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TitleHQ04 - Final Income Taxation
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Table of Contents
                            NORTHERN CPA REVIEW
                        
Document Text Contents
Page 1

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Page 2

Northern CPAR: Taxation II – Final Income Tax
taxpayer

Necessity for a consolidated
return

None Required

FINAL TAXATION EXAM DRILL QUESTIONS
1. Which is not subject to final tax?

a. Gain on sale of shares of stock directly to buyer
b. Royalties from musical composition
c. Capital gain on sale of real property classified as capital asset
d. Share of a partner in the distributive net income after tax of a business

partnership
2. Which is subject to final tax?

a. Share of the distribute net income of a general professional partnership
b. Winnings not exceeding P10,000
c. Prizes not exceeding P10,000
d. Interest income from foreign bank deposits

3. Which of the following passive income is taxed on an annual and net basis?
a. Capital gain on sale of domestic stocks directly to buyer
b. Capital gain on sale of domestic stocks through the Philippine Stock Exchange
c. Capital gain on sale of real property classified as capital asset
d. Capital gain on sale of real property classified as ordinary asset

4. Capital gain on the sale of which capital asset below is conclusively presumed
a. Real property used in business c. Personal property not used in business
b. Real property not used in business d. Personal property used in business

5. The passive income that is subject to a two-tiered final tax structure is
a. Capital gain on sale of stocks of a resident foreign corporation directly to buyer
b. Capital gain on the sale of capital interest in a partnership
c. Capital gain on sale of sale of real property not used in business
d. Capital gain on the sale of stocks of a domestic corporation directly to buyer

6. Which is taxed at the lowest final tax rate among the following passive income?
a. Interest income received from a depositary bank under the expanded foreign

currency deposit system received by a resident citizen
b. Cash dividend from a domestic corporation
c. Royalties from books and other literary works
d. Interest income from long-term deposit with maturity of over five years

7. All of the following are subject to 7 ½% final tax on interest on FCDU Deposit, except
a. Resident citizen c. Domestic corporation
b. Non-resident citizen d. Resident corporation
c. Resident alien

8. Dividends received by which of the following is not subject to dividend tax?
a. Resident individual c. Resident corporation
b. General professional partnership d. Non-resident foreign corporation

9. Ambiong Bank of Baguio started operation in 1995 with the following information on results of operation
and dividend declarations.

Year Net
income

Dividends
declared

1996 P
500,000

-

1997 1,500,00
0

-

1998 2,000,00
0

-

1999 1,000,00
0

-

2000 2,500,00
0

P 6,500,000

How much tax must have been paid in the 2000 dividend declaration of Ambiong
Bank?
a. P650,000 b. P390,000 c. P450,000 d. P0

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Driven for real excellence! Tax by Rex B. Banggawan, CPA, MBA Tax – 5th Batch – HQ04

Page 4

Northern CPAR: Taxation II – Final Income Tax
Share in the distributive income of a
joint venture

72,000

a. P46,000 b. P53,000 c. P38,700 d. P46,500

20.On January 1, 2008, Kevin purchased 1,000 P1,000 face value bonds of a domestic
corporation at face value. The bonds were dated January 1, 2007 and mature on
January 1, 2011. The bonds pay 12% annual interest every January 1. If Kevin
disposed of this investment directly to buyer on December 31, 2008 at 102, how much
is the total final tax due?
a. P24,000 b. P25,000 c. P1,000 d. P0

21.On January 1, 2005, Helen invested P1,000,000 to RCBC Commercial Bank’s 5-year,
tax-free time deposit. The long-term deposit pays 15% annual interest every January
1. In need of cash, Helen pre-terminated her investment on July 1, 2008. How much is
the final tax due and the proceeds of Helen’s investment?
a. P9,000; P1,066,000 c. P18,750; P1,056,250
b. P63,000; P1,012,000 d. P30,000; P1,345,000

22.How much final tax is withheld in the interest income paid by the bank on January 1,
2006?
a. P0 b. P18,000 c. P30,000 d. P7,500

23.Assuming the same information in the problem above, except that the investment was
made by a domestic corporation, how much final tax is withheld in the year of pre-
termination and the proceeds to the corporation?
a. P15,000; P1,060,000 c. P18,750; P1,056,250
b. P45,000; P1,030,000 d. P30,000; P1,345,000

20.Benito Mojica invested in an 8-year long-term deposit in Rizal Commercial Banking
Corporation amounting to P2,000,000 paying 10% interest semi-annually. How much
is the final tax to be withheld by Rizal Commercial Banking Corporation if Benito
Mojica pre-terminated his investment at the just after the end of the third year?
a. P0 c. P30,000
b. P72,000 d. P120,000

21.What if Benito Mojica pre-terminates it just after the end of the fifth year?
a. P0 c. P50,000
b. P72,000 d. P200,000

22.Benedict rendered advisory services to Alexander in connection with the latter’s tax
compliance from May 2, to July 2, 2006. In July 2, 2006, Alexander paid him a note
with a face value of P100,000 payable a year after. The same note could be discounted
at the bank for 15% at the time of receipt. How much compensation income and
interest income is to be included in gross income?
a. P85,000; P0 c. P85,000; P7,500
b. P100,000; P15,000 d. P100,000; P0

23.Andromeda, a non-resident alien, rendered professional services to Philippine
company, a domestic corporation. The total consultancy fees agreed were P1,000,000.
How much should Philippine company withhold?
a. P100,000 b. P200,000 c. P250,000 d. P 0

24.Andromeda, a non-resident alien, invests in the 60-day Peso time deposit of Metro
Pilipino Bank. Andromeda earned P100,000 interest income. How much final tax
should Metro Pilipino Bank withhold?
a. P 0 b. P20,000 c. P25,000 d. P 30,000

25.Assuming the same information in the preceding problem except that Andromeda is a
non-resident corporation. How much final tax is to be withheld?
a. P 0 b. P20,000 c. P25,000 d. P 30,000

26.Andromeda, a non-resident alien, deposited $100,000 in the FCDU unit of Universal
Bank, a resident foreign bank. During the period, Andromeda earned $1,000 total
interest. The relevant exchange rate between the Peso and the Dollar was P50:$1.
How much final tax should Metro Pilipino Bank withhold?
b. P50,000 b. P100,000 c. P125,000 d. P 0

27.Sunrise Bank, a non-resident foreign bank, has substantial foreign currency deposit at
the FCDU unit of Banco Italiano, a resident foreign bank, totaling $5,000,000. Total

4
Driven for real excellence! Tax by Rex B. Banggawan, CPA, MBA Tax – 5th Batch – HQ04

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