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INCOME TAXATION Chapter 1 – Introduction to Taxation
MC – part 1
- The point at which tax is levied is also called a. Impact of Taxation c. Incidence of taxation b. Situs of Taxation d. Assessment
- 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 limitation d. Generally for public purpose
- Which is correct? a. Tax condonation is a general pardon granted by the government b. The BIR had five deputy commissioners c. The government can still collect tax in disregard of a constitutional limitation because taxes are the lifeblood of the government d. The president of the Philippines can change tariff or imposts without necessity of calling Congress to pass a law for that purpose
- A. The power to tax includes the power to exempt B. The power to license includes the power to tax
Which is true? a. A only c. A and B b. B only d. Neither A and B
- International double taxation can be mitigated by any of the following except a. Providing allowance for tax credit b. Provision of reciprocity provisions in tax laws c. Provision of tax exemptions d. Entering into treaties to form regional trade blockage against the rest of the world
- Which is not an object of taxation? a. Persons c .Transactions b. Business d. Public Properties
- That courts cannot issue injunction against the government’s effort to collect taxes is justified by a. The lifeblood c. the ability to pay theory b. Imprescriptibility of taxes d. the doctrine of estoppel
- 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. Exploitation
a.
- This theory underscores that taxes are indispensable to the existence of the state.
Doctrine of equitable recoupment b. The Lifeblood Doctrine c. The benefit received theory d. The Holmes Doctrine
- A. Taxation is the rule, exception is the exemption B. Vague taxation laws are interpreted liberally in favor of the government
Which is false? A. A only c. Both A and B B. B only d. Neither A nor B
- Select the incorrect statement
a. The power to tax includes the power to exempt b. Exemption is construed against the taxpayer and in favor of the government c. Tax statues are construed against the government in case of doubt d. Taxes should be collected only for public improvements
- Which is not a public purpose?
a. Public education c. Transportation b. National defense d. None of these
- Which does not properly describe the scope of taxation?
a. Comprehensive c. Discretionary b. Supreme d. Unlimited
- All of these are secondary purposes of taxation except
a. To reduce social inequality b. To protect local industries c. To raise revenue for the support of the government d. To encourage growth of local industries
- What is the theory of taxation?
a. Reciprocal duties of support and protection b. Necessity c. Constitutionality d. Public purpose
- A. taxes should not operate retrospectively. B.tax is generally for public purpose
Which is true? a. A only c. A and B
a. c. Levy or distraint of taxpayers’ property for tax delinquency d. Determining the purpose of the tax to impose
- This refers to the privilege or immunity form a tax burden which others are subject to:
a. Exclusion c. Tax holiday b. Deduction d. Reciprocity
- Statement 1: the benefit received theory presupposes that some taxpayers within the territorial jurisdiction of the Phil. Will be exempted from paying tax so long as they do not receive benefits from the government. Statement 2: the ability to pay theory suggests that some taxpayers may be exempted from tax provided they do not have the ability to pay the same.
Which statement is true? Only statement 1 c. Both statements 1 and 2 b. Only statement 2 d. Neither statement 1 nor 2
- Which is not a legislative act?
a. Determination of the subject of the tax b. Setting the amount of the tax c. Assessment of the tax d. Determining the purpose of the tax
- Statement 1: Taxation is the rule; exemption is the exception Statement 2: Taxation may be used to implement the police power of the state a. I is true c. I and II are true b. II is true d. I and II are not true
- Which of the following powers of the Commissioner of Internal Revenue cannot be delegated?
a. The examination of tax return and the determination of tax due thereon b. To refund or credit tax liabilities in certain cases c. The power to compromise or abate any tax liability involving basic deficiency tax of P500,000 and minor criminal violations d. The power to reverse a ruling of the Bureau of Internal Revenue
- When exemption from a tax imposition is silent or not clearly stated, which is true?
a. Taxation applies since exemptions are construed against the government b. Exemption still applies since this is an instance of exemption by omission c. Taxation applies since exemptions are construed against the tax payer d. Exemption applies since obligation arising from law cannot be presumed and hence construed against the government
- What is the basis of taxation?
a. Reciprocal duties of support and protection b. Constitutionality
a. c. Public purpose d. necessity
- When the provisions of tax law are silent as to the taxability of an item, which is true?
a. Taxation applies since taxation is the rule, exemption is the exception b. Exemption applies since vague tax laws are construed against the government c. Taxation applies due to the Lifeblood doctrine d. Exemption applies since obligation arising from law is presumed; ignorance of the law is not an excuse
- Which of the following statement does not support the principle that tax is not subject to compensation or set-off? a. The government and the taxpayer are not creditors and debtors of each other b. Tax is not in the nature of contract but it grows out of a duty wherein taxpayers are bound to obey even without the personal consent of the taxpayer c. Taxes arise from law, not from contracts d. Both tax and debt partake the nature of an obligation
- Which is not legally tenable in refusing to pay tax?
c. For public purpose d. Non-appropriation for religious purpose
- That all taxable articles or properties of the same class shall be taxed at the same rate underscores
a. Equality in taxation c. Uniformity in taxation b. Equity of taxation d. None of these
- The following are limitations of taxation:
A. Territoriality of taxation B. Exemption of the government C. Taxation is for public purpose D. Non-impairment of contracts E. Non-delegation of the power to tax
Which of these are classified as both constitutional and inherent limitation?
a. A and B c. C and E b. B and C d. D and E
- The provisions in the Constitution regarding taxation are
a. Grants of the power to tax b. Limitations to the power to tax c. Grants and limitations to the power to tax d. Limitations against double taxation
- The constitutional exemption of non-stock, non-profit educational institutions refers to
a. Real property tax c. property tax and income tax b. Income tax d. business tax
- Which of the following is violative of the principle of non-delegation?
a. Requiring that legislative enactment must exclusively pertain to congress b. Authorizing the president to fix the amount of impost on imported and exported commodities c. Authorizing certain private corporation to collect taxes d. Allowing the secretary of finance and the BIR to issue regulation or rulings which go beyond the scope of a tax law
- Which of the following violates constitutional provisions?
a. Payment of salaries to priest or religious ministers employed by the Armed Forces of the Philippines b. Imposing tax on properties of religious institutions which are not directly and exclusively used for religious purposes c. Imposition of license for the sale of religious literature d. Authorizing the President of the Philippines to fix the rates of tariffs or imposts
- In order to phase-out a huge deficit, the President of the Philippines passed a law offering all taxpayers with previous tax delinquency to pay a minimum tax in exchange for relief from tax assessment in the
period of delinquency. Is this a valid exercise of taxation power? a. Yes, because the measure adopted is grounded upon necessity b. Yes, because the President is merely exercising his presidential discretion c. No, because the power of taxation is non-delegated d. No, because only the Department of Finance can issue such ruling
- Concerned with increasing unemployment rates in the country, the President of the Philippines encouraged the Philippine Senate to pass a law granting special tax privileges to foreign investors who will establish businesses in the country. The senate accordingly drafted the bill and passed to Congress for approval. Is this valid exercise of taxation power? a. Yes. It is the discretion of the President to adopt any measures he deemed necessary to alleviate poor conditions in the country. b. Yes. Any means beneficial to the public interest should be given optimum priority. c. Yes. The president’s proposal will have to be finally approved and passed by the legislature. The rule on non-delegation of taxation would not be violated. d. No. tax bills shall originate from the House of Representatives
- Ram is the only practicing lung transplant specialist in Baguio City. The City Government of Baguio passed a local ordinance subjecting the practice of lung transplant to 2% tax based on receipts. Ram objected claiming that other transplant specialists in other regions of the country are not subjected to tax.
Is Ram’s contention valid? a. Yes, because the rule of taxation should be uniform and equitably enforced b. Yes, because Ram is the only one subject. Other practitioners who would later practice would not be covered by the ordinance. c. No, because the ordinance would cover all transplant specialist who would practice in Baguio City. The uniformity rule would not be violated. d. No, because subjecting new industry to taxation would hamper economic growth.
- With the country under incessant shortage of sugar, the Philippine Congress enacted a law providing tax exemption and incentives to cane farmers without at the same time granting tax exemptions to rice farmers who produce the staple food of the Philippines, is the new law valid? a. Yes, since there is a valid classification of the taxpayers who would be exempted from tax b. Yes, since sugar is more important than rice c. No, since the grant of exemption is construed in favor of taxpayers d. No, because there is no uniformity in the grant of tax exemption
- Congress passed a law subjecting government-owned and controlled corporation (GOCCs) to income tax. Is the law valid? a. Yes, because all government agencies and instrumentalities are subject to tax b. Yes, because GOCCs are not government agencies and are essentially commercial in nature
b. Uniformity d. Equal protection clause
- Which is not a legislative act?
a. Assessment of the tax c. Determination of the subject of the tax b. Setting the amount of the tax d. Determining the purpose of the tax
- The inherent powers of the state are similar in the following respect, except:
a. They are inherent to the existence of the State b. They are exercisable without the need for an express constitutional grant c. All are not exercised by private entities d. They are exercised primarily by the legislature
- Which is mandatorily observed in implementing police power?
a. Public interest c. Public Use b. Just compensation d. All of these
- Which is considered in the exercise of eminent domain?
a. Public use c. Both a and b b. Just compensation d. Neither a and b
- The general power to enact laws to protect the well-being of the people is called
a. Police power c. Taxation b. Eminent domain d. all of these
- Which of the following entities will least likely exercise the power of eminent domain?
a. Electric cooperatives c. telecommunication business b. Water cooperatives d. transportation operators
- In exercising taxation, the government need not consider
a. Inherent limitations c. due process of law b. Just compensation d. constitutional limitations
- Licensing of business or profession is an exercise of
a. Police power c. Eminent Domain b. Taxation d. All of these
- Select the correct statement
a. Eminent domain refers to the power to take public property for private use after paying just compensation b. Police power being the most superior power of the State is not subject to any limitation c. Taxation power shall be exercised by Congress even without an express Constitutional grant d. Taxes may be collected even in the absence of a law since obligation arising from law is always presumed
- Which is principally limited by the requirement of due process?
a. Eminent domain c. taxation b. Police power d. all of these
- S1: congress can exercise the power of taxation even without constitutional delegation of the power of tax S2: only the legislature can exercise the power of taxation, eminent domain, and police power?
Which statement is correct? a. Statement 1 c. statement 1 and 2 b. Statement 2 d. neither statement 1 nor 2
- Which power of the state affects the least number of people?
a. Police power c. taxation b. Eminent domain d. taxation and police power
- Select the correct statement
a. The benefit received theory explains that the government is obliged to serve the people since it is benefiting from the tax collection from its subjects b. The lifeblood theory underscores the taxation is the most superior power of the state c. The police power of the state is superior to non-impairment clause of the constitution d. The power of taxation is superior to the non-impairment clause of the constitution
- Which of the following is not exercised by the government?
a. Taxation c. eminent domain b. Police power d. exploitation
- Select the incorrect statement
a. Since there is compensation, eminent domain raises money for the government b. Once a government is established, taxation is exercisable c. The most important of the power is taxation d. Police power is more superior that the non-impairment clause of the constitution
- The following statements reflects the differences among the inherent powers except:
a. The property taken under eminent domain and taxation are preserved but that of police power is destroyed b. Eminent domain and police power do not require Constitutional grant, but taxation, being a formidable power, requires constitutional grant c. Only eminent domain can be exercised by private entities d. Taxation, police power, and eminent domain are ways in which the government interferes with private right and property
- S1: the taxation power can be used to destroy if the law is valid S2: a tax law which destroys things, business, or enterprises for the purpose of raising revenue is an invalid tax law
Which is incorrect?
a. Increase in numbers of a herd animals b. Compensation for personal inquiries c. Moral damages d. Interest on moral damages
- Which is not subject to income tax?
a. Donation c. sales of goods b. Sale of service d. barter of goods
- The total consideration received from the sale of service constitute
a. Return on capital c. either a or b b. Return of capital d. both a or b
- When paid for, which of the following items may involve a return on capital?
a. House an lot c. dignity b. Life d. health
- The total consideration received from the sales of goods at a gain represents
a. Return on capital c. either a or b b. Return of capital d. both a or b
- The total consideration received from the sale of goods at loss represents
a. Return on capital c. either a or b b. Return of capital d. both a or b
- Why is income subject to taxation?
a. Income is the most prevalent source of a taxpayer’s wealth b. Income is the best measure of taxpayer’s ability to pay tax c. Rich people tend to have more income than the poor d. Any of these
- Which is not an item of gross income because of the absence of an undertaking from the taxpayer? a. Proceeds of a life insurance policy b. Forgiveness of indebtedness as an act of gratuity c. Revaluation surplus on properties d. Service fees
- Which is subject to income tax?
a. Proceeds of life insurance policy received by the family of the insured b. Excess of proceeds over the premiums paid received by the taxpayers c. Life insurance proceeds received by the corporation from the insurance of a deceased officer d. None of these
- Which of the following is exempted from income taxation because of the absence of ability to pay? a.damages received from patent infringement suit b. unrealized income from investments c. gain on sale of goods
d. inheritance
- Income tax may be imposed for the following purposes, except a. To provide large amount of revenues b. To limit corruption c. To offset regressive sales and consumption taxes d. To mitigate the evils arising from the inequalities in the distribution of income and wealth
- Which of the following constitutes taxable income? a. Return of premium on life insurance received by the insured b. Moral damages received from slander c. Proceeds of crop insurance d. Compensation for personal injury
- Which of the following is not a constructive receipt of income? a. Forgiveness of indebtedness in consideration of service b. Matured detachable interest interest coupons c. Deposit of income to taxpayer’s bank accounts d. Cash salary of an employee
- Transfers for insufficient consideration are subject to a. Income tax c. either a or b b. Transfer tax d. both a or b
- Which is specifically exempted from income taxation by virtue of legal exemption? a. Minimum wage b. Gain on sale of prohibited drug c. Unrealized gain d. All of these
MC – Part 2
- A resident alien naturalized in accordance with Philippine laws is a a. Resident citizen b. Resident alien c. Non-resident alien engaged in trade or business d. Non-resident alien not engaged in trade or business
- Who is not a resident alien? a. An alien who stayed in the Phil. For more than two years b. An alien who married and stayed in the Phil. For one year c. And alien who stayed in the Phil. For more than one year d. An alien who established his intention before the CIR to stay in the Phil. For an extended period of time
b. Resident corpo d. de jure corpo
- A partnership which dominantly operates business abroad is a a. Domestic corporation c. non-resident corpo b. Resident corpo d. de jure corpo
- Which is required to pay income tax? a. Revocable trust b. Estates under extrajudicial settlement c. Co-ownership d. Business partnership
- Which is not an income taxpayer? a. Non-resident foreign corporation b. Non-resident alien not engaged in trade or business c. Joint venture engaged in energy operation pursuant to a service contract with the government d. Irrevocable trusts
- Which of the following taxpayers is taxable only on income earned from the Philippines? a. Resident alien c.resident citizen b. Domestic corporation d. all of these
- All of the following are taxable only on income earned from sources within the Philippines, except a. Resident alien c. non-resident corporation b. Non-resident citizen d. domestic corporation
- Which is taxable on world income? a. Resident corporation c. resident citizen b. Non-resident citizen d. resident alien
MC – Part 3
- The place of taxation is a. Situs rule c. territoriality b. Situs d. gross income
- Which is an incorrect statement regarding of situs of income? a. Service income earned in the domicile of the taxpayer b. Interest income is earned in the residence of the debtor c. Royalty is earned where the intangible is employed d. Rent is earned in the location of the property
- Which statement is correct regarding situs of income? a. The gain on the sale of real property is earned in the location of the property b. The gain on sale of any property is earned in the place of sale
c. Merchandising income is earned in the residence of the properties d. Manufacturing income is earned in the place of sale
- Pedro, a non-resident citizen, lent money to shino, a resident chinese. The indebtedness was collateralized by a property located to Japan. The interest income is earned in a. The Philippines c. Japan b. China d. Japan, China, and the Philippines
- Gains on sale of goods manufactured and sold by the taxpayer within the Philippines is subject to tax
a. Wherever sold c. without the Philippines only b. If sold abroad only d. within the Philippines only
- Yvonne, a resident alien, bought a car manufactured in the Philippines and exported the same at a gain to Carla, a non-resident citizen. Which is correct? a. The gain is subject to tax in the Philippines since the commodity involved is manufactured in the Philippines b. The gain is subject to tax in the Philippines since the buyer is a citizen of the Philippines c. The gain is both subject to tax in the Philippines and abroad since the commodity involved is manufactured in the Philippines d. The gain is taxable abroad because it is sold abroad
- Juan, a resident alien, and Pedro, a non-resident alien, executed a contract of sale in Japan whereby Pedro shall purchase the lot owned by Juan in the Philippines. Which is true? a. The gain is exempt since the gain is derived outside the Philippines b. The gain is not subject to Philippines tax since Juan is a resident alien c. The gain is subject to Philippine tax because Juan is a resident alien d. The gain is subject to Philippine tax because the property is in the Philippines
c. Residents aliens d. Non-residents citizens Which of the following is subject to 15% final tax on interest from foreign currency deposits made with Philippines banks? a. Non-resident corporation b. Non-resident alien engaged in trade or business c. Non-resident alien not engaged in trade or business d. Resident alien The following are subject to final tax on all income from sources within the Philippines. Which is the exception? a. Non-resident foreign corporation b. Non-resident alien not engaged in trade or business c. Non-resident alien engaged in trade or business d. None of these The interest income from long-term peso deposits made with foreign banks is
a. Subject to 20% final tax b. Exempt from any tax c. Subject to regular tax d. None of these What is the final tax on interest income on 6-year deposit on dividends? a. 20% b. 12% c. 5% d. 0% Which of the following recipients is exempt from final tax dividends? a. Residents citizenship b. Non-resident alien c. Resident corporation d. Resident alien A dividend declaration in 2019 is subject to a final tax of? a. 6% b. 8% c. 10% d. 20% Dividends declared by a resident corporation is a. Exempt from tax b. Subject to 10% final tax c. Subject to regular income tax d. Subject to 20% final tax Between the date of declaration and the date of record, BCD Inc. sold as investment representing stock of ABC, INC., a domestic corporation. Which statement is correct? a. ABC, Inc. shall withhold 10% dividend tax if the buyer of the sale is an individual b. ABC, Inc. shall withhold 10%dividend if the buyer of the sale is a corporation
c. ABC, Inc. shall withhold 10%dividend if the buyer of the sale is a individual d. ABC, Inc. shall withhold 10%dividend if the buyer of the sale is a corporation Which is covered by final tax? a. Interest income from foreign banks b. Share in the net income of a joint venture c. P10,000 taxable prizes from the Philippines d. Share in the net income of a general professional partnership Which is not subject to 20% final tax? a. Interest income from trust funds b. Royalties from musical compositions c. P11,000 worth of prizes d. Winnings Which is not subject to 10% final tax? a. Royalties from literary works b. Dividends from a domestic corporation c. Share in the net income of a business partnership d. Royalties from a business trademark Which of the following taxable? a. Prize on sport competitions sanctioned by the national sports organization b. Prize from dance competition abroad c. Nobel prize d. Any prize received without effort Which is the following is taxable to a final tax a. Winnings exceeding P10, b. Winnings not exceeding P10, c. Winnings from PCSO or lotto d. All of these Prizes from sources abroad is subject to final tax a. If the amount of prizes exceeds P10, b. If the amount of prizes does not exceed P10, c. If it is given to the taxpayers without effort d. Under no circumstance The following winnings are exempt from tax, except one. Which is the exception? a. Jueteng winnings b. Lotto winnings exceeding P10k c. PCSO winnings not exceeding P10k d. All of these Which of the following is exempt from final tax? a. Interest income earned by a bank from deposits in another bank b. Royalties from books c. Interest income earned by a bank from lending activities d. All of these Dividend income from domestic corporations is subject to final tax effective
