Master Income Taxation: Key Concepts and Exam Preparation
School
American International Christian School**We aren't endorsed by this school
Course
ACC 216
Subject
Accounting
Date
Dec 11, 2024
Pages
4
Uploaded by MegaCaterpillarMaster384
Income TaxationReviewer- Comprehensive Exam 1MULTIPLE CHOICE: Theories1. Which is not part of compensation income subject toregular tax?a.Director's feesb.Bonuses and fixed allowancesc.Portion of salary contributed to SSSd.Portion of salary used to pay salary loans2. Which of the following deductions from grosscompensation income is included as part of gross Incomesubject to regular tax?a.Pag-ibig Contributionsb.PhilHealth Contributionsc.Contributions to uniond.Dues Withholding tax3. Which is not an element of an employer-employeerelationshipa.selection processb.power to dismissc.power of controld.payment of fixed wages4. Which is not a supplemental compensation income?a.de minimis benefitsb.honorariac.allowancesd.bonuses5. De minimis benefits are generallya.exempt from taxb.fully taxablec.taxable in excess of 90,000d.subject to fringe benefit tax6. Which of the following is subject to income tax?a.minimum wageb.de minimis benefitsc.GSIS benefitsd.Voluntary contribution to SSS, PHIC, HDMF7. Night differential pay is exempt from taxation whenreceived by aa.rank and file employeeb.special employeec.minimum wage earnerd.managerial or supervisory employee8. The 90,000-exemption threshold is applicable toa.regular employeesb.rank and file employeesc.managerial or supervisory employeed.all employees9. De minimis benefits not exceeding the threshold area.Exempt from Income taxb.Subject to fringe benefit taxc.Subject to regular tad.Deductions from gross income10. Who is not required to file quarterly income tax return?a.Pure compensation income earnerb.Pure business income earnerc.Pure professional Income earnerd.Mixed Income earner11. Which is incorrect regarding the 8% optional incometax?a.It substitutes the regular income tax and 1%percentage taxb.The 8% income tax option is irrevocable for theyear it is madec.May be opted to if the taxpayer claimed optionalstandard deductiond.May be used even if the taxpayer is also anemployee12. Who is not allowed the option to be taxed at 8%?a.Compensation Income Earnerb.Business Income earnerc.Professional Income Earnerd.Mixed Income Earner13. Which of the following cannot claim deductions fromgross income despite actual business? engagement ina.Resident Citizenb.Resident Alienc.Nonresident citizend.Non- resident alien not engaged in trade orbusiness14. Which is correct with optional standard deduction?a.It replaces itemized deductionb.It replaces P250,000 annual exemptions forindividualsc.Both A and Bd.Neither A nor B15. Individual income taxpayer must indicate his or herfinal option to claim OSD ona.The first quarter return during the yearb.Or before July 1 of the current yearc.The annual income tax returnd.Annual or quarterly return at his or her option 16. Which is not an element of an employer - employeerelationship?a.Power to selectb.Power to dismissc.Power of Controld.Power to tax17. Which is not an employee classification as to taxability?a.Regular employeeb.Minimum Wage Earner c.Supervisory Employeed.All of the above18. Which is not an exclusion criterion on employeebenefitsa.Necessity of the employee ruleb.Convenience of the employer rulec.Exemption by special lawd.Exemption by treaties or internationalagreements 19. All of these are exempt benefits of a minimum wageearner excepta.Hazard Payb.Holiday Pay c.Vacation Payd.Overtime Pay20. De minimis benefits not exceeding their thresholds area.Exempt from income taxb.Subject to fringe benefit taxc.Subject to regular taxd.Deductions from gross income 21. Who is subject to fringe benefit tax?a.An employer of rank-and-file employeesb.Managerial or supervisory employees c.An employer of managerial or supervisoryemployees d.Rank and file employees22. Which is not a characteristics of fringe benefit tax?a.Final taxb.An income taxc.Payable by the employerd.Imposed upon the monetary value of benefits23. The actual value of benefits realized by the managerialor supervisory employee is referred to as thea.Monetary valueb.Fair valuec.Grossed up monetary valued.Annual Depreciation Value24. First quarter income tax return is due ona.April 15 of the same yearb.April 25 of the same yearc.May 15 of the same yeard.May 25 of the same year25. Who is not allowed to avail the optional 8% tax?a.Compensation Income Earner
Income TaxationReviewer- Comprehensive Exam 1b.Business Income Earnerc.Professional Income Earnerd.Mixed Income EarnerTRUE or FALSE: Theories26. Income from services rendered by a lawyer as aconsultant is considered as compensation income fortaxation purposes.27. For income tax purposes, focus shall be given to theemployee since they are the one who have an Income andconsequently the tax payer.28. Employees who are receiving minimum wage aregenerally exempt from income tax.29. Taxable compensation income refers to allremunerations received under an employer employeerelationship.30. All deductions to be remitted to SSS, GSIS, PHIC orHDMF are considered as non – taxable31. Under the convenience of the employer rule, theultimate benefit redounds to the employer, the same isconsidered as non - taxable.32. All small value benefits are exempt from tax providedthat it emanates from an employer employee relationship.33. In all cases, excess to the statutory limitation of deminimis benefits is subject to Fringe Benefit Tax. 34. Compensation income can be classified as regular andsupplementary.35. Fringe benefits and supplementary compensationIncome is of the same thing.36. Fringe benefits received by an employee is subject torank-and-file the 90,000-exempt threshold,37. Fringe benefits of managerial employees generallyincludes management prerequisite benefits.38. Rule on Convenience of the employer's rule does notapply on Fringe Benefit Taxation.39. The default fringe benefit tax rate is 35%.40. Various BIR Form 2316 were consolidated to create BIRForm 1700 for a purely compensation income earner.41. All purely business income earner and mixed Incomeearner may avail of the 8% income tax option.42. Excess on the limit of de minimis benefits received by arank-and-file employee are always treated as otherbenefits subject to 90,000 threshold exemptions.43. The employee is the tax payer in Fringe Benefit tax.44. The 25% fringe benefit tax rate applies to all non-resident alien.45. All cash fringe benefit shall be valued at the exactamount paid.46. In case of in-kind benefits, the monetary value isequivalent to the fair value or book value whichever ishigher. 47. In Fringe benefit taxation, Aircrafts are alwayspresumed to be for business, while Yachts are alwayspresumed not for business.48. Expense account to be exempt must be for thepersonal account of the managerial employee.49. Determination of grossed up monetary value precedesthe determination of Fringe benefit tax.50. Grossed up monetary value refers to the total amountof benefits to which the employee is entitled.51. Resident Alien is subject to income tax for all incomesderived.52. Taxable estate and trusts are treated the same way asan individual tax payer.53. For individual income taxation, tax due is computed bymultiplying a fixed rate to the taxable income.54. In all cases, quarterly filling of income tax return isapplicable to individual tax payer.55. Generally, substituted filing applies to a purecompensation income earner.56. All individual tax payer who derives income frombusiness operations are required to file a quarterly incometax return even those who also derived compensationincome.57. Pure business income earner who is subject to ValueAdded Tax cannot availed of the 8% Optional Tax.58. In case of Pure Business/ Professional Income Earner,annual exemption of P250,000 was used as a deductionbefore the net total is multiply to the 8% optional tax rate.59. Incase of Mixed Income earner, Tax Due onCompensation income was computed separately from thebusiness income.60. Availment of 8% optional tax is always favorable 90s tothe tax payer.
Income TaxationReviewer- Comprehensive Exam 1PROBLEMS:1.) Mr. Lolong, a supervisory employee, received thefollowing income in 2021:Grosscompensationincome,beforecontributions to SSS, PhilHealth, and HDMFtotaling P124,000- P800,000 Fringe benefits- P200,000Gain from redemption of shares in a mutualfriend- P100,000 Commission income- P150,000 Gain on sale of stock through the PSE- P400,000Determine the total income to be reported by Mг. Lolongin gross income.a. P1,526,000c. P1,026,000b. P1,426,000d. P826,0002.) Calixto, employed, derived the following income duringthe year:Gross salaries - P400,00013th month pay and other benefits - 40,000SSS, PhilHealth, and Pag-ibig contributions -20,000Deductions for loans repayments - 50,000Deductions for withholding tax - 60,000Compute the compensation income to be reported in theannual income tax return.a. P440,000c. P380,000b. P330,000d. P390,0003.) Corazon resigned in 2021 after 12 years of service. Shehad the following income during the year:Salary, net of P80,000 withholding tax, P20,000SSS, P18,000 Philhealth- P480,00013th month pay and other benefits 96,000Separation pay - 1,000,000Compute the gross income subject to progressive (regular)tax.a. P1,566,000c. P560,000b. P1,560,000d. P480,0004.) Alex Luto, VAT-registered, had the following data for thetaxable year:Gross Sales, Phils - 1,900,000 Cost of Sales, Phils - 1,300,000Gross Sales, USA - 1,000,000Cost of Sales- 1,100,000Operating Expenses, Phils - 40,000Operating Expenses, USA - 65,000Non - operating Income - Phils - 50,000 If the taxpayer is a resident citizen, his tax due is:a. P29,000c. P63,750b. P32,000d. P49,5005.) If the taxpayer is a non-resident citizen, VAT-registered,his tax due is:a. P41,250c. P82,500b. P67,000d. P112,0006.) If the taxpayer is a resident alien, VAT- registered, histax due is:a. P41,250c. P82,500b. P67,000d. P112,0007.) Sally Rafa, an MWE, works for McDonny's, Inc. She hasno other source of income. For the taxable year, her totalregular compensation income, inclusive of the 13th monthpay, amounted to P180,000. During the year, she receiveda 13th month pay equivalent to P10,000, and contributedto SSS, Philhealth, and Pag-ibig a total amount of P3,000.In addition to the abovementioned amounts, she receivedthe following amounts: P90,000 for overtime pay, P10,000for night shift differential pay, P25,000 for hazard pay, andP35,000 for holiday pay. The tax due from hercompensation income is:a. P10,000c. P14,200b. P13,200d. None.8.) Elena Puto, a part-time exercise trainer, also operates ashoe store while offering her services to clients living inMetro Manila. In 2019, the gross sales of her shoe storeamounted to P1,100,000 while her receipts from hertraining services amounted to P400,000. Her total cost ofsales and operating expenses amounted to P150,000 andP35,000, respectively. Her non-operating Income (notsubject to FTs) amounted to P300,000.She signified in her 1st Quarterly ITR her intention to betaxed at the 8% income tax rate. Compute her income taxdue for 2019.a. P100,000c. P 68,000b. P124,000d. None of the above.9.) If Elena Puto, failed to signify her intention to be taxedat the 8% income tax rate, what will be her Income tax duein 2019?a. P374,500c. P284,500b. P369,800d. None of the above.10.) In 2018, Maginoo M. Henyo, the CEO of the PhilippineNuclear Fusion Corporation, earned compensation incomeof P4,000,500. This amount is inclusive of his 13th monthpay and other benefits of P250,000, but net of themandatory contributions to SSS and PhilhealthAside from his employment, he also owns a cafeteria. In2018, the cafeteria had gross sales of P1,500,000, cost ofsales of P500,000, and operating expenses of P300,000. Italso had non-operating income of P700,000.Compute his income tax due for 2018 if he avails of the 8%income tax rate option on his gross sales plus non-operating income arising from his cafeteria business.a. P1,101,360c. P1,257,360b. P1,277,360d. None of the above.11.) In the previous number, what would be Maginoo'stotal income tax due if he did not avail of the 8% incometax rate on gross sales plus non- operating income arisingfrom his business?a. P 696,969c. P1,549,360b. P1,650,920d. None of the above.12.) Maginoo resigned from Philippine Nuclear Fusion inthe first week of January 2019 to concentrate on hiscafeteria business.um His total compensation income in2019 amounted to P180,000 inclusive of other benefits(productivity bonus) of P30,000.In 2019, the cafeteria had gross sales of P2,300,000, cost ofsales of P750,000, and operating expenses of P450,000. Italso had non-operating income of P235,000.What is his income tax due for 2019 if he avails of the 8%income tax rate option on his gross sales plus non-operating income arising from his business?a. P 202,800c. P182,800b. P194,800d. None of the above.13.) Pong Pagong is the CEO of Sesame Zoo Corporation. In2019, he received total compensation of P10,000,000
Income TaxationReviewer- Comprehensive Exam 1inclusive of 13th month pay and other benefits in theamount of P800,000.He also owns a poultry farm which supplies the wet marketin his province. Its gross sales totaled P2,000,000. Thefarm's cost of sales and operating expenses amountedP300,000 and P180,000, respectively. Its non-operatingincome amounted to P230,000.Compute his income tax due in 2019.a. P3,691,000c. P3,901,000b. P3,874,760d. None of the above.14.) A private employee had the following remuneration in2024: Gross Salaries, net of P11,000 mandatorycontributions - 314,000Fixed RATA - 12,000Cost of Living Allowance - 24,00013th month pay 28,000Christmas Gift- 5,000Laundry Allowance (500/month) - 8,000What is the taxable compensation income?a. 314,000c. 338,000b. 326,000d. 350,00015.) Using the same Information from the precedingnumber, what is the total exempt de minimis benefit?a. 13,000c. 6,000b. 8,600d. 5,00016.) Using the same information from the precedingnumbers, what is the total exempt benefit?a. 36,000c. 52,000b. 47,600d. 90,00017.) ABC acquired a car for P1,200,000 and transferredownership to its supervisory employee for P400,000. Thecar shall be used partly in the employer's business.Compute for the monetary valuea. 80,000c. 800,000b. 240,000d. 1,200,00018.) Luzvimin paid the following fringe benefits during thecalendar quarter to its managerial employee: Salaries of Household help 10,000/month Salaries of personal security guard 15,000/monthPersonal driver 15,000/month Annual home owner's dues - 4,000 Garbage Dues - 100/weekCompute for the quarterly monetary valuesa. 122,200c. 121,200b. 125,200d. 44,10019.) XYZ bought a car worth P800,000 and registered it inthe name of its rank-and-file employee. It was agreed thatthe same will be used partially for its business. Computethe Fringe Benefit Tax assuming the employee is a non-resident alien?a. 376,471c. 188,235b. 266,667d. 0