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UNIVERSAL COLLEGE OF PARAÑAQUECOLLEGE OF BUSINESS & ACCOUNTINGTAX06– INCOME TAX ON INDIVIDUALSMULTIPLE CHOICE Which of the following is not considered a non-resident citizen? a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical pres...

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

BATCH 2019

UNIVERSAL COLLEGE OF PARAÑAQUE COLLEGE OF BUSINESS & ACCOUNTING

TAX06– INCOME TAX ON INDIVIDUALS MULTIPLE CHOICE 1. Which of the following is not considered a non-resident citizen? a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein. b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on permanent basis. c. A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. d. A citizen of the Philippines who went on a business trip abroad and stayed therein most of the time during the year. 2. Determine the correct classification of the following: I. Manny, a Fiiipino businessman, went on a business trip abroad and stayed there most of the time during the year. II. Kyla, a Filipino professional singer, held a series of concerts in various countries around the world during the current taxable year. She stayed abroad most of the time during the year. III. Efren, a Filipino "cue" artist went to Canada during the taxable year to train and participate in the world cup of pool. He stayed there most of the time during the year. A B C D I NRC RC RC RC II NRC NRC RC RC III NRC NRC NRC RC 3. Determine the correct classification of the following Fiiipino taxpayers: Scenario 1: A citizen of the Philippines who went on a business trip abroad and stayed therein most of the time during the year. Scenario 2: Onyok is a professional boxer who was featured in four (4) boxing bouts in the United States of America for the current calendar year. He stayed therein most of the time during the year. Scenario 3: To develop a better a relationship in preparation for their upcoming wedding, Pedro and Ana travelled around the world during the current taxable year. They stayed in various countries around the world most of the time during the taxable year. A. B. C. D. Scenario 1 NRC NRC NRC RC Scenario 2 NRC NRC RC RC Scenario 3 NRC RC RC RC 4. Due to his expertise, Engr. Pedro D. Magiba (a freelancer) was hired by a foreign petroleum contractor in Thailand to provide technical assistance for two months from February to March. He was hired again for the months of June-July and October-December of the same taxable year. Engr. Pedro D. Magiba is a; a. Resident citizen b. Nonresident citizen c. Special Filipino employee d. None of the above 5. Cheche, nonresident citizen, arrived in the July 1, 2015 to reside here permanently after working as nurse in the United States of America for many years. Which of the following statements is correct with respect to her classification for income tax purposes? a. She shall be classified as nonresident citizen for the year 2015 with respect to her income derived from sources abroad from January 1, 2015 until the date of her arrival in the Philippines b. She shall be classified as nonresident citizen for the whole year of 2015. c. She shall be classified as resident citizen for the whole year 2015. d. She shall be classified as neither resident nor nonresident citizen for the year 2015. 6. Dr. J, an expert American Physicist was hired by a Philippine corporation to assist in its organization and operation for which he had to stay in the Philippines for an indefinite period. His coming to the Philippines

Taxation by Din Rose Gonzales, CPA

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

BATCH 2019

was for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the Philippines. The American management expert intends to leave the Philippines as soon as his job is finished. For income tax purposes, the American management expert shall be classified as: a. Resident alien b. Nonresidentalien engaged in trade or business. c. Nonresident alien not engaged in trade or business. d. Resident citizen. 7. Rihanna, an American singer, was engaged to sing for one week at the Western Philippine Plaza after which she returned to USA. For income tax purposes, she shall be classified as: a. Resident alien. b. Nonresidentalienengaged in trade or business. c. Nonresident alien not engaged in trade or business. d. Resident citizen. 8. Which of the following is taxable based on world income? a. Resident alien b. Nonresident citizen c. Nonresident alien d. Resident Citizen 9. It is Important to know the source of income for income tax purposes (i.e. from within and without the Philippines) because; a. Some individuals and corporate taxpayers are taxable based on their worldwide income while others are taxable only on their 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. Use the following data for the next five (5) questions: A taxpayer, married without qualified dependent child, had the following data for taxable year 2018: Gross income, Philippines P 800,000 Gross income, USA 600,000 Expenses, Philippines 400,000 Expenses, USA 300,000 10. If the taxpayer is a resident citizen, married, his taxable income is a. P 400,000 b. P 350,000 c. P 700,000 d. P 650,000 11. If the taxpayer is a non-resident citizen, married, his taxable income is a. P 400,000 b. P 350,000 c. P 700,000 d. P 650,000 12. If the taxpayer is resident alien, married, his taxable income is a. P 400,000 b. P 350,000 c. P 700,000 d. P 650,000 13. If the taxpayer is a non-resident alien engage in trade or business in the Philippines, married and his country grants P 40,000 as a personal exemption for married individuals, his taxable income is a. P 400,000 b. P 360,000 c. P 700,000 d. P 660,000 14. If the taxpayer is a non-resident alien not engage in business in the Philippines, married and his country grants P 40,000 as a personal for married individuals, taxable income is a. P 800,000 b. P 400,000 c. P 360,000 d. P 350,000

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

BATCH 2019

15. Mr. Porras, married, left Philippines in the middle of the year on July 1, 2015 to go abroad and work there for two years, the following data were provided as of December 31,2015: (Assume all data from abroad only) Gross Income Expenses January 1 to June 30 P300,000 P100,000 July 1 to December 31 1,000,000 125,000 His taxable income is; ($1-P50) a. P150,000 c. P843,000 b. P1,403,000d. P0 16. Based on the above problem, but assuming he arrived from abroad on July 1,2015 to permanently resettle in the Philippines, after working abroad for 2 years, his taxable income as of December 31,2015 is: a. P168,000 c. P843,000 b. P1,025,000d. P825,000 17. If he did not leave Philippines at all, his taxable income is: a. P168,000 c. P843,000 b. P1,025,000d. None 18. Which of the following interest income derived within the Philippines is subject to basic income tax? a. Interest income from bank deposits b. Interest income from loans c. Interest income from deposit substitutes d. Interest income from trust funds 19. An instrument with a maturity period of ten (10) years was held by Juan (resident citizen) for two (2) years and was transferred to Smith (resident alien), who, in turn, held it for eight (8) years. The final withholding tax should as be: A. B. C. D. Juan - 20% final tax True False True False Smith - exempt True False False True 20. An instrument with a maturity period of ten (10) years was held by Smith (nonresident alien engage in trade or business) for three (3) years and transferred it to Juan, a resident citizen. Juan held it for two (2) years before subsequently transferring it to James (nonresident alien not engage in trade or business) who held it until the day of maturity. The final withholding tax are as follows: B. C. D. A. Smith - 12% final tax True True True True Juan - 20% final tax True True False False James - 5% True False False True 21. Which of the following interest income by a resident taxpayer is subject to 7 ½ % or 15 %? a. Interest income from peso bank deposits b. Interest income from deposit substitutes c. Interest income trust funds d. Interest income dollar deposit 22. A non-resident alien derived interest income from his bank deposit here in the Philippines under the FCDU system of a domestic bank. The interest amounted to $500. How much is the income tax due of the said alien? ($1 = Php50) a. P0 c. P8,000 b. P3,000d. P10,000 23. If an account in a depository bank under the foreign currency deposit system is jointly in the name of a nonresident citizen such as an overseas contract worker, or a Filipino seaman, and his spouse or dependent who is a resident of the Philippines, the interest on such deposit shall be: a. Exempted in its entirety. b. Subject to final withholding tax of 7 ½% in its entirety. c. 50% exempt and 50% subject to final withholding tax of 7 ½% d. Subject to regular income tax rates for Individuals. 24. Mr, X, a resident citizen, appoints Bank A—-Trust Department to manage his money created through a trust agreement. Bank A—Trust Department then invests said money in a long term investment (10-year corporate bond) of XYZ Corporation under the account name "Bank A - Trust Department", Mr, X did not withdraw his money from such trust agreement for at least five (5) years. The interest of Mr. X from the corresponding trust agreement is: a. Exempt from Income tax b. Subject to 15% preferential tax rate

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

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c. Subject to 20% final tax d. Subject to basic Income tax 25. Which of the following royalties earned within the Philippines is not subject to 10% final withholding tax? a. Royalties from computer software b. Royalties from books c. Royalties from literary works d. Royalties from musical compositions 26. The following taxpayers who received a dividend income from a domestic corporation will received net of 10% final withholding tax, except; a. Resident citizen b. Non-resident citizen c. Resident alien d. Non-resident alien engaged in trade or business 27. Which of the following cash and/or property dividends actually or constructively received by an individual shall not be subject to final tax but to regular income tax for individuals? a. Cash and/or property dividends from a domestic corporation or from a joint stock company b. Cash and/or property dividends from insurance or mutual fund companies c. Cash and/or property dividends from regional operating headquarters of multinational companies d. Cash and/or property dividends from a nonresident foreign corporation 28. Share in the net distributable income of a general co-partnership by a resident citizen is subject to: a. 10% final withholding tax b. 20% final withholding tax c. 6% capital gains tax d. Basic income tax 29. Share in the net distributable income of a general professional partnership by a resident citizen is subject to: a. 10% final withholding tax b. 20% final withholding tax c. 6% capital gains tax d. Basic income tax 30. If a non-resident citizen received his share in the income of a taxable joint venture, what type of income tax that will apply on the said income? a. Final withholding tax on passive income b. Capital gains tax c. Basic income tax d. Fringe benefit tax 31. Based on the preceding number, except that the joint venture is exempt from income tax, what type of income tax will apply on the said income? a. Final withholding tax on passive income b. Capital gains tax c. Basic Income Tax d. Fringe benefit tax Use the following data for the next two (2) questions Cliff is a self-employed and/or professional. He provided the following information for 2018 taxable year: Gross sales P 1,650,000 Cost of sales 500,000 Business expenses 425,000 Rental income (net) 308,750 Philippine charity sweepstakes winnings 500,000 Royalty income - books 120,000 Other royalty income - Philippines 60,000 Dividend income - domestic corporations 40,000 Interest income, BDO QC 100,000 Interest income received from a depository bank 50,000 under FCDS, Philippines Creditable withholding tax from business income 65,000 Quarterly tax payments 82,500 32. How much is the income tax payable of Cliff? a. P 9,500 b. P 10,500 c. P 57,500 d. P 205,000

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

BATCH 2019

33. How much is the income tax payable of Cliff assuming he opted to be taxed at 8% income tax rate? a. P 9,500 b. P 10,500 c. P 57,500 d. P 205,000 34. Cliff is deriving compensation and business income, He provided the following information for 2018 taxable year: Gross compensation income P 600,000 Gross sales 1,650,000 Cost of sales 500,000 Business expenses 425,000 Rental income (net) 308,750 Philippine charity sweepstakes winnings 500,000 Royalty income - books 120,000 Other royalty income - Philippines 60,000 Dividend income - domestic corporations 40,000 Interest income, BDO QC 100,000 Interest income received from a depository 50,000 bank under FCDS, Philippines Creditable withholding tax from business 65,000 income Quarterly tax payments 82,500 How a. P b. P c. P d. P

much is the income tax payable of Cliff assuming he opted to be taxed at 8% income tax rate? 89,500 90,500 57,500 205,000

35. Michael Cabarles, single, has the following income and expenses for the year 2018. He supports an eightyear-old illegitimate child. Professional Income, net of P60.000 P 540,000 withholding tax, Rental income (net) 47,500 Rewards as BIR informer 30,000 Wagering gains 50,000 Kickbacks received from suppliers of clients 40,000 Interest income on time deposit (net) 32,000 Dividend income from domestic corporations 75,000 Professional expenses 325,000 Household expenses, 24,000 Premium payment on health insurance 4,000 Facilitation fees paid to government agencies 15,000 Compute the amount of his taxable income subject to basic tax for 2018? a. P 325,000 b. P 340,000 c. P 415,000 d. P 445,000 Use the following data for the next three (3) questions: A resident citizen, married, with two (2) qualified dependent children has the following data for the year 2018: Gross sales, Philippines P 5,000,000 Sales returns and allowances, Philippines 500,000 Cost of sales, Philippines 1,500,000 Gross sales, Ukraine 3,000,000 Sales returns and allowances, Ukraine 200,000 Cost of sales, Ukraine 800,000 Business expenses, Philippines 500,000 Business expenses, Ukraine 300,000 Interest income, peso bank deposit BDO-Marikina 20,000 Interest income, US dollar deposit, BDO-Mandaluyong 50,000 Gain from sale of residential house and lot (selling price, P 3,000,000; FMV, time of sale, P5,000,000) Gain from sale of shares of stock listed and traded in the local stock exchange (selling price, P100,000) Gain from sale of shares of stock not traded in the local

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500,000 30,000 150,000

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UCP :TAX 06_ INCOME TAX ON INDIVIDUALS

BATCH 2019

stock exchange 36. How much is the total final tax on passive income? a. P 14,000 b. P 7,750 c. P 4,000 d. P 11,500 37. How much is the capital gains tax due? a. P 310,000 b. P 300,000 c. P 180,000 d. P 322,500 38. How much is the taxable net income? a. P 4,700,000 b. P 4,280,000 c. P 2,900,000 d. P 4,200,000 39. A taxpayer received during the taxable year 2018 the following passive income derived from within the Philippines: Interest on bank deposit under FCDU (net) P231,250 Royalty on a software application (gross) 95,000 Dividend income RFC (gross) 150,000 If taxpayer is a non-resident alien engaged in business, the final tax on the above passive income would amount to a. P59,809 c. P19,000 b. P67,750 d. P37,750 40. If the amount of prize received did not exceed P10,000, what type of income tax will apply? a. Final withholding tax on passive income b. Capital gains tax c. Basic income tax d. Fringe benefit tax 41. Which of the following transactions is subject to 6% capital gains tax: a. Sale of condominium units by a real estate dealer b. Sale of real property utilized for office use c. Sale of apartment houses ; d. Sale of vacant lot by an employee 42. Statement 1: Proceeds of sale of real property classified as capital asset may be exempt from the 6% capital gains tax Statement 2: Gain from sale of real property classified as capital asset to the Government may be taxed under Section 24 (A) at the option of the individual taxpayer. a. True, Truec. False, False b. True, Falsed. False, True 43. Larry sold his residential house for P5,000,000. Its FMV when he inherited it was P6,000,000 although its present FMV is P8,000,000. The tax on the above transaction is; a. P360,000 capital gains tax b. P480,000 capital gains tax c. 30% donor's tax d. Value added tax 44. But assuming that Larry used 1/4 of the proceeds of the said house to buy a new principal residence 10 days after the above sale and he properly informed BIR about it, the tax shall only be: a. P120,000 capital gains tax b. P240,000 capital gains tax c. P360,000 capital gains tax d. P480,000 capital gains tax 45. Based on the above problem, but assuming the residential house is located abroad, the capital gains tax is: a. P360,000 c. P120,000 b. P480,000 d. P0 46. Fringe benefit tax is computed based on: a. Grossed-up monetary value b. Monetary value

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