GI and Capital Gains

Question 1

Which of the following statement/s is/are true?

Statement I: The classification of asset or property as ordinary asset or capital asset depends upon the nature of the taxpayer’s business and its usage by the business.

Statement II: Non-profit entities are not considered as businesses.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 1

C

Question 2

Which of the following statement/s is/are true?

Statement I: Real properties used by an exempt corporation in its exempt operations are considered capital assets.

Statement II: Properties classified as ordinary assets for being used in business by all taxpayers are automatically converted to capital assets upon showing of proof that the same have not been used in business for more than 2 years prior to the consummation of the taxable transaction involving such property.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 2

A

Question 3

Which of the following interest income is subject to regular income tax?

a. Interest income from local currency bank deposit
b. Imputed interest income
c. Interest income from notes receivable
d. None of the above

Answer 3

C

Question 4

Which of the following statement/s is/are true?

Statement I: Income tax situs of service fees is in the place where the service is being rendered.

Statement II: Income tax situs of the gain on sale of goods is in the place of sale.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 4

C

Question 5

Which of the following taxpayers should pay the 6% capital gains tax?

a. Real property developer
b. Security dealer
c. Realty property dealer
d. None of the above

Answer 5

D

Question 6

Which of the following is/are not an additional rental income to the lessor?

a. Unrestricted advance rentals
b. Obligations of the lessor that are assumed by the lessee
c. Advance rental as a security deposit
d. All of the above

Answer 6

C

Question 7

Alice sold her stocks in a foreign corporation costing P2,800,000 directly to a buyer for P3,500,000. The stocks have fair value of P4,000,000 at the date of sale. The capital gains tax due of Alice is:

a. P45,000
b. P750,000
c. P195,000
d.P0

Answer 7

D

Question 8

Which of the following income is exempt from regular income tax?

a. Income from financing or leasing
b. Income from merchandising or trading
c. Income from excess annuity payments received
d. Income from qualified pension plans

Answer 8

D

Question 9

Which of the following statement/s is/are false?

Statement I: All business assets of the taxpayers are considered as ordinary assets.

Statement II: All personal assets of the individual taxpayers are considered as capital assets.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 9

A

Question 10

Why is income subject to taxation?

a. Income is the best measure of taxpayers’ ability to pay tax.
b. Income is the most prevalent source of taxpayers’ wealth
c. Rich people tend to have more income than the poor
d. None of these

Answer 10

A

Question 11

Which of the following statement/s is/are true?

Statement I: The sale, exchange, and other disposition of real property as capital assets in the Philippines is subject to a tax of 6% of the selling price.

Statement II: The sale, exchange, and other disposition of domestic stocks directly to the buyer is subject to a tax of 15% of the net capital gain.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 11

B

Question 12

What BIR form should be used in filing the 6% capital gains tax?

a. 1707
b. 1706A
c. 1707A
d. 1706

Answer 12

D

Question 13

Which of the following prizes and winnings is/are subject to income tax?

a. Winnings from PCSO games, exceeding P10,000
b. Prizes received without effort to join a contest
c. Prizes in athletic competitions sanctioned by their respective national sports association
d. None of the above

Answer 13

A

Question 14

Alice received the following winnings in 2023. Which of the following is subject to regular income tax?

a. P8,000 PCSO winnings
b. P1,000,000 Lotto winnings
c. P6,000 prize in singing contest
d. P25,000 prize in poster-making contest

Answer 14

C

Question 15

Which of the following is an ordinary asset?

1/1
a. Office supplies
b. Principal residence of the taxpayer
c. Home appliances
d. None of the above

Answer 15

A

Question 16

Which of the following is/are item/s of gross income subject to regular income tax?

a. Active royalty income
b. Prizes amounting to P10,000 and below
c. Property dividends received from a foreign corporation
d. All of the above

Answer 16

D

Question 17

Alice, a stock dealer, sold domestic stocks costing P3,700,000 directly to a buyer for P4,000,000. The stocks have fair value of P5,000,000 at the date of sale. The capital gains tax due of Alice is:

a. P45,000
b. P750,000
c. P195,000
d.P0

Answer 17

D

Question 18

Which of the following dealings in property is subject to regular income tax?

a. Sale of real property located in the Philippines classified as capital asset
b. Sale of shares in a domestic corporation sold outside the Philippine Stock Exchange
c. Sale of ordinary assets
d. None of the choices

Answer 18

C

Question 19

Which of the following statement/s is/are false?

Statement I: The sale of domestic stocks directly to a buyer within or outside the Philippines is subject to 15% capital gains tax.

Statement II: The 6% capital gains tax should be computed on the sale or other disposition of real properties regardless whether it resulted to net income or net loss.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

Answer 19

D

Question 20

Alice sold her principal residence in the Philippines which had a cost of P4,800,000, was sold for P7,500,000 at the time when the fair market value was P8,200,000. The capital gains tax is:

a. P450,000
b. P162,000
c. P492,000
d.P0

Answer 20

C

Question 21

Alice purchased a life annuity for P110,000 which will pay her P10,000 a year. The life expectancy of Alice is 12 years. Which of the following will Alice be able to include in her gross income?

a. P10,000
b. P20,000
c. P100,000
d.P0

Answer 21

A

Question 22

Which is a requisite of gross income?

a. Return of capital
b. Realized or receipt of gain
c. Exempted by law
d. None of the above

Answer 22

B

Question 23

Income, for tax purposes:

I. Is recognized in the year it is actually received in cash or cash equivalent

II. Means all income from whatever source (legal or illegal), unless specifically excluded under the Tax Code.

III. Means all wealth which flows into the taxpayer including return of capital.

a. I, II, and III
b. I and II only
c. I and III only
d. II only

Answer 23

B

Question 24

Alice leased his land to Risa for two years, beginning January 2023. Risa would pay monthly rental of P100,000. She paid rent up to June 2023 and then defaulted for the rest of the year. How much was the income of Alice for 2023?

a. P200,000
b. P400,000
c. P600,000
d.P0

Answer 24

C

Question 25

The annual 15% capital gains tax return is to be filed

a. on or before the 15th day of the fourth month following the taxpayer’s year-end
b. within 30 days from the end of the month of sale
c. on or before the 15th day of the fourth month following the close of the quarter when the sale was made
d. within 30 days from the date of sale or exchange

Answer 25

A

Question 26

The following may subject to 15% capital gains tax, except:

a. Domestic corporations dealing in real properties
b. Non-resident citizen dealer of mobile phones
c. Resident alien dealers of vehicle parts
d. Resident citizen dealers of stocks

Answer 26

D