GENERAL PRINCIPLES OF TAXATION: 1. Which of the following is the primary purpose of taxation? A. Enforce contribution from its subject for public purpose B. Raising revenue C. Achieving economic and social stability D. Regulate the conduct of business or profession 2. Statement 1: The power to tax includes the power to exempt Statement 2: The power to license includes the power to tax A. Only Statement 1 is true C. Both Statements are true B. Only Statement 2 is true D. Both Statements are false 3. What is the basis of taxation? A. Reciprocal duties of support and protection B. Constitutionality C. Public Purpose D. Necessity 4. The point in which tax is levied is also called A. Impact of taxation C. Incidence of taxation B. Situs of taxation D. Assessment 5. The power to enforce proportional contribution from the people for the support of the government is A. Taxation C. Eminent Domain B. Police Power D. Public Properties 6. Which is not an object of taxation A. Persons C. Transactions B. Business D. Public Properties 7. The courts cannot issue injunction against the government’s effort to collect taxes is justified by A. Lifeblood doctrine C. Ability to pay theory B. Imprescriptibility of taxes D. Doctrine of estoppel 8. This theory underscores that taxes are indispensable to the existence of the state. A. Doctrine of equitable recoupment C. Lifeblood Doctrine B. Benefit-received theory D. Holmes Doctrine 9. Which of the following inappropriately describes the nature of taxation? A. Inherent in sovereignty B. Essentially a legislative function C. Subject to inherent and constitutional D. Generally for Public Purpose
10. Which of the following statements is incorrect? A. Power to tax includes the power to exempt B. Exemption is construed against the taxpayer and in favor of the government C. Tax statutes are construed against the government in case of doubt D. Taxes should be collected only for public improvements. 11. Which of the following statements is not included as a secondary purpose of taxation? A. Reduce social inequality B. Protect local industries C. Raise revenue for the support of the government D. Encourage growth of local industries 12. Which of the following statements is incorrect? A. Every person must contribute his share in government costs. B. The existence of a government is expected to improve the lives of the people C. The government provides protection and other benefits while the people provide support. D. Only those who are able to pay the tax can enjoy the privileges and protection of the government. 13. Which is the most incorrect statement regarding taxes? A. Taxes are necessary for the continued existence of the government B. The obligation to pay tax does not rest upon the privilege enjoyed by or the protection afforded to the citizen of the government but upon the necessity of money for the support of the State. C. There should be a personal benefit enjoyed from the government before one is required to pay tax. D. Taxes should be collected without unnecessary delay but its collection should not be tainted with arbitrariness. 14. Statement 1: In the selection of the objects of taxation, the courts have no power to inquire into the wisdom, objectivity, motive, expediency or necessity of a tax law. Statement 2: An imposition can be both a tax and a regulation. Taxes may be levied to provide means for rehabilitation and stabilization of threatened industry. A. Only Statement 1 is true C. Both Statements are true B. Only Statement 2 is true D. Both Statements are false 15. Which of the following acts in taxation is administrative by nature? A. Determination of the amount to be imposed. B. Fixing the allocation of the amount to be collected between the local government and the national government. C. Levy or distrait of taxpayers property for tax delinquency. D. Determining the purpose of the tax to impose. 16. This refers to the privilege or immunity from a tax burden which others are subject to:
A. Exclusion C. Tax holiday B. Deduction D. Reciprocity 17. The process by which the sovereign raises income to defray the expenses of the government is called A. Subsidy C. Taxation B. Tariff D. Tribute 18. Which of the following statements is not correct? A. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the state B. The state can have the power of taxation even if the Constitution does not expressly give it the power to tax. C. For the exercise of the power to taxation, the state can tax anything at any time. D. The provisions of taxation in the Philippine Constitution are grants of power and not a limitation on taxing powers. 19. One of the characteristics of internal revenue laws is that they are: A. Criminal in nature B. Penal in nature C. Political in nature D. Generally prospective in application 20. One of the characteristics of our internal revenue laws is that they are: A. Political in nature B. Penal in nature C. Generally prospective in operation although the tax statute may nevertheless operate retrospectively provided it is clearly the legislative intent D. Criminal in nature. 21. In case of conflict between tax laws and generally accepted accounting principles (GAAP) A. Both tax laws and GAAP shall be enforced. B. GAAP shall prevail over tax laws C. Tax laws shall prevail over GAAP D. The issue shall be resolved by the courts. 22. The following are similarities of the inherent power of taxation, eminent domain, and police power, except. A. Are necessary attributes of sovereignty B. Interfere with private rights and property C. Affect all persons or the public D. Are legislative in implementation 23. Tax as distinguished from license fee A. Non-payment does not necessarily render the business illegal B. A regulatory measure
C. Imposed in the exercise of police power D. Limited to cover cost of regulation 24. Which of the following statement refers to police power as distinguished from taxation? A. It can only be imposed on specific property or properties B. The amount imposed depends on whether the activity is useful or not. C. It involves the taking of property by the government D. The amount imposed has no limit 25. The distinction of a tax from permit or license fee is that a tax is A. Imposed for regulation B. One which involves an exercise of police power C. One in which there is generally no limit on the amount that may be imposed D. Imposed before engagement in those activities 26. Which of following statements is not an implication of the lifeblood in taxation? A. Tax is imposed even in the absence of a Constitutional grant B. Claims for tax exemption are construed against taxpayers C. The government reserves the right to choose the objects of taxation D. The courts are allowed to interfere with the collection of taxes. 27. Which of the following similarities of the three powers of the state, except. A. They are all ways in which the State interferes with private rights and properties B. They all exist independently with Constitution and are exercisable by the government even without Constitution grant. However, the Constitution may impose conditions or limits for their power. C. The exercise of these powers by the local government units have no limits D. They all presuppose an equivalent form of compensation received by the persons affected by the exercise of the power. 28. Which of the following statements is not part of Constitutional limitations? A. Exemption of religious or charitable entities, non-profit cemeteries, churches and mosque from property taxes. B. Exemption of the government C. Non-appropriation of public funds or property for the benefit of any church, sect or system of religion. D. The requirement that appropriations, revenue or tariff bills shall originate exclusively in the House of Representatives. 29. Which of the following statements is not part of the Inherent limitations? A. Non-delegation of the taxing power C. Territoriality of taxation B. International comity D. Free worship rule 30. Which of the following statements describe “Marshall Doctrine”? A. Taxation power is not the power to destroy B. The Philippine government adopts free exercise of religion and do not subject its
exercise to taxation C. Properties outside the Philippine are not subject to tax D. Taxation power may be used to build or encourage beneficial activities or industries by the grant of tax incentives. 31. Taxes are not subject to automatic set-off or compensation, except A. The taxpayer cannot delay payment of tax to wait for the resolution of a lawsuit involving his pending claim against the government. B. Where the taxpayer’s claim has already become due and demandable such as when the government already recognized the same and an appropriation for refund was made. C. It allows the government sufficient period to evaluate the validity of the claim D. The government owes to the taxpayer. 32. Which of the following statements describe “Holmes Doctrine”? A. Taxation power is not the power to destroy B. The Philippine government adopts free exercise of religion and do not subject its exercise to taxation C. Properties outside the Philippine are not subject to tax D. Taxation power may be used to build or encourage beneficial activities or industries by the grant of tax incentives. 33. Which of the following statements is not correct about strict construction of tax laws? A. Vague tax laws are construed against the government and in favor of the taxpayers. B. The claim for exemption is construed strictly against the taxpayer in accordance with the lifeblood doctrine. C. A well-founded doubt is fatal to the claim; it is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported. D. A taxpayer claiming a tax exemption must not necessary to point a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. 34. A feasibility study needs or needs to look into the taxes of different political subdivisions of government which may be alternative sites of the business because A. Provinces, cities, and municipalities must have uniform taxes between and among themselves. B. The local taxes of a political subdivision need not be uniform with the local taxes of another political subdivision C. Businesses that are subject to national taxes are exempted from local business taxes D. Local business taxes may be credited against national business taxes. 35. Which of the following taxation powers that can be delegated? A. Determining the nature and purposes for which taxes shall be collected B. Fixing the amount to be imposed and tax rates C. Enact laws and ordinances, and to impose and collect taxes
D. Granting tax exemptions or condonations, and setting down the rules of taxation in general 36. Which of the following statements is not included about the importance of taxation? A. Taxation is very importance to regulate inflation, achieve economic and social stability and for social control. B. It is the primary source of government revenue that is used to effectively and permanently perform government functions. C. To raise revenue for the very existence of the government to serve the people for whose benefits taxes are collected D. To support other inherent powers of the State. 37. Which of the following statements is incorrect? A. Direct duplicate taxation is a valid defense against a tax measure if it violates the equal protection clause. B. There is no constitutional prohibition on double taxation C. A 20% final withholding tax on interest income on bank deposits and a 5% gross receipts tax on banks is a direct duplicate taxation D. The absence of any of the elements of direct double taxation makes it indirect duplicate taxation. 38. The reduction in the selling price of the income-producing property by an amount equal to the capitalized value of future taxes that may be paid by the purchaser. A. Transformation C. Tax Exemptions B. Capitalization D. Shifting 39. Which of the following is not a scheme of shifting the incidence of the tax burden? A. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines. B. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold C. The purchaser asks for a discount or refuses to buy at regular price unless it is reduced by an amount equal to the tax he will pay D. The manufacturer transfers the sales tax to the distributor, to the wholesaler, to the retailer and finally to the consumer. 40. Statement 1: The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not mentioned in the Constitution the state can still exercise the power. Statement 2: It is essentially a legislative function. Even in the absence of any constitutional provisions, taxation power falls to Congress as part of the general power of law-making A. Only Statement 1 is true C. Both Statements are true B. Only Statement 2 is true D. Both Statements are false
41. Which of the following statements is incorrect? A. The power of taxation is shared by the legislative and executive departments of government. B. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation C. The property of an educational institution operated by a religious order is exempt from property tax, but its income is subject to income tax. D. The prohibition of delegation by the state of the power of taxation will still allow the Bureau of Internal Revenue to modify the rules on time for filing of returns and payment of taxes. 42. Which of the following statements is incorrect? A. A law that imposes a tax on sugar mills central where the revenue collected will be used to improve the sugar industry is a tax for a public purpose, and the law is constitutional. B. A law that imposes a tax on the supervisor’s fee in the community, however, during the imposition of tax, only one person is having that income. This law is not constitutional C. A law that imposes a tax on movie goes in a city, where the revenues will be used to improve flood control infrastructures in the low areas in the city is constitutional. D. A law that gives tax privileges to manufacturers in defined industrial areas, which are not enjoyed by other manufacturers elsewhere, is not discriminatory and is constitutional. 43. Which of the following functions is not part of the legislative? A. Fixing the amount of the tax and or tax rates to be imposed. B. Implementation or collection of taxes C. Determination of the purpose for which taxes shall be imposed. D. Selection of the object or subject to be taxed 44. Mr. X is claiming for a refund for the overpayment of his income tax return, however, he is prevented due to the prescription. Instead of claiming as a refund he appeals to the BIR to offset the overpayment to his current income tax payable. Which tax doctrine best describe the case above? A. Marshall Doctrine C. Border Rule Doctrine B. Taxpayer’s Suit D. Equitable Recoupment 45. Direct duplicate taxation is prohibited because it comprises imposition of the same tax on the same property for the same purpose by the same state during the same taxing period. Which of the cases where double taxation does not apply? A. A tax imposed by the state and the local government upon the same occupation, calling or activity B. Taxes are imposed on the taxpayer’s final product and the storage of raw materials used in the production of the final product. C. A 5% tax on bank reserve deficiency and another 1% penalty per day as a consequence of such reserve deficiency. D. Real estate tax and income tax collected on the same real estate property leased for earning purpose.
46. Which of the following cases will the law not allow the person to do compromise on behalf of the government? A. Only the BIR Commissioner is expressly authorized by the Tax Code to enter into compromise for both civil and criminal liabilities subject to certain conditions. B. The Local Government Code has no provision regarding compromise; however, the tax liability is not prohibited from being compromised. C. The BIR is given the power to compromise with respect to customs duties limited to cases where legitimate authority is specifically granted, such as in the remission of duties D. The Customs Commissioner, subject to approval by the Secretary for Finance, has the power to compromise cases involving the imposition of fines, surcharges, and forfeitures. 47. Which of the following factors is not included in determining the situs of taxation? A. Amount of income B. Sources of income being taxed C. Place of the excise, privilege, business or occupation being taxed D. Subject matter of the tax (either person, property, rights or activity) 48. Statement 1: Tax laws are given retroactive effect because the rule of “ex-post facto law” is applicable for tax purposes. Statement 2: Tax rulings of the Secretary of Finance are binding to the Courts because the Department of Finance is the highest agency regarding tax administration. A. Only Statement 1 is true C. Both Statements are true B. Only Statement 2 is true D. Both Statements are false 49. Which of the following statement is incorrect? A. The government can enforce contribution upon its citizen only when the Constitution grants it. B. The State has the supreme power to command to enforce contribution from people within its jurisdiction. C. The government automatically possesses the power to collect taxes from its inhabitants. D. Taxation power exists inseparably with the State. 50. Which of the following statements is correct? A. Indirect double taxation is legal as long as there is no violation of equal protection and uniformity clauses of the Constitution. B. Direct double taxation is prohibited by the Constitution C. Indirect double taxation violates the Constitutional provisions uniformity and equal protection. D. There is direct double taxation in taxing the income of the corporation and again subject the portion of that income declared a dividend to Final tax. GROSS INCOME SUBJECTED TO REGULAR TAXES: 51. Under Sec. 32 (B) of the NIRC, which of the following items is included in the Gross income?
A. The proceeds of life Insurance policies paid to the heirs or beneficiaries upon the death of the insured. B. Gains from the sale of bonds, debentures or other certificates of indebtedness with a maturity of more than five years, gains from the redemption of shares in mutual fund company and interest income pertaining to investment securities of more than 5 years according to Section 22 (B) of the NIRC. C. Any amount received by the insured as a return of premiums paid by him under life insurance, endowment, or annuity contracts, either during the term of at the maturity of the term mentioned in the contract or upon surrender of the contract. D. Amounts received through accident or health insurance or under Workmen’s Compensation Acts as compensation for personal injuries or sickness including the amounts of any damages received, whether by suit or agreement on account of such injuries or sickness. 52. Which of the following statements is non-taxable compensation income according to Section 32 (B) of the NIRC? A. Compensation income including holiday, overtime pay, night shift differential pay, and hazard pay earned by minimum wage earner, who has other reportable income according to RR10-2008. B. Prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned by nonaccredited Philippine Olympic Sports Committee. C. Interest received by a nonresident individual or a nonresident corporation from deposits with the depository banks under the expanded foreign currency deposit system (EFCDS). D. Interest income received by cooperatives from any currency bank deposit and yield or deposit substitutes and royalties derived from sources within the Philippines. 53. Which of the following statements is not a requisite for non-taxable retirement benefits under Republic Act No. 7641? A. The retiring official or employee has been in the services of the same employer for at least 10 uninterrupted years. B. The employer maintains a reasonable private benefits plan and approved by the BIR Commissioner. C. Retiree should have been 50 years old at the time of retirement D. It should have been availed of for the first time. 54. Which of the following statements is incorrect regarding the Revenue Regulations 20-2001 pertaining to the cooperatives? A. Cooperatives that transact business purely with members are exempt from all taxes and fees. B. Income of cooperatives from business transactions to non-members are exempt from all taxes and fees, provided the accumulated reserve and undivided savings do not exceed 10, 000, 000. C. Cooperatives will be exempt for a period of 10 years from the date of registration with CDA, provided, that at least 25% of the net income of the cooperative is returned to the members in the form of interest and or patronage refund and the accumulated reserve and undivided saving do not exceed 10, 000, 000
D. Cooperatives are exempted from capital gains tax on sales or exchange of shares of stock and real property classified as capital assets. 55. Which of the following statements is incorrect pertaining to Revenue Regulation No. 1-2015? A. Further Amendments to Revenue Regulations No. 2-98 and 3-98, as last amended by Revenue Regulations No. 5-2008 and 8-2012, to with respect De Minimis Benefits. B. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentives schemes combined do not exceed ten thousand pesos (P10, 000) per employee per taxable year. C. It is a contractual agreement between an employer and a labor union that governs wages, hours, and working conditions for employees and which can be enforced against both the employer and the union for failure to comply with its terms. D. This provision is effective on January 1, 2016, a year after it was amended. 56. Which of the following causes of separation or termination is not exempted? A. Closure of employer’s business, downsizing of employer’s business B. Backwages or illegal deductions repaid by the employer upon termination C. Terminal leaves pay or the commutation of accumulated unused leave credits D. Abandonment of offices such as the registration and subsequent appointment to another office. 57. Which of the following statements is not exempted from regular income tax? A. Social security benefits, retirement gratuitous and other similar benefits from foreign government agencies and other institutions, private or public received by resident or non-resident citizens or aliens who come to settle permanently in the Philippines B. Income derived from investments in the Philippines in loans, stocks, bonds, or other domestic securities, or from interest on deposits in banks in the Philippines who is enjoying refinancing from a foreign government. C. Income derived by the government and its political subdivision from the exercise of essential government function. D. Income derived by the government-owned and controlled corporation (GOCCs) engaged in income-producing activities which are proprietary or commercial in nature. 58. Which of the following retirement benefits, pensions, gratuitous is subject to regular income tax under Sec. 32 (6) of the NIRC? A. Retirement benefits received under Republic Act. No. 7641 and those received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefits plan maintained by the employer. B. Any amount received by an official or employee or by his heirs from the employer as a consequence of the separation of such official employee from the service of the employer because of death sickness or other physical disability or for any cause within the control of the said official or employee. C. The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities pensions and other similar benefits received by a
resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public. D. Payment of benefits due to become due to any person residing in the Philippine under the laws of the United states administered by the United States Veterans Administration. E. Benefits received from enjoyed under the SSS in accordance with the provisions of Republic Act No. 8282 and benefits received under Republic Act. No. 8291, including retirement gratuity received by government officials and employees. 59. Which of the following is incorrect regarding the Revenue Regulation No. 32015? A. This revenue regulation is promulgated to implement the provisions Republic Act (RA) No. 10653. B. Accordingly, the amount of 82, 000 shall ONLY apply to the 13th-month pay and other benefits prescribed under the provisions of Section 2.78.1 (B) of RR No. 2-98, as amended and shall apply ALSO to the Minimum Wage Earner. C. It must be emphasized that this exclusion from gross income is not applicable to self-employed individuals and income generated from the business. D. The effective implementation of these Regulations all taxpayer-employers shall ensure the correct computation and application of the said increase on the 13th month and other benefits of the employees in the year-end adjustments and the same shall be clearly indicated among others. E. The said BIR form shall be issued by the employer to the employee on or before January 31 of the succeeding calendar year of if the employment is terminated before the close of such calendar year, on the day on which the last payment of compensation is made. F. In case the employee whose employment is terminated and subsequently employed transferee shall immediately furnish the new employer the accomplished BIR form issued by the previous employer for the appropriate withholding tax computation of the employee’s regular compensation and subsequent year-end adjustment if any. 60. Which of the following items is not subject to regular income taxation? A. Compensation income for services in whatever forms paid B. Gross income from the conduct of trade, business or exercise of a profession C. Gains derived from dealings in properties D. Dealings in capital assets of domestic stocks and real properties 61. Which of the following interest incomes is not subject to regular income tax? A. Income from lending activities to individuals and corporation by banks, finance companies, and other lenders. B. From bonds and promissory notes C. Interest income earned by the landowners in disposing their lands to their tenants. D. Interest income from banks deposits abroad 62. Which of the following statements about rent is/are correct? I. Obligations of the lessor that are assumed by the lessee are additional rental income to the lessor II. Advance rental is subject to regular income tax is restricted to be applied in future
years or upon the termination of the lease III. Leasehold improvements made by the lessee on the leased property are recognized by the lessor as income using the spread-out method or outright method. IV. Advance rental as a security deposit to guarantee payment or rent subject to contingency which may or may not happen V. Rent income is a passive income hence, subject to regular income tax A. I, II AND V C. I, II, III, AND IV B. I, II, III, IV AND V D. I, II, AND II 63. Which of the following statements about royalties is/are incorrect? I. Royalties earned from sources within the Philippine are generally subject to final tax. II. Active royalty income and royalties earned from sources outside the Philippines are subject to final income tax III. Royalties from mining properties and from books in the Philippines is are subject to final tax IV. Royalties earned by the resident foreign corporation are exempt from regular income tax. A. I and IV only C. III and IV only B. I, II, III and IV D. II and IV only 64. Which of the statements regarding Dividends income is/are incorrect? I. Dividends declared by domestic corporations are generally subject to 10% final tax if the recipient is an individual taxpayer. II. All kinds of dividends received from foreign corporations are items of gross income subject to regular income tax. III. When the declaration confers to the recipient a different interest or right after the stock dividend declaration or when the stocks dividends are subsequently redeemed is taxable IV. According to RR6-2008, the difference between the proceeds of the liquidating dividends and the cost of the investment is a capital or loss which is subject to the rules of regular income tax or to the 5%-10% capital gains tax rule. A. IV only C. I, II, III and IV B. II and IV only D. II and III only 65. Which of the following statements is relatively correct regarding the partner’s distributable share of the net income of the general professional partnership? A. The general professional partnership is not subject to any kind of taxes. B. The basis of income to be subject to regular income tax is not the net income but the actual distribution. C. If the items of gross income subjected to final tax and capital tax to the general professional partnership are included as an item of gross income subject to regular income tax when distributed to the partners. D. Any income received by the partner from the general professional partnership are not subjected to regular income tax but rather to a final tax of 10%-15% final tax rule. 66. Which of the following other sources of gross income is/are subject to regular income tax? I. Income distribution from taxable estates or trusts
II. Share from the net income of other pass-through entities III. Farming income IV. Recovery of past deduction V. Reimbursement of expenses VI. Cancelation of indebtedness for a consideration A. I, IV and VI C. I, III, IV and VI B. I, II, III, IV and VI D. I, II, III, IV, V and VI 67. Which of the following statements is incorrect regarding the recovery of past deductions? A. When past year deductions from gross income are subsequently recovered by the taxpayer or when accrued expenses previously deducted are subsequently paid at an amount less than the deduction claimed B. Past deductions that created tax benefit to the taxpayer must be reverted back to gross income in the year of recovery. C. If the net income in the period the deduction was made exceeds the amount of the deduction, all recoveries from the deduction are non-taxable. D. If the net operating loss in the period the deduction was made exceeds the amount of the deduction, all recoveries from the deduction is non-taxable. 68. The following items are the taxable recovery of past deductions, except. I. Recovery of previously claimed bad debt expense II. Refund of local tax expense III. Stock transaction tax in disposing of stocks through the Philippine stock exchange IV. Refund of foreign tax previously claimed as deduction V. Income tax paid or incurred to a foreign country, if the taxpayer claimed a credit for such tax in the year it was paid or incurred. VI. Re-commissioning of abandoned petroleum service contracts or mining properties VII. Release of reserve funds of insurance companies VIII. Special assessment A. III, IV, V-VII and VIII C. II, III, V and VIII B. II, IV, VI and VIII D. III, V and VIII 69. Which of the following data regarding the MWE is correct? A. A worker in the private sector who is paid the minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minim wage (i.e. those with salary grade 1 to 3) in the non-agricultural sector where he is assigned. B. Rate fixed by the Regional Tripartite Wage and Productivity Board of the Department of Labor and Employment or 5, 000 per month or 60, 000 per year, whichever is lower. C. The employee must not have other income aside from minimum wage and exempt benefits. D. Minimum Wage Income Earner is exempted from the regular income tax including the 13th-month pay and other benefits even there is another taxable income provided, that the other income is tax exempt also. 70. Which of the following statements is incorrect regarding the Minimum Wage Income Earner (MWE)?
A. When an employee become a minimum wage earner during the year, he shall be subject to income tax only on compensation earned during the taxable year before becoming a minimum wage earner. B. When an employee ceases to be a minimum wage earner during the year due to increase in salary, only the income for the rest of the year is taxable. C. The employee ceases to a minimum wage earner during the year by disqualification, the employer shall withhold income tax for the salaries of the employee for the entire taxable year. D. Under RMO 23-2011, COLA which forms part of the new wage rates prescribed to be the statutory minimum wage should be treated as part of the minimum wage and shall not be treated as separate or other benefits. 71. Which of the following compensation income is/are non-taxable or exempted from regular income tax? I. Income of the minimum wage income earner II. Other benefits of relatively small value that are not included in the list of the de minimis benefits. III. Income exempt under treaty or international agreements IV. Income or benefits necessary to the trade, business or conduct of profession of the employer V. Excess de minimis over the statutory limits. VI. For the convenience or advantage of the employer A. I, II, III and VI C. I, III, V, and VI B. I, III, IV and VI D. I, II, III, IV, V and VI 72. Which of the following de minimis benefits is/ are non-taxable from regular income tax under RR8-2012? I. Actual medical assistance not exceeding 10, 000 per annum II. Employee achievement award in the form of tangible property other than cash or gift certificates with an annual monetary value not exceeding 10, 000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees. III. Gifts are given during Christmas and major anniversary celebration not exceeding 10, 000 per annum IV. Daily meal allowances for overtime work and night or graveyard shift not exceeding 25% of the basic minimum wage on a per region basis. V. Monetized unused vacation leave credits of private employees not exceeding not exceeding 10 days during the year. VI. Monetized unused terminal leave pay or the commutation of unused leave credits due to involuntary separation from employment of the employee not exceeding 10 days leave credit limit. VII. Benefits receive by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total annual monetary value receives from both CBA and productivity incentive schemes combined do not exceed 10, 000 per employee per taxable year. A. I, II, III, IV, V and VII C. I, II, III, IV, V, VI and VII B. I, II, IV, V and VII D. I, II, IV, V, VI and VII
73. Which of the following statements is incorrect regarding the de minimis benefits? A. Any benefits received by a rank and file employee will be treated as other compensation income which is subject to RR3-2015 for the 13th-month pay and other benefits not exceeding 82, 000. B. Any excess of the statutory limit of the de minimis of managerial and supervisory employees is subject to regular income tax. C. For managerial and supervisory employees, any benefits are treated as fringe benefits in which subject to final fringe benefits tax. D. Medical cash allowance to dependents of employees not exceeding 750 per employee per semester or 125 per month. 74. Which of the following statements is correct? A. Employee benefits of non-Filipino nationals and or non-permanent residents of the Philippines from foreign governments, embassies or diplomatic missions and international organization in the Philippines are subject to regular income tax provided they are only rank and files employees. B. Filipino employees of a foreign government, embassies, diplomatic missions and international organization are immune from regular income tax also. C. Filipino claiming exemptions under the terms of international agreements or under provisions of special laws granting privileges to international organizations shall file an application for confirmation of tax exemption with the BIR’s International Tax Affairs Division (ITAD). D. A Foreign government, embassies, diplomatic missions and international organization have the obligation to withhold income tax by virtue of international comity as embodied in several international agreements to which the Philippine is a signatory. 75. Which of the following statements does not qualify to as necessity of the employer rule? A. Necessary traveling, transportation, representation or entertainment expenses that are subject to an accounting or liquidation in accordance with specific requirements of substantiation of expense. B. Representation and Transportation Allowance (RATA) of public officers and employees under the General Appropriation Act. C. Personnel Economic Relief Allowance (PERA) D. Cost of Living Allowances (COLA) 76. Benefits or allowances which are intended for the furtherance of the interest of the employer’s business or to ensure its smooth operations are exempt from income tax, except. A. Scholarship grant to an employee under contract to remain in service for a specified period upon completion of the study. B. Grant of housing privilege to employees working at distant or remote facilities even if the dwelling is distanced from the facility in compliance with labor safety standards. C. Cellphone allowance is given to all employees by the employer D. Car incentives to medical doctor’s on-call who are required to report on duty anytime.
77. Which of the following statements below is incorrect regarding the fixed allowance is given by the employer to the employees? A. The cost of living allowance and other benefits paid to the employee every payroll period are tax exempt. B. Ordinary and necessary traveling, representation or entertainment expense of the employee in the pursuit of his trade, business or profession is exempted from regular tax under the necessity of the employer rule. C. Expenses subjected to accounting or liquidation are tax exempt. D. Any excess of the advances return to the employer are non-taxable 78. Which of the following statements is false regarding paid vacation and sick leave allowances? A. The paid absences of an employee applied for his vacation or sick leave credits which are normally received as part of the regular salary is part of the regular compensation. B. Retainer fees of consultants, talents, and directors who have no management function in the business are professional income not a compensation income of the recipient. C. Commissions to non-employees such as independent sales agent is part of his compensation income. D. Tips and gratuities paid directly to an employee by customers of the employer which are not accounted for by the employee to the employer are not considered as compensation income but are to be reported as other income on the income tax return of the employee. 79. Compensation income includes performance based remunerations to an employee in addition to the regular compensation with or without regard to the payroll period, except. A. Gaines on exercise of stock options B. Emoluments and honoraria C. Taxable retirement and separation pay D. Director’s Fees of an independent employee 80. Which of the following items is not included in 13th-month pay and other benefits as governed by the RR3-2015? A. Christmas bonus of private employees B. Cash gifts for the wedding anniversary of a private employee C. Other Fringe benefits of rank and file employees D. Personal Economic Relief Allowance (PERA) GROSS INCOME SUBJECT TO FINAL TAXES 81. Under Section 24 (B) of the Tax Code, a final tax is imposed upon the gross passive income of citizen and resident aliens, except. A. Income from the savings accounts and time deposits maintained by a member of cooperatives. B. Royalty’s income from books which is less than 10, 000. C. Dividend income received from a domestic corporation by an individual. D. Income from winnings less than 10, 000.
82. Which of the following statements is incorrect pertaining passive income subject to Final tax? A. The Philippine government cannot compel non-resident subjects of foreign countries to withhold the tax as this would amount to infringement of foreign sovereignty. B. The final withholding tax is built upon taxpayer and government convenience in which the taxpayer is relieved the taxpayer of the obligation to file income tax return. C. Items of passive income are earned with very minimal involvement from the taxpayer and are generally irregular in timing and amount. D. A non-resident person not engaged in trade or business in the Philippine and nonresident foreign corporation is not subject to final tax but rather to regular income tax. 83. Which of the following interest income is/are not subject to final tax? i. Deposits substitute ii. Government securities iii. Cooperative’s income iv. Money market placements v. Trusts funds vi. Financial companies or lending institutions vii. Other investments evidenced by certificates prescribed by the Bangko Sentral ng Pilipinas. A. i, ii, iv, and vii C. i, ii, iii, iv , vi and vii B. i, ii, iv, vi, and vii D. i, ii, iv, v, and vii 84. Which of the following amount of winnings/ prizes is subject to a final tax of 20%? A. P10,000 winnings outside the Philippines B. P10,000 winnings earned within the Philippines C. P1,000 Philippines Sweepstakes winnings D. P9,000 first prize singing contest 85. The share of a partner in the income of a commercial partnership is A. Subject to a final tax of 10%. B. Subject to a creditable tax of 10% if the amount is P720, 000and below and 15%if the amount is more than P720, 000. C. Subject to normal tax of individual taxpayer D. Tax-exempt 86. The following corporate income is subject to income tax, except A. Cash dividends received from a domestic corporation by another domestic corporation B. Royalty income received from a domestic corporation C. Interest income on foreign loans D. Inter-corporate dividends received by a nonresident foreign corporation from a domestic corporation 87. Interest income received by an individual taxpayer (except a nonresident individual) from a depository bank under the expanded foreign currency deposit
system shall be subject to a final income tax at rate of: A. twenty percent (20%) of such interest income. B. fifteen percent (15%) of such interest income. C. seven and one-half percent (7 ½ ) of such interest income D. two and one-half percent (2 ½ ) of such interest income 88. Which of the following passive income from Philippine source is exempt from Philippine income tax when received by non-resident Aliens and non-resident citizens? A. Royalties, in general B. Yield or any other monetary benefit from deposit substitute C. Interest income received from a depository bank under expanded foreign currency deposit system D. Other winnings 89. Which of the following statements is incorrect regarding the dividends? A. If received by a domestic or resident corporation from a domestic corporation subject to tax, such dividend is tax-exempt. B. The pure stock dividend, dividend received from cooperative, and pure liquidating dividends are tax- exempt. C. Cash or property dividend is subject to final tax if received by an individuals or non-resident corporation from a domestic corporation. D. Any pure liquidating dividend not only a mere return of capital is tax exempt. 90. Which of the following statements is correct regarding the stock dividend? A. If the stockholder has a preference to take cash or property dividends instead of stock dividends it is subject to final tax. B. Some stockholder exercised the option to take cash or property dividends is not tax-exempt C. Any different kind of stock received by stockholder will be subject to final tax of 10% D. It is subject to tax if the exercise of option resulted in a change of the stockholder’s proportionate share of the outstanding shares of the corporation. 91. Which of the following is not subject to 10 final tax? A. Share of a partner in a commercial partnership B. Dividend income received by an individual from a domestic corporation C. Royalty income earned by an individual from his literary works D. Dividend income received by domestic from a resident foreign corporation 92. Which of the following statements regarding royalty income is correct? A. All royalty incomes are subject to 20% final tax B. Royalty income derived outside is subject to regular income tax C. Any royalty income from literary works received by the corporation is subject to either 10% or 20% final tax. D. Income from literary works is subject to 10% final withholding tax
93. Which of the following prizes is subject to tax? A. Sports competitions sanctioned by the national sports organization B. Nobel prize C. Prize from dance competition abroad D. Any prizes received without effort 94. Which of the following items is exempt from final tax? A. Winnings in competition sponsored by a local trading company B. Prizes in a body building competition C. Dividends from a foreign corporation D. Winnings from casino 95. On April 15, 2015, the following incomes of Mr. Jerome Chavez are: Compensation income from his employer net of withholding tax of 5, 750 19, 250 Interest income from his investment in UCPB 20, 000 Dividend income from ADFC 50, 000 Prize in a debate competition 15, 000 Royalties outside the Philippines 75, 000 Winnings from raffle sponsored by GMA 100, 000 Gain on sale of bonds with maturity date of less than 317, 650 Share from BDC a cooperative certified by CDA 6, 000 Interest income under EFCDS 20, 000 Interest income from Metrobank with a maturity date of 6 years but pre-terminated within three years 80, 000 How much is the income subject to regular tax and final taxes from the passive income? 96. Mr. Jude Capalar, a government rank, and file employee have the following summary of his compensation and benefits in 2015. Gross compensation income 324, 000 Less: Employee payroll deductions Contribution to GSIS, PHIC and HDMF 32, 000 Deduction for Withholding tax 34, 000 66, 0000 Net Regular payroll 258, 000 Representation and Transportation Allowance 18, 000 Personnel Economic Relief Allowance 24, 000 Christmas bonus 37, 000 Uniform Allowance 10, 000 Honoraria 15, 000 Christmas Gift 5, 000 Additional compensation allowance 36, 000 Monetized value of vacation leave and sick leave (15 days) 7, 500 How much is the gross taxable compensation income of Mr. Jude Capalar for 2015? A. 369, 500 C. 325, 000 B. 352, 500 D. 308, 000 97. Mr. Jerome Chavez, a private rank and file employee derived the following remuneration and benefits in 2015.
Basic compensation income 300, 000 Less: Employee’s contribution to SSS, PHIC and HDMF 24, 000 Withholding tax 30, 000 Net compensation income 246, 000 Overtime Pay 21, 000 Productivity incentive 25, 000 Vacation expense paid by the employer 20, 000 Cost of living allowance (COLA) 24, 000 Pre-computed daily transportation allw. 18, 000 Rice Allowance 27, 600 13th month pay 25, 000 Monetized unused leave credit (16 days) 16, 000 Uniform allowance 15, 000 How much is the gross taxable compensation income of Mr. Chavez for 2015? A. 249, 600 C. 364, 600 B. 312, 600 D. 394, 600 98. Mr. Montecina is preparing his income tax return from his employment and business income are: Basic compensation income 240, 000 Less: Contribution to SSS, PHIC and HDMF 20, 000 Withholding tax 40, 750 Net Payroll 186, 100 Add: Cost of Living Allowance 24, 000 Overtime Pay 6, 000 Night Shift Differential 8, 000 Holiday Pay 5, 000 Cash Gifts 5, 000 13th month pay 25, 000 Christmas bonus 15, 000 Other fringe benefits 20, 000 Laundry allowance 3, 000 Productivity Incentives 18, 000 Rice allowance 24, 000 Other reportable income: Gross sales 240, 000 Less: cost of sales 100, 000 Gross income from business 140, 000 Less: Deductions * 100, 000 Taxable income from business 40, 000 Additional information: a. On December 31, 2015, the taxpayer filed for the additional exemption of one (1) qualified dependent child. b. On June 20, 2015, the taxpayer donated a 10, 000 cash to Marasbaras, National High School- a public school and 5, 000 to the non-accredited non-government organization. c. Mr. Montecina received 10, 000 interest income, net of final tax from Bank of the Philippines. d. All expenses are connected with the taxpayer’s trade or business. How much is the tax due and payable or refund of Mr. Montecina during 2015?
A. 1, 000 C. (1, 000) B. 500 D. (500) 99. Atty. Jose Aguinalde, 64 years, married with two qualified dependent children with the following income below: Gross professional income, net of 10% FWT 625, 500 Professional Expenses 200, 000 Retirement benefits 200, 000 Prize in a sports tournament 50, 000 Gain from sale of bonds with maturity period of 4 years 20, 000 Interest income from bank deposit, Philippines 10, 000 Interest income under EFCDS 60, 000 Royalties income from outside the Philippines 10, 000 Philippine Lotto Winnings 60, 000 Share in a commercial partnership 40, 000 Interest income from bonds with maturity period of 5 years 20, 000 Share in a general professional partnership 60, 000 Additional information: a. Retirement benefits received from his previous employer that maintained a reasonable private pension plan after his 12 years of services. b. Prize in a sports tournament is sponsored by a group of businessmen promoting health products. c. The commercial partnership is subject to corporate income tax of 30% based on the taxable income. d. Inclusive to the amount received by the taxpayer from the general professional partnership is the share in interest income which was subjected to a final tax of 20% of 5, 000. How much is the taxable net income subject to regular income tax of Atty. Aguinalde during 2015? A. 720, 000 C. 485, 000 B. 680, 000 D. 480, 000 100. How much is the total final withholding taxes on passive income? A. 20, 500 C. 30, 500 B. 26, 500 D. 32, 500 101. How much is the income tax expense for 2015? A. 195, 400 C. 139, 500 B. 182, 600 D. 119, 000 102. Mr. Gerald Result, a resident citizen and supporting his two younger sisters has the following data for the year 2015: Gross sales 1, 000, 000 Sales returns and allowances 50, 000 Cost of sales 300, 000 Interest income from Metrobank 10, 000
Share in the net income of commercial partnership net of 10% final withholding tax 90, 000 Salaries of employee, net of 30, 000 CWT 270, 000 Valued Added Tax (VAT) 100, 000 Business permit and licenses 5, 000 Community tax 10, 000 Contribution to pension trust 50, 000 Entertainment expense 10, 000 Interest expense 50, 000 Research and development cost (deferred) benefits realized during July 1, 2015, 60, 000 Purchase of equipment with estimated life of 5 acquired on October 1, 2015 50, 000 Additional information: a. Result bought a residential dwelling for 100, 000 and transferred ownership to his supervisor. The property has 90, 000 zonal value. b. 20, 000 of the contributions to pension trust covers past year’s cost. c. Withholding taxes from the salaries of the employees are properly remitted to the BIR. How much is the total itemized deductions? A. 504, 450 C. 566, 950 B. 506, 950 D. 584, 950 103. How much is the taxable income of Resula for 2015? A. 255, 000 C. 150, 000 B. 175, 000 D. 68, 050 104. How much is the taxable income of Mr. Resula if he chooses optional standard deduction? A. 175, 000 C. 368, 050 B. 255, 000 D. 495, 000 105. How much is the total expense to be claimed as part of the itemized deductions from the fringe benefits given to his employees? A. 15, 000 C. 68, 000 B. 32, 000 D. 100, 000 106. On January 2, 2014, Mr. Keneth Sajorda, a resident citizen who sold land as a capital asset for 1, 800, 000 which had a cost to him of 600, 000. The property was subject to a mortgage of 700, 000, which was assumed by the buyer. Of the remaining 1, 100, 000 of the consideration, 200, 000 was payable on the date of sale, 600, 000 on January 2, 2015, and 300, 000 on January 2, 2016.
How much is the capital gains tax? A. 30, 000 C. 72, 000 B. 66, 000 D. 108, 000 107. Using problem #106, how much is the installment payment for January 2, 2015? A. 27, 000 C. 54, 000 B. 34, 000 D. 108, 000 108. Which of the following statements best describe the characteristics of Taxable Income? A. There must be a sale of goods or properties B. The gain must be realized and received C. There is no law or treaty exempt such income from taxation D. The gain received must be in form of cash 109. Which of the following items is not subject to taxation? A. Rentals and royalties from property located within the Philippines B. Gains, profits, and income from sale of real property as well as from personal property in the Philippines C. Any excess of the proceeds received over the acquisition costs and premium payments by an assignee of a life insurance policy. D. Receipt of money or property to be held in trust for, or to be remitted to, another person. 110. Which items are not exempted by law from taxation? A. Income of foreign government and foreign government-owned and controlled corporations. B. Philippine Amusement, Gaming Corporation (PAGCOR) C. Income of International missions and organization with income tax immunity D. SSS, GSIS, Pag-IBIG or PhilHealth benefits 111. Which of the following statements is incorrect about citizen? A. Those who are citizens of the Philippine at the time of adoption of the Constitution on February 2, 1987 B. Those born on January 17, 1973, of Filipino mothers who elected Filipino citizenship upon reaching the age of majority C. Those whose mothers and fathers are resident of the Philippines D. Those who are naturalized in accordance with law 112. Which of the following statements is incorrect about non-resident citizen? A. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with an indefinite intention to reside therein B. Who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for an employment on a permanent basis C. Working and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. D. Previously considered as a non-resident citizen and who arrives in the Philippines at anytime during the taxable year to reside permanently in the Philippines shall
likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines. 113. Which of the following statements is considered as a resident alien? A. Alien who stayed in the Philippines for an aggregate period of more than 180 days during the year B. Aliens who come to the Philippines for a definite purpose which in its nature may be promptly accomplished C. Aliens who shall come to the Philippines and stay therein for an aggregate period of not more than 180 days during the year. D. One who comes to the Philippines for a definite purpose which in its nature would an extended stay and to that end makes his home temporarily in the Philippines, although it may be his intention at all times to return to his domicile abroad. 114. Which of the following statements is correct? A. Citizens staying abroad for a period of at least 183 days are considered resident B. Aliens who stayed in the Philippines for more than 1 year as of the end of the taxable year is considered as non-resident C. Aliens who are staying in the Philippines for not more than 1 year but more than 180 days are deemed non-resident aliens not engaged in trade or business. D. Aliens who stayed in the Philippines for more than 180 days are considered nonresident aliens engaged in business 115. Which of the following statements is incorrect? A. A citizen who was previously a nonresident and who arrives and resides temporarily in the Philippines during the taxable year is considered non-resident citizen B. A citizen who works and derives income from abroad and whose employment requires him to be physically present abroad most of the time (at least 183 days) during the taxable year is to be classified as a non-resident citizen. C. A seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker. D. An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines. 116. Which of the following statements is correct? A. The nature of works of an alien will determine whether he is a resident or nonresident. B. If one come to the Philippine with an indefinite purpose in which his transactions can be accomplished with extended period he becomes non-resident. C. A foreigner who shall live in the Philippines with definite intention as to his stay is a non-resident. D. A foreigner who has acquired residency in the Philippines shall only become a non-resident when he actually departs with the intention of abandoning his residency in the Philippines.
117. Which of the following statements is incorrect about personal exemptions? A. In the case of a married individual, only the spouse who has income is allowed to claim a personal exemption. B. This exemption is granted only to individual taxpayers who have earnings not subjected to final taxes. C. The status of the individual taxpayer will matter in claiming this exemption. D. These exemptions include both the exemptions of the individual taxpayer, his family, and his dependents, are considered to be the equivalent of the minimum subsistence. 118. Which of the following taxpayers is not allowed for personal exemptions? A. Citizens of the Philippines C. Estates and Trusts B. Partnership and Corporation D. Resident Alien 119. The following are the requisites for a non-resident alien individual doing business in the Philippines may be granted personal exemptions, except. A. The country of which the non-resident alien is a subject or a citizen has an income tax law. B. Such income tax law of the foreign country does not allow personal exemptions to a Filipino citizen deriving income therefrom but not residing therein. C. Such ITR is true and accurate, covering all income received from sources within the Philippines D. The non-resident alien files an income tax return in the Philippines in due time. 120. Which of the following statements is incorrect? A. Residents and citizens of the Philippines such as resident citizen and domestic corporations are taxable on all income from sources within and without the Philippines. B. Under the Philippine laws, resident citizens and domestic corporations enjoy preferential privileges than aliens. C. The taxation of foreign income of resident citizens and domestic corporations properly reflected this difference in benefits consistent with the Benefit Received Theory. D. Resident and non-resident citizens are not subject to income tax for the income derived outside the Philippine. 121. Which of the following statements is not a requisite for Additional Exemptions? A. A taxpayer’s child, whether legitimate and legally adopted but not including illegitimate. B. Incapable of self-support child because of mental or physical who is more than 21 years old. C. Chiefly depending for support on the taxpayer and living with the taxpayer D. No married, not gainfully and not more 21 years old. 122. Which of the following is correct about the dependents? A. A dependent child includes a foster child- who is placed under planned temporary substitute parental care by a person duly licensed by the DSWD to provide foster care. B. The term chief support means head of the family only C. Dependent child includes mentally incapacitated who is employed D. Other collateral relatives can be qualified as dependent if they are chiefly
dependent upon and living with the taxpayer who is also unemployed, incapable of self-support and of legal age. 123. Which of the following statements is incorrect? A. If both spouses earn income during the taxable year, only one of the spouses can claim additional exemptions for dependent qualified children. B. If only one spouse is deriving taxable income, the only spouse may claim the additional exemptions. C. In a separated spouse, only the spouse who is the custody of the qualified dependent children if the latter income is greater than the other spouse. D. An unmarried individual with a child out of wedlock who is a recognized natural child can claim personal exemptions and additional exemptions. 124. Which of the following is incorrect as to the rules of change of status? A. If any of the dependent dies, marries, becomes 21 years old or becomes gainfully employed during the taxable year, the taxpayer may still claim the same exemption as if the event occurred at the end of the year. B. If the taxpayer dies during the calendar year, his estate cannot claim the personal and additional exemptions for himself and his dependents as if he died at the close of such year. C. If the taxpayer should have additional dependents during the taxable year, the taxpayer may claim the corresponding additional exemption in full for such year. D. If the dependent child who is incapacitated is employed, the taxpayer can’t claimed for additional exemption for the next calendar year. 125. Under RR2-98, NRA-ETB can claim only a basic personal exemption subject to the following reciprocity conditions, except. A. The country to which the NRA-ETB is a citizen must have an income tax law B. The income tax law of the country of the NRA-ETB allows personal exemptions to citizens of the Philippines not residing therein C. The NRA-ETB files a true and accurate return of his income from all sources from within the Philippines. D. The personal exemptions granted to NRA-ETB is absolute. 126. Which of the following statements is not correct regarding the RR2-98? A. A non-resident alien engaged in trade or business or in the exercise of a profession in the Philippines shall be applied to personal exemption in the amount equal to the exemptions allowed in the income tax law in the country of which he is subject-or citizen, to citizens of the Philippines not residing in such country, not to exceed the amount fixed under Sec. 35 of NIRC. B. Under Sec. 35 of NIRC can only claim a basic personal exemption-in which it does not involve the additional exemptions. C. If the reciprocity tax treaty stipulates to allow the only basic personal exemption, the Philippines will only allow basic personal exemption subject to limit. D. If the tax treaty stipulates that both basic personal and additional exemptions be allowed as exemptions, based on reciprocity principle the Philippine will also grant both basic and additional exemptions. 127. Which of the following statements is incorrect about the PHHI (Premium on Health and or Hospitalization Insurance)
A. The premiums on health and or hospitalization insurance (PHHI) paid by the taxpayer for himself, including h family, not exceeding P200 a month or P2, 400 a year. B. PHHI is claimed as a deduction against gross income provided that the family income of such taxpayer shall not exceed P250, 000 for the taxable year. C. To claim this deduction, the employee shall present the policy contract together with the original receipt of the premium payment for the current year to the employer. D. Total family income does not include primary and other income from sources received by all members of the nuclear family. 128. Which of the following incorrect regarding the BIR Ruling 003-2005 about trusts? A. Tax treatment of UITFs should not be any different from CTFs since they are considered similar products. B. An irrevocable trust is treated as a separate and distinct taxable entity from the person/s or parties that established the trust. C. An irrevocable trust is subject to any applicable taxes on its investment income as well as its investors, if and when the trust income is subsequently distributed to them. D. The nature of UITF is that they are considered as irrevocable trusts since the beneficial ownership in a UITF is maintained with the trustor-beneficiary, and considering that in the case of death of the trustor, The UITF participation forms part of the trustor’s estate subject to estate tax. 129. Which of the following is correct regarding the BIR Ruling 003-2005? A. Income accumulated in trust for the benefit of an unborn or unascertained person or persons with contingent interest, and income accumulated or held for future distribution under the terms of the will or trust is exempted from tax. B. Any income which is to be distributed currently by the fiduciary to the beneficiaries but not including income collected by a guardian of an infant which is to be held or distributed as the court may direct. C. Income received by estates of deceased persons after the period of administration or settlement of the estate is subject to tax. D. Income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated. 130. Which of the following is not a requisite of exemption of Employer’s trust under the Sec. 60 (B) of NIRC? A. Contributions are made to the trust by the employer, employees, or both for the purpose of distributing to such employees the earning and principal of the fund accumulated by the trust in accordance with such plan. B. Under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be used for, or diverted to, purposes other than for the exclusive benefit of his employees. C. Any amount actually distributed to any employee or distribute shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distribute. D. Employee’s trust must be in forms part of a pension, stock bonus or profit-sharing plan of an employer.
131. Which of the following conditions of the substituted filing system is not included? A. Amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer B. The employee’s spouse received purely compensation income from only one employer in the Philippines with correct withholding tax C. Employer files the annual information return (BIR Form No. 1604-CF) D. The employer issues BIR Form No. 1601-E/2307 to each employee. 132. The filing of consolidated, annual or adjustment return is required under each of the following circumstances, except. A. Concurrent employment during the year B. Successive employment during the year C. Receipt of income distribution from a general professional partnership, taxable trusts or taxable estates, exempt co-ownership or exempt joint ventures. D. Taxpayerer with employment income only 133. Which of the following statements is incorrect? A. An individual taxpayer engaged in business or practice of profession shall file, in addition to the annual income tax return (BIR Form 1701). B. The annual income tax due to the taxpayer shall be determined on the annual taxable income. C. Taxable income shall be reduced by creditable withholding taxes made upon the gross income of the taxpayer only. D. Tax refund or overpayment can be claimed through tax refunds or through a tax credit certificate. 134. Which of the following statements is true regarding the excess quarterly estimated tax? A. The excess quarterly estimated tax payments over the quarterly tax due may, at the option of the taxpayer, be carried forward to quarters of the succeeding taxable year or claimed through a tax refund. B. The option must be indicated in the annual adjustment return. C. Even the taxpayer decided to carry still it is revocable for that period. D. The option to refund may be in the form of cash or tax credit certificate. If the option to refund is selected, the excess refundable amount should not be carried over as a tax credit to the succeeding quarters of the following year. 135. Which of the following statements is incorrect? A. Married individuals shall file a return for the taxable year to include the income of both spouses, computing separately their individual income tax based on their respective total taxable income. B. When the filing of one return is not practical, each spouse may file a separate return of income. C. If any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income. D. The income of unmarried minors derived from property received from a living parent is excluded in the return of the parent.
136. Which of the following statements is true? A. If the taxpayer is unable to make his own return, the return may be made by his duly authorized agent or representative or by the guardian or other person charged with the care of his person or property. B. The principal and his representative or guardian assuming the responsibility of making the return are not responsible for penalties provided for erroneous, false or fraudulent returns. C. Pursuant to RMC No. 6-2001, corporation, companies or persons whose gross quarterly sales, earnings, receipts or output exceed P1, 919, 500 may file their annual income tax returns accompanied by balance sheets, profit and loss statement, schedules listing income-producing properties and the corresponding income therefrom, and other relevant statements duly certified by an independent CPA. D. For self-employed taxpayers, their quarterly income tax returns are to be reduced with the corresponding personal exemption. 137. Which of the following statements is not a requirement of the annual information return? A. Individuals, estates or trusts, not engaged in business or those earning pure compensation income, with sole earnings subject to final tax or whose sole income is exempt-through BIR Form 1705 to be filed on or before May 15 of the following year. B. Self-employed individuals, estates, and trusts engaged in business-through BIR Form 1701AIF to accompany the annual income tax return. C. Corporations and partnership in general-through BIR Form 1702AIF to accompany the annual income tax return. D. Pursuant to RMC No. 6-2001, corporation, companies or persons whose gross quarterly sales, earnings, receipts or output exceed P1, 919, 500 may file their annual income tax returns accompanied by balance sheets, profit and loss statement, schedules listing income-producing properties and the corresponding income therefrom, and other relevant statements duly certified by an independent CPA. 138. Which of the following statements is not correct regarding the filing of income tax return? A. The return shall be e-file and the tax e-paid on or before the 15th day of April of each year covering the income for the preceding year using the eFPS facilities through the BIR website. B. For non-electronic filing and payment system (not-eFPS) taxpayers shall be filed and the tax paid on or before the 15th day of April of each year covering the income for the preceding year. C. In the case of no payment returns, the same shall be filed with the RDo where the taxpayer is registered/has his legal residence or place of business in the Philippine or with the concerned RCO under the same RDO. D. In case the taxpayer has no legal residence or place of business in the Philippines, the return shall be filed by any authorized agent banks located within the jurisdiction of the Revenue District Officer (RDO). 139. Which of the following individual taxpayers are required to file income tax return that should be filed in triplicate, except? A. Individual receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not
entitled to substitute filing. B. Individuals receiving income subjected to final tax C. A trustee or a trust, guardian of a minor, executor/administrator of an estate, or any person acting in any fiduciary capacity for any person, where such trust, estate, minor, or person is engaged in trade or business. D. An individual engaged in trade or business or in the exercise of their profession and receiving compensation income as well. 140. The following taxpayers are not required to file income tax return, except. A. An individual whose gross income does not exceed his total personal and additional exemptions. B. An individual whose compensation income derived from one employer does not exceed 60, 000 and the income tax on which has been correctly withheld. C. An individual who is not engaged in business or practice of profession whose gross income does not exceed his personal and additional exemptions for dependents. D. Every non-resident alien on his income derived within the Philippines. 141. Which of the following documents are necessary to be attached to the income tax return upon filing, except. A. Statement of Net Worth and Operations if the gross sales, receipts or output from business do not exceed 50, 000 in any one-quarter B. Balance sheet and profit and loss statements if the gross sales, earnings, receipts or output from business in any one-quarter exceed 50, 000 but do not exceed 150, 000 C. Balance Sheet and profit-and-loss statements certified by an independent CPA and comparative Profit-and-loss statement for current and preceding taxable years and schedule of income producing properties and corresponding income therefrom if the gross sales, earnings, receipts or output from business in any one-quarter exceed 150, 000. D. Withholding tax form (BIR Form 2316) is necessary when the gross sales, receipts or income is below 50, 000. 142. Which of the following is not required to file an income tax return? A. Resident citizen with respect to his business earned outside the Philippines B. An employee with only one employer and whose compensation income is fully collected with creditable withholding tax C. Nonresident citizen with respect to his compensation income earned within the Philippines D. Nonresident alien with respect to his business income earned within the Philippines. 143. Which of the following corporations are exempt to the regular corporate tax, except. A. Labor, agricultural or horticultural organization established principally for profit. B. Mutual savings bank is not having a capital stock represented by shares, and cooperatives bank without capital stock organized and operated for mutual purposes and without profit. C. Cemetery Company owned and operated exclusively for the benefit of its members.
D. Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare. 144. Which of the following requisites for exemption of non-stock, non-profit corporation, except. A. It must be a non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletes, or cultural purposes, or for the rehabilitation of veterans. B. All net income or assets of the corporation or association must be devoted to its purposes and no part of its net income or asset accrues to or benefits any member or a specific person. C. It must be a branch of a foreign non-stock, non-profit corporation. D. The non-profit organization should meet the operational test only. 145. Which of the following statements is incorrect regarding the Minimum Corporate Income Tax (MCIT)? A. 2% MCIT is based on gross income not on taxable income after operating expenses. B. Passive income that has been subjected to a final tax shall not be included as a part of gross income. C. Any excess of the minimum corporate income tax over the normal tax shall be carried forward and credited against the normal tax immediately for three succeeding taxable years. D. A taxpayer who is liable to MCI and at the same time has an expanded withholding tax may deduct the EWT from MCIT and any excess will be a tax credit or refund following taxable year. 146. Which of the following statements is not true regarding the capital gains tax of a corporation derived within the Philippines? A. Capital gains on the sale of shares of stock not traded in the local stock exchange are subject to 5% and 10% based on net capital gains. B. Net capital gains on sales or exchange or disposition of lands and or buildings located outside the Philippine by the Resident Foreign Corporation is subject to 30%. C. Capital gains on sale or exchange or disposition of lands and or buildings located in the Philippines by a domestic corporation are subject to 6% of selling price or fair market value, whichever is higher. D. Percentage tax on the sale of shares of the stock traded on the local stock exchange is subject to ½ of 1% based selling price. 147. Which of the following passive income of a corporation is incorrect? A. The income of domestic banks under the EFCDS is subject to a final tax of 10%. B. Any dividends received by a resident foreign corporation from another foreign corporation is taxable at 30% on the portion which is earned in the Philippines which should be 50% of more of the total income earnings for the past 3 years. C. Royalty, yield or monetary substitutes from deposits, trust funds and similar arrangements of a domestic corporation are subject to 20% D. Any interest income on currency bank deposit by a non-resident foreign corporation is subject to 20%.
148. Corporation whether domestic, resident foreign or non-resident foreign, is subject to a tax rate of thirty percent (30%) except. A. Interest, dividends, rents, royalties and salaries B. Premiums, except reinsurance premiums C. Annuities, emoluments or other fixed or determinable, period or casual gains, profits and income D. Capital gains, including capital gains on sales of shares of stock in a domestic corporation not traded on the stock exchange. 149. Minimum corporate income tax is imposed whenever the corporation has zero or negative taxable income or whenever the MCIT is greater than the Normal Income tax (NIT) due from such corporation. Which of the following statements regarding the latter is incorrect? A. The effectivity shall commence on the 4th taxable year immediately following the year in which such corporation commenced its business operation B. The tax rate to be imposed is 2% of taxable income C. The computation and the payment shall apply at the time of filing the quarterly corporation income tax D. This tax applies only to domestic and resident foreign corporations 150. Statement 1: A final withholding tax of 15% of any profit remitted by the Philippine branch of a foreign corporation to its head office based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof. Statement 2: A final withholding tax of 15% based on the gross amount thereof shall be imposed on income derived from offshore banking units authorized by local commercial banks and branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas to transact business with UBOs including interest income derived from foreign currency loans granted to residents. A. Both statements are correct C. Only the first statement is correct B. Both statements are incorrect D. Only the 2nd statement is correct 151. This tax is imposed for each taxable year to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders or any other corporation. A. Minimum Corporate Income Tax B. Normal Corporate Income Tax C. Improperly Accumulated Earnings Tax D. Income Dividend Tax 152. The following organizations shall not be taxed in respect to income received by them, except. A. Labor, agricultural or horticultural organization not organized principally for profit B. Cemetery company owned and operated exclusively for the benefit of its members C. Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to or inure to the benefit of any member, organizer or any specific person. D. Philippine Amusement and Gaming Corporation
153. The following statements below describes the Minimum Corporate Income Tax (MCIT), except A. The computation and the payment of MCIT shall likewise apply at the time of filing the quarterly corporate income tax B. In the computation of the tax due for the taxable quarter, if the computed quarterly MCIT is higher than the quarterly normal income tax (NCIT), the tax due to be paid for such taxable quarter at time of filing the quarterly corporate income tax return shall be the MCIT which is two percent (2%) of the gross income as of the end of the taxable quarter. C. In the payment of quarterly MCIT, excess over MCIT from the previous taxable year(s) shall not be allowed to be credited D. Expanded withholding tax, quarterly corporate income tax payments under the normal income tax, payments under the normal income tax, and the MCIT paid in the previous taxable quarter(s) are not allowed to be applied against the quarterly MICT due. 154. Which of the following statements is incorrect? A. Resident foreign corporation is subject to income tax based on net income from sources within the Philippines B. Domestic corporation is subject to income tax based on net income from all sources C. Nonresident foreign corporations are subject to income tax based on gross income from sources within the Philippines D. Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10% 155. Which of the following statements is incorrect? A. Proprietary educational institutions and non-profit hospitals are subject to 10% of net taxable income. B. A proprietary educational institution is any private school maintained and administered by private individuals or groups with an issued permit to operate from the DECS or CHED or TESDA. C. Any government owned and controlled corporation is exempted from corporate income tax of 30% based on taxable income. D. If the gross income from unrelated trade, business or another activity exceeds fifty percent of the total gross income derived by such educational institutions or hospitals from all sources will be subjected to 30% corporate income tax. 156. Which of the following statements is correct regarding foreign/expanded currency deposit unit? A. Any income of depository banks under the Expanded Foreign Currency Deposit System from foreign currency transaction with non-residents is exempted from tax. B. If the interest income is not subjected to final tax by the borrower, the FCDU, EFCDU or OBU shall repost the same in its gross income in the income tax return and shall be subject to 7 1/2 % tax. C. Any income of non-residents from transactions with depository banks under the expanded system shall be subject to 10% D. The income from the regular banking unit of domestic banks is subject to the 30% regular corporate income tax.
157. On December 31, 2015, the following data of Hagupit Corporation are: Gross sales 4, 000, 000 Cost of Sales 1, 200, 000 Sale of office Building with Acc dep’n 450, 000 600, 000 Dividend Income from a domestic corporation 1, 200, 000 Prizes 40, 000 Royalties 20, 000 Interest Income in EFCDS 50, 000 Net capital gain on sale of stocks (not traded) 180, 000 Gain on sale of capital asset in Japan 800, 000 Rental Income from office computer 25, 000 Refund of business expenses overpaid in 2014 20, 000 Interest Income, net of final tax 6, 400 Gambling Income 20, 000 The following items are the identified deductions from the gross income are: Salaries and Wages expenses 400, 000 Rent Expense 36, 000 Light and Water expense 40, 000 Office Supplies Expense 25, 000 Insurance Expense 24, 750 Traveling Expense 30, 500 Advertising Expense 30, 000 Rooming-in and Breast Feeding 500, 000 Representation 75, 000 Depreciation Expense 30, 250 Repairs and Maintenance 5, 750 Postage and telephone expense 23, 500 Interest Expense 40, 000 Losses 80, 000 Bad Debts 40, 000 Retirement Expense 100, 000 Contribution to CHED 200, 000 Contributions to church 80, 000 Entertainment Expense 50, 000 Personal Expenses 200, 000 Additional Information: a. Salaries and Wages include the payment to the senior citizen which is classified as minimum wage earner of 15, 000. b. The company paid 10, 000 prepaid rent which was considered as Rent Expense. At the end of the year this 10, 000 is still unused. c. Traveling Expense includes the expense granted to the manager which is not connected to trade/business of 20, 000. d. Out of the total repairs and maintenance, 5, 000 was not supported by official receipts. e. Only 30% of the bad debts have been written off during the year. f. A number of losses include the following: 1. Losses due to fire on one’s company’s warehouse of 10, 000 in which 40% were
covered by the insurance. 2. Net operating loss carry-over of 5, 000 3. Wagering loss of 5, 000 4. The rest are deemed deductible Requirement: Compute the taxable income and tax due and payable. 157. The US embassy donated a vehicle to the Department of Foreign Affairs of the Philippines. Which of the following statements is correct? A. This transaction is exempted from payment of donor’s tax only. B. This transaction is exempted only from payment of documentary stamp tax. C. This transaction is exempted from payment of both donor’s tax and documentary stamp tax. D. This transaction is subject to both donor’s tax and documentary stamp tax. 158. A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not acceptable for legally refusing to pay the tax? A. That he has been deprived of due process of law. B. That there is a lack of territorial jurisdiction. C. That he derives no benefit from the tax. D. That the prescriptive period for the tax has elapsed. 159. Which statement refers to police power as distinguished from taxation? A. It is restricted by the Constitutional provision. B. It is superior to the non-impairment clause of the constitution. C. It involves the taking of property by the government. D. The amount imposed has no limit. 160. Which of the following is a correct nature of restriction to exercise taxation power? Constitutional Limitation Inherent Limitation A. Territorial jurisdiction Yes Yes B. International comity Yes No C. Rule of uniformity and equity No Yes D. Due process of law Yes No 161. Which of the following is not true? Taxation Police Eminent Domain A. Inherent to the existence Yes Yes Yes of the government B. Not legislative in nature No No No C. Superior to the now- Yes Yes No impairment clause D. Restricted by just No No Yes compensation
162. Which of the following is not correct? A. In the absence of specific tax provision, taxes, in general, are not cancelable. B. Prescriptive period for assessment and collection is applicable to returnable taxes. C. The law on prescription being a remedial measure should be interpreted liberally in order to protect the taxpayer. D. The prescriptive period should be the shorter between the required filing date and the actual date of filing. 163. To spread the burden of taxation, the corresponding estimated tax is collected at once every payroll period so that at the end of the taxable year, the amount of tax withheld will be equal or approximate to the actual tax for the year. This taxation system of the collection at source is based on what tax principle? A. Fiscal adequacy C. Administrative feasibility B. Theoretical justice D. Due process of law 164. One of the following situs of taxation is not true. Located or Earned Within Outside A. Taxable income of nonresident Yes No citizen B. Taxable estate of resident alien Yes Yes C. Taxable donation of resident citizen Yes Yes D. Taxable sale Yes Yes 165. Which of the following is not correct? A. In the absence of specific tax provision, taxes, in general, are not cancelable. B. Ad valorem taxes are imposed based on the standard of weight or measurement. C. Prescriptive period for assessment and collection is applicable to returnable taxes. D. The law on prescription being a remedial measure should be interpreted liberally in order to protect the taxpayer. 166. Which of the following statement is not true? A. If a taxpayer is acquitted in a criminal violation of the Tax Code, this acquittal does not exonerate him from his civil liability to pay the taxes. B. A convention for tax evasion is not a bar for collection of unpaid taxes. C. A tax assessment is necessary to a criminal prosecution for a willful attempt to defeat and evade payment of taxes. D. Criminal proceedings under the Tax code are now a mode of collection of internal revenue taxes, fees or charges. 167. Which of the following is not required to file an income tax return? A. Resident citizen with respect to his business income earned outside the Philippines B. An employee with only one employer and whose compensation income is fully collected with creditable withholding tax C. A non-resident citizen with respect to his compensation income earned within the Philippines. D. Non-resident alien with respect to his business income earned within the Philippines
168. Which of the following amount of winnings/ prizes is subject to a final tax of 20%? A. P10,000 winnings outside the Philippines B. P10,000 winnings earned within the Philippines C. P1,000 Philippines Sweepstakes winnings D. P9,000 first prize singing contest 169. A Filipino special taxpayer is taxable on his gross compensation income if his total earnings during the taxable year from multinational enterprises amounted to more than P975, 000. A. Yes, provided that the amount is to be reduced by personal exemption. B. Yes, provided that the amount is said taxpayer has the option to be taxed at special tax rate of 15% or normal tax C. Yes, for as long as the tax rate applicable is 15% D. No, because the special tax rate is applicable only to aliens classified as a special taxpayer. 170. The share of a partner in the income of a commercial partnership is A. Subject to a final tax of 10%. B. Subject to a creditable tax of 10% if the amount is P720, 000and below and 15%if the amount is more than P720, 000. C. Subject to normal tax of individual taxpayer D. Tax-exempt 171. Which of the following is subject to tax? A. The share of co-venturers in the income of a taxable joint venture. B. Capital gains on sale of partner’s capital C. Income of a general professional partnership D. Dividend income of a commercial partnership from a domestic corporation. 172. One of the following earnings is not considered as income of a nonresident foreign corporation subject to a normal tax of 30% on the gross amount. A. Rent of aircraft chartered by Philippine nationals B. Capital gains from sale of shares of stock C. Gains, profits and income from casual sales D. Interest dividends and royalty income 173. The following corporate income is subject to income tax, except E. Cash dividends received from a domestic corporation by another domestic corporation F. Royalty income received from a domestic corporation G. Interest income on foreign loans H. Intercorporate dividends received by a nonresident foreign corporation from a domestic corporation 174. This rule is not applicable to the construction of tax laws A. If the law is repealed, taxes assessed before the repeal of the may no longer be collected.
B. If the intent of the tax as not clear as to whether the taxpayer is covered by the tax obligation, the law shall be construed against the government. C. Where the intent to tax is clear and the taxpayer claims his exempt from the obligation, the tax shall be construed against the government. D. Provisions intended for the security of the taxpayer or to ensure equality or uniformity of taxation is mandatory. 175. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and private international banks (as lenders), it is stipulated that all payments of interest by the Central Bank to the lenders shall be made free and clear from all Philippine taxes which may be imposed thereon. Is the stipulation valid? A. Yes, based on international comity. B. Yes, based on the doctrine of non-taxability of the government. C. No, violative of the inherent limitations. D. No, violative of the constitutional limitations. 176. Montecina Inc., a Philippine Corporation, sold through the local stock exchange 10,000 PLDT shares that it bought 2 years ago. Montecina sold the shares for P2,000,000 and realized a net gain of P200,000. How much shall it pay tax on the transaction? A. It shall declare a P2,000,000 gross income in its income tax return, deducting the cost of acquisition as an expense. B. It shall report the P200,000 in its corporate income tax return adjusted by the holding period. C. It shall pay 5% tax on the first P100,000 of the P200,000 and 10% tax on the remaining P100,000. D. It shall pay a tax of one-half of 1% if the P2,000,000 gross sales. 177. The basis or test of exemption of real properties owned by religious, or charitable entities from real property taxes is: A. Use of the real property B. Ownership of the real property C. Location of the real property D. Ownership or location real property at the option of the Government 178. Transfer of the tax burden by one whom the tax is assessed to another. A. Shifting C. Transformation B. Capitalization D. Tax exemption 179. The method by which the manufacturer or producer upon whom the tax is imposed pays the tax and strives to recover such expense through lower production cost without sacrificing the quality of his product. A. Shifting C. Transformation B. Capitalization D. Tax exemption 180. The following are tax exempt corporations, except: A. Philippine Health Insurance Corporation (PHIC) B. SSS and GSIS
C. Philippine Amusement & Gaming Corporation (PAGCOR) D. Local water District 181. During the year 2015, Western College University, a proprietary educational institution registered with Securities and Exchange Commission (SEC) and the Commission on Higher Education (CHED), spent P15,000,000 for the construction of a new building. For income tax purposes, this amount may be: A. Claimed entirely as deduction from its 2015 gross income B. Classified as an asset or expensed outright, at the option of the government C. Classified as an asset and claim an annual depreciation over the life of the building D. Classified as an asset or expensed outright, at the option of the taxpayer 182. Which of the following is a nature of taxation? A. The power is exercised by legislative action B. It is essentially an administrative function C. It is generally payable in money D. Without it, the state can continue to exist 183. Interest income received by an individual taxpayer (except a nonresident individual) from a depository bank under the expanded foreign currency deposit system shall be subject to a final income tax at rate of: A. twenty percent (20%) of such interest income. B. fifteen percent (15%) of such interest income. C. seven and one-half percent (7 ½ ) of such interest income D. two and one-half percent (2 ½ ) of such interest income 184. Which of the following passive income from Philippine source is exempt from Philippine income tax when received by non-resident Aliens and non-resident citizens? A. Royalties, in general B. Yield or any other monetary benefit from deposit substitute C. Interest income received from a depository bank under expanded foreign currency deposit system D. Other winnings 185. How will the local government units be able to exercise their taxing powers? A. By Local Legislation B. By authority conferred by Congress C. By the issuance of the Department of Finance D. By the help of the Bureau of Internal Revenue 186. Which of the following statements is wrong? The premiums on hospitalization and health insurance may be deducted A. Not to exceed P2,400 a year per family B. Not to exceed P200 per month C. If the family income does not exceed P250,000 D. By either spouse in the case of married individuals
187. Which of the following heirs is not considered as primary? A. Legitimate children and their descendants, with respect to their legitimate parents and ascendants B. Legitimate parents and legitimate ascendants C. Surviving legitimate spouse D. Illegitimate children and their descendants 188. The following statements shall be sufficient causes for the disinheritance of children and descendants, legitimate as well as illegitimate, except. A. Has been convicted of adultery of concubinage with the spouse of the testator B. Guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendants. C. There is a maltreatment of the testator by word or deed, by the child or descendant D. Guilty of criminal offense 189. Which of the following statements is incorrect regarding estate tax? A. An essentially Mortis causa transfer which has been titled as inter Vivos shall be subject to donor’s tax B. Estate tax is more of revenue tax rather than that of a special tax C. If the decedent died on July 5, 20014 but the actual transfer of possession of the property to the heirs will take place on September 5, 2016, the estate tax will be computed based on the prevailing law on July 5, 2014. D. Under the Benefit-received theory in estate taxation, the state is a partner of the decedent in the distribution of the latter’s estate. 190. The following are the motives of a taxpayer that preclude the transfer in contemplation of death, except one, is to A. relieve the taxpayer of the burden of management B. save income and property taxes C. avoid payment of estate tax D. make dependents financially independent 191. The following are transactions and acquisitions exempt from transfer tax, except. A. Transmission from the first heir or done in favor of another beneficiary in accordance with the desire of the predecessor B. Transfer or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary C. The merger of usufruct in the owner of the naked title. D. All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions. 192. When a person dies and during the marriage the property relationship between the husband and wife was that of conjugal partnership of gains, the gross estate of the decedent would include A. exclusive property only B. All properties of husband and wife C. exclusive properties and one-half of the conjugal properties D. exclusive properties and all conjugal properties
193. Which of the following donations is not included as part of the gross estate of the decedent? A. revocable transfers B. transfers in a contemplation of death C. transfers with reservation of certain rights D. transmission under a special power of appointment 194. Which among the following distinguishes an estate tax from other kinds of taxes that are presently imposed under the provisions of the NIRC of 1997? A. Tax imposed on the privilege to transfer property ownership B. Tax that is imposed upon gratuitous transfers C. It is a tax that is imposed on the net value of the properties that are transferred D. It is imposed only upon the death of a person. 195. Mr. A died leaving several parcels of land. Before the properties are distributed to his heirs, the tax to be paid is known as A. Donor’s tax C. Inheritance tax B. Estate tax D. Transfer tax 196. The estate tax is to be computed starting from the death of the decedent because A. The provisions of the NIRC of 1997 require it B. The privilege to transfer properties takes place upon death C. It is only upon the decedent’s death that his heirs are known D. At the time of death, that estate taxes are due 197. Cliff Robertson, an American citizen, was a permanent resident of the Philippines. He died in Miami Florida. He left 10, 000 shares of Meralco, a condominium unit at the Twin Towers Building at Pasig, Metro Manila; a house and lot in Los Angeles, California, USA; a lease contract over a condominium located in Florida, USA. Which of the following properties shall be excluded in the Estate Tax Return to be filed with the BIR? A. The value of the Florida, USA condominium B. The value of the Pasig, Metro Manila condominium C. The value of the house and lot located in California, USA D. The value of the 10, 000 Meralco shares 199. Which of the following unpaid taxes is not deductible from the gross estate? A. Property taxes accrued prior to decedent’s date B. Income taxes on income earned and received from the estate after decedent’s death C. Gift taxes on life time gifts which remain unpaid at date of death D. Capital gain tax on transfers before death and paid after date of death 200. Which of the following is deductible from the exclusive portion of the gross estate? A. Vanishing deduction pertaining to property inherited by the decedent prior to marriage under conjugal property ownership B. Transfer for public use pertaining to joint donation of husband and wife to the government
C. Bad debts for uncollectible claims against insolvent person D. Family home pertaining to house and lot acquired during marriage under absolute community 201. Which of the following is allowed as a deduction from the gross estate of a nonresident citizen? A. Family home with respect to residential house located in the country B. Standard deduction of P1,000,000 C. Prorated amount of medical expenses incurred 18 months prior to date of death D. Vanishing deduction with respect to property located in the Philippines which was acquired through gratuitous title 4 years prior to death of present decedent 202. Which of the following proceeds of life insurance is to be included in the taxable gross estate? A. Insurance proceeds from SSS and GSIS B. Amount receivable by any beneficiary whose designation in the policy is irrevocable C. Proceeds of group insurance is taken out by a company for its employees D. Amount receivable by any beneficiary designated in the insurance policy 203. Which of the following should be included as part of the gross estate of a decedent resident alien? A. The transmission from the first heir, legatee or done in favor or another beneficiary, in accordance with the desire of the predecessor. B. Reversion of the right of usufruct to the owner of the naked title C. Property transferred under a general power of appointment D. Property transferred for the use of the Government of the Republic of the Philippines. 204. Which of the following items does not require that the value of the said deductible amount should be included as part of decedent’s interest reflected in the gross estate? A. Claims against the insolvent person B. Receivable under RA 4917 C. Claims against the estate D. Accommodation loan 205. The following requisites are needed for the deductibility of claims against the estate, except A. All person obligations existing at the time of the decedent’s death, including medical expenses prior to death. B. The liability was contacted in good faith and for adequate and full consideration in money or money’s worth C. The creditor’s claim must be enforceable in court D. The indebtedness was not have been condoned or prescribed 206. In which of following instances is the filing of an estate return a requirement? A. The gross value of the estate is 100, 000 and is exempt from the payment of the
estate tax B. the gross value of the estate exceeds 100, 000 but is below 200, 000 and is exempt from the payment of the estate tax C. The gross value of the estate does not exceed 200, 000 and is exempt from the payment of the estate tax D. The gross value of the estate exceeds 200, 000 but is exempt from the payment of the estate tax. 207. Which of the following item is considered situated outside the Philippines A. Franchise in the name of the decedent which is exercised in the Philippines B. Share of stock holdings of decedent in a foreign corporation whose business is 90% done in the Philippines C. Bond certificate issued by a domestic corporation owned by a nonresident decedent D. Foreign currency deposited in bank outside the Philippines 208. Problem: Read and analyze the problem below. Compute the total taxable estate and the estate tax due and payable. Show your solution in a good form. Mr. Tan Cruz died intestate on September 04, 1990. He was survived by his wife and his two legitimate children. He and his wife were under the conjugal partnership of gains. On December 20, 2013, the administrator of Mr. Tan Cruz gathered the estates of the decedents which include the cash in bank: Savings Deposits 53, 750 Time Deposits (excluding the interest of 5, 756) 120, 000 Bank deposits, Security Savings representing the amount received by heirs under RA 4917 500, 000 The identified personal and real properties of the decedents are as follows: o Real properties inherited before the marriage from his father who died before the present decedent’s death of 500, 000 o Received 1, 500, 000 real property given as a gift by his business partner during the marriage 41/2 years before the present decedent’s death. o Family car, cost of 1, 000, 000 (the fair market value at the date of death is 1, 125, 000) o Household furniture and fixtures acquired during the marriage, the fair market value, 580, 000. o Land inherited during the marriage from his mother-in-law who died 6 years before the present decedent’s death, 1,290, 890 o House and Lot at Tacloban, City, Philippines were his families live and resides worth 2, 150, 000. Obligation of and charges against certain properties follow: o Funeral expenses incurred are as follows Expense paid during internment for 5 days 10, 000
Mourning apparel of the surviving spouse and his two sons used on the occasion of the burial 12, 500 Expenses for the death notices published sent to the relatives 20, 000 Cost of the burial lot, tombstone 50, 500 Fees and charges for the rites and ceremonies incident to the burial 30, 000 o Medical expenses of last illness (unpaid as of the time of death, supported by bills and statements from hospital), 600, 000 o Judicial expenses incurred for the administration and settlement of the estate is 150, 000. o Claims against insolvent debtor, 20, 000 o Unpaid mortgage on inherited land from his mother-in-law, 25, 000 o Loss of properties due to typhoon at Bacoor, Cavite, 300, 000 o Unpaid realty tax on real property received as a gift from his father, 30, 000. Additional information about the estates are as follows: 1. The value of the real properties at the time of inheritance was 300, 000. 2. The value of the real property received as gift from his business partner was 1, 000, 000 3. House and Lot at Tacloban, City, Philippines were certified as the family home of the decedent and his family by the Barangay Captain in the locality where they were situated 4. Fees and charges for the rites and ceremonies include the expenses incurred after the burial, 4, 500. 5. Out of the Medical expenses supported by bills and statements from hospitals include the 140, 000 expenses after a year of his death. 209. The spouses June and Elvira Sandoval purchases a parcel of land for P5, 000, 000 and included their two minor children as co-purchasers in the Deed of Absolute Sale. The Commissioner of Internal Revenue (CIR) ruled that there was an implied donation and assessed donor’s taxes against the spouses. Which of the following statement is correct? A. CIR is wrong because donation must be express B. CIR is correct because the amount involved is huge and ultimately ends up with the children C. CIR is wrong because financial capacity is not a requirement for a valid sale. D. CIR is correct because there was animus don and since the children had no financial capacity to be co-purchasers 210. May-ann Makabenta, sold to Jan Vincent Vocal, her residential lot with a market value of 1, 000, 000 for 600, 000. Makabenta’s cost in the lot is 100, 000. Mr. Vacal is financially capable of buying the lot. What tax should be imposed and collected from Ms. Makabenta as a result of the transaction? A. Presumed capital gains tax C. Donor’s tax B. Real Property tax D. Tax on the transfer of property 211. Which of the following is not subject to Philippine donor’s tax? A. Donation Mortis causa
B. Donation which will take upon the birth of the done C. A creditor who, out of his affection, canceled the debt of the debtor D. A parcel of land in the USA donated by nonresident Filipino to a foreigner 212. Ms.Quejada, a citizen, and resident of USA, donated $100, 000 worth of stocks to her future daughter-in-law who is to be married to his only son in the Philippines. Is the donation subject to Philippine donor’s taxes? A. Yes, but only up to the extent that exceeds the allowable P10, 000 exemption for donation by reason of marriage. B. Yes, there is not showing in the problem that the marriage actually took place within one (1) year from the date of the donation. C. No, the donor is a non-resident alien hence he is not subject to the Philippine donor’s tax law. D. No, the donation took place outside of the Philippines hence not subject to the Philippine donor’s tax law. 213. In 2014, Mr. Encarnacion, a retiree, bought 10, 000 CDA shares that are unlisted in the local stock exchange for 10 per share. In 2015, the said shares had a book value per share of 60. In view of a car accident in 2016, Mr. Encarnacion had to sell his CDA shares but he could sell the same only for 50 per share. The sale is subject to tax as follows: A. 5% and 10% capital gains tax on the capital gain from the sale of 40 per share which is the difference between 50 per share and 10 cost per share. B. 5% and 10% capital gains tax on the capital gain from the sale of 50 per share which is the difference between 60 per share and 10 cost per share. C. 5% and 10% capital gains tax on the capital gain from the sale of 40 per share which is the difference between 50 per share and 10 cost per share plus donor’s tax on the excess of the fair market value of the shares over the consideration. D. Graduated income tax rates of 5% to 32% on the net taxable income from the sale of the shares. 214. Which of the following transactions is subject to the payment of the donor’s tax? A. General renunciation of a surviving spouse in his/her share in the inheritance of the deceased spouse B. A general renunciation by the surviving spouse of his/her share in the conjugal or absolute community upon its liquidation as a result of the death of the other spouse. C. Regulatory donation where there are legally demandable obligations D. Donation made outside the Philippines by a non-resident alien of property located outside of the Philippines. 215. Which of the following is not allowed as a deduction from a gross gift? A. Wedding gift by a nonresident alien to his only son who got married during the year B. Donation by a nonresident alien to the Philippine government C. Donation by a nonresident alien to educational institution, 80% of which is for free tuition fee of children of farmers D. Donation by a domestic corporation to the National government
216. Which of the following needs to be in writing? A. P2000 worth of jewelry is given as a gift to stranger B. P1000 worth of toy car was given as birthday to a son C. A parcel of land donated to the accredited charitable institution D. P4000 credit written off in favor of debtor in the name of friendship 217. Which of the following need not be in writing? A. A parcel of land donated to a stranger B. P2,000 worth of jewelry is given as a gift to mother-in-law C. P50,000 worth of old car given as birthday gift to a son D. P6,000 credit written off by the creditor in favor of a debtor who is a friend 218. Which of the following is subject is subject to tabular donor’s rate? A. A birthday gift was given to a mother-in-law B. A wedding gift was given to a daughter C. Donation to a town fiesta D. Gift to a 3rd cousin 219. Rosanna gave her parents a gift of P200,000and made a donation of P70,000 to her parish church. She also donated a parcel of land to the city government of Quezon city. Which of the gift made may be subject to donor’s tax? A. Donation to parish church B. Donation to parents C. Donation to the government of Quezon City D. All of the above 220. Which of the following is not subject to donor’s tax? A. Transfer of property for less than adequate and full financial consideration B. Cancelation of debt for personal consideration C. Contribution to a political candidate D. Gift to a stranger 221. A deed of donation was executed by Mr. A, a resident of Manila, in the City of Manila, in favor of Mr. B, a resident of Quezon City. Mr. B executed a deed of acceptance in Quezon City. The donor’s tax return must be filed with the Bureau of Internal Revenue Office at the A. Residence of the donor. B. Residence of the donee C. Residence of the donor or of the done, whichever the donor chooses D. Location of the property 222. Which of the following overseas call is subject to percentage tax? A. Transmitted by the A City Government of Baguio B. Transmitted by Health Center Massage Clinic of Baguio C. Transmitted by US embassy in the Philippines D. Transmitted for dissemination of news item through public press
223. Which of the following statement is not correct? A. Donation by a nonresident alien to the Philippine government is exempt from donor’s tax. B. A donation made by the husband without the consent of the wife is valid in cases of moderate donations for charity or on the occasion of family rejoicing or distress. C. Cash gift shall be valued at the fair market value or face value of the currency whichever is lower. D. The first P100,000 of the net gift for every year is not subject to donor’s tax. 224. A resident makes the following gifts or donations. Which of them is exempt from donor’s tax? A. Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural or adopted children to the extent of the first P10,000 B. Gifts made to or for the use of the National Government or any entity created by any of its agencies which are conducted for profit, or to any political subdivision of the said Government C. Gifts in favor of an educational and/ or charitable, religious cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization D. All of the above 225. Which of the following is subject to 4% percentage tax? A. Life insurance policy premiums collected by a resident foreign insurance company B. Life insurance policy premiums collected by agent of resident foreign insurance company C. Life insurance policy premiums collected by agent of nonresident foreign insurance company D. Premium on insurance policy took directly from the owner of the property insured 226. Which of the following statement is correct? A. The “Gross Philippine Billing” includes the total amount of gross revenue including non-continuous and interrupted flight. B. A VAT-registered radio and TV broadcasting company is subject to a percentage tax of 3% if its total gross receipts during the year are P1,500,000 and below. C. The gross receipts of the gas and water franchise are subject to a 3% percentage tax. D. Overseas dispatch, message or conversation is subject to a percentage tax of 10% 227. Which of the following is not correct? A. The percentage tax on stock transaction inside stock exchange is to be remitted within 5 banking days from the date withheld by the broker B. The percentage tax on winnings is to be remitted within 20 days from the date withheld C. The percentage tax on overseas dispatch is to be remitted within 20 days from the date withheld D. The percentage tax on IPO is to be remitted within 30 days from the date of listing on local stock exchange
228. Which of the following statement is not correct? A. A follow through offering is conducted during the IPO B. The primary offering of corporate own share is subject to IPO tax rate C. The secondary offering of the investment shares of the existing shareholder during the IPO D. IPO is the first-time public offering of the corporate own shares of stock COMPREHENSIVE PROBLEMS: PROBLEM 1: The following data are shown in the books of account of Dimalugi Service Enterprises: Collections Current Previous Revenues Accounts receivable Advances Bad debts recovery (previously written-off) Claims from insurance Proceeds of life insurance P 500,000 300,000 200,000 10,000 20,000 1,000,000 P300,000 100,000 20,000 5,000 The accounts receivable collected during the current period represents the revenue of the previous period. Required: Compute the total business taxes for the current and the previous period assuming that Dimalugi is engaged in: 1. Common carrier of passengers 2. Race track 3. Boxing exhibitions 4. Water utilities 5. Life insurance 6. Life insurance as agent of foreign insurance companies 7. Overseas communication dispatches from the Philippines PROBLEM 2: Mr. X and Mrs. XY made the following conjugal donations during the year: 1. House and lot, to their nephew, in contemplation of death of the X spouses (Their nephew, however, predeceased the donors due to vehicular accident), 1, 000, 000 2. Cash, to their daughter-in-law, on account of marriage to their son, 2, 000, 000 3. Business, to their son, on account of marriage, 5, 000, 000 4. Lot, for school building construction of TESDA, 500, 000
5. Car, to their church, 1, 000, 000 6. Shares of stock, to their daughter, who is still a minor. The investments are included in the will of the spouses, 4, 000, 000 7. Car, to the Rotary Club of Tacloban Chapter, 600, 000 8. Cash, to the Liberal Party on account of the forthcoming election, 2, 000, 000 Mr. X donated the following from his exclusive properties: 1. Cash, to his secretary, on account of birthday, 100, 000 2. Diamond ring to his wife, on account of wedding anniversary, 500, 000 3. Car, to his father, on account of birthday, 200, 000 Mrs. XY sold her exclusive land for 2, 000, 000 land for 2, 000, 000 but the fair market value amounts to 5, 000, 000. The sale was made in favor of her sister who considered the inadequate consideration as a gift. Requirements: compute the total amount of donor’s tax PROBLEM 3: Mr. X and Mrs. XY, Filipino citizen, made conjugal donations during the taxable year as follows: August 20, 2013, To their son on account of marriage of 300, 000 September 20, 2013, To their daughter-in-law on account of marriage, 100, 000 March 2, 2014, Liberal Party (Exclusive property of Mr. X), 500, 000 April 28, 2014, To Philippine Government and Chinese Government of 1, 200, 000 June 23, 2014, To their nephew on account of graduation of 50, 000 To their grandson on account of marriage of 100, 000 To their church of 200, 000 July 8, 2014, To their daughter, real property subject to suspensive The condition of passing the CPA exam. The donee intends to take the exam on 2015 of 1, 000, 000 To their son, house and lot on account of marriage Last year August 25, 2013, subject to mortgage of 400, 000 assumed by their son of 2, 000, 000 December 30, 2014, To Ramon Magsaysay Foundation of 500, 000 To their son of 500, 000 To their daughter-in-law of 100, 000 To their daughter of 500, 000 Requirement: Compute the amount of donor’s tax due of both spouses in each date. 229. Statement 1: the leasing of residential units is exempt from VAT if the annual rental does not exceed 12, 800 per unit. Statement 2: The sale of adjacent dwelling to different buyer shall be aggregated as one A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 230. Statement 1: The sale fruits and vegetables is exempt from business tax Statement 2: The sale of bread is exempt from business tax. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect
231. Statement 1: The 3% general percentage tax applies for non-VAT registered taxpayers. Statement 2: A seller is subject to percentage tax if he is non-VAT registered even if his sales or receipt exceed the VAT threshold A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 232. Statement 1: A seller is subject to percentage tax even if he registered as VAT taxpayer if his annual sales do not exceed the VAT threshold. Statement 2: A seller service which is specifically subject to percentage tax is subject to VAT if its 12 months sales or receipts exceed the VAT threshold. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 233. Statement 1: Common carriers are subject to VAT on their transport of cargoes or baggage. Statement 2: Domestic sea or air carriers are subject to VAT on their transport of passengers or cargoes. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 234. Statement 1: Franchise grantees of private franchises are subject to VAT. Statement 2: Franchise grantees of the government on utilities are subject to percentage tax. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 235. Statement 1: The VAT applies to receipts or sales other than those exempted and those specifically subject to percentage tax. Statement 2: A person with vatable sales or receipts not exceeding the VAT threshold may register as non-VAT taxpayers. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 236. Statement 1: a non-VAT registered person who invoiced VAT on his sale shall be subject to 12% VAT without the benefit of an input VAT, 3% percentage tax, and 25% surcharge. Statement 2: A VAT-registered person shall be subject to a final withholding VAT of 12% on sales to the government. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 237. Statement 1: The standard input VAT is 5% of governmental sales. Statement 2: The claimable input VAT on governmental sales is 7% of the sales. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect
238. Statement 1: Sellers of properties are subject to VAT on the fair market value of the property sold or disposed of Statement 2: Gross receipts include agency monies and bank loans received by the taxpayer. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 239. Statement 1: The vatable inventories and properties of a VAT taxpayer upon retirement or cessation of business are subject to VAT as deemed as sales. Statement 2: When a business changes its trade name, vatable items or properties in its possession shall be deemed sold on the date of the change. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 240. Statement 1: No appeal from a decision of the BIR on a claim for refund may be made until other a decision on the claim has been received from the BIR. Statement 2: The decision of the BIR on a claim for refund may be appealed to any court A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 241. Statement 1: An assessment of a tax is a prerequisite for its collection Statement 2: The remedy for the state to assess and collect does not prescribe where the taxpayer committed fraud in filing a return and paying the tax. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 242. Statement 1: After the receiving the Notice of Informal conference, the taxpayer has 15 days to respond on the latter. Statement 2: Once the BIR found out that the assessment to the taxpayer is sufficient, issuance of Pre-Assessment letter is to be followed wherein the taxpayer has 30 days to respond to this letter. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 243. Statement 1: If the protest of the taxpayer is denied, the taxpayer has a 30 days to appeal his protest to Court of Tax Appeals. Statement 2: If the protest of the taxpayer is still denied in the Court of Tax Appeals, the taxpayer can elevate his protest to Supreme Court within 15 days. A. Only statement 1 is correct C. Both statements are correct B. Only statement 2 is correct D. Both statements are incorrect 244. Which of the following shall be subject to Value- Added Tax? A. Any person who, in the course of his trade or business, sells, barters, exchanges or leases goods or properties B. Any person who, in the course of his trade or business renders service C. Any person who imports goods D. All of the choices
245. In the case of importation of taxable goods, who shall be liable to VAT? A. Importer, whether an individual or corporation and whether or not made in the course of his trade or business B. Importer if made in the course of trade or business only C. Importer if corporation and only when made in the course of trade or business D. None of the choices 246. One of the followings is not a major business internal revenue tax in the Tax Code. A. VAT C. Income tax B. Excise tax D. Percentage tax 247. The account title to best reflect the VAT on a purchase: A. Sales tax payable C. Input tax B. VAT payable D. Output tax 248. Georgia Baby is an operator of parking lots. What business tax is due on his income from the business? A. Broker’s tax C. Common carrier’s tax B. Caterer’s tax D. Value-added tax 249. Who shall be statutorily liable to pay for the tax on the sale of goods or properties and sale of services and lease of properties? A. Buyer C. Consumer B. Seller D. None of the choices 250. Which of the following shall not be included in the term “goods or properties”? A. Real properties not held primarily for sale to customers or not held for lease in the ordinary course of trade or business. B. The right or privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right. C. The right or the privilege to use any industrial, commercial or scientific equipment D. The right or the privilege to use motion picture film, films, tapes, and discs 251. Which of the following shall be subject to VAT? A. Sale of a residential house and lot B. Sale of an apartment house C. Sale of a private car by its owner D. all of the above 252. Mr. Lee Pong is a manufacturer of fermented liquors. In making sales, all taxes on the products and transactions are passed on to the buyers. For purposes of the value-added tax, which of the three taxes mentioned here that he pays forms part of the gross selling price? A. Excise tax C. Percentage tax B. VAT D. None of the above
253. Mr. B is a dealer of liquors. On his sales in the Philippines, his tax is: A. Excise tax C. Percentage tax B. VAT D. None of the above 254. Sale of real property, the initial payments of which exceed twenty-five percent (25%) of the gross selling price in the year of sale. A. Sale of real property by a real estate dealer on a deferred payment basis, not on installment B. Sale of real property on installment plan C. Initial payment D. None of the choices 255. Which of the following is not subject to value-added tax? A. Transmission of property to a trustee if the property is to be merely held in trust for the trustor and/or beneficiary B. Property transferred is one for sale, lease or use in the ordinary course of trade or business and the transfer constitutes a completed gift C. A zero-rated sale of goods or properties by a VAT registered person D. None of the choices 256. In which of the following cases shall the selling price be deemed inclusive of VAT? I. If the gross selling price is based on the zonal value or market value of the property II. If the VAT is not billed separately A. I only C. Both I and II B. II only D. Neither I nor II 257. Which of the following statements is incorrect? A. A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax B. The input tax on the purchase of goods, properties or services, related to zero-rated sales, shall be available as tax credit only in accordance with the Regulations. C. The input tax on purchases of goods, properties or services, related to such zerorated sale, shall be available for tax credit or refund in accordance with the Regulations. D. Any enterprise whose export sales exceeds 70% of the total annual production of the preceding taxable year shall be considered an export-oriented enterprise. 258. Which of the following is not a sale and, therefore, is not subject to the VAT? A. Transfer, use or consumption not in the ordinary course of business of goods or properties ordinarily intended for sale or use in the course of business. B. Distribution or transfer to shareholders or investors of shares in the profits of a VAT registered person C. Distribution or transfer to creditors in payment of debt; D. Consignment sales 259. Under the VAT law, which of the following sales may not be zero-rated? A. Export sales
B. Foreign currency denominated sales C. Sale of goods to the Asian Development Bank D. Sale of goods to an export-oriented enterprise 260. Which of the following statements is wrong? The VAT is: A. not an expense B. a tax credit C. not a part of the gross selling price D. on purchases, is a part of the cost of inventory 261. Which of the following shall be considered “deemed sale” A. Distribution or transfer to shareholders or investors shares in the profits of VAT registered person B. Distribution or transfer to creditors in payment of debt or obligation C. Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned D. All of the choices 262. For deemed sale transactions, other than retirement or cessation of business, the output tax shall be based on the: A. the selling price of the goods deemed sold as of the time of the occurrence of the transactions B. the market value of the goods deemed sold as of the time of the occurrence of the transactions C. acquisition cost of the goods deemed sold D. acquisition cost or the current market price of the goods whichever is lower 263. Which one is not included in the tax base of VAT on importation? A. value used by BOC in determining tariff and customs duties B. customs duties C. excise tax D. other charges after the release of imported goods from BOC 264. Ms. Consuelo Dimagulo receives a package of goods from her sister who lives in California, USA. Ms. Consuelo will use the goods for personal purposes. She is not VAT-registered. Which of the following statements is correct in connection with the receipt of a package? A. Ms. Consuelo shall be subject to VAT on importation B. Ms. Consuelo shall not be subject to VAT on importation because she is not VATregistered C. Ms. Consuelo shall not be subject to VAT on importation but shall be subject to VAT on sales D. None of the choices 265. Bigay Gabay, Inc. enjoys tax exemption for its importations. During a particular month, it imported goods from Japan. After the release from customs custody, Bigay Gabay, Inc. transferred the imported goods to Todo Bigay Trading, a VAT registered entity. For VAT purposes, the VAT on importation shall be paid by:
A. both Bigay Gabay, Inc. and Todo Bigay Trading B. neither Bigay Gabay, Inc, nor Todo Bigay Trading C. Bigay Gabay only D. Todo Bigay only 266. Statement 1: In the books of accounts of a VAT-registered taxpayer, purchases are recorded net of input taxes Statement 2: In the books of accounts of a VAT-registered taxpayer, sales are recorded net of output taxes. A. Both statements are correct B. Both statements are correct C. The first statement is correct but the second statement is wrong D. The first statement is wrong but the second statement is correct 267. One of the following statements is wrong. Identify. For a taxpayer who becomes liable for the first time to the VAT: A. There can be an input tax on purchases he made when not yet a VAT taxpayer B. He must use a VAT invoice on the sale of the goods purchased when not yet a VAT taxpayer C. He must still use the Non-VAT invoice in use when he was not yet a VAT taxpayer on the sale of goods on hand on the transition date D. There will be an adjustment in the inventory valuation on the transition date 268. Which is correct? The inventory balance in the financial statements at any given date of a VAT-registered person is: A. Balance, net of input taxes B. Balance, inclusive of input taxes C. Balance on which the transitional input tax is computed annually D. Balance where the value-added tax thereon may be calculated by multiplying it by 12% 269. Which statement is incorrect? VAT on importation of goods: A. is imposed on an importation for sale or for use in business B. is imposed on an importation for personal use C. shall be paid prior to removal from customs custody D. may not be available as input tax 270. Gaby, a Japanese residing in the Philippines, bought garments from ABC Corp, a domestic corporation, and exported the same to Japan. The total value of exports is P100,000. VAT (output tax) due on the transactions is: A. P10,000 C. None, because 0% applies B. P5,000 D. None, because the sale is exempt from VAT 271. All amounts given are VAT not included: A, Non-VAT taxpayer, sells to B, VAT taxpayer P60,000 B, VAT taxpayer, sells to C, VAT taxpayer 90,000 C, the VAT taxpayer, sells to D, VAT taxpayer, an exporter 150,000 D, VAT taxpayer, exports 300,000
The value added tax of B: A. payable of P10,000 C. payable of P10,800 B. payable of P9,200 D. payable of P7,200 272. Which of the following non-life insurance companies shall not be subject to VAT? A. crop insurance companies C. fidelity companies B. surety companies D. bonding companies 273. Which of the following milling jobs shall not be exempt from VAT? A. play into rice B. corn into corn grits C. wheat into flour D. sugar cane into raw sugar 274. Which of the following is not subject to VAT? A. Non-life reinsurance premiums B. Insurance and reinsurance commissions, whether life or non-life C. Life insurance premiums D. Reinsurance premiums 275. A VAT subject real estate dealer sold a residential lot on January 15, 2007. The following information was made available on the terms of the sale: Gross selling price P3,000,000 Initial payments on January 15, 2007 (consisting of down payment and installment in the year of sale) 900,000 Balance to be paid in equal installment, installments starting February 15, 2007 2,100,000 The zonal value of the residual lot was P2,800,000 How much was the output tax on January 15, 2007, using 12% VAT rate? A. P360,000 C. P108,000 B. P300,000 D. None 276. JP Corporation is a merchandising concern and has an inventory of goods for sale amounting to P1,000,000. Ria Corporation, a real estate developer, exchanged its real estate properties for shares of JP Corporation resulting in the acquisition of corporate control. How much was the output tax using 12% VAT rate? A. P120,000 c. P80,000 B. P100,000 d. None 277. Using the same data in the preceding number, how much was the output VAT on the exchange of real properties held for sale for shares of stock using 12% VAT rate? A. P120,000 c. P80,000 B. P100,000 d. None
278. The following information is taken from the books of a VAT registered enterprise was provided to you: Domestic sales of goods P3,000,000 Sales of packaging materials to an export-oriented enterprise whose export sales exceed 70% of the total annual production 2,000,000 Local sales of goods to Asian Development Bank 500,000 Consignment of goods (not returned within 60 days following the date of consignment) 200,000 Goods transferred for the personal use of the owner 100,000 How much was the total taxable sales? A. P3,000,000 C. P3,800,000 B. P3,300,000 D. P5,800,000 279. using the same data in the preceding number, how much was the output tax using 12% VAT rate? A. P360,000 C. P456,000 B. P396,000 D. P696,000 280. Scrap Products is a processor of refined sugar. It purchases sugarcane from farmers for processing into intermediate stages until it becomes refined sugar. In a month, it had the following sales and purchases, no tax include: Sales P880,000 Purchases of sugarcane 220,000 Purchases of containers and paper label 100,000 The value-added tax payable is: A. P66,000 C. P74,700 B. P88,000 D. P84,800 281. Mr. C is a VAT registered person, with the following data for a taxable month, VAT is not included: Sales, domestic, to consumers – P600,000; Sales, direct exports – P300,000; Purchases, total invoice cost, from VAT registered persons: Of goods of P550,000 and of services of P330,000.The services subject to the value added tax is: A. P600,000 C. P300,000 B. P400,000 D. P900,000 282. Mr. Abnoy, a VAT taxpayer, on August 1, 2011, made the following purchases from VAT sellers, for use in his business. The amounts stated not including VAT: Machine 1, with a useful life of 19 years P3,000,000 Machine 2, with a useful life of 3 years 1,800,000 Patent, with usefulness of 2 years 600,000 The input tax on the purchases, available to Mr. Abnoy, for the month of August 2011: A. P84,000 C. P51,000 B. P15,000 D. P62,000
283. Puss, VAT registered, made the following purchases during the month of January 2007: Goods for sale, inclusive of VAT P246,400 Supplies, exclusive of VAT 20,000 Office air-conditioner, total invoice price (estimated life is 3 years) 56,000 Home appliance for residence, gross of VAT 17,920 Service for store repair, contractor, not VAT registered, total invoice amount 33,000 Service for repainting of store, total invoice amount evidenced by an ordinary receipt issued by contractor 4,480 How much was the total allowable input taxes of Puss for the month using 12% VAT rate? A. P38,688 C. P34,800 B. P35,337.60 D. P34,542.86
