Which is a deductible expense?

A. regular repair of office equipment

B. refurbishing of an old building to prepare it for use

C. addition of a wing to an existing building

D. overhaul of machineries to extend their useful life

Which ofc the following taxpayers can claim deduction against gross income? *

A. a resident citizen taxpayer earning purely compensation income

B. non-resident foreign corporation

C. non-resident alien not engaged in trade or business

D. overhaul citizen earning a mix of passive and business income

Which is not a separate classification of deduction from gross income? *

A. net operating loss carry over

B. regular allowable itemized deductions

C. special allowable itemized deductions

D. net capital loss carry over

Which statement is incorrect regarding deductions? *

A. the claim of deduction, similar to exemption, is construed against the taxpayer

B. the use of optional standard deduction always results in reported taxable income

C. the unreasonableness of deduction is up to the BIR to prove

D. the incurrence of an operating loss is an indication of an unreasonable expense

The following cannot claim deduction from gross income except *

A. a self-employed individual taxpayer

B. a corporation earning purely passive income

C. an individual earnings purely passive income

D. an individual taxpayer earning purely compensation and passive income

Determine the amount of deductions. *

A. P800,000
 B. P1,200,000

C. P1,000,000

D. P1,400,000
Calapan Corporation bought equipment costing P500,000.  The equipment was
expected to have P50,000 residual value at the end of its 5-year expected life.
Calapan Corporation failed to withhold the creditable withholding tax on the
equipment. Compute the depreciation expense in the first year. *

A. P0

B. P45,000

C. P90,000

D. P180,000
Compute the deductible foreign currency loss. *

A. P200,000 in 2019

B. P300,000 in 2019

C. P300,000 in 2020

D. P200,000 in 2020
What is the deductible amount of loss to a related party? *

A. P0

B. P200,000

C. P300,000

D. P600,000
The accountant of Trinville corporation provides for an allowance against
unrecoverable accounts equivalent to 3% of Trinville’s total receivables.  The
allowance for bad debts had a balance of P45,000 and P50,000 at the start and
end of the year, respectively, while P30,000 of previous accounts were actually
found to be worthless and were written-off.  What is the deduction against gross
income for purposes of taxation? *

A. P0
 B. P25,000

C. P30,000

D. P50,000
What is the deductible amount of expense? *

A. P800,000

B. P500,000

C. P300,000

D. P0

What is the required adjustment to taxable net income? *

A. P300,000 increase

B. P300,000 decrease

C. P500,000 increase

D. P800,000 decrease
XYZ company declared a property dividend with book value of P1,000,000 and
fair value of P1,200,000.  The total dividends withheld on the dividends were
P60,000.  Compute the total deductible expense. *

A. P0

B. P60,000

C. P1,000,000

D. P1,060,000
Naza Company paid P32,000 fringe benefits tax for the purchase of merchandise
used by the family of one of its company officers.  How much is the deductible
expense against gross income? *

A. P0

B. P32,000

C. P68,000

D. P100,000
Makati corporation wishes to claim the foreign income tax paid as tax credit.
Compute the foreign income tax credit. *
 A. P480,000

B. P463,000

C. P445,000

D. P430,000
Balanga Inc.,contributed P500,000 for its pension fund inclusive of P200,000
funding of current service cost.  How much is the deductible pension expense? *

A. P200,000

B. P230,000

C. P300,000

D. P500,000
A fitness gym catering [to senior citizens recorded a total gross revenue of
P345,000 from senior citizens.  The gym provides 24% discount in excess of the
legal requirements.  What is the deductible amount of senior citizen’s  discount? *

A. P0

B. P69,000

C. P82,800

D. P90,789
Germania Inc., employs three senior citizens as regular employees.  Two of them
are receiving the minimum wage which is within the poverty level.  Total
minimum wage paid to these senior citizen employees during the year were
P182,000.  One of the senior citizen employees is a director of the company who
was paid P780,000 compensation during the year.Compute the deductible
additional compensation expense. *

A. P0

B. P27,300

C. P91,000

D. P144,300
An employer hired two senior citizens during the year as temporary replacements
for its two staffs who were on leave.  Both senior citizens were paid salaries not
in excess of the poverty level. Mang Pandoy, substituted for an employee who
went on one year sabbatical leave.  Mang Pandoy received a total of P144,000
during the year.  Aling Maria substituted for an employee who filed for maternity
leave for 3 months.  Aling Maria received a total of P28,000 during the year.
Compute the total deductible additional compensation expense. *

A. P0
 B. P21,600

C. P25,800

D. P43,000
Mr. Baldwin irrevocably designated in trust his investment portfolio consisting of
domestic stocks and bonds.  The dividend income rom the stocks shall be
distributed to the beneficiary while the interest on the bonds shall be
accumulated.  During the year, the portfolio earned p200,000 interest and
P135,000 dividends, net of final tax. What is the total deduction allowable to the
trust for the income distribution? *

A. P0

B. P21,600

C. P25,800

D. P43,000
A grantor irrevocably designated in trust a real property in favor of a beneficiary.
Under the trust indenture, 20% of the trust gross income shall be distributed to
the beneficiary.  The trustee shall be paid 5% of the gross income as
management fee.  During the year, the trust collected P810,000 rent income, net
of 10% creditable withholding taxes.  The trust recorded P350,000 in
expenses.Compute the deductible amount of income distribution to the fund. *

A. P0

B. P101,000

C. P110,000

D. P180,000
The optional standard deduction for corporate taxpayer is *

A. 40% of gross income

B. 40% of gross sales or gross receipts

C. 40% of total deductions claimed with r without support

d. 40% of cost of goods sold or direct cost of services

Which of the following individuals engaged in business cannot claim optional

standard deduction? *

A. resident citizen

B. non-resident citizen

C. resident alien

D. NRA-NETB

Which is correct with optional standard deduction? *

A. it replaces itemized deduction

B. it replaces P250,000 annual exemption for individuals

 C. both a and b

D. neither a nor b
The optional standard deduction for individual taxpayer is *

A. 40% of gross income

B. 40% of gross sales or gross receipts

C. 40% of total deductions claimed with or without support

D. 40% of the lower of actual deductible expenses and 40% of gross sales or gross receipts
One of the following can claim OSD.  Which is it? *

A. a self-employed individual taxpayer

B. a taxpayer earnings mix of passive income and compensation income

C. a taxpayer earning purely passive income

D. a taxpayer earnings purely compensation income

When purely employed, who of the following can claim OSD? *

A. resident citizen

B. non-resident citizen

C. resident alien

D. none of these
Corporate OSD is in lieu of all expenses such as the following except *

A. cost of sales or cost of services

B. regular itemized allowable deductions

C. Special itemized allowable deductions

D. net operating loss carry over

Compute Karem’s taxable compensation income. *

A. P240,600
 B. P290,000

C. P358,000

D. P400,000
What is Maria’s taxable compensation income in 2020? *

A. P240,600

B. P290,000

C. P380,000

D. P400,000
Total deductible expenses against gross income iP0 *

A. P0

B. P290,000

C. P380,000

D. P400,000
Compute Brix’s taxable net income. *
 A. P305,000

B. P320,000

C. P387,500

D. P420,000
Compute the tax still due. *

A. P21,500 refundable

B. P18,500 refundable

C. P5,000 refundable

D. P2,500 payable

The OSD of corporations under the cash basis is based on *

A. gross sales

B. gross receipts

C. total gross income

D. gross income from operations

The option to elect OSD is irrevocable *
 A. in the year it was made

B. over the next three years

C. in the quarter it was made

D. effective the quarter in the year the option was made

Which is presented as operating income in the income tax return? *

A. gain on sale of ordinary assets

B. share in the distributive net income of general professional partnership

C. share in the distributive net income of a business partnership

D. gross profit from the sale of goods

Which is not part of cost of services for a manufacturing concern? *

A. wages of plant employer

B. factory supplies

C. depreciation on plant equipment

D. interest expense

The OSD of corporations under the accrual basis is based on *

A. gross sales

B. gross receipts

C. total gross income

D. total gross income from operations

Which is correct with respect to the deduction claimable by a partner against his
share in the distributive net income of a general professional partnership? *

A. the partners can claim OSD provided the general professional partnership also claims OSD.

B. the partner can claim OSD provided the general professional claims OSD

C. the partner can claim itemized deduction provided the general professional partnership also
uses itemized deductions

D. the partner can claim itemized deduction provided the general professional partnership does
not use itemized deductions
Individual income taxpayer must indicate his or share option to claim OSD on *

A. the first quarter return during the year

B. or before July 1 of the current year

C. the annual income tax return

D. annual or quarterly return at his or her option

Corporate income taxpayers must indicate their options to claim OSD on *

A. the first quarter return during the year

 B. or before July 1 of the current year

C. the annual income tax return

D. annual or quarterly return at his or her option

Assuming Mrs. Kune elects to deduct OSD, compute the OSD. *

A. P800,000

B. P960,000

C. P928,000

D. P880,000
Compute the OSD assuming the taxpayer is a corporation. *

A. P800,000

B. P960,000

C. P928,000

D. P880,000
Assuming the taxpayer opted to avail of OSD, what is the OSD? *

A. P320,000

B. P328,000
 C. P440,000

D. P448,000
Compute the OSD if the taxpayer is under the accrual basis. *

A. P408,000

B. P368,000

C. P360,000

D. P320,000
Compute the OSD if the a taxpayer is under the cash basis. *

A. P408,000

B. P368,000

C. P360,000

D. P320,000
Who is a resident citizen? *

A. a citizen who went on tour abroad

B. a citizen of the Philippines who establishes to the satisfaction of the CIR the fac of his
physical presence abroad with a definite to reside therein

C. a citizen of the Philippines who leaves the Philippines during the taxable year to reside
abroad

D. a citizen of the Philippines who works and derives income abroad and whose employment
requires him to be physically present broad most of the time during the year.
Which of the following is an individual whose residence is within the Philippines
but who is not a citizen thereof? *

A. resident citizen

B. non-resident alien

C. resident alien

D. non-resident citizen
A non-resident alien is considered engaged in trade or business in the
Philippines if he stayed therein for *

A. at least 183 days

 B. at least 180 days

C. more than 183 days

D. more than 180 days

On which of the following dates shall a citizen who left the Philippines during the
year be classified as a non-resident citizen for the year? *

A. May 31

B. July 31

C. July 15

D. November 30
To which of the following does the substituted filing system apply? *

A. purely employed taxpayers

B. taxpayers purely engaged in business

C. mixed income taxpayers

D. any of these

Which is not a requisite of the substituted filing system? *

A. the taxpayer must have only one source of business income

B. the taxpayer must have only one employer during the year

C. the taxpayer has no other source of gross income subject to regular tax other than
compensation

D. the employer did not commit errors in the computation of the employee’s income tax

Which of the following employees is not required to file an annual consolidated

income tax return? *

A. those with concurrent employment during the year

B. those with successive employment during the year

C. those deriving income distribution from a general professional partnership, taxable trusts, or
taxable Estates

D. those earning purely compensation income when the employer correctly withheld the tax

A taxpayer who is both engaged in business and employment is not *

A. subject to the withholding tax on salaries by his employer

B. required to file quarterly income tax on business income

C. required to consolidate his quarterly mixed income for quarterly tax reporting

D. required to file annual consolidated income tax return

When should individual income taxpayers submit their annual or consolidated

return for the year 2020? *

A. April 15, 2020

 B. November 15,2020

C. April 15, 2021

D. 15th day of the fourth month following the fiscal year of the taxpayer
Which of the following taxes is a resident citizen or alien subject? *

A. final tax

B. capital gains tax

C. regular tax

D. all of these
A non-resident foreign corporation is taxable on *

A. world taxable income

B. world gross income

C. Philippine taxable income

D. Philippine gross income

The resident and non-resident classifications do not apply to *

A. domestic corporation

B. foreign corporation

C. both domestic and foreign corporations

D. neither domestic nor foreign corporations

Which of these is a special corporate taxpayer? *

A. a private school

B. a private hospital

C. a business partnership

D. a trading corporation

As a rule non-profit , non-stock corporations are exempt from income tax.  Which
of these non-profit entities is subject to income tax? *

A. Association

B. School

C. Farmer’s cooperative

D. Hospital

The point at which tax is levied is also called *

a. Impact of taxation

b. Situs of taxation

c. Incidence of taxation

d. Assessment
Which is not subject to taxation? *

a. Persons

b. Business

c. Transactions

d. Public properties
What is the theory of taxation? *

a. Reciprocal duties of support and protection

b. Necessity

c. Constitutionality

d. Public purpose

What is the primary purpose of taxation? *

a. To enforce contribution from its subjects for public purpose

b. To raise revenue

c. To achieve economic and social stability

d. To regulate the conduct of business or profession

What is the primary purpose of taxation? *

a. To enforce contribution from its subjects for public purpose

b. To raise revenue

c. To achieve economic and social stability

d. To regulate the conduct of business or profession

When tax is collected upon someone who is effectively reimbursed by another,
the tax is regarded as *

a. Direct

b. Indirect

c. Personal

d. Illegal

All are ad valorem taxes, except one. Select the exception. *

a. Poll tax

b. Estate tax

c. Real property tax

d. Capital gains tax on real property capital asset

Which is not an excise tax? *

a. Income tax
 b. Community tax

c. Estate tax

d. Occupation tax
Which is not an excise tax? *

a. Income tax

b. Community tax

c. Estate tax

d. Occupation tax
Which is not a source of tax law? *

a. Judicial decisions

b. Revenue regulations

c. Opinion of tax experts

d. Tax treaties and ordinances

Which is not subject to income tax? *

a. Donation

b. Sale of service

c. Sale of goods

d. Barter of goods
Larry married with one dependent child, received P255,000 business income. He
also derived an income of P15,000 from interest on bank time deposit. Compute
the income tax payable of the taxpayer. *

a. P1,000

b. P4,000

c. P0

d. none of the above

A resident citizen has P100,000 taxable Philippine income and 450,000 gross
income from business abroad. He incurred business expenses abroad in the
amount of P200,000.Compute the amount of income tax payable. *

a. P0

b. P40,000

c. P20,000

d. None of the above

Which of these is a special corporate taxpayer? *

a. A trading corporation

b. A business partnership
 c. A private hospital

d. A private school

The excess of “13th month pay and other benefits” is *

a. Subject to regular tax

b. Subject to fringe benefit tax

c. Subject to final tax

d. Exempt from income tax

Jonell is paid a monthly salary in the amount of P20,900. For the year 2020, he
received a 13th month pay and other benefits totaling P21,000. Compute his
income tax due. *

a. P0

b. P5,000

c. P160

d. P6,000
Which of the following is not included in the computation of taxable income? *

a. Ordinary gains

b. Net capital loss

c. Ordinary loss

d. Net capital gains

A long-term period means *

a. Less than 12 months

b. 12 months or less

c. More than 12 months

d. at least 12 months

A short-term period means *

a. Less than 12 months

b. 12 months or less

c. More than 12 months

d. at least 12 months

Which is a deductible expense? *

a. Marketing and advertising expense

b. Salaries of security guards in the factory

c. Insurance on factory building

d. cost of registered stocks

A resident corporation is taxable on *

a. Philippine gross income

b. World taxable income

c. World gross income

d. Philippine taxable income

A fitness gym catering to senior citizens recorded a total gross revenue of
P350,000 from senior citizens. The gym provides 24% discount in excess of the
legal requirements. What is the deductible amount of senior citizen’s discount? *

a. P0

b. P70,000

c. P84,000

d. 87,500

What is the deductible senior citizen discount? *

a. P0

b. P160,000

c. P184,000

d. P187,500
*

a. P50,000

b. P400,000

c. P450,000

d. P350,000
Gem Merchandising paid P350,000 to employees, net of P50,000 total
withholding tax on compensation. What is the deductible amount of expenses by
the employer? *

a. P50,000

b. P400,000

c. P450,000
 d. P350,000
*

a. 300,000

b. P140,000

c. P120,000

d. P100,000
*

a. P0

b. P140,000

c. P120,000

d. P100,000
Which is deductible tax expense against gross income? *

a. Documentary stamp tax

b. Estate tax

c. Donor’s tax

d. Foreign income tax claimed as tax credit

On January 20, 2021, a taxpayer borrowed P1,000,000 at 10% annual interest to
finance his acquisition of a luxury car. Compute the deductible expense *

a. P0

b. P100,000

c. P50,000

d. P75,000
A taxpayer paid P45,000 property insurance having 12-month coverage starting
March 1, 2020. Compute the deductible insurance expense in 2020? *

a. P0

b. P37,500

c. P7,500
 d. P45,000
*

a. P0

b. P70,000

c. P7,500

d. P45,000
The taxpayer withheld 5% creditable withholding tax on rental payments to
various VAT-registered lessors. The total taxes withheld were P5,600. What is
the deductible amount of rental expense? *

a. P0

b. P112,000

c. P7,500

d. P45,000
*

a. P0

b. P112,000

c. P30,000

d. P45,000
Pangasinan State University, a public educational institution, is *

a. Subject to income tax at preferential rate.

b. Subject to income tax at the regular rate.

c. Subject to both regular and preferential income tax.

d. Exempt from income tax.

A corporate taxpayer shall include what percentage of long-term capital gain in

the computation of the net capital gains or loss. *

a. 100%
 b. 0%

c. 50%

d. 200%
What is his net income? *

a. P170,000

b. P290,000

c. P100,000

d. PP20,000
Compute his total taxable income *

a. (P150,000)

b. (P30,000)

c. P90,000

d. P120,000
Compute his income tax due *

a. P52,000

b. P2,500

c. P65,000

d. P2,000

A non-resident film owner, distributor or lessor is subject to *

A. 25% tax on Philippine gross income

 B. 30% tax on global taxable income

C. 20% tax on global taxable income

D. 15% tax on gross income

A domestic cinematographic film owner, distributor, or lessor is subject to what

tax rate under CREATE law *

e. 25% tax on Philippine gross income

f. 25%% tax on global taxable income

g. 20% tax on global taxable income

h. 15% tax on gross income