MULTIPLE CHOICE (10 points) Read and analyze each item. Choose the correct answer.

1. Which of the following is INCORRECT?

a. Resident foreign corporations are subject to income tax based on net income from sources within the Philippines.

b. Domestic corporations are subject to income tax based on net income from all sources.

c. Non-resident foreign corporations are subject to income tax based on gross income from sources within the Philippines.

d. Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10%.

2. Which of the following shall be considered related income of proprietary educational institutions?

I. Income from tuition fees and miscellaneous school fees

II. Income from a hospital where medical graduates are trained for residency

III. Income from a canteen situated within the school campus

IV. Income from a bookstore situated within the school campus

a. I only

b. I and II only

c. I, II, and IV only

d. I, II, III, and IV

3. A domestic proprietary educational institution improved its library facilities by adding a new wing to its library building. The capital outlay on library improvement, for income tax purposes, may be:

a. Deducted at full at the time of completion of the improvement

b. Capitalized or expensed outright at the option of the school owners

c. Capitalized and depreciated over the estimated life of the improvement

d. Capitalized or expensed outright at the option of the government

4. H Hospital is a 100-bed hospital organized mainly for non-paying patients. However, out of the 100-bed capacity, 40 beds are allotted for paying patients, while the rest are intended for charity patients. The revenues generated from these paying patients, however, are being used to improve the facilities of the hospital. Which of the following statements is CORRECT?

I. H Hospital can claim exemption from real property tax. As a general principle, a charitable institution does not lose its character as such and its exemption from taxes because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.

II. H Hospital is subject to 10% on its net income, subject to compliance with the "predominance test".

a. I only

b. II only

c. I and II

d. Neither I nor II

5. For income tax purposes, which of the following is the taxable base of an international carrier doing business in the Philippines?

a. Gross Philippine Billings

b. Gross Philippine Billings minus deductible expenses

c. Regular rate of 30% of its net taxable income

d. Allocation of income from sources within and outside the Philippines, as well as expenses

6. For income tax purposes of an international air carrier, which of the following is included in the Gross Philippine Billings?

a. Tickets sold outside the Philippines for passengers originating from outside the Philippines

b. Passage documents sold outside the Philippines for excess baggage originating from the Philippines

c. Tickets sold in the Philippines for passengers originating from the Philippines but are not actually flown

d. Passage documents sold in the Philippines for cargoes originating from outside the Philippines

7. In order for an international carrier to qualify for an exemption on the basis of reciprocity, what type of tax shall be exempted as well by its home country?

a. Income tax

b. Business tax

c. Transfer tax

d. Any of the choices

8. Which of the following shall pay a tax of 10% of their taxable income?

I. Regional or area headquarters

II. Regional operating headquarters

a. I only

b. II only

c. I and II

d. Neither I nor II

9. Teri Yaki Corp., a Japanese corporation having no business in the Philippines, is engaged in shipbuilding. It leases some of its newly constructed ships to Super Fairy Inc., a Philippine carrier. What income tax rate will apply to the rental payments to the lessor?

a. 30% Basic Income Tax

b. 25% Final Withholding Tax

c. 7.5% Final Withholding Tax

d. 4.5% Final Withholding Tax

10. Which of the following will be the tax for rentals, charters, and other fees derived by a non-resident lessor of aircraft, machinery, and other equipment in the Philippines?

a. Twenty-five percent (25%)

b. Seven and one-half percent (7 %)

c. Four and one-half percent (4 %) of gross rentals or fees

d. Two and one-half percent (2 %) of gross income