CHAPTER 3: Self-Test Exercises Flashcards
Instructions
Exercise Drill No. 2: Income tax and transfer tax Check the box where each of the following items is taxable:
Barter of properties
income tax
Sale of goods
income tax
Rendering of services
income tax
Donation of properties
transfer tax
Transfer of properties from a decedent to the heirs upon death
transfer tax
Transfer for less than full and adequate consideration
income tax, transfer tax
Instructions
Exercise Drill No. 3: The tax concept of income
Check the appropriate box whether the following are exempt or taxable:
Winnings from gambling
taxable
Income from swindling
taxable
Indemnity for moral damages
exempt
Harvested fruits from an orchard
exempt
Compensation income
taxable
Interest income
taxable
Amount received by the insured in excess of insurance premiums paid
taxable
Proceeds of life insurance received by the heirs of the insured
exempt
Gain on sale of goods by the home ofice ot its branch
exempt
Gain on sale of goods and services between relatives
taxable
Gain on sale of goods by a parent corporation to a subsidiary corporation
taxable
Appreciation in the value of land
exempt
Birth of animal offspring
exempt
Income of a registered Barangay Micro-Business Enterprise
exempt
Cancellation of debt out of gratuity of the creditor
exempt
Cancellation of debt by the creditor in exchange of services rendered by the debtor
taxable
Matured interest from coupon bonds
taxable
Receipt of bank loan
exempt
Salaries of a minimum wage earner
exempt
PCSO or lotto winnings
taxable
Benefits from GSIS, SSS, Pag-Ibig or PhilHealth
exempt
Discovery of hidden treasure
exempt
Instructions
Exercise Dril No. :4 Income taxpayer classification
Indicate hte appropriate classification for each of the following taxpayers:
DC - Domestic corporation
RC - Resident citizen
RFC - Resident foreign corporation
NRC - Non-resident citizen
NRFC - Non-resident foreign corporation RA - Resident alien
NRA-ETB - Non-resident alien engaged ni trade or business
NRA-NETB - Non-resident alien not engaged ni trade or business
NT - Not a taxpayer
A fat Mexican tourist
NRA-NETB
A hardworking overseas Filipino worker
NRC
An expatriate employee
NRA-ETB
A Filipino who is privately employed in the Philippines
RC
An unemployed Filipino residing in the Philippines
RC
A Chinese businessman who has his domicile in the Philippines for 6 months
NRA-ETB
A Japanese who married a beautiful Filipina and has been residing in the Philippines for 2 years
RA
A 2nd year Korean college student studying in the Philippines
RA
A corporation incorporated under Philippine law
DC
A foreign corporation doing business in the Philippines
RFC
Trust designated by the donor as irrevocable
RC
Trust designated by the donor as revocable
RC
A business partnership
DC
A joint venture organized under a foreign law and is not operating in the Philippines
NRFC
An estate of a Filipino citizen judicially administered in Japan
NRC
An estate of a Filipino citizen extra-judicially administered in the Philippines
RC
A taxable joint venture organized in the Philippines
DC
A non-profit corporation organized in the Philippines
DC
Instructions
Exercise Drill No. 5: General Income Tax Rule
Check hte box that properly corresponds ot the taxability of hte folowing taxpayers: world income or philippine income
Non-resident citizen
Philippine income
Resident alien
philippine income
Non-resident alien engaged in trade or business
philippine income
Resident foreign corporation
philippine income
Resident citizen
world income
Non-resident alien not engaged in business
philippine income
Non-resident foreign corporation
philippine income
Domestic corporation
world income
Taxable trusts established by a Filipino citizen in the Philippines
world income
Taxable estate of a non-resident citizen judicially administered abroad
philippine income
Instructions
Multiple Choice - Theory: Part 1
When paid for, which of the following items may involve a return on capital?
a. House and lot
b. Life
c. Dignity
d. Health
a
Which is not a requisite of gross income?
a. Return on capital
b. Realized benefit
c. Exempted by law
d. Not exempted by law
c
Which is taxable item of income?
a. Increase in numbers of a herd of animals
b. Compensation for personal injuries
c. Moral damages
d. Interest on moral damages
d
Which is not subject to income tax?
a. Donation
b. Sale of service
c. Sales of goods
d. Barter of goods
a
The total consideration received from the sale of service constitute
a. Return on capital
b. Return of capital
c. Either a or b
d. Both a and b
a
The total consideration received from the sale of goods at a gain represents
a. Return on capital
b. Return of capital
c. Either a or b
d. Both a and b
d
The total consideration received from the sale of goods at a loss represents
a. Return on capital
b. Return of capital
c. Either a or b
d. Both a and b
b
Why is income subject to taxation?
a. Income is the most prevalent source of a taxpayer’s wealth.
b. Income si the best measure of taxpayers’ ability to pay tax.
c. Rich people tend to have more income than the poor.
d. Any of these.
b
Income tax may be imposed for the following purposes, except
a. To provide large amounts of revenues
b. To limit corruption
c. To offset regressive sales and consumption taxes
d. To mitigate the evils arising from the inequalities ni the distribution of income and wealth
b
Which is not an item of gross income because of the absence of an undertaking from the taxpayer?
a. Proceeds of a life insurance policy
b. Forgiveness of indebtedness as an act of gratuity
c. Revaluation surplus on properties
d. Service fees
b
Which is subject to income tax?
a. Proceeds of life insurance policy received by the family of the insured
b. Excess of proceeds over the premiums paid received by the taxpayer
c. Life insurance proceeds received by the corporation from the insurance of a deceased officer
d. None of these
b
Which of the following is exempted from income taxation because of the absence of ability to pay?
a. Damages received from patent infringement suit
b. Unrealized income from investments
c. Gain on sale of goods
d. Inheritance
b
Which of the following constitutes taxable income?
a. Return of premium on life insurance received by the insured
b. Moral damages received from slander
c. Proceeds of crop insurance
d. Compensation for personal injury
c
Which is specifically exempted from income taxation by virtue of legal exemption?
a. Minimum wage
b. Gain on sale of prohibited drugs
c. Unrealized gain
d. All of these
a
Which of the following is not a constructive receipt of income?
a. Forgiveness of indebtedness in consideration of service
b. Matured detachable interest coupons
c. Deposit of income to taxpayer’s bank accounts
d. Cash salary of an employee
d
Transfers for insufficient consideration are subject to
a. Income tax
b. Transfer tax
c. Either a or b
d. Both a or b
d
Instructions
Multiple Choice - Theory: Part 2
Which of the following is not an income taxpayer classification?
a. Resident citizen
b. Non-resident alien
c. Resident foreign corporation
d. General professional partnership
d
A resident alien naturalized in accordance with Philippine laws is a
a. Resident citizen
b. Resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
a
Who is not a resident alien?
a. An alien who stayed in the Philippines for more than two years.
b. An alien who married and stayed in the Philippines for one year.
c. An alien who stayed in the Philippines for more than one year.
d. An alien who established his intention before the CIR to stay in the Philippines for an extended period of time.
b
Which taxpayer is not a natural person?
a. Resident citizen
b. Taxable estate
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
b
AFilipino who has been abroad for more than 183 days is classified as a
a. Resident alien
b. Non-resident alien
c. Non-resident citizen
d. Non-resident citizen not engaged in trade or business
c
An alien who stayed less than one year in the Philippines is classified as a non-resident alien not engaged in trade or business if he stayed herein for less than
a. 180 days
b. 1year
c. 183 days
d. 2years
a
An American who showed proof to the satisfaction of the Commissioner fo Internal Revenue of his intention to stay in the Philippines as an immigrant is classified as a
a. Resident citizen
b. Resident alien
c. NRA - ETB
d. NRA - NETB
b
A Japanese who is staying in the Philippines for 183 days is a
a. Resident alien
b. Non-resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged ni trade or business
c
A canadian who is staying ni the Philippines for more than one year is a
a. Resident alien
b. Non-resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
a
A corporation incorporated according to Philippines laws is a
a. Domestic corporation
b. Resident corporation
c. Non-resident corporation
d. De jure corporation
a
Aforeign corporation which is not authorized to conduct business in the Philippines is a
a. Domestic corporation
b. Resident corporation
c. Non-resident corporation
d. De jure corporation
c
Which is taxable on world income?
a. Resident corporation
b. Non-resident citizen
c. Resident citizen
d. Resident alien
c
Aforeign corporation which operates a branch in the Philippines is a
a. Domestic corporation
b. Resident corporation
c. Non-resident corporation
d. De jure corporation
b
A partnership which dominantly operates business abroad is a
a. Domestic corporation
b. Resident corporation
c. Non-resident corporation
d. De jure corporation
a
Which is required to pay income tax?
a. Revocable trusts
b. Estates under extrajudicial settlement
c. Co-ownership
d. Business partnership
d
Which is not an income taxpayer?
a. Non-resident foreign corporation
b. Non-resident alien not engaged in trade or business
c. Joint venture engaged in energy operation pursuant to a service contract with the government
d. Irrevocable trusts
c
Which of the following taxpayers is taxable only on income earned from the Philippines?
a. Resident corporation
b. Domestic corporation
c. Resident citizen
d. All of these
a
All of the following are taxable only on income earned from sources within the Philippines, except
a. Resident alien
b. Non-resident citizen
c. Non-resident corporation
d. Domestic corporation
d
Instructions
Multiple Chocie -Theory: Part 3
The place of taxation is
a. Situs rule
b. Situs
c. Territoriality
d. Gross income
b
Genesis, a non-resident citizen, lent money to Shino, a resident Chinese. The indebtedness was collateralized by a property located in Japan. The interest income is earned in
a. the Philippines.
b. China.
c. Japan.
d. Japan, China and the Philippines.
b
Which is an incorrect statement regarding situs of income?
a. Service income is earned in the domicile of the taxpayer.
b. Interest income is earned in the residence of the debtor.
c. Royalty si earned where the intangible is employed.
d. Rent is earned in the location of the property.
a
Which statement is correct regarding situs of income?
a. The gain on the sale of real property is earned in the location of the property.
b. The gain on sale of any property is earned in the place of sale.
c. Merchandising income is earned in the residence of the proprietor.
d. Manufacturing income is earned in the place of sale
a
Gains on the sale of goods manufactured and sold by the taxpayer within the Philippines is subject to tax
a. wherever sold.
b. if sold abroad only.
c. Without the Philippines only.
d. within the Philippines only.
d
Jan, a resident alien, bought a car manufactured in the Philippines and exported the same at a gain to Carla, a non-resident citizen. Which is correct?
a. The gain is subject to tax in the Philippines since the commodity involved si manufactured in the Philippines.
b. The gain is subject to tax in the Philippines since the buyer is a citizen of the Philippines.
c. The gain is both subject to tax in the Philippines and abroad since the commodity involved is manufactured in the Philippines.
d. The gain is taxable in the Philippines since it is sold in the Philippines.
d
Juan, a resident alien, and Pedro, a non-resident alien, executed a contract of sale in Japan whereby Pedro shall purchase the lot owned by Juan ni the Philippines. Juan gains P1,000,000 in the exchange.
Which is true?
a. The gain is exempt since the gain is derived outside the Philippines.
b. The gain is not subject to Philippine tax since Juan is a resident alien.
c. The gain is subject to Philippine tax because Juan is a resident alien.
d. The gain is subject to Philippine tax because the property is in the Philippines.
d
