Income Tax Flashcard Questions
.docx
School
Arellano University Law School**We aren't endorsed by this school
Course
TAX 1
Subject
Accounting
Date
Jan 4, 2025
Pages
5
Uploaded by PrivateArtBear43
Income Tax Systems and Principles1.What are the Income Tax Systems?2.What are the features of the Philippine Income Tax Law?3.What are the Criteria in imposing Philippine Income Tax?4.What are the General Principles of Income Taxation?5.Distinguish Cash and Accrual Method.6.What are the rules on source on Situs of Income?7.Example of Taxing Income Sources.Accounting Periods1.Differentiate between a calendar year and a fiscal year.2.When is the deadline for the filing of a corporation’s final adjustment return for a calendar year? How about for a fiscal year?(Bar Q)Income and Taxability1.What is Income?2.When is Income Taxable?3.What is the difference between income and capital?(Bar Q)4.What are the items of gross income? (important)5.What are the items exempt from gross income? (important)6.Under what conditions are retirement benefits received by officials and employees of private firms excluded from gross income and exempt from taxation? (2000 BAR)7.Distinguish: Income, Revenue, and Capital.8.Tests in Determining whether Income is Earned for Tax Purposes.9.What is the General Formula for Gross Income?10.What is the General Formula for Taxable Income?11.What is Gross Income and taxable Income?12.Distinguish: Gross Income, Net Income and Taxable Income13.What constitutes doing business in order to classify a corporation as a resident foreign corporation?14.Formula for Computing Taxable Income of Individuals15.Formula for Computing Taxable Income of CorporationsCompensation and Fringe Benefits1.What is Compensation Income?2.What are the Forms of Compensation?3.What are Fringe Benefits?4.What are the kinds of Fringe Benefits?
5.What are De Minimis Benefits and How are they taxed?6.What is the Convenience of the Employer Rule?7.A “fringe benefit” is defined as being any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee. Would it be the employer or the employee who is legally required to pay an income tax on it? Explain. (2003 BAR)Deductions and Credits1.Distinguish: exclusions, deductions, and tax credits.2.What are the Allowable Deductions from Gross Income?3.What Items are not deductible?4.Give the requisites for deductibility of a loss. (1998 BAR)5.What is NOLCO and its requisites for deductibility?6.What are the requisites for the deductibility of a “bad debt”? (Bar Q)7.What are the requisites for the deductibility of “charitable contributions”? (Bar Q)8.What are the requisites for the deductibility of taxes?9.What are the requisites for the deductibility of interest expense?10.What are the requisites for the deductibility of depreciation ?11.What are Optional Standard Deductions?12.In 2012, Dr. K decided to return to his hometown to start his own practice. At the end of 2012, Dr. K found that he earned gross professional income in the amount of P1,000,000.00. While he incurred expenses amounting to P 560,000.00 constituting mostly of his office space rent, utilities, and miscellaneous expenses related to his medical practice. However, to Dr. K’s dismay, only P320,000.00 of his expenses were duly covered by receipts. What are the options available for Dr. K so he could maximize the deductions from his gross income? (2015 BAR)Capital Gains and Losses1.Distinguish a “capital” from an “ordinary asset”.2.What is the rationale for the rule prohibiting the deduction of capital losses from ordinary gains? Explain. (2003 BAR)3.What are Rules on Recognition of Capital Gains and Losses (pertaining only to Other Capital Assets)?4.Rules on subtracting Ordinary Loss and Capital Loss from Ordinary Gain and Capital Gain?5.Basis of Property Disposed Of (What value do we use to determine Cost?)6.Basis for determining gain/loss from sale/disposition of property?7.What is the Tax base and Tax rate on income from dealings in real property classified as capital assets situated in the Philippines? (Sources of Income Subject to Income Tax)8.What is the difference between Normal Corporate Income Tax and Capital Gains Tax?
9.Under what conditions can the sale of a principal residence be exempt from capital gains tax?10.How do you calculate the gain or loss when there is a Sale or Exchange?11.What is a Capital Gain? What are the rules on taxability of Capital Gains?12.Sample Problem of Capital Gain or Capital Loss.13.Sample Problem of Capital Gain or Capital Loss with NOLCO.14.Question: Donor's basis: 1,000 pesos. Fair Market Value (FMV) at the time of donation: 600 pesos. Selling price: 800 pesos.15.What are Rules on Recognition of Capital Gains and Losses pertaining to Stock Transactions?Corporate Income TaxKKK Corp. secured its Certificate of Incorporation from the Securities and Exchange Commission on June 3, 2013. It commenced business operations on August 12, 2013. In April 2014, Ms. J, an employee of KKK Corp. in charge of preparing the annual income tax return of the corporation for 2013, got confused on whether she should prepare payment for the regular corporate income tax or the minimum corporate income tax.a. As Ms. J’s supervisor, what will be your advice?b. What are the distinctions between regular corporate income tax and minimum corporate income tax? (2015 BAR)Special Scenarios and Miscellaneous1.What are disguised dividends in income taxation? Give an example.2.How are Prizes and Winnings Taxed?3.A, B, and C, all lawyers, formed a partnership called ABC Law Firm to practice their profession as lawyers. For the year 2012, ABC Law Firm received the following earnings and paid the following expenses:●Earnings:i.Professional/legal fees from various clients;ii.Cash prize received from a religious society in recognition of the exemplary service of ABC Law Firm;iii.Gains derived from the sale of excess computers and laptops.●Payments:i.Salaries of office staff;ii.Rentals for office space;iii.Representation expenses incurred in meetings with clients.a. What are the items in the above-mentioned earnings that should be included in the computation of ABC Law Firm’s gross income? Explain.
b. What are the items in the above-mentioned payments which may be considered as deductions from the gross income of ABC Law Firm? Explain.c. If ABC Law Firm earns net income in 2012, what, if any, is the tax consequence on the part of ABC Law Firm insofar as the payment of income tax is concerned? What, if any, is the tax consequence on the part of A, B, and C as individual partners, insofar as the payment of income tax is concerned? (2014 BAR)- – - - - - - - - - - - -To determine whether there will be a gain or loss in this scenario, we need to clarify the basis to use for calculating the gain or loss upon selling the donated property. According to tax rules:1. If the selling price is higher than the donor's basis, the gain is calculated using the donor's basis.2. If the selling price is lower than the fair market value (FMV) at the time of donation, the loss is calculated using the FMV at the time of donation.3. If the selling price is between the FMV at the time of donation and the donor's basis, there is no gain or loss.Let's apply these rules to the given numbers:- Selling Price: $800- FMV at the time of donation: $600- Donor's Basis: $1,000Case 1: Selling Price is higher than the Donor's BasisIf the selling price ($800) were higher than the donor's basis ($1,000), the gain would be calculated using the donor's basis:Gain = Selling Price - Donor's BasisBut this isn't the case here since $800 is not higher than $1,000.Case 2: Selling Price is lower than the FMV at the time of donation
If the selling price ($800) were lower than the FMV at the time of donation ($600), the loss would be calculated using the FMV:Loss = FMV at the time of donation - Selling PriceAgain, this isn't the case since $800 is not lower than $600.Case 3: Selling Price is between the FMV and Donor's BasisSince $800 is between the FMV $600 and the donor's basis $1,000, there is neither gain nor loss:No gain or lossIn conclusion, there will be neither a gain nor a loss from the sale of this donated property.