INCOME TAXATION

Name:___________________________ Date:________________________________
Section:__________________________ Installment/ Deferred payment/Penalties

1. Which of the following statements is not correct? Those who make a casual sale or disposition
of personal property on the installment plan may elect the installment basis of reporting income
if
a. The personal property sold is of a kind which would be included in the inventory
b. The selling price exceeds P1,000
c. The sale is in installment
d. The initial payments do not exceed 25% of the selling price

2. Income from a deferred payment sale of the property maybe reported using
a. The installment method only
b. Deferred payment method only
c. Either installment or deferred payment method
d. Neither the installment nor deferred payment method

3. In 2018, A sold a piece of land which had a cost of P1,000,000 for a selling price of
P4,000,000. The sale called for an assumption by the buyer of a mortgage on the land of
P1,500,000, cash of P500,000 on the date of sale and installment payments of P500,000 every
year thereafter. The land is an ordinary asset. The income to be reported in 2018 under the
installment method of reporting income is
a. 500,000 b. 750,000 c. 375,000 d. 1,000,000

4. A sold his ring, a capital asset, on February 14, 2018. The ring was acquired on January 14,
1980 at a cost of P60,000. The terms of payment:
Down payment, February 14, 2018 P25,000
Installment payment, February 14, 2019 25,000
Installment payment, February 14, 2020 50,000
Mortgage assumed by the buyer 20,000
Total P120,000
The taxable gain to be reported by A in 2018 is
a. P60,000 b. P30,000 c. P15,000 d. P7,500

5. F, sold the following capital assets

Land 1 Land 2 Land 3 Land 4
Selling price P400,000 P600,000 P800,000 P1,200,000
Cost 200,000 250,000 400,000 400,000
Commissions paid 30,000 70,000 --- ---
Selling expenses incurred 20,000 30,000 40,000 50,000
Terms of sale
Down payment, Feb 14,2018 50,000 70,000 50,000 150,000
Installment payments:
July 14, 2018 50,000 70,000 50,000 150,000
July 14, 2019 150,000 100,000 200,000 200,000
July 14, 2020 150,000 260,000 --- 200,000
Mortgage assumed by the buyer --- 100,000 500,000 500,000
The tax for 2018 is
a. P180,000 b. P112,080 c. P85,080 d. P82,080

6. A sold a delivery truck in installment on February 14, 2018, as follows:

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 Down payment, February 14, 2018 P40,000
Installment payment, February 14, 2019 80,000
Installment payment, February 14, 2020 80,000
Acquisition cost of delivery truck 300,000
Accumulated depreciation up to February 14, 2018 200,000
The income to be reported in 2018, is
a. P100,000 b. P40,000 c. P20,000 d. P10,000

7. E old the following capital assets

Land 1 Land 2 Land 3
Selling price P150,000 P500,000 P800,000
Cost 100,000 550,000 300,000
Gain (loss) P50,000 P(50,000) P500,000
Terms:
Down payment, Feb 14, 2018 P15,000 P50,000 P20,000
Installment payments:
July 14, 2018 7,500 25,000 75,000
Dec 14, 2019 7,500 25,000 75,000
Dec 14, 2020 120,000 400,000 630,000
The taxes due in 2018 is
a. 87,000 b. 11,550 c. 18,000 d. 9,000

8. The following refer to the transactions of D regarding the sale of her necklace, a capital asset:
Down payment, February 14, 2018 90,000
Installment payment, February 14, 2019 90,000
Installment payment, February 14, 2020 60,000
Mortgage assumed by the buyer 360,000
Cost when acquired on March 14, 2013 300,000
The taxable gain for 2018 is
a. P300,000 b. P150,000 c. P75,000 d. P45,000

9. A, a real estate dealer sold a house and lot for P600,000 on November 30, 2018. The cost of
the property is P375,000. The terms are: a) Down payment of P100,000 and b) Balance
payable in monthly installments of P25,000 beginning December 20, 2018. The income to be
reported in 2018 is:
a. P225,000 b. P125,000 c. P46,875 d. P37,500

10. Using the preceding number, except that the asset above is a capital asset, the capital gains
tax payable in 2018 is
a. P36,000 b. P7,500 c. P6,000 d. P3,750

11. On December 1, 2018, a real estate dealer sold a residential land for 6M (cost is 3.6M)
receiving 2M as down payment and a promissory note for the 4M balance payable at P400,000
a month beginning January 1, 2019. The promissory note has fair market value equal to 75%
of its face value, if the income is to be reported under the deferred payment method, the
income in 2018 is
a. P2,400,000 b. P1,400,000 c. P800,000 d. P1,200,000

12. On June 1, 2018, A sold shares of stocks of a resident foreign corporation held as capital
assets for 24 months for P500,000 (cost of P300,000), payable as follows: P200,000 on the
date of sale and the balances I secured by a promissory note where fair value is 85% of its
face value. Payments on the note were as follows:

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 January 1, 2019 P100,000
June 1, 2019 100,000
December 1, 2019 100,000
The capital gain in 2018 is

13. The income tax return for the calendar year 2018 was due for filing on april 15, 2019, but the taxpayer
voluntarily filed his tax return without notice from the BIR, only on September 15, 2019. The tax due
per return amounts to P250,000. The total amount due on September 15, 2019 (excluding compromise
penalty) is

14. Using the preceding number, but the income tax return is filed on time but through an internal revenue
officer other than with whom the return is required to be filed. The total amount due is

15. The taxpayer did not file his income tax return for the calendar year 2018. He was notified by the BIR of
his failure to file the tax return, for which reason he filed his tax return and paid the tax only after said
notice on October 15, 2020. The tax due per return is P100,000. The amount due is

16. Taxpayer filed on time his income tax return for calendar 2018 and paid P100,000 on April 15, 2019.
Upon pre-audit of his return, it was disclosed that he erroneously computed the tax due. The correct
amount of tax due is P 120,000. The taxpayer is assessed for deficiency income tax in a letter of
demand and assessment notice issued on June 15, 2020 calling for payment on or before July 15,
2019. The amount still due on July 15, 2020 is

17. A corporation filed its ITR and paid the tax for calendar year 2018 with a net taxable income of
P500,000. However, upon investigation, it was disclosed that its ITR was false or fraudulent because it
did not report a taxable income amounting to another P500,000. Failing to protest on time against
preliminary assessment notice, a final letter of demand and assessment notice issued on June 15,
2020 calling for payment on or before July 15, 2020. The amount still due on July 15, 2020 is

18. Using the preceding number, assuming that the assessment has become final and collectible, but the
corporation pays the tax assessment only on August 15, 2020, the total amount due (excluding
compromise penalty) is

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