NATIONAL COLLEGE OF BUSINESS AND ARTS Cubao-Fairview-Taytay SECOND SEMESTER SY 2015-2016 MID-TERM DEPARTMENTAL EXAMINATIONS TAXATION 1
2 HRS INCOME TAXATION
INSTRUCTIONS:
Select the correct answer for each of the following questions. Mark only one answer for each item by shading the corresponding letter of your choice on the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No. 2 only.
1.
Which of the following is not an example of a direct tax? a. Income tax b. Transfer tax c. Community tax
d. Business tax
2.
Police power as distinguished from eminent domain: a. Just compensation is received by the owner of the property. b. May be exercised by private individual. c. Superior to impairment clause of the Constitution. d. Property is taken by the government for public purposes.
3.
Which statement gives the correct answer? That feasibility study need not 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 uniform with the local taxes of another political subdivision. C. Businesses that are subject to national business taxes are exempted from local business taxes. D. Local business taxes may be credited against national business taxes.
4.
A fundamental rule in taxation is that the property of one country may not be taxed by another country. This is known as: A. International law B. International comity C. Reciprocity D. International inhibition
5.
Taxpayer received the following income in 2015: Rent, Philippines Rent, Hongkong Interest, peso deposit, PNB Interest, US$ deposit, PNB ($1,000 x P56) Interest, deposit in Hongkong (HK$1,000 x P7) Prize (cash) won in a local contest Prize (TV) won in a local lottery valued at Prize won in contest in US Lotto winning in US Dividend, domestic company If the taxpayer is a resident r esident citizen, his returnable gross income is: a. P18,000 b. P85,000 c. P103,000
P10,000 20,000 10,000 56,000 7,000 8,000 15,000 30,000 10,000 60,000 d. P226,000
6. Statement 1: Where donor’s tax has been paid on property received by a minor from a living parent, income on such property shall be included in the income tax return of the parent. Statement 2: The income tax return of a disabled person may be made by a person charged with the care of his property. Statement 3: The income tax return by an agent or authorized representative of the taxpayer, as indicated in the return, is under the sole responsibility of the agent or authorized representative. Statement 1 Statement 2 Statement 3 a. True True True b. False False False c. False True False d. True False True
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7.
Justine’s husband, Rain, died in April 2015 leaving seven (7) unmarried children living with and wholly dependent on Rain for support. The ages of the children are as follows: Children Ages Status A 24 Jobless B 22 Mentally retarded C 19 Studying in Manila D 10 Studying in their hometown E 8 Studying in their hometown F 6 Studying in their hometown G 3 Taken by the grandparents after the death of Rain For purposes of 2015 income tax return, how much total personal exemptions would Rain be entitled to? a. P150,000 b. P200,000 c. P225,000 d. P250,000
8.
Fords, a resident citizen, is employed as a manager of an Offshore Banking Unit in the Philippines. He is married but estranged from his wife. He has, living with him and fully dependent for support, his five (5) minor children, who were all unmarried and not gainfully employed. What amount could Fords claim as his basic personal and additional exemptions? a. None b. P50,000 c. P150,000 d. P200,000
9.
10.
A tax must be imposed for a public purpose. Which of the following is not a public purpose? a. National defense b. Improvement of sugar industry c. Public education d. Constructing a private resort Elmo received the following income in 2015: Business income, Philippines Business income, United States Expenses, Philippines Expenses, United States Interest on deposit with Metrobank Cash prize won in a local contest Cash prize won in a contest in U.S. Winnings in lotto Winnings in lotto in U.S. Dividends from SMC, a domestic company Interest on deposit in U.S. ($1 = P48) The taxable income if Elmo is a resident citizen, single, is: a. P259,000 b. P309,000 c. P265,000
P300,000 250,000 200,000 125,000 3,000 6,000 10,000 20,000 50,000 25,000 $500 d. P315,000
11. Congress granted a franchise to a shipping line for the operation of a passenger or freight service between Manila and Iloilo subject to the condition that the shipping line should carry government mails free of charge. It was then exempted from the payment of the franchise tax. In a law that was passed later, the shipping line’s exemption from the franchise tax was removed on the ground that the government needed funds for its projects. Was the law valid? a. Yes, because the government had the power to remove exemptions if the need for public funds arose. b. Yes, because the Congress had the sole prerogative to enact laws including removal of exemptions. c. No, because the grant of the franchise tax exemption was a valid consideration, which may be considered a contract. To remove the tax exemption would impair the obligation of contract. d. No, because Congress can only enact laws. It cannot remove or withdraw exemptions. 12. A fixed license fee on the sale of bibles and other religious literature is violative of: a. Non-infringement of religious freedom. b. No appropriation for religious freedom. c. Exemptions of religious, charitable or educational entities, non-profit cemeteries and churches from property taxation. d. Exemption of revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes from taxes and duties. Page 2 of 8
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13. Which of the following statements is correct? a. Tax amnesty is an immunity from all criminal, civil and administrative liabilities arising from nonpayment of taxes. b. Tax exemption is an immunity from civil liability only. It is an immunity or privilege, a freedom from a charge or burden to which others are subjected to. c. Tax amnesty applies only to past tax periods, hence of retroactive application, while tax exemption has prospective application. d. All of the above. 14. The taxpayer is a married nonresident alien engaged in business in the Philippines with two qualified dependent children. His country gives a nonresident Filipino with income therefrom a basic personal exemption of P30,000 and additional exemption for each qualified dependent child of P20,000. He is entitled to a total personal exemptions of: a. P30,000 b. P70,000 c. P190,000 d. P100,000 15. Taxpayers are husband and wife. The gross compensation income of the wife is P60,000 while the business income of the husband is P100,000. They have six (6) qualified dependent children but within the year one child died. Their total personal exemptions is: a. P100,000 b. P200,000 c. P225,000 d. P250,000 16. In case of deductions and exemptions on income tax returns, doubts shall be resolved: a. Liberally in favor of the taxpayer b. Strictly against the government c. Liberally in favor of the employer d. Strictly against the taxpayer 17. Which of the following is not a scheme of shifting the incidence of taxation? a. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold. b. The purchaser asks for a discount or refuses to buy at regular prices unless it is reduced by the amount equal to the tax he will pay. c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines. d. The manufacturer transfers the value-added tax to the distributor, then in turn to the wholesaler, to the retailer and finally to the consumer. 18. Which is wrong? Installment recognition of income is allowed in: a. Installment sales of real property where the initial payments do not exceed twenty-five percent of the selling price. b. Installment sales of personal property by a dealer where the initial payments exceed twentyfive percent of the selling price. c. Long-term contracts. d. Advance rental received. 19. The taxpayer is not a dealer of personal property regularly selling on installments. Installment method of reporting income is available to him on a sale of property if the initial payments on the sale: e. Exceed 25% of the selling price. b. Do not exceed 25% of the selling price. c. Regardless of the ratio of initial payments to the selling price. d. Do not exceed 25% of the contract price. 20. Which of the following distinguishes tax 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. 21. Tax of a fixed proportion of the value of the property with respect to which the tax is assessed and requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined is known as: a. Specific b. Ad valorem c. Special or regulatory d. Fiscal
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