INCOME TAX CHAPTER 4

• an ordinary asset is defined to include all other assets other than capital assets

  F
• both active income and passive income do not require direct participation of the taxpayer in earning the income.

  F
• there are 3 types of gross income for taxation purposes

  T
• the 3 tax schemes are mutually inclusive in coverage

  F
• regular income tax generally covers active income and capital gains

  T
• final tax generally covers passive income

  T
• capital gains arise from sale, exchange, and other disposition of any assets

  F
• there are only 2 types of assets for purposes of taxation

  T
• the technique used to measure income is referred to as an accounting method. the length of time over which income is reported is referred to as an accounting period.

  T
• regular accounting period are calendar and fiscal

  T
• individuals file their income tax returns on or before april 15 of the following calendar year

  T
• all taxpayers can change their accounting period when there is a change in the nature of their business, but the BIR must be notified in all cases

  F
• the first accounting period of a starting business will more likely be less than 12 months

  T
• the accounting period of a deceased taxpayer shall be terminated on December 31 in the year of death

  F
• accrual basis and cash basis are the most common accounting methods used practice

  T
• the withheld taxes on the income payments made by the taxpayers are tax credit against their income tax due

  F
• advanced income is an item of gross income for accrual basis taxpayers

  T
• generally, prepayments are non-deductible in the current accounting period

  T
• prepayments are deductible but in the future period they expire or are consumed in the business or trade of the taxpayer

  T
• the use of different methods for business of the same taxpayer is permitted by the law

  T
• initial payment includes downpayment and installments in the year of sale

  T
• contract price is synonymous with selling price

  F
• the crop year method is an accounting method

  T
• under the percentage of completion method, gross income is reported based on the cash collections from the contract price

  F
• the depreciated value of the property upon termination of the lease constitutes income to the lessee

  T
• there are 3 types of income tax return for each income tax scheme

  F
• all taxpayers, small or large are encountered to file their income tax return through the EFPS system of the BIR

  F
• large taxpayers are under the super provision of the BIR large taxpayer service

  T
• non-filling or non-payment of tax is subject to penalties such as surcharges, interest, compromise, and imprisonment

  F
• the interest on unpaid taxes is computed on the basic tax only excluding the surcharge

  T
• only large taxpayers shall file under eFPs

  F
• both manual filing and filing through-BIR forms makes use of manual payment

  T
• eFPS is fully electronic tax compliance

  T
• e-BIR forms makes use of electronic data entry and filing

  T
• eFPS filers may file manually when there is a BIR system downtime

  T