Gross Income and Special Corporations

99. One of the following is wrong. Which is it?
The gross income tax on corporation is:

a. Applicable to domestic corporations
b. Applicable to resident corporations
c. Applicable to non-resident corporations
d. May begin only beginning on taxable year 2000
❖ Answer: C
100. The president upon the recommendation of the secretary of finance may allow corporation the
option to be taxed on gross income, provided
I. The tax rate is 15%.
II. Available to firms whose ratio of cost of sales to gross sales or receipt from all source
does not exceed 55%.
III. Shall be irrevocable for 3 consecutive years during which the corporation is qualified
under the scheme.
a. Only I must be complied Only I and II c. I, II and III must be complied
b. must be complied d. None of the above
❖ Answer: C
101. The 15% gross income tax is applicable to:

Proprietary educational institutions
A B C D
Resident foreign corporations International True True False False
carriers where reciprocity is applicable True True True False
True False False False

SIMPLE GUIDE: If the taxpayer is not subject to 30% RCIT or 2% MCIT on its ordinary income, the 15% gross
income tax is not also applicable.
Answer: C
102. Which statement is wrong? The gross income tax:

a. Is optional to a qualified corporation
b. Available only if the ratio of the cost of sales does not exceed fifty-five percent of the
gross sales or receipts from all sources
c. The choice shall be irrevocable for three consecutive years that the corporation is
qualified under the scheme
d. Is always computed to compare with the normal income tax and minimum corporate
income tax
❖ Answer: D
103. Gross income taxation results to:

a. Less discretion on the part of tax examiners
b. Lower income tax revenues
c. More graft and corruption
d. More complicated tax computations.
❖ Answer: A
Special Corporations
104. Which of the following statements is incorrect?
a. Resident foreign corporations are subject to income tax based on net income from sources
within the Philippines.
b. Domestic corporations are subject to income tax based on net income from all sources.
c. Nonresident foreign corporations are subject to income tax based on gross income from
sources within the Philippines.
d. Private educational corporations are subject to income tax based on the net income from
sources within the Philippines at the tax rate of 10%.
❖ Answer: D
0 Private educational institutions are “domestic corporations’, taxable on income derived from within and without the
Philippines.
105. Which of the following shall be considered related income of proprietary educational institutions?
I. Income from tuition fees and miscellaneous school fees
II. Income from hospital where medical graduates are trained for residency
III. Income from canteen situated within the school campus
IV. Income from bookstore situated within the school campus
a. I only c. I, II and IV only
b. I and II only d. I, II, III and IV
Answer: “D”
106. A domestic proprietary educational institution improved its library facilities by adding a new
wing to its old library building. The capital outlay on library improvement, for income tax
purposes, may be:
a. Deducted at full at the time of completion of the improvement
b. ................................
c.
i. Capitalized or expensed outright at the option of the school owners
Capitalized and depreciated over the estimated life of the improvement Capitalized
or expensed outright at the option of the Government
d.
❖ Answer: B
107. Pioneer College, a private educational institution has presented the following data for the year:
Gross income, related activities P5,000,000
Gross income, unrelated activities 5.000.000
(except rental income)

2,000,000
Rental income (gross of 5% WT)
2.000,000
Expenses, related activities
3,000,000
Expenses, unrelated activities 100,000
Dividend income from a domestic corporation Quarterly income tax 500.000
paid for the first 3 quarters
How much is the income tax payable7

a. P700.000 c. P2,100,000
b. P1,850,000 d. P1,500,000
❖ Answer: “D"
Solution:
Gross income, related activities
Unrelated Income: P5.000.000
Gross income, unrelated activities (except rental)
Rental income (gross of 5% WT) 5,000.000
2.000 000 P12.000.000
Expenses, related activities
Expenses, unrelated activities 2.000.000
Taxable income
3,000,000 (5.000.WL
Tax rate (unrelated income*related income) Tax due
P7.000.000
Less: Quarterly tax payments
Withholding tax on rental income Income
30*.
Tax payable pziooffl
P500 000
100,000 iOOOOOpl.
PI,500,OOL

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99. One of the following is wrong. Which is it?

The gross income tax on corporation is:

101. The 15% gross income tax is applicable to:

True False False False

102. Which statement is wrong? The gross income tax:

103. Gross income taxation results to:

or expensed outright at the option of the Government

Gross income, related activities P5,000,000

Gross income, unrelated activities 5.000.000

(except rental income)

How much is the income tax payable7

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