Taxation MCQ Part 2

University of Cebu (UC) College of Law

25 October 2011

University of Cebu College of Law Bar Operations 2011 Taxation Law Society

MULTIPLE CHOICE QUESTIONS (Pre-Bar Exam) [based on Supreme Court 2011 Bar Coverage for Taxation]

INSTRUCTIONS: Please select the best answer by shading the portion (in the Answer Sheet) corresponding to your letter choice. (TIME LIMIT: 90 minutes)

1. Among Among the nature nature of taxati taxation on is that that it is an inheren inherentt powe powerr being being an attribut attribute e of sovereig sovereignty. nty. Which Which among the followi following ng is NOT among among its manifestation as such inherent power? a. b. c. d.

Courts cannot cannot issue an injunction injunction to enjoin the the collection collection of taxes. taxes. There should should be no improper improper delegation delegation of the power power to tax. tax. Taxes may be imposed imposed even even without without a constitution constitutional al grant. grant. The State State has the right to select the subjects and and objects objects of taxation.

2. The defense defense available available to a taxpayer taxpayer who is required required to pay excessive excessive taxes is: a. b. c. d.

That That the tax is is levied levied for a religio religious us purpose purpose Due Due pro proces cess s of of law law Equal Equal pro protec tectio tion n of the the law law Non-imp Non-impair airment ment of obligat obligation ions s of contrac contractt

3. The Municipality Municipality of Bogo Bogo in the province province of Cebu Cebu has an ordinance ordinance which which requires all stores, restaurants, and other establishments selling liquor to pay a fixed annual fee of P20,000. Subsequently, the municipal council proposed an ordinance imposing a sales tax equivalent to 5% of the amount paid for the purchase or consumption of liquor in stores, restaurants, and other establishments. establishments . The municipal mayor refused to sign the ordinance on the ground that it would constitute double taxation. Is the refusal of the mayor justified? a. No. The refusal of the the mayor mayor is unjustified unjustified because double taxation is allowed in our jurisdiction. b. No. The refusal of the the mayor is not not justified because the impositions are of different nature and character. c. No. The refusal of the the mayor mayor is unjustified unjustified because it is is not within his power. d. Yes. The refusal of the the mayor mayor is justified justified because the impositio impositions ns constitute double taxation. 4. Which Which is NOT an essentia essentiall character characteristic istic of of a tax? a. b. c. d.

It It It It

is is unlim unlimited ited as to to amoun amount. t. is a regu regula larr paym payment ent.. is is propo proportio rtionate nate in char character acter.. is is paya payabl ble e in mon money ey..

UC College of Law Bar Operations 2011

2

5. Which statement refers to police power as distinguished from taxation? a. b. c. d.

It can only be imposed on specific property or properties. The amount imposed depends on whether the activity is useful or not. It involves the taking of property by the government. The amount imposed has no limit.

6. An annual tax of P500.00 was imposed upon all residents of the Philippines, who are above twenty-one (21) years of age, with a gross annual income of P250,000, whether or not they send their children to public schools, for the purpose of raising funds in order to improve public school buildings. The said tax is: a. b. c. d.

violative of the equal protection clause of the Constitution confiscatory for a public purpose a contradiction to the inherent limitations of taxation

7. Which of the following violates the inherent limitation of the power of taxation? a. A supplier of school supplies for the Department of Education shifted the value-added tax (VAT), making the government an indirect taxpayer of the VAT. b. A revenue regulation was issued by the Department of Finance to amend a mistake in a tax law. c. Income of the United States (US) government in the Philippines is not subjected to income taxation. d. Resident citizens abroad are taxed on their income abroad even if they have no income from the Philippines. 8. Consider the following statements: The power of taxation involves the promulgation of rules. II. The State has the power to impose taxes even without a constitutional grant. III. Taxes are based upon the lifeblood theory. IV. There should be no improper delegation of the power to tax. I.

Choose the correct answer from among the following choices: a. Statements I and II are both manifestations of legislative in nature. b. Statements II and IV are both manifestations of legislative in nature. c. Statements I and IV are both manifestations of inherent in nature. d. Statements II and III are both manifestations of the of taxation.

taxation being taxation being taxation being inherent nature

9. Justice Marshall said that the power to tax involves the power to destroy while Justice Holmes maintains that the power to tax is not the power to destroy. Which among the following statements does NOT reconcile the two seemingly inconsistent opinions? a. The imposition of a valid tax could not be judicially restrained merely because it would prejudice taxpayer’s property. b. The power to tax could not be the subject of compensation and setoff.


3

c. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayer’s property. d. Justice Marshall’s view refers to a valid tax while Justice Holmes’ view refers to an invalid tax. 10. Which of the following is a similarity among the three (3) inherent powers of the State? a. They are superior to the impairment clause of the Constitution. b. They are means by which the State interferes with private rights and properties. c. They affect the community as a whole. d. They are commonly payable in money. 11. Mr. X is a law-abiding citizen who pays his real estate taxes promptly. Due to a series of typhoons and adverse economic conditions, an ordinance was passed by the City Government of Quezon City granting a 50% discount for payment of unpaid real estate taxes for the preceding year and the condonation of all penalties on fines resulting from the late payment. Arguing that the ordinance rewards delinquent taxpayers and discriminates against prompt ones, Mr. X demands that he be refunded an amount equivalent to one-half of the real estate taxes he paid. The city attorney rendered an opinion that Mr. X cannot be reimbursed because the ordinance did not provide for such reimbursement. Mr. X files a suit to declare the ordinance void on the ground that it is a class legislation. Will Mr. X’s suit prosper? a. The suit will prosper because the ordinance is discriminatory in character. b. The suit will prosper because the ordinance is not based on substantial distinction. c. The suit will not prosper because taxes are the lifeblood of the government and should be collected without unnecessary hindrance. d. The suit will not prosper because the ordinance is based on substantial distinction. Each set of taxes is a class by itself and the law would be open to attack only if all the taxpayers belonging to one class were not treated alike. 12.

Estate tax is an example of a: a. b. c. d.

Direct, property, and national tax Direct, excise, and national tax Direct, personal, and national tax Indirect, property, and national tax

13. The exemption of minimum wage earners from income tax is an illustration of: a. b. c. d.

Lifeblood theory Employer-benefit rule Nature of the power to tax Benefits-protection theory

14. Citing Section 10, Article VIII of the 1987 Constitution which provides that salaries of judges shall be fixed by law and that during their continuance in office their salary shall not be decreased, a judge of a


4

Regional Trial Court questioned the deduction of withholding taxes from his salary since it results into a net deduction of his pay. Is the contention of the judge correct? a. No. The contention is incorrect because taxes are enforced contributions. b. No. The contention is incorrect because taxes must be collected in order to support the government. c. No. The contention is not correct because deduction of withholding taxes is not a diminution contemplated by the Constitution. d. No. The contention is incorrect because deduction of withholding taxes is required by law. 15.

As to who bears the burden, a community tax is a – a. b. c. d.

Personal tax Direct tax Ad valorem tax Local tax

16. Which of the following corporations is subject to the Minimum Corporate Income Tax (MCIT)? a. b. c. d.

Proprietary educational institutions Resident foreign corporations Domestic corporations subject to special tax rates Offshore banking units

17. Edwin is a minimum wage earner working at Kudos Metal Corporation. During the year 2010, in addition to his basic salary, he also received holiday pay, overtime pay, night shift differential pay, and hazard pay. He received a hazard pay in view of the risky nature of his job as a production worker of the said corporation. Which of the aforementioned income received by Edwin is/are taxable? a. b. c. d.

Only the hazard pay and the night shift differential pay None of the income received by Edwin is taxable Only the night shift differential pay Only the hazard pay

18. The Improperly Accumulated Earnings Tax (IAET) shall be applicable to which of the following corporations? a. b. c. d.

Insurance companies Taxable joint ventures Banks Taxable partnerships

19. Which of the following is NOT a correct principle of individual income taxation? a. Resident Filipino citizens are taxable on all income from sources within and without the Philippines. b. Non-resident citizens are taxable only on income from sources within the Philippines. c. Overseas Contract Workers (OCW) are taxable only on income from sources without the Philippines. d. An alien individual, whether a resident or not of the Philippines, is taxable only on income from sources within the Philippines.


20.

5

The fringe benefit tax is NOT: a. a final tax to be withheld by the employer b. an employee’s benefit supplementing a money wage or salary c. to be paid on or before the 10th day of the month following the calendar quarter in which the fringe benefit was granted d. an expense deductible from the gross income of the employer

21. Under the National Internal Revenue Code, the term “corporation” excludes not only general professional partnerships, but also: a. b. c. d.

Joint stock companies Insurance companies Joint accounts or cuentas en participacion Joint venture formed for the purpose of undertaking construction projects

22. Which of the following statements about Minimum Corporate Income Tax (MCIT) is NOT correct? a. The MCIT is imposed on a taxable corporation beginning on the fourth taxable year of the corporation’s business operations. b. The imposition of the MCIT on a corporation may be suspended by the Secretary of Finance on the ground of legitimate business reverses. c. If the MCIT is applicable, it should be computed and paid quarterly at the time of filing of the quarterly corporate income tax. d. A resident foreign corporation is subject to MCIT. 23. On general rules on capital gains and losses, which of the following statements is NOT true? a. Capital gains and losses of corporations are always recognized in full. b. The net capital loss of one year can be carried over to the succeeding year by a corporation. c. Capital losses are always deductible only against capital gains. d. The recognition of capital gains and losses for individuals takes into account the holding period of the capital asset. 24. Under this test, the accrual of income and expenses for income tax computation purposes is permitted if the right to income or liability has been fixed, and the amount of such income or liability can be determined with reasonable accuracy. This test is called: a. b. c. d.

Immediacy test Rational basis test All events test Realization test

25. All of the following statements are correct EXCEPT one. Which one is the exception? a. Income from personal service is considered derived from the country where the services were rendered. b. Rents or royalties are considered derived from the country where the property is located.


6

c. Income from sale of property is considered derived from the country where the property is located. d. The source of interest income is the country where the creditor resides. 26.

The following fringe benefits are not taxable EXCEPT: a. Those which are authorized and exempted under special laws b. Contributions of the employer for the benefit of the employee to retirement, insurance, hospitalization benefit plans, holiday and vacation expenses c. Those benefits given to rank-and-file employees d. De minimis benefits

27. Mr. Ortega owns a 5-door apartment with a monthly rental of P 10,000 each residential unit. Later, he sold such property for it is not anymore generating income. The value of the property before sale was P10,000,000 and was sold at P7,500,000. Is Mr. Ortega liable to pay the capital gains tax? a. Yes, because the property sold is a capital asset, located in the Philippines and not used in business as it ceases to be profitable. b. Yes, because the property sold is a capital asset in contemplation of law and the capital loss is immaterial since again is presumed for sale. c. No, because the property sold is an ordinary asset which is real property used in business. d. No, because the apartment is considered to be a principal residence where sale thereof entitles the owner of the benefit of the exemption. 28. The Optional Standard Deduction (OSD), which is a deduction from gross income allowed to be taken in lieu of the itemized deductions, is: a. not available against compensation income of an individual taxpayer arising out of an employer-employee relationship b. not available to an individual taxpayer who is a self-employed resident alien c. available against compensation income of an individual taxpayer arising out of an employer-employee relationship d. available to an individual taxpayer who is a self-employed nonresident alien 29. Under Philippine tax laws, which of the following transactions shall NOT be subject to tax on dividends? a. Property dividends paid by a domestic corporation to a resident foreign corporation. b. Cash dividends received by a non-resident foreign corporation from a domestic corporation. c. Property dividends paid by a domestic corporation to a non resident citizen d. Partner’s share in the distributive income of a business partnership.

30. On November 10, 2010, Mr. and Mrs. Henares sold their principal residence in Makati City for P 6,500,000. The following requirements must be met in order that the capital gains presumed to have been


7

realized from such sale may not be subjected to the 6% capital gains tax, EXCEPT: a. They must inform the BIR of the intention of to avail of the tax exemption within thirty (30) days from the date of sale. b. They must fully utilize the proceeds of the said sale to acquire or construct a new principal residence immediately. c. The property sold must not be used in business. d. They can only avail of the tax exemptions once every ten (10) years. 31.

Foreign income taxes paid by a foreign corporation – a. May be claimed either as a deduction or as a credit, at the option of the corporation. b. May be claimed only as a deduction or as a tax credit, whichever has the lower amount. c. May be claimed as a tax credit only. d. Do not qualify either as a deduction or as a tax credit.

32. All of the following corporations below are exempt from income tax EXCEPT: a. b. c. d.

Philippine Health Insurance Corporation (PHIC) Philippine Amusement and Gaming Corporation (PAGCOR) Local Water Districts Philippine Charity Sweepstakes Office (PCSO)

33. Interest income received by a non-resident citizen from a depository bank under the expanded foreign currency deposit system shall be: a. b. c. d.

Subject to final tax of 10% of such interest income Subject to final tax of 7.5% of such interest income Subject to final tax of 20% of such interest income Exempt from tax

34. Which of the following income items earned by Mr. Roxas, a resident citizen, shall be included in the “Gross Income” for income tax computation purposes?

a. b. c. d.

Realized Gain from Redemption of of Bonds Shares in Mutual Fund Five Years Included Excluded Included Excluded

Realized Gain from Sale with Maturity of Excluded Excluded Included Included

35. Tiffany Rodriguez, a resident alien employed in a domestic corporation, was separated due to her falling eyesight. She was given P 50,000 as a separation pay. She contended that such pay is not taxable. Is her contention correct? a. Yes, because her separation is due to her disability, hence, involuntary and for a cause beyond her control.


8

b. No, because her separation is due to her disability, hence, a cause attributable to her own incapacity. c. Yes, because the separation pay is an income derived from sources within the Philippines. d. No, because the income of aliens is not subject to tax. 36. Which of the following income payments is subject to final withholding tax? a. Dividends received by a domestic corporation from a domestic corporation b. Interest income on dollar deposit of a non-resident alien c. Interest on long-term deposits with maturity period exceeding 5 years d. Tax informer’s reward

37. Which of the following statements below is correct regarding taxation of estates and trusts? a. Income of estates or any kind of property held in trust shall be taxable to the grantor if the instrument is revocable. b. Income of estates or any kind of property held in trust shall be taxable to the grantor if the instrument is irrevocable. c. Income of estates or any kind of property held in trust shall be taxable to the fiduciary if the instrument is revocable. d. Income tax imposed upon corporations shall also apply to the income of estates or of any kind of property held in trust. 38. Cash dividends received from a domestic corporation by Mr. Roberts, a non-resident alien engaged in business in the Philippines, is subject to: a. b. c. d.

10% final tax of the gross amount of the dividend. 15% final tax of the gross amount of the dividend. 20% final tax of the gross amount of the dividend. the schedular tax rates under the Tax Code because such item forms part of Gross Income.

39. Mr. Celso Angeles is a big-time swindler. In one year, he was able to earn P2,000,000 from his swindling activities. When the Commissioner of Internal Revenue discovered his income from swindling, the Commissioner assessed him a deficiency income tax for such income. The lawyer of Mr. Angeles protested the assessment on the ground that income tax applies only to legal income, not to illegal income. Is the contention of the lawyer of Mr. Angeles correct? a. No, the illegality of the income will not preclude the imposition of the income tax thereon. b. Yes, the illegality of the income will preclude the imposition of the income tax thereon. c. Yes, the BIR is without jurisdiction to impose taxes on illegal income. d. It depends on whether after the imposition of the tax, there will be anything left to return to the victims of the swindling activities. 40. Under Republic Act No. 9520, otherwise known as the “Philippine Cooperative Code of 2008”, what is the tax treatment of the interest paid by cooperatives on the savings and time deposits of their members?


a. b. c. d.

9

Subject to 20% final tax Exempt from tax Subject to 15% final tax Subject to 10% final tax

41. Mr. Lee is a non-resident alien based in Hong Kong. During the calendar year 2009, he came to the Philippines several times and stayed in the country for an aggregated period of more than 180 days. What kind of taxpayer is Mr. Lee for taxable year 2009? a. b. c. d.

A non-resident alien doing business in the Philippines. A resident alien A non-resident alien not doing business in the Philippines. A non-resident alien partly doing and partly not doing business in the Philippines.

42. Which of the following income items received by a non-stock, nonprofit organization operated exclusively for the promotion of social welfare is exempt from corporate income tax? a. b. c. d.

Assessment dues from members of the organization Income from grocery store operated by the organization Rentals from office spaces in the building owned by the organization Parking fees in the parking area inside the building owned by the organization

43. In computing gain or loss from the sale or other disposition of property acquired by gift or donation, the cost basis of the donee is: a. b. c. d.

Fair market value at the time of donation Purchase price plus expenses of acquisition, including VAT Fair market value at the time of purchase The basis as if the property is in the hands of the donor

44. ABC Corporation, a domestic corporation, paid various taxes during the taxable year 2010. For income tax computation purposes, which of the following is NOT deductible from its gross income? a. b. c. d.

Documentary stamp tax Value-added tax Real estate tax Fringe benefits tax

45. Which of the following cash or property dividends is subject to Philippine income tax? a. Received by a domestic corporation from another domestic corporation b. Received by a resident foreign corporation from a domestic corporation c. Received by a domestic corporation from a foreign corporation not doing business in the Philippines d. Received by a non-resident foreign corporation from another nonresident foreign corporation 46. Mirador, Inc., a domestic corporation, filed its Annual Income Tax Return for its taxable year 2008 on April 15, 2009. In the Return, it


10

reflected an income tax overpayment of P1,000,000.00 and indicated its choice to carry-over the overpayment as an automatic tax credit against its income tax liabilities in subsequent years. On April 15, 2010, it filed its Annual Income Tax Return for its taxable year 2009 reflecting a taxable loss and an income tax overpayment for the current year 2009 in the amount of P500,000.00 and its income tax overpayment for the prior year 2008 of P1,000,000.00. In its 2009 Return, the corporation indicated its option to claim for refund the total income tax overpayment of P1,500,000.00. Choose which of the following statements is correct: a. Mirador, Inc. may claim as refund the total income tax overpayment of P1,500,000.00 reflected in its income tax return for its taxable year 2009. b. Mirador, Inc. may claim as refund the amount of P500,000.00 representing the income tax overpayment for its taxable year 2009. c. No amount may be claimed as refund. d. Mirador, Inc. may claim as refund the amount of P1,000,000.00 representing the income tax overpayment for its taxable year 2008. 47. Which of the following should NOT be included in the gross estate of a decedent for purposes of computing the estate tax? a. Revocable transfer where the consideration is not sufficient b. Revocable transfer where the power of revocation was not exercised c. Proceeds of life insurance where the beneficiary designated is the estate and the designation is irrevocable d. Proceeds of life insurance where the beneficiary designated is the mother and the designation is irrevocable

48. A decedent who is not a citizen nor a resident of the Philippines shall be subject to the Philippine estate tax if: a. The decedent was a former Filipino citizen who acquired his new citizenship within six (6) months prior to his death. b. The decedent died in the Philippines. c. The decedent stayed in the Philippines prior to his death for a period of more than 180 days within the year whether continuous or interrupted. d. The decedent owns shares of stock of Philippine corporations at the time of his death. 49. The personal properties of a non-resident, not citizen of the Philippines would not be included in the gross estate if: a. The intangible personal property is in the Philippines b. The intangible personal property is in the Philippines and the reciprocity clause of the estate tax law applies c. The tangible personal property is in the Philippines d. The personal property is shares of stock of a domestic corporation 90% of whose business is in the Philippines


11

50. Mr. Estrada, a citizen of the Philippines and resident of Cebu City, died testate on June 10, 2010. Among his gross estate are properties inherited from his deceased father who died on April 14, 2007. What percentage of deduction will be used in computing the amount of vanishing deduction? a. b. c. d.

80% of the value taken as basis for vanishing deduction 100% of the value taken as basis for vanishing deduction 60% of the value taken as basis for vanishing deduction 40% of the value taken as basis for vanishing deduction

51. Summit Corporation took an insurance on the life of its President, Mr. Vincent Perez, designating his wife Ms. Grace Perez as revocable beneficiary. In the event of death of Mr. Perez, will the insurance proceeds for part of the gross estate of Mr. Perez? a. Yes, because the said insurance was secured on Mr. Perez’s life by his employer. b. No, because it was not Mr. Perez who secured said insurance for his life, and the same was not payable to his estate or to his executor or administrator, but to Ms. Grace Perez. c. Yes, because the said insurance was secured on Mr. Perez’s life by his employer, making Mr. Perez’s wife the revocable beneficiary. d. No, because the said insurance was secured by Mr. Perez’s employer, making the latter entitled to the insurance proceeds. 52. If the donor is a non-resident and not a citizen of the Philippines, which of the following statements is NOT correct? a. Property situated abroad but donated to a citizen of the Philippines is not subject to the donor’s tax. b. Property situated in the Philippines but donated to a donee abroad is subject to the donor’s tax. c. Property located outside the Philippines but donated on account of marriage to a resident of the Philippines is allowed a deduction of P10,000. d. Property located in the Philippines with a fair market value of P150,000 and donated to a citizen of the Philippines is subject to the donor’s tax. 53.

The following statements are presented to you for evaluation:

Statement No. 1 Donations to a stranger are based on gross gift. Statement No. 2 Only gratuitous transfers are subject to donor’s tax. Statement No. 3 All donations are subject to donor’s tax. a. b. c. d.

Only Statement No. 1 and Statement No. 3 are FALSE. Only Statement No. 1 and Statement No. 2 are TRUE. Only Statement No. 1 is FALSE. All statements are FALSE.

54. Mr. Villamor maintains legal residence in Quezon City. He transacted business in Makati City, and temporarily resided in Cebu City for a month. During his stay in Cebu City, he made a donation to his nephew who graduated Magna Cum Laude from one of the reputable universities in


12

Cebu City. The donation was accepted through a notarized document executed in Mandaue City. In which BIR office should the Donor’s Tax Return be filed? a. b. c. d.

Cebu City Mandaue City Quezon City Either Cebu City or Quezon City, at the option of the donor

55. Under the value-added tax (VAT) system, export sales of goods are subject to 0% VAT because the consumption will be made outside the Philippines, while importations of goods are subject to 12% VAT because they are for consumption within the Philippines. This is in accordance with what principle? a. b. c. d.

Principle of Recoupment Immediacy Principle Destination Principle Territorial Jurisdiction Principle

56. If an importer of goods is tax-exempt, the value-added tax (VAT) imposed on such importation: a. Should be paid by the tax-exempt importer, if he subsequently sells the goods to a non-tax-exempt purchaser b. Should be paid by the non-tax-exempt purchaser to whom the taxexempt importer sells the goods c. Is a liability either of the tax-exempt importer or the non-taxexempt purchaser d. Is not due even if the imported goods are subsequently sold to a non-tax-exempt purchaser because the transaction was exempt at the point of importation 57. For value-added tax (VAT) on sale of services, the output VAT is computed: a. On billings of the month b. On collections of the month on all billings made c. On the contract price of contracts completed during the taxable period d. Only and strictly on labor performed under the contract for services 58. The phrase “deemed sale” for VAT purposes includes inventories of taxable goods existing at the time of: a. Change of control of a corporation through the acquisition of the controlling interest b. Change in the trade name or corporate name of the business c. Merger or consolidation d. Dissolution of a partnership and the creation of a new partnership which takes over the business 59. All of the following transactions, EXCEPT one, are exempt from valueadded tax (VAT). Which one is the exception? a. Lease of residential units with a monthly rental per unit of P20,000, but the amount of aggregate rentals received by the lessor during the year does not exceed P1,500,000 b. Sale of real properties utilized for socialized housing as defined under the Urban Development and Housing Act of 1992


13

c. Lease of residential units with a monthly rental per unit of P10,000, but the amount of aggregate rentals received by the lessor during the year exceeds P1,500,000 d. Sale of residential lot valued at P2,500,000 60. Sweet Sugar Corporation is engaged in the manufacture of refined sugar. It ordered P5,000,000 worth of raw materials from a certain sugarcane plantation in Bacolod City. Can Sweet Sugar Corporation recover input VAT from the said transaction? a. No, because the sale of agricultural food products in their original state is exempt from VAT. b. No, because no VAT was passed on by the sugarcane plantation to Sweet Sugar Corporation. c. Yes, because Sweet Sugar Corporation is allowed to claim presumptive input VAT from the transaction. d. Yes, because Sweet Sugar Corporation was burdened with VAT when it purchased the raw materials. 61. Which of the following transactions below is NOT subject to the valueadded tax (VAT)? a. Services rendered to persons engaged in international air transport operations b. Services rendered by domestic common carriers by land for the transport of goods c. Transport of passengers by domestic sea carriers from the Philippines to a foreign country d. Services rendered by international shipping carriers doing business in the Philippines 62. Which of the following transactions is NOT exempt from value-added tax (VAT)? a. Sale of equipment and fuel to persons engaged in international shipping transport operations. b. Sale or importation of fertilizers. c. Services rendered by individuals pursuant to an employer-employee relationship. d. Sale or lease of passenger or cargo vessels and aircraft for international operations. 63. Under the National Internal Revenue Code of 1997, the Commissioner of Internal Revenue has no power or authority – a. To terminate taxable year and make assessment b. To inquire into the taxpayer’s bank deposits if there is a reasonable ground to investigate due to tax evasion c. To obtain information, examine, summon, and take testimony d. To prescribe fair market value of real properties 64. The Commissioner of Internal Revenue may _______ the payment of internal revenue tax when it appears to be unjustly or excessively assessed. a. b. c. d.

compromise abate credit refund


14

65. This principle states that where a claim for tax refund or credit is filed beyond the prescriptive period, it can still be applied against other taxes that may be due: a. b. c. d.

Claim of right doctrine Doctrine of proprietary interest Doctrine of equitable recoupment Equitable tax benefit rule

66. An audit by the Bureau of Internal Revenue (BIR) of a taxpayer’s accounting records shows that it withheld P1,500,000 from its suppliers but remitted to the BIR only the amount of P250,000. The BIR should subject the taxpayer to a: a. written notice calling it to an informal conference b. formal assessment notice and a letter of demand for the payment of the deficiency tax c. preliminary assessment notice d. warrant of levy and distraint 67. An under-declaration of sales by a taxpayer to the extent of 30% or the over-declaration of expenses to the extent of 30% shall be – a. b. c. d.

Subject to 50% surcharge Immediately due for collection Prima facie presumption of fraud on the part of the taxpayer Subject to income tax assessment

68. Which of the following will NOT suspend the period for collection of any tax by summary or judicial proceedings? a. If the taxpayer requests for reinvestigation which is granted by the Bureau of Internal Revenue (BIR) b. If the taxpayer cannot be located in the address given by him in the tax return filed c. If the taxpayer is found bankrupt by a competent court d. If the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located 69. The accused, a government employee occupying a salary grade level of 28, was charged with having violated the provisions of a tax ordinance for having willfully and deliberately refused to pay the tax imposed upon his business amounting to P1,800,000.00. The penalty imposed by the ordinance in accordance with the provisions of Section 516 of the Local Government Code of 1991 is six (6) months imprisonment. The City Prosecutor should file the tax evasion case with the: a. Metropolitan Trial Court because the imposable imprisonment is less than six (6) years imprisonment b. Sandiganbayan because the employee has a salary grade level higher than grade 27 c. Court of Tax Appeals because of the amount involved d. Regional Trial Court because it is a court of original jurisdiction and the Court of Tax Appeals acts only in aid of its appellate jurisdiction being an appellate court 70. For the calendar year ended December 31, 2010, Park Tower Corporation filed its income tax return on March 10, 2011. When is the last day for the Bureau of Internal Revenue (BIR) to make an assessment


15

concerning the said taxable period, assuming that the return filed was neither false nor fraudulent? a. b. c. d. 71.

December 31, 2013 March 10, 2014 April 15, 2014 April 14, 2014

The Court of Tax Appeals (CTA) has no jurisdiction to review – a. decisions of the Commissioner of Internal Revenue on undisputed assessments b. decisions of the Commissioner of Customs on seizure or forfeiture cases where the Commissioner orders the release of the seized cargo c. in instances where the Commissioner of Internal Revenue has failed to act on a disputed assessment within 180 days from submission of protest by the taxpayer d. the inaction of the Commissioner of Internal Revenue on disputed assessments after the lapse of 180 days from submission by the taxpayer of the complete supporting documents to support a protest

72. Mr. Francisco, a Filipino citizen, is a stockholder of Sonic Corporation, a domestic corporation engaged in the trading of house appliances. Sonic Corporation was incorporated in year 2000. Last June 20, 2011, Sonic Corporation received a Final Assessment Notice (FAN) mailed by the Bureau of Internal Revenue (BIR) last June 9, 2011. The assessment pertains to Sonic Corporation’s failure to withhold 10% tax on cash dividends declared on May 20, 2008 and received by Mr. Francisco on July 20, 2008. Based on the foregoing facts, which of the following statements is correct? a. Withholding tax should be 20%, hence, the assessment is erroneous. b. Assessment has already prescribed. c. Assessment has not yet prescribed. d. Mr. Francisco should pay 10% withholding tax because his dividend income is taxable. 73. Which of the following statements regarding the power of local government units to grant tax exemption privileges is NOT correct? a. Local government units may grant tax exemptions, tax incentives or tax reliefs through the issuance of duly approved ordinances. b. Any tax exemption or relief granted by a local government unit to a type of business shall apply to all businesses similarly situated. c. The power to grant tax exemption or incentive applies to regulatory fees imposed by the local government unit. d. In the case of shared revenues, the exemption or relief granted shall only extend to the local government unit granting such exemption or relief. 74. A taxpayer who desires to appeal a decision of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate jurisdiction over real property taxes imposed by a local government unit may raise the issue before the: a. Secretary of Finance b. Secretary of Interior and Local Government


16

c. Court of Tax Appeals d. Supreme Court 75. In addition to the basic real property tax, a city may levy an annual tax on idle lands at the rate not exceeding: a. b. c. d.

1% 5% 3% 2%

of the assessed value of the of the assessed value of the of the assessed value of the of the assessed value of the

real property real property real property real property

76. In determining the situs of local business tax, when there is no branch or sales office in the city where the sale or transaction was made – a. The sale shall be recorded in the principal office and the tax shall be paid in the city where the sale was made. b. The sale shall not be recorded in the principal office but the tax shall be paid in the city where the sale was made. c. The sale shall be recorded in the principal office and the tax shall be paid in the city where the principal office is located. d. The sale shall be recorded in the principal office but only 70% of the recorded sales shall be taxable by the city where the sale was made. 77. Which of the following properties is NOT exempted from payment of the real property tax? a. Machinery and equipment used for pollution control and environmental protection b. Lands and buildings actually, directly, and exclusively used for religious, charitable or educational purposes c. Machinery and equipment that are actually, directly, and exclusively used by local water districts d. Real property owned by the Republic of the Philippines or any of its political subdivisions, when the beneficial use thereof has been granted to a taxable person 78.

The President of the Philippines, through an executive order, may – a. b. c. d.

impose anti-dumping duties impose marking duties impose countervailing duties impose discriminatory duties

79. The President of the Philippines issued an Executive Order imposing an additional duty of 15% ad valorem on all imported commodities. The move of the President was done upon recommendation by the National Economic Development Authority (NEDA) that the collection would alleviate the cash collection of the government because of the delay in the legislative approval of the additional 2% value-added tax. The Executive Order is: a. Valid, because the President is authorized under the flexible tariff clause of the Tariff and Customs Code to issue such Executive Order b. Valid, because the issuance in accordance with sound advice from the NEDA in pursuance of the interest of the national economy and general welfare c. Not valid, because it exceeded the scope of the presidential prerogative under the flexible tariff clause


17

d. Not valid, because Congress is in session when the Executive Order was issued which results to usurpation by the President of the legislative power to tax. 80. Which among the following statements would be descriptive of a discriminatory duty? a. It may be imposed by the Secretary of Finance upon recommendation of the Secretary of Foreign Affairs who would know of the discriminatory practices from the various ambassadors posted in foreign countries. b. The discriminatory duty is imposed in order to protect Philippine consumers from the influx of cheap imported goods from other countries. c. In the instance where the country of origin of the products subject to discriminatory duties persists in its discriminatory practices against Philippine products, the President of the Philippines may ban imports from such countries. d. Discriminatory duties are imposed whenever any product is granted any form of specific subsidy by the country of origin without granting the same subsidy to products of other countries.

- end -

Taxation MCQ Part 2

Recommend Documents