# On January 1 2014.
Lorna invested P1,000,000 to BDO's 5-
year, tax-free time deposit. The long-term deposit pays 10%
annual interest every January 1. In need of cash, Lorna pre
terminated her investment on July 1, 2017. How much is the final
tax due? (ANSWER: ₽ 42,000)
# It arises as when two or more heirs or beneficiaries inherit and
undivided property from a decedent, or when a donor makes a gift
of an undivided property in favor of two or more donees
ANSWER: Co-ownership
# Which of the following interest income derived within the
Philippines is subject to basic income tax?
ANSWER: Interest income from loans
# Pedro, Juan and Antonio are heirs of Luna who died on
November 1, 2017. The properties of Luna comprised solely of
real property valued at P50, 000,000 at the time of his death. The
property is subject to lease earning rental income. During 2018,
the property remained undivided and it derived a net rental
income of P15, 000,000.
*What amount should each heir report in their individual returns
as their share in the net rental income of the property they
inherited in 2018? (₽ 5,000,000)
*For income tax purposes, the heirs will be tax on net rental
income from the inherited property for the year 2018 as:
(Co-owners)
*What amount should be reported as taxable income of the co-
ownership in 2018? (₽ 0)
# Namahinga Nah died leaving an estate worth P10, 000,000.
The estate is under administration. In 2018 the properties in the
estate earned a gross income of P600, 000 and the estate
incurred expenses of P150, 000. Francis one of the heirs,
received P120, 000 from the 2018.
*Compute of income of the estate. Income tax payable of estate.
(16,000)
*Assume that Francis also earned net income of P500, 000 from
his trading business. What amount should Francis report as his
taxable income for 2018? (₽ 570,000)
*What amount should Francis report as his taxable income for
2018? Compute the income tax payable of francis. (85,000)
# Lebron James (NRANETB) received royalty fee from Viva
Records Corporation, a domestic corpora for his musical
compositions under the album "Whatever it Takes". James is an
Amell composer and has never set foot in the Philippines.
ANSWER: 25% FWT
# Which of the following income of an individual taxpayer is
subject to final tax? ANSWER: D
a. P10,000 prize in Manila won by a resident citizen.
b. Dividend received by a resident citizen from a resident foreign
corporation.
c. Shares in the net income of a general professional partnership received
by a resident citizen.
d. Dividend received by a non-resident alien from a domestic corporation.
# When their parents died, Romeo and Juliet inherited five (5)
hectares of land in Isabela. They decided to invest capital and
developed the land into a subdivision being sold either on
installment or cash basis
Q1: Is a partnership created by Romeo and Juliet?
Q2: Are they subject to final tax on their respective share in the
income
ANSWER: Yes, Yes
#On January 1, 2018, Binat established a trust fund for the benefit
of his comrade, Lagnat appointed Atty. Sipon as the trustee. The
property transferred to the trust is a piece of land with a dormitory
earning rental income. During the year, the trust earned P40,
000,000 revenues and incurred expenses of P10, 000,000. Out of
the trust's income, Atty. Sipon gave Mar P10, 000,000 cash. In
the same year, Mar earned compensation income of P3, 000,000.
* The taxable income of Lagnat is (₽ 13,000,000)
* The taxable income of the trust is (₽ 20,000,000)
# TG Partnership reported for a year net profit from trading
amounting to P800,000. The other income included interest
income of P8,000, net of 20% final withholding tax, and dividend
income from domestic corporation of P20,000. Assuming T and G
share profits and losses equally, how much is the final withholding
tax on the distributive share of T in the earnings of that
partnership?
ANSWER: ₽ 29,400
# If the amount of prize received did not exceed P10.000, what
type of income tax will apply?
ANSWER: Basic income tax
# A general professional partnership is exempt from income tax,
but is required to file an income tax return
ANSWER: B. Because the net income of the partnership will be
traced into the income tax return of the partners.
# Which of the following statements is correct? ANSWER: A
a. Interest income on bank deposit or investment with maturity period of at
least five years is exempt from income tax.
b. Interest income on treasury-bond with maturity period of at least five (5)
years is
c. The tax exemption on long term bank deposit or investment extends to
all types of taxpayers.
d. All of the above
# Which of the following statements is not correct? ANSWER: D
a. Interest income from long term deposit is exempt from income tax.
b. Winnings from Philippine Charity Sweepstakes prior to 2018 taxable year
are exempt from income tax.
c. Royalties on books, literary works and musical compositions are subject
to 10% non creditable withholding tax.
d. A prize of P10,000 is subject to 20% final tax.
# Which of the following statements is wrong? ANSWER: A
a. A general partnership in trade is not taxable as a corporation.
b. A joint venture for undertaking construction projects is not taxable as a
corporation.
c. A consortium for energy operations pursuant to an operating consortium
agreement under a service contract with the government is not taxable as a
corporation.
d. A co-ownership where the activities of the co-owners are limited to the
preservation of property and collection of income from the property is not
taxable as a corporation.
# A non-resident alien not engaged in trade or business derived
P50.000 interest income I his long-term bank deposit here in the
Philippines. How much is the income tax due said alien?
ANSWER: ₽ 12,500
# Which of the following statements about interest income from
long-term deposit is false? ANSWER: C
a. Interest income from long-term deposit or investment is exempt from
income tax.
b. If a long-term deposit or investment is pre-terminated, the applicable tax
rate on the interest income is 0% if the holding period is 5 years or more.
c. If a long-term deposit is pre-terminated, the applicable tax rate on the
interest income is 0% if the holding period is 4 years to less than 5 years.
d. If a long-term deposit is pre-terminated, the applicable tax rate on the
interest income is 12% if the holding period is 3 years to less than 4 years.
# Statement 1: Where the estate is under judicial administration,
the income of the estate shall be taxable to the fiduciary or
trustee.
Statement 2: Where the estate is not under judicial administration,
the income of the estate shall be taxable to the heirs and
beneficiaries
ANSWER: Statements 1 and 2 are true
# Statement 1: Any income of nonresident individual taxpayers
from transactions with depository banks under the expanded
foreign currency deposit system shall be exempt from income tax.
Statement 2: Any income of nonresident individual taxpayers from
transactions with offshore banking units shall be exempt from
income tax. ANSWER: BOTH STATEMENTS ARE CORRECT
# Statement 1: The amount of income of the estate for the taxable
year, which is properly paid or credited during such year to any
legatee, heir, or beneficiary, is a special item of deduction from
the gross income of the estate. Statement 2: An allowance paid to
a widow or heir out of the corpus of the estate, is not deductible
from the gross income of the estate.
ANSWER: STATEMENTS 1 & 2 ARE TRUE
# Statement 1: A GPP shall not be subject to Income Tax.
Statement 2. Income payments to a GPP shall be considered
exempt from withholding tax
ANSWER: Statements 1 and 2 are true
# Statement 1: The share of the partner in the gross income of the
GPP is added to his own gross income.
Statement 2: The share of the partner in the net income of a GPP
is also considered passive income.
ANSWER: Statement 1 is true but statement 2 is false
# Statement 1: Co-ownership and partnership are similar as to
taxability,
Statement 2: Corporations and ordinary partnerships are similar
as to taxability.
ANSWER: Statement 1 is false but Statement 2 is true
# For purposes of taxation, partnership is
I. Classified into two major categories, partnership in trade and
general professional partnership.
II. Partnership in trade is treated as corporate taxpayer.
III. General professional partnership is exempt from income tax
ANSWER: I, II and III
# 1st statement: Taxable income from self-employment (business
and profession) is reported on a quarterly and annual basis. 2nd
statement: The quarterly income tax return shall be filed and the
tax paid as follows: 1st Q - not later than April 15, 2nd Q - not
later than August 15, 3rd Q - not later than September 15.
ANSWER: statement 1 is true but statement 2 is false
# Statement 1: All royalty income derived from sources within the
Philippines are subject to final withholding tax.
Statement 2: All royalty income derived from sources outside of
the Philippines received by resident citizens are subject to basic
income tax.
ANSWER: Both statements are correct
# Statement 1: When an estate under administration has income
purchasing properties the annual income of the estate becomes
part of the taxable gross estate.
Statement 2: When an estate under administrative has income
purchasing properties and its income during the year is distributed
to the heirs as part of the gross income for the year
ANSWER: Statements 1 & 2 are false
# Statement 1: For purposes of computing the distributive share
of the partners of a general professional partnership, the net
income of the partnership shall be computed in the same manner
as a corporation.
Statement 2: Partners of a taxable partnership are considered as
shareholders and profits distributed to them by the partnership are
considered as dividends.
ANSWER: Statements 1 and 2 are true
# Statement 1: A CPA and a Dentist may form a GPP or an
ordinary partnership.
Statement 2: Partnership and Corporation have separate juridical
personalities from the owners.
ANSWER: Statement 1is false but statement 2 is true
# Statement 1: A Partner of a GPP is not required to include in his
personal gross income his share in the distributable income of the
GPP Statement 2: Corporations may form a taxable partnership
but not a GPP.
ANSWER: Statements 1 and 2 are false
# Statement 1: All partnerships are taxed in the same manner as
corporation
Statement 2: The income of a general commercial partnership is
also subject Regular Corporate Income Tax whichever is
applicable.
ANSWER: C. Statement 1 is false but statement 2 is true
# TGT & Co. is a general partnership in trade and on its fifth year
of operations. During current taxable year, it had a gross profit
from sales and business expenses P2,000,000 and P1,000,000,
respectively. T, G, and T share equally in the profits a losses of
the partnership.
*The income tax due of the partnership is: (300,000)
*The income tax payable of the partners as a consequence of
being a partner in the Partnership is: ( ₽ 0)
# 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
years. The interest of Mr. X from the corresponding trust
agreement is... ANSWER (subject to 20% final tax)
# Mr. Notiwala created a trust naming his eldest son. Kadudaduda
as beneficiary if the eldest son could not abide with the terms
provided in the trust instrument. Mr. Notiwala has the power to
cancel the trust agreement. For the current taxable year (2018),
the trust earned a net income before personal exemptions of
P1.000.000. on the other hand, the grantor earned a
compensation income of P1,500,000and business income of
P1,000,000. how much is the taxable income of Mr. Notiwala?
ANSWER: ₽ 3,500,00
# Mr. Nag-aalangan created a trust naming his eldest son.
Kadudaduda as beneficiary if the eldest son could not abide with
the terms provided in the trust instrument. Mr. Nag-aalangan has
the power to cancel the trust agreement. For the current taxable
year (2018), the trust earned a net income before personal
exemptions of P1.000.000. on the other hand, the grantor earned
a compensation income of P1,500,000and business income of
P1,000,000. The taxable income of the trust is
ANSWER: nil
# If an account in a depository bank under the foreign currency
deposit system is jommy" 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 assume 2018 taxable year
ANSWER: 50% exempt and 50% subject to final withholding tax
of 15%
# A taxable partnership may be subject to the following taxes:
I. Minimum corporate income tax
II. Regular corporate income tax
III. Improperly accumulated earnings tax.
ANSWER: I and II only
# Pedro and Ana contributed money and purchased five (5)
hectares of land in 2017. In the same year, they sold the land a
higher price. In 2018 they bought a bigger parcel and sold it after
three (3) months at double the price. They paid the corresponding
capital gains taxes.
Q1: Have they formed an unregistered partnership subject to
tax?
Q2: Are their respective shares in the income taxable to them?
ANSWER: NO, YES
# On January 1, 2016, Pedro purchased at face value 1,000
P1,000 face value bonds of San Miguel Corporation, a domestic
corporation. The bonds were dated January 1, 2016 and mature
on January 1, 2028. The bonds pay 10% annual interest every
December 31. Pedro sold the investment directly to Juan on
December 31, 2018 at 102. Which of the following statements is
true?
ANSWER: (D. The gain on sale is subject to basic income tax)
# A non-resident alien derived interest income only in 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)
ANSWER: (₽ 0)
# The partner's share in the profits of a general professional
partnership is regarded as received by the partners although not
yet distributed. This concept of income reporting under the Tax
Code is known as:
ANSWER: Constructive receipt basis of reporting income
# Which of the following passive income is exempt from tax when
received by resident or citizen and nonresident aliens engaged in
trade or business in the Philippines but subject to 25% final tax
when received by nonresident aliens not engaged in trade or
business?
ANSWER: B. Interest income from long term deposit or
instrument evidenced by certificates prescribed by Bangko Sentra
ng Pilipinas
# Which of the following shall not be subject to the 20% final tax
a. Amount of interest from any currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust funds and similar
arrangements
b. Winnings other than Philippine Charity Sweepstakes and Lotto winnings,
regardless of amount
c. Philippine Charity Sweepstakes and Lotto winnings exceeding P10,000
d. Prizes amounting to ten thousand pesos (P10,000) or less
ANSWER: D
#Which of the following royalties earned within the Philippines is
not subject to 10% final withholding tax? ANSWER: A
a. Royalties from computer software
b. Royalties from books
c. Royalties from literary works
d. Royalties from musical compositions
