Income

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS

10

Chapter 3: Concept of Income

CHAPTER 3

CONCEPT OF INCOME

Problem 3 – 1 TRUE OR FALSE

1. True

2. False – Some wealth that made to increase the taxpayer’s net worth are gifts and

inheritance and these are not taxable income.

3. True

4. False – Sometimes a sale results to loss.

5. True

6. True

7. True

8. False – Filipino citizen who is not residing in the Philippines is taxable only for income

earned within.

9. False – The basis of tax is the fair market value of the instrument.

10. False – Not income for the employee and not subject to income tax because the

beneficiary is the employer.

11. False – Accrual reporting reports income when there is earning regardless of

collection.

12. False – Most taxpayer opts for calendar year basis, except corporation which may opt

for fiscal year.

13. True

14. False – Prepaid expenses are not allowable deductions whether cash or accrual

method of reporting income is used.

15. False – There is no rule of 25% initial payment if the sale is made on regular basis of

personal goods.

Problem 3 – 2 TRUE OR FALSE

1. True

2. True

3. False- All income distributed are considered as from all income earned outside the

Philippines.

4. False – Only calendar method starts from January and ends at December of the

taxable year.

5. True

6. True

7. True

8. False – The reportable income of the decedent’s estate is only the earnings after

death.

9. False – Service business is allowed to deduct expenses using accrual method if such

business opted to use accrual method, but the income is still reportable using cash

basis.

10. True

11. True

12. True

13. True

14. True

15. True

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS

Chapter 3: Concept of Income

Problem 3 – 3

1. D

2. C

3. A

4. C

5. B

6. C

7. D

8. C

9. B

10. C

11. C

Problem 3 – 4

1. D

2. B

3. B

4. A

5. D

6. A

7. B

8. D...