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FALLARCUNA, ERIKCA MAE Y. BSA 2 - 2FERMIN, ALYSSA MAE G.CHAPTER 9 – REGULAR INCOME TAX: INCLUSION IN GROSS INCOMETRUE OR FALSE 1 Items of gross income subject to regular income tax and capital gains tax are reportable to the government. Rent is a passive income, but is not subject to final tax. The ...

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FALLARCUNA, ERIKCA MAE Y. FERMIN, ALYSSA MAE G.

BSA 2-2

CHAPTER 9 – REGULAR INCOME TAX: INCLUSION IN GROSS INCOME TRUE OR FALSE 1 1. 2. 3. 4. 5.

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Items of gross income subject to regular income tax a gains tax a re reportab le to the government. Rent is a passive income, but is not subject to fina l tax. The interest income fro m bonds i ssued by banks is s final tax. Gains from dealings in capital assets are generall y the regular income tax . The gross income from operations enjoying a t ax holiday a in gross income subject t o regul ar tax, but ar e pr deduc tions in the inco me tax return. The share in a bu siness pa rtnership is subject to final ta share in a general professional partnersh ip is subj ect income tax. Gains from dealings in ordinary assets are subject to regu tax. Items of passive royalty inco me a re subject to final while items of active royalty income are subje ct to regu tax. Compensation income is an in clusion in gross income regular tax except compensation inco me of s pecia l aliens. The reportable gross income from business or the ex a profession is net of the cost of goods sold or co st of s Items of i ncome which are inc luded in gross income subjec tax are exc luded in gross in come subject to regular income Imput ed interest income is an it em of gross income regul ar income t ax. Advanced rentals are income in the year received. Real prope rty tax and insurance on the property if ass u the lessee constitute income t ax to t he lessor. Corporate winnings are exclusion in gross income; hence exempt from income tax. Stock dividends a re never subject to income tax. Pensions or retirement benefits are inclusions in gr subject to regular income t ax if the employee is termina any cause within his control. Prizes in athletic competitions san ctioned by t he government are exc lusions in gross income subje ct to fina are inclusions in gross income subject to regular income t Corporate prizes are exclusions in gross income subject to but are inclusions in gross income subject to regular inco Stock splits are never sub ject to income t ax.

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The share f rom the net income of a joint ventu re organized subject to 10% final withholding t ax. Income distribution f rom taxable estates and trusts is an in gross income subject to regular tax by the heir or bene The recovery of past deduction must be reverted back to g of taxpayers using the cash ba sis. The recovery of bad debts need not be reve rted back to gr of taxpayers using cash ba sis. The recovery of deduction from an exempt year is subject t General professional pa rtnerships ar e not exempt from regu but are sub ject to final t ax and capital gains t ax. An indebtedness cancell ed by the creditor out of mercy is to the debtor. When there is a net loss in the period the dedu ction is subsequent recove ry of the deduction will not have any tax The refund or recovery of non-deduc tibl e t axes shall not b back to gross income. The loss of the partne rship can be claimed by the as deduction in their income tax return, The accoun ting period of the taxpa yer has a direct impa the amount of gross income to be reported. The power of the CIR to redistribute in come and expens e in power to impute income between affiliated enterpris es. The situs of taxation has an impact on the extent of t he gross income. Creditable withholding taxes are added back t o the of reportab le gross income. The output VA T must be included as part of the gross inc taxpayers. The requirement to revert back to gr oss income the amount withheld taxes applied only to VAT taxpayers. Generally, all ti mes of income NRA-NETB and NRFC s fro m the Philipp ines are inclusion s in gross income subject to fina The taxpayer must enter into an ad vanced pricing agreemen BIR for its cross-borde r t ransfer pricing w ith associated enterprises. Transfer pricing between associated en terprises must be ma length. The transfer pric ing regulations apply on ly to c ross-borde tr ansfers o f goods and services between ass oci at ed ent erpr Corporation s under the direct and indirect control of same controlling individual or corpora tion are associated enterprises. Under the accrual ba sis of account ing, items of gross reported in the period the y are re ceived. Basically, transfer pricing ad just men t i s needed when income reported for Ph ilipp ine t axation is understated.

MULTIPLE CHOICE – THEORY: PART 1

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c. Pa ssive royalty income d. Cap ital gain on the sale of dom estic socks Which is no t an item of gross income subject to final tax? a. Di vidends f rom a domestic corporation b. Pr izes in excess of P10 ,000 by an individual c. Sha re in the income of a genera l professional partne rsh d. Wi nnings Which of these employee benefits i s subject to fina l tax? a. Fringe benefit s to rank and file employees b. Regular pay of supervisory and managerial employees c. Fringe benefit s t o supervisory and managerial employees d. Regular pay of rank and file em ployees All of these are items of gross inc ome subject to regular one. Select the exception. a. Co mpensation income b. Interest incom e from long-term bank deposits c. Ordinary gain on sale of proper ties d. Interest on notes receivables Which is an income exempt from income tax? a. Income of a general professional partne rship b. Foreign dividends c. Taxes collected by the government d. Income of government-owned and controll ed corporations All of these are subject to regular income tax except a. Pr ofessional f ees b. Wages and commissions c. Bu siness income d. Cap ital gain from the sale of real property locat Ph ilippines Which is exempt from regular tax? a. Income f rom construction b. Income of quali fied pension plans c. Income f rom merchandising or t rading d. Income f rom financing or leasing Which item of gross income is not subject t o regular tax? a. Interest incom e from foreign bank deposits b. Cap ital gain on sale of bonds w ith more than 5 years ma c. Gain on sale of domestic stocks by a security dealer d. Cap ital gain on sale of patent Which is no t part of compensation income subject to regula a. Di rector’s f ees b. Bonuses and fixed allowances c. Po rtion of salary contributed t o SSS d. Po rtion of salary used to pay salary loans Which is i ncluded in the g ross inc ome subject to regula a resident alien? a. Gross income from the sale of goods abroad b. Interest incom e from promissory notes of resident clien c Interest income from relatives ab road

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Dividends subject t o regular tax i ncludes a. Foreign dividends c. Both a and b b. Do mestic dividends d. Neither a nor b Statement 1: All prizes earned abroad are subject to regul Statement 2: All prizes in the Philippine s are subject to Which statement is generally correct ? a. St atement 1 c. Both statements 1 & 2 b. St atement 2 d. Neither statement is t Which is an item of gross income subject to regular tax? a. Lottery winnings f rom abroad b. Imputed intere st income c. Ad vanced rent representing securi ty deposit f or conting ma y or may not happen d. Leasehold improvements with useful life not extending lease terms. Which of t he following is not subj ect to regular tax o domestic corporation o r resident citizen? a. Deposit intere st income from abroad b. Pr ize no t exceeding P10 ,000 from the Philippines c. Income f rom abroad exempt under t reaty d. Ro yalties from abroad Which is subject to regular tax to a non-re sident foreign corporation or non-resident alien not engaged in trade or b a. Bu siness incom e in the Philippine s b. Cap ital gain from the sale of s tocks directly to a the Philippines c. Di vidends f rom domestic corpora tions d. None of these Which is subject to regular tax t o a resident foreign corp a. Se rvice fees abroad b. Gain from sale of real property capital assets in the P c. Di vidends f rom a domestic corporation d. Gain from deali ngs in property abroad. The proceeds of the life insurance received by the wife of ensured is a. Ex empt from income tax c. Pa rt of taxable income b. Sub ject to final tax d. Partly exempt and part

MULTIPLE CHOICE – THEORY: PART 2 1.

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Which of the following will not be reported in gross incom a. Re ceipt of inheritance b. Sha re in the net income of a f oreign partnership c. Ro yalties from foreign sources d. Income distribution from a taxable estate Which is no t a reportable type of gross income? a Pa ssive royalties

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d. Farming income All income earned abroad that final taxes id earned within the progressive tax of a a. Do mestic corporation c. b. Re sident citizen d. All items of passive income ear ned to a. Re sident citiz en only.

would othe rwi se be s Philippines shall be Resident aliens All taxpayers abroad are subject to

b. A domestic corporation only. c. A resident citizens and domestic corpo rations. d. All taxpayers. Which individual t axpayer is not s ubject to progress ive ta a. NRA-ETB c. Resident a lien b. Spe cial aliens d. Resident citizen Which corpo rate taxpayer is not subject to regular tax? a. Domestic corporation c. Bu sine ss-partnership b. Re sident corporation d. Non-resident foreign co Individual taxpay ers shall report their income on a. a fiscal year. c. either fiscal or calend b. a calendar year. d. a crop y ear. Corporation s are allowed t o report their income on a. a fiscal year. c. either fiscal or calend b. a calendar year. d. a crop y ear. Which is subject to progressive ta x to an individual taxpa a. Pr oceeds of life insurance policy b. Gift c. Am ounts receiv ed by the insured in excess of premiums p d. Co mpensation f or personal injur ies Which of these is sub ject to Philippine regular in co me foreigner? a. Ren t income on properties located abroad b. Di vidend incom e from a domestic corporation c. Interest incom e on a deposit ab road d. Interest income from do mestic bonds If not covered by t he substitut ed filing syst em, employed taxpayers shall report the ir regular income a. mon thly. c. quarterly. b. annually. d. quarterly and annually. Corporation s and individuals engaged in business or in th of a profession are required to report the ir regula r incom a. monthly. c. quarterly. b. annually. d. quarterly and annually. Which is incorrect concerning transactions between enterprises? a. Transactions between related pa rties should not be cont b. Pr icing should be determined by f ree market forces. c. Pr icing should be motivated by the need to save fro m to tax

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A VAT taxpa yer collected P66,600, inclusive o f P7,200 VAT P600 withholding tax. Compute the gross i nc ome subje income tax. a. P 59,400 c. P 66,000 d. P 60,000 b. P 67,200 A non-VAT t axpa yer collected P79,200, ne t of 1% withho What is the amount subject to regular income tax? c. P 80,000 a. P 71,351 b. P 71,429 d. P 79,200 A VAT t axpa yer taxpayer received P45,900 incl usive of VAT 10% cred itable withhold ing tax. Compute the gross inc ome regular tax. a. P 45,000 c. P 45,536 d. P 51,000 b. P 45,900 A non-VAT taxpayer received P8,000 i nterest income, ne t of withholding tax. Compute t he amount subject to regular inc a. P 0 c. P 8,000 d. P 10,000 b. P 6,400 A VAT-registered taxpayer received P 18 ,000 dividend, net o final withhold ing tax. Compute t he amount subject to r egul tax. a. P 0 c. P 17,857 d. P 20,000 b. P 17,647 A resident foreign corporate t axpayer entered into a pricing agr eemen t (APA ) with the BIR with respect to the its expor t sales t o a f oreign country. A mark-up ratio of cost is set in the APA. During the y ear, the manuf actured goods c osting P12,000,000 and exported 8 production to its foreign affiliate at a pri ce of P12,000,0 What is the amount of gross income s ubject to Philippine t a. P2,000,000 c. P2,400,000 d. P6,000,000 b. P4,800,000 Ms. Nene Gosio registered a manufac turing business as a B from tax. She also owns another taxable business which is the trading of goods. Ms. Gosio ordered her BMBE busine its production to her t rading business at ultimate sales p You were tasked by your audi t supervisor to conduct pricing eva luation of Ms. Gosio's busine sses. Based study, you de termined that the r etail profit rate of trading businesses with s imilar operations involvi goods is 40%. During the year, the trading bus ines total purc hases of P400,000 from the BMBE and sold 75% of P500,000. What is t he gross income of the trading business to be su regular income tax following the a rms' length principle? c P 200 000 a P 0...