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IAI – SUMMATIVE THEORY AND PRACTICE (REVIEW SUBJECTS)

NAME OF STUDENT:_________________________ Date ________


TAXATION REVIEW
SUBMIT BY SEPTEMBER 17, 2021
MULTIPLE CHOICE: Choose the correct answer.
1. The process by which the sovereign raises income to defray the expenses of the government.
a. Subsidy b. tariff c. taxation s. tribute
2. One of the characteristics of internal revenue tax is that they are:
a. criminal in nature b. penal in nature c. political in nature d. generally prospective in application.
3. In case of conflict between tax laws and generally accepted accounting principles:
a. both tax laws and GAAP shall be enforced. c. Tax laws shall prevail over GAAP.
b. GAAP shall prevail over tax laws. d. the issue shall be resolved by the court.
4. Which of the following has no power of taxation?
a. provinces b. cities c. barangays d. barrios
5. “Schedular system of income taxation” means:
a. all types of income are added together to arrive at gross income.
b. separate graduated rates are imposed on different types of income.
c. compensation income and business/professional income are added together in arriving at gross income.
d. capital gains are excluded in determining gross income.
6. Which of the following statements is true?
a. opinions of legal luminaries sources of tax laws.
b. the constitution grants exemption from all kinds of taxes to religious and charitable organizations.
c. because the power to tax is unlimited, comprehensive, plenary and supreme, the power to tax can reach over into any
jurisdiction to seize upon person or property.
d. the “benefits-protection theory” is the source of the doctrine of symbiotic relationship.
7. One of the following is a primary purpose of taxation:
a. protection of local industries against foreign competition through imposition of high customs duties on imported
goods. d. . to secure revenue for the support of the government.
b. reduction of inequities in wealth and income by imposing progressively higher tax rates.
c. strengthening of anemic enterprises by giving tax exemptions.
8. Which of the following is not a secondary purpose of taxation?
a. To serve as key instrument of social control. d. to achieve social and economic stability.
b. to effect a more equitable distribution of wealth among people.
c. to raise revenue to defray the necessary expenses of the government.
9. Which is the best answer? A tax reform at any given time underscores the fact that:
a. taxation is an inherent power of the state. c. taxation is essentially a legislative power.
b. the state can and should adopt progressive taxation. d. taxation is a power that is very broad.
10. The legislative body can impose a tax at any amount underscores the legal truism that taxation is:
a. an inherent power of the tax. c. essentially a legislative power.
b. a very broad power of the state, d. for public purpose.
11. All of the following EXCEPT one, are basic principles of the sound tax system.
a. fiscal adequacy b. theoretical justice c. administrative feasibility d. inherent in sovereignty
12. Under this basic principles of sound tax system, the government should not incur a deficit.
a. theoretical justice b. administrative feasibility c. fiscal adequacy d. none of the adequacy
13. The following, EXCEPT one, are basic principles of a sound tax system.
a. it should be capable of being effectively enforced. d. it must be progressive
b. sources of revenue must be sufficient to meet government expenditures and other need.
c. it should be exercised to promote public welfare.
14. Real property taxes should not disregard increases in the value of real property occurring over a long period of time, To do
otherwise would violate the canon of a sound tax system referred to as:
a. theoretical justice b. fiscal adequacy c. administrative feasibility d. symbiotic relationship
15. Which of the following is not one of the canons of a sound tax system?
a. quantifiability b. equality c. certainty d. convenience
16. Which theory in taxation states that without taxes, government would be paralyzed for lack of power to activate and
operate it, resulting in its destruction?
a. power to destroy theory b. lifeblood theory c. sumptuary theory d. symbiotic doctrine
17. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The law was thought to be sufficient to
drive many cigarette companies out of business , and was questioned in court by a cigarette company that would go out of
business because it could not be able to pay the increased tax.
The cigarette company is_____________________.
a. wrong because taxes are the lifeblood f the government.
b. wrong because the law recognizes that the power to tax is the power to destroy.
c. correct because no government can deprive a person of his livelihood.
d. correct because Congress in this case, exceeded its power to tax..
18. Which statement below expresses the lifeblood theory?
a. The assessed taxes must be enforced by the government.
b. The power of taxation is an inherent power of the sovereign to impose burden upon subjects and objects within its
jurisdiction for the purpose of raising revenues.
c. The underlying basis of taxation is government necessity for without taxation a government can neither exist nor
endure. d. taxation is an arbitrary method of exaction by those who are in the seat of power.
19. The power to tax is the power to destroy. Is this always so?
a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory.
b. Yes. The tax collections should enforce a tax law even if it results to the destruction of the property rights of a taxpayer.
c. Yes. Tax laws should always be enforced because without taxes the very existence of the State is endangered.
d. No. The Supreme Court may nullify a tax law, hence, property rights are not affected.
20. The requirement of equality or theoretical justice is complied with if the tax is:
a. progressive b. regressive c. ad valorem d. specific
21. The power of taxation can only be exercised by the lawmaking body:
a. subject to constitutional and inherent limitations. c. legislative in character
b. equality or theoretical justice . d. inherent in sovereignty
22. The President of the Philippines and the Prime Minister of Japan entered into an executive agreement in respect of a loan
facility to the Philippines from Japan whereby it was stipulated that interest on loans granted by private Japanese financial
institutions in the Philippines shall not be subject to Philippine income taxes. What basic characteristic of taxation has been
violated by this agreement?
a. inherent limitation b. theoretical justice c. legislative in character d. administrative feasibility
23. Although the power of taxation is basically legislative in character, it is NOT the function of Congress to:
a. fix with certainty the amount of taxes. c. identify who should collect the tax.
b. collect the tax levied under the law. d. determine who should the subject to the tax.
24. Which statement gives the correct answer? That a feasibility study needs or need to look into the taxes of different political
subdivisions of government may be alternative sites of the business because
a. Provinces, cities and municipalities must have uniform taxes between and among themselves.
b. The local taxes of a political subdivision need not be uniform with the social taxes of another political subdivision.
c. Businesses that are subject to national taxes are exempted from local business taxes.
d. Local business taxes may be credited against national business taxes.
25. 1-The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not
mentioned in the Constitution, the state can still exercise the power.
2-It is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls to Congress
as part of the general power of lawmaking.
a. false. false b. false, true c. true, true d. true, false
26. Those restrictions on the exercise of the power of taxation that are found in the constitution or implied from the provisions:
a. theoretical justice b. legislative in character c. inherent limitations d. constitutional limitations
27. Which of the following statements is not correct?
a.
b. Taxes may be imposed to raise revenue or to provide disincentives to certain activities within the state.
c. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax.
d. For the exercise of the power of taxation, the state can tax anything at any time.
e. The power of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers..
28. One of the following is not an inherent limitation on the exercise of the power of taxation:
a. international comity b. double taxation c. territorially d. non-delegation of the legislative power to tax

1. Treating persons who are similarly situated in the same manner –


a. uniformity of taxation b. equality of taxation c. due process of law d. non-delegation of the legislative power to tax
2. All subject or objects that are similarly situated are treated alike as to the burden that may be imposed and the benefits
that may result:
a. equitable b. proportional c. uniformity d. progressive
3. A tax law is not violative of the due process clause when it is:
a. arbitrary b. discriminatory c. excessive d. proportionate
4. Which of the following is violative of the uniformity rule in taxation?
a. Different tax rates on boarding stables for race horses and boarding horses that are not for racing.
b. Wholesale dealers in oil are subject to occupation tax while wholesale dealers in other articles such as sugar, bacon,
cost, iron and other things are not so subject..
c. A road users’ tax imposed on all motor vehicles registered and operating in the City of Manila but does not subject
vehicles not registered therein but also operating temporarily in said city.
d. A tax of P2 per square meter or fraction thereof is imposed on every billboard or sign anywhere in the country.
5. The Lung Center of the Philippines, a charitable institution is erected in the middle of a twelve hectare lot:
i. A big space at its ground floor is being leased to private parties for canteen and small store spaces, and to medical
or professional practitioners who use the same as their private clinics for their patients whom they charge their
professional services.
ii. The rest of the portions of the building are used for its patients, whether paying or non-paying.
iii. Almost one-half of the entire area of the lot on the left side of the building is vacant and idle.
iv. A big portion on the right side is being leased for commercial purposes to a private enterprise known as the
Elliptical Orchids & Garden Center.
Which portion is subject to real property tax?
a. I only b. I and II c. III and IV d. I, III, and IV
6. The City Council passed an ordinance imposing an occupation tax on an airconditioning technician. Conde is the only person
with such occupation in the city. He challenged the validity of the ordinance as being discriminatory since he is the only one
adversely affected.
a. The ordinance is unconstitutional because Conde is denied of his right to equal protection of the law.
b. The contention of Conde is not justified because the rule on uniformity is not violated considering that the ordinance
would also be imposed on all airconditioning technician who may come within the jurisdiction of the city.
c. The issue on validity or invalidity of the ordinance should be set aside. d. The contention of Conde is tenable.
7. Statement 1 – The constitutional exemption on income taxes, property taxes and customs duties is allowed onnon-stock,
non-profit educational institutions only.
Statement 2 – A building being leased by its owner to a private educational institution for use as classrooms is exempt from
property tax.
Statement 3 – Income of a non-stock, non profit educational institution run by the Archdiocese is exempt from the tax
provided that the income are actually, directly and exclusively used for educational purposes.
Which of the above statements are correct?
a. Statement 1 only b. Statements 1 & 2 c. Statement 2 only d. All of them
8. Which of the following statements is not correct?
a. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation.
b. The property of an educational institutional institution operated by a religious order is exempt from property tax, but
its income is subject to income tax.
c. The prohibition of delegation by the state of the power of taxation will still allow the Bureau of Internal Revenue to
modify the rules on time for filing of returns and payment of taxes.
d. The power of taxation is shared by the legislative and executive departments of government.
9. The Bicol School of Business and Arts, a proprietary educational institution which is offering primary, secondary and tertiary
education, is registered with and accredited by the Department of Education (DepEd) and the Commission on Higher
Education (CHED). Which of the following is exempt from tax? What kind of tax?
a. The importation of laboratory equipments – from customs duties.
b. The school building being rented by the school – from real property tax.
c. A portion of the school building being leased to a fast food chain – from real property tax.
d. The income from operation – from income tax.
10. The head priest of the religious sect Tres Personas Solo Dios, as the corporation sole, rented out a 5,000 sq. m. lot
registered in its name for use as school site of a school organized for profit. The sect used the rental for the support and
upkeep of its priests. The rented lot is:
a. not exempt from real property taxes because the user is organized for profit.
b. exempt from real property taxes since it is actually, directly and exclusively used for religious purposes.
c. not exempt from real property taxes since it is the rent, not the land that is used for religious purposes.
d. exempt from real property taxes since it is actually, directly, and exclusively used for educational purposes.
11. Lualhati Educational Foundation, Inc. a stock educational institution organized for profit, decided to lease for commercial
use a 1,500 sq.m. portion of its school. The school actually, directly, and exclusively used the rents for the maintenance of
its school buildings, including payment of janitorial services is the leased portion subject to real property tax?
a. Yes, since Lualhati is a stock and for profit educational institution.
b. No, since the school actually, directly, and exclusively used the rents for educational purposes.
c. No, but it may be subject to income taxation on the rents it receives.
d. Yes, since the leased portion is not actually, directly and exclusively used for educational purposes.
12. All appropriation, revenue or tariff bills, authorizing increase of the public debt, bills of local application, and private bills
shall originate exclusively in the
a. Office of the President b. House of Representatives c. Senate d. Supreme Court
13. Which of the statement is wrong? Tax laws
a. must originate from the House of representative and on which same bill the Senate may propose amendments.
b. may originate from the Senate and on which same bill the House of Representatives may propose amendments.
c. may have a House version and Senate version approved separately.
d. may be recommended by the President to Congress.
14. Congressman Luis Villafuerte of the 3rd district of Camarines Sur and Senator Juan Ponce Enrile sponsored a bill in the House
of Representatives and the Senate, respectively, increasing the personal exemptions of individual taxpayers as well as
granting tax exemption to minimum wage earners. Which of the following is correct?
a. The senate bill should be discussed ahead of the house bill.
b. The senate and house bill maybe discussed at the same time in both houses.
c. The house bill should be discussed ahead of the senate bill.
d. No priority; each bill can be discussed ahead of the other.
15. No law granting any tax exemption shall be passed without the concurrence of:
a. majority of all members of the Congress. c. ¾ vote of all members of the Congress.
b. 2/3 vote of all members of the Congress. d. Unanimous vote of all members of the Congress.
16. Which of the following statements is incorrect with respect to the power of the President?
a. Congress may authorize the President to fix within specified limits tariff rate, import and export quotas, tonnage and
wharfage dues, and other duties or imposts within the framework of the national development program of the govt.
b. the President can veto any particular item in a revenue or tariff bill, but the veto shall not affect the items or items to
which he does not object.
c. the power of taxation can be delegated to the President of the Philippines.
d. the President of the Philippines is empowered to grant tax exemption on certain class of taxpayers.
17. Which of the following statements is incorrect?
a. no person shall be imprisoned for non-payment of debt or non-payment of taxes.
b. the passage of laws granting tax exemptions requires the concurrence by the majority of all the members of Congress.
c. the Supreme Court’s jurisdiction over tax cases cannot be impaired.
d. the revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes are
exempted from taxes and duties.
18. They restrict the exercise of the power of taxation although they are not embodied in the Constitution.
a. theoretical justice b. legislative in character c. inherent limitations d. constitutional limitations
19. Money collected from taxation shall be paid to any religious dignitary EXCEPT when
a. the religious dignitary is assigned in the Philippine Army. c. it is part of a lawmaker’s pork barrel..
b. it is paid by a local government unit.. d. the payment is passed in audit by the COA.
20. A tax must be imposed for public purpose.. Which of the following is not a public purpose?
a . national defense b. public education c. improvement of sugar industry d. none of the above
21. A fundamental rule in taxation is that “the property of one country may not be taxed by another country”. This is known as
a. international law b. international comity c. reciprocity d. international inhibition
1. Question 1 – Can the state tax the Armed Forces of the Philippines?
Question 2 – Are government -owned and controlled corporations subject to tax?
a. Yes, No b. Yes, Yes c. No, Yes d. No, No
2. Diplomatic officials such as heads of states and ambassadors are exempt from taxes and duties because of:
a. international comity b. reciprocity provisions c. principle of territoriality d. exemption in the tax code
3. Which of the following activities is not a public purpose?
a. construction of bridges c. payment of Christmas bonuses of government officials and employees.
b. opening of road on a tract of land owned by a private individual. d. scholarship to poor but deserving students.
4. Deals with the provisions of the law which determines the person or property to be taxed, the sum or sums to be raised,
the rate thereof, and the time and manner of levying, receiving and collecting of taxes:
a. collection b. payment c. enforced contribution d. levy
5. Constituted of the provisions of law which prescribe the manner of enforcing the obligation on the part of those taxed to
pay the demand thus created:
a. collection b. proportionate in character c. enforced contribution d. levy
6. The amount required is dictated by the needs of the government is:
a. license fee b. tax c. toll d. tariff
7. One of the characteristics of a tax is:
a. a tax is pecuniary in nature and the law may not allow payment in kind.
b. it is dependent upon the will or contractual assent, express or implied, of the person taxed.
c. it is levied by the state by virtue of its sovereignty. d. it is collected for public and private purpose.
8. One of the characteristics of a tax is that:
a. it is generally based on contract. b. it is generally payable in money c. it is generally assignable. d. optional
9. Which is not an essential characteristic of tax?
a. unlimited as to amount c. Payable in money c. proportionate in character d. regular in payment
10. No person shall be imprisoned for non-payment of:
a. property tax b. excise tax c. poll tax d. income tax
11. An example of a property tax is:
a. additional community tax on income of real properties. c. real estate tax on real properties.
b. estate tax on inherited personal as well as real properties. d. donor’s tax on donation of property.
12. Which of the following is not an example of excise tax?
a. transfer tax b. sales tax c. real property tax d. income tax
13. Sharon, a CPA has just obtained her CPA license. Before she can lawfully pursue her occupation, she should pay:
a. professional tax (PTR) b. Percentage tax c. CPA’s income tax d. value-added tax
14. A tax is imposed upon a person who is directly bound to pay it is:
a. direct tax b indirect tax c. excise tax d. poll tax
15. One is not a direct tax:
a. immigration tax b. transfer tax c. income tax d. contractor’s tax
16. The basic community tax of P5.00 of an individual is a:
a. property tax b. direct tax c. national tax d. ad valorem tax
17. Which of the following statements is not wrong?
a. non-payment of additional community tax is a ground for imprisonment.
b. in case of conflict between a tax law and a revenue regulation, the latter shall prevail.
c. a revenue regulation can expand the provision of law by imposing a penalty even if the law it implements does not
impose a penalty. d. revenue bills originate exclusively from the senate.
18. Statement 1 – The value-added tax is a property tax.
Statement 2 – The estate tax is a direct tax.
a. the two statements are correct. c. Statement 1 is correct, statement 2 is wrong.
b. the two statements are wrong. d. statement 1 is wrong, statement 2 is correct.
19. Forms part of the purchase price of the commodity or service and passed on to customers:
a. direct tax b. indirect tax c. excise tax d. poll tax
20. A tax on business is:
a. direct tax b. indirect tax c. property tax d. none of these
21. Fermin is a mining operator. His mineral lands are not covered by any lease contract. The tax Fermin has to pay based on
the actual value of the gross output or mineral products extracted is:
a. mining tax b. royalties c. rental d. ad valorem tax
22. Tax that is imposed solely to raise revenue for government expenditures:
a. revenue tax b. regulatory tax c. specific tax d. ad valorem tax
23. Tax levied for particular or specific purpose irrespective of whether revenue is actually raised or not:
a. revenue tax b. regulatory tax c. specific tax d. ad valorem tax
24. Tax imposed by the national government and is effective within the entire jurisdiction thereof:
a. national tax b. local tax c. proportional tax d. general tax
25. Taxes imposed by a political subdivision of the estate and is effective only within the territorial boundaries thereof:
a. national tax b. local tax c. progressive tax d. regressive tax
26. Which of the following taxes is proportional?
a. value-added tax b. income tax c. estate tax d. donor’s tax
27. The following are kinds of taxes as to graduation. Which one is not?
a. digressive b. uniform c. regressive d. progressive
28. An example of a tax where the concept of progressivity finds application is the:
a. income tax on individuals c. value-added tax on certain articles
b. excise tax on petroleum products d. amusement tax on boxing exhibits
29. There can be classification of the subject matter being required to shoulder the burden. Which is the exception?
a. tax b. license fee c. toll d. eminent domain
30. Which of the following may not raise money for the government?
a. power of taxation b. police power c. power of eminent domain d. privatization of government’s capital asset
31. The power of the state or those to whom the power has been delegated to take private property for public use upon paying
to the owner a just compensation is:
a. power of eminent domain b. police power c. power of taxation d. people power
32. The power of the state to enact such laws in relation to persons and property as may promote public morals, public safety
and the general welfare of the people:
a. power of eminent domain b. police power c. power of taxation d. people power
33. The following are similarities of the inherent power of taxation, eminent domain and police power EXCEPT one:
a. are necessary attributes of sovereignty. c. affect all persons or the public.
b. interferes with private rights and property. d. are legislative in their implementation.
34. Which statement refers to police power as distinguished from taxation?
a. it can only be imposed on specific property or properties.
b. the amount imposed depends on whether the activity is useful or not.
c. it involves the taking of property by the government. d. the amount imposed has no limit.
35. Police power as distinguished from taxation:
a. just compensation is received by the owner of the property. c. maybe exercised by private individuals
b. superior to the non-imprisonment clause of the constitution. d. property is taken by the government for public purpos
36. Which statement is WRONG?
a. the power of taxation may be exercised by the government, its political subdivisions, and public utilities.
b. generally, there is no limit on the amount of tax that may be imposed.
c. the money contributed as tax becomes part of the public funds.
d. the power of tax is subject to certain constitutional limit.
37. Mr. No Null is exempt from all taxes:
Q1 – Is he exempt from customs duties on the importation of goods?
Q2 – Is he exempt from parking fees on the parking areas owned by the government?
Q3 - Is he exempt from Mayor’s permit fees?
Which of the above questions is / are answerable by “NO”?
a. Q2 only b. Q1 and Q2 c. Q2 and Q3 d. Q1, Q2 and Q3
38. After having been informed that some massage parlors are being used as fronts for prostitution, the Sangguniang
Panglunsod of Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such onerous taxes that
leave them no other alternative but to stop operating. The passage of the ordinance is a valid exercise of:
a. taxation b. eminent domain c. police power d. police power and power of taxation
39. Which of the following statements id correct?
a. non-payment of tax and debt is a ground for imprisonment.
b. the power to tax may include the power to destroy.
c. provisions in the Philippine Constitution on taxation are grants of power.
d. Land and buildings being used actually, directly and exclusively for religious and charitable purposes by churches and
charitable institutions are exempt from income and property taxes.
40. The following statements are correct. Which is the EXCEPTION?
a. The rule of taxation shall be uniform and equitable.
b. taxation may be used to supplement the police power of the state.
c. police power is superior to the non-impairment clause of the constitution.
d. the salary of the justices of the supreme court are exempt from income tax.
41. Statement 1 – The congress can enact tax laws even in the absence of a constitutional provision granting said body to tax.
Statement 2 – A tax may be validly imposed in the exercise of police power and not the power to tax.
a. false, false b. false, true c. true, true d. true, false
42. Tax as distinguished from license fee:
a. non-payment does not necessarily render the business illegal. c. imposed in the exercise of police power.
b. a regulatory measure. d. limited to cover cost of regulation.
43. The distinction of a tax from permit or license fee is that a tax is:
a. imposed for regulation c. one which involves exercise of police power.
b. one in which there is generally no limit on the amount that may be imposed. d. answer not given.
44. Which of the following terms describes this statement “ that the state complete discretion on the amount to be imposed
after distinguishing between a useful and non-useful activity?
a. tax b. license fee c. toll d. customs duty
45. Which of the following is not a distinction or similarity of license fee from tax?
a. imposed for regulation c. nonpayment makes the business illegal.
b. involves exercise of police power d. legal compensation or reward of an officer for services.
46. All of the following, EXCEPT one, are characteristics of a toll:
a. demand of proprietorship c. maybe imposed by private individuals.
b. compensation for the use of another’s property. d. levied for the support of the government
47. This is a demand of ownership:
a. license fee b. tax c. toll d. franchise
48. One of the following is not a characteristic of a special assessment:
a. it has special application only to a particular time and pace.
b. it is levied only on land.. c. maybe be levied on business d. based wholly on benefits.
49. Which statement is wrong?
a. a tax is a demand of sovereignty c. a special assessment is a tax..
b. a toll is a demand of ownership. d. customs duty is a tax.
50. Which of the following is not a characteristic of debt?
a. generally arises from contract. c. assignable
b. payable only in money. d. imprisonment is not a sanction for non-payment
1. All funds or income derived by the government from any other source:
a. tax b. customs duty c. revenue d. ordinary income
2. It comprise all kinds of funds including taxes:
a. license fee b. income c. customs duty d. revenue
3. Which of the following constitute double taxation?
a. a license fee and a tax imposed on the same business or occupation for selling the same articles.
b. a tax imposed both on the occupation of fishing and on fish fond operation.
c. persons engaged in leasing or selling real property are subject to real estate dealers tax and their sales are also
subject to 10% VAT.
d. A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% is also imposed as a consequence
of such reserve deficiency.
4. Which of the following is not an element of direct duplicate taxation which a violative of the equal protection and
uniformity clauses in the constitution?
a. same property s taxed twice. b. same taxing authority c. same amount d. same purpose
5. Which of the following statements is correct?
a. tax laws can never have a retroactive effect.. d .the government cannot tax its agencies and instrumentalities.
b. in the Philippines, there may be double taxation.
c. a taxpayer’s suit can be filed by any taxpayer in any instance against the government.
6. The following constitute double taxation except one:
a. both taxes are imposed in the same amount. c. both taxes are imposed by the same taxing authority.
b. both taxes are levied for the same purpose. d. both taxes are imposed upon the same person.
7. Statement 1 – Our Constitution does not prohibit double taxation.
Statement 2 – If double taxation occurs, the taxpayer may seek relief under the uniformity clause or the equal
protection guarantee.
a. ist statement is correct, 2nd statement is wrong. c. both statements are wrong.
b. ist statement is wrong, 2nd statement is correct. d. both statement are correct.
8. Double taxation in its general sense means taxing the same twice during the same taxing period in the sense, double
taxation.
a. violates substantive due process. c. violates the right to equal protection.
b. does not violate substantive due process. d. does not violate the right to equal protection.
9. Your client owns a row of apartments. He complains to you that he is being required to pay four (4) kinds of taxes on
this line of business alone. From the list given by your client, which of the following taxes has been wrongly imposed on
him?
a. real estate tax on the land and building. c. income tax on income from rent.
b. value-added tax on the gross receipts from rent. d. community tax based on the assessed value of the
apartment house.
10. One of the following is a false statement about double taxation. Which is it?
a. direct duplicate taxation is a valid defense against a tax measure if it is violative of the equal protection clause.
b. absence of any of the elements of direct double taxation makes it indirect duplicate taxation.
c. a 20% withholding tax on interest income on bank deposits and a 5% gross receipts tax on banks is direct duplicate
taxation. d. there is no constitutional prohibition on double taxation.
11. Statement 1 – An ordinance imposing a tax on the manufacture of softdrinks and another tax on the sale of the
softdrinks constitute double taxation.
12. Statement 2 – A criminal case for tax evasion maybe filed against a taxpayer even without prior assessment issued by
the Commissioner of Internal revenue.
Which of the following statements is false?
a. statement 1 only. b. statement 2 only c. Neither statements d. both statements
13. Mr. Alas sells shoes in Makati through a retail store. He pays the VAT on the gross sales to the BIR and the municipal
license tax based on the same gross sales to the city of Makati. He comes to you for advice because he thinks he is
being subjected to double taxation. What advice will you give him?
a. Yes, there is double taxation and it is oppressive.
b. The city of Makati does not have this power. d. yes, there is a double taxation and this is illegal in the Phil.
c. double taxation is allowed where one tax is imposed by the national government and the other by the local
government.
14. Transfer of the tax burden by one on whom the tax is assessed to another:
a. shifting b. capitalization c. transformation d. tax exemption
15. Which of the following is not a scheme of shifting the incidence of tax burden?
a. the manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold.
b. the purchases asks for a discount or refuse to buy at regular price unless it is reduced by an amount equal to the
tax he will pay.
c. changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad so that the title
passes abroad instead of in the Philippines.
d. the manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, to the retailer and finally
to the consumer.
16. The reduction in the selling price of income-producing property by an amount equal to the capitalized value of future
taxes that may be paid by the purchaser.
a. shifting b. capitalization c. transformation d. tax exemption.
17. The method by which the manufacturer or producer upon whom the tax is imposed pays the tax and strives to recover
such expense through lower production cost without sacrificing the quality of his product:
a. shifting b. capitalization c. transformation d. tax exemption
18. The grant of immunity to articular persons or corporation or to persons or corporations of a particular class from a tax
which persons and corporations generally within the same taxing district are obliged to pay:
a. tax exemption b. tax evasion c. tax avoidance d. tax amnesty
19. Which of the following are NOT usually imposed when there is a tax amnesty?
a. civil, criminal and administrative penalties. c.. civil and administrative penalties.
b. civil and criminal penalties q. criminal and administrative penalties.
20. Statement 1 – The grant of a tax amnesty must be construed against the taxpayer and liberally in favor of the taxing
authority.
Statement 2 – A tax exemption is a personal privilege which can be assigned or transferred by the grantee unless
disallowed in the law granting tax exemption.
Which of the above statements is true?
a. statement 1 only b. statement 2 only c. neither statements d. both statements
21. Statement 1 – A BIR Ruling issued by a Commissioner of Internal Revenue which grants tax exemption would create a
perpetual exemption in favor of the taxpayer.
Statement 2 – A tax exemption may be withdrawn anytime at the pleasure of the taxing authority.
Which of the above statements is true?
a. Statement 1 only b. statement 1 & 2 c. Statement 2 only d. Neither of them
22. It is also know as tax dodging:
a. tax exemption b. tax evasion c. tax avoidance d. transformation
23. It is otherwise known as tax minimization:
a. tax exemption b. tax evasion c. tax avoidance d. transformation
24. Which of the statements constitute tax avoidance?
a. deliberate failure of a taxpayer to pay taxes due to the government.
b. connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes.
c. Maybe contrary to the intent of the legislature but nevertheless do not violate the law. d. Punishable by law.
25. In case of ambiguity, tax laws shall be interpreted:
a. strictly against the taxpayer. c. liberally in favor of the taxpayer
b. liberally against the government. d. liberally in favor of the government.
26. In cases of deductions and exemptions on income tax returns, doubts shall be resolved:
a. strictly against the taxpayer. c. liberally in favor of the taxpayer
b. liberally against the government. d. liberally in favor of the government
27. The following except one, are exceptions to the rule that tax exemptions must be strictly construed against the
taxpayer:
a. where the statute granting the exemption provides for liberal interpretation thereof
b. if the taxpayer does not fall within the purview of the exception by clear legislative intent.
c. in case of special taxes relating to special cases and affecting only special classes of persons.
d. if exemptions refer to public property.
28. A franchise can be amended by:
a. an amendment of special law, which granted the franchise. c. an amendment of tax laws.
b. an amendment of a law of general application. d. an amendment of a revenue regulation.
29. Some franchise holders who are paying the franchise tax are being required by an amendatory law to pay the value-
added tax, while others remain subject to franchise tax. Which of the following constitutional provisions makes the law
unconstitutional?
a. No law shall be passed impairing the obligation of contract. c. the rule of taxation shall be uniform.
b. no person shall be deprived of property without due process of law. d. none of these.
30. Statement 1 – The point on which a tax is originally imposed is impact of taxation.
Statement 2 – As a rule, taxes are subject to set-off or compensation.
1st statement 2nd statement
a. true true
b. false true
c. false false
d. true false
31. Which of the following is not considered as a step in making a revenue regulation effective?
a. recommendation by the commissioner of internal revenue to the secretary of finance. c. legislation by congress
b. approval by the secretary of finance. d. publication in a newspaper of general circulation.
32. All of the following, except one, are sources of tax laws:
a. legislations, tax treaties and tax ordinances. c. Opinions of authors
b. judicial decisions d. administrative rules and regulations.
33. Statement 1 – In case of conflict between a revenue regulation and the provisions of the National Internal Revenue
Code, the latter shall prevail.
Statement 2 – The revocation of a revenue regulation cannot be made retroactive even if the reason for its revocation
is that it is erroneous or contrary to law.
a. Statement 1 is correct, statement 2 is wrong c. both statements are wrong.
b. both statements are correct. d. statement 1 is wrong, statement 2 is correct.
34. The least source of our tax laws is:
a. statutes b. court decisions c. constitution d. BIR Rulings
35. When the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and the said
taxpayer is assessed with a tax at present, the two taxes may be set-off with each other. This doctrine is called
a. set-off doctrine b. doctrine of reciprocity c. tax sparing doctrine d. equitable recoupment
36. The place or authority that has the right to impose and collect taxes:
a. territoriality b. international comity c. situs of taxation d. transformation
37. Domicile or residence of the owner is not the situs of taxation:
a. income tax b. community tax c. estate tax d. business tax
38. Which among the following concepts of taxation is the basis for the situs of income taxation?
a. lifeblood doctrine of taxation c. compensatory purpose of taxation
b. symbiotic relation in taxation d. sumptuary purpose of taxation
1. Which of the following is not correct with respect to a taxpayer’s suit?
a. it must pertain to illegal disbursement of public funds.
b. it pertains to the passage of a seemingly unconstitutional measure.
c. the funds sought to be disbursed must have been raised through taxation.
d. it must not refer to an enactment of a tax law.
2. Anie Ledesma, a student activist, wants to impugn the validity of a tax on text messages. Aside from claiming that
the law adversely affects her since she sends messages by text, what may she allege that would strengthen her
claim to the right to file a taxpayer’s suit?
a. that she is entitled to the return of the taxes collected from her in case the court nullifies the tax measure.
b. that the tax money is being extracted and spent in violation of the constitutionally guaranteed right to
freedom of communication.
c. that she is filing the case in behalf of substantial number of taxpayers.
d. that text messages are an important part of the lives of the people she represents.
3. Who among the following is a non-resident alien?
a. an alien who comes to the Philippines for a definite purpose which in its nature may be promptly
accomplished. c. An alien who has acquired residence in the Philippines.
b. An alien who comes to the Philippines for a definite purpose which in its nature would require an extended
stay. d. an alien who lives in the Philippines with no definite intention as to his stay.
4. Who among the following taxpayers is taxable on income within and without?
a. Alcuizar, a resident of Davao City, working as overseas contract worker in Iraq.
b. Philiip, naturalized Filipino citizen and married to a Filipina. He had been living in Olongapo City since 1970.
c. Rodrigo dela Hoya, Spanish citizen, a resident of Madrid, Spain, spent a one week vacation trip in Boracay.
d. Dao Ming So, Taiwanese singer, held a 3-day concert in Manila.
5. Which of the following taxpayers whose personal exemption is subject to the law on reciprocity under the tax
code?
a. non-resident citizen with respect to his income derived from outside the Philippines.
b. non-resident alien who shall come to the Philippines and stay herein for an aggregate period of more than 180
days during any calendar year.
c. resident alien deriving income from foreign country.
d. non- resident alien not engaged in trade or business in the Philippines whose country allows personal
exemption to Filipinos who are not residing but are deriving income from said country.
6. The personal exemption of the non-resident alien engaged in trade or business in the Philippines is equal to that
allowed by:
a. the income tax law of his country to a resident of the Philippines not residing there.
b. the income tax law of his country to a citizen of the Philippines not residing there or the amount provided by
the NIRC to a citizen or resident whichever is lower.
c. the National Internal Revenue Code to a citizen or resident.
d. the income tax law of his country allows to a citizen of the Philippines not residing there or the amount
provided by the NIRC to a citizen or resident alien, whichever is higher.
7. An exemption provided by law to take care of personal living and family expenses of the taxpayers and the amount
of which is determined according to the status of the taxpayers are:
a. Optional standard deduction c. additional exemption
b. personal exemption d. special additional exemption
8. An exemption allowed to a taxpayer who has qualified legitimate, illegitimate, or legally adopted children
a. additional exemption b. optional standard deduction
c. special additional personal exemption d. personal exemption
9. A man has three wives under his tribal customs and practice. He is entitled to a personal exemption appertaining
to:
a. a single individual c. a married individual d. a married individual plus additional exemption for
dependents pertaining to each of the 2 extra wives.
b. a head of the family plus additional exemption for dependents pertaining to each of his three wives.
10. As a rule, who of the spouses is the proper claimant of the additional exemption with respect to any of the
dependent children?
a. the husband of his income is higher than the income of the wife. c. the husband.
b. the spouse who has a higher income d. the wife.
11. The wife can claim additional exemption if:
a. the husband is a nonresident citizen with income from within and without the Philippines.
b. the husband’s income is lower than her income. d. the husband is a pure business income earner.
c. the husband has no income of his own.
12. The husband can waive his right to claim the additional exemption in favor of his wife if:
a. he is a nonresident citizen whose income is purely without the Philippines.
b. he has no income of his own. d. he is compensation income earner in the Philippines.
c. his income is purely subject to final withholding tax.
13. Who among the following persons qualifies as dependent for purposes of additional exemption?
a. sister-in-law b. stepmother d. grandfather d. illegitimate daughter
14. Who of the following is not qualified dependent for purposes of claiming the additional exemption?
a. illegitimate child b. legally adopted child c. legitimate child d. child by natural adoption
15. All of the following, EXCEPT one, are taxable on income within only:
a. resident alien b. nonresident citizen c. resident citizen d. nonresident alien.
16. which of the following statements is correct about a non-resident alien?
a. taxable on income within and without. d. maybe entitled to claim basic personal exemption.
b. shall be taxable on all income derived from sources within the Philippines.
c. maybe entitled to claim additional exemption.
17. Which of the following statements is incorrect on winnings of a resident citizen?
a. lotto winnings in the United States of a Filipino residing in the Philippines is taxable In the Philippines.
b. lotto winnings sponsored by the PCSO is not taxable to a resident citizen.
c. winnings of a brand new car in a raffle draw sponsored by a shopping mall is taxable.
d. winnings in a raffle draw sponsored by a cigarette company is subject to tax based on the schedule of rates in
the tax table if the amount involved does not exceed P10,000.
18. The payor of passive income subject to final tax is required to withhold the tax from the payment due the
recipient. The withholding of the tax has the effect of:
a. a final settlement of the tax liability on the income. c. a credit from the recipients income tax liability.
b. consummating the transaction resulting in an income. d. a deduction in the recipient’s income tax returns.
19. Passive income includes income derived from an activity in which the earner does not have any substantial
participation. This type of income is:
a. usually subject to a final tax. c. taxable only if earned by a citizen.
b. exempt from income taxation. d. included in the income tax return.
20. The optional standard deduction on individual is:
a. 40% of taxable income. c. 40% of business and/or professional including compensation income.
b. 50% of business and/or professional income. d. 10% of business and/or professional excluding
compensation income.
21. Optional standard deduction is allowed to:
a. resident alien c. Nonresident alien not engaged in trade or business.
b. nonresident alien engaged in trade or business. d. nonresident foreign corporation.
22. There is no taxable income until such income is recognized. Taxable income is recognized when the :
a. taxpayer fails to include the income in jjis income tax return.
b. income has been actually received in money or its equivalent.
c. income has been received, either actually or constructively.
d. transaction that is the source of the income consummated.
23. Mr. Santiago purchased a life annuity for P100,000 which will pay him P10,000 a year. The life expectancy of Mr.
Santiago is 12 years. Which of the following will Mr. Santiago be able to exclude from the gross income?
a. P 100,000 b. P 10,000 c. P 20,000 d. P 120,000
24. If an individual performs services for a creditor who in consideration thereof cancels the debt, the cancellation of
indebtedness may amount :
a. to a gift b. to a capital contribution c. to a donation inter vivos d. to a payment of income.
25. Cardenas is indebted to David. Due to his inability to pay the debt, he was asked to lean the piggery of the latter
for three months. Thereafter, David gave him P5,000 cash and condoned the debt amounting to P10,000..
How much income should be declared by Cardenas?
a. P 5,000 b. P 10,000 c. P 15,000 d. None
26. Rewards given to persons instrumental in the discovery of violations of the National Internal Revenue Code are
subject to:
a. final tax of 10% on rewards collected. c. final tax of10% of rewards collected or P1,000,000. whichever is low.
b. final tax of 10% of rewards collected or P1,000,000, whichever is higher. d. final tax of 10% of P1,000,000.
27. The proceeds received under a life insurance endowment contract is not considered part of gross income:
a. if it is stated in the life insurance endowment policy.
b. if the price for the endowment policy was not fully paid.
c. where payment is made as a result of the death of the insured.
d. where the beneficiary was not the one who took out the endowment contract.
28. Proceeds of insurance taken by corporation on the life of an executive to indemnify it against loss in case of his
death is:
a. exempt from income tax c. subject to final tax.
b. part of taxable income. d. partly exempt partly taxable.
29. Cocoon Corporation took two life insurance policies on the life of its EVP, Mrs. Perez in one policy, the beneficiary
is the corporation and the other designates her husband as the revocable beneficiary. The insurance premium paid
by Cocoon Corporation is:
a. tax deductible insofar as the first policy is concerned. c. not tax deductible for both policies.
b. tax deductible for both policies. d. first policy is not deductible, second policy is deductible.
30. Mrs. Lucero was insured under an endowment policy with a value of P500,000. Total premiums paid by her during
the term of premium payments on the policy was P490,000 from which there was a return of premiums of P40,000
At the maturity of the policy, Mrs. Lucero received P 500,000. The income of Mrs. Lucero under the policy is:
a. zero b. P 500,000 c. P 10,000 d. P 50,000

Numbers 31 and 32 are based on the following information.


Sonia took a life insurance from Sunstar Insurance Company, with her husband Noli as the beneficiary. Under the
policy, Sunstar will pay Sonia the amount of P500,000 when the policy matures, or to her beneficiary husband in case she
dies before the maturity. Sonia will pay P10,000 annually for 20 years.
31. Assuming that the policy matured when Sonia reached 50 years old and she received the entire P 500,000. How
much income should she report?
a. P 500,000 b. P 200,000 c. P 300,00 d. none
32. Assume that Sonia died after 10 years of paying premium. How much income should be reported to the BIR/
a. P 500,000 b. P 100,000 c. P 400,000 d. none

33. Andrew is the owner and beneficiary of a P500,000 policy on the life of his father. Andrew sells the policy to his
brother Randy for P150,000. Randy subsequently pays premiums of P50,000. Upon his father’s death, Randy must
a. include P 500,000 in his gross income. c. include P 300,000 in his gross income.
b. exclude the entire proceeds in his gross income. d. include P 350,000 in his gross income.
34. Mr. Marte was injured in a vehicular accident in 2016. He incurred and paid medical expenses of P20,000 and legal
fees of P10,000 during the year. In 2017, he received P 70,000 as settlement from the insurance company which
insured the car owned by the other party involved in the accident. From the above payments and transactions, the
amount of taxable income of Mr. Marte in 2016 is:
a. zero b. P 40,000 c. P 70,000 d. P 50,000
35. Liela was hit by a bus while on her way home. She survived but had to pay P 150,000 for her hospitalization. She
was unable to work for six (6) months which meant that she did not receive her usual salary of P 10,000 a month or
a total of P60,000. She sued the bus company and was able to obtain a final judgment awarding her P 150,000 as
reimbursement for her hospitalization, P 60,000 for the salaries she failed to receive while hospitalized, and
P 250,000 as moral damages for her pain and suffering. She was able to collect in full from the judgment. How
much income did she realize when she collected from the judgment?
a. P 400,000 b. P 250,000 c. P 60,000 d. P 400,000
36. Samson was injured in a vehicular incident in 2014. He incurred and paid hospital expenses of P30,000 and legal
fees of P15,000 during that year. In 2015, he recovered P 40,000 as settlement from the insurance company which
insured the car owned by Mardi., the other party involved in the accident. From the above payments and
transactions, the amount of income taxable to Samson is:
a. P 40,000 in 2015 b. P 5,000 in 2015 c. P 5,000 in 2014 d. none
37. Which of the following is a taxable income?
a. income from a qualified pension plan c. moral damages
b. compensation for personal injuries d. interest on moral damages
38. All the items below are excluded from gross income, EXCEPT:
a. Gain from sale of long-term bonds, debentures and indebtedness.
b. value of property received by a person as donation or inheritance.
c. retirement benefits received from the GSIS, SSS, or accredited retirement plans.
d. separation pay received by a retiring employee under a voluntary retirement program of the corporate
employer.
39. On October 1, 2015, Samantha inherited properties worth P 3,000,000 from her mother. The properties are
earning income of P 90,000 a month. How much income is to be reported by Samantha in 2015?
a. P 3,000,000 b. P 3,090,000 c. P 3, 270,000 d. P 270,000
40. Which of the following statements is wrong about fringe benefits?
a. the fringe benefit tax does not apply to rank and file employees.
b. the rule on the de minimis benefit does not apply to rank and file employees.
c. the monetary value received by an official or employee is presumed to be net of the fringe benefit tax.
d. if the recipient of a fringe benefit is a non-resident alien not engaged in trade or business, the monetary value
shall be divided by 75% in order to arrive at the gross-up monetary value.
41. Which of the ceilings on the following de minimis benefits is correct?
Rice Subsidy Uniform Allowance
a. P 1,200 P 3,000
b. 1.500 4,000
c. 1,000 3,500
d. 2,000 6,000
42. Statement 1 – Laundry allowance not exceeding P 300 per month is not an exempt de minimis benefit if given to
rank and file employee.
Statement 2 – Rice subsidy of P 2,000 per month is an exempt de minimis benefit regardless of whether the
recipient employee is occupying a managerial position or not.
a. statement 1 and 2 is wrong c. statement 1 is correct while statement 2 is wrong
b. statement 1 and 2 is correct d. statement 1 is wrong while statement 2 is correct.
43. Which of the following compensation payments to a minimum wage earner is subject to income tax?
a. Holiday pay b. overtime pay c. night shift differential pay d. none of these
44. For purposes of income taxation, which of the following is not considered as a corporation?
a. general professional partnership c. business partnership
b. unregistered partnership d. joint stock corporation
45. Which of the following is subject to income tax?
a. SSS and GSIS c. Philippine Health Insurance Corporation (PHIC)
b. Local Water Districts d. Philippine Amusement and Gaming Corporation (PAGCOR)
46. A resident corporation is one that is:
a. Organized under the laws of the Philippines that does business in another country.
b. organized under the laws of a foreign country that sets up a regional headquarter in the Philippines doing
product promotion and information dissemination.
c. organized under the laws of the Philippines that engages business in a special economic zone.
d. organized under the laws of a foreign country that engages in business in Makati City, Philippines.
47. One of the following is taxed on gross income.
a. domestic corporation c. non-profit cemetery
b. resident foreign corporation d. nonresident foreign corporation
48. Interest income of a domestic commercial bank derived from a peso loan to a domestic corporation in 2014 is:
a. subject to the 30% income tax based on its net taxable income. c. subject to 10% final withholding tax
b. subject to the 20% final withholding tax. d. subject to the 7.7% final withholding tax.
49. Which of the following statements is wrong on corporation?
a. domestic corporations are taxable in the Philippines on income derived from Japan and Philippine sources.
b. resident foreign corporations are taxable in the Philippines on income earned in the United States.
c. nonresident foreign corporations are taxable in the Philippines on income derived from sources in the
Philippines only.
d. domestic corporations are taxable in the Philippines on income earned from business operation in the Unites
States.
50. If the gross income from unrelated activity exceeds 50% of the total gross income derived by any private
educational institution, the rate shall be 30% based on the entire taxable income. This principle is known as:
a. constructive receipt b. tax benefit rule c. end result doctrine d. predominance test
51. “Taxable net income received during each year from all sources” is the tax base fro income tax purposes of this
class of taxpayers.
a. domestic corporations c. resident foreign corporations engaged in trade or business in the Philippines
b. resident corporations d. resident foreign corporations nt engaged in trade or business in the Philippines.

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