The maximum cost ratio for corporations to avail of the gross income tax is:

a.
40%.

b.
55%.

c.
60%.

d.
45%.

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The correct answer is: 55%.

Question 2
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Which is deductible in the measurement of net income from business or profession?

a.
Tuition fees of the taxpayer’s brother.

b.
Interest expense on borrowings from family members.

c.
Salaries of personal security guard of a managerial employee.

d.
Mandatory payroll deduction.

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The correct answer is: Salaries of personal security guard of a managerial employee.

Question 3
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An adjustment return is least likely to be required when:

a.
The employee receives compensation from multiple employers.

b.
The employer has over-withheld the tax.

c.
The employee has two successive employers during the year.

d.
The employer has under-withheld the tax.

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The correct answer is: The employer has under-withheld the tax.

Question 4
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Corporate income taxpayers must indicate their options to claim OSD on:

a.
The first quarter return during the year.
b.
Annual or quarterly return at his or her option.

c.
The annual income tax return.

d.
Or before July 1 of the current year.

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The correct answer is: The first quarter return during the year.

Question 5
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A non-resident alien, not engaged in trade or business is not subject to:

a.
Final tax.

b.
Capital gains tax.

c.
None of the choices.

d.
Regular tax.

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The correct answer is: None of the choices.

Question 6
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Question text

A minimum wage earner who is subjected to withholding tax shall:

a.
File an adjustment return and pay residual tax.

b.
File an adjustment return and claim tax refund.

c.
Do nothing.

d.
File a quarterly income tax return.

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The correct answer is: File an adjustment return and pay residual tax.

Question 7
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Which of these can claim the corporate OSD against gross income?

a.
Private schools.

b.
Non-profit hospital.

c.
Retail stores.

d.
Exempt corporations.

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The correct answer is: Retail stores.

Question 8
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Gross receipts, as compared with gross sales, include:

a.
Cash collections on completed contracts only.

b.
Both cash and on account transactions.

c.
Transactions on account sales only.

d.
Cash collections only.

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The correct answer is: Cash collections only.

Question 9
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Question text

MCIT shall commence on the:

a.
4th taxable year following the year of start of operation.

b.
3rd year of operation.

c.
3rd taxable year following the year of start of operation.

d.
5th year of operation.

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The correct answer is: 4th taxable year following the year of start of operation.

Question 10
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Which of the following can treat capital expenditures as outright deductions?

a.
Private educational institutions.

b.
Non-profit schools or Universities.

c.
All of the choices.

d.
Public schools or universities.
Feedback

The correct answer is: All of the choices.

Which is not a requisite of a deductible loss?

a.
It must be sustained by the taxpayer in the current year.

b.
It must be compensated by insurance or indemnity contracts.

c.
It must be reported to the BIR within 45 days from the occurrence of the loss.

d.
It must pertain to a property connected to the trade, business or profession of the taxpayer.

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The correct answer is: It must be compensated by insurance or indemnity contracts.

Question 12
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Which taxpayer is subject to the MCIT?

a.
Government-owned and controlled corporations.

b.
International Carriers.

c.
Private schools.
d.
Home Development Mutual Fund.

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The correct answer is: Government-owned and controlled corporations.

Question 13
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A husband earned P450,000 taxable income. His wife also earned P100,000 taxable income. Which is
true?

a.
Both spouses will report tax due.

b.
The husband pays tax while the wife is exempt.

c.
There will be no aggregate tax due for the spouses.

d.
The wife pays the tax while the husband is exempt.

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The correct answer is: There will be no aggregate tax due for the spouses.

Question 14
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Which of these is a partially deductible contribution?

b.
Donation to foreign institutions with treaty exemptions.

c.
Donation to priority activities of the govt.

d.
Donation to the govt. for public purpose.

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The correct answer is: Donation to the govt. for public purpose.

Question 15
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Which can claim deduction by itemized deduction only?

a.
Employed taxpayers.

b.
Non-resident alien engaged in trade or business.

c.
General professional partnership.

d.
Business partnership.

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The correct answer is: Non-resident alien engaged in trade or business.

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Question text

The option to elect OSD is irrevocable:

a.
In the year it was made.

b.
Over the next three years.

c.
Effective the quarter in the year the option was made.

d.
In the quarter it was made.

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The correct answer is: In the year it was made.

Question 17
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Which is incorrect regarding the 8% optional income tax?

a.
The 8% income tax option is irrevocable for the year it is made.
b.
May be opted to if the taxpayer claimed OSD.

c.
It substitutes the regular income tax and the 3% percentage tax.

d.
May be used even if the taxpayer is also an employee.

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The correct answer is: May be opted to if the taxpayer claimed OSD.

Question 18
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Who is not required to file quarterly income tax return?

a.
Pure professional income earner.

b.
Mixed income earner.

c.
Pure compensation income earner.

d.
Pure business income earner.

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The correct answer is: Pure professional income earner.

Question 19
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The regular corporate income tax is:

a.
2% or 1% of taxable income.

b.
25% of taxable income.

c.
2% of gross income.

d.
25% of gross income.

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The correct answer is: 25% of taxable income.

Question 20
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Which is exempt from corporate income tax?

a.
Joint venture.

b.
Non- profit corporations.
c.
Government-owned and controlled corporations.

d.
Partnership.

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The correct answer is: Non- profit corporations.

Which is correct with optional standard deduction?

a.
It replaces P250,000 annual exemptions for individuals.

b.
Neither does it replace itemized deduction nor replaces P250,000 annual exemptions for individuals.

c.
It replaces itemized deduction.

d.
It replaces itemized deduction and replaces P250,000 annual exemptions for individuals.

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The correct answer is: It replaces P250,000 annual exemptions for individuals.

Question 22
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Excess MCIT is valid as a tax credit over:

a.
Two years.

b.
Four years.
c.
Three years.

d.
Five years.

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The correct answer is: Three years.

Question 23
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The optional standard deduction for individual taxpayers is:

a.
40% of gross sales or gross receipts.

b.
40% of gross income.

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.

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The correct answer is: 40% of gross sales or gross receipts.

Question 24
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Question text

Which is not included in corporate OSD?

a.
Administrative expenses.

b.
Selling expenses.

c.
Creditable withholding tax.

d.
Cost of sales.

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The correct answer is: Creditable withholding tax.

Question 25
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Which of the following cannot claim deduction from gross income?

a.
Non-resident citizens engaged in business.

b.
Resident aliens deriving a mix of passive income and business income.

c.
Resident citizens deriving mixed income from employment and business.

d.
Resident citizens deriving income solely from employment.

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The correct answer is: Resident citizens deriving income solely from employment.

Question 26
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Who is not subject to withholding tax on compensation?

a.
Pure compensation income earner.

b.
Mixed income earner.

c.
None of the choices.

d.
Minimum wage earner.

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The correct answer is: Mixed income earner.

Question 27
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Question text

Individual income taxpayer must indicate his or her option to claim OSD on:

a.
Or before July 1 of the current year.

b.
Annual or quarterly return at his or her option.

c.
The first quarter return during the year.

d.
The annual income tax return.

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The correct answer is: The annual income tax return.

Question 28
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Which is deductible tax expense against gross income?

a.
Donors tax.

b.
Documentary stamp tax.

c.
Estate tax.

d.
Foreign income tax claimed as tax credit.
Feedback

The correct answer is: Documentary stamp tax.

Question 29
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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 earning purely compensation income when the employer correctly withheld the tax.

c.
Those deriving income distribution from a general professional partnership, taxable trusts, or taxable estates.

d.
Those with successive employment during the year.

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The correct answer is: Those earning purely compensation income when the employer correctly withheld the
tax.

Question 30
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The first quarter income tax return is due:

b.
April 25 of the same year.

c.
May 25 of the same year.

d.
May 15 of the same year.

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The correct answer is: April 25 of the same year.

Who cannot claim foreign income tax credit?

a.
Domestic corporations.

b.
None of these.

c.
Resident aliens.

d.
Resident citizens.

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The correct answer is: None of these.

Question 32
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A taxpayer who is both engaged in business and employment is not:

b.
Subject to the withholding tax on salaries by his employer.

c.
Required to consolidate his quarterly mixed income for quarterly tax reporting.

d.
Required to file quarterly income tax on business income.

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The correct answer is: Required to consolidate his quarterly mixed income for quarterly tax reporting.

Question 33
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The quarterly income tax return is due on or before:

a.
30 days following the end of the quarter.

b.
60 days following the end of the quarter.

c.
45 days following the end of the quarter.

d.
15th day of the fourth month following the end of the quarter.

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The correct answer is: 60 days following the end of the quarter.
Question 34
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Resident foreign corporations:

a.
Are limited to 25% RCIT subject to the 1% or 2% MCIT.

b.
May be subject to 20% RCIT.

c.
Are required to withhold the dividend tax.

d.
Shall elect either RCIT or MCIT.

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The correct answer is: Are limited to 25% RCIT subject to the 1% or 2% MCIT.

Question 35
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To which of the following does the substituted filing system apply?

a.
Purely employed taxpayers.
b.
Any of the choices.

c.
Taxpayers purely engaged in business.

d.
Mixed income taxpayers.

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The correct answer is: Purely employed taxpayers.

Question 36
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Which of the following is not a direct cost of service of a corporate car-parking operator?

a.
Cashier salaries.

b.
Security guard salaries.

c.
Depreciation of parking buildings.

d.
Marketing expenses.

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The correct answer is: Marketing expenses.

Question 37
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Question text

Which is not deductible against gross income?

a.
Compensation of minimum wage earners.

b.
Fringe benefits to rank and file employees.

c.
Salaries of managerial or supervisory employees.

d.
Depreciation value of Fringe benefits given to managerial employee.

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The correct answer is: Depreciation value of Fringe benefits given to managerial employee.

Question 38
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Individual OSD is in lieu of all expenses, such as but not including:

a.
Special itemized allowable deductions.

b.
Regular itemized allowable deductions.

c.
Cost of sales or cost of services.

d.
Net capital loss carry over.

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The correct answer is: Net capital loss carry over.

Question 39
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A taxpayer paid for R&D expenses that are not chargeable to capital account. The taxpayer wished
to amortize the Sam over its expected period of benefits. If the R&D is expected to benefit the
taxpayer for 6 years, what is the correct amortization period for the R&D expenses?

a.
72 months.

b.
60 months.

c.
30 months.

d.
36 months.

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The correct answer is: 72 months.

Question 40
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Question text

If husband and wife are both employed, which is correct regarding their income tax exemption in
the tax table?

a.
Only the husband shall be allowed the P250,000 income tax exemption in the tax table.

b.
Either the husband or the wife can take advantage of the P500,000 income exemption in the tax table.

c.
Each family is allowed P500,000 income tax exemption in the tax table.

d.
Each spouse shall be entitled to a P250,000 income tax exemption in the tax table.

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The correct answer is: Either the husband or the wife can take advantage of the P500,000 income exemption in
the tax table.

If the husband is employed with P700,000 taxable income while his wife is unemployed, he shall be
actually subject to tax on:

a.
P 350,000 of income.

b.
P700,000 of income.

c.
P200,000 of income.

d.
P 450,000 of income.

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The correct answer is: P 450,000 of income.

Question 42
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Which of the following cannot be deducted against gross income of non-VAT taxpayers?

a.
Foreign income tax.

b.
Philippine income tax.

c.
Value added tax.

d.
Percentage tax.

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The correct answer is: Philippine income tax.

Question 43
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Corporate OSD is in lieu of all expenses such as the following except:

a.
Regular itemized allowable deductions.
b.
Special itemized allowable deductions.

c.
Cost of sales or cost of services.

d.
Net operating loss carry over.

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The correct answer is: Cost of sales or cost of services.

Question 44
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Which of these may grant relief from the MCIT?

a.
National Office of the BIR.

b.
Office of the Commissioner of Internal Revenue.

c.
Office of the Revenue District Officer having jurisdiction.

d.
Secretary of Finance.

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The correct answer is: Secretary of Finance.

Question 45
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Question text

Non-operating income subject to regular tax is excluded in the OSD base of:

a.
Both individual taxpayers and corporate taxpayers.

b.
Neither individual taxpayers nor corporate taxpayers.

c.
Individual taxpayers.

d.
Corporate taxpayers.

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The correct answer is: Individual taxpayers.

Question 46
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Who is not allowed the option to be taxed at 8%?

a.
Mixed income earner.

b.
Business income earner.

c.
Compensation income earner.

d.
Professional income earner.

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The correct answer is: Compensation income earner.

Question 47
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The OSD of corporations under the accrual basis is based on:

a.
Gross sales.

b.
Total gross income.

c.
Total gross income from operations.

d.
Gross receipts.

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The correct answer is: Total gross income.

Question 48
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Question text

A taxpayer incurred research and development expenditures which are related to a capital account
subject to depreciation. The taxpayer should;

a.
Treat the R&D expenses as capital expenditures and depreciate them over the useful life of the related asset.

b.
Claim them as outright deductions or treat them as deferred charges and amortize them over 10 years.

c.
Claim outright deduction for the research and development expenses.

d.
Treat the R&D expenses as a deferred expenses and amortize them over 60months.

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The correct answer is: Treat the R&D expenses as capital expenditures and depreciate them over the useful life
of the related asset.

Question 49
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Securities becoming worthless is considered as an ordinary loss to?

a.
Banks.

b.
All of these.

c.
Security dealers.
d.
Trust.

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The correct answer is: All of these.

Question 50
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One of the following can claim OSD. Whic is it?

a.
A taxpayer earning purely compensation income.

b.
A taxpayer earning a mix of a passive income and compensation income.

c.
A taxpayer earning purely passive income.

d.
A self-employed individual taxpayer.

Feedback

The correct answer is: A self-employed individual taxpayer.

Research and development costs that are not chargeable to capital account can be claimed as:

a.
Deferred expense subject to amortization.

b.
Either Deductible expense or Deferred expense subject to amortization.
c.
Both Deductible expense and Deferred expense subject to amortization.

d.
Deductible expense.

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The correct answer is: Either Deductible expense or Deferred expense subject to amortization.

Question 52
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For taxpayers involved in the sale of services, gross income means:

a.
Gross receipts less returns, allowances, discounts, and cost of services.

b.
gross sales less sales returns, discounts, and cost of services.

c.
Gross receipts, less returns, allowances, discounts, and cost of goods sold.

d.
Gross sales less sales returns, discounts, and cost of goods sold.

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The correct answer is: Gross receipts less returns, allowances, discounts, and cost of services.

Question 53
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Question text

Which of the following expenses is not part of the deductible expenses of the taxpayer?

a.
Real property tax on business properties.

b.
Expanded withholding taxes on certain expenses.

c.
Withholding tax on employees’ salaries

d.
Documentary stamp tax on the sale of stocks directly to a buyer.

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The correct answer is: Documentary stamp tax on the sale of stocks directly to a buyer.

Question 54
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For taxpayers involved in the sale of goods, gross income means:

a.
Gross receipts, less returns, allowances, discounts, and cost of goods sold.

b.
Gross receipts less returns, allowances, discounts, and cost of services.

c.
Gross sales less sales returns, discounts, and cost of goods sold.

d.
gross sales less sales returns, discounts, and cost of services.
Feedback

The correct answer is: Gross sales less sales returns, discounts, and cost of goods sold.

Question 55
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The OSD of individuals under the cash basis is based on:

a.
Gross receipts.

b.
Gross sales.

c.
Gross income from operations.

d.
Total gross income.

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The correct answer is: Gross receipts.

Question 56
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The optional standard deduction for corporate taxpayers is:

a.
40% of gross sales or gross receipts.

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

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

d.
40% of gross on come.

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The correct answer is: 40% of gross on come.

Question 57
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Exempt corporations are subject to MCIT on their income from:

a.
Unrelated activities.

b.
Both related and unrelated activities if they pass the dominance test.

c.
Both related and unrelated activities if they fail the dominance test.

d.
Related activities.

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The correct answer is: Unrelated activities.

Question 58
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Which is not covered by the optional standard deduction?

a.
Premium for health and hospitalization insurance.

b.
Salaries expense.

c.
Senior citizen”s discount.

d.
Contribution expense.

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The correct answer is: Premium for health and hospitalization insurance.

Question 59
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Which is an item of income subject to regular tax?

a.
Dividend income.

b.
Royalty income.
c.
Gain on sale of domestic stocks.

d.
Gain on sale of equipment.

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The correct answer is: Gain on sale of equipment.

Question 60
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For purposes of the OSD, which is not deducted in the determination of gross receipts?

a.
Allowances.

b.
Sales returns.

c.
Cost of services.

d.
Discounts.

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The correct answer is: Cost of services.

In the determination of the distributive net income of the general professional partnership:

a.
Partners can claim OSD on their share in the net income of a general professional partnership.

b.
Partners can claim OSD on their share in the net income of a general professional partnership provided the
latter uses OSD.

c.
Partner cannot claim OSD on their share in the net income of general professional partnership.

d.
Partners can claim OSD on their share in the net income of a general professional partnership provided the
latter uses itemized deductions.

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The correct answer is: Partner cannot claim OSD on their share in the net income of general professional
partnership.

Question 62
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When should individual income taxpayers submit their annual or consolidated return for the year
2021?

a.
April 15, 2021.

b.
November 15, 2021.

c.
April 15, 2022.

d.
15th day of the fourth month following the fiscal year of the taxpayer.

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The correct answer is: April 15, 2021.

Question 63
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Who are not related parties for purposes of the NIRC?

a.
The trustee and the beneficiary of a trust.

b.
Fiduciary of trusts with the same grantor.

c.
A partner and the partnership.

d.
Corporations under common control.

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The correct answer is: Corporations under common control.

Question 64
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Which is deductible in the computation of the MCIT?.

a.
Loss on sale of assets.

b.
Office utilities.
c.
Marketing expenses.

d.
Salaries of employees directly engaged in rendering the service.

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The correct answer is: Salaries of employees directly engaged in rendering the service.

Question 65
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Cost of services of banks excludes the following except:

a.
Interest expense on depositor’s accounts.

b.
Loss on sale of assets.

c.
Local tax expense.

d.
Advertising expense.

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The correct answer is: Interest expense on depositor’s accounts.

Question 66
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Which individual income taxpayer can claim tax credit for foreign taxes paid?

a.
Non-resident citizen.

b.
Resident alien.

c.
All of the choices.

d.
Resident citizen.

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The correct answer is: All of the choices.

Question 67
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Bad debts expense includes:

a.
Securities becoming worthless.

b.
Neither Uncollectible debts due to the taxpayer and Securities becoming worthless.
c.
Uncollectible debts due to the taxpayer.

d.
Uncollectible debts due to the taxpayer and Securities becoming worthless.

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The correct answer is: Uncollectible debts due to the taxpayer.

Question 68
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Which of the following taxes is a resident citizen or alien subject?

a.
Regular tax.

b.
Capital gains tax.

c.
All of the choices.

d.
Final tax.

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The correct answer is: Regular tax.

Question 69
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Which of the following individuals engaged in business cannot claim optional standard deduction?

a.
NRA-NETB.

b.
Resident alien.

c.
Resident citizen.

d.
Non-resident citizen.

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The correct answer is: Resident citizen.

Question 70
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When purely employed, who of the following can claim OSD?

a.
None of the choices.

b.
Resident citizen.
c.
Non-resident citizen.

d.
Resident alien.

Feedback

The correct answer is: Non-resident citizen.

Which is subject to or can be subjected to MCIT?

a.
Non-profit hospitals.

b.
Exempt corporations.

c.
Private schools.

d.
Non-resident lessors of aircraft or vessels.

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The correct answer is: Exempt corporations.

Question 72
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Which is a correct statement?

a.
All of the choices.

b.
Losses between related parties are deductible.
c.
Gains between related parties are taxable.

d.
Gains between related parties are exempt from income tax.

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The correct answer is: Gains between related parties are taxable.

Question 73
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Which is subject to the Improperly Accumulated Earnings Tax?

a.
All of the choices.

b.
Non-resident foreign corporations.

c.
Domestic corporations.

d.
Resident foreign corporations.

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The correct answer is: Domestic corporations.

Question 74
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Which can claim full deduction for the loss of securities becoming worthless?

a.
Non-security dealers.

b.
Both Security dealers and Non-security dealers.

c.
Neither Security dealers nor Non-security dealers.

d.
Security dealers

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The correct answer is: Security dealers

Question 75
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Which of the following items of entertainment, amusement and recreation expenses can be claimed
as a deduction?

a.
Entertainment expenses for potential and existing clients.

b.
Entertainment expenses in excess of the limits of the law.

c.
Entertainment expenses paid to officials of the govt.

d.
Entertainment expenses not receipted in the name of the taxpayer.

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The correct answer is: Entertainment expenses for potential and existing clients.

Question 76
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Which of these is deducted in the computation of the Improperly Accumulated Profits?

a.
Profits from capital gains.

b.
Corporate income tax.

c.
NOLCO.

d.
Profits from passive income.

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The correct answer is: Corporate income tax.

Question 77
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Which is a correct statement?

a.
Resident foreign corporations are to elect either RCIT or MCIT.

b.
Domestic corporations shall elect either MCIT or RCIT.

c.
Resident foreign corporations are liable to either 20% or 25% RCIT.

d.
MSMEs may still be taxable like large corporations.

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The correct answer is: MSMEs may still be taxable like large corporations.

Question 78
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Which is a deductible tax expense?

a.
Real property tax on business properties.

b.
Special assessment.
c.
Surcharges and penalties.

d.
Stock transaction tax.

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The correct answer is: Special assessment.

Question 79
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Which of the following may be subject to final tax?

a.
Regular compensation income.

b.
Supplemental compensation.

c.
13th month pay and other benefits.

d.
Fringe benefits.

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The correct answer is: Fringe benefits.

Question 80
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Which of the following can be deducted by a VAT taxpayer?

a.
VAT.

b.
Interest on tax delinquency.

c.
Donors tax.

d.
Philippine income tax.

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The correct answer is: VAT.