DE LA SALLE UNIVERSITY (DLSU) Short Quiz 5

Taxation (INTAXTN) Second Term 2018-2019

Set A February 12, 2019

Name: ________________________________________________________________ Section: __________

Answers
1. 6. 11. 16.

2. 7. 12. 17.

3. 8. 13. 18.

4. 9. 14. 19.

5. 10. 15. 20.

Instruction: Choose the letter of the best answer from the given choices. University policies on
academic honesty as stated and inferred in the student handbook are strictly enforced.

1. The following will form part of cost of goods sold or cost of services for MCIT tax purposes, except:
a. Commission of agent of car dealer.
b. Freight-in.
c. Salaries of employees directly rendering services.
d. Interest expense on deposits received by banks.

2. Which of the following income of foreign currency deposit unit (FCDU) of a bank will be subject to 10%
income tax based on gross income?
a. Interest income on loan to residents.
b. Interest income on bank deposit in another FCDU.
c. Interest income on loans to non-residents.
d. Gain from sale of investment in bonds.

3. The following corporations are not subject to 2% MCIT, except:

a. Regular banking units.
b. Non-stock non-profit educational institution.
c. Non-profit hospitals.
d. Offshore banking units on taxable interest income.

4. Which of the following income distribution of the trust fund to the trustee will be subject to 20% FWT?
a. Interest income on deposit in foreign currency deposit unit (FCDU) of a bank.
b. Gain on sale of investment in foreign shares.
c. Dividend income from investment in domestic shares.
d. Gain on sale of investment in domestic shares listed in the Philippine Stock Exchange

5. Which of the following corporations will be subject to the 10% income tax based on taxable income?
a. Trading company.
b. Regular banking unit.
c. Regional operating headquarters.
d. Offshore banking unit.

6. Which of the following trusts shall the taxable income be consolidated and the income tax thereon
computed on the basis of such consolidated income?
a. Trust No. 1 and Trust No. 2 have the same grantor and with different beneficiaries.
b. Trust No. 1 and Trust No. 2 have the same grantor and the same beneficiary.
c. Trust No. 1 and Trust No. 2 have different grantors and the same beneficiary.
d. Trust No. 1 and Trust No. 2 have different grantors and the same fiduciary and beneficiary.

7. The share of the partner in following income items of a general professional partnership will no longer be
subject to graduated income tax on the part of the partner, except:
a. Interest income on peso bank deposit in a domestic bank.
b. Gain from sale of investment in a domestic corporation.
c. Dividend income from investment in domestic shares.
d. Gain from sale of real property considered as ordinary asset.

8. The following are the rules for purposes of determining the deductions of a general professional
partnership and its partners, except:
a. Either the partners or the partnership can claim the OSD but not both.
b. The partnership can either claim the OSD or itemized deduction.
 c. If the partnership adopts the itemized deduction, the partners can still claim additional itemized
deduction from their share in the partnership income.
d. If the partners have income other than their share in the partnership income, they can opt to adopt
OSD or itemized deduction for other income items.

9. A partnership that is not a general professional partnership is subject to the following income tax, except:
a. Capital gains tax on sale of domestic shares.
b. Final withholding tax on royalty income considered as passive income.
c. Minimum corporate income tax.
d. Improperly accumulated earnings tax.

10. Which of the following income items will only be taxed to the estate or trust?
a. Income held in trust for the benefit of an unborn child.
b. Income that will be distributed by the fiduciary to the beneficiary.
c. Income received by the estate of a deceased person during the administration or settlement of the
estate.
d. Income which can either be distributed to the beneficiary or accumulated, depending on the discretion
of the fiduciary.

11. Rumpelteazer, Inc. is a Greek company that manufactures keratonin. Its Philippine subsidiary is
Skimbleshanks Industries Philippines Corporation which manufactures electronic products. Rumpelteazer
receives royalty income from Skimbleshanks for the use of technology in manufacturing electronic
products in the Philippines. No services were rendered in the Philippines for technology transfer. As a
Certified Public Accountant, which of the following is correct with regard to the applicable tax imposed
upon the royalty income?
a. Subject to final withholding tax of 10%.
b. Subject to final withholding tax of 20%.
c. Subject to final withholding tax of 30%.
d. Exempt from income tax.

Use the following problem for the next two questions:

Pedro Pipa Corporation had the following information for the years ended December 31, 2018, 2019 and 2020:

Regular corporate income tax MCIT

2018 P250,000 P400,000

2019 600,000 550,000

2020 800,000 1,200,000

12. How much is the income tax still due for the year ended December 31, 2019?
a. P200,000.
b. P450,000.
c. P550,000.
d. P600,000.

13. How much is the excess MCIT that can still be carried over as of December 31, 2020?
a. P-0-.
b. P400,000.
c. P550,000.
d. P600,000.

Use the following problem for the next three questions:

Princesa, single, and Reyna, married with 2 dependent children, are partners in P&R Partnership. P&R derived
gross income of P6,000,000 and incurred expenses of P3,500,000 for the year ended December 31, 2017. It
had gross profit rate of 75%. Princesa shares 60% in the partnership profit and Reyna shares 40%. The
partnership adopted the itemized deduction for income tax purposes.

14. Assuming the partnership is business partnership, how much is Princesa’s income tax liability on her share
in the profit?
a. P-0-.
b. P105,000.
c. P205,000.
d. P253,000.

15. Assuming the partnership is a general professional partnership, how much is Reyna’s income tax liability
on her share in the profit?
a. P-0-.
b. P105,000.
 c. P253,000.
d. P285,000.

16. Assuming the partnership is a general professional partnership, how much Reyna’s income tax liability on
her share in the profit if the partnership adopted the optional standard deduction?
a. P393,800.
b. P425,800.
c. P515,400.
d. P547,500.

Use the following problem for the next two questions:

On October 15, 2018, Mr. Papaitan, married, died living a net estate of P100,000,000. The estate was in the
hands of Mr. Piaya, married, the executor. Ms. Paprika, single, was one of the heirs to the estate. For the year
ended December 31, 2019, the estate derived interest income on loans of P3,000,000 and rental income on
lease of land of P7,000,000, and incurred related expenses of P1,200,000. Mr. Piaya distributed land worth
P30,000,000 and income of P3,500,000 to Ms. Paprika.

Ms. Paprika is also engaged in the business of leasing her land. She derived rental income of P4,750,000 and
incurred leasing expenses of P500,000.

17. How much is the income tax liability of the estate of Mr. Papaitan for the year ended December 31, 2019.
a. P-0-.
b. P1,546,000.
c. P1,590,000.
d. P2,666,000.

18. How much is the income tax liability of Ms. Paprika for the year ended December 31, 2019.
a. P1,210,000.
b. P2,323,600.
c. P2,330,000.
d. P2,490,000.

Use the following problem for the next two questions:

Gullfaxi Corporation engaged in freight and trucking business derived the following for the year ended
December 31, 20A1:

Share in net income of the joint venture with Jackdaw Corp. P 9,000,000
Dividend received from Jackal Corp., a domestic corporation 180,000
Dividend received from Jemmy Corp., a non-resident foreign corporation 100,000
Own net income 12,000,000

The joint venture with Jackdaw is a taxable joint venture, where Gullfaxi shares 50% in its profit.

19. How much is the taxable income of Gullfaxi for the year ended December 31, 20A1?
a. P12,000,000.
b. P12,100,000.
c. P19,100,000.
d. P19,280,000.

20. How much dividend income of Gullfaxi for the year ended December 31, 20A1 is exempt from income tax?
a. P-0-.
b. P100,000.
c. P280,000.
d. P9,100,000. <— 9,180,000