable because her termination is not voluntary.
[C] Tanggal’s P100,000 termination pay is not taxable because it is against her will.
[D] Tanggal’s P100,000 termination pay is taxable because it is due to cause which is beyond her control.
[E] Termination fee is absolutely not taxable.

42. Mr. Isidro was a nonresident citizen of the Philippines in 2008. On May 15, 2009, he arrived in the Philippines to
reside permanently in Baguio City. His income for the year was:
From January 1, 2009 to May 14, 2009 P2,000,000
From May 15, 2009 to Dec. 31, 2009 1,500,000
Which of the following statements is wrong?
[A] He is considered a resident citizen on his P1,500,000 income.
[B] He is considered as nonresident citizen on his P2,000,000 income.
[C] He is considered as resident citizen on his P2,000,000 and P1,500,000 income.
[D] He is not taxable on his P2,000,000 income.
[E] His total income of P3,500,000 is not taxable.

43. Who among the following can not claim personal exemptions?
[A] Nonresident alien not engaged in trade or business in the Philippines.
[B] Nonresident alien engaged in trade or business in the Philippines.
[C] Nonresident citizen.
[D] Resident alien.
[E] All aliens.

44. One of the following is a taxable compensation income

[A] Income from a qualified pension plan.
[B] Compensation for personal injuries.
[C] Stock dividend received.
[D] Board and lodging provided for free by the employer.
[E] None of the above.

45. Which of the following share in the net income received by an individual shall not be subject to final tax but to
regular income tax for individuals?
[A] Share of an individual in the distributable net income after tax of a business partnership of which he is a partner.
 [B] Share of an individual in the distributable net income of a general professional partnership of which he is a
partner.
[C] Share of an individual in the distributable net income after tax of an association, a joint account, or a joint
venture or consortium taxable as a corporation of which he is a member or co-ventuerer.
[D] All of the above.
[E] None of the above.

46. If an individual renders services for a creditor who in consideration thereof cancels the debt, the cancellation of
indebtedness may amount to a
[A] Gift.
[B] Capital contribution.
[C] Donation inter-vivos.
[D] Payment of income.
[E] Charitable contribution.

47. Which of the following statements is not correct? Relatively small meal allowances paid to rank and file employee
intended to promote health and goodwill are
[A] Considered as de minimis fringe benefits.
[B] Not subject to fringe benefit tax.
[C] Not subject to income tax as compensation.
[D] Subject to income tax as compensation.
[E] None of the above.

48. Which of the following statements is most correct? Statement 1. All Filipino citizens are taxable for their income
earned within and outside the Philippines. Statement 2. Insurance premium paid by the employer for the life
insurance of the employee, where the beneficiary is the employer is a taxable compensation income of the
employee. Statement 3. Upon death of the insured employee, the proceeds of the life insurance is taxable against
the beneficiary.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

49. Both Noel and Mike are covered by a BIR approved employer’s pension plan. Noel retired from his employment at
age 52 after serving the same employer for 12 years. Mike retired at age 51 after serving the same employer for 10
intermittent services.
[A] Only the retirement pay of Noel is tax exempt.
[B] Only the retirement pay of Mike is tax exempt.
[C] Both the retirement pay of Noel and Mike are tax exempt.
[D] Both the retirement pay of Noel and Mike are taxable.
[E] Only half of both retirement pays of Noel and Mike are taxable.

50. Manuel resigned from his employment and received P25,000 separation pay. Krista received P30,000 as her terminal
pay due to retrenchment legally enforced by her employer. Jinky received P35,000 termination pay when she was
dismissed due to gross negligence.
[A] Only the separation pay of Manuel is taxable.
[B] Only the terminal pay of Krista is not taxable.
[C] Only the termination pay of Jinky and Krista are not taxable.
[D] Only the separation pay of Manuel and Jinky are not taxable.
[E] All their pays are taxable income.

51. Which of the following is taxable?

[A] SSS and GSIS benefit.
[B] Social security benefit received by a balikbayan from employer abroad.
[C] Separation pay received by a 50-year old employee due to the retrenchment program of the employer.
[D] The 13th month pay and other benefits not exceeding P30,000.
[E] Proceeds from health insurance.

52. Mr. Lessor leases his land to a religious organization that uses the land directly and exclusively for religious
purposes. A church building was erected on the land. Is Mr. Lessor subject to real property tax?
[A] No. The property is actually, directly and exclusively used for religious purposes and it is exempt by the
Constitution.
[B] No. The real property tax is exempt on property actually, directly and exclusively used for religious purposes.
 [C] No. The occupant/lessee is a religious organization and exempt from real property taxes.
[D] Yes. The property is earning profit from the lease.
[E] Yes. The property is not owned by a religious organization which is actually, directly and exclusively using it for
religious purposes.

53. Under the following circumstances, the installment basis of reporting income is allowed, except
[A] Sale by a dealer of personal property on installment.
[B] Casual sale of personal property on installments where the selling price exceeds P1,000 and the initial payments
do not exceed 25% of the selling price.
[C] Sale of realty where the initial payments do not exceed 25% of the selling price.
[D] Sale by individuals of real property, considered as capital asset, if initial payments do not exceed 25% of the
selling price.
[E] None of the above.

54. An individual taxpayer receiving a non-interest bearing note as compensation shall treat as income for the
[A] Face value of the note at that time.
[B] Fair discounted value of the note at that time.
[C] Maturity value of the note at that time.
[D] Fair value of the note at that time.
[E] Future value of the note at the time.

55. Which of the following statements is most correct? Statement 1. Compensation may be paid in money or in some
medium other than money, as for example, stocks, bonds or other forms of property. Statement 2. Where
compensation is paid in property other than money, the employer shall make necessary arrangement to ensure that
the amount of the tax required to be withheld is available for payment to the Commissioner. Statement 3. If services
are paid for in a medium other than money, the fair market value of the thing taken in payment is the amount to be
included as compensation subject to withholding.
[A] Statement 1.
[B] Statement 2.
[C] Statement 3.
[D] All of the above.
[E] None of the above.

56. Which of the following statements is most correct?

[A] A mere increase in the value of the property is not income but merely an unrealized increase in capital.
[B] Gain may occur as a result of exchange of property, payment, assumption, reduction or cancellation of the
taxpayer’s indebtedness (unless it amounts to gift) or other profit realized from the completion of a transaction.
[C] If the taxpayer receives, through mistake, an amount in excess of the amount agreed upon, the excess is not
taxable unless the duty to return is not clear or is disputed.
[D] All of the above.
[E] None of the above.

57. Which of the following statements is most correct?

[A] The name by which the remuneration for services is designated is immaterial to constitute compensation
income.
[B] The basis upon which the remuneration is paid is immaterial in determining whether the remuneration
constitutes compensation.
[C] Remuneration for services constitutes compensation even if the relationship of employer and employee does not
exist any longer at the time when the payment is made between the person in whose employ the services had
been performed and the individual who performed them.
[D] All of the above.
[E] None of the above.

58. The following are deemed to constitute sale or exchanges between related parties, if made
[A] Between or among members of the family which includes brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants.
[B] Between an individual and a corporation more than fifty percent (50%) in value of the outstanding stock of each
of which is owned, directly or indirectly, by or for the same individual.
[C] Between a grantor (trustor) and a fiduciary (trustee) of any trust.
[D] Between a fiduciary of a trust and a beneficiary of such trust.
[E] All of the above.

59. Baracko Bama works as a security guard with a monthly salary of P5,000 in the house of Atty. Miguel Arroyo. Atty.
Arroyo successfully defended the former against a vehicular accident case. The prevailing lawyer’s fee of Atty.
 Arroyo is P6,000, which they agreed that such shall become Mr. Bama’s salary for the current month. How much is
the compensation income of Mr. Bama in the current month?
[A] P6,000.
[B] P5,000.
[C] P1,000.
[D] P11,000.
[E] P 0.

60. On April 1, 2010, Mr. Emmanuel Dagdag, with fifteen (15) minor children out of three marriages, has just started his
employment. How much would he avail as personal exemption for Taxable Year 2010?
[A] P150,000.
[B] P50,000.
[C] P112,500.
[D] P200,000.
[E] P 0.

61. An accident solely attributable to the criminal negligence of the driver of Darasudus Bus Company resulted to the
death of Jack’s wife, physical injury to Jack that prevented him from working for a month and the total wreck of his
brand new car which he bought for P800,000. In the action for damages filed by Jack against the bus company, the
Court awarded the following:
For Jack’s injury consisting mainly in the loss of his right arm P 30,000
For the loss of one-month salary 50,000
For the death of his wife 500,000
For moral damages on account of such loss 100,000
For the loss of his car the value of which doubled because of inflation 1,600,000
How much is the gross income of Jack?
[A] P2,280,000.
[B] P850,000.
[C] P50,000.
[D] P880,000.
[E] P 0.

62. Mr. Mendoza assigned and conveyed his principal residence with fair market value of P4,000,000 and in addition
paid P2,000,000 to acquire as new principal residence of Ms. Sapaen. Ms. Sapaen, on the other hand, conveyed her
principal residence to Mr. Mendoza with fair market value of P5,000,000, with the intention of making the property
received from Mr. Mendoza as her new principal residence. The historical cost of the old principal residence of Mr.
Mendoza is P1,000,000 while the historical cost of the old principal residence of Ms. Sapaen is P500,000. How much
is the cost basis of the new principal residence of Mr. Mendoza?
[A] P4,000,000.
[B] P3,000,000.
[C] P500,000.
[D] P416,6667.
[E] P6,000,000.

63. Taking into consideration the same data in the preceding number, how much is the cost basis of the new principal
residence of Ms. Sapaen?
[A] P4,000,000.
[B] P3,000,000.
[C] P500,000.
[D] P416,667.
[E] P6,000,000.

64. Jovit is the first Pilipinas Got Talent champion and he won P2 million as cash prize, a house and lot at Ali Homes in
Batangas City with the total fair value of P5 million, and a recording contract with Sony Music Inc. for P10 million in
two years. How much is his tax due?
[A] P 0.
[B] P1,400,000.
[C] P3,400,000.
[D] P400,000.
[E] P3,390,000.

65. Sikanto Tinabangsit, a Thai citizen and the reigning WBO Super Featherweight Champion, successfully defended his
crown against Kid Laban Gurruud at the Big Dome just a day after he arrived here in the Philippines and won P12
million in cash and a Cayenne with fair value of P8 Million. How much is his final withholding tax?
 [A] P 0.
[B] P4,000,000.
[C] P2,400,000.
[D] P1,600,000.
[E] P5,000,000.

66. In July 2009, Mr. Jupiter, a nonresident citizen and with one dependent child, had a net capital loss of P100,000. In
September 2010, he gained P200,000 from the sale of his personal car. How much is his taxable net income in
Taxable Year 2010?
[A] P25,000.
[B] P100,000.
[C] P125,000.
[D]P50,000.
[E] P 0.

67. Mr. Jerico, a nonresident Filipino actor, shot his movie under Star Cinema, Inc. (domestic corporation) in Los
Angeles, California, USA and was paid in 2010 the professional fee of P25 million. How much is the creditable
withholding tax?
[A] P 0.
[B] P2,500,000.
[C] P3,742,500.
[D] P3,750,000.
[E] P7,949,000.

68. Mr. Walter, a nonresident Filipino, is working in Jollibee, Los Angeles, California as a service crew. He receives the
annual basic pay of P750,000, regular housing allowance of P250,000 and regular travel allowance of P500,000 all
from Jollibee Foods Corporation (a domestic corporation). How much is the taxable net compensation income?
[A] P 0.
[B] P1,450,000.
[C] P1,500,000.
[D] P700,000.
[E] P1,200,000.

69. Mr. Smith, a resident American, is a programmer of Accenture (resident foreign corporation) in Canlubang, Laguna,
Philippines and he receives P1,200,000 annual salary and regular profit sharing of P1,300,000. How much is his
taxable income?
[A] P 0.
[B] P2,500,000.
[C] P1,200,000.
[D] P1,150,000.
[E] P2,450,000.

70. Mr. Omagana, a resident Japanese, owned 2,000 common shares of San Miguel Corporation with book value of
P1,000,000. He sold half to Mr. Hapona, a direct buyer, for P1,000,000. The other half through the Philippine Stock
Exchange for P950,000, inclusive of the broker’s fee of P50,000. How much is the final tax?
[A] P90,000.
[B] P49,750.
[C] P49,500.
[D] P180,000.
[E] P190,000.

71. Mr. Clyde had the following data for a taxable year:
Gross Income, Philippines P 380,600.28
Gross Income, United States 255,304.65
If Mr. Clyde is a resident citizen of the Philippines, how much is his taxable income?
[A] P585,904.
[B] P635,904.93.
[C] P380,600.28.
[D] P635,904.
[E] P585,904.93.

72. Taking into consideration the same data in the preceding number, how much is his taxable income if Mr. Clyde is a
nonresident citizen of the Philippines?
[A] P635,904.
 [B] P635,904.93.
[C] P330,600.
[D] P380,600.
[E] P330,600.28

73. Taking into consideration the same data in No. 71, how much is his taxable income if Mr. Clyde is a nonresident alien
engaged in business or trade in the Philippines?
[A] P635,904.
[B] P635,904.93.
[C] P330,600.
[D] P380,600.
[E] P330,600.28

74. Taking into consideration the same data in No. 71, how much is his taxable income if Mr. Clyde is a nonresident alien
not engaged in business or trade in the Philippines?
[A] P635,904.
[B] P635,904.93.
[C] P330,600.
[D] P380,600.
[E] P330,600.28

75. Ms. Chamcey, a resident of Baguio City, had the following data for a calendar year:
Regular Wages P 84,800
Overtime Pay 20,000
Holiday Pay 6,000
13th Month Pay 25,000
Actual Medical Allowance 15,000
Hazard Fee 5,000
Night Shift Differential 2,000
How much is her taxable net compensation income?
[A] P 0.
[B] P67,800.
[C] P117,800.
[D] P157,800.
[E] P107,800.

76. Mr. Dominador, a resident Filipino, had the following information for a calendar year:
13th Month Pay P 20,000
Actual medical expenses for the year 5,000
Bonus 20,000
Rice subsidy 8,000
Christmas gift 2,000
How much is his taxable de minimis?
[A] P 0.
[B] P10,000.
[C] P30,000.
[D] P25,000.
[E] P55,000.

77. Mr. Eric, a resident citizen of the Philippines, an employee, had the following data for 2009:
Basic Salaries P 240,000
Payroll Deductions
SSS Contributions 10,000
Philhealth Contributions 2,500
HDMF Contributions 2,000
Labor Union Dues 1,500
Advances from employer 12,000
13th Month Pay 20,000
Christmas Bonus 20,000
Productivity Incentives Pay 5,000
Rice Subsidy 5,000
How much was the taxable net compensation income?
[A] P184,000.
[B] P174,000.
 [C] P224,000.
[D] P204,000.
[E] P 0.

78. Mr. Rogers, an alien, engaged in business in the Philippines has the following information on income and expenses in
2010:
Gross Income P 220,000
Rent on building, Philippines, net of 5% EWT 95,000
Rent on commercial building, USA 70,000
Interest Income, debtor resides in Hongkong 10,000
Dividends from Ford Motors (USA) declared in 2010 50,000
Gross Income of Ford Motors for years prior to declaration of dividends are as follows:
Within Without
2007 P300,000 P500,000
2008 400,000 100,000
2009 500,000 200,000
Royalties received from Ford Motors (USA) for use of
patents in USA 50,000
Dividend from Walmart Corp. (USA) declared in 2010 80,000
Gross Income of Walmart Corp. for years prior to declaration of dividends are as follows:
Within Without
2008 P400,000 P600,000
2009 400,000 400,000
Gain on sale in the Philippines, land located in Japan 300,000
Gain on sale in the Philippines, car purchased in Japan 50,000
Expenses:
Business expenses, Philippines 100,000
Depreciation building in Philippines 20,000
Depreciation building in USA 10,000
Expenses, sale of car in the Philippines 10,000
Expenses, sale of land in the Philippines 50,000
Unallocated expenses 60,000
How much is the income from sources within?
[A] P630,000.
[B] P600,000.
[C] P450,000.
[D] P400,000.
[E] P350,000.

79. Taking into consideration the same data in the preceding number, how much is the income from sources without?
[A] P630,000.
[B] P600,000.
[C] P450,000.
[D] P400,000.
[E] P350,000.

80. Taking into consideration the same data in No. 78, how much is the taxable net income assuming the taxpayer is
single and the country where he is a citizen allows P50,000 basic personal exemption to single taxpayers who are not
residing therein?
[A] P246,000.
[B] P196,000.
[C] P216,000.
[D] P296,000.
[E] P346,000.