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FALLARCUNA, ERIKCA MAE Y.

BSA 2-2
FERMIN, ALYSSA MAE G.

CHAPTER 9 – REGULAR INCOME TAX: INCLUSION IN GROSS INCOME


TRUE OR FALSE 1
1. Items of gross income subject to regular income tax and capital gains
tax are reportable to the government.
2. Rent is a passive income, but is not subject to final tax.
3. The interest income from bonds issued by banks is subject to final
tax.
4. Gains from dealings in capital assets are generally subject to the
regular income tax.
5. The gross income from operations enjoying a tax holiday are included
in gross income subject to regular tax, but are presented as deductions
in the income tax return.
6. The share in a business partnership is subject to final tax, but the
share in a general professional partnership is subject to regular
income tax.
7. Gains from dealings in ordinary assets are subject to regular income
tax.
8. Items of passive royalty income are subject to final income tax while
items of active royalty income are subject to regular income tax.
9. Compensation income is an inclusion in gross income subject to regular
tax except compensation income of special aliens.
10. The reportable gross income from business or the exercise of a
profession is net of the cost of goods sold or cost of services.
11. Items of income which are included in gross income subject to final
tax are excluded in gross income subject to regular income tax.
12. Imputed interest income is an item of gross income subject to regular
income tax.
13. Advanced rentals are income in the year received.
14. Real property tax and insurance on the property if assumed by the
lessee constitute income tax to the lessor.
15. Corporate winnings are exclusion in gross income; hence they are
exempt from income tax.
16. Stock dividends are never subject to income tax.
17. Pensions or retirement benefits are inclusions in gross income subject
to regular income tax if the employee is terminated due to any cause
within his control.
18. Prizes in athletic competitions sanctioned by the Philippine
government are exclusions in gross income subject to final tax, but
are inclusions in gross income subject to regular income tax.
19. Corporate prizes are exclusions in gross income subject to final tax
but are inclusions in gross income subject to regular income tax.
20. Stock splits are never subject to income tax.
TRUE OR FALSE 2
1. The distributable net income of a general professional partnership is
subject to creditable withholding tax.
2. Exempt joint ventures and co-ownerships are treated as pass-through
entities and are subject to income tax.
3. The distribution by the GPP of items of passive income is an inclusion
in gross income of the partner subject to regular income tax.
4. General professional partnerships are exempt from tax and hence,
exempt from withholding.
5. The share from the net income of a joint venture organized abroad is
subject to 10% final withholding tax.
6. Income distribution from taxable estates and trusts is an inclusion
in gross income subject to regular tax by the heir or beneficiary.
7. The recovery of past deduction must be reverted back to gross income
of taxpayers using the cash basis.
8. The recovery of bad debts need not be reverted back to gross income
of taxpayers using cash basis.
9. The recovery of deduction from an exempt year is subject to tax.
10. General professional partnerships are not exempt from regular tax but
are subject to final tax and capital gains tax.
11. An indebtedness cancelled by the creditor out of mercy is an income
to the debtor.
12. When there is a net loss in the period the deduction is taken, the
subsequent recovery of the deduction will not have any tax benefit.
13. The refund or recovery of non-deductible taxes shall not be reverted
back to gross income.
14. The loss of the partnership can be claimed by the partners as
deduction in their income tax return,
15. The accounting period of the taxpayer has a direct impact upon the
amount of gross income to be reported.
16. The power of the CIR to redistribute income and expense includes the
power to impute income between affiliated enterprises.
17. The situs of taxation has an impact on the extent of the reportable
gross income.
18. Creditable withholding taxes are added back to the amount of
reportable gross income.
19. The output VAT must be included as part of the gross income of VAT
taxpayers.
20. The requirement to revert back to gross income the amount of withheld
taxes applied only to VAT taxpayers.
21. Generally, all times of income NRA-NETB and NRFCs from the Philippines
are inclusions in gross income subject to final tax.
22. The taxpayer must enter into an advanced pricing agreement with the
BIR for its cross-border transfer pricing with associated enterprises.
23. Transfer pricing between associated enterprises must be made at arm’s
length.
24. The transfer pricing regulations apply only to cross-border transfers
of goods and services between associated enterprises.
25. Corporations under the direct and indirect control of the same
controlling individual or corporation are associated enterprises.
26. Under the accrual basis of accounting, items of gross income are
reported in the period they are received.
27. Basically, transfer pricing adjustment is needed when the income
reported for Philippine taxation is understated.
MULTIPLE CHOICE – THEORY: PART 1
1. Which is not subject to income tax?
a. Gain from sale of shares in mutual funds by the investor
b. Prizes in recognition of civic, religious, and artistic
achievements
c. PCSO and lotto winnings, not exceeding P20,000
d. All of these.
2. Which is an item of gross income subject to regular tax?
a. Gain on sale of lot by a realty dealer
b. Interest income from bank deposits.
c. Passive royalty income
d. Capital gain on the sale of domestic socks
3. Which is not an item of gross income subject to final tax?
a. Dividends from a domestic corporation
b. Prizes in excess of P10,000 by an individual
c. Share in the income of a general professional partnership
d. Winnings
4. Which of these employee benefits is subject to final tax?
a. Fringe benefits to rank and file employees
b. Regular pay of supervisory and managerial employees
c. Fringe benefits to supervisory and managerial employees
d. Regular pay of rank and file employees
5. All of these are items of gross income subject to regular tax except
one. Select the exception.
a. Compensation income
b. Interest income from long-term bank deposits
c. Ordinary gain on sale of properties
d. Interest on notes receivables
6. Which is an income exempt from income tax?
a. Income of a general professional partnership
b. Foreign dividends
c. Taxes collected by the government
d. Income of government-owned and controlled corporations
7. All of these are subject to regular income tax except
a. Professional fees
b. Wages and commissions
c. Business income
d. Capital gain from the sale of real property located in the
Philippines
8. Which is exempt from regular tax?
a. Income from construction
b. Income of qualified pension plans
c. Income from merchandising or trading
d. Income from financing or leasing
9. Which item of gross income is not subject to regular tax?
a. Interest income from foreign bank deposits
b. Capital gain on sale of bonds with more than 5 years maturity
c. Gain on sale of domestic stocks by a security dealer
d. Capital gain on sale of patent
10. Which is not part of compensation income subject to regular tax?
a. Director’s fees
b. Bonuses and fixed allowances
c. Portion of salary contributed to SSS
d. Portion of salary used to pay salary loans
11. Which is included in the gross income subject to regular tax of a
resident alien?
a. Gross income from the sale of goods abroad
b. Interest income from promissory notes of resident clients
c. Interest income from relatives abroad
d. Gain from the sale of domestic stocks directly to a buyer
12. Which of the following deductions from gross compensation income is
included as part of gross income subject to regular tax?
a. Pag-ibig Contributions c. PhilHealth Contributions
b. Contributions to union d. dues Withholding tax
13. Which interest income is subject to regular tax?
a. Interest income from notes c. Interest income from lending
b. Interest income from bonds d. All of these
14. Dividends subject to regular tax includes
a. Foreign dividends c. Both a and b
b. Domestic dividends d. Neither a nor b
15. Statement 1: All prizes earned abroad are subject to regular tax.
Statement 2: All prizes in the Philippines are subject to final tax.

Which statement is generally correct?


a. Statement 1 c. Both statements 1 & 2
b. Statement 2 d. Neither statement is true
16. Which is an item of gross income subject to regular tax?
a. Lottery winnings from abroad
b. Imputed interest income
c. Advanced rent representing security deposit for contingency which
may or may not happen
d. Leasehold improvements with useful life not extending beyond the
lease terms.
17. Which of the following is not subject to regular tax of a domestic
corporation or resident citizen?
a. Deposit interest income from abroad
b. Prize not exceeding P10,000 from the Philippines
c. Income from abroad exempt under treaty
d. Royalties from abroad
18. Which is subject to regular tax to a non-resident foreign corporation
or non-resident alien not engaged in trade or business?
a. Business income in the Philippines
b. Capital gain from the sale of stocks directly to a buyer in the
Philippines
c. Dividends from domestic corporations
d. None of these
19. Which is subject to regular tax to a resident foreign corporation?
a. Service fees abroad
b. Gain from sale of real property capital assets in the Philippines
c. Dividends from a domestic corporation
d. Gain from dealings in property abroad.
20. The proceeds of the life insurance received by the wife of the ensured
is
a. Exempt from income tax c. Part of taxable income
b. Subject to final tax d. Partly exempt and partly taxable

MULTIPLE CHOICE – THEORY: PART 2


1. Which of the following will not be reported in gross income?
a. Receipt of inheritance
b. Share in the net income of a foreign partnership
c. Royalties from foreign sources
d. Income distribution from a taxable estate
2. Which is not a reportable type of gross income?
a. Passive royalties
b. Dividends from a foreign corporation
c. Rent income
d. Capital gains from the sale of domestic stocks through the PSE
3. Which of the following is included in gross income subject to regular
tax?
a. Sub-contract income from petroleum service contractors
b. Interest income from government securities
c. Share in the net income of a taxable co-ownership
d. Farming income
4. All income earned abroad that would otherwise be subject to final
taxes id earned within the Philippines shall be subject to progressive
tax of a
a. Domestic corporation c. Resident aliens
b. Resident citizen d. All taxpayers
5. All items of passive income earned abroad are subject to regular tax
to
a. Resident citizen only.
b. A domestic corporation only.
c. A resident citizens and domestic corporations.
d. All taxpayers.
6. Which individual taxpayer is not subject to progressive tax?
a. NRA-ETB c. Resident alien
b. Special aliens d. Resident citizen
7. Which corporate taxpayer is not subject to regular tax?
a. Domestic corporation c. Business-partnership
b. Resident corporation d. Non-resident foreign corporation
8. Individual taxpayers shall report their income on
a. a fiscal year. c. either fiscal or calendar year.
b. a calendar year. d. a crop year.
9. Corporations are allowed to report their income on
a. a fiscal year. c. either fiscal or calendar year.
b. a calendar year. d. a crop year.
10. Which is subject to progressive tax to an individual taxpayer?
a. Proceeds of life insurance policy
b. Gift
c. Amounts received by the insured in excess of premiums paid
d. Compensation for personal injuries
11. Which of these is subject to Philippine regular income tax to a
foreigner?
a. Rent income on properties located abroad
b. Dividend income from a domestic corporation
c. Interest income on a deposit abroad
d. Interest income from domestic bonds
12. If not covered by the substituted filing system, employed individual
taxpayers shall report their regular income
a. monthly. c. quarterly.
b. annually. d. quarterly and annually.
13. Corporations and individuals engaged in business or in the exercise
of a profession are required to report their regular income
a. monthly. c. quarterly.
b. annually. d. quarterly and annually.
14. Which is incorrect concerning transactions between associated
enterprises?
a. Transactions between related parties should not be controlled.
b. Pricing should be determined by free market forces.
c. Pricing should be motivated by the need to save from total income
tax.
d. Non-arms’ length pricing between related parties may be restated
by the BIR to reflect the arms’ length value of transactions.
15. Which is not an associated enterprise to the controlling individual
of a holding company?
a. An associate of a subsidiary in the group
b. The parent company
c. A direct subsidiary company
d. A subsidiary of a subsidiary in the group
MULTIPLE CHOICE – PROBLEMS: PARTT 1
1. Mr. Lolong, a supervisory employee, received the following income in
2015:

Gross compensation income, before contributions


to SSS, PhilHealth, and HDMF totaling P124,000 P 800,000
Fringe benefits 200,000
Gain from redemption of shares in a mutual friend 100,000
Commission income 150,000
Gain on sale of stock through the PSE 400,000

Determine the total income to be reported by Mr. Lolong in gross


income.
a. P1,526,000 c. P1,026,000
b. P1,426,000 d. P 826,000
2. Calixto, employed, derived the following income during the year:

Gross salaries P 400,000


13th month pay and other benefits 40,000
SSS, PhilHealth, and Pag-ibig contributions 20,000
Deductions for loans repayments 50,000
Deductions for withholding tax 60,000

Compute the compensation income to be reported in the annual income


tax return.
a. P440,000 c. P380,000
b. P330,000 d. P390,000
3. Corazon resigned in 2015 after 12 years of service. She had the
following income during the year:

Salary, net of P80,000 withholding tax, P20,000


SSS, P18,000 Philhealth and P40,000 13th month pay P 480,000
Separation pay 1,000,000

Compute the gross income subject to progressive (regular) tax.


a. P1,480,000 c. P560,000
b. P1,560,000 d. P480,000
4. Iriga Corporation is engaged in the sales of goods. It reported the
following summarized financial statements during the year:

Sales P 3,500,000
Less: Cost of sales 2,000,000
Gross profit P 1,500,000
Commission income on consignment 200,000
Interest income from customers 20,000
Interest income, net of final tax 10,000
Dividend income 50,000
Total income P 1,780,000
Less: Admin and selling expenses 1,000,000
Net income P 780,000
Compute the total gross income subject to regular tax.
a. P1,720,000 c. P1,780,000
b. P1,770,000 d. P 840,000
5. Precy, Inc., a domestic corporation, reported the following income in
2014.
Philippines Abroad
Service fees P 400,000 P 300,000
Interest income – bank 40,000 70,000
Royalties – franchise 80,000 30,000
Compute the total gross income subject to regular income tax.
a. P920,000 c. P 800,000
b. P860,000 d. P 700,000
6. If Precy Inc. is a resident foreign corporation, compute the gross
income subject to regular tax.
a. P 520,000 c. P 400,000
b. P 480,000 d. P 440,000
7. Andres leases a building to a client. During the year, he received
the following remittance from the lessee:

Rental, net of 5% creditable withholding tax P 1,900,000


Real property tax of the leased building 50,000
Reimbursement for utilities used
by the lessee paid by Andres 200,000

How much will be included in gross income subject to regular tax?


a. P2,050,000 c. P2,000,000
b. P2,250,000 d. P1,950,000
8. Mr. Croki, a professional practioner, received the following from his
clients:

Advances for future services to be earned P 30,000


Collections for past services rendered 70,000
Reimbursements for client expense 40,000
Reimbursement for out-of-pocket expenses 10,000

How much will be included in Croki’s gross income for regular income
tax purposes?
a. P 150,000 c. P 110,000
b. P 140,000 d. P 100,000
9. The Big Bird Security Agency (BBSA)received P3,000,000 from its
clients. P2,400,000 of this was designated for salaries of guards
assigned to various client establishments.

How much will be included in the gross income of BBSA


a. P 600,000 c. P3,000,000
b. P2,400,00 d. P 0
10. Farmers, Inc. purchased an agricultural lot for P1,000,000. It was
later discovered that the lot had gold deposits. Thus its fair value
increased to P4,000,000. This increase in fair value is
a. exempt from income tax.
b. subject to income tax.
c. partially exempt and partially taxable.
d. Any of these
11. Northern Cattle Company produces beef meat. In 2015, it reported the
following:

Sales of live cattle P 600,000


Sale of young feeders 200,000
Increase in value of cattle inventory 300,000
Compute the income subject to regular tax.
a. P 1,100,000 c. P 900,000
b. P 800,000 d. P 600,000
12. Don Juanito has the following income in 2015:

Sales from vegetables P 400,000


Sales from fruits 200,000
Sales of carabao (acquired for P30,000 in 2015) 35,000
Interest income from tenants on the sale of
agricultural land pursuant to the Agrarian
Reform Program 12,000

The gross income subject to progressive tax is


a. P 647,000 c. P 600,000
b. P 617,000 d. P 605,000
13. Mr. Conner purchased a life annuity for P1,000,000 which will pay him
P100,000 a year. What will Mr. Conner include in his gross income on
the 11th year of the policy?
a. P1,000,000 c. P 200,000
b. P 100,000 d. P1,200,000

14. Edwin purchased the life insurance policy of Paulo for P50,000. He
continued the policy by paying P20,000 premium after which Paulo died.
Edwin collected the P500.000 proceeds of the policy.

How much will Edwin exclude from his gross income?


a. P 500,000 c. P 70,000
b. P 430,000 d. P 0
15. Mr. Benson insured his life with his children as beneficiaries. He
died after paying P200,000 premiums. His children collected the
P1,000,000 life insurance proceeds. How much will be excluded from
Mr. Benson's gross income?
a. P 800,000 c. P 200,000
b. P1,000,000 d. P 0
16. Pedro's crop was destroyed by incessant rains. He received P200,000
from an insurer that insured his crop. The proceeds of the insurance
is an
a. item of gross income subject to regular tax.
b. item of gross income subject to final tax.
c. exclusion from gross income.
d. exempt income.
17. In 2016, Northern Crest Corporation (NCC) reported a P40,000 recovery
from bad debts that was claimed as deduction against gross income in
2012. In 2012, the write-off increased the operating loss of NCC to
P50,000. NCC was very profitable from 2013 to the present. How much
of the P40,000 recovery is subject to tax?
a. P 60,000 c. P 40,000
b. P 10,000 d. P 0
18. West Oil abandoned an oil facility in 2012 and expensed the P300,000
unrecovered investment in the facility as abandonment loss. The 2012
taxable income before provision for the loss was P100,000. West posted
continuous loss until 2015. With increasing prices of crude oil in
2016, West re-commissioned the facility for use. How much will be
included in its gross income in 2016
a. P 300,000 c. P100,000
b. P 200,000 d. P0
19. Sarah Baby International graduated from its income tax holiday
incentive and effectively subject to tax beginning 2015. In 2016, it
collected a P4M from a P6M receivable which was written off as bad
debt expense in 2013. Before the write-off, Sarah International had
P1M profit. Sarah posted profits in 2014 and 2015 in excess of its
operating loss in 2013.

Compute the amount of recovery subject to regular income tax.


a. P6,000,000 c. P4,000,000
b. P1,000,000 d. P 0
20. In 2015, an accrual basis taxpayer received a cash refund for an
income tax assessment which he paid in 2011 consisting of the
following:

Basic tax P 40,000


Surcharge 10,000
Interest 4,000
Total taxes paid P 54,000

How much must be reverted back to gross income in 2015?


a. P 0 c. P10,000
b. P 4,000 d. P44,000
21. In the immediately preceding problem, compute the tax benefit if the
refund was of local tax instead of income tax.
a. P 44,000 c. P 10,000
b. P 4,000 d. P 0
22. An accrual basis taxpayer recovered a P20,000 local tax expense which
was refunded by the local government in 2015. The local tax expense
was paid in 2013 when the taxpayer sustained a P5,000 net operating
loss. How much shall be reverted to income?
a. P O c. P 20,000
b. P 5,000 d. P 15,000

23. A taxpayer under the cash basis wrote-off P50,000 receivables in 2010.
In 2015, P30,000 of the receivables was recovered.

Determine the amount to be included in gross income in 2015 assuming


that the taxpayer incurred a net operating loss of P40,000 in 2010.
a. P 0 c. P 30,000
b. P 10,000 d. P 40,000

MULTIPLE CHOICE – PROBLEMS: PARTT 2


1. Mr. Cordillera owns 20% interest in a joint venture engaged in
construction projects. In 2015, the joint venture reported profits of
P500,000, inclusive of P20,000 from time deposits.

Compute the total income to be reported in gross income of Mr.


Cordillera?
a. P 0 c. P 96,000
b. P 4,000 d. P 100,000
2. Mr. Buaya, with 14 dependent children, had the following data for his
income tax return in 2018:

Sales P 490,000
Gross compensation income 120,000
Cost of sales 200,000
Non-taxable compensation 30,000
Administrative and selling expenses 120,000
Personal expenses 70,000

What is the net income?


a. P 170,000 c. P100,000
b. P 290,000 d. P 20,000
3. Compute the taxable compensation income.
a. (P150,000) c. P 90,000
b. (P 30,000) d. P 120,000
4. Compute the taxable income.
a. P 10,000 c. P 140,000
b. P100,000 d. P 260,000
5. Raymund and Zeus practice their accounting profession through a general
professional partnership. They contributed equal capital and agreed to
share in profits equally. The following relates to their gross receipts
and expenses:

Gross receipts P 4,000,000


Less: Cost of services 1,800,000
Gross income from operations P 2,200,000
Add: Other non-operating income
Gain on sale of equipment P 100,000
Interest on time deposits 40,000 140,000
Total gross income P 2,340,000
Less: Allowable deductions 1,200,000
Net profits P 1,140,000

What is the reportable income in the tax return of Raymund?


a. P1,170,000 c. P 550,000
b. P 500,000 d. P 570,000
6. In the immediately preceding problem, determine the amount of income
to be reported by Zeus assuming that their partnership is a beauty
parlor.
a. P 0 c. P 550,000
b. P 570,000 d. P 500,000
7. An alien employee in an RHQ had the following in 2015:

Gross compensation income P 1,500,000


Contributions to SSS, PhilHealth, and HDMF 150,000
Creditable with holding tax 202,500

What is the total amount to include in gross income subject to regular


income tax?
a. P 0 c. P1,350,000
b. P1,147,500 d. P1,500,000

8. In the immediately preceding problem, what is the amount to include in


gross income assuming the employee is a Filipino rank and file
employee?
a. P 0 c. P1,500,000
b. P1,147,500 d. P1,350,000
9. A corporation had the following gains from dealings in properties:

Sale of delivery truck P 150,000


Sale of domestic stocks 50,000
Sale of 3-year corporate bonds 12,500
Sale of 6-year corporate bonds 7,500
What is the total amount of gain to be included in gross income?
a. P 150,000 c. P 170,000
b. P 162,500 d. P 212,500
10. Shown below is a compilation of the gain on the sale of real
properties:

Real properties classified as Philippines Abroad


Ordinary assets P 300,000 P 800,000
Capital assets 400,000 200,000

What is the amount of income to be included in gross income subject


to regular income tax assuming the taxpayer is a domestic corporation?
a. P1,300,000 c. P1,700,000
b. P1,100,000 d. P300,000
11. What is the gain to be included in gross income subject to regular
income tax if the taxpayer is a resident foreign corporation?
a. P 300,000 c. P700,000
b. P400,000 d. P1,100,000
12. What is the gain to be included in gross income if the taxpayer is a
resident alien?
a. P700,000 c. P300,000
b. P400,000 d. P1,100,000
13. A taxpayer collected the following passive income during the year:

Passive income Philippines Abroad


Interest income from banks P 300,000 P 800,000
Royalties from books 200,000 100,000
Rent of properties 400,000 200,000

What is the amount to be reported in gross income if the taxpayer is


a resident citizen?
a. P 900,000 c. P1,500,000
b. P1,100,000 d. P2,000,000
14. In the immediately preceding problem, what is the reportable gross
income assuming the taxpayer is a resident alien?
a. P 0 c. P 600,000
b. P 900,000 d. P 400,000
15. In 2020, the taxpayer received the following prizes and winnings:

Passive income Philippines Abroad


Prizes P 10,000 P 100,000
Winnings 400,000 100,000

What is the reportable item of gross income if the taxpayer


respectively is a resident citizen and a non-resident citizen?
a. P 500,000 ; P 0 c. P 0 ; P 500,000
b. P 510,000 ; P 10,000 d. P 910,000 ; P 410.000

16. What is the reportable item of gross income if the taxpayer is a


domestic corporation and a resident foreign corporation, respectively?
a. P 500,000 ; P 0 c. P 910,000 ; P 410,000
b. P 510,000 ; P 10,000 d. P 500,000 ; P 10,000
17. Mang Sipalay registered his business as a BMBE. He made a total sale
of P500,000 and incurred cost of sales of P400,000. He also earned
P10,000 interest income from time deposits. What is the total
reportable gross income?
a. P 0 c. P100,000
b. P 10,000 d. P110,000
18. Boracay Company is registered as a TIEZA locator subject to 5% gross
income tax. During the year, it made a total P400,000 gross receipts
from various tourist assistance services. It also incurred P210,000
in direct services.

What is the amount to be included in gross income subject to regular


income tax?
a. P 0 c. P210,000
b. P 190,000 d. P400,000
19. Mr. Siayan is a 5-6 lender. During the year, he granted loans totaling
P2,000,000 and collected P400,000 in interest. He also earned P8,000
in temporary investments in domestic bonds plus additional P6,000 from
bank deposit substitutes. Direct cost of lending was P100,000.

What is the total amount to be reported in gross income subject to


regular tax?
a. P0 c. P414,000
b. P300,000 d. P308,000
20. Mr. Asuncion received the following royalties from the following
sources:

Mining claims P 150,000


Novel, "Alicia in Wonderland" 250,000
Basic Accounting textbook 250,000
Musical composition "Dayang-dayang” 40,000

What is the total amount to be reported in gross income?


a. P 0 c. P 400,000
b. P 150,000 d. P 520,000

MULTIPLE CHOICE – PROBLEMS: PARTT 3


1. Mrs. Kapalong has several interests in various businesses and
partnerships. He received the following income during the year:

Dividends from a domestic corporation P 120,000


Dividends from a resident foreign corporation 80,000
Share in net income of a business partnership 200,000
Share in the net income of a professional partnership 100,000

What is the total income to be reported in gross income?


a. P 0 c. P 300,000
b. P 380,000 d. P 180,000
2. Ms. Panabo received a total P200,000 from her father for her support.
During the year, she also received a P150,000 total distribution from
the trust irrevocably designated by her grandfather in her favor. She
also received P120,000 income distribution from the estate of her
grandmother undergoing judicial settlement

What is the total amount to be included in her gross income?


a. P 200,000 c. P 350,000
b. P 270,000 d. P 470,000
3. A non-VAT taxpayer collected P45,000 net of P5,000 withholding tax.
Compute the gross income subject to regular tax.
a. P5,000 c. P45,000
b. P40,000 d. P50,000
4. A VAT taxpayer collected P66,600, inclusive of P7,200 VAT and net of
P600 withholding tax. Compute the gross income subject regular income
tax.
a. P 59,400 c. P 66,000
b. P 67,200 d. P 60,000
5. A non-VAT taxpayer collected P79,200, net of 1% withholding tax. What
is the amount subject to regular income tax?
a. P 71,351 c. P 80,000
b. P 71,429 d. P 79,200
6. A VAT taxpayer taxpayer received P45,900 inclusive of VAT and net of
10% creditable withholding tax. Compute the gross income subject to
regular tax.
a. P 45,000 c. P 45,536
b. P 45,900 d. P 51,000
7. A non-VAT taxpayer received P8,000 interest income, net of 20% final
withholding tax. Compute the amount subject to regular income tax.
a. P 0 c. P 8,000
b. P 6,400 d. P 10,000
8. A VAT-registered taxpayer received P18,000 dividend, net of 10% final
withholding tax. Compute the amount subject to regular income tax.
a. P 0 c. P 17,857
b. P 17,647 d. P 20,000
9. A resident foreign corporate taxpayer entered into an advanced pricing
agreement (APA) with the BIR with respect to the pricing of its export
sales to a foreign country. A mark-up ratio of 50% of the cost is set
in the APA. During the year, the corporation manufactured goods
costing P12,000,000 and exported 80% of the production to its foreign
affiliate at a price of P12,000,000.

What is the amount of gross income subject to Philippine tax?


a. P2,000,000 c. P2,400,000
b. P4,800,000 d. P6,000,000
10. Ms. Nene Gosio registered a manufacturing business as a BMBE exempt
from tax. She also owns another taxable business which is engaged in
the trading of goods. Ms. Gosio ordered her BMBE business to sell its
production to her trading business at ultimate sales prices.

You were tasked by your audit supervisor to conduct a transfer pricing


evaluation of Ms. Gosio's businesses. Based on your study, you
determined that the retail profit rate (on sales) of trading
businesses with similar operations involving similar goods is 40%.
During the year, the trading business made a total purchases of
P400,000 from the BMBE and sold 75% of these for P500,000.

What is the gross income of the trading business to be subjected to


regular income tax following the arms' length principle?
a. P 0 c. P 200,000
b. P 100,000 d. P 120,000