chapter 3

Question 1

all income derived from whatever source, including, but not limited to, the following items:

Answer 1

gross income

Question 2

Compensation for services in whatever from paid, including, but not limited to fees, salaries, wages, commissions, and similar items;

Answer 2

gross income

Question 3

derived from the conduct of trade or business or the exercise of a profession;
Gains derived from dealings in property;
Interest;
Rents;
Royalty;

Answer 3

gross income

Question 4

all income derived from whatever source, including, but not limited to, the following items:
Dividends;
Annuities;
Prizes and winnings;
Pensions; and
Partner’s distributive share from the net income of the general professional partnership.

Answer 4

gross income

Question 5

Rental income shall be taxable on the year received, whether earning or unearned, provided, there is no restriction as to its use, and regardless of method of accounting employment.

Answer 5

rental payment

Question 6

Upon forfeiture in favor of the lessor, or
Upon application as rental payment.

Answer 6

security deposit

Question 7

Improvements made by the lessee shall be treated as Income of the lessor. If:

Answer 7

LEASEHOLD IMPROVEMENTS

Question 8

The Improvements will be owned by the lessor at the end of the ________

Answer 8

lease;

Question 9

The _____ is not required to pay the lessee the value of such improvements.

Answer 9

lessor

Question 10

____________ dividends shall be taxable upon declaration.

Answer 10

CASH & PROPERTY DIVIDENDS

Question 11

GENERAL RULE: Distribution of stock dividend is not taxable because they are not realized income.

Answer 11

stock dividends

Question 12

EXCEPTION: A stock dividend constitutes income if it gives the shareholder an interest different from that which his former stockholding represented.

Answer 12

stock dividends

Question 13

are exempt up to the stockholder in liquidation is less than the cost of investment, the loss in the transaction is deductible to the extent allowed for capital losses.

Answer 13

LIQUIDATING DIVIDENDS

Question 14

The ____ imposes a tax on income from whatever source which means that it includes income whether coming from legal or illegal sources. EXAMPLE:

Answer 14

law

Question 15

Gross Income means all income derived from whatever source, including, but not limited to, the following items:
(Section 32, RA 8424)

Answer 15

GROSS INCOME,

Question 16

Compensation for services in whatever from paid, including, but not limited to fees, salaries, wages, commissions,
and similar items;

Answer 16

gross income

Question 17

derived from the conduct of trade or business or the exercise of a profession;

Answer 17

gross income

Question 18

Gains derived from dealings in property;
4) Interest;
5) Rents;
6) Royalty;
7) Dividends;
8) Annuities;
9) Prizes and winnings;
10) Pensions; and
11) Partner’s distributive share from the net income of the general professional partnership.

Answer 18

gross income

Question 19

Rental income shall be taxable on the year received, whether earning or unearned, provided, there is no restriction as to its use, and regardless of method of accounting employment.

Answer 19

outright

Question 20

Book Value at the end of lease term/Remaining term of the lease.

Answer 20

spread out

Question 21

KINDS:
1) Cash Dividends
2) Property Dividends
3) Stock Dividends
4) Liquidating Dividends
what kind of dividend?

Answer 21

dividend income

Question 22

In order for recovery of bad debts to be considered income, the following must be compiled:
1) Bad debts were written of in the previous year/s;
2) Such bad debts were deducted in arriving at taxable income;
3) There is a resulting tax benefit in the deduction.

Answer 22

recovery of bad debts

Question 23

The following are the requirements before refund of taxes be considered income:
1) There is payment of tax in the previous year/s;
2) The tax paid was deducted in arriving at taxable income;
3) There is a resulting tax benefit on the deduction.

Answer 23

refund of taxes

Question 24

Debtor performs services to the creditor

what are the tax treatment?

Answer 24

Compensation Income

Question 25

Creditor desires to benefit the debtor
without any consideration

what are the tax treatment?

Answer 25

gift

Question 26

Creditor is a corporation and the debtor
is a stockholder of such corporation

what are the tax treatment?

Answer 26

dividend income

Question 27

The proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a single sum or otherwise, but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.

Answer 27

life insurance

Question 28

GENERAL RULE: Exempt from tax since it is a mere reimbursement for the loss of life.
EXCEPTION: The following shall be taxable:
1) The beneficiary was chosen for a valuable consideration.
2) The interest earned on the insurance policy.

Answer 28

life insurance

Question 29

The amount received by the insured, as a return of premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or the upon surrender of the contract.

Answer 29

return of premium

Question 30

The Value of property acquired by gift, bequest, devise, or descent: Provided, however, that income from such property, as well as gift, bequest, device, or descent of income from any property, in cases of transfers of divided interest, shall be included in gross Income.

Answer 30

GIFTS, BEQUESTS & DEVISES

Question 31

Amounts received, through Accident or Health Insurance or under Workmen’s Compensation Acts, as compensation for personal injuries or sickness, plus the amounts of any damages received, whether by suit or agreement, on account of such injuries or sickness.

Answer 31

COMPENSATION FOR INJURIES OR SICKNESS

Question 32

Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines.

Answer 32

INCOME EXEMPT UNDER TREATY

Question 33

1) Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in bank in the Philippines by:
a. Foreign governments
b. Financing institutions owned, controlled, or enjoying refinancing from foreign governments; and
c. International or regional financial institutions established by foreign governments.

Answer 33

miscellaneous items

Question 34

2) Income derived from any public utility or from the exercise of any essential government function accruing to the Government of the Philippines or to any political subdivision thereof.

Answer 34

miscellaneous items

Question 35

3) Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement but only if:
a. The recipient was selected without any action on his part to enter the contest or proceeding; and
b. The recipient is not required to render substantial future services as a condition to receiving the prize or award.

Answer 35

miscellaneous items

Question 36

6) GSIS, SSS, Medicare and Pag-Ibig contributions, and union dues of individuals.
7) Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years.

Answer 36

miscellaneous items

Question 36

4) All prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned by their national sports associations.
5) Gross benefits from 13th month pay and other benefits received

Answer 36

miscellaneous items

Question 37

8) Gains realize by the investor upon redemption of shares of stock in a mutual fund company as defined in Section 22(BB) of this Code.

Answer 37

miscellaneous items