06 Gross Income taxation questionnaire PDF

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Chapter 6 Income, for tax purpose: I. Means all income from whatever source (legal or illegal), unless specifically excluded under the Tax Code II. Means all wealth which flows into the taxpayer other than return of capital III. Is recognized in the year it is actually received in cash or cash equiv...

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Chapter 6 1. Income, for tax purpose: I. Means all income from whatever source (legal or illegal), unless specifically excluded under the Tax Code II. Means all wealth which flows into the taxpayer other than return of capital III. Is recognized in the year it is actually received in cash or cash equivalent IV. Refer to the amount of money coming to a person or corporation within a specified time, whether as payment of services, interest, or profits from investment. a. I, II and III only c. I, II, III and IV b. I and IV only d. None of the above 2. The sources from which income is derived a. Labor b. Illegal activities c. Profits derived from sale or exchange of capital assets d. All of the above 3. The sources from which income is derived A Labor Gifts and inheritance Use of capital

B True True True

C True False True

False

D True False False

False False

4. In 2018, Pedro sent his sister Ana $10,000 via a telegraphic transfer through the Banko De Uro el Pilipinas. Lorna, the bank’s remittance clerk made a mistake and credited Ana with $100,000 which she promptly withdrew. The bank demanded the return of the mistakenly credited excess, but Ana refused. The BIR entered the picture and investigated Ana. Would the BIR be correct if it determines that Ana earned taxable income under these facts? a. No, she had no income because she had no right to the mistakenly credited funds b. Yes, income is income regardless of the source. c. No, it was not her fault that the funds in excess of $10,000 were credited to her. d. No, the funds in excess of $10,000 were in effect donated to her. 5. Which of the following is a characteristic of income? A B Increase in taxpayer’s wealth True Realization of gain True Return of taxpayer’s wealth True True

C True False

6. Which of the following is a requisite for an income to be taxable? a. There must be gain b. The gain must be realized or received c. The gain must not be excluded by law from taxation d. All of the above 7. Which of the following is not an income for income tax purposes? a. Gain derived from labor b. Return on capital c. Excess of selling price over cost of assets sold d. Gift received 8. Which of the following is not an income for income tax purposes? a. Collection of loans receivable

False False

D True False False

False

b. Condonation of debt for services rendered c. Excess of selling price over the cost of an asset sold d. None of the above 9. Which of the following is not a characteristic of income a. Increase in taxpayer’s wealth b. Realization or receipt of gain c. Earnings constructively received d. Return of taxpayer’s wealth 10. Which is not a valid definition of income a. Income is the return from capital invested b. Income is a fund at one distinct point of time c. Income means all wealth which flows into the taxpayer other than a mere return of capital d. Income means cash or its equivalent unless otherwise specified 11. The share in the profits of a partner in a general professional partnership is regarded as received by him and thus taxable although not yet distributed. This principle is known as a. Actual receipt of income b. Advance reporting of income c. Accrual method of accounting d. Constructive receipt of income 12. Which of the following is considered or construed as an example of “constructive receipt”? a. Retirement benefits, pensions, gratuities b. Fees paid to a public official c. Interest coupons that have matured and are payable but have not been cashed d. Deposits for rentals to answer for damages, restricted as to use 13. Constructive receipt occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts, except: a. A security deposit to insure the faithful performance of certain obligations of the lessee to the lessor b. Deposit in banks which are made available to the seller of services without restrictions; c. Issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; d. Transfer of the amounts retained by the payor to the account of the contractor 14. There is constructive receipt of income when: a. Payment is credited to payee’s account b. Payment is set aside for the payee, or otherwise made available so the payee may draw upon it at any time, or so the payee could have drawn upon it during the taxable year if notice of intention to withdraw had been given without substantial limitations. C. Both “a” and “b” D. Neither “a” nor “b” 15. When different types of income are subjected to common tax rate, the tax system is describe as a. Global tax system b. Gross income tax system c. Scheduler tax system d. Final tax system 16. Situs, for taxation purposes will depend upon various factors, including: I. The nature of the tax and the subject matter thereof II. The possible protection and benefit that may accrue both to the government and to the taxpayer.

III. Domicile or residence IV. Citizenship V. Source of income a. I and V only b. I, III and IV only

c. I, III, IV and V d. I, II, III, IV and V

17. As a rule, income from whatever source is taxable. Income from whatever source may come from: I. Gains arising from expropriation of property II. Gambling gains III. Income from illegal business or from embezzlement IV. Recovery of receivables previously written off V. Tax refunds VI. Compensation for injury suffered VII.Gratuitous condonation of debt a. I and II only b. I, IV and V only c. I, IV, V and VI only d. I, II, III, IV and V only 18. SItus of taxation on income from sale of property purchased a. Place of the seller b. Place of sale c. Place of buyer d. As determined by the Commissioner 19. Which of the following test of source of income is incorrect? a. Interest income - resident of the debtor b. Income from services - place of performance c. Royalties - place of use of intangible d. Gain on sale of real property - place of sale 20. Situs of taxation on income from sale shares of a domestic corporation a. Always treated as income derived from within the Philippines b. Always treated as income derived from without the Philippines c. May be treated as income within or without the Philippines depending on the place of sale d. May be treated as income within or without the Philippines depending where the shares are kept 21. Situs of taxation on income from sale shares of a foreign corporation a. Always treated as income derived from within the Philippines b. Always treated as income derived from without the Philippines c. May be treated as income within or without the Philippines depending on the place of sale d. May be treated as income within or without the Philippines depending where the shares are kept 22. Statement 1: A gain from sale of shares of a domestic corporation shall be considered derived from the Philippines regardless of where the shares were sold Statement 2: A gain from a sale of shares of a foreign corporation shall be considered derived from the country where the corporation was created or organized. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 & 2 are true 23. Pedro earned interest income from a promissory note issued to him by Juan, a resident of California, U.S.A. Assuming that Pedro is a nonresident citizen, the interest income is a. Subject to basic income tax

b. Subject to final tax c. Not subject to income tax d. Partly subject to scheduler and partly subject to final tax 24. Mr. Parker, a French citizen permanently residing in the Philippines, received several items during the taxable year. Which among the following is not subject to Philippine income taxation? a. Consultancy fees received for designing a computer program and installing the same in Shanghai facility of a Chinese firm b. Interest from his deposits in a local bank of foreign currency earned abroad converted to Philippine pesos c. Dividends received from an American corporation which derived 60% of its annual gross receipts from Philippine sources for the past ten (10) years d. Gains derived from the sale of his condominium unit located in Quezon City. 25. It is important to know the source of income for tax purpose (ie., from within or without the Philippines) because: a. Some individual corporate taxpayers are taxed on their worldwide income while others are taxable only upon income from sources within the Philippines b. The Philippines imposes income tax only on income from sources within c. Some individual taxpayers are citizens while others are aliens d. Export sales are not subject to income tax 26. Which of the following taxpayers is taxable on income from all sources within and outside the Philippines a. Domestic corporation b. Resident foreign corporation c. Resident citizen d. Both “a” and “c” 27. Which of the following is NOT true about source of income? a. In case of income derived from labor, source is the place where the labor is performed. b. In case of income derived from use of capital, source is the place where the capital is employed c. Ion case of profits from the sale or exchange of capital assets, source is the place or transaction occurs d. None of the above 28. Which income from sources partly within and partly outside the Philippines is allocated on the time basis? a. Income of the international shipping corporation with vessels touching Philippine ports b. Income of a telegraph company with transmission from the Philippines to points abroad c. Income from goods produced in whole or in part in the Philippines and sold in a foreign country, or vice-versa d. Income from personal services performed in part in the Philippines and in part abroad 29. A taxpayer is employed by a shipping company touching Philippine and foreign ports. In 2018, he received a gross payment for his services rendered of P3,000,000. In that year, the vessels on board of which he rendered services had a total stay in Philippine ports of four months. His gross income from the Philippines was: a. P0 c. P1,500,000 b. P1,000,000 d. P3,000,000 30. Chris is a Filipino immigrant living the United States for more than 15 years. He is retired and he came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays here about a month. He regularly receives a pension from his former employer in the United States, amounting to US$2,000 a month. While in the Philippines, with his pension pay from his former employer, he

purchased three condominium units in Makati which he is renting out for P25,000 a month each. Does the US$2,000 pension become taxable because he is now in the Philippines? a. Yes. Income received in the Philippines by the non-resident citizen is taxable b. Yes, income received in the Philippines or abroad by non-resident citizen is taxable c. No. Income earned abroad by a non-resident citizen is not taxable in the Philippines d. No. The pension is exempt from taxation being one of the exclusions from gross income 31. All of the following are correct except one. Which is the exception? a. The source of interest income is the country where the debtor resides b. The source of interest income is the country where the creditor resides c. Rents or royalties are considered derived from the country where the property is located d. Income from personal services is considered derived from the country where the services were rendered. 32. Which of the following is considered income derived from within the Philippines? I. Gain on sale of personal property purchased in the Philippines and sold in Canada II. Compensation received from services in the Philippines III. Rent income from real property located in USA IV. Gain on sale of shares of a foreign corporation sold in the Philippines a. I and II only c. II and IV only b. I, II and IV only d. all of the above 33. Which of the following is not an income derived from sources within the Philippines for income tax purposes? a. Interests derived from bonds issued by a foreign corporation b. Interest on notes or other interest-bearing obligations of residents c. Both “a” and “b” d. Neither “a” nor “b” 34. Which of the following statements is correct with respect to valuation of income? a. The amount of income recognized is generally the value received or which the taxpayer has a right to receive b. If the services were rendered at a stipulated price, in the absence of any evidence to the contrary, such price shall be presume to be the fair market value of the compensation received c. Transfer of land made by a person to another in payment of services rendered in the form of attorney’s fees shall be considered as part of the gross income of the latter valued at either the fair market value or the zonal valuation, whichever is higher, in the taxable year received d. All of the above 35. Compensation income is earned when an employer-employee relationship exists. Which of the following income represents income earned through employee-employer relationship? I. Professional fees II. Wages III. Pension pay IV. Wages a. I only c. II and III only b. I and III only d. I, II, III and IV 36. Pedro is a member of the board of directors ABC Company. During the current taxable year, Pedro received director’s fees amounting to P300,000 from quarterly board meetings he attended. Such fees should: a. Form part of Pedro’s gross compensation income, whether or not he is at the same time an employee of the corporation b. Form part of Pedro’s gross compensation income only if he is at the same time an employee of the corporation

c. d.

Both “a” and “b” are correct Neither “a” nor “b” is correct

37. Which of the following compensation will be subject to graduated rates? a. Basic salary whether or not the employee is a minimum wage earner b. Basic salary only if the employee is not minimum wager earner c. 13th month pay and other benefits not exceeding P30,000 d. Fringe benefits received by supervisory or managerial employee 38. Which of the following items that reduces salaries of employees is not an exclusion from gross income? a. GSIS or SSS Contributions b. Pag-ibig Contributions c. Labor Union Dues d. None of the choices 39. One of the following compensation income of an individual taxpayer is not an exclusion from gross income: a. Monetized vacation leaves not exceeding 10 days a year b. Separation pay of an employee who resigned from his employment c. Retirements benefits of an employee under a qualified benefit plan who has worked for an employer for at least 10 years, who at the time of retirements is not less than 50 years of age, and who avails of the retirement for the first time d. All of these 40. Which of the following is taxable? a. Separation pay received by a 50-year old employee due to the retrenchment program of the employer b. Retirement pay received from a benefit plan registered with the BIR, where at the time the employee retired, he was 57 years of age, retiring from employment for the first time in his life, and was employed with the employer for 8 years c. Social security benefit received by a balikbayan from employer abroad at age of 30 d. None of the above 41. Statement 1: Amounts received by reason of involuntary separation remain exempt from income tax even if the official or employee at the time of separation has rendered less than ten (10 years of services and/or below fifty (50) years of age Statement 2: Any amount received by an official or employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, such as retrenchment, redundancy, or cessation of business are exempt from income tax a. Both statements are correct b. Both statements are not correct c. Only the first statement is correct d. Only the second statement is correct 42. The taxpayer was retired by his employer in 2016 and paid P2,000,000 as a retirement gratuity without any deduction for withholding tax. The corporation became bankrupt in 2018. Can the BIR subject the P2,000,000 retirement gratuity to improve tax in 2018? 1st answer: Yes, if the retirement gratuity was paid based on a reasonable pension where the taxpayer was 50 years old and has served the corporation. 2nd answer: No, if the taxpayer was forced by the corporation to retire. a. 1st and 2nd answers are correct b. 1st answer is correct but 2nd answer is wrong c. 1st answer is wrong but 2nd answer is correct d. 1st and 2nd answers are wrong

43. JJ, an official of Excel Corporation, asked for an earlier retirement because he was immigrating to Canada with his girlfriend. He was paid P3,000,000 as separation pay in recognition of his valuable services to to the corporation. Paul, another official of the same company was separated for occupying a redundant position. He was given P1,000,000 separation pay. Rene who was rendered 11 years of service and who is now 55 yrs. old opted to retire for the first time. He received P2,000,000 retirement pay. The total income subject to withholding tax is _______. a. P1,000,000 c. P3,000,000 b. P2,000,000 d. P6,000,000 44. Which among the following is part of the taxable income of an employee? I. Insurance premium provided by the employer of the life insurance policy of the employee where the designated beneficiary is the relative of the employee II. Insurance premium paid by employer on the life insurance policy of the employee where the designated beneficiary is the employer III. The income tax of the employee paid by the employer as part of the employee’s benefit IV. The income tax of the employee advanced by the employer, deductible against future income of the employee a. I only c. II and III only b. I and II only d. III only 45. Statement 1: Remuneration for services constitutes compensation income even if the relationship of employer and employee does not exist any longer at the time when payment is made between the person in whose employ the services had been performed and the individual who performer them. Statement 2: In general, fixed or variable allowances which are received by a public officer or employee or officer or employee of a private entity, in addition to the regular compensation, fixed for his position or office, is compensation subject to income tax and consequently, creditable withholding tax on compensation income a. Both statements are correct b. Both statements are incorrect c. Only the first statement is correct d. Only the second statement is correct 46. Statement 1: Representation and Transportation Allowances (RATA) granted under Section 34 of the General Appropriations Act to certain officials and employees of the government are considered reimbursements for the expenses incurred in the performance one’s duties rather than as additional compensation Statement 2: The excess of RATA in statement 1, if not returned to the employer, constitutes taxable compensation income of the employee Statement 3: COLA of minimum wage earners is exempt from income tax a. All statements are correct b. All statements are incorrect c. Only statement 3 is correct d. Only statement 3 is incorrect 47. Juana, widow received the following during 2018:  Received $500 ($1=P44) monthly interest income from the pension plan of his deceased husband who served in the US Army for 20 years  Won a beauty contest “Miss Byuda 2018”. she received the following as prizes:  Cash prize, P50,000  Free-trip abroad worth P50,000  College scholarship with International College of Business and Economics worth P100,000  Goods worth P20,000  P100,00 from her debtor in payment of a loan, and interest in the sum of P15,000.  Inherited from her grandmother a lot and apartment valued at P2,500,000 from which she is receiving monthly rental of P15,000

The income subject to tax is a. P415,000 c. P250,000 b. P679,000 d. P515,000 48. Statement 1: The stipends received by resident physicians during their intensive training in the residency program of a hospital are subject to creditable withholding tax on c...