IRTAX 004

As a rule, this is not part of taxable income

• Profit sharing of a partner from SVG & Co., a general professional partnership.

• Hazard pay received by a civil engineer working at ABC Corporation.

• Overtime pay received by a rank-and-file employee.

• 13th month pay amounting to 87,000.

This is taxable income

• Retrenchment pay received by Gon Hunter because of his poor eyesight

• SSS Maternity benefits received by Clarice amounting to 70,000.

• Refund of excess income tax received by Rolly on her his last payroll cut-off upon annualization

• Separation pay received by Jonathan amounting to 100,000 upon resignation.

If an individual performs services for a creditor who in consideration therefor cancels the debt, the cancellation of indebtedness may amount to

• A gift

• A donation inter-vivos

• A capital contribution

• A payment of income

Mae, a dedicated and honest employee of Beef Corp. for the past 20 years, was advised that she is to be retrenched as the company was losing heavily but that she would be given the separation pay provided by law. To avoid the implication of inefficiency, Mae was advised to file a letter of resignation instead of being retrenched. If Mae files a letter of resignation and receives the separation pay, the amount is.

• Partly taxable, partly exempt.

• Exempt from income tax

• Subject to final tax

• Taxable in full

Christine is engaged in the marketing of cars. When her son got married to the daughter of a respectable senator Bato Dela Rose, she gave the newly wedded couple a brand-new car worth P800,000 as a wedding gift. The value of the car is.

• Taxable income to the newly wedded couple

• Deductible expense of Christine.

• Taxable income to the couple and deductible expense of Christine

• Not taxable income to the newly wedded couple

Statement 1: Gains realized from the sale or exchange or retirement of bonds, debentures, or other certificates of indebtedness with a maturity of more than 5 years, shall not be taxable to the investor seller.

Statement 2: Income derived from investments in the Philippines in loans, stocks, bonds, or other domestic securities, or from interest on deposits in banks in the Philippines, including sale of investments, by foreign governments and financial institutions wholly owned, controlled, or enjoying financing from foreign governments, shall be exempt from income tax, and consequently from withholding tax.

• Statement 1 is true.

• Statement 2 is true

• Both statements are false

• Both statements are true.

Faye Toos has been an employee of Bling Corp. for the last 25 years. Her employer set up a BIR-approved private benefit plan primarily for retirement payments to its retiring employees. Her employer also set up a trust fund for the exclusive benefit of its employees, and to which the employees can make contributions. So far, Faye has contributed a total of ₱40,000 to this trust fund. When she retired at age 55, she received the following amounts from her employer: (1) ₱200,000 representing her retirement benefits and which was paid out of the BIR-approved benefit plan; and (2) a dividend of ₱200,000 from the trust fund. Which statement is incorrect?

• Faye Toos’ retirement benefits from the BIR-approved private benefit plan are income tax-exempt.

• ₱40,000 of the ₱200,000 which Faye received from the trust fund is exempt from income tax.

• ₱160,000 of the ₱200,000 which Faye received from the trust fund shall be subject to an FWT.

• None of the above.

Advance rental in the nature of prepaid rental, received by the lessor under a claim or right, and without restriction as to use is.

• Taxable income of the lessor in the year received if he is on the cash method of accounting.

• Taxable income of the lessor in the year received if he is on the accrual method of accounting.

• Taxable income of the lessor up to the amount earned in the year the rental is received.

• Taxable income of the lessor in the year received whether he is on the cash or accrual method of accounting.

Which payments made by the lessee under such terms of the lease contract should be considered as additional rent income of the lessor?

A. If a lessee paid directly to the local government the real estate tax on the property of the lessor B. If the amount received by the lessor is a security deposit for the faithful compliance by the lessee of the terms of the contract C. If the amount received by the lessor is a loan extended by the lessee to the lessor.

• Only A and C

• Only B and C

• A, B and C

• Only A

Should the lessee make permanent improvements to the property leased under an agreement that upon the expiration of the lease contract the improvements shall belong to the lessor, the lessor may recognize income from the leasehold improvements.

A. At the time when such improvements are completed, the fair market value of such improvements.

B. By spreading over the remaining term of the lease the estimated depreciated value of such improvements at the termination of the lease and report as income for each year of the lease an aliquot part thereof.

• A but not B is allowed.

• B but not A is allowed.

• Neither A nor B is allowed.

• Either A or B is allowed.