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University of Makati

Business and Income Taxation

MULTIPLE CHOICE QUESTIONS

1. A kind of tax where rates increases as the tax base increases


a. Degressive b. Proportionate c. Regressive d. Progressive
2. One of the following is not a direct tax
a. Immigration tax b. transfer tax c. income tax d. value added tax
3. Individuals who are foreigners but are employees under a special contract of employment from a business
organization established in the Philippines such as an offshore banking unit are called
a. Resident citizens
b. Special alien employees
c. Resident aliens
d. Non-resident aliens
4. One of the following is a non-resident alien
a. A citizen who comes to the Philippines for a definite purpose which in its nature maybe promptly
accomplished
b. An alien who comes to the Philippines for a definite purpose which in its nature maybe promptly
accomplished
c. An alien who has acquired residence in the Philippines
d. An alien who lives in the Philippines with no definite intention to his stay
5. Who is classified as a resident citizen?
a. A Filipino whose residence is in the Philippines
b. A Filipino whose residence is in a foreign country
c. A foreigner who is residing in the Philippines
d. None of the above
6. Winnings or prizes earned from the Philippine Charity Sweepstakes (under NIRC) is classified as
a. Subject to final income tax
b. Subject to basic income tax
c. Exempt from income tax
d. Not an income
7. Winnings or prizes earned from the Philippine Charity Sweepstakes (under TRAIN) is classified as
a. Subject to final income tax
b. Subject to basic income tax
c. Exempt from income tax
d. Not an income
8. An individual got married but was legally separated, after two years from her spouse. Currently she lives
in a house, co-habiting with her boyfriend, living together as common law husband and wife. For income
tax purposes, her civil status is
a. Head of family
b. Married
c. Single
d. No answer
9. A fundamental law in taxation that prohibits a country from imposing taxes on the properties of a foreign
government/country
a. International law
b. Reciprocity
c. International inhibition

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d. International comity
10. Taxation as distinguished from police power and power of eminent domain.
a. Property is taken to promote the general welfare.
b. Maybe exercised only by the government.
c. Operates upon the whole citizenry.
d. There is generally no limit as to the amount that may be imposed.
11. Which is an exemption allowed to a taxpayer for having a legitimate child as dependent?
a. Additional Personal Exemption
b. Special Addition Exemption
c. Optional Standard Deduction
d. Basic Personal Exemption
12. An exemption provided by the law to take care of the personal, living and family expenses of the taxpayer
and the amount of which is determined by the civil status of said tax payer is
a. Additional Personal Exemption
b. Special Addition Exemption
c. Optional Standard Deduction
d. Basic Personal Exemption
13. For income tax purposes, who of the following can claim addition personal exemption?
a. Married but legally separated individual with a dependent mother and brother
b. Single individual with a nephew dependent
c. Married individual who has a dependent minor child
d. Married individual even if he has no children
14. Which of the following items of income is taxable at basic income tax?
a. Interest income received by a non-resident citizen from a depository bank under the expanded
foreign currency deposit system
b. Share in Net income of a general professional partnership
c. Winnings from the Philippine charity sweepstakes
d. Dividends income received by an individual from a domestic corporation
15. Which of the following can be claimed as tax credit against the Philippine income tax due in the case of a
resident citizen?
a. National income tax to a foreign country
b. Excess profit tax of a foreign country
c. War profit tax to a foreign country
d. All of the above
16. 1st statement: if a taxpayer is qualified to claim a tax credit for a foreign income tax, he may elect to claim
it as a deduction from the gross income.
2nd statement: the word “Foreign Income Tax” for which tax credit maybe claimed means national income
tax proper only, and shall exclude any interest, surcharge or any other penalty thereon.
a. 1st statement is true; 2nd statement is false
b. 1st statement is false; 2nd statement is true
c. Both statements are correct
d. Bothe statements are wrong
17. Income tax payment to a foreign country, in the case of a resident citizen maybe claimed as a:
a. Deductions from gross income only
b. Tax credits from income tax due only
c. Both deductions from gross income and tax credits at the same time
d. Either deductions from gross income or tax credit from income tax due
18. Which of the following is entitled to claim as tax credit for any foreign income tax payment?
a. A national of Hong Kong, who is a resident in the Philippines

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b. A citizen of Australia, who is residing therein
c. A resident of the Philippines and is a Filipino
d. No answer given
19. Which of the following is not claimable as tax credit by a resident alien?
a. Withholding tax at source
b. Excess tax credit in prior year
c. Income tax abroad
d. No answer given
20. It is the privilege of not being imposed a financial obligation to which others are subject.
a. Tax incentive
b. Tax exemption
c. Tax amnesty
d. Tax credit
21. The use of illegal or fraudulent means to avoid or defeat the payment of tax.
a. Exemption
b. Shifting
c. Avoidance
d. Evasion
22. Which of the following may not raise money for the government?
a. Power of taxation
b. Police Power
c. Eminent Domain
d. License Fee
23. Income tax payments in foreign countries in the case of a Filipino who is a resident of a foreign country
maybe claimed as
a. Deductions from income tax due
b. Deductions from gross income
c. Deductions from gross income and income tax due at the same time
d. None of the above
24. 1st statement: Itemized deductions should be duly documented by vouchers or receipts.
2nd statement: Only business expenses may be deducted from the gross income of individuals.
a. Both correct b. both wrong c. correct, wrong d. wrong, correct
25. The Optional Standard Deduction in 2009 is equal to what percent of the applicable base?
a. 10% b. 5% c. 40% d. 15%
26. In income taxation, the term “corporation” includes the following, except
a. Ordinary partnership
b. Joint venture
c. Consortium
d. General professional partnership
27. Which of the following is not subject to the corporate income tax?
a. Proprietary educational institution
b. Public education institution
c. Private cemeteries
d. No answer given
28. A corporation organized and created under the laws of a foreign country and is authorized to do
business/trade in the Philippines is
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation

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d. No answer given
29. One of the general principle of income taxation:
a. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within and without the Philippines
b. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within the Philippines only
c. A domestic corporation is taxable on income derived from sources in the Philippines only
d. No answer given
30. Which of the following is classified as special corporation subject to preferential corporate income tax
rates:
a. Regional Operating Headquarters of Multinational Corporation
b. Domestic Mutual Life Insurance Company
c. Resident Mutual Life Insurance Company
d. No answer given
31. A company which may be classified as a resident corporation or a non-resident corporation is:
a. Domestic corporation c. Foreign corporation
b. Government owned corporation d. no answer given
32. The Philippine Health Insurance Corporation, a government owned corporation is:
a. Exempt from the corporate income tax
b. Subject to the preferential corporate income tax for special corporations
c. Subject to the basic corporate income tax
d. No answer given
33. Which is not correct? The following are exempt from the corporate income tax:
a. Bureau of Internal Revenue
b. Philippine Health Insurance Corporation
c. Proprietary Education Institution
d. Social Security System
34. Statement 1- The point on which tax is originally imposed is impact of taxation.
Statement 2- Eminent domain is inferior to non-impairment clause of the constitution.
Statement 3- As a rule, taxes are subject to set-off or compensation.
Statement 4- As a rule, provisions on the validity of tax exemptions are resolved liberally in favor of the
taxpayer.

Statement 1 Statement 2 Statement 3 Statement 4


a. True False False True
b. False True True False
c. True True False False
d. False False True True
35. A tax must be imposed for public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
c. Improvement of the sugar and coconut industries
d. Improvement of a subdivision road

PROBLEM SOLVING

A resident citizen, single with qualified dependent illegitimate children had the following during the
calendar year.

Gross compensation income P550,000

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Expenses related to his employment P250,000
SSS premium contributions P5,600
Philhealth contribution P3,400
Pag-ibig contribution P1,850
Union dues P3,200

36. The taxable income before basic and additional personal exemption is
a. P535,950
b. P285,950
c. P289,150
d. P539,150
37. The income tax due in NIRC is
a. P114,245
b. P120,785
c. P113,285
d. P40,238
38. The income tax due in TRAIN is
a. P63,988
b. P7,190
c. P45,238
d. P51,488

Z, married, had the following data for the taxable year:


Gross income, Philippines P800,000
Gross income, China P220,000
Gross income, Netherlands P425,000
Expenses, Philippines P300,000
Expenses, China P125,000
Expenses, Netherlands P250,000

39. If the taxpayer is a resident citizen, married, his taxable income is


a. P770,000
b. P500,000
c. P450,000
d. P720,000
40. If the taxpayer is a resident citizen, married, his income tax due in NIRC is
a. P195,000
b. P211,000
c. P110,000
d. P125,000
41. If the taxpayer is a non-resident citizen, single, his taxable income is
a. P770,000
b. P500,000
c. P450,000
d. P720,000
42. If the taxpayer is a non-resident citizen, married, his income tax due in TRAIN is
a. P110,000
b. P123,000
c. P43,000

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d. P55,000

CMM Corporation has disclosed the following data for the year 2018:
Gross income, Philippines P5,000,000
Business expenses, Philippines P2,000,000
Gross income, Thailand P1,500,000
Business expenses, Thailand P750,000
Gross income, Ireland P3,200,000
Business expenses, Ireland P1,600,000

43. What is the corporate income tax due if CMM is a domestic corporation?
a. 1,605,000
b. 900,000
c. 1,125,000
d. 705,000
44. What is the corporate income tax if CMM is a resident foreign corporation?
a. 1,605,000
b. 900,000
c. 1,125,000
d. 705,000
45. What is the corporate income tax if CMM is non-resident foreign corporation?
a. 2,910,000
b. 900,000
c. 1,605,000
d. 1,500,000

McJollibee University, a proprietary educational institution, has the following information for the year
2018:

Income from the tuition fee of the students P1,800,000


Income from the rent of the tenants P350,000
Income from the selling of books, and other supplies P290,000
University expenses P750,000

46. What is the corporate income tax due of McJollibee University?


a. 0
b. 315,000
c. 169,000
d. 507,000
47. What is the corporate income tax due of McJollibee University if the income from rent of the tenants is
P2,150,000?
a. 1,047,000
b. 1,272,000
c. 349,000
d. 215,000

Portgas D. Ace, 35 years old, died from the battle. His estate shows the following:
Gross Estate P6,500,000

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Taxes, Losses, Other expenses P1,250,000

48. How much is the estate tax due of Portgas D. Ace?


a. 681,000
b. 547,200
c. 300,000
d. 155,250

The following are the information of the donation made by Luffy to the following persons:

Nico Robin P680,000


Nami P350,000
Roronoa Zoro P220 ,000
Vinsmoke Sanji P190,000
Usopp P89,000
Tony Tony Chopper P100
Franky 100,900
Brook P68,000
Jimbei P460,000

49. How much is the donor’s tax to be paid by Luffy if all of them are his friends?
a. 136,640
b. 155,400
c. 647,400
d. 548,400
50. How much is the donor’s tax due to be paid by Luffy if all of them are his brothers and sisters?
a. 136,640
b. 155,400
c. 647,400
d. 548,400

“I would prefer even to fail with honor than to win by cheating.”


-Sophocles

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