Tarlac State University

College of Business and Accountancy

Tax 1

QUIZ 2

NAME: SCORE:
SECTION:

General instruction: Any form of erasure will invalidate your answer. Use uppercase only. Use of friction
pen/pencil is not allowed.

I. TRUE OR FALSE. Write PAK if the statement is correct, GANERN if the statement is wrong.
1. Net capital loss carry over is not applicable to corporations.
2. Capital assets become ordinary assets if used in business.
3. The capital gains on sale of land located outside the Philippines of a resident foreign corporation is
subject to a capital gains tax based on the selling price or fair market value, whichever is higher.
4. The 6% capital gains tax can be computed by multiplying the rate to the selling price or zonal value or
assessed value whichever is higher.
5. Resident alien is an individual who is residing in the Philippines but is not a citizen thereof.
6. Passive income earned outside the Philippines by a resident citizen is exempt in income taxation.
7. A vacant and unused lot is a capital asset of a real estate developer.
8. Citizen staying abroad for a period of at least 183 days are considered non- resident.
9. Estates under judicial settlement are treated as individual taxpayers.
10. Dealers in securities are subject to 6% capital gains tax.
11. GPP is a partnership formed for the exercise of a common profession.
12. Rule of holding period is not applicable to corporations.
13. The sale of foreign stocks directly to buyer is subject to capital gains tax.
14. Items of passive income from abroad are subject to final tax.
15. Final tax is collected at source; hence there is a need to file income tax return.

II. MULTIPLE CHOICE. Write your answer on the space provided before the number.
1. A Filipino who is abroad for more than 183 days
a. Resident alien
b. Non-resident alien
c. Non-resident citizen
d. Non- resident citizen not engaged in trade or business
2. A Japanese who is staying in the Philippines for 183 days
a. Resident alien
b. Non-resident alien
c. Non- resident citizen engaged in trade or business
d. Non- resident citizen not engaged in trade or business
3. An alien who stayed less than one year in the Philippines is classified as non-resident alien not engaged
in trade or business if he stayed herein for less than
a. 180 days b. 1 year c. 183 days d. 2 years
4. Which of the following taxpayers is taxable only on income earned from the Philippines?
a. Resident Corporation c. Resident Citizen
b. Domestic Corporation d. All of these
5. A non-resident citizen, arrived in the Philippines on July 1, 2000 to reside here permanently after
working as a nurse in the United States of America for many years. Which of the following statements is
correct with respect to Mrs. A’s classification for income tax purposes?
a. Shall be classified as non-resident citizen for the year 2000 with respect to her income derived
from sources abroad from January 1, 2000 until the date of her arrival in the Philippines.
b. She shall be classified as non-resident citizen for the whole year of 2000.
c. She shall be classified as resident citizen for the whole year of 2000.
d. She shall be classified as neither resident nor non-resident citizen for the year 2000.
6. Anktryd Inc. Bought a parcel of land in 2009 for P7M as part of its inventory of real properties. In 2010,
it sold the land for 12M which was its zonal valuation. In the same year, it incurred a loss of 6M for
selling another parcel of land in its inventory. These were the only transactions it had in its real estate
business. Which of the following is the applicable tax treatment?
a. Anktryd shall be subject to a tax of 6% of 12M.
 b. Anktryd could deduct its P6M loss from its P5M gain.
c. Anktryd’s gain of P5M shall be subject to the holding period.
d. Anktryd’s P6M loss could not be deducted from its P5M gain.
7. C, an American singer was engaged to sing for one week at the Western Philippine Plaza after which she
returned to USA. For income tax purposes, she shall be classified as:
a. Resident Alien
b. Non Resident Alien engaged in trade or business
c. Non Resident Alien not engaged in trade or business
d. Non Resident Citizen
8. Sheldren Inc. bought a parcel of land in 2009 for P7M as part of its inventory of real properties. In 2010,
it sold the land for 12M which was its zonal valuation. In the same year, it incurred a loss of 6M for
selling another parcel of land in its inventory. These were the only transactions it had in its real estate
business. Which of the following is the applicable tax treatment?
a. Sheldren shall be subject to a tax of 6% of 12M.
b. Sheldren could deduct its P6M loss from its P5M gain.
c. Sheldren’s gain of P5M shall be subject to the holding period.
d. Sheldren’s P6M loss could not be deducted from its P5M gain.
9. A sale of principal residence to purchase a new principal residence shall be exempt from tax if done:
a. Once every 10 years and reported to BIR within 18 months from sale.
b. Once every 18 years and reported to BIR within 18 months from sale.
c. Once every 10 years and reported to BIR within 2 months from sale.
d. Once every 10 years and reported to BIR within 1 months from sale.
10. Which of the following on income of an individual taxpayer is subject to final tax?
a. P10,000 prize in Manila won by resident citizen
b. Dividend received by a resident citizen from a resident corporation.
c. Dividend received by a non-resident alien from a domestic corporation.
d. Share in the net income of a general professional partnership received by a resident alien.
11. Passive income includes income derived from an activity in which the earner does not have any
substantial participation. This type of income is
a. Usually subject to final tax c. Taxable only if earned by a citizen
b. Exempt from income taxation d. Included in the income taxation.
12. F sold his residential house to Ms P for P5M. Its FMV when he inherited it was P6M although its
present FMV is P8M. the tax on above transaction is:
a. 360,000 CGT b. 480,000 CGT c. 300,000 CGT d. 0
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. Which is not subject to 20% final tax?
a. Interest income from trust funds c. P11,000 worth of prizes
b. Royalties from musical composition d. Winnings
15. Which is not subject to 10% final tax?
a. Royalties from literary works
b. Dividends from a domestic corporation
c. Share in the net income of a business partnership
d. Royalties from a business trademark
16. Erna earned the following prizes from two different competitions:
DATE EVENT GROSS PRIZE
January 4, 2011 Singing competition P12,000
February 14, 2011 Painting competition P10,000
How much is the final tax due?
a. 5,500 b. 4,400 c. 3,000 d. 10,000
17. Patricia, a resident citizen, had the following incidental income in 2015:
Interest on Philippine currency bank deposit P 40,000
Lotto winnings 2,000
Prize won in Showtime 5,000
Royalty from musical compositions 80,000
Dividend from domestic corporation 60,000
How much is the total final taxes?
a. 22,000 b. 23,400 c. 30,000 d. 31,400
18. The transactional 15% capital gains tax is to be paid
a. Within 30 days from the end of month of sale
b. Within 30 days from the date of sale or exchange
 c. On or before the 15th day of the fourth month following the close of the quarter when the sale was
made.
d. On or before the 15th day of the fourth month following the taxpayer’s year end.
19. The BIR form used to file capital gains transaction from sale of securities directly to buyer
a. 1601-E b. 1706 c. 1707-A d. 1707
20. The BIR form used to file capital gains transaction from sale of real properties not used in business
a. 1601-E b. 1706 c. 1707-A d. 1707
Items 21 through 22 are based on the following information:
Luis sold for P10,000,000 his residential land in Manila (FMV is P12,000,000).
21. If Luis utilized all of the P10,000,000 in buying a house and lot to be used as his new principal
residence, the final tax due from Luis is:
a. P720,000 b. P600,000 c. P120,000 d. P0
22. If Luis utilized only P7,000,000 of the proceeds of the sale in acquiring a new principal residence, the
final tax due from Luis is:
a. P720,000 b. P216,000 c. P180,000 d. P0

23. Ligaya sold 1,500 shares of her stock investment in a domestic corporation. The par value per share was
P85 but were acquired by her at P90. On the date of sale, the shares had a selling price of P120 per
share. The capital gains tax on the sale if the shares are not listed and traded in the Philippine Stock
Exchange is:
a. P1,080 b. P2,250 c. P4,500 d. P6,750

Items 24 through 25 are based on the following information:

Hershe, a non-resident citizen, received the following income in 2023:
Within Without
Interest income on bank savings deposit P20, 000 P10, 000
Cash dividend 30,000 20,000
Prizes 8,000 10,000
Lotto Winnings 50,000 10,000
Royalty - books 30,000 20,000
Royalty - invention 40,000 30,000
Interest on foreign currency deposit 10,000 20,000
Sale of land held for not more than 12 months as capital asset 400,000 200,000
24. Gross Income of Hershe subject to regular income tax is?
a. P560,000 b. P468,000 c. P568,000 d. P618,000
25. Gross Income of Hershe subject to regular income tax is?
a. P560,000 b. P468,000 c. P568,000 d. P618,000

III. TAX RATES. Indicate the tax rate that applies to each of the following income.
TAX RATE

Interest Income from long term bank deposits received by a resident citizen
Interest Income from an expanded foreign currency deposit system of a resident foreign corporation
Royalties on musical composition received by a non resident alien not engaged in trade or business
Cash dividends from a domestic corporation received by a resident foreign corporation.
Sale of real property not used in business located in the Philippines by a domestic corporation
Royalties received by a non resident alien engaged in trade or business
Prize won on Wowowee amounting to P10,000 received by a non resident citizen
Sale of shares not listed and not traded sold directly to buyer
Lotto winnings amounting to P8,000 received by a domestic corporation
Interest income on a Philippine bank deposit received by a resident alien.