TAX DEDUCTION, EXCLUSION, CREDIT

Question 1

It refers to a flow of wealth to the
taxpayer which are not treated as
part of gross income, for purposes of
computing the taxpayer’s taxable
income,

Answer 1

Tax Exclusions

Question 2

It refers to amounts which the law
allows to be deducted from gross
income in order to arrive at net
income.

Answer 2

Tax Deductions

Question 3

It refers to foreign taxes paid
beforehand but are claimed as credits
against Philippine income tax to arrive
at the tax due and payable.

Answer 3

Tax Credit

Question 4

Under Exclusion (Retirement Benefits, Pensions, Gratuities, Etc.)
If there is a reasonable benefit plan:

Answer 4

a. The employee must have been in the service of the employer for 10 years
b. The employee must not be less than 50 years of age at the time of retirement
c. Availed once

Question 5

Taxpayers who cannot avail of deductions from Gross Income

Answer 5

a. Citizens and resident aliens whose income is purely compensation income
b. Non-resident aliens not engaged in trade or business in the Philippines
c. Non-resident foreign corporations

Question 6

Under Exclusion (Retirement Benefits, Pensions, Gratuities, Etc.)
If there is NO reasonable benefit plan:

Answer 6

a. The employee must have been in the service of the employer for 5 years
b. The employee must be 60 years of age but not beyond 65 at the time of retirement

Question 7

This refers to the privilege or immunity form a tax burden which others are subject to:

Answer 7

Tax Holiday

Question 8

Which of the following is a passive income but is nevertheless subject to regular tax by virtue of exclusion under final income taxation?
A. Prizes amounting to 10K
B. Service Income
C. Merchandising Income
D. Dividends from domestic corporations

Answer 8

A

Question 9

Which is a correct statement regarding exclusion in gross income?
a.They are included in gross income subject to regular income tax
b.They are ignored in the determination of gross income
c.They are presented in gross income but are presented as deductions
d.They are subject to final tax

Answer 9

D. They are subject to final tax

Question 10

Statement 1: items of passive income from abroad are subject to regular income tax. Statement
2: items of passive income from the Philippines are generally subject to final income tax.
Which statement is correct?

Answer 10

BOTH STATEMENTS

Question 11

Which is not a feature of regular income tax?
a.It generally applies to all items of gross not subject to final tax
b.Creditable withholding tax
c.Gross income tax
d.Accounting period

Answer 11

C

Question 12

Deductions from gross income are
A. Personal Expenses
B. Business Expenses
C. Either A or B
D. Neither A or B

Answer 12

B.

Question 13

Which of the following statement distinguishes deductions from exclusions from gross income?
a.Deductions can be claimed by citizens while P250,000 income exemption cannot be claimed by aliens
b.Deduction are outflows from gross incomes while exclusions are not outflows from gross income
c.Both deductions and exclusions are deducted from gross income.
d. All of these

Answer 13

B

Question 14

Which corporate taxpayer is not subject to regular income tax?
a.Non-resident foreign corporation
b.Domestic corporation
c.Resident foreign corporation
d.Business partnership

Answer 14

A

Question 15

Which is correct with respect to exclusions from gross income?
a.They are included as part of gross income but are subsequently deducted
b.They are not included in gross income but are added to taxable income
c.They are not considered in the computation of taxable income
d.They are synonymous with deductions

Answer 15

C

Question 16

Which is correct with respect to deductions from gross income?
a.They pertain to expenses of generating items of business or professional gross income
b.They are excluded from the determination of taxable income
c.They include all expenses incurred in the generation of any income
d.They include P250,000 annual income exemption

Answer 16

A

Question 17

Which constitute a taxable item of gross income?
a.Compensation for personal injuries
b.Gain from sale in mutual funds
c.Gain from sale of government bonds
d. income exempt under treaty

Answer 17

C

Question 18

The proceeds of an insurance policy received by the corporation as beneficiary on the life of its officer is
a. A gift
b.A taxable income
c.An inheritance
d.Exempt from income tax

Answer 18

D

Question 19

Mr. buguey was insured in a life insurance with his daughter, ybon, as the irrevocable beneficiary. Ybon was paid the entire proceeds when Mr. buguey died. The proceeds constitute
a.A taxable inheritance
b.A taxable gift
c.A taxable income
d.An exclusion from gross income

Answer 19

D

Question 20

A widow who collected the life insurance proceeds of her decease husband is
a.Exempt to the entire amount of the proceeds
b.Taxable to the excess of the proceeds over the premiums paid by the husband
c.Taxable to the excess of the proceeds over the premiums paid by the widow
d.Exempt with respect to the portion of the proceeds representing returns of a premium

Answer 20

A

Question 21

Which is not requisite of exemption of a retirement benefit plan?
a.10 years of employment
b.The employer maintains a reasonable pension
c.The retiree must be a senior citizen
d.First time availment of retirement exemption

Answer 21

C

Question 22

Termination benefits are exempt from income tax provided that the reason for termination is
A. Beyond the employee’s control
B. Within the employer’s control
C. Within the employee’s control
D. Beyond the employer’s control

Answer 22

A