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Income TaxationPrinciples of taxation Which of the following statements is false regarding the power of taxation? a. Its scope is unlimited b. Its exercise is absolutely unlimited c. It is based on necessity, because without taxes, the state cannot function d. Revenue raised must be used for public ...

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Income Taxation Principles of taxation 1. Which of the following statements is false regarding the power of taxation? a. b. c. d.

Its scope is unlimited Its exercise is absolutely unlimited It is based on necessity, because without taxes, the state cannot function Revenue raised must be used for public purpose

2. Statement 1: Governmental units performing purely governmental functions are exempt from the income tax Statement 2: Government agencies and GOCCs performing proprietary functions are taxable unless exempt by the law a. b. c. d.

True, true False, false True, false False, true

3. If a taxpayer does not want to pay his taxes due, which of the following reasons are without merit? a. b. c. d.

His right to due process was violated The right to assess has prescribed He cannot see the benefits received therefrom The tax agency does not have jurisdiction to impose/collect taxes

4. Police power versus taxation a. b. c. d.

Amount collected is limited to the cost of regulation Property is taken in the exercise thereof Inherent power of the state All of the above

5. This is the power to acquire private property upon payment of just compensation thereof for public purposes a. b. c. d.

Police power Taxation Eminent domain Internet domain

6. Which of the following is true about double taxation? a. b. c. d.

Direct double taxation is prohibited by the Constitution Indirect double taxation is prohibited by the Constitution None of the choices Both of the choices

7. Which of the following statements is true? a. Without express grant from Constitution, the National Government will not have the power to tax. b. Without express grant from Constitution, local government units will not have the power to tax. c. National taxes and custom duties are administered by the BIR while local taxes are administered by LGUs. d. None of the statements are true 8. Which of the following is the basis for taxation? a. b. c. d.

Lifeblood theory Benefits protection theory Necessity theory General welfare theory

9. As of year 2020, who is the BIR Commissioner? a. b. c. d.

Carlos Dominguez Cesar Dulay Kim Henares Ramon Lopez

10. Which is the strongest inherent power of the state? a. b. c. d.

Police power Eminent domain Taxation None of the above

11. Which of the following statements is true? a. While the inherent powers were not granted by the Constitution, it can abolish any of the three by express provision b. Taxation is the most broad or all-encompassing power c. Both of the statements d. None of the statements

12. Fixing the rate of tax is an aspect of: a. b. c. d.

Tax administration Tax legislation Tax collection None of the choices

13. Assessment of a tax liability is an aspect of: a. b. c. d.

Tax administration Tax legislation Tax collection None of the choices.

14. In line with __________, the government should not incur deficit. a. b. c. d.

Fiscal adequacy Administrative feasibility Theoretical justice Necessity theory

15. Which of the following is not a Constitutional limitation of taxation? a. b. c. d.

Due process of the law International comity Non-impairment of contracts Uniformity and equity in taxation

16. Which of the following is true about constitutional limitations of taxation? a. The constitution prohibits taxation of all revenues and assets of non-stock, non-profit educational institutions b. The constitution prohibits taxation of all revenues and assets of religious and charitable entities 17. The basis or test of exemption of real property owned by religious or charitable entities from real property taxes is: a. b. c. d.

Use of real property Ownership of real property Location of real property All of the above

18. Income taxation in the Philippines has the following features, except: a. b. c. d.

Comprehensive tax situs Progressive or schedular for individuals, in general Indirect for both corporations and individuals Global, for corporations, in general

19. This type of tax is paid by the one by which the law demands to pay it: a. b. c. d.

Direct tax Indirect tax Specific tax Ad valorem tax

20. Which of the following statements is correct? a. b. c. d.

The power to tax is inherent There can only be tax if there is a law imposing the tax All of the choices None of the choices

21. Which of the following taxes are progressive? a. b. c. d.

Estate tax Donor’s tax Income tax Value added tax

22. Which of the following taxes are indirect? a. b. c. d.

Value-added tax Percentage tax Estate tax Documentary stamp tax

23. Which of the following statements is incorrect? a. b. c. d.

Police power, eminent domain and taxation can be exercised simultaneously Unlike taxation, direct benefit is realized by the society in police power Both statements None of the statements

24. Which of the following does not describe VAT? a. b. c. d.

Indirect tax Proportional tax Ad valorem tax Local tax

25. Tax exemption are strictly construed ______ and generally ruled in favor of _______. a. b. c. d.

Taxpayer; government Government; taxpayer Taxpayer; taxpayer Government; government

26. Which of the following statements about tax laws are false? a. b. c. d.

Tax laws, unless expressly stated otherwise, are retroactive Decisions of the Court of Tax Appeals are considered part of the laws of the land Both statements None of the statements

27. A tax imposed is invalid, except if: a. b. c. d.

The theory of taxation is disregarded The limitations (i.e., inherent and constitutional) are not observed It is retroactive It results to double taxation

28. Which of the following statements is not correct? a. b. c. d.

The chartable contributions given to church are taxable Sale of bibles and rosary are taxable Both statements None of the statements

29. Which of the following does not describe real property taxes? a. b. c. d.

National tax Property tax Ad valorem Direct tax

30. Which of the following statements is wrong? a. b. c. d.

A tax is demand of sovereignty A toll is demand of ownership A special assessment is a tax Custom duties is a tax

31. Which of the following is not an example of an excise tax? a. b. c. d.

Sales tax Income tax Transfer tax Property tax

32. A suit questioning the validity of a tax law is called: a. b. c. d.

Taxpayer suit Derivative suit Class suit Representative suit

33. Which of the following is false? a. b. c. d.

A person cannot be imprisoned for nonpayment of tax Taxes are penal in nature Both statements None of the statements

34. This refers to the point on which the tax burden finally rests or settles down: a. b. c. d.

Impact of taxation Incidence of taxation Theory of taxation Burden of taxation

35. A form of tax escape by which one is given immunity wherein others are subjected to tax: a. b. c. d.

Tax avoidance Tax immunity Tax amnesty Tax exemption

Income Taxation – Individuals 36. Which of the following shall not be considered a 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 a definite intention to reside therein. b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis c. A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year (183-day rule) d. A citizen of the Philippines who went on a business trip abroad and stayed therein most of the time during the year 37. Mr. A, a non-resident citizen, arrived on the Philippines on July 1, 2020 to reside here permanently after working as a nurse in Canada for the past 10 years. Which of the following statements is correct with respect to Mr. A’s classification for tax purposes? a. He shall be classified as a non-resident citizen with respect to his income derived from January 1, 2020 until the date of his arrival in the Philippines b. he shall be classified as non-resident citizen for the whole year of 2020 c. He shall be classified as resident citizen for the whole year of 2020 d. He shall be classified as neither resident citizen nor non-resident citizen for the year 2020 38. Mr. B, an American social media influencer was hired as a management consultant by one of the big companies in the Philippines for one event, which will last for a period of not more than 3 months starting October 1, 2020. Initially, his coming to the Philippines was for a definite purpose. However, he was subsequently chosen to lead a project for a period of 1 year. The American intends to leave the Philippines as soon as his job is finished. For the taxable year 2020, Mr. B shall be classified as a: a. b. c. d.

Resident citizen Resident alien Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business

39. Mr. C, a Korean singer, was engaged to sing for every night for one week at the Mall of Asia Arena, after which he returned to Korea. For income tax purposes, he shall be classified as: a. b. c. d.

Resident alien Nonresident alien engaged in trade or business Nonresident alien not engaged in trade or business Resident citizen

40. Mr. D, a Chinese businessman, stayed in the Philippines from November 28 to December 5, 2020 to watch the PBA Finals held in Araneta Coliseum. During his stay, he bought equity investments from blue-chip Philippine Companies. He also invested in mutual funds in the country. Mr. D is a: a. b. c. d.

Resident citizen Resident alien Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business

41. A “global” system of income taxation means: a. All types of income, except those subject to final taxes and capital gains taxes, are aggregated to arrive at the taxable base b. Separate graduated rates are imposed on different types of income c. Capital gains are excluded in determining gross income d. Compensation income and business/professional income are taxed worldwide (i.e., at different places in the world) 42. The Philippines is said to have: a. b. c. d.

A global income tax system A schedular income tax system A semi-global, semi-schedular income tax system A regressive income tax system

43. The following are subject to net income taxation, except: a. b. c. d.

Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business Resident citizen Non-resident citizen

44. The following individuals are required to file an income tax return, except: a. b. c. d.

Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business Resident citizen Non-resident citizen

45. The payor of passive income subject to final tax is required to withhold the tax from the payment due to the recipient. The withholding of the tax has the effect of: a. b. c. d.

A credit from the recipient’s income tax liability A final settlement of the tax liability on the income Consummating the transaction resulting in an income A deduction in the recipient’s income tax return

46. MWEs receiving “other benefits” exceeding 90,000, in addition to the statutory minimum wage (SMW), hazard pay, overtime pay, holiday pay, night shift differential shall be

a. b. c. d. 47.

Taxable on the excess benefits received only Taxable on the excess benefits as well as the SMW received Still exempt from income tax, being classified as MWE None of the above

Mr. A, married, with two dependent children, received the following income for 2020: Business income, PH Business income, HK Interest, PHP deposit, BDO Interest, U$D deposit, BDO Interest, HK$ deposit, in HK Prize (Refrigerator) in local lottery Lotto winnings, PH (PCSO) Prize won in a contest in US Lotto winnings, US Dividend, PH company

1,000,000 200,000 100,000 420,000 50,000 50,000 2,000,000 300,000 100,000 600,000

Determine the net taxable income assuming he is: a. b. c. d. 48.

RC 80,000 180,000 1,558,000 1,650,000

NRC 180,000 80,000 908,000 1,000,000

RA 830,000 1,000,000 908,000 1,000,000

NRE-ETB 180,000 1,000,000 908,000 1,000,0000

Mr. A, a resident citizen, provided the following data for the current year taxable: Gross income from business income (gross of 12,000 CWT) Business expenses Royalty from books Gain on direct sale to buyer of shares of stock held as capital asset Loss on sale of land in the PH, held as capital asset How much is the income tax payable of Mr. A? a. 12,000 b. 18,000 c. 30,000 d. None

700,000 300,000 40,000 70,000 500,000

49. Mr. A, married, supporting his 3 minor children had the following data for the current taxable year (assume exchange rate of PHP50 = U$D1) Business income Professional income Salaries (no WTC) Business and professional expenses Income tax paid abroad

Philippines (in PHP) 1,000,000 400,000 200,000 250,000

Abroad (in U$D) 20,000 10,000 8,000 4,000

If Mr. A is a resident citizen, his income tax payable should be: a. b. c. d.

434,000 570,500 589,000 509,000

50. If Mr. A is a non-resident citizen, his income tax payable should be: a. b. c. d.

295,000 358,020 384,380 357,000

51. Mr. A and Mrs. A, both CPAs and residents of the Philippines with minor children, had the following data for the 2020 taxable year: Basic salaries, wife th 13 month pay and other bonuses, wife Professional fees (net of 5% CWT) Expenses – Practice of profession Rental income (net of 5% CWT) Rental expenses, repairs (gross of 2% CWT) Other income, husband How much is the taxable income of Mr. A? a. b. c. d. 52.

484,000 684,000 1,870,000 2,554,000

How much is the taxable income of Mrs. A? a. b. c. d.

371,000 359,000 1,870,000 410,000

1,200,000 140,000 1,710,000 190,000 80,000 64,000

53. Ms. C (Not VAT-registered) operates a pet shop and at the same time, offers interior design services to her clients. The following data were provided by her for the taxable year 2019: Pet shop Gross sales Cost of sales Operating expenses

1,800,000 600,000 200,000

Interior design services Gross revenues Cost of services Operating expenses

1,150,000 120,000 80,000

How much is the income tax liability for the year? a. b. c. d.

216,000 300,000 475,000 540,000

54. Assuming Ms. C signified her intention to avail of the 8% tax regime as provided by the TRAIN law, how much is the income tax payable? a. b. c. d.

216,000 300,000 430,000 540,000

55. The income tax due of a mixed income earner who opted to be taxed at 8% income tax rate shall be: a. The tax due from compensation computing using the graduated rates b. The tax due from self-employment and/or practice of profession or 8% of gross sales/receipts and other non-operating income c. Either a or b d. Both a and b

56. Which of the following is incorrect about the levying of capital gains tax on sale of real

properties in the Philippines? a. In case of sale or disposition with the intention to buy or construct a new principal residence, the Commissioner of Internal Revenue shall be notified within 30 days from the date of sale or disposition if the taxpayer intends to apply for income tax exemption b. In case of eminent domain, the buyer shall have the option to be taxed at either capital gains tax or ordinary income tax

c. Both statements d. None of the statements 57. Which of the following is not a valid tax credit to the income tax due?

a. b. c. d.

Expanded withholding taxes Withholding taxes on compensation Final withholding taxes on passive income None of the choices

58. Which of the following is not within the scope of tax legislation?

a. b. c. d.

Fixing the imposable tax rate Assessment of tax Determining the subject to be taxed Determining the purpose of the tax

59. When will a self-employed individual file its first quarter income tax return?

a. b. c. d.

April 15 of current year May 15 of current year July 15 of current year April 15 of the following year

60. In 2020, Mr. C, a resident Filipino citizen, received dividend income from a U.S. based corporation which owns a chain of Filipino restaurants in the west coast of the U.S.A. The

dividend remitted to Mr. C is subject to U.S. withholding tax with respect to a non-resident alien like Mr. C. Under the Philippine laws, such income is subject to:

a. b. c. d.

Final income tax Basic income tax Capital gains tax Exempt from tax

61. Which of the following may not raise money for the government? 62. Power of taxation 63. Police power

← b. c. d. e.

Power of eminent domain

I, II and III I and II only III only II and II only

64. Which of the following statements is not correct?

a. Taxes may be imposed to raise revenue or to provide incentives or disincentives for certain activities within the State b. The state can have the power taxation even if the Constitution does not expressly give it the power to tax c. For the exercise of the power of taxation, the state can tax anything at any time d. The provisions of taxation in the Constitution are grants of power and not limitations on the taxing power

65. One of the following is not a characteristic or an element of tax:

a. b. c. d.

It is levied by legislature It is payable in money or in kind It is proportionate in character It is an enforced contribution

66. Which of the following is not an element of direct double taxation?

a. b. c. d.

Same subject matter Same taxable period Same amount of tax Same taxing authority

67. Which of the following is not an exception to the general rule of non-delegability

of taxing power? a. The President’s authority to fix tariff rates, import and export quotas, tonnage and wharfage dues b. Local government unit’s to create its own source of revenues by levying taxes c. Revenue bills originating from the Senate d. Delegation to administrative agencies for implementation of tax law 68. In the case of a mixed income earner opting to be taxed at 8% tax, which shall be the

tax base of the 8%? a. Gross sales or receipts from business or practice of profession and other non-operating income b. Gross compensation income from employment c. Both a and b d. Neither a nor b 69. Assuming the same information above, which of the following is incorrect?

a. b. c. d.

The taxpayer is considered as a mixed income earner The 8% tax shall be in lieu of all types of income taxes and business tax of 3% The taxpayer may not adopt a fiscal year of accounting period None of the choices

70. Optional standard deduction is allowed for the following taxpayers, except:

a. b. c. d.

Resident alien Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business None of the choices

71. Which of the following income of a minimum wag...