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Solution Manual

Income Taxation
(2009 Edition)

Chapter 1

True or False 1-1

1. True
2. False. Taxation covers person, properties, rights and
transactions.
3. False. Person in taxation includes the concept of
partnership, corporation, estate and trust.
4. True
5. False. Taxation as a legislative process is under the
power of the legislative body, the Congress.
6. False. Taxation is the primary source of government
revenue. Usually, the government resorts to borrowing
if taxes collected are not sufficient to defray its
budgetary requirements.
7. True
8. True
9. False. Basically, taxes imposed are based on the ability
of the taxpayer to pay.
10. False. It is the primary obligation of the state to
protect all the constituents regardless of whether they
pay or not their tax liabilities.

True or False 1-2

1. True
2. True
3. True
4. True
5. True
6. False. The President cannot delegate the power of
taxation, since taxation is not vested in the President.
Taxation is vested in the legislative body.
7. False. Taxation cannot be separated from the state.
The moment a state exists, taxation also exists.
8. False. The making of tax law is undertaken ahead of the
collection of taxes.
9. False. Levying refers to the making of tax laws.
10. False. Only the legislative body, the Congress, can
grant tax exemptions.

True or False 1-3

1. False. It is the legislative branch of the government that


is vested with the power of taxation.
2. False. The power of taxation is restricted by inherent
and constitutional limitations.
3. False. Tax assessment is the valuation and
determination of the amount of tax. The passage of
taxation is called levying or imposition of tax.
4. False. The three inherent powers can be and have been
delegated by the Legislative to the Executive Branch.
5. True
6. True
7. False. The two kinds of double taxation are called
indirect double taxation and direct double taxation.
8. False. Tax avoidance is a legal way of avoiding payment
of taxes.
9. False. Income tax cannot be classified as ad valorem,
since the amount is not fixed and does not rely upon an
independent appraiser. It is properly classified as
graduated.
10. False. The Constitution does not expressly mention
double taxation. However, imposition of double taxation
violates the principle of uniformity; hence, considered
unconstitutional.

True or False 1-4

1. False. Taxes are broader than customer duties.


2. False. The power to grant tax exemption is vested in
the legislative branch of the government.
3. True
4. True
5. False. The idea that the tax rate and not the tax
payment shall be the same is the tenet of uniformity and
equity in taxation.
6. True
7. True
8. False. Although taxation is the strongest among the
three inherent powers of the State, it is subject,
however, to inherent and Constitutional limitations.
9. False. In forward tax shifting, the price of goods or
services keeps on increasing because of tax added.
10. False. Special assessment is imposed and collected
by the local government units. It is a local tax.

True or False 1-5

1. False. Not all government units exercise the power of


taxation. Only the Congress exercises the power of
taxation.
2. True
3. True
4. True
5. True
6. False. It is true that taxation cannot be separated from
the state; however, taxation is not absolute.
7. True
8. False. Tax assessment is the valuation of the property
and the determination of the amount of tax liabilities.
Enactment of tax laws is called levying or imposition of
tax.
9. True
10. False. Only non-payment of the poll tax is not subject
to imprisonment. Non-payment of other types of tax is
subject to criminal liability or sanction.

True or False 1-6

1. False. The power of taxation is comprehensive but


never absolute.
2. True
3. True
4. True
5. False. The three inherent powers of the state are not
dependent upon the Constitution.
6. True
7. True
8. True
9. False. The subject to be taxed and the amount of tax
are within the discretion of the Legislative Branch and
cannot be delegated. What can be delegated is the
administrative aspect, the assessment and collection of
taxes.
10. False. The Bureau of Internal Revenue administers
the taxes listed in the National Internal Revenue Code.

True or False 1-7

1. False. Tax liability is non-transferable, while debt is


transferable.
2. True
3. True
4. True
5. True
6. False. Real property tax is a local tax and administered
by the local government units.
7. False. It is properly classified as specific tax and not ad
valorem tax.
8. False. Levy is the taking of real property to enforce
collection of taxes. The taking of personal property is
called distraint.
9. False. The concept of proportionate in character is that
the amount of tax collected is based on the ability of the
taxpayer to pay. It does not imply that the taxpayer
without money is exempted from payment of tax.
10. False. The situs of occupation is the place where the
occupation is performed.

True of False 1-8

1. False. The Supreme Court, not the Congress, decides


on the legality of tax laws. The decision of the Supreme
Court is final and executory.
2. False. The other term for tax minimization is tax
avoidance.
3. False. The Bureau of Internal Revenue is under the
Department of Finance.
4. False. The Philippine tax system is either graduated or
proportional. The regressive tax system has not yet
been adopted in the Philippines.
5. False. Non-payment of the poll tax is not subject to
imprisonment as one of the Constitutional limitations
and not one of the inherent limitations.
6. True
7. True
8. False. The power of eminent domain is the taking of
private property with just compensation for public
purpose. The two acts mentioned are under the police
power.
9. False. Collection of tax liabilities is the third stage of the
taxation system. The payment of tax due is the stage
that is incidental to the whole taxation system.
10. True

True or False 1-9

1. True
2. False. Tax cases involving more than P1,000,000 is
handled by the Court of Tax Appeals.
3. True
4. False. When the President vetoes certain items in the
bill passed by the Congress, the veto exercise is called
item veto. When the President objects to the whole bill,
it is called pocket veto.
5. False. Tax exemption is non-transferable.
6. False. What is exempted by the Constitution is the
property tax on religious or educational institutions.
Their property, however, is subject to other types of tax.
7. False. The concept of tax exemption is privilege given
to certain types of taxpayer but not to reduce the tax
liability.
8. True
9. False. Late payment of the poll tax is subject to
surcharge or interest.
10. False. The Philippine Constitution does not expressly
prohibit double taxation. However, tax laws that are not
uniform and equitable are unconstitutional.

True or False 1-10

1. False. Taxation imposes contributions not only on


individuals but also on properties, rights and
transactions.
2. False. The legislative body of the government and not
the President undertakes the imposition of taxation.
3. False. Taxation is a legislative exercise undertaken by
the Congress.
4. False. Taxation even not provided expressly in the
Philippine Constitution can be imposed. It is an inherent
power of the state.
5. False. It is true that taxation is the strongest among
the three inherent powers of the state, but it is subject
to inherent and Constitutional limitations; hence, not
absolute.
6. False. It is only the legislative branch of the government
that can delegate the three inherent powers of the State.
7. False. Uniformity and equity in taxation implies that the
tax rates applied, and not the amount of tax to be paid,
should be the same to all taxpayers belonging under the
same class.
8. True
9. True
10. True

True or False 1-11

1. True
2. True
3. False. The principle of fiscal adequacy presupposes that
taxes collected are sufficient to meet the fiscal
requirements of the government.
4. False. Taxation is the lifeblood of the government, but
only the legislative body can exercise taxation. Not all
government units can exercise the power of taxation.
The administrative aspect of taxation has been
delegated by the Legislative to the Executive Branch.
5. False. Collection of taxes through withholding taxes is
a concrete example of the principle of administrative
feasibility.
6. False. The doctrine of escape from taxation is intended
to reduce the amount of tax liability
7. False. Tax on fermented liquor is classified as specific
tax, since it is based on weight (volume) of the product.
8. False. Tax evasion is an unlawful mode of reducing tax
liability. The process of transferring the tax burden from
one taxpayer to another is called tax shifting.
9. True
10. True

True or False 1-12

1. True
2. True
3. False. Toll is imposed by private entities, either
individual or corporate, to cover maintenance and
operating expenditures.
4. True
5. False. Proportional tax classification is based on a fixed
percentage or rate where the subject of taxation
belongs. Estate tax falls under the graduated
classification.
6. False. Collection is a stage where government agencies
are tasked to demand the tax liabilities. Taxpayers’ act
of meeting their tax liabilities is called payment stage.
7. True
8. False. The concept of equity in taxation is based on the
premise that taxes collected are dependent upon the
ability of the taxpayer to pay.
9. False. The basic premise of international comity is that
all states are treated alike. It is the principle of privity
of relationship that the state continues to impose
taxation on its subjects even outside its territorial
jurisdiction.
10. False. Prospective application means that tax laws are
operative after the approval of the President of the tax
bill.
11. True
12. True
13. True
14. True
15. False. Tax laws can be retroactive if it is the intention
of the Legislative Branch that it will be effective
retroactively. Otherwise, the effect shall be prospective.
Multiple Choice 1-1 Multiple Choice 1-2
Multiple Choice 1-3

1. D 6. B 1. C 6. B 1. A 6. B
2. B 7. C 2. D 7. A 2. C 7. A
3. C 8. A 3. C 8. C 3. B 8. C
4. A 9. B 4. C 9. D 4. B 9. A
5. A 10.C 5. C 10. D 5. C 10. B

Multiple Choice 1-4 Multiple Choice 1-5


Multiple Choice 1-6

1. D 6. C 1. C 6. C 1. D 6. C
2. A 7. A 2. D 7. C 2. A 7. B
3. B 8. B 3. B 8. B 3. A 8. A
4. D 9. A 4. A 9. C 4. B 9. A
5. C 10.C 5. B 10.C 5. B 10. D

Multiple Choice 1-7 Multiple Choice 1-8

1. D 6. B 1. B 6. B
2. A 7. A 2. D 7. C
3. C 8. B 3. A 8. A
4. A 9. C 4. C 9. D
5. D 10.C 5. C 10. B

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