Professional Documents
Culture Documents
TAXATION
JB DIMAAMPAO
1. Under RA 9010 the following will be subject to EVAT starting January 1, 2003, except:
a. 12% VAT
b. 0% VAT
c. Exempt
d. Specific Tax
a. before the preliminary investigation of a fraudulent tax evasion case could prosper
b. to fix the tax liability of a taxpayer
c. establish a case for judicial action
d. for issuance of warrant of distraint or levy
6. The manufacture and importation of the following for local consumption are subject to
excise tax, except:
a. alcohol products
b. tobacco products
c. cinematographic films
d. mineral products
8. The BIR commissioner may_________ payment of internal revenue tax when it appears
to be unjustly or excessively assessed, or that the administrative and collection costs
involved do not justify the collection thereof.
1
a. compromise
b. abate
c. credit
d. refund
a. Files a written claim for credit/refund with the BIR within 2 years from payment
b. Pays the tax under protest
c. Appeals to the CTA
d. Amends his tax return
12. Requirements in order that retirement benefits may be exempt from income tax:
a. Must be paid to an employee who is at least 50 years old and has served his
employer for at least 10 years
b. Exemption from taxation of retirement benefit must be availed of only once
c. The benefit must be received under an existing Collective Bargaining Agreement
d. a and b only
13. For purposes of the donor’s tax, the following are considered strangers:
14. The special deductions from the gross estate are the following, except:
15. Funeral expenses that can be claimed as deduction from the gross estate should be:
16. The usual modes of avoiding the occurrence of double taxation are:
2
17. Jose is a law-abiding citizen who pays his real estate taxes promptly. Due to a series
of typhoons and adverse economic conditions, an ordinance is passed by Quezon
City granting a 50% discount for payment of unpaid real estate taxes for the
preceding year and the condonation of all penalties on fines resulting from the late
payment.
Arguing that the ordinance rewards delinquent taxpayers and discriminates against
prompt ones, Jose demands that he be refunded an amount equivalent to one-half of
the real estate taxes he paid. The municipal attorney rendered an opinion that Jose
cannot be reimbursed because the ordinance did not provide for such
reimbursement. Jose files suit to declare the ordinance void on the ground that it is a
class legislation.
a. Resident Filipino citizens with income from foreign sources only are allowed personal
and additional exemptions
b. Non-resident aliens not engaged in trade/business in the Philippines are not allowed
any personal exemptions
c. Non-resident aliens engaged in trade/business in the Philippines are allowed
personal exemptions based on reciprocity
d. All of the above
19. The periodic decrease in the value of a fixed asset due to wear and tear,
obsolescence or inadequacy
a. depletion
b. depreciation
c. capital loss
d. special loss
21. Citing Section 10, Article VIII of the 1987 Constitution which provides that salaries of
judges shall be fixed by law and that during their continuance in office their salary
shall not be decreased, a judge of a Regional Trial Court questioned the deduction of
withholding taxes from his salary since it results into a net deduction of his pay.
3
d. No. The contention is incorrect because deduction of withholding taxes is required
by law.
e. None of the above.
22. The following conditions shall be observed when there is a net capital loss carry
over:
a. The loss carried over is for a holding period not exceeding 12 months
b. The amount of the loss should not exceed the income before exemptions in the year
when the loss was sustained
c. The taxpayer should not be a corporation
d. All of the above
23. What is the minimum compromise rate in cases of doubtful validity of assessment?
24. Which of the following VAT transactions are not considered zero-rated?
25. Barbaran municipality has an ordinance which requires that all stores, restaurants,
and other establishments selling liquor should pay a fixed annual fee of P20,000.
Subsequently, the municipal board proposed an ordinance imposing a sales tax
equivalent to 5% of the amount paid for the purchase or consumption of liquor in
stores, restaurants, and other establishments. The municipal mayor refused to sign
the ordinance on the ground that it would constitute double taxation.
a. No. The refusal of the mayor is unjustified because double taxation is allowed in our
jurisdiction.
b. No. The refusal of the mayor is not justified because the impositions are of different
nature and character.
c. No. The refusal of the mayor is unjustified because it is not within his power.
d. No. The refusal of the mayor is not justified because double taxation will generate
more revenues.
e. None of the above.
26. This is a summary administrative remedy, seizure of real property to enforce payment
of tax due:
a. Levy
b. Distraint
c. Forfeiture
d. Tax lien
a. Splitting of donation
b. Survivorship agreement
c. Holding period for capital asset transactions
d. None of the above
28. Tony has inadvertently omitted P100,000 income in his 2004 Income Tax Return.
Upon discovery in 2005, the BIR issued an assessment for deficiency income tax for
4
P100,000 plus 50% fraud surcharge. Meanwhile, Tony included the omitted P100,000
income in his 2005 Income Tax Return. What advice will you give Tony?
a. Amend his 2004 Income Tax return to reflect the correct amount of income
b. Pay the assessed tax plus surcharge, and thereafter , ask for refund
c. Protest the assessment
d. Any of the above
29. Tino is engaged in buying and selling of fresh fruits at the Q-Mart and Aranque
Markets. He is also exporting canned and preserved fruits to Japan. In 2004, he made
a gross sales of P2,000,000. He is liable for VAT registration fee of :
a. P500
b. P1,000
c. P1,500
d. Exempt
30. Shirley was allowed to deduct P200,000 bad debts written off in 2003, where she had
a net income before bad debts of P180,000 and a net loss of P20,000. IN 2004, she was
able to recover the bad debts written off in full. The bad debts recovery is:
31. A taxpayer who believes that a tax ordinance is unconstitutional should appeal to:
a. BIR Commissioner
b. Metropolitan Trial Court
c. Court of Tax Appeals
d. Secretary of Justice
32. Any of the following conditions should be met to enable the President to increase the
VAT from 10% to 12% starting January 1, 2006:
a. VAT collection to Gross Domestic Product in the previous year exceeds 2 4/5%
b. National Government Deficit to Gross Domestic Product in the previous year
exceeds 1 ½ %
c. VAT tax effort to Gross National Product equals 4%
d. Either a or b
34. Before any civil or criminal action is filed by the BIR in court, _____________ is
necessary:
35. The ___________ has exclusive and original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue Code or Tariff and Customs
Code and other laws administered by the Bureau of Internal Revenue or the Bureau of
5
Customs, where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is one million pesos or more.
a. BIR Commissioner
b. Metropolitan Trial Court
c. Regional Trial Court
d. Court of Tax Appeals
36. The principle that where a claim for refund/credit is filed beyond the prescriptive
period, it can still be applied against other taxes that may be due, is:
a. Public purpose
b. Uniformity Principle
c. Not to let the collection of taxes to private person
d. All of the above
38. Where the gross income of a taxpayer exceeds P150,000 per quarter his income tax
return must be accompanied by:
40. Cash dividends received from a domestic corporation are subject to final tax of 10% if
received by:
41. Due to an uncertainty whether or not a new tax is applicable to printing companies,
ABC Printers submitted a legal query to the Bureau of Internal Revenue on that issue.
The BIR issued a ruling that printing companies are not covered by the new law.
Relying on this ruling, ABC Printers did not pay said tax.
Subsequently, however, the BIR reversed the ruling and issued a new one stating that
the tax covers printing companies. Could the BIR now assess ABC Printers for back
taxes corresponding to the years before the new ruling?
6
42. The following are subject to amusement taxes:
a. Toll
b. License
c. Penalty
d. None of the above
a. The President
b. BIR
c. CTA
d. a and b only
46. Life insurance proceeds shall not be included in taxpayer’s gross income when:
47. The BIR Commissioner can inquire into the bank deposit of the taxpayer in the
following cases:
48. Seizure and forfeiture proceedings are within the exclusive jurisdiction of
a. Weapons of war
7
b. Insidious articles
c. Narcotic Drugs.
d. Gambling devices
e. Live animals
51. The following BIR actions on the protest of an assessment are tantamount to denial
thereof:
52. JB got married to SAY last January 2004. On November 30, 2004, SAY gave birth to
twins. Unfortunately, however, SAY died in the course of her delivery. Due to
complications, one of the twins also died on December 15, 2004.
In preparing his Income Tax Return (ITR) for the year 2004, what should JB indicate in
the ITR as his civil status:
a. Single
b. Married with 2 dependents
c. Head of the family with 1 dependent
d. Head of the family with 2 dependents
e. None of the above
53. The following criteria need not be observed in the exercise of the flexible power of the
President under the Tariff & Customs Code:
a. National security
b. Welfare of the people
c. Jurisdiction of the Customs Commissioner
d. National Economy
54. Monthly support regularly given by an unmarried daughter to her aged mother.
a. Dumping duties
b. Marking duties
c. Discriminatory duties
d. None of the above
a. Compensation income
b. Donation
c. Indirect dividend
d. Either a or b
8
d. a or b whichever is higher
a. Personal articles
b. Articles for repair
c. Articles for public exposition/exhibits
d. All of the above
59. The following non-resident aliens can be subject to 15% income tax on income
derived from sources within the Philippines.
60. Which of the following taxes are not deductible from gross income:
63. VAT is
a. special tax
b. local tax
c. specific tax
d. regressive tax
e. none of the above
64. The following taxes have been replaced by VAT per RA 9337
65. The following are not subject to the improperly accumulated earnings tax, except:
9
66. If monthly rental income of a residential unit exceeds P 10,000 per unit, the same
shall be subject to 12% VAT.
67. The preliminary investigation of a fraudulent tax evasion case may be enjoined in the
following cases.
69. Why is the Fringe Benefits Tax collectible from the employer and not from the
employee?
70. A taxpayer with gross annual sales not exceeding P100, 000 is exempt from payment
of business tax and registration requirements.
a. True
b. False, required to register with the BIR but exempt from the payment of registration
fee
c. False, required to pay registration fee
d. b and c are correct
72. In ruling on the constitutionality of the EVAT, the Supreme Court held that:
a. A revenue bill shall originate exclusively in the House of Representatives but the
Senate may adopt its own version
b. The requirement of three separate readings on separate days cannot be dispensed
with
c. The Bicameral Conference Committee cannot make unauthorized insertions on the
Senate version of the bill
d. b and c are incorrect
10
b. boxing exhibitions
c. billiards
d. bowling
e. c and d only
a. taxicab operators
b. common carriers transporting cargoes
c. tourist buses
d. motor tricycles
a. VAT
b. percentage tax
c. specific tax
d. ad valorem tax
e. exempt
76. A tax imposed at every stage of distribution process on the sale, barter or exchange
of goods and services and transactions deemed sale, as well as importation of goods
and services.
a. privilege tax
b. percentage tax
c. VAT
d. excise tax
77. Mario disputed a deficiency tax assessment and upon receipt of an adverse decision
by the Commissioner of Internal Revenue, filed an appeal with the Court of Tax
Appeals. While the appeal is pending, the BIR served a warrant of levy on the real
properties of Mario to enforce the collection of the disputed tax. Granting arguendo
that the BIR can legally levy on the properties, what could Mario do to stop the
process?
a. P 10,000
b. P 9,000
c. P 8,000
d. P 25,000
a. personal tax
b. national tax
c. excise tax
d. direct tax
e. progressive tax
80. Under RA8424, the allowable deduction for medical expenses of a resident decedent
shall not exceed :
a. P 50,000
11
b. P 550,000
c. P 5,000
d. P 500,000
81. Per RA 9504, how much is the total personal and additional exemption of Mrs. A, who
became a widow during the taxable year and supporting her mother and one mentally
retarded illegitimate 25 year-old child?
a. P 75, 000
b. P 40, 000
c. P 100, 000
d. P 48, 000
83. Which of the following are excluded from the gross estate?
a. the President
b. the Congress
c. Judiciary
d. BIR
e. All of the above
85. The standard deduction of P 1,000,000 from the gross estate is:
a. optional
b. in addition to the itemized deductions
c. not available to resident decedents
d. in lieu of all itemized deductions
86. The following are the requisites for income to be taxable, except:
87. Who among the following are NOT required to file an income tax return?
88. Which of the following are NOT exempt from income tax?
12
b. Philippine National Oil Company
c. University of the Philippines
d. PAGCOR
e. b and d
90. Which escape from taxation does not result in loss of revenue to the government?
a. Tax evasion
b. Tax avoidance
c. Tax exemption
d. Shifting
e. All of the above
a. Fringe benefits which are authorized and exempted from tax under special laws.
b. Contributions of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefits.
c. Membership fees, dues and other expenses borne by the employer in social or
athletic clubs or other similar organizations.
d. Benefits given to rank and file employees, whether granted under a collective
bargaining agreement or not.
e. De minimis benefits.
92. The final tax on capital gains from sale of real property, classified as capital asset is:
a. 20% based on the gross selling price or current fair market value whichever is
higher.
b. 7.5% based on the gross profit.
c. 6% based on the gross selling price or zonal value, whichever is higher.
d. 6% of the purchase price or the assessed value whichever is higher.
e. None of the above
93. Sale, barter, exchange or other disposition of shares of stocks which are traded in the
local stock exchange is subject to:
94. Domeng bought a parcel of residential land for P 1,000,000 sometime in 1980. He sold
the same to Norbie for P 10,000,000 on October 15, 2000. The transaction is subject to
6% capital gains tax.
a. True
b. False, if Domeng is engaged in the real estate business.
c. False, it is subject to VAT if the sale is in the regular course of trade or business.
d. b and c are correct.
95. Who may not avail of the itemized deductions from gross income?
a. Resident aliens
b. Non resident aliens engaged in trade or business in the Philippines.
13
c. Resident foreign corporations.
d. Citizens and resident aliens whose income is purely compensation income.
96. The following are requisites for the deductibility of bad debts, except:
a. not political
b. penal
c. civil
d. both a and b
e. both a and c
98. Under the “Life-Blood doctrine”, the main source of revenue of the government is
taxes.
The power to tax includes the power to destroy in all cases.
100. Tips and gratuities paid directly to an employee by a customer and not reported to
the employer
a. Files a written claim for credit/refund with the BIR within 2 years from payment
b. Pays the tax under protest
c. Appeals to the CTA
d. Amends his tax return
102. The oft-cited doctrine that taxes are lifeblood of the government does not favor one
of the following rules:
103. Taxes are not enforced proportional contributions. In our jurisdiction, the following
statements are correct except:
14
a. Taxes are obligations created by law.
b. Taxes are based on one’s ability to pay.
c. Taxes are levied by authority of the law.
d. The power to tax is not unlimited.
a. Upon taxation depends the Government’s ability to serve the people for whose
benefit taxes are collected.
b. The BIR should be given the necessary discretion to avail itself of the most
expeditious way to collect taxes.
c. Taxes cannot be imposed by the executive department not by the courts.
d. The best evidence obtainable under Section 6 (B) of the NIRC does not include mere
photocopies of records/documents.
105. Congress passed a law allowing the payment of taxes in kind/services. This violates
the principle of:
a. Economic efficiency
b. Fiscal adequacy
c. Theoretical justice
d. Administrative feasibility
108. The power to tax involves the power to destroy, said Chief Justice Marshall of the
US Supreme Court. This should be construed to mean that:
109. The secondary or non-revenue purposes of taxation include the following except:
15
a. Vanishing deduction
b. Allowable deduction
c. Exemption method
d. None of the above
a. Illegal gains
b. Tax refund involving deductible tax
c. Tax refund involving non-deductible tax
d. Cash dividend
e. Annuities
113. Gross income means all income derived from whatever source, including the
following items except:
a. Pensions
b. Prizes and winnings
c. Rents
d. Stock dividends
114. Exclusions from gross income under the Tax Code include the following except:
a. Veterans benefits
b. Compensation for injuries and sickness
c. Gifts, bequests, and devises
d. Gains from redemption of shares of stock
a. The former may be availed of only by corporate taxpayers, whereas the latter may
apply to individual taxpayers.
b. The former applies to corporate and individual taxpayers engaged in business or are
practicing their profession, whereas the latter covers only natural persons.
c. The former may be found in Section 34, while the latter is granted under Section 35.
d. The former is a privilege while the latter is a matter of right.
119. Donation to stranger is subject to 30% of the net gift. Stranger includes:
a. Second cousin
16
b. Half brother
c. Lineal descendant
d. Collateral relative within the fourth civil degree of relationship
120. Taxes are the lifeblood of the government and their prompt and certain availability is
an imperious need. This pronouncement was cite in several decisions of the
Supreme Court except in the case of:
121. “Lest the collector kill the hen that lays the golden egg.” This has been
metaphorically mentioned to justify a settled rule as laid down in the case of:
122. The symbiotic relationship theory as enunciated in the case of CIR vs. Algue, Inc.,
158 SCRA 9, is an amplification of:
123. Settled is the rule that in tax matters, the government is not estopped by the errors
or mistakes committed by its agents or officers. This should be construed to
mean that:
124. Srictissimi juris may be applied in the construction and interpretation of tax laws
except:
125. May a taxpayer who has claim for VAT input credit or refund, set-off said claim
against his other tax liabilities?
a. Yes, provided that the claim is set-off against other unpaid income tax.
b. Yes, provided that the claim is set-off against other national internal revenue tax.
c. Yes, provided that the claimant is a VAT-registered taxpayer.
d. Yes, provided that the claim is duly substantiated by receipts.
126. The police power, the power of taxation and the power of eminent domain are co-
equal and inherent powers of government. May a tax be validly imposed in the
exercise of the police power and not of the power to tax?
a. Yes, because the power to tax and police power have some similar objectives.
b. Yes, because the police power of the state includes the power to regulate
c. Yes, because taxes may be imposed to regulate.
17
d. Yes, because taxation also involves the power to carry out the legitimate objects of
government.
133. Income from long-term contracts may not be reported under one of the following
methods:
a. Outright method
b. Spread-out method
c. Completed contract basis
d. Accrual basis
e. Cash basis
134. How is compensation paid in promissory note treated for income tax purpose?
18
a. Subject to final tax
b. It is taxed at gross amount
c. Taxable to the amount of the fair market value of the promissory note
d. It is deductible from gross compensation income
e. None of the above
a. Specific tax
b. VAT
c. Percentage tax
d. Excise tax
a. True
b. False, because carabao is a capital expenditure
c. False, because carabao is subject to depreciation
d. Both b and c
a. 1.5%
b. 4%
c. 2%
d. 8%
a. Means of escape from tax liability outside what is legal and permissible
b. Tax saving device within the means sanctioned by law
c. Deduction from foreign taxes paid
d. a and c only
139. The following are qualified dependents of a head of the family, except:
a. Capital
b. Receipts
c. Realized profit
d. None of the above
142. The following can avail of the Input Tax Credit, except:
19
c. Exporter of goods and services not registered under the VAT system
d. Purchaser of services, lessee or licensee upon payment of compensation, rental,
royalty or fee
143. Educational services rendered by private educational institutions are exempt from
VAT if duly accredited by the following, except:
144. For VAT purposes in connection with deferred payment sale of real property, the
term “initial payments” shall include:
147. Determine which of the following is (are) included in the preparation of annual
income tax returns:
148. JR was a passenger of an airline that crashed. He survived the accident but
sustained serious physical injuries which required hospitalization for 3 months.
Following negotiations with the airline and its insurer, an agreement was reached
under the terms of which JR was paid some amounts. Which of the following
amounts constitute taxable income?
149. MAR got married to SALLY last January 2005. On November 30, 2005, SALLY gave
birth to twins. Unfortunately, however, SALLY died in the course of her delivery.
Due to complications, one of the twins also died on December 15, 2005. In
20
preparing his Income Tax Return (ITR) for the year 2005, what should MAR
indicate in the ITR as his civil status?
a. Single
b. Married
c. Head of the family
d. Widower
e. None of the above
a. Delinquent accounts
b. Cases under administrative protest, after issuance of the final assessment notice to
the taxpayer, which are still pending.
c. Criminal tax fraud cases
d. None of the above
151. A taxpayer received a tax deficiency assessment of P1.2 Million from the BIR
demanding payment within 10 days, otherwise, it would collect through summary
remedies. The taxpayer requested for reconsideration stating the grounds
therefore. Instead of resolving the request for reconsideration, the BIR sent a
Final Notice before Seizure to the taxpayer. Which of the following remedies can
the taxpayer avail?
152. The Roman Catholic Church owns a 2-hectare lot in a town in Tarlac province. The
Church and a convent occupy the southern side and middle part. The
southeastern side by some commercial establishments, while the rest of the
property, in particular the northwestern side, is idle or unoccupied. Which of the
following is correct?
a. Tuition fees
b. Laboratory fees
c. Rentals from canteen concessionaires
d. Interest from money-market placements of the tuition fees
e. Donation of a lot and building by school alumni
154. Frank Sinatra, an American Citizen, was a top executive of a US company in the
Philippines until he retired in 1999. He came to like the Philippines so much that
following his retirement, he decided to spend the rest of his life in the country. He
applied for and was granted a permanent resident status the following year. In the
spring of 2004, while vacationing in Orlando, Florida, USA, he suffered a heart
attack and died. Which of the following assets shall not be included in taxable
gross estate in the Philippines?
21
d. Shares of stock in San Miguel Corporation and PLDT.
e. Shares of stock in Disney World in Florida
f. None of the above
155. An individual client not engaged in realty business paid in full the P50,000 attorney’s
fees of his counsel in lot which he bought in 1990 for P5,000 and which has a fair
market value of P60,000. Which of these is correct?
156. One of these is not the correct period within which internal revenue taxes shall be
assessed:
a. Within 3 days after the last day prescribed by law for the filing of the return
b. Within 3 years from the date the return was filed
c. If no return was filed, within 10 years from date of discovery of failure to file return
d. If return is false or fraudulent, within 10 years from date of discovery of the falsity or
fraud.
157. One of these is not an exception to the rule that for income tax purposes, the books
and records of a taxpayer shall be subject to examination and inspection only
once in a taxable year:
a. In a discrepancy between the tax withheld and the amount actually remitted by the
withholding agent
b. When the excise tax due has not been paid
c. Transfer by an exempt person of articles to non-exempt person
d. When the commissioner or his duly authorized representative finds that proper tax
should be assessed.
159. To pre-empt the lapse of prescriptive period within which the government can
assess and/or collect in court without assessment,
22
d. Waiver being unilateral, acceptance by the state need not observe the level of
authority of the officials empowered to accept.
a. Income tax
b. Transfer taxes (donor or estate)
c. Value Added Tax
d. Privilege tax
162. One of these is not a type of local tax and other impositions –
164. In local business taxes, the local government of one of these is prohibited to collect
–
a. factory site
b. Principal office
c. places thru which sales trucks pass
d. none of the above
23
ANSWER KEY TAXATION
24
25