Chapter 4

Question 1

What are the three income taxation schemes under the NIRC?

Answer 1

Final income taxation
Capital gains taxation
Regular income taxation

Question 2

Are the tax schemes mutually inclusive or exclusive?

Answer 2

They are mutually exclusive meaning that an item of gross income that is subject to tax in one scheme will not be taxed by the other schemes.

Question 3

This is characterized by final taxes wherein full taxes are withheld by the income payor at the source.

Answer 3

Final income taxation

Question 4

This kind income is earned with very minimal or even without active involvement of the taxpayer in the earning process.

Answer 4

Passive income

Question 5

This arises from transactions requiring a considerable degree of effort or undertaking from the taxpayer.

Answer 5

Active or regular income

Question 6

These are all properties held by the taxpayer, whether or not connected with his trade of business, and which are not included among the properties considered as ordinary assets under Section 39 of the Tax Code.

Answer 6

Capital assets

Question 7

These are all properties specifically excluded from the definition of capital assets.

Answer 7

Ordinary assets

Question 8

This is imposed on the gain realized on the sale, exchange, and other dispositions of certain capital assets.

Answer 8

Capital Gains Tax

Question 9

This is the length of time over which income is measured and reported.

Answer 9

Accounting period

Question 10

This accounting period is 12 months in length.

Answer 10

Regular accounting period

Question 11

This accounting period is less than 12 months.

Answer 11

Short accounting period

Question 12

This accounting period starts from January 1 and ends December 31.

Answer 12

Calendar accounting period

Question 13

This accounting period is any 12-month period that ends on any day other than December 31.

Answer 13

Fiscal accounting period

Question 14

When is the deadline of filing the income tax return?

Answer 14

On the 15th day of the fourth month following the close of the taxable year of the taxpayer

Question 15

What is the accounting period of a newly commenced business?

Answer 15

The start of the business until the designated year-end of the business

Question 16

What is the accounting period of a business that will be dissolved?

Answer 16

The start of the current year to the date of dissolution

Question 17

What is the accounting period of a business that changed accounting period?

Answer 17

the start of the previous accounting period to the designated year-end of the new accounting period

Question 18

What is the accounting period of a dead taxpayer?

Answer 18

The start of the calendar year to the date of death

Question 19

What is the accounting period of a taxpayer whose accounting period is terminated by the CIR?

Answer 19

Start of current year to the date of termination

Question 20

If a taxpayer has more than one type of business, utilizing various accounting methods, should he report his income using a common one?

Answer 20

No kasi pwede naman magconsolidate

Question 21

Under this basis of accounting, income is recognized when earned regardless of when received and expense is recognized when it is incurred regardless of when paid.

Answer 21

Accrual basis

Question 22

Under this basis of accounting, income is recognized when received and expense is recognized when paid.

Answer 22

Cash basis

Question 23

Under this method, gross income is recognized and reported in proportion to the collection from the installment sales.

Answer 23

Installment method

Question 24

This means the total payment made by the buyer, in cash or in property, int he taxable year the sale was made.

Answer 24

Initial payment

Question 25

This is the entire amount for which the buyer is obligated to the seller.

Answer 25

Selling price

Question 26

This is the amount receivable in cash or other property from the buyer

Answer 26

Contract price

Question 27

This is the value of the asset used in determining gain or loss upon sale. It is the difference between the purchase price and the accumulated depreciation.

Answer 27

Tax basis

Question 28

This is the sale of properties of which the seller is not the dealer

Answer 28

Casual sale

Question 29

This isa. variant of the accrual basis and is used in reporting income when a non-interest bearing note is received as consideration in a sale.

Answer 29

Deferred payment method

Question 30

In this method, the estimated gross income from construction is reported base don the percentage of completion of the constriction project.

Answer 30

Percentage of completion method

Question 31

These are tangible improvements made by the lessee to a property of the lessor

Answer 31

Leasehold improvements

Question 32

In this method, the lessor may report as income the fair market value of such buildings or improvements subject tot he lease at the time when such building or improvements are completed.

Answer 32

Outright method

Question 33

In this method, the lessor may spread over the life of the lease the estimated depreciated value of such buildings or improvements at the termination of the lease and report as income for each year of the lease an aliquot part thereof.

Answer 33

Spread-out method

Question 34

This refers to the science of breeding and caring for farm animals.

Answer 34

Animal husbandry

Question 35

These are those crops that yield harvests through years.

Answer 35

Perennial crops

Question 36

These are crops that are harvested once after several years

Answer 36

One-time crops

Question 37

Under this method, farming income is recognized as the difference between the proceeds of the harvest and expenses of the particular crop harvested. Here, the expenses of each crop are accumulated and deducted upon the harvest of the crop.

Answer 37

Crop year basis

Question 38

What is the surcharge for failure to file or pay deficiency tax on time?

Answer 38

25% of basic tax

Question 39

What is the surcharge for willful neglect to file and pay taxes

Answer 39

50% of basic tax

Question 40

What is the penalty for wrong venue filing of tax?

Answer 40

25% of basic tax

Question 41

What is the penalty for filing of fraudulent return?

Answer 41

50% of basic tax

Question 42

What is the interest of tax penalty?

Answer 42

12% per annum (computed on actual days of delay)

Question 43

This is an amount paid in lieu of criminal prosecution over a tax violation.

Answer 43

Compromise penalty

Question 44

What is the compromise penalty of 20,000 to 50,000 tax unpaid.

Answer 44

10,000

Question 45

What is the compromise penalty of 50,000 to 100,000 tax unpaid?

Answer 45

15,000

Question 46

What is the compromise penalty of 100,000 to 500,000 tax unpaid?

Answer 46

20,000