CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
Subject: Income Taxation
Midterm Examination
(Last Name, First Name, MI)
Name: Section: Score
Teacher: Exam Date: 40
Instruction: Please read each question carefully and circle the correct answer for each one. Use a pen to mark
your answers, ensuring that they are legible. No erasures are allowed. Remember to keep your eyes on your own
paper and do not share answers with others.
1. All of the following statements are correct, except one. Which is the exception?
A. The source of interest income is the country where the debtor resides
B. The source of dividend income is the country where the corporation was incorporated
C. Rents are considered derived from the country where the property is located
D. Income from personal services is considered derived from the country where the services were
rendered.
2. Which is not a creditable withholding income tax?
A. Expanded withholding income tax
B. Withholding income tax on passive income
C. Withholding income tax at source
D. Withholding income tax on compensation income
3. As a rule, the following are taxable income, except
A. Cash dividend
B. Scrip dividend
C. Property dividend
D. Stock dividend
4. Exclusions from gross income, except:
A. Interest on the price of the land covered by the Presidential Decree on land reform.
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
B. Interest payments on proceeds of life insurance held by the insurer
C. GSIS/SSS, Philhealth and Pag-ibig contributions and Union dues of individuals
D. Gains realized by an investor upon redemption of shares of stock in a mutual fund company.
5. A non-resident alien engaged in trade of business won in a 6/42 lotto draw conducted last April 15, 2021
amounting to P100,000,000.00. What is the tax consequence of such event?
a. The winnings is exempt from income tax
b. The winnings is subject to graduated rate
c. The winnings is subject to 20% final withholding tax
d. The winnings is subject to 25% final withholding tax
6. Based on the preceding number, suppose the taxpayer is a non-resident alien not engaged in trade or
business, what is the applicable tax?
a. The winnings is exempt from income tax
b. The winnings is subject to graduated rate
c. The winnings is subject to 20% final withholding tax
d. The winnings is subject to 25% final withholding tax
7. Income derived by a depository bank under the expanded foreign currency deposit system from foreign
currency transactions with local commercial banks, shall be subject to a final tax rate of:
a. Seven and one-half percent (7 ½%)
b. Twenty percent (20%)
c. Ten percent (10%)
d. Fifteen percent (15%)
8. Which of the following items that reduces salaries of employee is not an exclusion from gross income?
a. GSIS or SSS Contribution
b. Pag-ibig Contribution
c. Labor Union Dues
CMDI – Midterm Examination -Income Taxation Page 2
CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
d. None of the above
9. Share in the net distributable income of a general professional partnership by a resident citizen is subject
to:
a. 10% final withholding tax
b. 20% final withholding tax
c. 6% capital gains tax
d. Regular income tax at 0% to 35%
10. The following taxpayers who received a dividend income from a domestic corporation will receive net of
10% final withholding tax, except
a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien engaged in trade or business
11. Tonton deposited P300,000,000 pesos of his lotto winnings with the Bank of the Philippine islands.
Uncertain on which investment should he devote the money, he decided to temporarily deposit his
winnings with the said bank. His interest income from the said deposit will be subjected to:
a. 10% final tax
b. 20% final tax
c. added to his gross income and subjected to 0%-35% tax
d. Exemption from income tax
12. The following income are subject to final tax, except:
a. Royalty income received by a domestic corporation from another domestic corporation.
b. Cash dividend received by a domestic corporation from a resident foreign corporation.
c. Cash dividends received by a domestic corporation from another domestic corporation.
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
d. Interest income received by a resident foreign corporation from a Philippine bank.
13. On January 1 of the current taxable year, Mr. Bong Gha lends Php 50, 000 to his officemate with interest
of 12% per annum payable within six months. The interest income subject to Final Tax is ?
a. 9,000
b. 6,000
c. 3,000
d. Zero
14. Mr. Adams, a resident citizen, earned the following during the current taxable year:
Interest income on a savings account in the Philippines: PHP 80,000
Interest income on a time deposit account in Australia: PHP 150,000
Interest income on notes receivable from customers in the Philippines: PHP 15,000
As a resident citizen, how much of Mr. Adams' total interest income is subject to final tax?
a. PHP 95,000
b. PHP 230,000
c. PHP 80,000
d. PHP 150,000
15. Based on the preceding number, how much of Mr. Adams' total interest income is subject to final tax if he
is a non-resident citizen?
a. PHP 95,000
b. PHP 0
c. PHP 80,000
d. PHP 15,000
16. A self-employed individual, married, received the following dividends during the 2019 taxable year:
Cash dividend from Alpha Company (domestic corporation): PHP 250,000
Cash dividend from Bravo Company (resident foreign corporation): PHP 100,000
The income data related to Bravo Company for a three-year period before declaration of dividends were as
follows:
Gross income derived from Philippines, Php 1, 200, 000
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
Gross income derived from Singapore, Php 1, 800, 000
What is the total gross taxable income subject to final income tax for the resident citizen for the 2019
taxable year?
a. PHP 250,000
b. PHP 290,000
c. PHP 350,000
d. PHP 100,000
17. Given the same income sources for the year 2019, what is the final income tax due for the non-resident
alien not engage in trade or business for the 2019 taxable year?
a. PHP 25,000
b. PHP 62,500
c. PHP 50,000
d. PHP 10,000
18. If a resident citizen wins a passive income prize from within the Philippines, what is the applicable tax
rate?
a. 0%
b. 10%
c. 20%
d. 25%
19. Which of the following prizes or winnings is subject to a 20% final withholding tax (FWT)?
a. Winnings from the PCSO amounting to PHP 8,000
b. Prizes from under national sports competition
c. Winnings from a lottery amounting to PHP 15,000
d. None of the above
20. Under the guidelines, which of the following prizes must be subject to final income tax?
a. Winnings from the Philippine Charity Sweepstakes Office (PCSO) amounting to PHP 12,000
b. Cash prize from an international sports competition sanctioned by Philippine Sport Commission
amounting to PHP 20,000
c. Prizes from a local talent contest amounting to PHP 5,000
d. Winnings from a raffle draw conducted by a local charity amounting to PHP 8,000
21. Which of the following statements is not correct?
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
A. Minimum wage earners shall be exempt from the payment of income tax
B. Holiday pay, overtime pay, night shift differential and hazard pay shall be exempt from income
tax
C. Prizes and awards granted to athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national sports associations are
exclusions from gross income
D. Benefits received from or enjoyed under the Social Security System are exclusions from Gross Income
22/ One of the following is taxable income
A. Gifts, bequests and devices
B. Amounts received as rewards for giving information instrumental in the discovery of violation of
the Tax Code and seizure of smuggled goods.
C. Proceeds from life insurance
D. Separation pay received by an employee due to a cause beyond his control
23. As a rule, this is not part of taxable income
A. Overtime pay
B. 13 month pay
C. Profit sharing
D. Hazard pay
24. This is a taxable income
A. Separation pay due to resignation
B. Retrenchment pay
C. Refund of Philippine Income Tax
D. SSS/ GSIS benefits
25. The following items are exclusions from gross income, except
A. labor union dues
B. IOUs
C. SSS/GSIS premiums contributions
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
D. Pag-ibig premiums contributions
26. Dividends paid by a domestic corporation maybe taxable but subject to final tax, except.
A. if received by a resident citizen
B if received by a non-resident corporation
C. if received by a resident alien
D. if received by another domestic corporation
27. A works as a minimum wage earner in an advertising firm in Makati. During the year, she received
P10,000 a month as salary or a total of P120,000. In addition, she also received 13 month pay, Christmas
bonus, productivity bonus, midyear bonus and 14" month pay amounting to P90,000. The total deductions
for her SSS premiums, Medicare, Pag-ibig, and Union dues contributions amounted to P5,000. A's taxable
income,
a. P70,000 b. P65,000 c. P95,000 d. P0
28. Exclusions from gross income, except:
A. interest on the price of the land covered by the Presidential Decree on land reform
B. Interest payments on proceeds of life insurance held by the insurer.
C. GSIS, SSS, Philhealth and Pag-ibig contributions and Union dues of individuals.
D. Gains realized by an investor upon redemption of shares of stock in a mutual fund company.
29. A purchased a life annuity for P1,000,000 which will pay him P100,000 a year. The life expectancy of A is
12 years. Which of the following will A be able to exclude from his income?
a. P1,000,000 b. P1,200,000 c. P200,000 d.P100,000
30. Mr. Juanito had the following income in 2018:
Compensation income Php 300,000 ( net of P77,000 SSS, PhilHealth, HDMF and union dues)
Supplemental compensation income 30,000
13th month pay and other benefits 25,000
What is the gross taxable compensation income?
A. P352,000 B. P325,000 C. P280,000 D. P330,000
31. An employee received the following remunerations aside from the basic pay:
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
Fixed representation and transportation allowance P 24,000
Night shift differential pay 12,000 Hazard pay 12,000
Honoraria 8,000
Profit sharing 24,000
13th month pay 18,000
Compute the gross taxable compensation income.
A. P68,000 C. P44,000 B. P56,000 D. P80,000
32. It refers to income received or earned but is not taxable as income because it is exempted by law or by
treaty.
A. Exclusion B. Inclusion C. Deduction D. Taxation
33. First Statement: Tax free income is not to be included in the income tax return unless information
regarding it is specifically called for
Second Statement: While exclusions are simply not taken into account in determining gross income,
deductions are subtracted from gross income to arrive at net income.
A. Both statements are correct
B. Both statement are incorrect
C. Only the first statement is correct
D. Only the second statement is correct
34. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievement, shall be excluded from gross income, but only if the recipient:
I – is selected without any action on his part to enter the contest or proceeding.
II – is not required to render substantial future services as a condition to receiving such prize or award.
A. Both I and II are correct
B. Neither I nor II is correct
C. Only I is correct
D. Only II is correct
35. Department of Finance grants its employees 20 days’ sick leave for the whole year. Such sick leave may
be converted into cash before the end of the year. Nicanor, one of its rank-and-file employees, who is
earning a rate of P 600 per day, monetized his unused sick leave of P 6,600 at the end of the year. The
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
whole amount of P 6,600 monetized unused vacation is:
S1: Part of Nicanor’s taxable compensation.
S2: Partly treated taxable compensation and partly exempt from income tax.
a. Only S1 is true b. Only S2 is true c. Both are true d. Both are false
36. Nicanor, a non-resident citizen residing in United State of America, deposited $5,000 in ABC Bank, a
local bank authorized by the Banko Sentral ng Pilipinas (BSP) to engage in foreign-currency denominated
transactions.
S1: If the deposited money earns $20 interest income, the interest income is subject to 15% final tax.
S2: If the deposited money earns P1,000 interest income, the interest income is subject to 20% final tax.
a. Only S1 is true b. Only S2 is true c. Both are true d. Both are false
37. One of the following is not a requisite of a taxable income.
a. There must be gain.
b. The gain must be realized or received.
c. The gain must not be excluded by law from taxation.
d. The gain must be that of resident or nonresident citizen.
38. Under this system, the amount of income tax withheld by the withholding agent is constituted as a full and
final payment of the income tax due from the payee on the said income.
a. Creditable withholding tax
b. Final withholding tax
c. Global tax system
d. Schedular tax system
39. Which of the following passive income is not subject to 20% final withholding tax. As a general rule,
which of the following passive income of resident citizen?
a. Interest from any peso bank deposit
b. Yield or any other monetary benefit from deposit substitutes and from trust funds and similar
arrangements
c. Prizes (except prizes amounting to P10,000 or less)
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CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City
d. Royalties on books, as well as other literary works and musical compositions
De minimis benefit pertaining to monetized value of vacation and sick leave credits paid to government
officials and employees is limited to:
40.
a. 10 days b. 15 days c. 20 days d. None of choices
END OF EXAM
Proverbs 16:3 (NIV)
"Commit to the Lord whatever you do, and he will establish your plans."
CMDI – Midterm Examination -Income Taxation Page 10
