MOCK BAR EXAMINATION QUESTIONS IN

TAXATION
1. Under RA 9010 the following will be subject to EVAT starting January 1, 2003, except:
a.
b.
c.
d.

Professionals, actors, actresses, talent, singers, etc.

Banks and non-bank financial intermediaries
Services performed as professional athletes
Cabarets, night clubs and racetracks

2. Export of Marikina shoes is subject to:

a.
b.
c.
d.
3.

Assessment is necessary in the following cases, except:

a.
b.
c.
d.

4.

12% VAT
0% VAT
Exempt
Specific Tax

before the preliminary investigation of a fraudulent tax evasion case could prosper
to fix the tax liability of a taxpayer
establish a case for judicial action
for issuance of warrant of distraint or levy

The prescriptive period for collection of taxes is:

a. 10 years from discovery of omission to file return, falsity or fraud if there is no
assessment
b. 3 years from filing of return
c. 5 years from release of assessment
d. a and c are correct

5.

Importation of automobiles is subject to:

a.
b.
c.
d.
e.

6.

The manufacture and importation of the following for local consumption are subject to
excise tax, except:
a.
b.
c.
d.

7.

alcohol products
tobacco products
cinematographic films
mineral products

Domestic sale of bagoong is:

a.
b.
c.
d.
e.

8.

Graduated Ad valorem tax of 2% to 60%

VAT of 12%
Specific tax
a and b
Exempt

exempt from VAT

subject to 12% VAT if gross annual sales exceed P1.5M
subject to 0% VAT
subject to 3% percentage tax if exempt from VAT
b and d are correct

The BIR commissioner may_________ payment of internal revenue tax when it appears
to be unjustly or excessively assessed, or that the administrative and collection costs
involved do not justify the collection thereof.
a. compromise

b. abate
c. credit
d. refund
9.

No credit/refund of taxes shall be allowed unless the taxpayer:

a.
b.
c.
d.

10.

Assessment is:
a.
b.
c.
d.

11.

A written notice of the tax due

Based on facts and not presumed
Demand for payment of the tax within a prescribed period of time
All of the above

The following are required to keep books of accounts, except:

a.
b.
c.
d.

12.

Files a written claim for credit/refund with the BIR within 2 years from payment
Pays the tax under protest
Appeals to the CTA
Amends his tax return

Corporations and partnerships

Persons engaged in trade or business in the Philippines
Persons who earn passive income
None of the above

Requirements in order that retirement benefits may be exempt from income tax:
a. Must be paid to an employee who is at least 50 years old and has served his
employer for at least 10 years
b. Exemption from taxation of retirement benefit must be availed of only once
c. The benefit must be received under an existing Collective Bargaining Agreement
d. a and b only

13.

For purposes of the donors tax, the following are considered strangers:
a.
b.
c.
d.

14.

The special deductions from the gross estate are the following, except:
a.
b.
c.
d.

15.

Judicial expenses in testate or intestate proceedings

Standard deduction
Family home up to P1,000,000
Medical Expenses within one year from the death of the decedent not exceeding
P500,000

Funeral expenses that can be claimed as deduction from the gross estate should be:
a.
b.
c.
d.

16.

Brother or sister, whether whole or half-blood

Relatives by consanguinity in the collateral line within the 4th civil degree
Relatives by affinity, except the spouse of the donor
None of the above

Actual amount incurred

Not exceeding P200,000
5% of the gross estate
The lowest of the above figures

The usual modes of avoiding the occurrence of double taxation are:

a.
b.
c.
d.

Reciprocal exemption either by law or treaty

Tax credit for foreign taxes paid
Deduction for foreign taxes paid
All of the above

17.

Jose is a law-abiding citizen who pays his real estate taxes promptly. Due to a series of
typhoons and adverse economic conditions, an ordinance is passed by 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, Jose demands that he be refunded an amount equivalent to one-half of the real estate
taxes he paid. The municipal attorney rendered an opinion that Jose cannot be reimbursed
because the ordinance did not provide for such reimbursement. Jose files suit to declare
the ordinance void on the ground that it is a class legislation.
Will his 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.
e. None of the above

18.

Which of the following statements are true?

a. Resident Filipino citizens with income from foreign sources only are allowed personal
and additional exemptions
b. Non-resident aliens not engaged in trade/business in the Philippines are not allowed
any personal exemptions
c. Non-resident aliens engaged in trade/business in the Philippines are allowed
personal exemptions based on reciprocity
d. All of the above

19.

The periodic decrease in the value of a fixed asset due to wear and tear, obsolescence
or inadequacy
a.
b.
c.
d.

20.

The following cases may not be compromised:

a.
b.
c.
d.

21.

depletion
depreciation
capital loss
special loss

Criminal tax fraud cases

Withholding tax cases
Delinquent accounts with duly approved schedule of payments
All of the above

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 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
dimunition contemplated by the fundamental law.
d. No. The contention is incorrect because deduction of withholding taxes is required
by law.
e. None of the above.

22.

The following conditions shall be observed when there is a net capital loss carry over:
a. The loss carried over is for a holding period not exceeding 12 months
b. The amount of the loss should not exceed the income before exemptions in the year
when the loss was sustained
c. The taxpayer should not be a corporation
d. All of the above

23.

What is the minimum compromise rate in cases of doubtful validity of assessment?

a.
b.
c.
d.

24.

Which of the following VAT transactions are not considered zero-rated?

a.
b.
c.
d.

25.

40% of the basic assessed tax

10% of the basic assessed tax
No limitation
P1,000,000

Export sales of goods

Domestic sale of goods in the regular course of trade or business
Foreign currency denominated sale
Sale of gold to Bangko Sentral ng Pilipinas

Barbaran municipality has an ordinance which requires that all stores, restaurants, and
other establishments selling liquor should pay a fixed annual fee of P20,000. Subsequently,
the municipal board 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. 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 mayor is unjustified because double taxation is allowed in our
jurisdiction.
b. No. The refusal of the mayor is not justified because the impositions are of different
nature and character.
c. No. The refusal of the mayor is unjustified because it is not within his power.
d. No. The refusal of the mayor is not justified because double taxation will generate
more revenues.
e. None of the above.

26.

This is a summary administrative remedy, seizure of real property to enforce payment of

tax due:
a.
b.
c.
d.

27.

Which of the following cannot be considered as tax avoidance?

a.
b.
c.
d.

28.

Levy
Distraint
Forfeiture
Tax lien

Splitting of donation
Survivorship agreement
Holding period for capital asset transactions
None of the above

Tony has inadvertently omitted P100,000 income in his 2004 Income Tax Return. Upon
discovery in 2005, the BIR issued an assessment for deficiency income tax for P100,000
plus 50% fraud surcharge. Meanwhile, Tony included the omitted P100,000 income in his
2005 Income Tax Return. What advice will you give Tony?
a. Amend his 2004 Income Tax return to reflect the correct amount of income

b. Pay the assessed tax plus surcharge, and thereafter , ask for refund
c. Protest the assessment
d. Any of the above
29.

Tino is engaged in buying and selling of fresh fruits at the Q-Mart and Aranque Markets.
He is also exporting canned and preserved fruits to Japan. In 2004, he made a gross sales
of P2,000,000. He is liable for VAT registration fee of :
a.
b.
c.
d.

30.

Shirley was allowed to deduct P200,000 bad debts written off in 2003, where she had a
net income before bad debts of P180,000 and a net loss of P20,000. IN 2004, she was able
to recover the bad debts written off in full. The bad debts recovery is:
a.
b.
c.
d.

31.

Taxable to the extent of P180,000

Taxable to the extent of P20,000
Taxable to the extent of P200,000
Not taxable

A taxpayer who believes that a tax ordinance is unconstitutional should appeal to:
a.
b.
c.
d.

32.

P500
P1,000
P1,500
Exempt

BIR Commissioner
Metropolitan Trial Court
Court of Tax Appeals
Secretary of Justice

Any of the following conditions should be met to enable the President to increase the
VAT from 10% to 12% starting January 1, 2006:
a. VAT collection to Gross Domestic Product in the previous year exceeds 2 4/5%
b. National Government Deficit to Gross Domestic Product in the previous year
exceeds 1 %
c. VAT tax effort to Gross National Product equals 4%
d. Either a or b

33.

In 2004 Allan gave the following donations:

a.
b.
c.
d.

P100,000 to the Iglesia ni Kristo

P500,000 for campaign expenses of a senatorial candidate
P200,000 to victims of calamities
P300,000 to IBP

Which of the above donations are subject to donors tax?

34.

Before any civil or criminal action is filed by the BIR in court, _____________ is
necessary:
a.
b.
c.
d.

35.

Approval of the Secretary of Justice

Approval of the BIR Commissioner
Approval of the Secretary of Finance
Approval of the President

The ___________ has exclusive and original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue Code or Tariff and Customs Code
and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs,
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
one million pesos or more.
a. BIR Commissioner

b. Metropolitan Trial Court

c. Regional Trial Court
d. Court of Tax Appeals
36.

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

37.

The fundamental principles of local taxation are:

a.
b.
c.
d.

38.

Salary of farm workers in the form of products raised in the farm.

Separation pay of employees who voluntarily resigned
Value of leasehold improvement constructed on the leased land
Increase in market value of land
None of the above

Cash dividends received from a domestic corporation are subject to final tax of 10% if
received by:
a.
b.
c.
d.

41.

Audit certificate of an independent CPA

Comparative Financial Statements
Schedule of Taxes and Licenses
Summary of Income payments

The following income are not taxable, except:

a.
b.
c.
d.
e.

40.

Public purpose
Uniformity Principle
Not to let the collection of taxes to private person
All of the above

Where the gross income of a taxpayer exceeds P150,000 per quarter his income tax
return must be accompanied by:
a.
b.
c.
d.

39.

Doctrine of equitable benefit

Doctrine of equitable recoupment
Equitable tax benefit rule
Cohan Rule

Another domestic corporation

Resident foreign corporation
Non-resident alien engaged in trade/business in the Phil.
Resident Filipino citizen

Due to an uncertainty whether or not a new tax is applicable to printing companies, ABC
Printers submitted a legal query to the Bureau of Internal Revenue on that issue. The BIR
issued a ruling that printing companies are not covered by the new law. Relying on this
ruling, ABC Printers did not pay said tax.
Subsequently, however, the BIR reversed the ruling and issued a new one stating that the
tax covers printing companies. Could the BIR now assess ABC Printers for back taxes
corresponding to the years before the new ruling?
a.
b.
c.
d.
e.

42.

Yes. The reversal of the ruling is not prejudicial to the taxpayer.

Yes. The reversal of the ruling is within the power of the BIR.
Yes. The reversal of the ruling is consistent with the lifeblood doctrine.
Yes. The reversal of the ruling does not result in grave injustice to the taxpayer.
None of the above.

The following are subject to amusement taxes:

a. Gross receipts of carnivals
b. Gross receipts of cinemahouses

c. Professional basketball games

d. Gross receipts of circus
43.

The following are considered taxes:

a.
b.
c.
d.

44.

The power to tax may be delegated to:

a.
b.
c.
d.

45.

Court of Tax Appeals

Collector of Customs
Regular courts
Secretary of Finance

The equal protection clause is subject to reasonable classification. Classification to be

valid must:
a.
b.
c.
d.

50.

To determine the gross estate in estate tax cases

Compromise on the ground of financial incapacity
Taxpayer executes a waiver of the Bank Secrecy Law
All of the above

Seizure and forfeiture proceedings are within the exclusive jurisdiction of

a.
b.
c.
d.

49.

The amount does not qualify as income

The recipient is always the beneficiary
The life insurance policy always provides for exclusion
The amount is paid upon the death of the insured
None of the above

The BIR Commissioner can inquire into the bank deposit of the taxpayer in the following
cases:
a.
b.
c.
d.

48.

Interpret tax laws and decide tax cases

Obtain information, summon and examine witnesses
Collect national internal revenue taxes
All of the above

Life insurance proceeds shall not be included in taxpayers gross income when:
a.
b.
c.
d.
e.

47.

The President
BIR
CTA
a and b only

The BIR Commissioner is empowered to:

a.
b.
c.
d.

46.

Toll
License
Penalty
None of the above

Rest on substantial distinction

Germane to the purpose of the law
Not limited to existing conditions only
All of the above

The following are prohibited importations, except:

a.
b.
c.
d.
e.

Weapons of war
Insidious articles
Narcotic Drugs.
Gambling devices
Live animals

51.

The following BIR actions on the protest of an assessment are tantamount to denial
thereof:
a. Filing of collection case in court
b. Issuance of warrant of distraint/levy
c. Inaction of the BIR Commissioner within 180 days from submission of supporting
documents by the taxpayer
d. All of the above

52.

JB got married to SAY last January 2004. On November 30, 2004, SAY gave birth to
twins. Unfortunately, however, SAY died in the course of her delivery. Due to complications,
one of the twins also died on December 15, 2004.
In preparing his Income Tax Return (ITR) for the year 2004, what should JB indicate in the
ITR as his civil status:
a.
b.
c.
d.
e.

53.

The following criteria need not be observed in the exercise of the flexible power of the
President under the Tariff & Customs Code:
a.
b.
c.
d.

54.

Dumping duties
Marking duties
Discriminatory duties
None of the above

Cancellation of debt of employee by his employer is taxable as

a.
b.
c.
d.

57.

Taxable income of mother

Subject to donors tax
Exempt from tax
None of the above

The following are special customs duties, except:

a.
b.
c.
d.

56.

National security
Welfare of the people
Jurisdiction of the Customs Commissioner
National Economy

Monthly support regularly given by an unmarried daughter to her aged mother.

a.
b.
c.
d.

55.

Single
Married with 2 dependents
Head of the family with 1 dependent
Head of the family with 2 dependents
None of the above

Compensation income
Donation
Indirect dividend
Either a or b

Informers reward is equal to

a. 10% of revenues, surcharges or fees collected by the BIR as a result of the
information given
b. P 1,000,000
c. a or b whichever is lower
d. a or b whichever is higher

58.

The following are duty-free articles:

a.
b.
c.
d.
59.

The following non-resident aliens can be subject to 15% income tax on income derived
from sources within the Philippines.
a.
b.
c.
d.

60.

fringe benefits tax

common carriers tax
caterers tax
percentage tax on banks and finance companies
b and c only

The following are not subject to the improperly accumulated earnings tax, except:
a.
b.
c.
d.

66.

special tax
local tax
specific tax
regressive tax
none of the above

The following taxes have been replaced by VAT per RA 9337

a.
b.
c.
d.
e.

65.

general professional partnership

ordinary business partnership
estates and trusts
all of the above

VAT is
a.
b.
c.
d.
e.

64.

if separation is due to death, sickness or injury of employee

if employee voluntarily resigned
if employee resigned at the age of 60
if the employer closed shop
all of the above

The following are taxed like corporation

a.
b.
c.
d.

63.

Philippine Income Tax

Value Added Tax
Transfer Taxes
All of the above

Separation pay is taxable.

a.
b.
c.
d.
e.

62.

employed by regional area/operating headquarters of multinational companies

employed by OBU
employed by petroleum service contractor and subcontractor
all of the above

Which of the following taxes are not deductible from gross income:
a.
b.
c.
d.

61.

Personal articles
Articles for repair
Articles for public exposition/exhibits
All of the above

Publicly held corporations

Insurance companies
Banks and other non-bank financial intermediaries
None of the above

If monthly rental income of a residential unit exceeds P 10,000 per unit, the same shall
be subject to 12% VAT.
a. True, without any further condition.

b. True, only if the total gross annual rentals received exceed P 1.5M
c. False, this is subject to 0% VAT.
d. False, this is exempt from VAT under RA 9337
67.

The preliminary investigation of a fraudulent tax evasion case may be enjoined in the
following cases.
a.
b.
c.
d.
e.

68.

Sale of real estate is subject to VAT

a.
b.
c.
d.

69.

True, if made in the regular course of trade or business

False, it is exempt if the real estate is classified as capital asset
False, it is exempt if what is sold is a residential unit
a and b are correct

Why is the Fringe Benefits Tax collectible from the employer and not from the employee?
a.
b.
c.
d.

70.

when there is a prejudicial question

when double jeopardy is clearly apparent
when charges are manifestly false and motivated by lust for vengeance
when the court has no jurisdiction over the offense
all of the above

Valuation of benefits is easier at the level of the employer

Collection of FBT is ensured because it is withheld at source
The employee does not have the means to pay
a and b are correct

A taxpayer with gross annual sales not exceeding P100, 000 is exempt from payment of
business tax and registration requirements.
a. True
b. False, required to register with the BIR but exempt from the payment of registration
fee
c. False, required to pay registration fee
d. b and c are correct

71.

Which of the following statements is wrong?

a. The MCIT is equal to 2% of the gross income of the corporation
b. The MCIT is not computed quarterly but on an annual basis
c. The MCIT payments can be carried over for the next 3 years immediately following
such payment
d. The taxpayer should pay the MCIT or the regular income tax whichever is higher.

72.

In ruling on the constitutionality of the EVAT, the Supreme Court held that:
a. A revenue bill shall originate exclusively in the House of Representatives but the
Senate may adopt its own version
b. The requirement of three separate readings on separate days cannot be dispensed
with
c. The Bicameral Conference Committee cannot make unauthorized insertions on the
Senate version of the bill
d. b and c are incorrect

73.

The following are exempt from amusement tax:

a.
b.
c.
d.
e.

professional basketball games

boxing exhibitions
billiards
bowling
c and d only

10

74.

The following are subject to 3% common carriers tax, except:

a.
b.
c.
d.

75.

The manufacture of casino rubbing alcohol is subject to:

a.
b.
c.
d.
e.

76.

VAT
percentage tax
specific tax
advalorem tax
exempt

A tax imposed at every stage of distribution process on the sale, barter or exchange of
goods and services and transactions deemed sale, as well as importation of goods and
services.
a.
b.
c.
d.

77.

taxicab operators
common carriers transporting cargoes
tourist buses
motor tricycles

privilege tax
percentage tax
VAT
excise tax

Mario disputed a deficiency tax assessment and upon receipt of an adverse decision by
the Commissioner of Internal Revenue, filed an appeal with the Court of Tax Appeals. While
the appeal is pending, the BIR served a warrant of levy on the real properties of Mario to
enforce the collection of the disputed tax. Granting arguendo that the BIR can legally levy
on the properties, what could Mario do to stop the process?
a. Appeal the BIRs action to the Court of Appeals
b. Dispute BIRs levy on the properties before the Court of Tax Appeals
c. File a motion for injunction with the Court of Tax Appeals on the ground that such
collection will jeopardize the interest of the taxpayer or the government.
d. Secure a temporary restraining order before the Supreme Court.
e. None of the above

78.

Additional exemption for each dependent child per RA 9504

a.
b.
c.
d.

79.

Income tax is not a

a.
b.
c.
d.
e.

80.

P 10,000
P 9,000
P 8,000
P 25,000

personal tax
national tax
excise tax
direct tax
progressive tax

Under RA8424, the allowable deduction for medical expenses of a resident decedent
shall not exceed :
a.
b.
c.
d.

P 50,000
P 550,000
P 5,000
P 500,000

11

81.

Per RA 9504, how much is the total personal and additional exemption of Mrs. A, who
became a widow during the taxable year and supporting her mother and one mentally
retarded illegitimate 25 year-old child?
a.
b.
c.
d.

82.

The following is not a taxable income of a resident Filipino citizen:

a.
b.
c.
d.
e.

83.

There must be gain or profit

The gain must be received or realized
The gain must not be excluded by law or treaty from taxation
The income must exceed the personal and additional exemptions of the taxpayer
None of the above

Who among the following are NOT required to file an income tax return?
a.
b.
c.
d.

88.

optional
in addition to the itemized deductions
not available to resident decedents
in lieu of all itemized deductions

The following are the requisites for income to be taxable, except:

a.
b.
c.
d.
e.

87.

the President
the Congress
Judiciary
BIR
All of the above

The standard deduction of P 1,000,000 from the gross estate is:

a.
b.
c.
d.

86.

proceeds of life insurance policy payable to an irrevocable beneficiary

revocable transfers
transfer in contemplation of death
claims against insolvent persons
none of the above

Basically, power of taxation is exercised by

a.
b.
c.
d.
e.

85.

income from an illegal business

income from a business abroad
income from casino
winnings from lotto
none of the above

Which of the following are excluded from the gross estate?

a.
b.
c.
d.
e.

84.

P 75, 000
P 40, 000
P 100, 000
P 48, 000

Filipino citizen with business income from the Philippines.

Resident alien on income derived within the Philippines.
Non-resident alien engaged in trade or business
An individual whose sole income has been subjected to final withholding tax.

Which of the following are NOT exempt from income tax?

a.
b.
c.
d.
e.

Philippine Health Insurance Corporation

Philippine National Oil Company
University of the Philippines
PAGCOR
b and d

12

89.

Which of the following is a qualified dependent for additional exemption?

a.
b.
c.
d.
e.

90.

Which escape from taxation does not result in loss of revenue to the government?
a.
b.
c.
d.
e.

91.

45 years old mentally retarded son

an illegitimate child
legally adopted child
all of the above
none of the above

Tax evasion
Tax avoidance
Tax exemption
Shifting
All of the above

The following fringe benefits are not taxable, except:

a. Fringe benefits which are authorized and exempted from tax under special laws.
b. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefits.
c. Membership fees, dues and other expenses borne by the employer in social or
athletic clubs or other similar organizations.
d. Benefits given to rank and file employees, whether granted under a collective
bargaining agreement or not.
e. De minimis benefits.

92.

The final tax on capital gains from sale of real property, classified as capital asset is:
a.
b.
c.
d.
e.

93.

Sale, barter, exchange or other disposition of shares of stocks which are traded in the
local stock exchange is subject to:
a.
b.
c.
d.

94.

True
False, if Domeng is engaged in the real estate business.
False, it is subject to VAT if the sale is in the regular course of trade or business.
b and c are correct.

Who may not avail of the itemized deductions from gross income?
a.
b.
c.
d.

96.

capital gains tax of 5% and 10% of capital gain

percentage tax of of 1% of selling price
10% VAT
none of the above

Domeng bought a parcel of residential land for P 1,000,000 sometime in 1980. He sold
the same to Norbie for P 10,000,000 on October 15, 2000. The transaction is subject to 6%
capital gains tax.
a.
b.
c.
d.

95.

20% based on the gross selling price or current fair market value whichever is higher.
7.5% based on the gross profit.
6% based on the gross selling price or zonal value, whichever is higher.
6% of the purchase price or the assessed value whichever is higher.
None of the above

Resident aliens
Non resident aliens engaged in trade or business in the Philippines.
Resident foreign corporations.
Citizens and resident aliens whose income is purely compensation income.

The following are requisites for the deductibility of bad debts, except:

13

a. There must be a valid and subsisting debt.

b. The debt must be charged off during the taxable year.
c. The debt must be actually ascertained to be worthless and uncollectible during the
taxable year.
d. It must be evidenced by a closed and completed transaction.
97.

What is the nature of tax laws?

a.
b.
c.
d.
e.

98.

not political
penal
civil
both a and b
both a and c

Under the Life-Blood doctrine, the main source of revenue of the government is taxes.
The power to tax includes the power to destroy in all cases.
a.
b.
c.
d.

99.

Both statements are true.

Both statements are false.
The first statement is true while the second statement is false
The first statement is false while the second statement is true.

Which of the following is not a source of tax laws?

a. Administrative regulations and rulings or opinions of the Secretary of Justice.
b. Administrative regulations and rulings or opinions of the Secretary of Budget and
Management.
c. Administrative regulations and rulings or opinions of the Commissioner of Internal
Revenue.
d. Administrative regulations and rulings or opinions of the Secretary of Finance.

100.

Tips and gratuities paid directly to an employee by a customer and not reported to the
employer
a.
b.
c.
d.

101.

No credit/refund of taxes shall be allowed unless the taxpayer:

a.
b.
c.
d.

102.

Files a written claim for credit/refund with the BIR within 2 years from payment
Pays the tax under protest
Appeals to the CTA
Amends his tax return

The oft-cited doctrine that taxes are lifeblood of the government does not favor one of
the following rules:
a.
b.
c.
d.

103.

Taxable compensation income and subject to withholding tax.

Not taxable.
Taxable compensation income but not subject to withholding tax.
Subject to donors tax.

Taxes are not subject to set off

Taxes should be collected without unnecessary hindrance
Tax exemptions should be sparingly granted
Doctrine of Equitable Recoupment

Taxes are not enforced proportional contributions.

statements are correct except:
a.
b.
c.
d.

In our jurisdiction, the following

Taxes are obligations created by law.

Taxes are based on ones ability to pay.
Taxes are levied by authority of the law.
The power to tax is not unlimited.

14

104.

Which of the following judicial pronouncements is most recent:

a. Upon taxation depends the Governments ability to serve the people for whose
benefit taxes are collected.
b. The BIR should be given the necessary discretion to avail itself of the most
expeditious way to collect taxes.
c. Taxes cannot be imposed by the executive department not by the courts.
d. The best evidence obtainable under Section 6 (B) of the NIRC does not include mere
photocopies of records/documents.

105.

Congress passed a law allowing the payment of taxes in kind/services. This violates the
principle of:
a.
b.
c.
d.

106.

Which of the following statements may not be untenable:

a.
b.
c.
d.

107.

The nature of the states power to tax is two-fold.

Legislative power to tax involves the promulgation of rules.
The rule of taxation should not be proportionate.
Tax exemptions are liberally construed in favor of the government.

The following propositions are erroneous exept:

a.
b.
c.
d.

108.

Economic efficiency
Fiscal adequacy
Theoretical justice
Administrative feasibility

Public purpose includes indirect public advantage.

The power to tax is inherent because it requires a set of rules.
Taxes are always based on the amount received by the taxpayer.
Taxpayer must receive personal benefit for the payment of tax.

The power to tax involves the power to destroy, said Chief Justice Marshall of the US
Supreme Court. This should be construed to mean that:
a. The power of taxation is unlimited
b. The power to tax may be used solely for the purpose of raising revenues.
c. The power to tax includes the power to regulate even to the extent of prohibition or
destruction.
d. The power to tax is superior to all other forms of the government.

109.

The secondary or non-revenue purposes of taxation include the following except:

a.
b.
c.
d.

110.

Which of the following statements is true:

a.
b.
c.
d.

111.

As an implement of the police power of the State

To encourage the growth of local industries.
To reduce social inequality
To protect our local industry against unfair foreign competition.

Payment signifies an act of compliance by the taxpayer.

The act of assessing and collecting taxes is administrative in character.
Symbiotic relationship theory is different from benefits received principle.
All of the above.

Which of the following prevents the occurrence of double taxation?

a.
b.
c.
d.

Vanishing deduction
Allowable deduction
Exemption method
None of the above

15

112.

The following items are taxable except:

a.
b.
c.
d.
e.

113.

Gross income means all income derived from whatever source, including the following
items except:
a.
b.
c.
d.

114.

Veterans benefits
Compensation for injuries and sickness
Gifts, bequests, and devises
Gains from redemption of shares of stock

Fringe benefit tax shall be paid by the employer because:

a.
b.
c.
d.

116.

Pensions
Prizes and winnings
Rents
Stock dividends

Exclusions from gross income under the Tax Code include the following except:
a.
b.
c.
d.

115.

Illegal gains
Tax refund involving deductible tax
Tax refund involving non-deductible tax
Cash dividend
Annuities

The employee received the benefit net of tax

The Tax Code expressly so states
The employer relieves the employee of the burden to pay the tax
The employer is the agent of the employee for the payment thereof.

Allowable deductions are distinguished from personal exemptions in that:

a. The former may be availed of only by corporate taxpayers, whereas the latter may
apply to individual taxpayers.
b. The former applies to corporate and individual taxpayers engaged in business or are
practicing their profession, whereas the latter covers only natural persons.
c. The former may be found in Section 34, while the latter is granted under Section 35.
d. The former is a privilege while the latter is a matter of right.

117.

Which of the following statements is not correct?

a.
b.
c.
d.

118.

Gross estate includes the following items except:

a.
b.
c.
d.

119.

Interest on government securities is not tax exempt effective January 1, 1998.

Stock dividend is tax exempt.
Premium on life insurance may be taxable to the employee.
Fringe benefit is subject to 32% final tax effective January 1, 2000.

Transfer for insufficient consideration

Donations mortis causa
Revocable transfers
Transfer under special power of appointment.

Donation to stranger is subject to 30% of the net gift. Stranger includes:

a.
b.
c.
d.

Second cousin
Half brother
Lineal descendant
Collateral relative within the fourth civil degree of relationship

16

120.

Taxes are the lifeblood of the government and their prompt and certain availability is an
imperious need. This pronouncement was cite in several decisions of the Supreme Court
except in the case of:
a.
b.
c.
d.

121.

Lest the collector kill the hen that lays the golden egg. This has been metaphorically
mentioned to justify a settled rule as laid down in the case of:
a.
b.
c.
d.

122.

Yes, provided that the claim is set-off against other unpaid income tax.
Yes, provided that the claim is set-off against other national internal revenue tax.
Yes, provided that the claimant is a VAT-registered taxpayer.
Yes, provided that the claim is duly substantiated by receipts.

The police power, the power of taxation and the power of eminent domain are co-equal
and inherent powers of government. May a tax be validly imposed in the exercise of the
police power and not of the power to tax?
a.
b.
c.
d.

127.

Local ordinance imposing business tax.

Local ordinance granting tax amnesty.
Provision of the NIRC granting tax credit.
Special law lowering tax rate.

May a taxpayer who has claim for VAT input credit or refund, set-off said claim against
his other tax liabilities?
a.
b.
c.
d.

126.

The power to tax is supreme and unlimited.

The power to tax is plenary and comprehensive.
The state may still collect prescribed taxes.
BIR can still present evidence to prove assessment.

Srictissimi juris may be applied in the construction and interpretation of tax laws except:
a.
b.
c.
d.

125.

Ability to pay principle

Progressive system of taxation
Lifeblood doctrine
Benefit-protection theory

Settled is the rule that in tax matters, the government is not estopped by the errors or
mistakes committed by its agents or officers. This should be construed to mean that:
a.
b.
c.
d.

124.

Gomez vs. Palomar, 25 SCRA 827

Punzalan vs. Manila, 95 SCRA 46
Roxas vs. CTA, 23 SCRA 276
Villegas vs. Pao, 86 SCRA 270

The symbiotic relationship theory as enunciated in the case of CIR vs. Algue, Inc., 158
SCRA 9, is an amplification of:
a.
b.
c.
d.

123.

Commissioner vs. Pineda, 21 SCRA 105

Vera vs. Fernandez, 89 SCRA 199
Lutz vs. Araneta, 98 SCRA 148
Philex Mining vs. CIR, 294 SCRA 678

Yes, because the power to tax and police power have some similar objectives.
Yes, because the police power of the state includes the power to regulate
Yes, because taxes may be imposed to regulate.
Yes, because taxation also involves the power to carry out the legitimate objects of
government.

Taxes are not subject to set-off because:

a. Taxes are the lifeblood of the government.
b. Taxes are the sinews of the state.

17

c. Taxes are enforced charges

d. Taxes should be collected without unnecessary hindrance
e. Taxes are not ordinary obligations.
128.

May the collection of taxes be barred by prescription?

a.
b.
c.
d.
e.

129.

May the courts enjoin the collection of revenue taxes?

a.
b.
c.
d.
e.

130.

Yes, provided that they are income taxes.

Yes, provided that they are local taxes.
Yes, provided that they are custom duties.
Yes, provided that the tax law provides for prescriptive periods.
Yes, provided that they are imposed by special laws.

No, because taxes are the lifeblood of the government.

No, because taxes are needed to carry out the legitimate objects of the government.
No, except if the collection will jeopardize the interest of the taxpayer.
No, except if the taxpayer is financially incapable.
None of the above.

What is the purpose of the doctrine of constructive receipt of income?

a.
b.
c.
d.

To ensure collection of taxes.

To compel taxpayers to report their income
To prevent tax evasion.
To prevent the taxpayer on the cash basis from postponing the actual receipt of
taxable income.
e. None of the above.
131.

Any amount received under claim of right is taxable if:

a.
b.
c.
d.
e.

132.

Taxable rent income includes the following items except:

a.
b.
c.
d.

133.

Value of permanent improvement

Premiums paid on the insurance of the leased premises
Royalties
Interest on bond issued by the lessor

Income from long-term contracts may not be reported under one of the following
methods:
a.
b.
c.
d.
e.

134.

It arises from illegal transaction.

It is received without restriction as to its disposition.
It is decreed by the court
The claimant dies
The claimant donates the same

Outright method
Spread-out method
Completed contract basis
Accrual basis
Cash basis

How is compensation paid in promissory note treated for income tax purpose?
a.
b.
c.
d.
e.

Subject to final tax

It is taxed at gross amount
Taxable to the amount of the fair market value of the promissory note
It is deductible from gross compensation income
None of the above

18

135.

Tax applicable to certain specified goods or articles manufactured or purchased in the

Philippines for domestic sale or consumption.
a.
b.
c.
d.

136.

Cost of carabao used in farming is deductible as any ordinary expense.

a.
b.
c.
d.

137.

Capital
Receipts
Realized profit
None of the above

The following can avail of the Input Tax Credit, except:

a.
b.
c.
d.

143.

Employers contribution to pension trust

Personal, family, living expenses
Wagering losses
Kickbacks

For tax purposes, income is synonymous to:

a.
b.
c.
d.

142.

Either or both parents

Brother/Sister of whole or half-blood
Senior citizen
Grandchildren

Which of the following is deductible for income tax purposes:

a.
b.
c.
d.

141.

Means of escape from tax liability outside what is legal and permissible
Tax saving device within the means sanctioned by law
Deduction from foreign taxes paid
a and c only

The following are qualified dependents of a head of the family, except:

a.
b.
c.
d.

140.

1.5%
4%
2%
8%

Tax evasion is:

a.
b.
c.
d.

139.

True
False, because carabao is a capital expenditure
False, because carabao is subject to depreciation
Both b and c

Under RA 9337, a presumptive input tax credit is allowed to processors/manufacturers of

milk, sardines, mackerel, refined sugar, cooking oil, and packed noodle-based instant
meals at the rate of:
a.
b.
c.
d.

138.

Specific tax
VAT
Percentage tax
Excise tax

Importer of goods/articles previously subjected to VAT

Purchaser of domestic goods upon consummation of the sale
Exporter of goods and services not registered under the VAT system
Purchaser of services, lessee or licensee upon payment of compensation, rental,
royalty or fee

Educational services rendered by private educational institutions are exempt from VAT if
duly accredited by the following, except:

19

a.
b.
c.
d.
144.

For VAT purposes in connection with deferred payment sale of real property, the term
initial payments shall include:
a.
b.
c.
d.

145.

Securities and Exchange Commission

Commission on Higher Education
Department of Education, Culture and Sports
Technical Education and Skills Development Authority

Payments made in the year of sale in addition to the down payment

Mortgage on the real property sold not exceeding the cost thereof
Evidence of indebtedness issued by the purchaser to the seller at the time of sale
Down payment only made at the time of sale.

In our jurisdiction, which of the following statements may be erroneous:

a. Taxes are pecuniary in nature.
b. Taxes are enforced charges and contributions.
c. Taxes are imposed on persons and property within the territorial jurisdiction of a
State.
d. Taxes are levied by the executive branch of the government.
e. Taxes are assessed according to a reasonable rule of apportionment.

146.

Determine which of the following items are taxable:

a.
b.
c.
d.
e.

147.

Determine which of the following is (are) included in the preparation of annual income
tax returns:
a.
b.
c.
d.
e.

148.

Proceeds of life insurance received by a child as irrevocable beneficiary

13th month pay and de minimis benefits
Dividends received by a domestic corporation from another domestic corporation.
Interest on deposits with BPI Family Bank
None of the above

JR was a passenger of an airline that crashed. He survived the accident but sustained
serious physical injuries which required hospitalization for 3 months. Following
negotiations with the airline and its insurer, an agreement was reached under the terms
of which JR was paid some amounts. Which of the following amounts constitute taxable
income?
a.
b.
c.
d.

149.

Income from jueteng

Gain arising from expropriation of property
Taxes paid and subsequently refunded
Recovery of bad debts previously charged off
All of the above

P500,000 for his hospitalization

P250,000 as moral damages
P300,000 for loss of income during the period of his treatment and recuperation
JR received from his employer the amount of P200,000 representing the cash
equivalent of his earned vacation and sick leaves.

MAR got married to SALLY last January 2005. On November 30, 2005, SALLY gave
birth to twins. Unfortunately, however, SALLY died in the course of her delivery. Due to
complications, one of the twins also died on December 15, 2005. In preparing his
Income Tax Return (ITR) for the year 2005, what should MAR indicate in the ITR as his
civil status?
a.
b.
c.
d.

Single
Married
Head of the family
Widower

20

e. None of the above

150.

Which of the following cases may not be compromised:

a. Delinquent accounts
b. Cases under administrative protest, after issuance of the final assessment notice to
the taxpayer, which are still pending.
c. Criminal tax fraud cases
d. None of the above

151.

A taxpayer received a tax deficiency assessment of P1.2 Million from the BIR demanding
payment within 10 days, otherwise, it would collect through summary remedies. The
taxpayer requested for reconsideration stating the grounds therefore. Instead of
resolving the request for reconsideration, the BIR sent a Final Notice before Seizure to
the taxpayer. Which of the following remedies can the taxpayer avail?
a.
b.
c.
d.

152.

File an injunction before the Regional Trial Court

Appeal to the Court of Tax Appeals
Appeal to the Court of Appeals
Proceed with Certiorari before the Supreme Court

The Roman Catholic Church owns a 2-hectare lot in a town in Tarlac province. The
Church and a convent occupy the southern side and middle part. The southeastern side
by some commercial establishments, while the rest of the property, in particular the
northwestern side, is idle or unoccupied. Which of the following is correct?
a. The Church may claim tax exemption on the entire land.
b. The exemption covers only the southern side and middle part occupied by the
Church and a convent and the eastern side by a school run by the church.
c. The tax is imposable on the northwestern side which is idle or unoccupied.
d. The entire property is taxable for real property taxation

153.

XYZ Colleges is a non-stock, non-profit educational institution run by the Archdiocese of

BP City. Which of the following item(s) is included in its Income Tax Return?
a.
b.
c.
d.
e.

154.

Frank Sinatra, an American Citizen, was a top executive of a US company in the

Philippines until he retired in 1999. He came to like the Philippines so much that
following his retirement, he decided to spend the rest of his life in the country. He
applied for and was granted a permanent resident status the following year. In the
spring of 2004, while vacationing in Orlando, Florida, USA, he suffered a heart attack
and died. Which of the following assets shall not be included in taxable gross estate in
the Philippines?
a.
b.
c.
d.
e.
f.

155.

Tuition fees
Laboratory fees
Rentals from canteen concessionaires
Interest from money-market placements of the tuition fees
Donation of a lot and building by school alumni

Bank Deposits with Citibank Makati and Citibank Orlando, Florida

A condominium unit in Makati
Shares of stock in the Philippine subsidiary of the US Company where he worked.
Shares of stock in San Miguel Corporation and PLDT.
Shares of stock in Disney World in Florida
None of the above

An individual client not engaged in realty business paid in full the P50,000 attorneys
fees of his counsel in lot which he bought in 1990 for P5,000 and which has a fair market
value of P60,000. Which of these is correct?
a. The client-transferor is subject to final capital gains tax based on P60,000
b. The client-transferor is subject to final capital gains tax based on P50,000

21

c. The client-transferor is not subject to final capital gains tax

d. The client-transferor is subject to income tax for the difference between P50,000 and
P5,000
e. None of the above
156.

One of these is not the correct period within which internal revenue taxes shall be
assessed:
a.
b.
c.
d.

157.

One of these is not an exception to the rule that for income tax purposes, the books and
records of a taxpayer shall be subject to examination and inspection only once in a
taxable year:
a.
b.
c.
d.
e.

158.

Within 3 days after the last day prescribed by law for the filing of the return
Within 3 years from the date the return was filed
If no return was filed, within 10 years from date of discovery of failure to file return
If return is false or fraudulent, within 10 years from date of discovery of the falsity or
fraud.

When the taxpayer is outside the Philippines

When there is fraud, irregularity or mistake
Verification of compliance with withholding tax laws
When taxpayers requests reinvestigation
Verification of capital gains tax liabilities

Which of the following cases is pre-assessment notice required?

a. In a discrepancy between the tax withheld and the amount actually remitted by the
withholding agent
b. When the excise tax due has not been paid
c. Transfer by an exempt person of articles to non-exempt person
d. When the commissioner or his duly authorized representative finds that proper tax
should be assessed.

159.

To pre-empt the lapse of prescriptive period within which the government can assess
and/or collect in court without assessment,
a. The government may issue jeopardy assessment
b. The government may require waiver of prescriptive period
c. The waiver by the taxpayer must be accepted by the commissioner or his duly
authorized deputy.
d. The waiver is a waiver by the taxpayer of his right to invoke the defense of
prescription.
e. b, c and d only

160.

One of these is true:

a. Waiver of prescriptive period to last until the completion of investigation is valid.
b. Waiver is a taxpayers concession to the state, thus, it must be construed strictly
against the state
c. Waiver being unilateral, the state need not express its acceptance, and when
accepted, the taxpayer need not be notified.
d. Waiver being unilateral, acceptance by the state need not observe the level of
authority of the officials empowered to accept.

161.

One of these has no time limit within which to assess:

a.
b.
c.
d.

162.

Income tax
Transfer taxes (donor or estate)
Value Added Tax
Privilege tax

One of these is not a type of local tax and other impositions

22

a.
b.
c.
d.
163.

For casual sale of real property, you do not pay

a.
b.
c.
d.

164.

factory site
Principal office
places thru which sales trucks pass
none of the above

Special classes of real property do not include

a.
b.
c.
d.

166.

Capital gains tax

Documentary stamp tax
Local transfer tax
Income tax

In local business taxes, the local government of one of these is prohibited to collect
a.
b.
c.
d.

165.

Municipal taxes on business & occupations

Municipal fees & service charges
Real property taxes
Taxes on gross receipts of transportation businesses

Local water district

Public power generating company
Hospitals
Schools

Which is not a levy on real property

a.
b.
c.
d.

Special education fund

Ad valorem tax on idle land
Special assessment
Transfer tax on sale or transfer

23

ANSWER KEY TAXATION

1. D
2. B
3. A
4. D
5. A
6. C
7. A
8. B
9. A
10 .D
11. D
12. D
13. C
14. A
15. D
16. D
17. D
18. D
19. B
20. D
21. C
22. D
23. A
24. B
25. B
26. A
27. D
28. C
29. A
30. C

31. D
32. D
33. D
34. B
35. D
36. B
37. D
38. A
39. B
40. D
41. E
42. B
43. D
44. D
45. D
46. D
47. D
48. B
49. D
50. E
51. D
52. B
53. C
54. C
55. D
56. D
57. C
58. C
59. D
60. D

61. B
62. B
63. C
64. E
65. D
66. B
67. C
68. D
69. B
70. B
71. B
72. A
73. E
74. B
75. D
76. C
77. D
78. D
79. C
80. D
81. A
82. D
83. A
84. B
85. B
86. D
87. D
88. E
89. D
90. D

91. C
92. C
93. B
94. A
95. D
96. D
97. E
98. C
99. B
100 .A
101. A
102. D
103. D
104. C
105. D
106. C
107.A
108. C
109. B
110. B
111. C
112. C
113. D
114. D
115. D
116. B
117. C
118. D
119. A
120. C

121. C
122. D
123. B
124. A
125. B
126.C
127. E
128. D
129. C
130. C
131. B
132. A
133. E
134. E
135. D
136. A
137. B
138. A
139. D
140. A
141. B
142. C
143. A
144. A
145. D
148. E
147. E
148. C
149. B

150. C
151. B
152. B
153. C
154. F
155 A
156. A
157. C
158. D
159. E
160. B
161. D
162. D
163. D
164. C
165. B
166. D

24