Passive Income:

1 Novo Inc, resident corporation has earned the following income during the year:
Dividend income from:
 Microsoft, a non – resident foreign corporation P 500,000
 Intel, a resident foreign corporation (ratio of Philippine income over world income for the past
three years is 40%) 400,000
 Panday, a domestic corporation 300,000
Interest income from:
 Current account, BDO 600,000
 Savings deposit, ABN – AMRO Bank, UK 700,000
 FCDU deposits 800,000
Royalty income from various domestic corporation 100,000
The total final tax on passive income assuming the taxable year is 2018.
a. P 200,000 b. P 260,000 c. P 328,000 d. P 1,088,000 # 33

2. Avono, Inc, a resident foreign corporation has earned the following income during the year 2018:
Dividend income from:
 Microsoft, a non – resident corporation P 500,000
 Intel, a resident foreign corporation 400,000
 Panday, a domestic corporation 300,000
Interest income from:
 Current account, BDO 600,000
 Savings deposit, ABN – AMRO Bank, UK 700,000
 FCDU deposits 800,000
Royalty income from various domestic corporation 100,000
Additional information:
 The ratio of Microsoft gross income in the Philippines over worldwide income for the past three years is
40%.
 The ratio of Intel’s gross income in the Philippines over worldwide income in the Philippines over
worldwide income for the past three years is 60%.
 The ratio of Panday’s gross income in the Philippines over worldwide income for the past three year is
80%.
How much is the income tax expense of Avono, Inc?
a. P 200,000 b. P 400,000 c. P 320,000 d. P 272,000 # 34
Assume that Avono, Inc, is a domestic corporation, how much is the income tax expense?
a. P 200,000 b. P 560,000 c. P 680,000 d. P 740,000

3. In 2018, a domestic corporation declared and paid dividends to its shareholders as follows:
To Apol, a resident citizen P 100,000
To Alex, a nonresident citizen 100,000
To George, a resident alien 100,000
To LJ, a non-resident alien engaged in trade in the Philippines 100,000
To Francis, a nonresident alien not engaged in trade in the Philippines 100,000
To Chen, a domestic corporation 100,000
To a resident foreign corporation 100,000
To a nonresident foreign corporation (with tax sparing) 100,000
How much is the final tax?
 a. P 80,000 b. P 90,000 c. P 85,000 d. P 95,000 # 36

4. ABC Company and DEF Company formed a joint venture. They agreed to share to profit or loss in the ratio of
70% and 30% respectively. The results of operations of the joint venture as well as the con-venture are as
follows:
Joint venture ABC Co. DEF Co.
Gross income P 5,000,000 P 3,000,000 P 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

The income tax payable of the joint venture is

a. P 0 b. P 150,000 c. P 300,000 d. P 600,000

The total income tax payable of ABC Co. is

a. P 0 b. P 150,000 c. P 300,000 d. P 600,000

The total income tax expense od DEF Co. is

a. P 0 b. P 150,000 c. P 570,000 d. P 750,000

Assume that the joint venture is a tax-exempt JV, its income tax payable is
a. P 0 b. P 150,000 c. P 300,000 d. P 600,000 # 39

Capital Gains Tax

1. Chris, Inc. sold its vacant lot to Moca Corp. for P 10,000,000 which it acquired at a cost of P 5,000,000. The fair
market value of the said property per tax declaration is P 12,000,000, while its zonal value is P 15,000,000. How
much is the income tax applicable on the transaction?
a. P 600,000 b. P 720,000 c. P 900,000 d. P 1,500,000

2. IN 2018, East Star Inc. sold shares of stock for P 250,000. The shares, acquired in 2015 at a cost of P 100,000
were held as investment, and were sold directly to the buyer. How much was the capital gains tax due?
a. P 10,000 b. P 15,000 c. P 22,500 d. P 45,000

3. Using the same data in # 2, how much is the capital gains tax assuming the shares were sold by a foreign
corporation?
a. P 10,000 b. P 15,000 c. P 22,500 d. P 45,000

4. 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?
a. P 10,000 b. P 15,000 c. P 22,500 d. nil

5. In 2018, East Star Inc. sold shares of stock of a domestic corporation for P 250,000. The shares acquired in
2015 at a cost of P 100,000 were held as investment, and were sold through the local stock exchange. How much
was the applicable tax due?
a. P 1,250 b. P 1,500 c. P 10,000 d. P 15,000

6. Assume the share sold were not held for investment purposes and the seller is a dealer in securities, how
much is the stock transaction tax (STT)?
a. P 1,250 b. P 1,500 c. P 10,000 d. nil
Regular Income Tax (RCIT), Minimum Corporate Income Tax (MCIT), Gross Income Tax (GIT)