CAPITAL GAINS TAXATION

1). Newt sold the following shares of stock of domestic corporations which he bought for
investment
purposes:
Listed and traded Not listed and trade
Selling price 250,000 143,680
Selling expense 12,000 3,680
Cost 118,000 80,000

Determined the capital tax

Assume Bryan is a dealer in securities, the capital gains tax is
Assume the shares sold are shares issued by foreign corporations, the capital gain tax is:

1) *listed and traded – dumadaan sa Philippines stock exchange

*not listed and trade – directly to buyer
143, 680 – 3680 – 80,000 = 60,000 x 15% = 9,000 Capital Gains Tax

Stock Transaction Tax will be based on Listed and Traded

S.P 250,000 x 60% of 1% = 1,500 (250k x 1% x 60%)

*If foreign corporation, the first 100k is 5% and 10% on excess so 60k gains X 5% = 3K CGT

2). Dobby, a resident citizen, disposed the following shares of stock of a domestic corporation
whose shares are not listed and traded in the local stock exchange:
Date of Sale Cost Selling Price
Jan. 15, 2018 P80,000 135,000
Feb. 14, 2018 175,000 150,000
March 30, 2018 256,000 360,000

The capital gains tax on the Jan. 15, 2018 sale is –

The capital gains tax on the Feb. 14, 2018 sale is –
The capital gains tax on the March 30, 2018 is –
The capital tax payable (refundable) when the consolidated return is filled on or before April 15,
2018

2) Dobby – directly to buyer; resident citizen 15%

135k – 80,000 = 55k x 15% = 8,250 capital gains
150k – 175k = (25k) = no tax since it’s a loss
360k – 256k = 104k x 15 % = 15,600 capital gains
8,250 + 15,600 = 23,850 Total Capital Gains

Capital tax payable = 645k Selling Price – 511k Cost = 134,000 Gain on annual/ consolidated
134,000 x 15 % = 20,100
23,850 CGT – 20,100 = 3,750 Capital Tax refundable since sobra ung binayad mong tax
3.) Dumbledore sold his principal residence at a gain of P1,000,000. The same property was
acquired in 2018 for P2,000,000 and had a zonal and assessed value of P2,500,000 and
P2,200,000, respectively, at the date of sale. Immediately after the sale, Dumbledore acquired a
smaller residence for his family for P1,800,000. Compute the net capital gains tax due from
Dumbledore.
Selling Price = 3M (2M + 1M Gain) New Principal Residence = 1.8M
3M – 1.8 M = 1.2M hindi nagamet

3M x 6% = 180,000 to be deposited to government escrow account

180k x (1.2M/3M) = 72,000 Capital Gains Tax to be paid

4). Magic Realty Corporation, a real estate dealer, sold a 500 sq. meter house and lot for
P4,500,000. The house and lot was sold at 20% discount from its appraised value and 10%
discount from its zonal value which is also the same with its assessed value. Magic corporation
used the proceeds to acquire a smaller house and lot for P3,000,000 after 2 years from the date
of acquisition. Compute the capital gains tax due from the transaction.

NO CAPITAL GAINS TAX because they are a real estate dealer; it is considered a real property

5.) Voldemort Co., a foreign corporation, paid P25,000 in capital gains tax when the company
sold its investments representing stocks of a domestic corporation directly to buyer. The stocks
cost Voldemort Co. P800,000. Compute the selling price of Voldemort Co’s stocks.

*If foreign corporation, the first 100k is 5% and 10% on excess

100k x 5% = 5,000
200k X 10 % = 20,000. (20,000 / 10% = 200k)
25,000 --→ Given Capital Gains Tax
300K Gain + 800k Cost = 1.1M selling Price

6.) Digory is a realty dealer. He buys and sells for his account and also sells developed
properties of Baguio Realty Corporation (BRC), a non-listed domestic corporation, on a
commission basis. In 2019, he sold various house and lots at a gain of P5,000,000 for BRC. He
was paid commissions in kind consisting of 150,000 BRC stocks with fair value of P450,000 at
the date of receipt. In 2020, Digory sold half of the shares for P9 per share to a corporation who
is very eager to acquire ownership of BRC. Compute the capital gains tax on the transaction.
*If Silent Problem, it is a resident citizen/domestic corporation

Selling Price - 9per share x (150k/2) = 675,000

(450k/150k) 3 per share x 75,000 = (225,000)
=450,000 x 15%
= 67,500 Capital Gains Tax
He is a realty dealer but he is selling stocks so it is considered
7.) The following relates to the disposition and reacquisition of Snape’s principal residence:

Construction cost of new residence P 4,000,000

Excess cash proceeds from the sale of the old residence P 500,000

The old residence was subject to P 500,000 mortgage which was assumed by the buyer. The old
residence should have been sold at its P6,000,000 fair market value except that Snape was too
eager to close the sale and was so excited to see his new home which he himself designed.

7.a)Compute the capital gains tax that should be deposited in escrow at the date of sale.

Selling Price : 4M + 500K + 500K Mortgage = 5M S.P

Fair Market Value : 6M (higher)
6M x 6% =360,000 Deposit to escrow account

7.b)Compute the capital gains tax to be released to Snape upon construction of his new
residence (how much is the exempt part of the escrow)

360k X (4M/5M) = 288,000 Withdrawable from the escrow account while the rest will be left to
the government

8.) Which of the following sale transactions will be subject to capital gains tax?
a. Sales of shares of stock by a dealer in securities
b. Sales of shares of stock during an Initial Public Offering
c. Sales of shares of stock not through the local stock exchange by a person who is not a dealer
in securities.
d. Sales of shares of stock through the local stock exchange by a person who is not a dealer in
securities.

9.) Statement 1: Tax CGT on sale of real properties shall be paid within 30 days from sale or
disposition. TRUE
Statement 2: The CGT on the unutilized portion of the proceeds in case of sale of a real
property classified as a principal residence shall be paid within 30 days after the expiration of
the 18 month period. FALSE
A B C D
Statement 1 True False True False
Statement 2 True False False True

10.) Which of the following transaction is subject to 6% capital gains tax:

a. Sale of condominium units by a real estate dealer
b. Sale of real property utilized for office use
c. Sale of apartment houses
d. Sale of vacant lot by an employee CAPITAL ASSET ----→ NOT USED IN BUSINESS
11. Statement 1: The determination of 6% capital gains tax on sale of real property is based on
net capital gains realized by the seller of real property. FALSE
Statement 2: Except for certain passive income, a nonresident alien not engaged in trade or
business shall be taxed at 25% of his gross income derived from sources within the Philippines
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

12. Mike, a resident citizen taxpayer owns a property converted into apartment units with a
monthly rental of P10,000 per unit. He subsequently sold the property to Leomar, a resident
alien taxpayer. The sale shall be subject to:
a. 6% Capital gains tax
b. Regular income tax
c. 6% capital gains tax or basic income tax at the option of Mike
d. 6% capital gain tax or basic income tax at the option of Leomar.

13. Statement 1: Proceeds of sale of real property classified as capital asset may be exempt
from the 6% capital gains tax. TRUE
Statement 2: Gain from sale of real property classified as capital asset to the Government may
be taxed under Section 24 (A) at the option of the individual taxpayer. TRUE
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

14. Vincent sold a residential house and lot held for P10,000,000 to his friend. Its FMV when he
inherited it from his father was P12,000,000 although its present FMV is P15,000,000.
The tax on the above transaction is: FMV 15M X 6% = 900K
a. P720,000 capital gains tax
b. P900,000 capital gains tax
c. 30% donor’s tax
d. Value added tax

15. Assuming the house and lot was Vincent’s principal resident and he used ½ of the proceeds
to buy a new principal residence within eighteen months after the above sale. Assume further
that Vincent properly informed the BIR about the sale. It shall be:
a. Exempt from capital gains tax
b. Subject to P300,000 capital gains tax
c. Subject to P450,000 capital gains tax or (900k x ½)
d. Subject to P600,000 capital gains tax

16. Based on the above problem, but assuming the residential house is located abroad, the
capital gains tax is: NONE since CGT is only applicable to philippines
a. P0 c. P450,000
b. P300,000 d. P 480,000

17. In 2018, East Star Inc. sold shares of stock for P250,000. The shares, acquired in 2016 at a
cost of P100,000, were held as investment, and were sold directly to a buyer. How much was
the capital gains tax due?
250,000 – 100,000 = 150,000 x 15% = 22,500 Capital Gains Tax

18. Assume the shares sold were not held for investment purposes and the seller is a dealer in
securities, how much is the capital gains tax?
0 or None since he is a dealer of securities

19. Assume the shares sold were from a foreign corporation, what type of income tax will apply
on the transaction?
a. Regular income tax
b. Capital gains tax -→ only for domestic corporations
c. Either a and b at the option of the seller
d. Either a and b at the option of the buyer

20. In 2018, East Star Inc. sold shares of stock of a domestic corporation for P250,000. The
shares, acquired in 2016 at a cost of P100,000, were held as investment , and were sold through
the local stock exchange. How much was the applicable tax due?
Stock Transaction Tax = 250k x 60% of 1%
250k X 1% X 60% = 1,500 Stock Transaction Tax

21. Assume the shares sold were not held for investment purposes and the seller is a dealer in
securities, how much is the capital gains tax?
0 or None since he is a dealer of securities

22. Which of the following income will be taxed in the same manner regardless of the
classification of the taxpayer?
a. Capital gain on sale of land and/or building
b. Capital gain on sale of shares of stock of a domestic corporation
c. Ordinary gain on sale of land and/or building
d. Ordinary gain on sale of shares of stock of a domestic corporation

23. A dealer in securities sold unlisted shares of stocks of a domestic corporation in 2018 and
derived a gain of P500,000 therefor. The gain is
a. Taxable at 30% regular corporate income tax based on net taxable income
b. Taxable at 15% capital gains tax based on net capital gain
c. Taxable at 6/10 of 1% stock transaction tax based on the gross selling price or fair market
value, whichever is higher
d. Exempt from income tax
24. Godric Gryffindor had the following transactions in JKL Corporation’s common stock:
Oct. 10, 2019 Purchased 10,000 shares @P100 P1,000,000
Oct. 28, 2019 Purchased 5,000 shares @P98 490,000
Nov. 24, 2019 Sold the 10,000 shares purchased on 10/10/19 920,000
Dec. 10, 2019 Purchased 3,000 shares @P90 270,000

24.a) Determine the loss sustained by Godric and indicate whether it is deductible or not.
Selling Price = 920,000 Cost ( 1M)
Loss = 80,000 (920k-1M)

Wash Sales Scenario

From Nov.24 Sales, the Oct.28 and Dec.10 Purchases are within the 30 days so 8,000 shares are
available

80,000 X (8k / 10k ) = 64,000 – distribute to the 5k and 3k shares of purchases

80,000 X (2k / 10k ) = 16,000 – deductible

64,000 x (5k/8k) = 40,000

64,000 x (3k/8k) = 24,000

24.b) If the shares acquired on October 28, 2019 are sold today at Php 100 per share,
determine Godric’s gain or loss.
 INCOME TAXATION
Master Precious Lang Sa Kalam
Name:_________________________________ Date:_____________________
Section:_______________________________ COMPENSATION & FRINGE BENEFIT TAX

1. As a rule, fringe benefits furnished or granted in cash or in kind b an employer to an individual employee
may be subject to the fringe benefit tax, if given to
A. Rank and File employees B. Managerial Employees C. Those holding supervisory positions
a. Only A and B
b. Only A and C
c. Only B and C
d. A,B and C
2. The fringe benefit tax is oyer
A. Imposed on the employer B. Withheld at source C. Deductible expense by the employee
a. Only A and B
b. Only A and C
c. Only B and C
d. A,B and C
3. Which of the following is subject to the fringe benefit tax?
a. Compensation income of the rank and file employees
b. Fringe benefit of the rank and file employees
c. Compensation income of the managerial employees
d. Fringe benefit of the managerial employees

4. The following concepts denotes exemption from the fringe benefit tax, except
a. Convenience of the employer
b. Necessity to the business or trade
c. Welfare and benefit of the employees
d. De minimis benefits
CORRECT
5. With regard to the amount on which the fringe benefit tax rate is applied, which statement is wrong?
-

The tax benefit rate is applied on

A. The monetary value of the fringe benefit
B. The gross-up monetary value of the fringe benefit
C. The amount deductible by the employer from gross income
D. Both amounts of the fringe benefit and the fringe benefit tax

6. The following fringe benefits are not subject to fringe benefit tax, except
a. If required by the nature of or necessary to the trade, business or profession of the employer
b. Contribution of the employer for the benefit of the employee to retirement, insurance and
hospitalization benefit plans
c. Benefits given to rank and file employees
d. If given for the convenience or advantage of theX employee employer

7. Basic rules on fringe benefits tax, except

a. Fringe benefits given to rank and file employees are not subject to fringe benefit tax
b. Fringe benefits given to a supervisory or managerial employee are subject to fringe benefit tax
c. De minimis benefits whether given to rank and file employee or to a supervisory or managerial
employee are not subject to fringe benefit tax → subject
d. The fringe benefit tax is a tax imposed on managerial or supervisory employee si la !

8. Which of the following statements is correct?

a. Fringe benefit given to employees is subject to fringe benefit tax
b. Fringe benefit given to employees is exempt from fringe benefit tax have
c. If the fringe benefits is taxable, the tax will be paid by the employer They can Benefits
P Fringe
d. Fringe benefits may be given to managerial, supervisory and rank and file employees but not the TAX

9. Daily meal allowance for overtime work is a de minimis benefit if not exceeding what percent of the basic
minimum wage?
A. 10%
b. 15%
c. 20%
D. 25%
10. Facilities or privileges furnished or offered by an employer to his employees that are of relatively small
value and are offered or furnished by the employer merely as a means of promoting the health, goodwill,
contentment or efficiency of his employees.
a. Fringe benefit
b. fringe benefit tax F BT
Benefit -0 Compensation Income/si la mis mo magbabayad ng
/etd 8)* Rank and file got a
Fringe
unlike pag Managers /Supervisor their F BT is
,
paid by their Employer
 value
c. de minimis benefit → small
d. grossed up monetary value

11. The following fringe benefits are not subject to fringe benefit tax except

a. Fringe benefits given to rank and file employees, whether granted under a collective bargaining agreement
or not
b. Contributions of the employer for the benefit of the employees to retirement, insurance or hospitalization
benefit plans
c. De minimis benefits as defined in the rules and regulation to be promulgated by the secretary of finance,
upon recommendation by the commissioner
d. Fringe benefits furnished or granted by the employer to its managerial and supervisory employees

12. Which statement is wrong? The fringe benefit tax is

a. imposed on the employer
b. imposed on the rank and file employee if the amount of the benefit exceeds the ceiling allowed by the tax
code
c. withheld at source
d. deductible by the employer

13. Alohomora Corporation gave the following cash benefits to a rank and file employee in 2018: → PPT
Uniform Allowance 8,000
solution
Rice subsidy 28,000
Monetized unused leave credits (12days) 18,000
* 14) Private Employees
Safety achievement award 10,000 Vacation leave
→

Medical allowance to dependents of the employee 2,000

Government Employees
Medical benefits 12,000 Sick leave
-0
th
13 month pay 35,000
Christmas bonus 35,000
The fringe benefit that shall be considered part of taxable income is?

14. The following are considered as de minimis benefits granted to each employee except,
a. monetized unused sick leave credits of private employees not exceeding 10 days during the year
b. monetized unused vacation leave credits of private employees not exceeding 10 days during the year
c. monetized value of vacation leave credits paid to government officials and employees
d. Monetized value of sick leave credits paid to government officials and employees
NOT CASH !
15. Which of the following is not considered as de minimis benefits? → Dapat
a. employees achievement award for length of service or safety achievement in the form of cash or gift
certificate not exceeding 10,000 per year
b. medical cash allowance to dependents of employees not exceeding 1,500 per year -0 3,000
c. gifts given during Christmas and major anniversary celebrations not exceeding 5,000 per year
d. medical allowance to cover medical and health care needs, annual medical/executive check up, maternity
assistance and routine consultations not exceeding 10,000 per year

16. In 2018, Stupefy corporation allowed its sales manager to incur expenses subject to reimbursement, as
* 70't si Corp nagbayad
follows: 14 ooo
20K 70% Kay employee
=
x SO 30%
Electricity (meralco)-70% in the name of A Corporation 20,000 70% 1400
=
2K x
Water (Maynilad)- 70% in the name of A corporation ✓ 2,000
Grocery (SM) ✓ 10,000 10000
=

to Fringe Benefit
Tax
Gasoline of Company car X 12,000 25,400 subject
Representation and transportation-Business trip X 4,000 ÷ 65%
The amount subject to fringe benefit tax is Cross Up Monetary
Value
39 077

17. The grossed-up monetary value of fringe benefit subject to fringe benefit tax received by a non-resident
alien individual not engaged in trade or business in the Philippines is computed by dividing the monetary
value of the fringe benefit by
a. 75% NRA NETB
b. 68%
c. 85%
d. 15%

18. As a means of promoting the health, goodwill and efficiency of his employees, employer A gave rank and
file employee B the following fringe benefits in 2018:
a. Monetized unused vacation leave of 15 days 15,000
b. Rice subsidy 32,000
c. Uniform and clothing allowance 8,000
/etd
 d. Achievement award for length of service in the form of tangible personal property 15,000
e. Gifts given during Christmas and major anniversary celebrations 10,000
f. 13th month pay 68,000
The amount of fringe benefits is?

19. The employer’s deductions for the benefits given?

20. The following data belong to Accio corporation for the year 2018
a. Educational assistance to supervisors and their children 100,000
b. employer contribution for the benefit of the employees to retirement, insurance and hospitalization benefit
plans → 505 Monetary Value
.

X 80,000
c. Year’s rental for an apartment paid by the corporation for the use of its comptroller 120,000
The fringe benefit tax due is 100K t 420k x 50%3=160 000M .V÷ 65%
X 35% 86,154 FBT =

21. Wingardium Laviosa Corp, a regional operating headquarter of a MNC in the Philippines provided its
employees cash and non cash fringe benefits in 2018 as follows: nasa PPT
Total amount of fringe benefits 1,000,000
60% of said amount was given to rank and file employees
40% of said amount was given to corporate officers as follows
a. To resident citizens (taxed at regular rates)-45%
b. To non resident aliens not engaged in business in the Philippines-35%
c. To special aliens and Filipino employees- 20%
The fringe benefit tax due is

22. Aguamenti Co., paid a monthly salary of P100,000 and the monthly rental of P68,000 for a condominium
unit for the General Manager. nasa PPT
Determine the monthly fringe benefit tax payable

23. Expecto Patronum Co., owns a condominium unit which is being used by the president of the corporation.
It has a fair market value per real property tax declaration of 2,100,000 and a zonal value of 3,000,000
Determine the fringe benefit tax due nasa PPT

24. Mr. Avada Kedavra is a mining engineer employed by Hogwarts Co., a mining firm. The company’s mine is
in Mindanao. Mr. Avada Kedavra was provided by the company with living quarters at the mine site. The
fair rental value of the living quarters is P15,000 a month. nasa PPT
Determine the fringe benefit tax due

25. In addition to other fringe benefits, Mr. Ferula, a chief accountant, availed of the car plan of his employer,
weasley Company. Under the plan, Mr. Ferula shouldered only 50% of the cost of the car, with the
company shouldering the other 50%. Mr. Ferula paid 340,000 for the car. The car was registered in the
name of Mr. Ferula. A) Monetary Value
.
=
340000 ÷ 65% X 351 183 077 FBT
.
=

Determine:
523 077 Deductible Expense
a. The fringe benefit tax due B) .
Fringe Benefit 340000 I
= FBT 183 077 = =
,

b. The deductible expense of the employer it will

under COMPANY Name be 120 years
* If car was registered depreciation Value

nd
26. In 2018, Stupefy company purchased a 2 hand car for its chief accountant as a fringe benefit. The cash
purchase price of the car was 120,000. The company paid 30,000 as a down payment plus four equal
annual installment of 30,000 (120,000 plus 30,000 interest). The ownership was transferred to the chief
accountant If installment Valve with NO Interest
-0

Determine the fringe benefit tax due 120000/5 years 24000M V ÷ 65% X 35% 12,923 FBT
=
= .

27. In 2018, A sales manager, purchased a brand new car amounting to P500,000 of which P200,000 was
contributed by the company as his fringe benefit.
Determine the fringe benefit tax due 200000 MN ÷ 65% X 35% 107,692 FBT =

28. In 2018, Sectum Sempra Corp hired Miss Norris as sales manager for cosmetics. She was given the
following compensation and fringe benefit: 4000×3 maids x 12 mon 144000 =

Salary 200,000/month
Three maids Y
4000/per maid/month 8000×12 mon 96 000 =

Personal driver ✓ 8,000/month 1200 =

Home owner’s Association dues ✓ 1,200/year

241,200 Moll
Determine the fringe benefit tax due (20187 241200mV ÷ 65% X
35=129,877 FBT

29. In 2018, dumbledore the owner of hogwarts Supermarket lent 100,000 to snape, the supermarket
manager. It was stipulated in their agreement that the amount should be paid in one year with an annual
interest of 3%. 9,000 Monetary Value
12% 3% 9% X 100000
= =

/etd
9 000 Mv ÷ 65% X 35% 4,846 F BT
=
 Determine the fringe tax due.

30. In 2018, Mr. Aperecium The Vice President for Finance of granger Corporation incurred the following
expenses in attending a 3-day foreign business convention: hotel
per day
300 on

Plane tickets (USA travel) : 300×3=900 Exempt

1000×304=5300
First class 130% Taxable ) $1,000 then the rest Taxable
Economy EXEMPT X $500
Hotel accommodation (USA) $2700 2700 -

900 Ex =
$1800
Value
Inland Travel × $600 5/2,100×50=705000 Monetary
Assume $1.00 = 50
105000 MY ÷ 65% X 351=56,538 FBT

Determine the fringe benefit tax due assuming

31. In 2018 Hufflepuff Corporation paid for the annual rental of residential house used by its general manager
amounting to 136,000. The entry to record the benefit is
a. Fringe benefit expense 136,000
Monetary Value
since Rent
Fringe benefit tax expense 36615
-
64,000 136 000 x 50%
Cash 172,615 200,000 M V
6800€
-

=
-

b. Fringe benefit expense 136,000

Fringe benefit tax expense 32,000 68K ÷ 65% X 35%
Cash 168,000 = 36 615 FBT
c. Fringe benefit expense 68,000
Fringe benefit tax expense 32,000
Cash 100,000
d. Fringe benefit expense 68,000
Fringe benefit tax expense 64,000
Cash 132,000
32. Identify whether or not the following are subject to fringe benefits tax:
=
a. Fringe benefit required by the nature of or necessary to the trade or business of the employer.
b. Fringe benefit for the convenience or advantage of the employer.
c. Fringe benefit given to rank and file employees.
d. Housing privilege of the AFP
e. Housing units situated inside or adjacent to business or factory (located within 30 meters from the
± perimeter of the business)
f. Temporary housing for an employee who stays in the housing for 3 months or less.
E g. Representation and entertainment allowances which are fixed in amount and regularly received by
v employee.

¥
h. Use by employee of aircraft (including helicopters) owned and maintained by the employer.
i. Cost of economy and business class airplane tickets for foreign travel.
j. De minimis benefits
k. Educational assistance granted to employees’ dependents through competitive scheme under
TTscholarship program of the company.
l. Cost of premiums borne by the employer for the group insurance of his employees.
m. Contribution of the employer for the employee under SSS and GSIS laws.
n. Contribution of employer for the benefit of the employee to retirement, insurance and hospitalization
benefit plans.

33. Compensation income is earned when an employer-employee relationship exist. Which of the following
income represents income earned through emploee-employer relationship?
I . Professional fees
II. Wages
III. Pension pay
IV. Capital gain
a. I only c. II and III only
b. I and III only d. I, II ,III and IV
Answer: C
I: “Professional” fess are classified as business income
IV: Capital gains are derived from sale/disposal/exchange/barter of capital assets

/etd
34. Pedro is a member of the board of directors of ABC Company. During the current taxable year, Pedro
received director's fees amounting to P300,000 from quarterly board meetings he attended. Such fees
should
a. form part of Pedro's gross compensation income, whether or not he is at the same time an employee
of the corporation
b. form part of Pedro's gross compensation income only if he is at the same time an employee of the
corporation
c. Both “a” and “b” are correct
d. neither “a” nor “b” is correct
Answer: B

35. Which of the following compensation will be subject to graduated rates?

a. basic salary whether or not the employee is a minimum wage earner
b. basic salary only if the employee is not a minimum wage earner
c. 13th month pay and other benefits not exceeding P90,000
d. fringe benefits received by supervisory or managerial employee
Answer: B

36. Which of the following items that reduces salaries of employees is not an exclusion form gross income?
a. GSIS or SSS contributions
b. Pag-Ibig contribution
c. Labor Union Dues
d. None of the choices
Answer: D
37. One of the following compensation income of an individual taxpayer is not and exclusion from gross
income?
a. monetized vacation leaves not exceeding 10days a year
b. separation pay of an employee who resigned from his employment
c. retirement benefits of an employee under qualified benefit plan who has worked for an
employee for at least 10years, who at the time of retirement is not less than 50years of age, and who avails of
the retirement for the first time
d. all of these
Answer: B
Separation pay, in general is taxable compensation income unless the reason for the separation is beyond the
control of the employee such as but not limited
- Retrenchment
-Illness

38. Which of the following is taxable?

a. separation pay received by a 50-year old employee due to the retrenchment program of the
employer
b. retirement pay from a benefit plan registered with the BIR where at the time the employee retired, he
was 57 years of age, retiring from the employment for the first time in his life, and was employed with the
employer for 8 years
c. social security benefit received by a balikbayan from employer abroad
d. none of the above
Answer: B

39.✓Statement 1: Amounts received by reason of involuntary separation remain exempt from income tax even if
the official or employee at the time of separation has rendered less than ten(10) years of service and/or
below fifty (50) years of age
✓Statement 2: Any amount received by an official or employee or by his heirs from the employer due to
death, sickness or other physical disability or for any cause beyond the control of the said official or employee,
such as retrenchment, redundancy or cessation of business are exempt from income tax.
a. both statements are correct
b. both statements are not correct
c. only the first statement is correct
d. only the statement is correct
Answer: A

/etd
40. The taxpayer was retired by his employer in 2016 and paid P2,000,000 as a retirement gratuity without any
deduction for withholding tax. The corporation became bankrupt in 2018. Can BIR subject the P2,000,000
retirement gratuity to income tax in 2018?
x1st Answer: Yes, if the retirement gratuity was paid based on a reasonable pension where the taxpayer
was 50 years old and has served the corporation.
x 2nd Answer: No, if the taxpayer was forced by the corporation to retire

a. 1st and 2nd answers are correct

b. 1st answer is correct but 2nd answer is wrong
c. 1st answer is wrong but 2nd answer is correct
d. 1st and 2nd answers are wrong
Answer: D
1st Answer is wrong. To be exempt, the retirement pay must be based on a reasonable retirement plan
and the employee must be at least 50 years old and should have served the company for at least 10 years
2nd Answer is wrong. Thew rules on tax exempt retirement pay and separation pay are different. 2nd
statement is applicable to separation pay rather than retirement pay.

41. JJ, an official of Excel Corporation, asked for an earlier retirement because he was immigrating to Canada
with his girlfriend. He was paid P3,000,000 as separation pay in recognition of his valuable services to the
corporation. Paul, another official of the same company was separated for occupying a redundant position.
He was given P1,000,000 separation pay to retire for the first time. He received P2,000,000 retirement pay.
Total income subject to withholding tax is _______.
a. P1,000,000 c. P 3,000,000
b. P2,000,000 d. P6,000,000
Answer: C

42. Which among the following is part of the taxable income of an employee?
I. Insurance premium provided by employer on the life insurance policy of the employee where the
designated beneficiary is the relative of the employee
II. Insurance premium pay paid by employer on the life insurance policy of the employee where the
designated beneficiary is the employer
III. The income tax of the employee paid by the employer as part of the employee's benefit
IV. The income tax of the employee advanced by the employer, deductible against future income of the
employee.
a. I only c. II and III only
b. I and III only d. III only
Answer: B

43. Statement 1: Remuneration for services constitutes compensation income even if the relationship of the
employer and employee does not exist at the time when payment is made between the person in whose
employ the services had been performed and the individual who performed them.
Statement 2: In general, fixed or variable allowances which are received by a public compensation,
fixed for his position or office , is compensation subject to income tax and consequently creditable withholding
tax on compensation income

a. both statements are correct

b. both statements are incorrect
c only the first statement is correct
d. only the second statement is correct
Answer: A
Statement 2: Basis: Section 2.78.1(A) of RR 2-98 as amended by RR 10-2008. Example of
fixed or variable allowances are transportation allowance, representation allowance, communication
allowance, living away from home allowance (LAFHA), and the like.

44.✓Statement 1: Representation and Transportation Allowances (RATA) granted under Section 34 of the
General Appropriations Act to certain official and employees of the government are considered
reimbursement for the expenses incurred in the performance one's duties rather than as additional
compensation.
✓Statement 2: The excess of RATA in statement 1, if not returned to the employer, constitutes taxable
compensation income of the employee
✓Statement 3: COLA of minimum wage earners is exempt from income tax
a. all statements are correct
/etd
 b. All statements are incorrect
c. Only statement 3 is correct
d. only statement 3 is incorrect
Answer: A
The COLA forms a part of the new wages rates of or statutory minimum wage. Hence, it is covered by the
income tax exemption of MWEs under RA 9504, as implemented by Revenue Regulations No. 10-08, which
covers the statutory minimum wage (inclusive of COLA under NCR wage Order No. NCR-16), including holiday
pay, overtime pay, night shift differential pay and hazard pay.

45. Juana, widow received the following during 2018:

Received $400 (1$=P44) monthly interest income from the pension plan of his deceased husband who
served in the US Army for 20years
Won a beauty contest “Miss Byuda 2018”. She received the following cash Prizes:

Cash prize P50,000

Free-trip abroad worth P50,000
College scholarship with international College of Business and Economics worth P100,000
Goods worth P20,000
P100,000 from her debtor in payment of a loan and interest in the sum of P15,000.
Inherited from her grandmother a lot and apartment valued at P2,500,000 from which she is receiving
monthly rental of P15,000

The income subject to tax is -

a. P415,000 c. P250,000
b. P679,000 d. P515,000
Answer: B
Solution:
Monthly interest on pension ($500 x P44 x 12) P264,000
Total prizes received from a beauty contest 220,000
Interest from a debtor 15,000
Rental income in inherited apartment (P15,000 x 12) 180,000
Total income subject to tax P679,000
The question was income subject to tax. Therefore, it shall include all types of income subject to
income tax (regardless of the type of income tax; Basic, FWT, CGT)

46.✓Statement 1: The stipends received by resident physicians during their intensive training in the residency
program of a hospital are subject to creditable withholding tax on compensation income.
✓Statement 2: Reasonable amounts of the reimbursements/advances for traveling and entertainment expenses
which are pre-computed on a daily basis and are paid to an employee which
a. All statements are correct
b. All statements are incorrect
c. only statement 3 is correct
d. only statement 3 is incorrect
Answer: A
Statement 1: Pursuant to Section 2.57.2 (A)(1) of RR 2-98. Under Section 2.57.2(A)(1) of RR 2-
98.

✓47. Statement 1: Tips or gratuities paid deirectly to an employee by a customer of the employer that are not
accounted fotr by the employee to the employer are considered as taxable income subject to basic tax
✓Statement 2; The tips described in statement 1 shall not be subject to withholding tax for the reason
that the tips are not accounted by the employee to the employer.
a. both statements are correct
b. both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
Answer: A Basis: RR 2-98

48. As a means of promoting the health, goodwill, contentment and efficiency of his employees, employer pa-
fall gave rank and file employee na-fall the following fringe benefit in 2014:
PPT
a. Monetized unused vacation leave of 15 days 45,000
b. Rice subsidy 36,000 "
compensation "
c. Uniform and clothing allowance 15,000 Income
/etd
d. Achievement award for length of service in the form of
tangible personal property 20,000
e. Gifts given during Christmas and
anniversary celebrations 20,000
f. Medical benefits 20,000
g. 13th month pay 60,000
h. Laundry allowance 5,000
i. Mid year bonus 60,000
j. Productivity bonus 80,000
k. basic pay before deductions 250,000
l. SSS,Pag-ibig,philhealth contributions 20,000

Determine the taxable benefits of na-fall before personal exemption.

Determine the taxable benefits before exemption if the employee is a government employee

49. Paasa a minimum wage earner received the following from UMASA corporation in the year 2017

Basic Pay-Minimum wage 60,000 PPT under

Holiday Pay 5,000
Hazard Pay
Night shift differential
10,000
8,000
compensation
13th month pay 5,000 Income
Productivity incentive 2,000
Uniform allowance 6,000
Rice subsidy 23,000
Mid year bonus 5,000
Overtime pay 7,500
Commission from sales 4,000
Paid used leave credits(not included in the basic pay) 2,000
Paid Unused vacation leave-12 days 4,200
Net income from a sari-sari store 50,000

1. Determine the taxable income of PAASA before personal exemption

2. If the abovementioned income were received in the year 2016, how much is the taxable income?

50. The following are the employees of Cecile’s Convenience Store owned by Cecile Acosta as May 1, 2018:
Name of Employee Position Monthly Salary
Campos, Mark, Daniel Manager 42,000
David, Kathrina Senior Cashier 25,200
Maghinang, Russel Cashier 23,500
Mercado, Jean Michael Driver 20,900
Tadeo, Mary Antonette Clerk 18,000

Assume that income taxes are withheld on a semi-monthly basis and the statutory deductions are subtracted
from the gross pay on the payroll date nearest to the end of the month. Compute the net pay of each employee

Regular Income Tax Table

Range of Taxable Income Income Tax Due = B + (R * E)

Bracket Additional Rate Excess Over

Over Not Over Basic Amount (B)
(R) (E)
1 - P250,000 - - -

2 P250,000 P400,000 - 20% 250,000

3 P400,000 P800,000 30,000 25% 400,000

4 P800,000 P2,000,000 130,000 30% 800,000

5 P2,000,000 P8,000,000 490,000 32% 2,000,000

/etd
 6 P8,000,000 - 2,410,000 35% 8,000,000

Revised Withholding Tax Table

Daily 1 2 3 4 5 6

Compensation Level 685 and 685 1,096 2,192 5,479 21,918

(CL) below

Prescribed Minimum 0.00 0.00+20% 82.19+25% over 356.16+30% over 1,342.47+32% 6,602.74+35% over
Withholding Tax over CL CL CL over CL CL

Weekly 1 2 3 4 5 6

Compensation Level 4,808 and 4,808 7,692 15,385 38,462 153,846

(CL) below

Prescribed Minimum 0.00 0.00+20% 576.92+25% over 2,500.00+30% 9,423.08+32% 46,346.15+35%

Withholding Tax over CL CL over CL over CL over CL

Semi-Monthly 1 2 3 4 5 6

Compensation Level 10,417 and 10,417 16,667 33,333 83,333 333,333

(CL) below

Prescribed Minimum 0.00 0.00+20% 1,250.00+25% 5,416.67+30% 20,416.67+32% 100,416.67+35%

Withholding Tax over CL over CL over CL over CL over CL

Monthly 1 2 3 4 5 6

Compensation Level 20,833 and 20,833 33,333 66,667 166,667 666,667

(CL) below

Prescribed Minimum 0.00 0.00+20% 2,500.00+25% 10,833.33+30% 40,833.33+32% 200,833.33+35%

Withholding Tax over CL over CL over CL over CL over CL

PHIC TABLE

Monthly Salary * 2.75% Monthly Premium Personal Share Employer’s Share

P10,000 and below P275.00 P137.50 P137.50

P10,000.01 up to P39,999.99 P275.00 up to P1,099.99 P137.50 up to P549.99 P137.50 up to P549.99

P40,000 and above P1,100.00 P550.00 P550.00

HDMF TABLE

Percentage of Monthly Compensation

Monthly Compensation
Employee Share Employer Share

P1,500 and below 1% 2%

Over P1,500 2% 2%

/etd
 SSS TABLE

/etd
 INCOME TAXATION
Precious Lang Sak alam
Name:__________________________ Date:_____________________
Section:_________________________ GROSS INCOME

1. Exclusions from gross income, except:

a. Interest on the price of the land covered by the Presidential Decree on land reform Interest
b. Interest payments on proceeds of life insurance held by the insurer. → Taxable ung payment
c. GSIS, SSS, Philhealth and Pag-ibig contributions and Union dues of individuals.
d. Gains realized by an investor upon redemption of shares of stock in a mutual fund company.
2. Which of the following statements is correct?
a. The power of taxation reaches even the citizens abroad and their income earned from sources
outside the Phils. FALSE x

b. Priests and religious institutions are exempt from income and property taxes. false
-

c. Separation benefits received by terminated employees resulting from a deadlock in their collective
bargaining agreement are exempt from income tax.
d. The value of a property received as a gift, or under a will or testament or through legal succession
is exempt from taxation. False exempt lang sa Income Tax Lang
3. One of the following is taxable income
a. Gifts, bequests and devices
b. Amounts received as rewards for giving information instrumental in the discovery of violation of
the Tax Code and seizure of smuggled goods.
c. Proceeds of life insurance
d. Separation pay received by an employee due to a cause beyond his control
4. Which of the following statements is not correct?
a. Proceeds of life insurance policies paid to beneficiaries upon the death of the insured are
excluded from gross income regardless of whether the proceeds are received as a single sum
or in installments.
b. In case of transfer for a valuable consideration by assignment or otherwise of a life insurance,
endowment or annuity contract or any interest therein, only the actual value of such
consideration and the amount of the premium and the sums subsequently paid by the transferee
are exempt from income tax.
c. Marriage fees, baptismal offerings, sums paid for saying masses for the dead and other
contributions received by a clergyman, evangelist or religious worker for services rendered is
taxable income
d. Monetization of leave credits of employees who were unable to go on leave due to exingencies
of the service constitute taxable income. → dapat may LIMIT
5. Which of the following statements is correct as regards a resident citizen?
a. Income from illegal activities are subject to final tax -0131T
b. Income tax refunds constitute taxable income to the taxpayer
PREDOMINANCE TEST
c. Recovery of bad debts previously written off is part of taxable income → May
d. As a rule, contest awards and prizes are subject to 20% final tax if they amount to more than
P10,000, otherwise they will be part of taxable income.
6. Which of the following statements is not correct? only if Minimum
wage Earner
T a. Minimum wage earners shall be exempt from the payment of income tax ,
F b. Holiday pay, overtime pay, night shift differential and hazard pay shall be exempt from income
tax
T c. Prizes and awards granted to athletes in local and international sports competitions and
tournaments whether held in the Philippines or abroad and sanctioned by their national sports
associations are exclusions from gross income
T d. Benefits received from or enjoyed under the Social Security System are exclusions from Gross
Income
7. One of the following is part of taxable income subject to schedular rate
a. Compensation for damages
b. The share of a partner in the undistributed net income of a general co-partnership
c. Living quarters and meals furnished and given to an employee for the convenience of the
employee
d. Facilities or privilege of relatively small value offered by the employer as a means of promoting
the health, goodwill, contentment, or efficiency of the employee
RIT 8. Which is not creditable withholding income tax? advance payment of tax ; cannot be deducted annually
Dapat a. Expanded withholding income tax c. Withholding income tax on passive income Ofinal Tax
-

b. Withholding income tax at source d. Withholding income tax on compensation income

9. As a rule, this is not part of taxable income
a. Profit sharing b. Hazard pay c. Overtime pay d. 13th month pay
10. This is a taxable income INVOLUNTARY
→ Dapat
a. Retrenchment pay c. Separation pay due to resignation para exempt ;
b. SSS/ GSIS benefits d. Refund of Philippine Income Tax Resignation is
controlled by an
/etd employee
 11. Which of the following is taxable income?
a. Prizes and awards as an awardee of Ramon Magsaysay Award Foundation
b. Damages awarded as a consequence of a libel and slander suits Return of capital
c. Interest on Philippine lotto winnings
d. Amounts received as returns of premiums
12. Which of the following statements regarding dividends is correct?
( 10%7
a. Exempt from tax if received by a resident citizen from a domestic corporation→ Final Tax
b. Exempt from tax if received by a resident alien from a domestic corporation → Final Tax ( 10% )
c. Taxable subject to year-end tax if received by a resident citizen from a non-resident corporation
d. Taxable subject to final tax if received by a non-resident citizen from non-resident corporation
13. As a rule, the following are taxable income, except
a. Cash dividend b. Property dividend c. Scrip dividend d. stock dividend
14. The following items are exclusions from gross income, except
a. Labor union dues c. IOUs
b. SSS/GSIS premium contributions d. Pag-ibig premiums contributions
15. Which of the following is part of gross income?
a. PCSO & Phil. Lotto winnings c. Proceeds of life insurance
b. Bank interest on long-term deposit d. Raffle prize not exceeding P10,000
16. If refunded, this is taxable d
can be expense
a. Estate tax b. donor’s tax c. special assessment d. fringe benefit tax →
17. Income tax payments to a foreign country, in the case of a resident citizen may be claimed as
a. Tax credit and deduction from gross income c. tax credit or deduction from gross income
b. Tax credit only d. deduction from gross income only
18. Dividends paid by a domestic corporation may be taxable but subject to final tax, except.
a. If received by a resident citizen c. If received by a non-resident corporation
b. If received by a resident alien d. If received by another domestic corporation
19. A works as a minimum wage earner in an advertising firm in Makati. During the year, she received
P10,000 a month as salary or a total of P120,000. In addition she also received 13 th month pay,
Christmas bonus, productivity bonus, mid year bonus and 14 th month pay amounting to P42,000. The
total deductions for her SSS premiums, Medicare, Pag-ibig, and Union dues contributions amounted to
P5,000. A’s taxable income, if single Minimum wage
→
a. P70,000 b. P65,000 c. P95,000 d. P0 Earner EXEMPT

20. A) PCSO and Phil. lotto winnings are excluded from gross income because they are subject to final tax FALSE
B) Prizes, awards and winnings are excluded from gross income because they are subject to final tax FALSE
a. Both are true b. Both are false c. Only the first is true d. Only the second is true
21. Which of the following is taxable?
a. P100,000 interest on long-term deposit or investment c. P12,000 prize in a supermarket 20%
raffle EXEMPT
b. P200,000 gain on sale of 10-year bonds EXEMPT d. P1M winnings from Phil. lotto 20%
22. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of
indebtedness is excluded from income if with a maturity of 5 YEARS
a. P20,000 b. More than 7 years c. More than 8 years d. More than 10 years
23. Gross benefits received by officials and employees of public and private entities as thirteenth month
pay and other benefits such as productivity bonus, service incentive pay and Christmas bonus shall be
excluded from taxable income up to 90 000 because of TRAIN LAW
a. P20,000 b. P82,000 c. P40,000 d. P50,000
24. Advance rental in the nature of prepaid rental, received by the lessor under a claim or right and without
restriction as to use is -
record agad
a. Taxable income of the lessor in the year received if he is on the cash method of accounting
b. Taxable income of the lessor in the year received if he is on the accrual method of accounting
c. Taxable income of the lessor in the year received whether he is on the cash or accrual method
of accounting
d. Taxable income of the lessor up to the amount earned in the year the rental is received
25. Which payments made by the lessee under such terms of the lease contract should be considered as
additional rent income of the lessor?
A. If the lessee paid directly to the government a real estate tax on the property of the lessor
I Q
B. If the amount received by the lessor is in the nature of a security deposit for the faithful
compliance by the lessee of the terms of the contract
X C. If the amount received by the lessor is in the nature of a loan extended by the lessee to the
lessor.
a. Only A b. Only A and C c. Only B and C d. A, B, and C
26. Should the lessee make permanent improvements on the property leased under an agreement that
upon the expiration of the lease contract the improvements shall belong to the lessor, the lessor may
recognize income from the leasehold improvements
A. At the time when such improvements are completed the fair market value of such improvements

/etd
 B. By spreading over the remaining term of the lease the estimated depreciated value of such
improvements at the termination of the lease and report as income for each year of the lease an
aliquot part thereof

a. A but not B is allowed c. Either A or B is allowed

b. B but not A is allowed d. Neither A nor B is allowed
27. After 10 years of romantic relationship, A decided to end his relationship with B which made B very
angry, B with anger in her eyes boxed, kicked and berated A. A tried to pacify B, but B slipped, lost
control and fell to the ground requiring hospitalization. To buy peace, A decided to shoulder the medical
expenses for the injuries suffered by B. The amount is
a. Taxable income B c. Subject to final tax
b. Deductible expense of A d. Exempt from income tax
28. In 2014, A inherited pieces of jewelry from her father with a FMV of P500,000. Her father acquired the
property in 1975 for P200,000. If A sells these pieces of jewelry in 2014 for P550,000, A’s gross profit is
a. P350,000 b. P50,000 c.P550,000 d. P300,000 SP 550K
=
-
FMV 500K

29. Using the preceding no., except that A acquired the property as a birthday gift from her father, A’s gross
profit is
5. P= 500k
-

200K
a. P350,000 b. P50,000 c.P550,000 d. P300,000
30. One of the following may be a taxable income for a resident individual:
a. Property received as gifts c. Interest on Philippine lotto winnings
b. Cash received as inheritance d. Benefits from the SSS and/or GSIS
with Tax Benefit
31. One of the following represents taxable income: ✓
deduct sales and Tax o
-

a. Refund of overpaid rental expense in the prior year c. Refund of income tax in prior year
b. Refund of donor’s tax paid in prior year d. Refund of special assessment
paid in prior year
32. Cash allowance of P125 per month given to Central Bank employees to cover the medical expenses of
their dependents shall be
a. Included as part of gross compensation income
b. Excluded from gross compensation income
c. Partly included, partly excluded from gross compensation income
d. Subject to final tax
33. At the testimonial dinner for new CPAs, C, a reviewer was requested to sing the theme song of the
movie “Ghost”. A was so delighted that she feels she is falling in love with C so she decided to cancel
C’s indebtedness to her. As a result,
a. C realized a taxable income as compensation for services 't na CONSIDERATION
b. If c accepts the cancellation, he will pay donor’s tax Walang Kapala
→so not taxable
c. C received a gift from A and therefore not part of his taxable income
d. The amount of indebtedness cancelled is partly taxable, partly exempt.
34. A was adjudged the best boxer in the recently concluded Asian games. In recognition of his splendid
performance, he was awarded a trophy and a cash price of P1M. As a result,
a. The value of the trophy and the cash prize are part of his taxable income
b. Only the value of trophy is taxable
c. Only the cash prize is taxable
d. Both are exempt from income tax
35. A purchased a life annuity for P1,000,00 which will pay him P100,000 a year. The life expectancy of A
Return of is 12 years. Which of the following will A be able to exclude from his income?
premium d- a. P1,000,000 b. P1,200,00 c. P200,000 d. P100,000
36. If an individual performs services for a creditor who in consideration thereof cancels the debt, the
cancellation of indebtedness may amount to
a. A gift b. A donation inter-vivos c. A capital contribution d. A payment of
income
37. A transferred his commercial land with a cost of P600,000 and with a FMV of P900,000 to ABC Corp. in
exchange of the stock of the corporation with par value of P800,000. As a result of the transfer A
gained control of the corporation. As a result
a. The gain is the difference between the par value of the shares of stocks and the cost of the land
b. The loss is the difference between the FMV of the land and the par value of the stocks
c. No gain because the land was in exchange of purely shares of stock and A became the majority
stockholder
d. No loss because the par value of the shares is greater than the cost of the land
38. This is not part of gross compensation income
a. Salary of P10,000 a month of an employee
b. Fringe benefits of P10,000 a month
c. Salary of P10,000 a month of a partner in a general professional partnership
d. Honorarium and allowances of P10,000 of a member of the board of directors of a corporation
39. Mr. A, a farmer, had the following data for the year:
Sales of livestock and farm products raised P270,000
/etd Inflow : Sales ( 270K 3160K) 430000=

Outflow : cost ( 190K 3 140k ) -4330000 )

Rental Income = 105000
CASH METHOD 205 000
 ACCRUAL
Sales of livestock and farm products raised 160,000 sales 430 000

Cost of raising livestock and farm products 190,000 COGS :

110000
Cost of livestock and farm products purchased and sold 140,000 Beg
330000
1- Porch
Rental income of farm equipment 105,000 End ( 1130007
Inventory of livestock and farm products, January 1 110,000 LESS : COGS ( 327000 )

Inventory of livestock and farm products, December31 113,000 103 000

Add : Rent Income 705000
A. Using cash method of accounting, the income is:

-028,01M
ACCRUAL
a. P205,000 b. P208,000 c. P395,000 d. P202,000
B. Using accrual method of accounting, the income is:
a. P205,000 b. P208,000 c.P395,000 d.P202,000
40. Give the income tax due (refund) for the taxable year:

a. A, a resident alien, single, had the following during the year:

1. Salaries (net of payroll deduction), P200,000
2. Allowances, P25,000
3. 13th month pay, P26,000
4. Christmas cash gift P10,000
5. 14th month pay, P26,000
6. Payroll deductions
a. Withholding tax on salary, P16,000
b. Contributions for SSS, PHIC, PAG-IBIG, and labor union dues, P16,000
c. Advances / Loans, P30,000
7. Prem. on health and hospitalization ins., P2,750
8. Bank interest income, net of 20% w/tax, P1,400
b. A, resident citizen, single had the following during the year
Gross compensation income P480,000
Deductions from compensation income:
SSS contributions P3,600
Pag-ibig Contributions 1,200
Philhealth Contributions 1,800
Union dues 2,400
Premium payments on health insurance (P250/month) 3,000
Other income
Prizes and awards received as best athlete in the Palarong Pambansa 10,000
Prizes and awards received for the silver medal in the South East Asian games 25,000
Prize won in a Supermarket raffle 10,000
Prize won as a Lucky Home Viewer 20,000
13th month pay 40,000
Christmas cash gift 10,000
Mid year bonus 40,000
Interest on bank deposit (net of 20% wt) 16,000
Interest on foreign currency deposit (net of 7.5% wt) 10,000

c. D, is a resident citizen, married, with 2 qualified dependent children, had the following:
Professional fees P400,000
Gross income from rental of conjugal properties 600,000
Expenses connected with profession 180,000
Expenses connected with rental of properties 200,000
Tax withheld on professional fees 40,000
Tax withheld on rental of properties 30,000

d. D, married with 4 qualified dependent children, had the following:

Compensation income, (net of P19,000
SSS, Philhealth and Pag-ibig Contributions & Php 80,000 cwt) P400,000
13th month pay 42,000
Productivity bonus 42,000
Premium payments on health insurance 2,400
Personal, family and living expenses 200,000

41. A leased her lot as follows Leasehold Improvement

19 ! E' ytrs
Lessee X 5.5
125 yrs = yrs
Agreed annual rental P200,00 70M X 5.5=2200000 LESSOR

Start of lease Jan I 2014 1-1-14 112821 a Year

2.2mg 19.5 yrs =

Rentals received by the lessor since

(112821×412)
Leasehold Income JULY
START
on 1-1-14 (3 years rent) 600,000 2014=56411
-2015 112 821
Security deposit 200,000
=

TOTAL INCOME RENT INCOME

4/1
2014=56411 t 600000=656 2014 = 600 000
/etd 1. A.) NONE since fully
recognized
Leasehold Improvement Expense 2015=112821 2015 =
since 2014
I
→
By 20/4 2015 since
600000
512 821
256411 -

000T 3 yrs

Rffxhptense
200000 200
456411 7127821
 112 821
Total Income
3) 13.5 yrs
x

LHI 225633 security I 523 084 LOSS

t 200000 Deposit Improvements introduced by the lessee (will ( 50 ooo ) salvage Value
425 633 belong to the lessor upon expiration/termination) 10M 7,473,084 Expense
Estimated useful life of improvements 25 years
2. B) 512821 Date of completion of improvements 7-1-14
X 17.5 yrs Term of lease 20 years
8974368
) )
Determine the:
1.
10M
-
8974368
a) Income to be reported by the lessor in 2014 and 2015 assuming he will spread his
income on the improvement over the term of the lease.
I 025 632
security
f- 200 000 Deposit
b) Deductible expense of lessee X. in 2014 and 2015 10M 119.5 yrs 512 821 a year =

2. Suppose the lease was terminated thru the fault of the lessee at the start of the 19 th year;
1225632 Total Expense
determine the: all unrecognized income will be recognized 112.81 2. A ) 2.2M
X 17.5 yrs 1,974,368
a) Income to be reported by the lessor on the improvements
-

1 974 368 -225633

b) Deductible expense of lessee X. , ,
leaseholdIncome
Improvement
3. Suppose the improvements were destroyed by fire on January 1 of the 15 th year of the
lease, determine the deductible loss of the lessor on the improvements, if:
Salvage value d
50,000
All income -0 Expense to become loss

42. RA 9505, otherwise known as PERA Act of 2008, is

a. Personal equity and retirement account c. personal exemption and retirement
account
b. Personal exemption and the reciprocity action d. personal equity and the reciprocity action

43. The following income received by officials and employees in the public sector are not subject to income
tax and withholding tax on compensation, except
a. 13th month pay and other benefits exceeding P82,000 paid or accrued during the year
b. Representation and transportation allowance (RATA) granted under the General Appropriations
Act
c. Personnel Economic Relief Allowance (PERA) granted to government personnel
d. Monetized value of leave credits paid to government officials and employees

44. A holds 1000 common shares of ABC, a domestic Corp. acquired at P110 per share. Later, he received
a 10% stock dividend in common shares and thereafter sold directly to buyer 500 shares at P120 per
share. 1000×110=770000
Determine the gain (loss) assuming the shares are ordinary assets Stock Div x 1.10
Price 120×500=60000
Selling 1 700 Shares
Less : cost 100×500 ( 50007
=

GAIN -10000
170000/1100=100 Afnoosutnt per Share

Di -Winston Churchill

Tax Handout: CPA Review School of Accountancy

/etd