1.

All of the following cannot claim deductions, except

a. Non-resident corporation
b. NRA-NETB
c. Resident citizen who is a pure compensation earner
d. Non-resident citizen engaged in trade or business
2. All of the following cannot claim personal exemption, except
a. Domestic corporation
b. NRA-NETB
C. NRA-ETB
d. General professional partnership
3. Which of the following can be deducted as interest expenses?
a. Interest on personal debt
b. Interest on debt from a related creditor.
c. Imputed interest on capital
d. Interest on assessed tax delinquency
4. All of the following cannot deduct business expenses incurred abroad on foreign operation, except
a. Domestic corporation
b. Resident corporation
c. Non-resident citizen engaged in trade or business
d. Non-resident alien engaged in trade or business
5. Business expenses incurred abroad by a taxpayer may still be deducted by a resident foreign
corporation provided
a. it is incurred or is used for its foreign operation
b. it is not illegal nor against moral
c. it does not represent any bribe or kickback to government officials
d. it is used or is incurred in connection with the conduct of its Philippine business
6. Which is a non-deductible expense?
a. Salaries of staff in a professional practice
b. Tuition fee of the dependents of the taxpayer
c. Transportation incurred in providing services to clients
d. Rental of the taxpayer's business establishment
7. Which of the following can either be capitalized or expensed at the option of the taxpayer?
a. Discount interest upon the receipt of the loan for a taxpayer reporting his taxable income at cash
basis
b. Interests incurred to finance Petroleum Operations
c. Interest expense incurred for borrowings to financed acquisition of property for use in business or
trade
d. Discount interest upon the receipt of the loan for a taxpayer reporting his taxable income at
accrual basis
8. During 2013, Insider, Inc. borrowed long-term loan from a bank incurring thereon a total interest
of P150,000. It earned an extra P50,000 when it temporarily invested the same to another bank prior
to disbursement. On the other hand, it has earned an interest income from notes receivable from
various customers amounting to P100,000. How much is the deductible interest expense for Insider,
Inc. in 2013?
a. P150,000 b. P 133,500 c. P 87,500 d. P 129,000
9. Select the incorrect statement
a. Interest expense incurred abroad by a domestic corporation can be deducted
b. interest expense incurred abroad by a resident corporation for its Philippine operation is
deductible
c. receivable charged-off by a domestic corporation from a foreign receivable can be deducted
d. write off of a foreign receivable account representing income abroad is deductible by a resident
corporation
10. Asiatica Sea Breeze, Inc., a domestic corporation, paid income tax for its Japanese and
Indonesian operation 8 to 1,500,000 and P800,000 respectively. Taxable income from its Japanese
and Indonesian operation 5 ,000,000 and P2,000,000 respectively. Taxable income attributable from
sources within the Philippines was P10,000,000. Assume that the corporate tax rate was 30%.
How much is the creditable foreign income tax of Asiatica Sea Breeze, Inc.?
a. P 2,100,000 b. P2,300,000 c. P 2,450,000 d. P2,200,000
11. what is the deductible foreign income tax expense if Asiatica Sea Breeze, Inc. claims the foreign
tax paid as tax expense?
a. P 2,100,000
b. P2,300,000
c. P 2,450,000
d. P2,200,000
12. Assuming Asiatica Sea Breeze, Inc. is a resident Japanese corporation, how much is the
deductible foreign tax expense if it claimed the foreign taxes paid as deductions to gross income?
a. P0 b. P2,300,000 c. P 1,500,000 d. P 2,450,000
13. Which of the following losses can be deducted from gross income?
a. losses on the destruction of the principal residence of the taxpayer
b. losses for which a deduction has been in the estate tax return
C. losses incurred from trading domestic securities through the Philippine Stock Exchange
d. loss arising from the disposition of a real property classified as ordinary asset
14. Which of the following losses cannot be deducted outright?
Loss on embezzlement Theft where the perpetrator Loss of income
pending investigation is identified under the cash basis
a. Yes yes yes
b. Yes yes no
c. No yes no
d. No no no

15. A loss is deductible in which of the following scenario?

a. A corporation which is a party to a consolidation exchange its shares of stock costing P5,000,000
to the stock of the new corporation with fair value of P3,500,000
b. A stockholder acquires control to a corporation upon exchanging properties worth P10,000,000
for the stocks of the corporation with fair value of P8,000,000
C. A stockholder of a corporation, which is a party to a merger, exchanges its stock investment
costing P3,000,000 for the stocks of the surviving corporation with fair value of P2,000,000 and a
property worth P500,000
d. A stockholder with substantial holding but not control sold properties to the corporation at a loss
16. Losses from the following transactions are transactions between related parties and hence not
allowed as deductible for tax purposes, except?
a. Losses from sales and exchanges of properties between corporations which are controlled directly
and indirectly by the same individual
b. Losses incurred in liquidation by the controlling individual from his interest in a controlled
corporation
c. Losses from transaction between fiduciaries of trusts wherein the grantor is the same person,
between grantor and fiduciary of a trust or between the fiduciary of a trust and the beneficiary
d. Losses incurred by a controlling (owning more than 50%) individual to a controlled corporation
17. An ordinary and necessary expenses which is fully documented and supported by receipts may
be fully deducted for income tax purposes over and above the limit set by law
a. medical expense b. contribution c. representation d. high school fee
18. Which of the following is a deductible expense for income tax purposes?
a. Salaries of domestic servants
b. Ordinary repair of the personal car
c. Provision for doubtful accounts
d. None of the above
19. The following are examples of corporate expenses is deductible from gross income, except
a. Representation expenses designed to promote business.
b. Contributions to drum up business like contribution of soft drinks to barrio fiestas.
c. Expenses paid to an advertising firm in order to create a favorable image for the corporation.
d. Premiums on life insurance covering the life of an employee if the beneficiary is his heirs.
20. Flores Corporation took two insurance on the life of its President, Mr. Chan. In one policy, the
beneficiary is the corporation to compensate it for its expected loss in case of death of its President.
The other policy designatea Mr. Chan's wife as its irrevocable beneficiary.
Q1: are the insurance premiums paid by Flores corporation in both policies deductible?
Q2: Will the insurance proceeds be treated as income subject to tax by the corporation and by the
wife?
a. Yes to both questions. c. Yes to 1st question and No to 2nd question
b. No to both questions. d. No to 1st question and Yes to 2nd question
21. Interest on business is deductible for income purposes. However, one of the following
a. Interest on delinquency tax.
b. Interest on indebtedness incurred to purchase delivery equipment.
c. Interest on indebtedness secured to purchase a tax-exempt security.
d. None of the above
22. One is not a deductible tax
a. Business tax c. Energy tax on electrical power consumption
b. Privilege tax d. Occupation tax
23. One is a deductible tax
a. Estate tax b. Franchise tax c. Donor's tax d.Special assessment
24. One is entitled to tax credit for taxes paid to foreign country
a. Resident aliens c. Non-resident aliens with reciprocity
b. Domestic corporation d. Non-resident citizens
25. One is entitled to tax credit for taxes paid to foreign country
a. Non-resident aliens
b. Foreign corporations
c. Resident aliens with income derived solely from sources within the Philippines.
d. Resident citizens
26. The following taxpayers can claim tax credit except one
a. Domestic corporations c. Members or beneficiaries of a foreign partnership or trust
b. Resident Filipino citizens d. Non-resident aliens
27. Vicor Co., a domestic corporation has net income from within the Philippines, P200,000 and from
the USA, P300,000. Income tax paid on income from USA is P110,000. The tax credit on income tax
paid to US goverment is
a. P105,000 b. P64,000 c. P 90,000 d. P110,000
28. One is not a deductible loss
a. Loss due to removal or demolition of old building the scrapping of old machinery or equipment
incident to renewal or replacement
b. Loss due to removal of building or real estate purchased when the purchase was for the
acquisition of the land and without intending to use the building.
C. Loss in value of securities of such extent that the securities have become worthless and are
written off.
d. Loss in usefulness in business of an asset so that the business is discontinued or the asset is
discarded.
29. A building was partially destroyed by fire in 2006. It had a book value of P4,000,000. The
insurance company was willing to pay P3,000,000 which was refused by the owner of the building.
Finally, the claim was settled in 2008 for P3,500,000. The P3,500,000 proceeds is
a. Exempt b. taxable in full c. Subject to final tax d. partly taxable
30. Referring to immediately preceding problem, the taxpayer can claim a deductible loss of
a. P1,000,000 in 2006 b. P1,000,000 in 2008 c. P500,000 in 2006 d. P500,000 in 2008
31. In 2006, Boy's residence was totally destroyed by fire. The property had an adjusted basis and a
fair market value of P130,000 before the fire. During 2006, Boy received insurance reimbursement
of P120,000 for the destruction of his home. Boy's 2006 adjusted gross income was P70,000. Boy
had no casualty gains during the year. What amount of the fire loss was Boy entitled to claim as an
itemized deduction on his 2007 tax return?
a. P0 b. P8,500 c. P 8,600 d. P10,000
32. The following were taken from the income statement of ABC corporation for the year 2007:
Gross profit on sales P800,000
Less: Deductible expenses P440,000
Provision for bad debts 80,000 520.000
Net income before income tax P280,000
Additional information:
a. Accounts written-off during the year and charged to allowance for bad debts - P50,000.
b. Recoveries on accounts receivable previously written-off in 2006 and credited to allowance for
bad debts.
Allowed as deduction by the BIR P 30,000
Disallowed by the BIR as deduction 20,000
The net income before income tax of ABC Corporation is:
a. P280,000 b. P260,000 c. P330,000 d. P340,000
33. Which of the following assets is subject to depreciation for income tax purposes?
A. Stock in trade b. Goodwill c. Equipment used in business d. Residential house
34. A store building was constructed on January 2, 2002 with a cost of P570.000. Its estimated useful
life is 16 years after 10 years. In January, 2007 replacement of some worn-out parts of the building
costing P50,000 was spent. After the repairs, the building was appraised with a fair market value of
PN allowable deduction for depreciation for the year 2007 is
a. P35,795.45 b. P43,750.00 c. P49,431.82 d. P31,250.00
35. Angel is a cash basis self-employed air conditioning repairman with 2006 gross business receipts
of P200,000. Angel's cash disbursements were as follows:
Air conditioning parts P25,000
Yellow pages listing 20,000
Estimated national income on self-employment income 10,000
Business long distance telephone calls 4,000
Charitable contributions 2 ,000
What amount should Angel report as self-employment income before personal exemption?
a. P151,000 b. P149,000 c. P141,000 d. P139,000
36. Which of the following is correct regarding Net Operating Loss Carry-Over?
a. Claimable by taxpayers even if not engaged in trade or business
b. The carry-over period is up to 5 years
c. NOLCO can be claimed only up to the extent of available taxable income in the immediately
following three years
d. NOLCO can be claimed simultaneously with OSD
37. Concerning write-off of bad debts, which of the following is deductible?
a. When incurred at the cash basis of reporting taxable income
b. When a night of recourse to a third party can be invoked
C. The balance of a loans receivable which remains outstanding after final liquidation of the taxpayer
under an insolvency proceeding
d. Incurred from personal credit of the taxpayer
38. Blue Moon, Inc. is a resident international mining corporation with various mining operation
across Europe and America. It has properties abroad equivalent to P4,000,000,000 with expected
residual value of P500,000,000 and an average useful life of 20 years. In the Philippines, it bas
P60,000,000 mining properties with estimated residual value of P10,000,000 and a useful life of 10
years. How much is the total depreciation deductible against gross income for Philippine income tax
purposes?
a. P0 b. P175M only c. P 180M d. 5M only
39. Using the same choices in the immediately preceding problem and assuming Blue Moon, Inc. is a
domestic corporation, how much is the total claimable depreciation expense?
a. P0 b. P175M only c. P 180M d. 5M only
40. Which of the following depreciation in value of property is deductible?
a. Depreciation for a building of a private educational institution where the initial cost of
construction is charged to expensed
b. The portion of depreciation determined by the BIR as unreasonable for the current period
c. Depreciation for personal properties of the taxpayer such as his cars and cell phones
d. Depreciation in value of land due to calamity
41. Which of the following can deduct depreciation expense?
a. Taxpayer operating a service business
b. A non-resident foreign corporation
c. Taxpayer earning purely compensation income
d. Taxpayer earning purely passive income
42. Which contribution is not fully deductible?
a. Donation to the government or government-owned and controlled corporation to be used in
priority activities
b. Donations to foreign governments or international organization in compliance to treaties
c. Donation for non-government organization engaged exclusively for educational purposes
d. Donations to accredited domestic non-government institutions
43. Which of the following contribution is subject to limit?
a. Donations to beggars on the street
b. Donations to Bahay Kalinga, an accredited nonprofit charitable institution
c. Donations to the government of the Philippines for public purpose
d. Donations to BOI-registered entities operating on areas covered by the Investment Priority Plan
44. Transient, Inc., a domestic corporation, has the following lists of contributions to
various institutions and organizations;
A. 50,000 to a scientific research institute accredited by the government
B. 40,000 to a fund raising drive of GMA 7 for St. Bernard, Samar incident victims
C. P20,000 regular donations to squatters nearby the company office
D. P300,000 to the Roman Catholic Church
Transient, Inc. taxable income before contribution is appropriately determined as P5,800,000. How
much is the total deductions for contributions allowable?
a. P290,000 b. P380,000 c. P 400,000 d. P340,000
45. Assuming that the taxpayer in the immediately preceding is a single taxpayer in the immediately
preceding is a single individual how much is the net income?
a. P5,220,000 b. P5,200,000 c. P 5,390,000 d. P5,410,000
46. Which of the following is incorrect concerning general expenses?
a. Only transportation from the taxpayer's office to his clients and vice versa can be claimed as
transportation expenses
b. Travel expenses are deductible only when incurred or paid abroad hence inshore travel costs are
non deductable
c. Travel expenses include those that are incurred while away from home for business purpose.
d. for fixed and variable advance allowances that are retained by the employee is taxable as income
upon him
47. Affluent, Inc., a resident corporation, is engaged at both service and sales of goods. A summary
of its operation is provided as follows:
Sales of Service Sales of Goods
Gross Receipts P 4,000,000 Net sales P 8,000,000
Direct costs of services 2,500,000 Cost of goods sold 4,500,000
Other deductible expenses 1,000,000 Other deductible expenses 3,000,000
Entertainment expenses Entertainment expenses
Food and beverages for client 45,000 45,000
Payments to GRO and call boy 50,000 50,000
entertainers
How much is the deductible entertainment, amusement and recreation expenses
a. P 70,000 b. P 80,000 C. P 90,000 d. P190,000
48. Which of the following cannot claim optional standard deduction
a. A taxpayer earning professional income
b. A taxpayer with a share in the net income of a general professional partnership
c. A domestic corporation engaged in business
d. A non-resident alien engaged in trade or business
49. Select the correct statement concerning Optional Standard Deduction?
a. Can be resorted to by the taxpayer if he cannot substantiate his business expenses under itemized
deductions
b. OSD cannot be revoked by the taxpayer for 3 consecutive taxable period
C. Can be claimed simultaneously with NOLCO
d. Can be claimed simultaneously with a deduction for health and hospitalization insurance by an
individual taxpayer
50. Optional standard deduction is not allowed to
a. Individuals earning purely compensation
b. Non-resident corporations
c. Corporations deriving purely passive income subject to final tax
d. Any of these
51. Which is not correct concerning OSD?
a. It is computed as 40% of gross income or gross receipts less direct cost of services for any taxpayer
b. It is computed as 40% of gross income for corporations
c. It is computed as 40% of gross sales or revenue for individual taxpayers
d. Gross income means gross sales or revenue less cost of goods sold or cost of services
52. Which is incorrect?
a GPP can claim OSD similar to those claimable by corporations
b. A partner in a GPP can still claim either itemized deductions or optional deductions from his share
in the net income of the GPP
c. To avail of the OSD, the taxpayer must signify in his return his election of the OSD
d. The taxpayer who wants to avail of the OSD must use the OSD in filing his quarterly return.