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3. Which of the following passive income is taxed on an annual and net basis?
a. Capital gain on sale of domestic stocks directly to buyer
b. Capital gain on sale of domestic stocks through the Philippine Stock Exchange
c. Capital gain on sale of real property classified as capital asset
d. Capital gain on sale of real property classified as ordinary asset
4. Capital gain on the sale of which capital asset below is conclusively presumed
a. Real property used in business c. Personal property not used in business
b. Real property not used in business d. Personal property used in business
6. Which is taxed at the lowest final tax rate among the following passive income?
a. Interest income received from a depositary bank under the expanded foreign currency
deposit system received by a resident citizen
b. Cash dividend from a domestic corporation
c. Royalties from books and other literary works
d. Interest income from long-term deposit with maturity of over five years
7. All of the following are subject to 7 % final tax on interest on FCDU Deposit, except
a. Resident citizen d. Domestic corporation
b. Non-resident citizen e. Resident corporation
c. Resident alien
9. Ambiong Bank of Baguio started operation in 1995 with the following information on results
of operation and dividend declarations.
Year Net income Dividends declared
1996 P -
500,000
1997 1,500,000 -
1998 2,000,000 -
1999 1,000,000 -
2000 2,500,000 P 6,500,000
How much tax must have been paid in the 2000 dividend declaration of Ambiong Bank?
a. P650,000 b. P390,000 c. P450,000 d. P0
11. Interest income from foreign currency deposits made abroad by a resident citizen is subject
to
a. 20% final tax b. 7 % final tax c. 4 % final tax d. regular tax
13. The interest income on long-term deposit that is pre-terminated on the third year is subject
to
a. 0% b. 12% c. 20% d. 5%
14. Armando is a partner in a business partnership. At the end of 2010, he has a total of
P300,000 profit sharing on the after tax income of the partnership inclusive of P120,000
salaries as a managing partner. Compute the amount final tax to be withheld from
Armandos profit sharing.
Saint Paul School of Professional Studies
Final Examination in Taxation
a. P12,000 c. P30,000
b. P18,000 d. P 0
15. Final taxes are generally withheld at source and does not require an income tax return,
which is an exception
a. Final tax on interest income from deposit
b. Final tax on royalties
c. Final tax on capital gain on sale of domestic shares of stock directly to buyer
d. Final tax on dividends
19. On January 1, 2008, Kevin purchased 1,000 P1,000 face value bonds of a domestic
corporation at face value. The bonds were dated January 1, 2007 and mature on January 1,
2011. The bonds pay 12% annual interest every January 1. If Kevin disposed of this
investment directly to buyer on December 31, 2008 at 102, how much is the total final tax
due?
a. P24,000 b. P25,000 c. P1,000 d. P0
20. On January 1, 2005, Helen invested P1,000,000 to RCBC Commercial Banks 5-year, tax-free
time deposit. The long-term deposit pays 15% annual interest every January 1. In need of
cash, Helen pre-terminated her investment on July 1, 2008. How much is the final tax due
and the proceeds of Helens investment?
a. P9,000; P1,066,000 c. P18,750; P1,056,250
b. P63,000; P1,012,000 d. P30,000; P1,345,000
21. How much final tax is withheld in the interest income paid by the bank on January 1, 2006?
a. P0 b. P18,000 c. P30,000 d. P7,500
22. Assuming the same information in the problem above, except that the investment was
made by a domestic corporation, how much final tax is withheld in the year of pre-
termination and the proceeds to the corporation?
a. P15,000; P1,060,000 c. P18,750; P1,056,250
b. P45,000; P1,030,000 d. P30,000; P1,345,000
21. Andromeda, a non-resident alien, invests in the 60-day Peso time deposit of Metro Pilipino
Bank. Andromeda earned P100,000 interest income. How much final tax should Metro
Pilipino Bank withhold?
a. P 0 b. P20,000 c. P25,000 d. P 30,000
22. Assuming the same information in the preceding problem except that Andromeda is a non-
resident corporation. How much final tax is to be withheld?
Saint Paul School of Professional Studies
Final Examination in Taxation
a. P 0 b. P20,000 c. P25,000 d. P 30,000
23. Andromeda, a non-resident alien, deposited $100,000 in the FCDU unit of Universal Bank, a
resident foreign bank. During the period, Andromeda earned $1,000 total interest. The
relevant exchange rate between the Peso and the Dollar was P50:$1. How much final tax
should Metro Pilipino Bank withhold?
b. P50,000 b. P100,000 c. P125,000 d. P 0
24. Sunrise Bank, a non-resident foreign bank, has substantial foreign currency deposit at the
FCDU unit of Banco Italiano, a resident foreign bank, totaling $5,000,000. Total interest
credited to Sunrise Bank was $600,000 equivalent to P28,800,000 at the time of payment.
How much is the final tax on the interest received by Sunrise Bank?
a. P10,080,000 b. P5,760,000 c. P2,880,000 d. Exempt
25. The system of tax compliance wherein the employees does not have to make computations
nor file an income tax return at the end of the year
a. Final withholding tax scheme c. Substituted Filing of Tax Returns
b. Creditable withholding tax scheme d. Self-Assessment Method
26. The substituted Filing of Tax Return is applicable where (choose the exception)
a. The employee earns pure compensation income
b. The employee has only one employer
c. The tax withheld by the employer is correct
d. The employee is also engaged in the exercise of a profession
27. Creditable withholding tax rates shall not be less than ____ but not more than ____
a. 5%; 20% c. 1%; 32%
b. 1%; 20% d. 2%; 15%
30. The return for final withholding tax by withholding agent shall be filed not later than
a. 20 days from the close of each calendar quarter
b. 25 days from the close of each calendar quarter
c. 23 days from the close of each calendar quarter
d. 60 days from the close of each calendar quarter
Saint Paul School of Professional Studies
Final Examination in Taxation
31. The process by which the sovereign raises income to defray the expenses of the
government is called
a. Subsidy c. Taxation
b. Tariff d. Tribute
32. One of the characteristics of internal revenue tax is that they are
a. Criminal in nature c. Penal in nature
b. Political in nature d. Generally prospective in application
33. In case of conflict between tax laws and generally accepted accounting principles (GAAP)
a. Both tax laws and GAAP shall be enforced c. GAAP shall prevail over tax laws
b. Tax laws shall prevail over GAAP d. The issue shall be resolved by the court
36. A tax reform at any given time underscores the fact that taxation is a/an
a. Inherent power of the state c. Essentially a legislative power
b. Power that is very broad d. State can and should adopt progressive
taxation
37. The legislative body can impose a tax at any amount underscores the legal truism that
taxation is
a. An inherent power of the tax c. very broad power of the state
b. Essentially a legislative power d. for public purpose
38. Under this basic principle of sound tax system, the government should not incur a deficit
a. Theoretical justice c. fiscal adequacy
b. Administrative feasibility d. None of the above
39. A feasibility study needs or need to look into the taxes of different political subdivisions of
government which may be alternative sites of the business
Saint Paul School of Professional Studies
Final Examination in Taxation
a. Provinces, cities and municipalities must have uniform taxes between and among
themselves
b. The local taxes of a political subdivision need not be uniform with the local taxes of
another political subdivision
c. Business that are subject to national taxes are exempted from local business taxes.
d. Local business taxes may be credited against national business taxes
43. The personal exemption of the nonresident alien engaged in trade or business in the
Philippines is equal to that allowed by:
a. The income tax law of his country to a citizen of the Philippines not residing therein
b. Income tax law of his country to a citizen of the Philippines not residing there or the
amount provided by the NIRC to a citizen or resident, whichever is lower
c. The NIRC to a citizen or resident
d. The income tax law of his country allows to a citizen of the Philippines not residing there
or the amount provided by the NIRC to a citizen or resident alien, whichever is higher.
Saint Paul School of Professional Studies
Final Examination in Taxation
44. A nonresident alien deriving income from Philippine sources claims that he is entitled to
personal exemptions. Which of the following is not a condition for the allowance of
personal exemptions to said nonresident alien?
a. The taxpayer stayed in the Philippines for an aggregate period of more than 180 days
b. His country has an income tax law that allows personal exemptions to Filipinos not
residing therein
c. That He has filed a true and accurate return of his total income from all sources within
the Philippines
d. Taxpayer is married to a Filipinos
45. Statement 1: If the taxpayer dies during the taxable year, his estate may still claim the
personal and additional exemptions for himself and his dependent as if he died at the close
of such year.
Statement 2: If the spouse or any of the dependents dies or if any of such dependents
marries, becomes twenty one (21) years old or becomes gainfully employed during the
taxable year, the taxpayer may still claim the same exemptions as if the spouse or any of the
dependents died, or as if such dependents married, became twenty one (21) years or
became gainfully employed at the close of such year.
a. Only statement 1 is correct c. Both Statements are incorrect
b. Only Statement 2 is correct d. Both statements are correct
47. All requirements for services performed by an employee for his employer, whether paid in
cash or in kind, not specially exempted under the Tax Code are known as:
a. Gross business income; c. Gross compensation income;
b. Gross professional income; d. Passive income;
50. In computing gain or loss from the sale of other disposition of property acquired as gift or
donation, the basis of cost shall be:
a. The fair market value as the date of acquisition;
b. The purchase price plus expenses of acquisition;
c. The latest inventory value;
d. The same as it would be in the hands of the donor;