TAXATION 1 – Income Taxation General Principles of Taxation
1. Taxation as distinguished distinguished from police police power power and power power of eminent domain. domain. A. Property is taen to promote the general general welfare. !. "ay#e exercised exercised only #y the go$ernment. go$ernment. %. Operates Operates upon upon the whole citi&en citi&enry. ry. D.There is generally no limit as to the amount that may be imposed. '. The following are constitutional constitutional limitations( limitations( except A. No imprisonment imprisonment for non)payment non)payment of poll tax. !. Non)impairment Non)impairment of the o#ligation of of contracts. contracts. %. *ule of uniformity and and e+uity in taxation. taxation. D. Exemption from income tax of charitable institutions, cemeteries, churches, personage or convents appurtenant thereto, as well as all lands, buildings and improvements actually, directly and exclusively used for religious, charitable and educational purposes. ,. -hich of the following following statements is correct correct A. The President is authori&ed to increase or decrease national internal re$enue tax rates. !. One of the nature of of taxation is the reciprocal reciprocal duties of protection protection and support #etween the state and su#/ects thereof. C. Every sovereign government government has the inherent power to tax. 0. Income tax in an indirect indirect tax. . A tax must #e imposed imposed for pu#lic purpose. purpose. -hich of the following following is not not a pu#lic purpose A. Nati National onal defense defense !. Pu#lic Pu#lic educat education ion %. Impro$ement of the sugar sugar and coconut coconut industries. industries. D.mprovement of a subdivision road. 2. -hich is not an an essential essential characteristic characteristic of a tax !.t is unlimited as to amount. !. It is paya paya#le #le in money money.. %. It is proportion proportionate ate in character character.. 0. It is an an enforced contri#ution. 3. 4pecial assessment is an enforced enforced proportional proportional contri#ution contri#ution from from owners owners of land especially #enefited #y pu#lic impro$ement. -hich one of the following is not considered as one of its
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characteristics A. It is le$ied le$ied on land. land. ".t is based on the government#s need of money to support its legitimate ob$ectives. %. It is not a personal lia#ility lia#ility of the persons persons assessed. assessed. 0. It is #ased solely on the #enefit #enefit deri$ed #y the owners owners of the land. 5. It is the pri$ilege pri$ilege of not not #eing #eing imposed imposed a financial o#ligation to which which others others are su#/ect. A. Tax incen incenti$e ti$e ". Tax exemption exemption %. Tax Tax amne amnesty sty 0. Tax Tax credit credit 6. As to scope scope of the legislati$e power power to tax( which which is not correct A. -here there there are no constitutional constitutional restrictions( restrictions( and and pro$ided the su#/ects are within the territorial /urisdiction of the state( %ongress has unlimited discretion as to the persons( property or occupations to #e taxed. !. In the a#sen a#sence ce of any any constitut constitutiona ionall prohi#itio prohi#ition( n( %ongress %ongress has has the right right to le$y a tax of any amount it sees fit. %. The discreti discretion on of %ongr %ongress ess in imposi imposing ng taxes taxes extends extends to to the mode( mode( method method or ind of tax( unless restricted #y the constitution. D. The sole sole arbiter arbiter of the the purpose purpose or which which taxes taxes shall be levied levied is is Congress, provided the purpose is public and the courts may not review the levy of the tax to determine whether or not the purpose is public. 7. -hich of the following following is a nature nature of taxation taxation !.The power is granted by legislative action. !. It is essentially an an administrati$e administrati$e function. %. It is generally generally paya#l paya#lee in money. money. 0. -ithout it the state can continue to exist. exist. 18. -hich of the following is not a determinant of the place of taxation A. 4ource 4ource of the income income !. %iti %iti&ensh &enship ip of the taxpayer taxpayer %. *esidence of the taxpayer D.!mount of tax to be imposed
11. -hich of the following statements is not correct A. An inherent inherent limitat limitation ion of taxati taxation on may #e disreg disregarde arded d #y the applicat application ion of a constitutional limitation. !. The proper property ty of an educa educationa tionall institutio institutionn operated operated #y #y a religious religious order order is exempt from property tax( #ut its income is su#/ect to income tax. C. The prohibit prohibition ion of delegat delegation ion by the the state of of the power power of taxatio taxationn will still allow the "% to modify the rules in time for filing of returns and payment of taxes.
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characteristics A. It is le$ied le$ied on land. land. ".t is based on the government#s need of money to support its legitimate ob$ectives. %. It is not a personal lia#ility lia#ility of the persons persons assessed. assessed. 0. It is #ased solely on the #enefit #enefit deri$ed #y the owners owners of the land. 5. It is the pri$ilege pri$ilege of not not #eing #eing imposed imposed a financial o#ligation to which which others others are su#/ect. A. Tax incen incenti$e ti$e ". Tax exemption exemption %. Tax Tax amne amnesty sty 0. Tax Tax credit credit 6. As to scope scope of the legislati$e power power to tax( which which is not correct A. -here there there are no constitutional constitutional restrictions( restrictions( and and pro$ided the su#/ects are within the territorial /urisdiction of the state( %ongress has unlimited discretion as to the persons( property or occupations to #e taxed. !. In the a#sen a#sence ce of any any constitut constitutiona ionall prohi#itio prohi#ition( n( %ongress %ongress has has the right right to le$y a tax of any amount it sees fit. %. The discreti discretion on of %ongr %ongress ess in imposi imposing ng taxes taxes extends extends to to the mode( mode( method method or ind of tax( unless restricted #y the constitution. D. The sole sole arbiter arbiter of the the purpose purpose or which which taxes taxes shall be levied levied is is Congress, provided the purpose is public and the courts may not review the levy of the tax to determine whether or not the purpose is public. 7. -hich of the following following is a nature nature of taxation taxation !.The power is granted by legislative action. !. It is essentially an an administrati$e administrati$e function. %. It is generally generally paya#l paya#lee in money. money. 0. -ithout it the state can continue to exist. exist. 18. -hich of the following is not a determinant of the place of taxation A. 4ource 4ource of the income income !. %iti %iti&ensh &enship ip of the taxpayer taxpayer %. *esidence of the taxpayer D.!mount of tax to be imposed
11. -hich of the following statements is not correct A. An inherent inherent limitat limitation ion of taxati taxation on may #e disreg disregarde arded d #y the applicat application ion of a constitutional limitation. !. The proper property ty of an educa educationa tionall institutio institutionn operated operated #y #y a religious religious order order is exempt from property tax( #ut its income is su#/ect to income tax. C. The prohibit prohibition ion of delegat delegation ion by the the state of of the power power of taxatio taxationn will still allow the "% to modify the rules in time for filing of returns and payment of taxes.
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0. The power power of taxa taxation tion is share shared d #y the legislat legislati$e i$e and and executi$e executi$e departments of the go$ernment. 1'. 4tatement 1 – The point on which tax is originally imposed is impact of of taxation. 4tatement ' – 9minent domain is inferior to non)impairment non)impairment clause of the constitution. 4tatement , – As a rule( taxes are su#/ect to set)off or compensation. compensation. 4tatement – As a rule( pro$isions on the $alidity of tax exemptions are resol$ed li#erally in fa$or of the taxpayer. 4tatement 1 4tatement ' 4tatement , 4tatement A. True :alse :alse True !. :a :alse True True :alse C. True True &alse &alse 0. :a : alse :alse True True 1,. A tax system where the re$enues are supplied mostly #y indirect taxes. A. 4c 4chedular %. Progressi$e !. Propo Proporti rtiona onall D.%egressive 1. A tax system where the greater #ul of the tax re$enues is deri$ed #y direct taxes. A. 4chedu 4chedular lar C. Progressiv Progressive e !. Proportional 0. *e *egressi$e 12. This is an inherent limitation on the power of taxation. A. *ule on uniformity uniformity and e+uity in in taxation. taxation. !. 0ue process of of law and e+ual e+ual protection of the laws. %. Non)impairment Non)impairment of the /urisdiction of of the 4upreme %ourt %ourt in tax cases. D.Tax must be for the public purpose.
13. This is a constitutional constitutional limitation on the power of taxation. A. Tax laws must #e applied within the territorial territorial /urisdiction of the state. !. 9xemption of go$ernment go$ernment agencies agencies and instrumentalities instrumentalities from taxation. taxation. C. 'o appropriation of public money for religious religious purposes. 0. Power to tax cannot #e delegated delegated to pri$ate persons or entities. entities. 15. They exist independent of the constitution #eing fundamental powers of the state( except A. Po P ower of taxation %. Power of imminent domain !. Police Police power power D.Power of recall 16. The power to ac+uire pri$ate property upon payment of /ust compensation compensation for pu#lic purpose
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A. Power of taxation !. Police power
C. Power of imminent domain 0. Power of recall
17. The power to regulate li#erty and property to promote the general welfare. A. Power of taxation %. Power of imminent domain ". Police power 0. Power of recall '8. The power to demand proportionate contri#utions from persons and property to defray the expenses of the go$ernment. !.Power of taxation %. Power of imminent domain !. Police power 0. Power of recall '1. !asic Principles of a sound tax system( except A. :iscal ade+uacy %. Administrati$e feasi#ility !. 9+uality or theoretical /ustice D.ntellectual sensitivity ''. The tax imposed should #e proportionate to the taxpayer;s a#ility to pay. A. :iscal ade+uacy %. Administrati$e feasi#ility ".E(uality or theoretical $ustice 0. Intellectual sensiti$ity ',. The sources of re$enue as a whole( should #e sufficient to meet the demands of pu#lic expenditures. !.&iscal ade(uacy %. Administrati$e feasi#ility !. 9+uality or theoretical /ustice 0. Intellectual sensiti$ity '. The tax laws must #e capa#le of con$enient( /ust and effecti$e administration. C. !dministrative feasibility A. :iscal ade+uacy !. 9+uality or theoretical /ustice 0. Intellectual sensiti$ity '2. Persons or things #elonging to the same class shall #e taxed at the same rate. A 4implicity in taxation %. 9+uality in taxation D.)niformity in taxation !. *eciprocity in taxation '3. The tax should #e proportional to the relati$e $alue of the property to #e taxed. A 4implicity in taxation C. E(uality in taxation !. *eciprocity in taxation 0.
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'6. It literally means =place of taxation>? the country that has the power and /urisdiction to le$y and collect the tax. A. !asis of taxation %. 4cope of taxation ". *itus of taxation 0. Theory of taxation '7. The existence of the go$ernment is a necessity and that the state has the right to compel all indi$iduals and property within its limits to contri#ute A. !asis of taxation %. 4cope of taxation !. 4itus of taxation D.Theory of taxation ,8. The reciprocal duties of support and protection #etween the people and the go$ernment. !."asis of taxation %. 4cope of taxation !. 4itus of taxation 0. Theory of taxation ,1. 4u#/ect to inherent and constitutional limitations( the power of taxation is regarded as supreme( plenary( unlimited and comprehensi$e. A. !asis of taxation C. *cope of taxation !. 4itus of taxation 0. Theory of taxation ,'. Our National Internal *e$enue @aws are A. Political in nature %. %riminal in nature !. Penal in nature D.Civil in nature ,,. The le$ying or imposition of tax and the collection of the tax are processes which constitute the taxation system. A. !asis of taxation %. Nature of taxation ".!spects of taxation 0. Theory of taxation ,. The process or means #y which the so$ereign( through its law)maing #ody raises income to defray the expenses of the go$ernment. A. Toll C.Taxation !. @icense fee 0. Assessment ,2. 9nforced proportional contri#utions from persons and property le$ied #y the state #y $irtue of its so$ereignty for the support of the go$ernment and for all pu#lic needs. C.Taxes A. Toll !. @icense fee 0. Assessment ,3. An escape from taxation where the tax #urden is transferred #y the one on whom the tax is
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imposed or assessed to another. !. *hifting %. Transformation !. 9xemption 0. %apitali&ation ,5. An escape from taxation where the producer or manufacturer pays the tax and endea$ors to recoup himself #y impro$ing his process of production there#y turning out his units of products at a lower cost. A. 4hifting C.Transformation !. 9xemption 0. %apitali&ation ,6. An escape from taxation where there is a reduction in the price of the taxed o#/ect e+ual to the capitali&ed $alue of future taxes which the taxpayer expects to #e called upon to pay. A. 4hifting %. Transformation D.Capitali+ation !. 9xemption ,7. The use of illegal or fraudulent means to a$oid or defeat the payment of tax. A. 9xemption %. A$oidance !. 4hifting D.Evasion 8. The use of legal or permissi#le means to minimi&e or a$oid taxes. A. 9xemption C.!voidance !. 4hifting 0. 9$asion 1. 4ynonymous to tax e$asion. !.Tax dodging %. Tax exemption !. Tax minimi&ation 0. Tax e$asion '. 4ynonymous to tax a$oidance. A. Tax dodging %. Tax exemption ". Tax minimi+ation 0. Tax e$asion ,. In e$ery case of dou#t( tax statutes are construed A. 4trictly against the go$ernment and the taxpayer. !. @i#erally in fa$or of the go$ernment and the taxpayer. C. *trictly against the government and liberally in favor of the taxpayer. 0. @i#erally in fa$or of the go$ernment and strictly against the taxpayer. . In e$ery case of dou#t( tax exemptions are construed A. 4trictly against the go$ernment and the taxpayer. !. @i#erally in fa$or of the go$ernment and the taxpayer. %. 4trictly against the go$ernment and li#erally in fa$or of the taxpayer. D.iberally in favor of the government and strictly against the taxpayer.
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2. In case of conflict #etween the Tax %ode and the Philippine Accounting 4tandards PA4B. A. PA4 shall pre$ail o$er the Tax %ode. ".Tax Code shall prevail over P!*. %. PA4 and Tax %ode shall #e #oth disregarded. 0. The taxpayer may choose #etween the PA4 or the Tax %ode. . 3. Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to their property or occupation they may #e engaged. !.Personal, poll or capitation %. 9xcise !. Property 0. *egressi$e 5. Tax imposed on personal or real property in proportion to its $alue or on some other reasona#le method of apportionment. A. Personal( poll or capitation %. 9xcise ".Property 0. *egressi$e 6. Tax imposed upon performance of an act( the en/oyment of pri$ilege or the engaging in an occupation. A. Personal( poll or capitation C.Excise !. Property 0. *egressi$e 7. Tax which is demanded from the person whom the law intends or desires to pay it. !.Direct %. 9xcise !. Indirect 0. Percentage 28. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another. A. 0irect %. 9xcise ".ndirect 0. Percentage 21. Tax which imposes a specific sum #y the head or num#er or #y some standard of weight or measurement and which re+uires no assessment other than a listing or classification of the o#/ects to #e taxed. !.*pecific %. 9xcise !. Ad)$alorem 0. Income 2'. Tax of a fixed proportion of the amount or $alue of the property with respect to which the tax is assessed.
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A. 4pecific ".!d-valorem
%. 9xcise 0. Percentage
2,. Tax #ased on a fixed percentage of the amount of property( income or other #asis to #e taxed. !.Proportional %. *egressi$e !. Progressi$e 0. Indirect 2. Tax where the rate decreases as the tax #ase increases. A. Proportional C.%egressive !. Progressi$e 0. Indirect 22. Tax where the rate increases as the tax #ase increases. A. Proportional %. *egressi$e ".Progressive 0. Indirect 23. -hich of the following statements is not correct A. Tax #urdens shall neither #e imposed nor presumed to #e imposed #eyond what the statute expressly and clearly states #ecause tax statutes should #e construed strictly against the go$ernment. !. Tax exemptions( tax amnesty tax condonations and their e+ui$alent pro$isions are not presumed and( when granted are strictly construed against the taxpayer #ecause such pro$isions are highly disfa$ored #y the go$ernment. %. 9xemptions from taxation are highly disfa$ored in law and he who claims tax exemption must #e a#le to /ustify his claim or right. D. The ouse of %epresentatives has the duty and the exclusive power of constructing and interpreting tax laws. 25. The strongest of all inherent powers of the state #ecause without it( the go$ernment can neither sur$i$e nor dispense any of its other powers and functions effecti$ely. C. Power of Taxation A. Police Power !. Power of 9minent 0omain 0. Power of *ecall 26. This power is superior to the non)impairment clause and is #roader in application #ecause it is a power to mae and implement laws. A. Power of Taxation %. Power of 9minent 0omain !. Power of *ecall D.Police Power 27. -hich of the following statements is not correct A. An inherent limitation of taxation may #e disregarded #y the application of a constitutional limitation. !. Income tax lia#ilities shall #e paid #y the inha#itants e$en if foreign in$aders occupy our country.
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%. Taxes may #e imposed retroacti$ely #y law( #ut unless so expressed #y such law( these taxes must only #e imposed prospecti$ely. D. Tax laws are either political or penal in nature. 38. -hich of the following is not a constitutional limitation on the Power of Taxation A. No person shall #e depri$ed of life ( li#erty or property without due process of law. !. No person shall #e denied the e+ual protection of the law. C. 'o person shall be imprisoned for debt or non-payment of tax. 0. No law granting any tax exemption shall #e passed without the concurrence of a ma/ority of all the mem#ers of %ongress.
31. The distinction of a tax from permit or license fee is that a tax isC A. Imposed for regulation. !. One which in$ol$es an exercise of police power. C. /ne in which there is generally no limit on the amount that maybe imposed. 0. @imited to the cost of regulation. 3'. Police power as distinguished from the power of eminent domainC A. Dust compensation is recei$ed #y the owner of the property. !. "ay#e exercised #y pri$ate indi$iduals. C. 0ay regulate both liberty and property. 0. Property is taen #y the go$ernment for pu#lic purpose. 3,. A tax wherein #oth the incidence of or the lia#ility for the payment of the tax as well as the #urden of the tax falls on the same person. !.Direct tax %. Indirect tax !. Ealue added tax 0. Percentage tax 3. -hich one of the following is not a characteristic or element of a tax A. It is an enforced contri#ution. !. It is legislati$e in character. %. It is #ased on the a#ility to pay. D.t is payable in money or in 1ind. 32. Tax as distinguished from license feesC A. @imited to co$er cost of regulation. !. A regulatory measure. C. 'on-payment does not necessarily render the business illegal. 0. Imposed in the exercise of police power. 33. The power of taxation is exercised #y
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A. The President !. The 4upreme %ourt
%. !ureau of Internal *e$enue D. Congress
35. One of the characteristics of internal re$enue laws is that they areC A. %riminal in nature %. Political in nature !. Penal in nature D.Generally prospective in application. 36. -hich of the following is not an example of excise taxC A. Transfer tax C. %eal property tax !. 4ales tax 0. Income tax 37. The following are similarities of the inherent power of taxation( eminent domain( and police power( except oneC A. Are necessary attri#utes of so$ereignty ".*uperior to the non-impairment clause of the constitution. %. %ompensation is recei$ed. 0. Are legislati$e in character. 58. -hich of the following is not a scheme of shifting the incidence of taxation A. The manufacturer transfers the tax to the consumer #y adding the tax to the selling price of the goods sold? !. The purchaser ass for a discount or refuse to #uy at regular prices unless it is reduced #y the amount e+ual to the tax he will pay? C. Changing the terms of the sale li1e &/" shipping point in the Philippines to &/" destination abroad, so that the title passes abroad instead of in the Philippines2 0. The manufacturer transfers the sales tax to the distri#utor( then in turn to the wholesaler( in turn to the retailer and finally to the consumer.
51. -hich of the following statements is not correct A. Taxes may #e imposed to raise re$enues or to pro$ide disincenti$es to certain acti$ities within the state? !. The state can ha$e the power of taxation e$en if the %onstitution does not expressly gi$e it the power to tax. %. :or the exercise of the power of taxation( the state can tax anything at any time. D. The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing powers. 5'. @icense fee as distinguished from taxC A. Non)payment does not necessary render the #usiness illegal. !. A re$enue raising measure %. Imposed in the exercise of taxing power.
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D.imited to cover cost of regulation.
5,. Ealue)added tax is an example ofC A. Fraduated tax %. *egressi$e tax !. Progressi$e tax D.Proportional tax 5. -hich tax principle is descri#ed in the statement = the more income earned #y the taxpayer( the more tax he has to pay.> A. :iscal Ade+uacy %. Administrati$e feasi#ility ".Theoretical $ustice 0. Inherent in so$ereignty 52. The most superior and least limita#le among the fundamental powers of the stateC A. Power of recall %. Power of taxation ". Police power 0. Power of eminent domain 53. One of the characteristics of a tax is thatC A. It is generally #ased on contact. ".t is generally payable in money. %. It is generally assigna#le. 0. It is generally su#/ect to compensation. 55. The following are the characteristics of our internal re$enue laws exceptC !.Political in nature. !. %i$il in nature. %. Fenerally prospecti$e in application. 0. "ay operate retrospecti$ely if congress so pro$ides. 56. -hich of the following has no power of taxation A. Pro$inces %. !arangays D."arrios !. %ities 57. -hich of the following statements is wrong A re$enue #illC A. "ust originate from the Gouse of *epresentati$es and on which same #ill the 4enate may propose amendments. ". 0ay originate from the *enate and on which same bill the ouse of %epresentatives may propose amendments. %. may ha$e a Gouse $ersion and a 4enate $ersion appro$ed separately( and then consolidated( with #oth houses appro$ing the consolidation $ersion. 0. "ay #e recommended #y the President to %ongress. 68. Tax as distinguished from special assessmentC A. not as a personal lia#ility of the person assessed. !. #ased wholly on #enefits %. exceptional as to time and place D.based on necessity and is to raise revenues
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61.
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78. The 0epartment of :inance thru its officers entered into a contract with foreign in$estors granting them exemption from all forms of taxes to encourage in$estments in the Phils. The contract is A. Eoid( unless the President ratifies ".3oid, because the power to grant tax exemption is vested in Congress. %. Ealid( if the President has authori&ed the officers to enter into such contract. 0. Ealid( #ecause the purpose is to promote pu#lic welfare.
71. Tax as distinguished from de#t A. no imprisonment for non)payment%. #ased on contract D.based on law !. may #e paid in ind 7'. %ongress can impose a tax at any amount and at anytime shows that A. Taxation is an inherent power of the state. !. Taxation is essentially a legislati$e power. C. Taxation is a very broad power of the state. 0. Taxation is #ased on taxpayers; a#ility to pay. 7,. The amount re+uired is dictated #y the needs of the go$ernment inC A. @icense fee %. Toll ".Tax 0. 0e#ts 7. A charge imposed on land for special #enefits deri$ed resulting from pu#lic impro$ements. A. Tax %.@icense D. *pecial assessment !. Toll 72. -hich of the following are National Internal *e$enue Taxes I. Income tax III. 0onor;s tax E. Other percentage tax II. 9state tax IE. Ealue Added tax EI.9xcise Tax EII. 0ocumentary stamp tax A. I( II( III( IE !. I( II( III( IE( E
%.I( II( III( IE( E( EI D., , , 3, 3, 3, 3
73. The !ureau of Internal *e$enue shall ha$e a chief and four B assistant chiefs to #e nown as A. 4ecretary and Assistant 4ecretaries !. 4ecretary and
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D.Commissioners and Deputy Commissioners
75. The three fundamental powers of the state are I. Inherent in the state and may #e exercised #y the state without need of any constitutional grant. II. Not only necessary #ut indispensa#le. !.True2 True !. True? false
%. :alse? true 0. :alse? false
76. The three fundamental powers of the state are I. "ethods #y which the state interfere with pri$ate rights. II 9xercised primarily #y the legislature. !.True2 True !. True? false
%. :alse? true 0. :alse? false
77. I. Police power regulates #oth li#erty and property while the power of eminent domain and the power of taxation affect only property rights. II Police power and the power of taxation may #e exercised only #y the go$ernment while the power of eminent domain may #e exercised #y some pri$ate entities. !.True2 True %. :alse? true !. True? false 0. :alse? false 188. I. The property taen in police power is destroyed while the property taen under the power of eminent domain and power of taxation are not destroyed. II. In power of taxation( the compensation recei$ed is the protection afforded to the citi&ens? in police power the compensation recei$ed is the altruistic feeling that somehow you contri#uted to the promotion of the general welfare? in power of eminent domain( the compensation recei$ed is the /ust compensation paid for the property taen. !.True2 True !. True? false
%. :alse? true 0. :alse? false
181. I. The point on which a tax is originally imposed is impact of taxation. II. The point on which a tax #urden finally rests or settles down is incidence of taxation. !.True2 True !. True? false
%. :alse? true 0. :alse? false
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18'. I. Police power is superior to the non)impairment clause of the constitution. II. Power of taxation is superior to the non)impairment clause of the constitution. A. True? True ".True2 false
%. :alse? true 0. :alse? false
18,. I. No person shall #e imprisoned for de#t or non)payment of tax. II. Tax laws are ci$il and penal in nature #ecause there are penalties pro$ided in case of $iolation. A. True? True !. True? false
%. :alse? true D. &alse2 false
18. I. Tax may #e collected in an unlimited amount. II. @icense fee may #e collected in an unlimited amount. A. True? True ".True2 false
%. :alse? true 0. :alse? false
182. I. Tax is imposed to raise re$enue. II. @icense fee is imposed to raise re$enue. A. True? True %. :alse? true ".True2 false 0. :alse? false
183.
I. Tax is a demand of so$ereignty. II. Toll is a demand of so$ereignty.
A. True? True ".True2 false
%. :alse? true 0. :alse? false
185. I Tax is imposed on persons( property( and property rights. II. 4pecial assessment is imposed on persons( property( and property rights. A. True? True ".True2 false
%. :alse? true 0. :alse? false
186. I. %ollection of tax is a legislati$e act. II. Imposition of tax is an administrati$e act. A. True? True !. True? false 187. I.
%. :alse? true D.&alse2 false
A state has the power to tax e$en if not granted #y the constitution.
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II. A state cannot exercise police power if not granted #y the constitution. A. True? True %. :alse? true ".True2 false 0. :alse? false 118. I. There can only #e a tax e$en if there is a law imposing the tax. II. The power to tax may include the power to destroy. !.True2 True !. True? false
%. :alse? true 0. :alse? false
111. I. 0ue process of law in taxation under the constitution is a grant of power. II. Pro$isions in the Philippine constitution on taxation are grants of power. A. True? True !. True? false
%. :alse? true D.&alse2 false
11'. I. In the Philippines( there may #e dou#le taxation. II. Taxation may #e used to implement the police power of the state. !.True2 True !. True? false
%. :alse? true 0. :alse? false
11,. I. @icense fee is a charge imposed under police power. II. 4pecial assessment is le$ied on lands only. !.True2 True !. True? false
%. :alse? true 0. :alse? false
11. I. Tax is imposed regardless of pu#lic impro$ement. II. 4pecial assessment is imposed regardless of pu#lic impro$ements. A. True? True ".True2 false
%. :alse? true 0. :alse? false
112. I. Tax a$oidance is the use #y the taxpayer of legal or fraudulent means to a$oid or defeat taxes. II. Tax e$asion is the use #y the taxpayer of illegal or fraudulent means to a$oid or defeat taxes. A. True? True !. True? false
C.&alse2 true 0. :alse? false
113. I. One of the essential characteristics of a tax is it is unlimited in amount. II. A tax is generally unlimited #ecause it is #ased on the needs of the state.
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A. True? True !. True? false
C.&alse2 true 0. :alse? false
115. I. The power of taxation is inherent in so$ereignty #eing essential to the existence of e$ery go$ernment. Gence( e$en if not mentioned in the constitution the state can still exercise the power and is essentially a legislati$e function. II. 9$en in the a#sence of any constitutional pro$ision( taxation power falls to %ongress as part of the general power of law)maing. !.True2 True !. True? false
%. :alse? true 0. :alse? false
116. I. The President has the power to $eto a re$enue #ill e$en if such #ill was already appro$ed #y %ongress. II. The President is superior to %ongress as heHshe can $eto any #ill e$en if already appro$ed #y %ongress. A. True? True ".True2 false
%. :alse? true 0. :alse? false
'D3D)! T!4P!5E%*
1. The National Internal *e$enue %ode of 1766 is A. *A 7,,5 !. %A 33 %. *A 728 D. %! 6787 '. -hich of the following statements is not correct A. An indi$idual citi&ens of the Philippines who is woring and deri$ing income from a#road as an o$erseas contract worer is taxa#le on income from sources within and without the Philippines. !. A seaman who is a citi&en of the Philippines and who recei$es compensation for ser$ices rendered a#road as a mem#er of the complement of $essel engaged exclusi$ely in international trade shall #e treated as a resident citi&en. %. A non) resident citi&en who is not engaged in #usiness in the Philippines is treated as non)resident alien who is not engaged in #usiness in the Philippines
18
D.
!n alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources in the Philippines
,. -hich of the following statements is not correct A. In the case of married indi$iduals( where only one of the spouses is deri$ing gross income( only such spouse shall #e allowed the personal exemption. ! In the case of married indi$iduals( the additional exemptions may#e claimed #y only one of the spouses %. As a rule( the hus#and shall #e the head of the family and proper claimant of the additional exemption D. n the case of legally separated spouses, additional exemption maybe claimed by the spouses who has custody of the children but shall not exceed four97: for each spouse . A resident citi&en is taxa#le on all income deri$ed from sources A. -ithin the Philippines only !. -ithout the Philippines only %. Partly within and partly without D. ;ithin and without the Philippines 2. A non)resident citi&en is taxa#le on all income deri$ed from sources !. ;ithin the Philippines only !. -ithout the Philippines only %. Partly within and partly without 0. -ithin and without the Philippines 3. A resident alien is taxa#le on all income deri$ed from sources !. ;ithin the Philippines only !. -ithout the Philippines only %. Partly within and partly without 0. -ithin and without the Philippines 5. A non)resident alien is taxa#le on all income deri$ed from sources !. ;ithin the Philippines only !. -ithout the Philippines only %. Partly within and partly without 0. -ithin and without the Philippines
6. The following taxpayers are allowed to claim additional exemptions( except A. *esident citi&ens !. non) resident citi&ens %. *esident aliens D. 'on-resident aliens 7. -hich of the following statements is not correct
19
A.
If only one spouse is deri$ing taxa#le income( only said spouse may claim the additional exemption ". If #oth spouses earn taxa#le income only one of the spouses can claim additional exemption C. f legally separated from the spouse, the husband can claim the additional exemption unless he waives the right in favor of his wife D. An unmarried indi$idual with a child out of wedloc can claim a personal exemption as a head of the family plus exemption <=. A citi&en of the Phils. who wors and deri$es income from a#road is a resident if he stayed outside the Phils. A. :or less than 168 days !. :or more than 168 days %. :or 16, days or more D. &or less <6> days
11. A citi&en of the Phils. -ho wors a#road and whose employment re+uires him to #e physically present a#road most of the time during taxa#le years A. Taxa#le on income within and without the Phils. !. Taxa#le on income from without the Phils. %. 9xempt from income tax D. Taxable income from within the Phils. 1'. A citi&en of a foreign country is considered a non)resident alien engaged in #usiness in the Phils. If he stayed inside the Phils. A. :or 16, days or more !. :or less than 16, days C. &or more than <6= days 0. :or less than 168 days
1,. -hich of the following dependents is not +ualified to entitle a taxpayer additional persona exemption A. *ecogni&ed natural son who cele#rated his '1 st #irthday during the taxa#le year. !. @egitimate natural son( '1 years old who got married on 0ecem#er ,1( of the year. %. @egally adopted son( '1 years old son who #ecame employed 0ecem#er ,8( of the taxa#le year.
20
D. ;idowed mother, who celebrated her ?@ th birthday during the taxable year.
1. :or income tax purposes( which of the following is considered head of the :amily A. "arried indi$idual who has dependent minor child. ". 0arried but legally separated individual with a dependent mother who is ?@ years old %. 4ingle indi$idual with a common law life 0. "arried indi$idual e$en if he has no children 12. -hich of the following dependents will +ualify a single taxpayer as head of the family A. Taxpayer;s #rother( '' years old( unemployed( unmarried( li$ing with him and dependent upon him for support !. Taxpayer;s sister( 16 years old( unemployed( unmarried li$ing with parents( #ut dependent upon him for chief support C. Taxpayer#s illegitimate son, <8 years old, unemployed, single, living with him and dependent upon him for support 0. Taxpayer;s godchild( 18 years old( dependent upon him for chief support 13. "r. A with a dependent minor legitimate child #ecame a widower in Danuary of '887. In :e#ruary of the following year( he got married to "s. ! and su#se+uently in No$em#er of the same year( the latter ga$e #irth to three ,B #oys. :or calendar year '818( "r. A;s #asic and additional personal exemption isC A. P52(888 !. P188( 888 %. P1'2( 888 0. P
21
%. D.
Non)resident alien not engaged in #usiness in the Philippines 'on-resident alien engaged in business in the Philippines
17. A legally married couple had the following data in year '8818 A. Two +ualified legitimate dependent children !. Two dependent nephews %. One illegitimate child of hus#and 0. One of legitimate child died in 0ecem#er '818 9. !oth spouses are gainfully employed. The claima#le personal and additional exemptions of the coupleC A. G)P 28( 888( -)P 1'2( 888 !. G)P 188(888( -)P 28( 888 C. -P <==, ===, ;-P A?, === 0. G)P 128( 888( -)P 28( 888 '8. A( who #ecame a widower in :e#ruary of taxa#le year '818 had the following dependentsC A. !. %. 0.
Two legitimate children *ecogni&ed natural child with current common law wife !( his common law wife Illegitimate child with another woman
The total #asic personal and additional exemption in '887 isC A.
22
'. Taxa#le on income from all sources within and without the Phil. !. %esident citi+en !. Non)resident citi&en %. *esident alien resident alien
0. Non)
'2. Taxa#le only on income from sources within the Phil. except !. %esident citi+en !. Non)resident citi&en %. *esident alien resident alien
0. Non)
'3. "ay not claim personal exemption A. Non)resident citi&en !. Non)resident alien engaged in trade or #usiness in the Phil.
'7. -ill not +ualify as dependent A. @egitimate child !. !rother
%. "other
,8. Personal exemption( if single A. P'8( 888 !. P'2( 888
%. P,'( 888
D. 'ephew
D. P?=, ===
,1. Personal exemption( if married #ut /udicially declared as legally separated with no dependent. A. P'8( 888 !. P'2( 888 %. P,'( 888 D. P?=, ===
,'. Personal exemption( if married #ut li$ing separately without /udicial decree of separation A. P'8( 888 !. P'2( 888 %. P,'( 888 D. P?=, === ,,. Personal exemption( if married #ut /udicially declared as legally separated with dependent
23
A. P'8( 888
!. P'2( 888
%. P,'( 888
D. P?=, ===
,. Personal exemption( if head of the family A. P'8( 888 !. P'2( 888 %. P,'( 888
D. P?=, ===
,2. Amount of additional exemption each +ualified dependent child is A. P6( 888 !. P188( 888 %. P28( 888 D. P8?, === ,3. The num#er of dependent children who will +ualify for additional exemption purposes shall not exceed. A. , children ". 7 children %. 2 children 0. 3 children ,5. An unmarried or legally separated man or woman with one or #oth parents( or with one more #rothers and sisters( or with one or more legitimate( illegitimate( or legally adopted children li$ing with and dependent upon him or her for their chief support( where such #rothers( or sisters( or children( regardless of age are incapa#le of self)support #ecause of mental physical defect. A. Food father of a family !. "arried family
%. 4ingle
D. ead of the
,6. A non)resident alien is deemed doing #usiness in the Phil. If he A. Is an indi$idual whose residence is within the Phil. !. Is an indi$idual whose father or mother is an alien who is engaged in #usiness in the Phil. %. Is an indi$idual who is naturali&ed in accordance with law D. *hall come to the Phil. !nd stay therein for an aggregate period of more than <6= days during a calendar year. ,7. One is not correct A. If the taxpayer marries during the taxa#le year( he may claim the personal exemption in full as a married person for such year. !. If the taxpayer dies during the taxa#le year( his estate may still claim the personal and additional exemption for himself and his dependents as if he died at the close of such year. %. If the spouse of the taxpayer or any of the dependents dies during the taxa#le year( the taxpayer may still claim the same exemptions as if death occurred at the close of such year.
24
D. f the taxpayer should have additional dependent children during the taxable year, he can always claim the additional exemptions for such year.
8. One is correct A. -here #oth hus#and and wife recei$e compensation income( the additional exemption shall #e claimed #y wife unless she explicitly wai$es her right in fa$or of her hus#and in the withholding exemption certificate. ". usband and wife shall be treated as separate taxable units and each shall be allowed to claim personal exemption %. If the gross income does not exceed P'8( 888( a special additional personal exemption of P( 888 may #e claimed #y the taxpayer. 0. Gus#and and wife shall #e treated as separate taxa#le units and shall #e allowed to claim only one personal exemption either for the hus#and or wife at their option. 1. !. The term =chief support> means more than one)half of the re+uirements for support ". If two children contri#ute e+ual amounts for the support of dependent( neither one of them may #e +ualify as head of the family !. True, true !. True( false %. :alse( true 0. :alse( false '. !. If any of the +ualified dependents #ecomes '1 years old during the taxa#le year( the taxpayer may claim the same exemptions as if such dependent #ecame '1 years old at the close of such year. ". Parents li$ing with and dependent upon the taxpayer for their support regardless of their age will +ualify as dependents ! True, true !. True( false %. :alse( true 0. :alse( false ,. !. If the dependent child marries during the taxa#le year( the taxpayer may still claim the same exemption as if the marriage occurred at the close of such year. ". In the case of married indi$iduals( the additional exemptions shall #e claimed #y only one of the spouses ! True, true !. True( false %. :alse( true 0. :alse( false . -ho is non)resident alien not engaged in #usiness in the Phil.
25
!. !n alien who comes in the Phil. &or a definite purpose which in its nature may be promptly accomplished.. !. An alien who comes to the Phil. :or definite purpose which in its nature would re+uire an extended stay of more than 168 days. %. An alien who has re+uired residence in the Phil. 0. An alien who li$es in the Phil. -ith no definite intention as to his stay
2. The personal exemption of the non)resident alien engaged in trade or #usiness in the Phil. is e+ual to that allowed #y. A. The income tax law of his country to a citi&en of the Phil. not residing there ". The income tax law of his country to a citi+en of the Phil. not residing there or the amount provided by the '%C to a citi+en or resident whichever lower. %. The NI*% to a citi&en or resident 0. The income tax law of his country to a citi&en of the Phil. not residing there or the amount pro$ided #y the NI*% to a citi&en or resident whiche$er is higher. 3. !. If a taxpayer marries during the year( he may claim the personal exemption for married indi$iduals in full for such year. ". A dependent child who marries within the year may still +ualify as dependent for the year. !. True, true !. True( false %. :alse( true 0. :alse( false 5. ( married( had the following data for the taxa#le yearC Fross income( Philippines P88(888 Fross income( %hina ,88(888 9xpenses( Philippines '88(888 9xpenses( %hina 128(888 If the taxpayer is a resident citi&en( married( his taxa#le income is D. P>==,=== A. P,87( 888 !. P,16( 888 %. ,28( 888 6. If the taxpayer is a non)resident citi&en( married( his taxa#le income is A. P ,88( 888 !. P127( 888 C. P
26
taxa#le income is A. P,58( 888
". P
%. P'88( 888
D. P128( 888
21. If the taxpayer is non)resident alien not engaged in #usiness in the Phil. married and his country grants P,2( 888 as personal exemption for married indi$iduals( his taxa#le income is A. P,58( 888 !. P158( 888 %. P'88( 888 D. P7==, === 2'. -ith regard to deduction for premiums on hospitali&ation and health insurance( which of the following statements is wrong A. Allowed as deduction e$en if income is from compensation only !. Allowed as deduction e$en if income is from #usiness or practice of Profession %. Allowed as deduction e$en if mixed income D. !llowed as deduction only if the taxpayer is ta1ing itemi+ed deductions from gross income. 2,. -hich of the following statements is wrong The premiums on hospitali&ation and health insurance may #e deducted A. Not exceed P'( 88 a year per family !. Not exceed P'88 per month %. If the family income doesn;t exceed P'28( 888 D. "y either spouse in the case of married individuals 2. A resident( single with +ualified dependent illegitimate children had the following during the calendar year. Fross compensation income P'28( 888 9xpenses related to his employment 1'8( 888 444 premium contri#utions ,( 388 Philhealth contri#ution '( 88 Pag)i#ig contri#utions '( 888 6, B==9: 0. P115( 888 22. In which of the following should additional exemption not #e allowed to the taxpayer A. An alien( whose dependent child is li$ing with him in the Phil. !. A resident citi&en( who has '2 years old mentally retarded son C. ! resident citi+en, who has a ?= years old mother as his dependent 0. a resident alien with an illegitimate child( 5 years old
27
. C/%P/%!T/' 1. :or income taxation purposes( the term =corporation > excludes one of the following C A. Ordinary partnership !. An incorporated #usiness organi&ation C. General professional partnership 0. !usiness partnership '. -hich of the following is su#/ect to the corporate income tax A. a non) stoc and non profit educational institution !. Pu#lic educational institution C. Private cemeteries 0. %i$ic league or organi&ation not organi&ed for profit and operated exclusi$ely for the promotion of social welfare ,. A corporation organi&ed and created under the laws of a foreign country and is authori&ed to do #usinessH trade in the Phil. isC A. 0omestic corporation %. Non)resident foreign corporation ". %esident foreign corporation 0. Feneral co)partnership . One of the general principles of income taxationC A. A foreign corporation engaged in #usiness in the Phil. is taxa#le on all income deri$ed from sources within and without the Phil. ". ! foreign corporation engaged in business in the Phil. is taxable on all income derived from sources within the Phil. only. %. A domestic corporation is taxa#le on income deri$ed from sources within the Phil. only. 0. A domestic corporation is taxa#le on income deri$ed from sources without the Phil. only. 2. One of the following doesn;t fall under the definition of a =corporation> for income tax purposeC A. Feneral partnership !. Doint stoc company %. Insurance company D. *ole partnership 3. -hich of the following is classified as 4pecial %orporation su#/ect to preferential corporate income tax rate
28
A. 4ocial security 4ystem %. Phil. %harity 4weepstaes Office ". Proprietary Educational nstitution 0. Fo$ernment 4er$ice Insurance 4ystem 5. A corporation which may #e classified as either a resident corporation or non) resident %orporation is A. 0omestic corporation %. Fo$ernment owned and controlled corporation ". &oreign corporation 0. Non)profit hospital 6. The Phil. Gealth Insurance %orporation( a go$ernment owned corporation isC !. Exempt from the corporate income tax !. 4u#/ect to the preferential corporate income tax for special corporations. %. 4u#/ect to the #asic corporate income tax. 0. 4u#/ect to final tax. 7. Pu#lic educational institutions( lie the (uarters %. ,8 days after the end of each of the first +uarters 0. 38 days after the end of each of the first +uarters 1. A final or annual return is filed on or #efore the 12 th day of the A. "onth following the close of the taxa#le year !. 'nd month following the close of the taxa#le year.
29
%. ,rd month following the close of the taxa#le year. D. 7th month following the close of the taxable year 12. A corporation on a fiscal year ending "arch ,1( should file its annual return A. On or #efore April 12 of the same year C. /n or before uly
30
%. 4hall #e irre$oca#le for three consecuti$e taxa#le years that the corporation is +ualified under the scheme D. s compared with the normal income tax and minimum corporate income tax B'1. A %orporation;s records showC Normal Taxes 9xcess "%IT 9xpress withholding Luarter Income Tax "%IT -ithheld Prior Mear Tax Prior Mear :irst P188( 888 P68( 888 P'8( 888 P,8 888 P18( 888 4econd 1'8( 888 '28(888 ,8( 888 Third '28( 888 188( 888 8( 888 :ourth '88( 888 188( 888 ,2( 888 The income tax due for the second +uarter is A. P188( 888 !. P68( 888 %. P28( 888
D. P7=, ===
''. The income tax due for the second +uarter is A. P1'8( 888 !. P'28( 888 %. P128( 888
D. P8>=, ===
',. The income tax due for the third +uarter is A. P'28( 888 !. P188( 888 %. P18( 888
D. PA=, ===
'. The income tax due for the year is A. P'88( 888 !. P188( 888
%. P1,2( 888
D.
'2.
31
4chool related expenses The income tax due for '885 is A. P 25( 888 !. P 7( 388
6'8( 888
C. P <6, ===
0. P '8( 888
'7. %PA college( a pri$ate educational institution organi&ed in '888( had the following data for '885. Tuition fees P 68 888 *ental income 2'8( 888 4chool related expenses 28( 888 The income tax due for '885 is A. P 15( 388 !. P 2( 288
%. P 188( 888
D. P
,8. %PA Airlines( a resident foreign international carrier has the following records of income for the period. The income represents gross Phil. #illingsB A. %ontinuous flight from "anila to Toyo1( 888 ticets at P '( 888 per ticet !. :light form "anila to 4ingapore ? transfer flight from 4ingapore to Toyo'( 888 Ticets at P '( 888 per ticet %. %ontinuous flight from "anila to 4ingapore ,( 888 ticets at P1(888 per ticet The income tax due is A. P''2( 888 !. P1'2( 888
%. P188( 888
0. P
,1)3 The A corporation pro$ided the following data for calendar year ending 0ecem#er ,1( '887 1 P28B. Philippines A#road Fross income P( 888( 888 8( 888 0eductions '( 288( 888 12( 888 Income Tax Paid ,( 888 ,1. If it is a domestic corporation( its income tax after tax credit is !. PBA?,=== !. P6,'( 888 %. P73'( 288 0. P68( 888 ,'. If it is a resident corporation( its income tax is A. P5,8( 888 !. P1( '68( 888 %. P68( 888 ,,. If it is a non)resident corporation( its income tax is A. P,58( 888 !. P1('68(888 %.P668(888
D. P7?=, ===
D.P<,8==,===
32
,.
D.P
,5. If it is a resident international carrier( its income tax is !.P<==,=== !.P18(888 %.,5(888 0.P1'2(888 ,6. If it is a non)resident cinematographic film ownerHlessor( its income tax is !.P<,===,=== !.P188(888 %.P,88(888 0.P1'6(888 ,7. If it is a non)resident lessor of $essels(its income tax is A.P188(888 ".P<6=,=== %.P,88(888
0.P1'6(888
8. If it is a non)resident lessor of aircrafts( machineries and e+uipments( its income tax is A. P188(888 !.P168(888 C.P>==,=== 0.P1'6(888 1. If it is a resident corporation #ut its expenses within and outside the Philippines is P,"(
33
3. If the corporation is a non)stoc educational? institution( which uses all its re$enues or income for educational and charita#le purposes ( its income is !. P= !.P5,8(888 %.P1'8(888 0.P3(888 B5. A domestic corporation organi&ed in 1776 pro$ided the following informationC '88, '88 '882 '883 '885 Net 4ales P(888(888 P2(888(888 P3(888(888 P5(888(888 P6(888(888 %ost of sales '(888(888 '(288(888 '(688(888 (888(888 2('88(888 !usiness 9xpenses 1(788(888 '(,28(888 '(788(888 ,(188(888 '(,88(888 The tax due after tax credit( if any for '882 A.P63( 888 !. P72( 888 C.P6A,?==
0.P75(288
6.
34
Other IncomeC 0i$idend from 4an "iguel %orp 58(888 0i$idend from :ord "otors( <4A 1'8(888 Fain( sale of 4an "iguel shares directly to #uyer128(888 *oyalties( Philippines 28(888 *oyalties( <4A 188(888 Interest other than from #ansB 38(888 *ent( land <4A '28(888 Other rent income 188(888 Pri&e( contest in "anila '88(888 @and sold in the Philippines selling pri&eB '(888(888 The cost of the land which is not used in #usiness is P1"( while :"E is P,"( Its total tax lia#ility as a domestic corporation isC D. P@6=,?== A. P568(288 !. P71,(388 %. P73,(388 2'. !ased on the a#o$e pro#lem( its total tax lia#ility if it is a resident corporation is A. P5'1(888 !. P357('88 %. P327('88 D.PA7<,=== 2,. And if it is a non)resident corporation( its total tax lia#ility is A. P6,(288 !.571(588 %. P571('88 D.P67B,=== 2. A domestic corporation had the following dataC Fross income 0eductions 1776 P1(888(888 P1('88(888 1777 '(888(888 1(788(888 '888 ,(888(888 '(728(888 '881 1(888(888 1(188(888 '88' 768(888 288(888 The taxa#le income in '88' isC !. P>6=,=== !. P,,8(888
%. P188(888
0. P28(888
Partnership
1. If a partner on his own transactions( is on the cash method of accounting while the general professional partnership is on the accrual method of accounting( in the partner;s determination of his taxa#le income for the year( he !.0ust convert his income from the partnership into cash method !. "ust con$ert his own income into accrual method %. 0oes not report his income from the partnership #ecause the partnership is exempt from income tax 0. %an consolidate his share in the net income of the partnership under accrual method with his own income under cash method
35
'. The net share recei$ed #y a partner in a general professional partnership is !. Part of his taxable income !. 9xempt from income tax %. 4u#/ect to corporate tax 0. 4u#/ect to final tax ,. The net shares recei$ed #y a partner in a general co)partnership is A. Part of his taxa#le income !. 9xempt from income tax %. 4u#/ect to corporate tax D.*ub$ect to final tax . -hich of the following statements is not correct A. -hen the co)owners in$est the income of the property co)owned in a #usiness or any income producing properties or acti$ities constituting themsel$es into a #usiness partnership( such partnership is conse+uently su#/ect to tax as a corporation. !. As a rule( a co ownership is mot su#/ect to income tax #ecause the acti$ities of the co)owners are limited to the preser$ation and en/oyment of the property and the collection of the income there from. %. A co)owner is su#/ect to income tax on his share in the net income of the co) ownership actually or constructi$ely recei$ed. D.!ll partnerships, no matter how created or organi+ed are considered corporations sub$ect to corporate income tax. 2. The following statements regarding taxa#le partnerships are correct( except A. They file +uarterly and year)end income tax returns. !. They are su#/ect to the rules on corporation for capital gain tax( final tax on passi$e income( normal income tax( minimum corporate income tax and gross income tax. %. The partners; share in the distri#uta#le net income is su#/ect to final tax. D.They are sub$ect to the improperly accumulated earnings tax. 3. -hich of the following statements is correct !.Partners of a taxable partnership are considered as stoc1holders and profits distributed to them by the partnership are considered as dividends. !. The share of each partner in net income of a taxa#le partnership shall #e #ased on their capital contri#ution . %. The share of an indi$idual partner in the net income of taxa#le partnership shall #e e+ual to the share of a capitalist partner with the least capital contri#ution. 0. The industrial partner shall contri#ute money and or property #ut not ser$ices.
36
5. 4tatement 1) A %PA and a 0entist may form a FPP or an ordinary partnership 4tatement ') Partnership and %orporations ha$e separate /uridical personalities distinct from the owners( as such partners and stocholders are not lia#le to creditors of #usiness A. True( true %. :alse( true ". &alse, false 0. True( false 6. 4tatement)1 The share of the partner in the net income of an OP is added on his own gross income. 4tatement)' The share of the partner in the net income in FPP is also considered as passi$e Income. A. True( true %. :alse( true ". &alse, false 0. True( false 7. As regards a general professional partnership( which of the following statements is correct A. Treated lie a corporation( hence it is su#/ect to the corporate income tax !. It is exempt from income tax( hence it need not file an IT* %. Partners; share are su#/ect to final tax D. Partners# share will be included in their respective T%s whether distributed or not 18. As regards an ordinary partnership( which of the following statements is correct A. Partners; share are su#/ect to final tax( hence it not file an IT* !. 4u#/ect to improperly accumulated earnings tax %. Treated lie corporations( hence partners ha$e limited lia#ility D. Partner#s share even if distributed will not be included in their T% <<. A! partnership with A and ! as partners had a net professional income amounting to P288(888. Its other income included #an interest income of P6(888( net of final withholding tax and it recei$ed di$idend income from a domestic corporation of P18( 888. A is single and has compensation income of P'88( 888. The net taxa#le income of A who shares profit and loss e+ually with ! is A.P,3( 888 C. P7==,=== !.P8( 888 0. P ( 888
1'.
37
A. P216( 888 ". P?==, ===
%. P218( 888 0. P286( 888
B1,. ?= 1. A and ! are partners in a Partnership which reali&ed a gross income of P688( 888 with a %orresponding P,28( 888 expenses in the year '885. A is married with ' +ualified dependent children ( he earned P88(888 in his own #usiness( incurring P',8(888 allowa#le expenses while !( single had P28(888 and P'28(888 gross income and expenses respecti$ely. They share profits and losses at C3. If the partnership is a FPP( the taxa#le income of A su#/ect to 2),'K is C. P8?=,=== A. P'53( 888 !. P168( 888 0. P,'8( 888 12. And the taxa#le income of ! su#/ect to 2) ,'K is A. P,2( 888 C. P78=,=== !. P'58( 888 0. P 58( 888 B13. If the partnership is an OP( its tax due is !. P<77, === H1,2(888 %. P12,( 888 !. P16( 888 0. P186( 888 15. And the total tax lia#ility of A is A. P1'( '8 C. P><, <7=9:76,B== !. P16( 788 0. P,'( 288 16. The total tax lia#ility of ! is A. P,'( 288 !. P6( ,38
C. P?=, 6B=9:
0. P,1( 18
17. A( !( and % are partners sharing profits and losses ,8K( ,8K and 8K( respecti$ely. The following data pertain to the partnership and the indi$idual account of the mem#ers in their own #usiness for the taxa#le year '88C A ! % Partnership Fross income P88( 888 P,88( 888 P,28( 888 P788( 888 0eductions 188( 888 58( 888 138( 888 '8( 888 0rawing Account 2( 888 ,( 888 '( 888 18( 888 %i$il 4tatus 4ingle "arried Gead of the family If the partnership is a FPP( the taxa#le income of % is C. P>?A, === A. P'( 888 !. P,'( 888 '8. The taxa#le income of ! is FPPB
0. P,6'( 888
38
A. P'( 888
". P>78, ===
'1. The taxa#le income of A is OPB !. P86=, === !. P176( 888
%. P,25( 888
%. P132( 888
''. The taxa#le income of ! is OPB A. P168( 888 !. P176( 888
%. P132( 888
',.The taxa#le income of % is OPB A. P168( 888 !. P176( 888
C. P
0. P,6'( 888
0. P'( 888
0. P'( 888
0. P'( 888
'. The income tax due of the partnership if OP !. P , B== !. P25( 888 %. P,5( 888
0. P'6( 528
'2. If ! opts to claim the 18K O40 OPB( his taxa#le income is ". P8>6, === A. P,35( 388 %. P'68( 888 0. P,77( 388 '3. A and ! are co)owners #y $irtue of a property gi$en to them #y their father. The co) ownership had a gross rental income of P288(888 gross of 2K taxB and expenses related to rental acti$ity of P'88(888 #ut 18K is not deducti#le for the year '885. A and ! share in the profits at 52K and '2K( respecti$ely. A withdrew P28(888 from the co) ownership net income for the year( ! did not withdraw any amount. A and ! are #oth single. The income tax lia#ility of the co)ownership D.P= A. P18'(88 !. P53(688 %. P68(888 '5. The taxa#le income of A #efore exemption ".P87=,=== A. P,'8(888 %. P68(888
0. P8
'6. 4uppose A and ! did not di$ide #ut instead in$ested the entire profit in another #usiness $enture where they earned a net income after deductions of P28(888( the tax due of the co) ownership is A. P18'(88 !. P1(888 C.P
Estates and Trusts
1. -hich of the following statements is correct A. 9states and trusts are allowed a personal exemption of P,'(888 if the executor or trustee is
39
married. !. The income tax rates for corporate taxpayers apply to taxa#le estates and trusts. %. The taxa#le year of estates and trusts may#e calendar or fiscal year D.&or a trust to be taxable, it must be irrevocable, both as to corpus 9principal: and income '. The property( rights and o#ligations of a person which are not extinguished #y his death and those which accrued thereto since the opening of succession. A. Assets !. %apital C.Estate 0. Income ,. The term applied to the person whose property is transmitted through succession( whether or not he left a will !.Decedent !. Transferor %. Transferee 0. Frantor . The term applied to the answer in No. , if he left a will A. Transferor !. Frantor %. 0onor
D.Testator
2. The person called to the succession either #y the pro$ision of a will or #y operation of law !.eir !. 0e$isee %. @egatee 0. Trustor 3. The person to whom a gift of real property is gi$en #y $irtue of a will A. Geir !.Devisee %. @egatee 0. Trustor 5. The person to whom the gift of personal property is gi$en #y $irtue of a will C.egatee A. Geir !. 0e$isee 0. Trustor 6. The person who esta#lishes a trust A. Geir !. 0e$isee
%. @egatee
D.Trustor
7. The person in whom confidence is reposed as regards property for the #enefit of another person A. 0e$isee ".Trustee %. @egatee 0. Geir 18. The person for whose #enefit the trust has #een created A. @egatee !. Geir C. "eneficiary
0. Trustee
<8. :or income tax purposes( any person or corporation that holds in trust an estate of another person or persons ".&iduciary A. !eneficiary %. @egatee 0. 0e$isee
40
G%/** 'C/0E
1. All of the following statements are correct( except one. -hich is the exception A. The source of interest income is the country where the de#tor resides ". The source of dividend income is the country where the corporation was incorporated %. *ents are considered deri$ed from the country where the property is located 0. Income from personal ser$ices is considered deri$ed from the country where the ser$ices were rendered. '. – A gain from sale of shares of a domestic corporation shall #e considered deri$ed from the Philippines regardless of where the shares were sold. ) A gain from sale of shares of a foreign corporation shall #e considered deri$ed from the country where the corporation was created or organi&ed. A. ".
True? True True2 &alse
%. 0.
:alse? True :alse? :alse
,. -hich is not a credita#le withholding income tax A. 9xpanded withholding income tax ". ;ithholding income tax on passive income %. -ithholding income tax at source 0. -ithholding income tax on compensation income . As a rule( this is not part of taxa#le income A. Profit sharing %. D. !. Ga&ard pay 2. This is taxa#le income A. *etrenchment pay resignation !. 444HF4I4 #enefits
O$ertime pay <>th month pay
C.
*eparation pay due to
0.
*efund of Philippine Income tax
3. -hich of the following is taxa#le income A. Pri&es and awards as an awardee of *amon "agsaysay Award :oundation !. 0amages awarded as a conse+uence of a li#el and slander suits C. nterest on Philippine lotto winnings 0. Amounts recei$ed as returns of premiums 5. One of the following is taxa#le income A. Fifts( #e+uests and de$ices ". !mounts received as rewards for giving information instrumental in the discovery of violation of the Tax Code and sei+ure of smuggled goods
41
%. 0.
Proceeds from life insurance 4eparation pay recei$ed #y an employee due to a cause #eyond his control
6. As a rule( the following are taxa#le income( except A. %ash di$idend %. 4crip di$idend !. Property di$idend D. *toc1 dividend 7. The following items are exclusions from gross income( except A. @a#or union dues C. /)#s !. 444HF4I4 premiums contri#utions 0. Pag)i#ig premiums contri#utions 18. -hich of the following is part of gross income A. P%4O Phil @otto winnings !. !an interest on long)term deposit %. Proceeds of life insurance D. %affle pri+e not exceeding P<=,=== 11. If refunded( this is taxa#le A. 9state tax !. 0onor;s tax
%. D.
4pecial assessment &ringe benefit tax
1'. Income tax payments to a foreign country( in the case of a resident citi&en may #e claimed as A. Tax credit and deduction from gross income !. Tax credit only C. Tax credit or deduction from gross income 0. 0eduction from gross income only 1,. 0i$idends paid #y a domestic corporation may#e taxa#le #ut su#/ect to final tax( except A. if recei$ed #y a resident citi&en !. if recei$ed #y a resident alien %. if recei$ed #y a non)resident corporation D. if received by another domestic corporation 1. -hich of the following statements regarding di$idends is wrong A. 9xempt from income tax if recei$ed #y a domestic corporation from another domestic corporation !. 9xempt from income tax if recei$ed #y a resident corporation from a domestic corporation %. Taxa#le su#/ect to year)end tax if recei$ed #y a resident citi&en from a non)resident corporation D. Taxable sub$ect to final tax if received by a non-resident citi+en from a non-resident corporation
42
12. X wors as a secretary in an ad$ertising firm in "anila. 0uring the year( she recei$ed P18(888 a month as salary or a total of P1'8(888. In addition she also recei$ed 1,th month pay( %hristmas #onus( producti$ity #onus( mid year #onus and 1 th month pay amounting to P8(888. The total deductions for her 444 premiums( "edicare( Pag)i#ig( and
43
final tax. A. !oth are true ". "oth are &alse
%. 0.
True? :alse :alse? True
17. -hich statements is correct !. ncomes from illegal activities are taxable. !. Tax refunds constitute taxa#le income to the taxpayer. %. *eco$ery of #ad de#ts pre$iously written off is part of taxa#le income 0. As a rule( contest awards and pri&es are su#/ect to '8K final tax if they amount to P18(88 or more( otherwise they will #e exempt from income tax. '8. One of the following is taxa#le income A. %ompensation for damages ". The share of a partner in the undistributed net income of a general professional partnership %. @i$ing +uarters and meals furnished and gi$en to an employee for the con$enience of the employer 0. :acilities or pri$ilege of relati$ely small $alue offered #y the employer as a means of promoting the health( goodwill( contentment( or efficiency of the employee. '1.-hich of the following is taxa#le A. P188(888 interest on long)term deposit or in$estment !. P'88(888 gain on sale of 18)year #onds C. P<8,=== pri+e in a supermar1et raffle 0. P1 " winnings from Phil. lotto ''. Fain reali&ed from the sale or exchange or retirement of #onds( de#entures or other certificate of inde#tedness is excluded from gross income if with a maturity of !. ? years or more %. "ore than 6 years !. "ore than 5 years 0. "ore than 18 years ',. Fross #enefits recei$ed #y officials and employees of pu#lic and pri$ate entities as 1,th month pay and other #enefits such as producti$ity #onus( ser$ice incenti$e pay and %hristmas #onus shall #e excluded from taxa#le income up to A. P'8(888 %. P8(888 ". P>=,=== 0. P28(888 '. 9xclusions from gross income( exceptC A. Interest on the price of the land co$ered #y the Presidential 0ecree on land reform. ". nterest payments on proceeds of life insurance held by the insurer
44
%. F4I4H444( Philhealth and Pag)i#ig contri#utions and
/nly < Only 1 and ,
%. 0.
Only ' and, 1( ' and,
'5. One of the following represents taxa#le incomeC !. %efund of overpaid rental expense in prior year !. *efund of donor;s tax paid in prior year %. *efund of income tax in prior year 0. *efund of special assessment paid in prior year '6. If an indi$idual performs ser$ices for a creditor who in consideration thereof cancels the de#t( the cancellation of inde#tedness may amount to A. A gift %. A capital contri#ution D. ! payment of income !. A donation inter)$i$os '7. This is not part of gross compensation income
45
A. 4alary of P '8(888 a month !. :ringe #enefits of P18(888 of an employee C. *alary of P<=,=== a month of a partner in a general professional partnership 0. Gonorarium and allowances of P18(888 of a mem#er of the #oard of directors of a %orporation ,8. "r ( a farmer( had the following data for the yearC 4ales of li$estoc and farm products raised 4ales of li$estoc and farm products purchased %ost of raising li$estoc and farm products
P'58(888 138(888 178(888
%ost of li$estoc and farm products purchased and soldQQQ 18(888 *ental income of farm e+uipment 182(888 In$entory of li$estoc and farm products( Danuary 1 118(888 In$entory of li$estoc and farm products( 0ecem#er ,1 11,(888
&%'GE "E'E&T* T!4
1. In '818( X %orporation allows its 4ales "anager to incur expenses su#/ect to reim#ursement( as followsC 9lectricity) 58K in the name of X %orporation -ater – 58K in the name of X %orporation Frocery PON94B Fasoline of company car *epresentation and Transportation – #usiness trip The amount su#/ect to fringe #enefit tax is A. P6(888 %. !. P'2(88 D.
P'8(888 '(888 18(888 1'(888 (888
P12(88 P
'. -hich of the following is su#/ect to fringe #enefit tax A. compensation income of the ran and file employees
46
!. %. D.
fringe #enefit of the ran and file employees compensation income of the managerial employees fringe benefit of the managerial employees
,. The following concepts denote exemption from the fringe #enefits tax( except A. con$enience of the employer !. necessity to the #usiness or trade C. welfare and benefits of the employee 0. de minimis #enefits . As a rule( fringe #enefit furnished or granted in cash or in ind #y an employer to an indi$idual employee may#e su#/ect to the fringe #enefit tax( if gi$en to 1. *an and file employees '. "anagerial employees ,. Those holding super$isory positions A. !.
1 and ' only 1 and , only
C. 0.
8 and > only 1( ' and ,
%. D.
' and , only <, 8 and >
2. The fringe #enefit tax is 1. Imposed on the employer '. -ithheld at source ,. 0educti#le #y the employer A. !.
1 and ' only 1 and , only
3. -ith regard to the amount on which the fringe #enefit tax rate is applied( which statement is wrong The tax #enefit rate is applied on !. The monetary value of the fringe benefit !. The gross)up monetary $alue of the fringe #enefit %. The amount deducti#le #y the employer from gross income 0. !oth accounts of the fringe #enefit and the fringe #enefit tax 5. The following fringe #enefits are not su#/ect to fringe #enefit tax( except A. if re+uired #y the nature of or necessary to the trade( #usiness or profession of the employer !. contri#utions of the employer for the #enefit of the employee to retirement( insurance and hospitali&ation #enefit plans %. #enefits gi$en to the ran and file employees D. if given for the convenience or advantage of the employee 6. !asic rules on fringe #enefits tax( except
47
A. :ringe #enefit gi$en to ran and file employees is not su#/ect to fringe #enefits tax !. :ringe #enefit gi$en to a super$isory or managerial employee is su#/ect to fringe #enefits tax %. 0e minimis #enefit whether gi$en to ran and file employee or to super$isory or managerial employee is not su#/ect to fringe #enefit tax D. The fringe benefit tax is a tax paid by the managerial or supervisory employee. 7. :acilities or pri$ileges or offered or furnished or offered #y an employer to his employees that are of relati$ely small $alue and are offered or furnished #y the employer merely as a means of promoting the health( goodwill( contentment( or efficiency of his employees. !. &ringe benefit %. 0e minimis #enefit !. :ringe #enefit tax 0. Frossed)up monetary 18. -hich statement is wrong The fringe #enefit tax is A. imposed on the employer ". imposed on the managerial or supervisory employee %. withheld at source 0. deducti#le #y the employer 11. As a means of promoting the health( goodwill( and efficiency of his employees( employer A ga$e ran and file employee X the following fringe #enefits in '887C 1. "oneti&ed unused $acation lea$e of 12 days P 7(888 '. *ice su#sidy '(888 ,.
P',(888 P<<,===
1'. The employer;s deductions for the #enefits gi$en A. P',(888 %. P33(888 D. P67,=== !. P16(888
48
<>. The grossed)up monetary $alue of fringe #enefit su#/ect to fringe #enefit tax recei$ed #y a non)resident alien indi$idual not engaged in trade or #usiness in the Philippines is computed #y di$iding the monetary $alue of the fringe #enefit #y !. A?F %. 62K !. '2K 0. 12K
1. The following fringe #enefits are not su#/ect to fringe #enefits tax( exceptC A. :ringe #enefits gi$en to the ran and file employees( whether granted under a collecti$e #argaining agreement or not !. %ontri#utions of the employer for the #enefit of the employees to retirement( insurance and hospitali&ation #enefits plans %. 0e minimis #enefits( as defined in the rules and regulations to #e promulgated #y the 4ecretary of :inance( upon recommendations of the %ommissioner. D. &ringe benefits furnished or granted by the employer to its managerial and supervisory employees.
DED)CT/'* !'D E4E0PT/'*
1. -hich of the following statements is true A. Payments which constitutes #ri#es( ic#acs( and others of similar nature which are necessary to reali&e the profit are allowed as deduction from gross income !. The taxes which are deducti#le from gross income include the taxes( interest and penalties incident to tax delin+uency %. 0eductions are amounts allowed #y the Tax %ode to #e deducted from gross income to arri$e at the income tax lia#ility of a taxpayer. D. osses from wagering transactions shall be allowed only up to the extent of the gains from such transactions. '. X %orp. had a net sales of P1". The actual entertainment( amusement and recreation expense amounted to P'8(888. The deducti#le =9A*> expense is A. P'8(888 %. P18(888 !. P 3(888 D. P ?,=== ,. M %orp. had a net re$enue of P1". The actual entertainment( amusement and recreation expense amounted to P'8(888. The deducti#le =9A*> expense is A. P'8(888 %. P 2(888 D. P <=,=== !. P 3(888
49
. %orp. is engaged in the sale of goods and ser$ices with net sales and net re$enue of P'" and P1" respecti$ely. The actual entertainment( amusement and recreation expense amounted to P16(888. The deducti#le =9A*> expense is A. P16(888 %. P1'(888 !. P13(888 0. P 3(888 2. This is not deducti#le from gross income A. Transportation expenses from the main office to the #ranch ". Transportation expenses from home to the office and from the office bac1 to home %. Tra$el expenses on #usiness trips 0. Tra$el expenses while away from home in the pursuit of trade( #usiness or profession 3. A re$enue expenditure is A. for 1. @osses from sales or exchanges of property '. Interest expense ,. !ad de#ts A. !.
1 and ' only ' and , only
%. D.
1 and , only <, 8 and >
7. The phrase =related taxpayers> will apply to the following( exceptC A. !etween mem#ers of a family !. !etween the grantor and a fiduciary of any trust %. !etween a fiduciary of a trust and a #eneficiary of such trust D. "etween an individual and a corporation more than ?=F in value of the outstanding stoc1 of which is owned, directly or indirectly for such individual, in case of distributions in li(uidation.
50
18. :or indi$iduals( premiums paid during the taxa#le year for health andHor hospitali&ation insurance taen out #y him on himself( including his family shall #e allowed as deductions from gross income( pro$ided that the family has a gross income of A. "ore than P'28(888 C. 'ot more than P8?=,=== !. "ore than P288(888 0. Not more than P'(88 11. The deduction for premium payments on health and H or hospitali&ation insurance is not a$aila#le toC A. An indi$idual with gross compensation income only !. An indi$idual with gross income from #usiness or practice profession( whether he is a$ailing of the optional standard deduction or itemi&ed deduction %. An indi$idual with mixed income D. "oth husband and wife 1'. ) In case of married taxpayer( only the spouse claiming the additional exemptions for dependents shall #e entitled to the deduction on premium payments on health and H or hospitali&ation insurance. ) The deduction for premium payments on health and H or hospitali&ation insurance shall not exceed P'(88 for the family or P'88 a month !. !.
True2 True True? :alse
%. 0.
:alse? True :alse? :alse
<7. In '887( ( a resident citi&en( engaged in #usiness #orrowed money from A!% !an from which he had an interest expense of P'8(888. Gis deposit in XM #an yielded an interest income of P'2(888. Gis deduction for interest expense is A. P'8(888 C. P @,A?= !. P 2(888 0. P18('28
51
0.Allowed as a deduction or treated as a capital expenditure at the option of the go$ernment 12. If an indi$idual is on the cash #asis of accounting( will interest paid in ad$ance #e allowed as a deduction :irst answer ) No( it is a deduction in the year that the inde#tedness was paid and not in the year that the interest was paid. 4econd answer – Mes( if the inde#tedness is paya#le in periodic amorti&ations( the amount of the interest which corresponds to the amount of the principal amorti&ed or paid during the year shall #e allowed as a deduction in such taxa#le year. !. True2 True %. :alse? :alse !. True? :alse 0. :alse? True 13. "ay #e deducted from gross income A. Philippine income tax !. &oreign income tax
%. 0.
9state or donor;s tax 4pecial assessment
15. A taxpayer engaged in #usiness incurred a partial loss of property as followsC Asset 1 Asset ' !oo $alue of the asset at the time of loss P'88(888 P'88(888 %ost to restore the property #ac to its normal operating condition 1'8(888 ,88(888 Insurance reco$ery 28(888 None 4al$age None 8(888 The deducti#le loss for asset 1 is A. P1'8(888 ". P A=,=== 16.
The deducti#le loss for asset ' is A. P,88(888 !. P'88(888
%.
C. 0.
P,8(888 0. P68(888
P
17. The operating loss( which had not #een pre$iously offset as deduction from gross income shall #e carried o$er as deduction from gross income for the next A. ' consecuti$e taxa#le years immediately following such loss. ". > consecutive taxable years immediately following such loss. %. consecuti$e taxa#le years immediately following such loss. 0. taxa#le year immediately following such loss. '8. A taxpayer had the followingC
52
Mear 1 Mear 2 Fross income P78(888 Allowa#le 0eductions 18(888
'1.
''.
Mear' Mear , Mear P28(888 P28(888 P8(888 P'8(888
2,8(888
,8(888
18(888 18(888
The income to #e reported in year ' is A. P'8(888 %. !. P38(888 D.
P28(888 P =
The income to #e reported in year 2 is A. P38(888 C. !. P'8(888 0.
P6=,=== P 8
One of the following losses can not #e deducted from gross income A. To construct a #igger warehouse( a corporation demolished an old warehouse which had a construction cost of P'" and a #oo $alue of P,88(888. ".Demolition of a building existing on a land purchased where the corporation has no use for the building at the time of purchase and it was its intention to remove the building in order to build its factory. %. A corporation retired its machinery from the #usiness #ecause of the increase in the cost of production and the failure of the machinery to meet the desired num#er of units of production. 0. A corporation ascertained that its ! %orp. stocs are worthless #ecause of the total insol$ency of ! %orp.
',. 9xamples of taxes that are deducti#le except A. Occupation tax %. 0ocumentary stamp tax D. Philippine income tax !. Pri$ilege tax '. Non)deducti#le taxes( except A. 4pecial assessment !. 0onor;s tax
%. D.
9state tax "usiness tax
'2. X ac+uired a machine at a cost of P'28(888. 4crap $alue is P'8(888 and the estimated useful life was '2 years. After depreciating the asset for '8 years using the straight)line method( it was determined that the remaining life is not fi$e years. The annual depreciation from the '1 st year assuming a remaining life of 18 years without scrap is A. P18(888 %. P7('88 D. PB,B== !. P11(288
53
'3. ) An expense which is necessary #ut not ordinary( or ordinary #ut not necessary is 0educti#le from gross income. ) The taxpayer must signify his intention to elect the itemi&ed deduction( otherwise( he is deemed to ha$e chosen the optional standard deduction. A. True? True %. :alse? True !. True? :alse D. &alse2 &alse '5. ) Interest paid on preferred stoc is deducti#le from gross income of the paying corporation. ) A capital expenditure usually #enefits more than one accounting period and is deducti#le from gross income in the year it is paid or incurred. A. !.
True? True True? :alse
%. D.
:alse? True &alse2 &alse
'6 . ) The cost of leasehold impro$ements shall #e deducti#le from gross income of the paying corporation. ) %ontri#utions #y the employer to a pension trust for past ser$ice cost is deducti#le in full in the year that the employer made the contri#utions. A. True? True %. :alse? True ". True2 &alse 0. :alse? :alse '7. :or indi$iduals with gross compensation income( the following may#e deducted( exceptC A. Personal exemptions !. Additional 9xemptions C. /ptional standard deduction 0. Premium payments on health andHor hospitali&ation insurance ,8. :or indi$iduals with gross income from #usiness or practice of profession( the following may #e deducted 1. Optional standard deduction '. Itemi&ed deduction ,.QPersonal exemptions . Additional exemptions 2. Premium payments on health and H a hospitali&ation insurance A. !.
1( '( , and '( , and
C. 0.
>, 7 and ? and either < or 8 1( '( ,( and 2
54
,1. Any amount amount su#se+uently su#se+uently recei$ed on account account of of a #ad de#t de#t pre$iously pre$iously charged off and allowed as a deduction from gross income in prior years must #e included in gross income in the taxa#le year in which recei$ed. This is A. 4e$erance test %. 0estination of income test !. @ife)#loo @ife)#lood d theory theory D. E(ui E(uita tabl ble e doct doctri rine ne of tax tax benefit ,'. X too out a life insurance insurance policy policy of P1(888(888 naming naming his wife as as #eneficiary. The policy pro$ides that the insurance company company will pay X the amount of P1(888(888 after the '2 th year of the policy and his #eneficiary( should he die #efore this date. The premiums paid on the policy is P588(888. If X outli$ed the policy and recei$ed the proceeds of P1(888(888( such proceeds will #eC A. Taxa#le in full %. 9xempt from income tax ". Part Partly ly taxa taxabl ble, e, part partly ly exem exempt pt 0. 4u#/ect to to fi final ta tax ,,.
( a dedica dedicated ted and and honest honest employ employee ee of *4T *4T %orp. %orp. for for the past past '8 years years was ad$ised that he is to #e retrenched as the company was losing hea$ily #ut that he would #e gi$en the separation pay pro$ided #y law. To a$oid implication of inefficiency inefficiency was ad$ised to file a letter of resignation instead instead of #eing retrenched. If files a letter of resignation and recei$es the separation pay( such amount is !.Taxable in full %. 9xempt from income tax !. Partly taxa#le ( partly exempt 0. 4u#/ect to final tax
,2.
C.
Exem xempt from in income tax tax 0. 4u#/ect to final tax
,3. "ay consider consider capital expenditures as re$enue re$enue expenditures expenditures A. *esident *esident citi&en citi&en !. 0omestic corporation
C. 0.
Priv Privat ate e educ educat atio iona nall inst instit itut utio ions ns *esident alien
,5. "ay claim claim tax credit for income taxes paid to foreign country. !.%esident citi+en !. *e *esident alien
%. 0.
Non)resident citi&en Non)resident alien
55
,6. One of the following following is not not correct correct for deducti#ility of losses from gross gross income A. "ust "ust arise arise from from fire( fire( stor storm m or othe otherr casua casualty lty(( ro##er ro##ery( y( thef theftt or em#e&&lement !. "ust "ust not not #e compe compensa nsated ted #y insu insura rance nce or othe otherr form form of of indem indemni nity ty %. A decla declarat ration ion of loss loss #y cas casual ualty ty shou should ld #e filed filed with with the !urea !ureauu of Internal *e$enue D. 0ust 0ust have have been been clai claimed med as as deduc deductio tionn in the the estat estate e retur returnn of the the taxpayer ,7. -hich of the the following following statements is not not correct correct !.
The optional standard deduction is an amount e(ual to forty percent 97=F: of the Gross income from business or practice of profession of the taxpayer. ". The optional standard deduction is not a$aila#le against compensation income arising Out of an employer)employee relationship C. The election of Optional 4tandard 0eduction is irre$oca#le irre$oca#le for the taxa#le year for -hich the choice is made. D.
8. The following following may #e allowed allowed to claim optional optional standard standard deduction( deduction( except except A. !.
*esident citi&en Non)resident citi&en
%.
*esident alien D. 'on-resident al alien
1. The following following may may elect elect optional optional standard standard deduction deduction or itemi&ed deduction( except A. Taxa#le estates and trusts partnership !. 0omestic corporation '
.
%. D.
Feneral professional &ore &oreig ignn corp corpooratio ationn
The optional standard deduction for indi$iduals is
A. 18K of the gross income !. 18K 18K of of th the gro gross ss sale salesH sHre rece ceip ipts ts salesreceipts
%.
8K of the gross income D. 7=F of the gross
,. "ay consider consider capital expenditures as re$enue re$enue expenditures expenditures
56
A. !. C. 0.
*esid *esident ent cit citi&e i&enn 0omest 0omestic ic corpo corpora ratio tions ns Private Private educati educational onal institution institutionss *esi *eside dent nt alie alienn
. A #uilding was partially partially destroyed #y fire in '818. The #uilding had a #oo $alue of P18". The insurance company was willing to pay P2 "( which was refused #y the owner. :inally( the claim was settled in '811 for P7". The proceeds will #e !. Exempt Exempt from from income income tax tax !. Part Part of taxa# taxa#le le inc income ome %. 4u 4u#/ #/ec ectt to fina finall tax tax 0. Partly Partly exempt exempt(( partly partly taxa#le taxa#le
2. too too a life life insuran insurance ce policy policy of P'" naming naming his his wife wife as #enef #eneficia iciary. ry. The The policy pro$ides that the insurance company will pay the amount of P' " after the '2 th year of the policy and his #eneficiary( should he die #efore this date. The premiums paid on the policy is P1.2". If outli$ed the policy and recei$ed the proceeds of P'"( such proceeds will #eC !. Taxabl Taxable e in full full !. 9xemp 9xemptt from from income income tax tax %. Partl Partlyy taxa# taxa#le( le( partl partlyy exempt exempt 0. 4u#/ec 4u#/ectt to fina finall tax. tax.
3. !( a retailer retailer of goods uses the accrual method method in reporting reporting his income and and expenses. Gis '818 transactions showC an. < - une >=
ul < - *ept. >=
/ct.< - Dec
><
Fross 4ales P1(888(888 %ost of 4ales 388(888 !usiness expenses 188(888
P588(888 '88(888 28(888
P788(888 ,88(888 58(888
:or the period Danuary 1 to Dune ,8( '818( he used the itemi&ed deduction #ut decided to use the optional standard standard deduction #eginning #eginning Duly 1. !;s annual income tax return using the optional standard deduction will show a net income #efore exemptions of !. P1(238(888 ". P 788(888
%. P1(8'8(888 D. P<,>8=,===
57
5. *@F %orporation( a retailer of goods uses the accrual method of accounting in reporting its income and expenses under the calendar year #asis. :rom Danuary 1 to Dune ,8( '818( it used the itemi&ed deduction #ut decided to use the optional standard deduction method when it filed its annual income tax return. Its '818 transactions showC an. < - une >=
ul < - *ept. >=
/ct.< - Dec
><
Fross 4ales %ost of 4ales !usiness expenses
P1(888(888 388(888 188(888
The net income of *0F is !. P1(238(888 ". P 338(888
P588(888 ,88(888 28(888
P788(888 388(888 128(888
%. P688(888 D. PA8=,===
6. "0F %orporation is engaged in trading #usiness. The reported income and expenses for taxa#le year '818 showC 4ales P18(888(888 %ost of sales 3(888(888 Feneral #usiness expenses 1(888(888 Interest on time deposit grossB 188(888 Interest expense on loans paya#le 168(888 The net taxa#le income is !. P'(626(888 ". P'(6'8(888
%. P,(888(888 D. P8,6B8,===
C!PT! !**ET*
1. -here the taxpayer is a corporation( which of the following statements is true A. The holding period does not apply to corporation( hence( capital gains and losses are recogni&ed at 28K. !. The net capital loss can #e carried o$er in the next succeeding year %. %apital loss is deducti#le only up to the extent of ordinary gains D. /rdinary loss is deductible from capital gains '. ) %apital losses are deducti#le from ordinary gains #ut net capital loss is not deducti#le from ordinary gains.
58
Ordinary losses are deducti#le only to the extent of the capital gains #ut the net capital loss is not deducti#le from ordinary gain. A. True? True %. :alse? True D. &alse2 &alse !. True? :alse -
,. An indi$idual taxpayer owns a ten 18B) door apartment with a monthly rental of P18(888 each residential unit. Ge sold this property to another indi$idual taxpayer. -hich is not correct A. The seller is not lia#le to pay the capital gains tax. ". The property sold is a capital asset. %. The taxpayer is engaged in #usiness 0. The rental income is su#/ect to income tax using the graduated rates. 2. Golding period is the duration for which the taxpayer held the capital asset. A capital asset held #y the taxpayer for not more than 1' months is said to #e !. short-term %. long)term !. medium)term 0. no)term 3. The following rules as to recognition of capital gains or losses from the disposition of personal property classified as capital asset apply where the taxpayer is an indi$idual. -hich is the exception A. 0epending on the holding period( the percentages of gain or loss is 188K if the capital asset has #een held for 1' months or less? and 28K if the capital asset has #een held for more than 1' months. !. %apital losses are deducti#le only to the extent of the capital gains? hence( the net capital loss is not deducti#le. %. Ordinary losses are deducti#le from capital gains #ut net capital loss cannot #e deducted from ordinary gain. D.'et capital loss carry over in a taxable year should not exceed the capital gain in the year the loss was incurred. 3. -here the taxpayer is a corporation( the following rules as to recognition of capital gains or losses from the disposition of property classified as capital asset shall apply. -hich is the exception A. The holding period does not apply to corporations( hence( capital gains and losses are recogni&ed at 188K. !. %apital losses are deducti#le only to the extent of capital gains. %. Ordinary losses are deducti#le from capital gains #ut net capital loss cannot #e deducted
59
from ordinary gain. D. 'et capital loss carry-over should not exceed the net income in the year the loss was incurred. 5. The term =capital assets> include A. 4toc in trade or other property included in the taxpayer;s in$entory. ". %eal property not used in the trade or business of taxpayer. %. Property primarily for sale to customers in the ordinary course of his trade or #usiness. 0. Property used in the trade or #usiness of the taxpayer and su#/ect to depreciation. 6. A sold his principal residence at a selling price of P2" #ut with a :"E of P3". The property sold was ac+uired for P,". Ge purchased his new principal residence at a cost of P5". The capital gains tax is A. P,38(888 %. P'8(888 D. P = !. P,88(888 7. Gow much is the #asis costB of the new principal residence A. P5" C. P?0 !. P3" 0. P" 18. If only P" out of P2 " was utili&ed in ac+uiring his new principal residence( the capital gain tax is A. P38(888 %. P,88(888 ". PA8,=== 0. P,38(888 11.
'*T!0E'T 0ET/D
-hich of the following statements is not correct Those who mae a casual sale or disposition of personal property on the installment plan may elect the installment #asis of reporting income if A. The personal property sold is not of a ind which would #e included in the in$entory. !. The selling price exceeds P1(888 %. The sale is in installment D. The initial payments do not exceed 8?F of the contract price.
60
'. In '887( sold a piece of land which had a cost of P1" for a selling price of P". The sale called for an assumption #y the #uyer of a mortgage on the land of P1.2"( cash of P288(888 on the date of sale and installment payments of P288(888 e$ery year thereafter. The land is an ordinary asset. The income to #e reported in '887 under the installment method of reporting income is A. P288(888 %. P,52(888 !. P528(888 D. P<,===,===
&'G, PE'!TE* !'D %E0EDE*
1.The Income tax return for the calendar year '818 was due for filing on April 12( '811( #ut the taxpayer $oluntarily filed his tax return without notice from the !I*( only on Duly 12( '811. The tax due per return amounts to P188(888. The total amount due on Duly 12( '811 excluding compromise penaltyB is !. P12(888 ". P111('28
%. P115(288 D. P<>=,===
'.
C. 0.
P<6=,=== P'82(888
61
. Taxpayer filed on time his income tax return for the calendar year '886 and paid on April 12( '887.
%. P,2(888 D. P8?,===
2. A corporation filed its IT* and paid tax for calendar year '886 with a net taxa#le income of P288(888. Gowe$er( upon in$estigation( it was disclosed that its IT* was false or fraudulent #ecause it did not report a taxa#le income amounting to another P288(888. :ailing to protest on time against the preliminary assessment notice( a final letter of demand and assessment notice issued on Dune 12( '818 calling for payment on #efore Duly 12( '818. The amount still due on Duly 12( '818 is !. P,'6(1'2 ". P'75(288
%. P'3'(288 D. P>=B,8?=
3.
C. P>6A,@
5. Indi$idual self)employed taxpayers are re+uired to file their Income Tax *eturnsC A. !. %. D.
On a yearly #asis(( once a year. On a +uarterly #asis( non)cumulati$e system On a +uarterly #asis( cumulati$e system /n a (uarterly basis, cumulative system and on a yearly basis, once a year.
62
6. The indi$idual income tax return of a fixed earner employeeB is filed on or #efore A. ". %. 0.
April 12 of the current taxa#le year !pril
7. A resident citi&en taxpayer is allowed to pay his income tax due on installment #asis ifC A. ". %. 0.
!asic income tax is P'(888 or #elow "asic income tax is over P8,=== !asic income tax is o$er P2(888 !asic income tax is o$er P1(888.
18. ! was employed #y A %orporation on the first woring day of Danuary '886 on a part)time #asis with a salary of P18(888 a month. Ge then recei$ed his 1, th month pay. In 4eptem#er '886 he accepted another part)time /o# from ! %orporation from which he recei$ed a total compensation of P86(888 for the year '886. The correct total taxes were withheld from #oth earnings. -ith regard to the filing of income tax return IT*B for the year '886 which of the following is true A. ! is exempt from filing his IT* #ecause the correct total taxes ha$e #een withheld. ". " is not exempt from filing his T% because his total compensation income for 8==6 came from more than one employer. %. ! is exempt from filing his IT* #ecause his total income for '886 came from employer)employee relationship. 0. ! is not exempt from filing his IT* #ecause his income came from employer) employee relationship. 11. Fenerally( the following indi$iduals are re+uired to file an income tax return. -ho is the exception A. 9$ery :ilipino citi&en residing in the Philippines. ". Every &ilipino citi+en residing outside the Philippines, on his income from sources outside the Philippines. %. 9$ery alien residing in the Philippines on income deri$ed from sources within the Philippines. 0. 9$ery non)resident alien engaged in trade or #usiness in the Philippines.
63
1'. -here compromise penalties is not allowed A. :ailure to preser$e or eep #oos of accounts and accounting records. !. :ailure to eep records of accounts or records in a nati$e language or in 9nglish. %. :ailure to ha$e #oos of accounts audited and ha$e financial statements attached to income tax return certified #y an independent %PA. D. eeping two 98: sets of boo1s of accounts or records. 1. All criminal $iolations may #e compromisedC AB 9xcept those already filed in court. !B 9xcept those in$ol$ing fraud. A. True2 True !. True? :alse
%. :alse? True 0. :alse? :alse
'. :or filing a false and fraudulent return( a surcharge is imposed atC A. '2K as criminal penalty !. '2K as administrati$e penalty %. 28K as criminal penalty D. ?=F as administrative penalty ,. This is not an administrati$e remedy a$aila#le to a taxpayer in connection with collection of taxes. A. !. %. D.
:iling a petition for reconsideration or rein$estigation :iling a claim for tax refund or credit 9ntering into a compromise &iling a criminal complaint against erring "% officials or employees.
. A compromise for a tax lia#ility on the ground of financial incapacity to pay shall still in$ol$e a payment of tax from the taxpayer at a minimum compromise rate of !. <=F of the basic assessed tax !. '8K of the #asic assessed tax %. ,8K of the #asic assessed tax 0. 8K of the #asic assessed tax
2.
64
!. '8K of the #asic assessed tax %. ,8K of the #asic assessed tax 0. 8K of the #asic assessed tax '8. An assessment shall #ecome final if not protested administrati$ely( if such protest is not filed with the !I*( from receipt of the assessment within A. >= days !. 38 days
%. 78 days 0. 168 days
'1.
%. 78 days 0. 168 days
''. An appeal on an assessment may #e made to the %TA if the !I* does not act on the protest within( how many days from the taxpayer;s su#mission of documents supporting his protest !. ,8 days ". 38 days
%. 78 days D. <6= days
',. I ) The taxpayer shall respond to a pre assessment notice( and if he fails to respond( an assessment shall #e issued. II ) An assessment issued may #e +uestioned administrati$ely with the !I*. A. True2 True !. True? :alse
%. :alse? True 0. :alse? :alse
'. -here a return was filed( as a general rule( the prescripti$e period for assessment after the date the return was due or was filed( whiche$er is later( is within A. > years !. 2 years
%. 5 years 0. 18 years
'2. -here any national internal re$enue tax is alleged to ha$e #een erroneously or illegally collected. As a remedy( the taxpayer should first file an action for refund with the
65
!. *egional Trial %ourt ". %ourt of Tax Appeals
C. "% 0. %ourt of Appeals
'3. In case of an assessment of a tax A. The assessment should #e made within , years from date of filing of the return. !. The assessment should #e made within , years from date of the return is due. C. ! protest should be made on time, otherwise the assessment becomes final and executory. 0. A protest may #e filed anytime #efore the !I* collects the tax. '5. 0ate of payment of tax erroneously paid 0ate of claim for refund was filed 0ate decision of denial #y the !I* was recei$ed @ast day to appeal to the %TA is !. April 12( '811 ". Danuary 12( '811
April 12( '887 Danuary 12( '818 4eptem#er 12( '818
%. No$em#er 12( '818 D. /ctober
'6.
%. 0ecem#er 6( '818 D. /ctober 86, 8=<=
,8. 0ate assessment was recei$ed "arch 6( '818 0ate petition for reconsideration was filed with the !I* "arch '6( '818 0ate of filing of documents to support the petition "ay 6( '818 No decision on the protest is recei$ed as of Octo#er ,8( '818 The last day to appeal to the %TA is !. April 12( '811 C. December 7, 8=<= ". No$em#er 6( '818 0. No$em#er ,8( '818 ,1. -hich of the following statements is correct
A. Indi$iduals deri$ing compensation income are exempt from filing IT*.
66
!. Feneral professional partnership are exempt from filing IT*. %. 0omestic corporations can a$ail the optional standard deduction #eginning '886. D. %esident aliens engaged in business in the Philippines are re(uired to file (uarterly and annual T%. ,'. -hich of the following statement is correct !. ! protest should be filed by a taxpayer, otherwise the assessment becomes final and can no longer be (uestioned in court. !. A protest may #e filed #y the taxpayer anytime #efore the !I* collects the tax. %. The assessment should #e made #y the !I* within fi$e years from the filing of the return. 0. The assessment shall include only tax proper.
,,. -hich of the following statements is incorrect !. ! pre-assessment notice shall be re(uired before an assessment maybe made. ". The taxpayer shall #e informed of the law and the facts on which the assessment is made( otherwise the assessment shall #e $oid. C. The %ommissioner may refund a tax e$en without a claim refund from the taxpayer where on the face of the return upon which the payment was made( such a payment clearly appears to ha$e #een erroneously made. D. A suit may #e #rought e$en after the lapse of two years from the date of payment( if any super$ening cause arises after payment.
,. The following are the grounds to cancel a tax lia#ility #y the %ommissioner( except A. The tax is un/ustly or excessi$ely assessed. !. The administration and collection costs in$ol$ed do not /ustify the collection of the amount. C. ! reasonable doubt as to the validity of the claim against the taxpayer. 0. Illegal collection of tax. ,2. -hich of the following is not a re+uisite to toll the collection of taxes to #e made #y the !I*( upon proof of the following to the %ourt of Tax Appeals A. !. C. 0.
It will /eopardi&e the interest of the taxpayer. It will /eopardi&e the interest of the go$ernment. &iling of a bond for at least double the amount of the tax assessed. The case is not dilatory.
67
,3. -hich of the following will not interrupt the running of the prescripti$e period for assessment and collection of taxes A. -hen the %ommissioner is prohi#ited from maing the assessment or #eginning distrait and le$y or a proceeding in court and for thirty ,8B days after. ". The taxpayer re(uests for the reinvestigation which is granted by the Commissioner. %. -hen the taxpayer is out of the Philippines. 0. -hen the taxpayer cannot #e located in the address gi$en #y him in the return. ,5. The power to decide disputed assessments( refunds of internal re$enue taxes( fees or other charges( penalties imposed in relation thereto( or other matters arising under the Tax %ode or other laws administered #y the !I* is $ested with !. The Commissioner of the "% !. The 4ecretary of :inance %. The %ourt of Tax Appeals 0. The *egular %ourts
,6. It is the official action of an administrati$e officer in determining the amount of tax due from a taxpayer( or it may #e a notice to the effect that the amount stated therein is due from the taxpayer with a demand for payment of the tax or deficiency stated therein !. Tax in$estigation ". Tax audit
C. Tax assessments 0. Tax mapping
,7. -hich of the following is not the remedies of the go$ernment in tax collection !. Tax lien %. :orfeiture ". %ompromise D. Protest 8. %ommissioner of !I* may compromise any internal re$enue tax when( except one A. A reasona#le dou#t as to the $alidity of the claim against the taxpayer exists. !. The financial position of the taxpayer demonstrates a clear ina#ility to pay the assessed tax. C. The tax or any portion thereof appears to be un$ustly or excessively assessed. 0. The taxpayer has #een granted #y the 49% or #y any competent tri#unal a moratorium or suspension of payments to creditors( or otherwise declared #anrupt or insol$ent.
