Department of Accountancy and Taxation

COLLEGE OF ARTS AND SCIENCES

San Beda University
Manila

MIDTERM DEPARTMENTAL EXAMINATION

SUBJECT CODE/ TITLE: TXINCOME-Philippine Tax System

NAME: ___________________________________ Section: _________ Score/Rating : ________________

REGULAR CLASS SCHEDULE: ________________

Instructions:

1. WRITE IN CAPITAL LETTERS the letter of your choice on a separate answer sheet
(any paper will do). ERASURES ARE STRICTLY NOT ALLOWED.
2. Show your solutions on the problem solving type questions
3. After taking the exam, take a picture of your answer sheet using the CamScanner.
4. Submit the CamScanner File in the red canvas designated as
“SURNAME_SECTION_MIDTERM EXAM”; and
5. Submit the photo of your answer sheet in my Messenger Account – “Paul Vincent
Casilla”.
6. Instructions not followed shall devoid your Midterm Exam.

1. Which of the following defines the country's tax policy?

a. Philippine Constitution c. In Pari Materia Principle
b. National Internal Revenue Law d. Tax Transformation

2. Which of the following statements is/are correct?

i. Taxation is a process.
ii. Enactment of Tax Laws is part of the taxation process.
iii. The Constitution expressly conferred the power of Taxation to the President of the
Philippines.
iv. Taxation requires voluntary contribution from inhabitants to support the government.
Choices: a. i, ii, iii and iv. b. i, ii and iii only c. i and ii only d. i only

3. Which of the following is/are elements of impact of taxation?

i. Levy ii. Assessment iii. Collection
Choices: a. i, ii and iii b. i and ii only. c. ii and iii only. d. iii only.

4. The statement that “he who received more should give more" is based on this basic tax
principle.
a. Fiscal adequacy c. Administrative feasibility
b. Theoretical justice d. Due process of law

5. Statement 1: The aspects of taxation are shared by the legislative and executive branches of
the government
Statement 2: Levying, imposition, and collection of taxes are legislative in character
a. Both statements are true
b. Both statements are false
c. Statement 1 is true, but statement 2 is false
d. Statement 1 is false but statement 2 is true

6. Statement 1: A taxpayer may validly

question a Tax Law which benefits only a

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particular industry or economic activity, a. Both statements are true
and which does not directly benefit such b. Both statements are false
taxpayer. c. Only Statement 1 is true
Statement 2: The error of any d. Only Statement 2 is true
government employee in the
enforcement of taxes binds the 8. Which of the following correctly
government and may be allowed to describes the primary purpose of taxation?
impede or estop government’s right to
collect the correct taxes. Fiscal Regulatory
a. Both statements are true
b. Both statements are false purpose purpose
c. Only Statement 1 is true a. To raise revenue
d. Only Statement 2 is true Yes Yes
b. To check inflation
7. Statement 1: In case of vague statues Yes No
levying taxes, these are to be construed c. To discourage consumption of
strictly against the government and harmful products
liberally in favor of the subject or citizens No No
to which they are imposed. d. To limit influx of foreign products
Statement 2: Without violating the law, No Yes
Tax Shifting is a form of escape that can
be legally resorted to by the taxpayer a. Minimum wage
without causing the government loss of b. De minimis benefits
revenue.

9. Which of the following is income to the recipient?

a. Stock option c. Pre-emptive stock right
b. Stock dividend d. Stock warrant

10. The following are the gross royalty income of a resident citizen for the period:
Royalty income as author P100,000
Royalty income from franchising 200,000
Royalty income from gold mine 500,000

The total final tax on royalty income is

a. P 80,000 c. P130,000
b. P 100,000 d. P150,000

11. The following are the income of a resident citizen for the period:
Interest income from an investment in a 10-year bond P40,000
Interest income from 5-year time deposit in Philippine bank 50,000
Interest income from expanded foreign currency deposit 60,000
His taxable interest income is
a. P110,000 c. P40,000 e. none of the above
b. P100,000 d. P 0

12. An American citizen has been staying in the Philippines since August 15, 2021. What
would be his classification for the year 2021 and 2022, respectively?
a. Non-resident alien not engaged in trade or business; resident alien
b. Non-resident alien engaged in trade or business; resident alien
c. Non-resident alien not engaged in trade or business; resident citizen
d. Non-resident alien engaged in trade or business; resident citizen

THAT IN ALL THINGS, GOD MAY BE GLORIFIED

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13. A citizen who left the Philippines on March 1, 2017 would be classified as (select the best
answer)
a. Resident citizen for the year 2017.
b. Non-resident for the year 2018.
c. Non-resident for the year 2017.
d. Resident citizen for the year 2018.

14. Which of the following statements is NOT correct?

a. The government automatically possesses the power to collect taxes from its
inhabitants
b. The local government unit can enforce contribution upon its citizen only when the
Constitution or any delegated law grants it
c. The national government can enforce contribution upon its citizen only when the
Constitution or any delegated law grants it
d. The State has the supreme power to command and enforce contribution from the
people within its jurisdiction.

15. Statement 1: The taxes collected by the national government may be used and appropriated
by the local government unit
Statement 2: The taxes collected by the local government unit may be used and
appropriated by the national government
a. Both statements are true
b. Both statements are false
c. Only Statement 1 is true
d. Only Statement 2 is true

16. If there is showing that expenses have been incurred but the exact amount thereof cannot
be ascertained due to absence of documentary evidence, it is the duty of the BIR to make an
estimate of deduction that may be allowable in computing the taxpayer’s taxable income,
which estimate may be based on 50% of the taxpayer’s claimed deduction. This is called
a. Cohan Rule c. Cojan Rule
b. Johan Rule d. Trojan Rule

17. Which of the following income is NOT subject to final tax if received by an individual
taxpayer?
I. Share of a partner in the net income of a general professional partnership
II. Cash dividend received by a stockholder from a domestic corporation
III. Winnings in PCSO lotto amounting to P10,000
IV. Prizes amounting to P10,000
a. I and II c. I, II and IV
b. I and IV d. I, II, III, IV

18. Orlando F. Waya is a Filipino non-resident who returned to the Philippines on 31 August
2022 to live permanently in the country. From January 1 to August 31, he had the following
income: From within the Philippines: P100,000; and From Outside the Philippines: P300,000.
He also earned the following from September 1 to December 31, 2022: From within the
Philippines: P150,000; and From Outside the Philippines: P400,000
The total income of Mr. Waya subject to tax for 2022 is:
a. P950,000
b. P650,000
c. P550,000

THAT IN ALL THINGS, GOD MAY BE GLORIFIED

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d. P250,000

19. Pacito Despacito, a resident alien had the following in 2021:

Gross Income, Philippines P 2,000,000.00
Business connected expenses 1,200,000.00
Dividends received:
From domestic corporation (net):
60% of its income came from Philippine source 90,000.00
40% of its income came from Philippine source 72,000.00
From resident foreign corporation (gross):
60% of its income came from Philippine source 50,000.00
40% of its income came from Philippine source 40,000.00
How much is Pacito’s net taxable income?
a. P750,000
b. P780,000
c. P796,000
d. P830,000

20. Jennica Ong, a resident citizen of the Philippines had the following income items:
Interest on Philippine peso savings deposit in Allied Bank -------------- P10,000
Interest on Philippine peso time deposit with maturity of 5 years ------ 30,000
Interest on US dollar deposit PCI-Equitable Bank
(under the expanded foreign currency deposit system) ------------- 5,000
Royalty from book copyrighted in the Philippines ------------------------ 15,000
Dividend from a domestic corp. ---------------------------------------------- 20,000
The total final tax withheld at source is:
a. P11,875 d.P7,375
b. P5,875 e. 12,725
c. P6,250

21. For Philippine income tax computation, which of the following individual is taxable also
for income earned outside the Philippines?
a. Nonresident alien c. Resident alien
b. Nonresident citizen d. Resident citizen

22. All of the following taxes are classified as income taxes, except
a. 20% royalty tax
b. 10% dividend tax
c. 6/10 of 1% tax on the selling price of shares of stock traded-in the local stock exchange
d. 6% capital gains tax on sale of land

23. The sale of non-listed shares from a foreign corporation may be subjected to
a. 6% capital gains tax only. c. 5%-10% capital gains tax only.
b. 15% capital gains tax only. d. Normal Tax

24. Which is not subject to 10% final tax?

a. Royalties from literary works
b. Dividends from a domestic corporation
c. Share in the net income of a business partnership
d. Royalties from a business trademark

25. Prizes from which of the following is taxable?

a. Sports competitions sanctioned by the national sports organization
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b. Nobel prize
c. Prize from dance competition abroad
d. Any prizes received without effort

26. Jay Pumba won P800,000 prize in a national dancing competition. The organizer of the
event declared that the P800,000 grand prize is "tax free". How much final tax must be remitted
by the organizer to the BIR?
a. P 200,000 c. P88,889
b. P 160,000 d. P 0
27. A concerned government employee furnished the BIR a statement detailing the improper
tax practices of a corporate taxpayer. The information was instrumental to the collection of
P500,000 tax. How much informer's tax reward after tax shall be provided to the informant?
a. P50,000 c. P40,000
b. P45,000 d. P 0
28. Concerned with increasing unemployment rates in the country, the President of the
Philippines encouraged the Philippine senate to pass a law granting special tax privileges to
foreign investors who will establish businesses in the country. The senate accordingly drafted
the bill and passed to congress for approval.
Is this valid exercise of taxation power?
a. Yes. It is the discretion of the President to adopt any measures he deemed necessary to
alleviate the condition of the country
b. Yes. Any means beneficial to the public interest should be given optimum priority
c. Yes. The president’s proposal will have to be finally approved and passed by the
legislature. The rule on non-delegation of taxation would not be violated.
d. No. Tax bills shall originate from the house of representative

For Nos. 29-31:

PP & Co., a partnership engaged in the practice of accounting, had a gross income of 220,000
and expenses of 85,000 during the year 2022:
Ping Pong
Share in P/L ration 75% 25%
Income from other business 125,000 325,000
Expenses 80,000 190,000
Status Married Unmarried
Dependent children none 2

29. What is the income tax payable of the partnership?

a. Zero c.75,000
b. 40,500 d. 47,250
30. What is the taxable income of Ping and Pong?
a. P96,250; P68,750 c. P146,250; P118,750
b. P146,250; P168,750 d. P96,250; P168,750

31. How much is the income tax payable/(refundable) of Ping and Pong?
a. P18,100; P28,700 c. (P10,125): (P3,375)
b. 0;0 d. P29,250;P P33,750

THAT IN ALL THINGS, GOD MAY BE GLORIFIED

TAX01-Philippine Tax System 2nd Semester, AY2021-2022
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PART II: PROBLEM SOLVING

INSTRUCTION: SOLVE EACH PROBLEM AND SHOW YOUR SOLUTION. DOUBLE RULE
YOUR FINAL ANSWER. NO SOLUTION, NO CREDIT. USE A SEPARATE SHEET OF
PAPER TO SOLVE THESE PROBLEMS.

Will I Am, a resident citizen, has the following income for the year 2022:
Gross income from business of selling cocks (net of Cost of Sale: 200,000)..... P1,800,000
Gross income from business of cocktails (net of Cost of Sale: 100,000)...... 800,000
Property Dividend from resident corporation...................................................... 50,000
Cash Dividend from domestic corporation...................................................... 10,000
Interest income on accounts receivable……… ……………………….......................... 15,000
Yield from Deposit Substitute ..................................................................... 25,000
Interest income from trust funds ……………………….......................................... 1,000,000
Interest income from investment management accounts ………………………..... 1,750,000
Sale of common shares held as capital asset from Innove, Inc, listed and traded thru Philippine Stock
exchange:
Fair Market Value P 1,000,000
Selling Price 500,000
Acquisition Cost 200,000
Sale of common shares held as capital asset from UNION, Inc, listed and traded thru Philippine
Stock exchange:
Fair Market Value P 2,000,000
Selling Price 1,000,000
Acquisition Cost 200,000
Sale of real property not used in trade or business located in Imus, Cavite:
Assessed Value P 5,000,000
Zonal Value 6,000,000
Selling Price 4,000,000
Acquisition Cost 7,000,000
Sale of real property not used in trade or business located in Uganda:
Assessed Value P 500,000
Zonal Value 600,000
Selling Price 400,000
Acquisition Cost 350,000
Interest under Expanded Foreign Currency Deposit System 500,000
Won 1st prize: Land Cruiser, in a PCSO raffle draw worth 3,000,000
Won a prize from Barangay Pico League 11,000
Won a prize from Jueteng 10,000
Interest from P1,000,000 individual trust funds
(Term: 5 years)......................................................................... 100,000
Royalties from cinematographic films………......................... 50,000
Interest from P3,000,000 investment management accounts
(Term: 5 years) After one year and one month, he pre-
terminated the investment account..................... 200,000
Business expenses from cock business................................... 720,000
Business expenses from cocktail business................................... 900,000
An amount paid out for betterments made to increase
the value of the land.................................................................... 80,000
Amount paid in restoring the real property located in
Imus, Cavite ............................................................................ 120,000

1. Assuming Will I Am signified in his first quarter return his intention to avail of the 8% preferential tax
rate, how much is his income tax due for the year 2022?
2. Assuming Will I Am is also employed in Shell Pilipinas Inc. earning a total compensation income per
annum of P250,000, how much is his total income tax due?

THAT IN ALL THINGS, GOD MAY BE GLORIFIED

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3. Assuming Will I Am, a mixed income earner where he also earned a total compensation income of
P2,500,000, net of exclusions, signified in his first quarter return his intention to avail of the OSD, how
much is his income tax due?
4. Using all the facts above, however, Will I Am, who earned purely from his businesses of cock and
cocktail a total gross sales of P2,600,000 and P3,300,000, respectively, and incurred cost of sales for each
of P400,000 and P 900,000 for 2019, respectively, signified in his first quarter return his intention to avail
of the 8% preferential tax rate, how much is his total income tax due?

THAT IN ALL THINGS, GOD MAY BE GLORIFIED