1.

The following are agents and deputies for the collection of National Internal Revenue Taxes,
except:
a. The Commissioner of Customs and his subordinates with respect to the collection of
national internal revenue taxes on imported goods
b. The head of appropriate government office and his subordinates with respect to the
collection of energy tax
c. Banks duly accredited by the CIR with respect to receipt of payments of internal revenue
taxes authorized to be made thru banks
d. The city and municipal treasurers with respect to collection of real property tax.

2. A keeper of garage whose gross receipts for the year exceed P1,919,500 is subject to
a. VAT
b. common carrier’s tax
c. franchise tax
d. All of the above

3. The actual effort exerted by the government to effect the exaction of what is due from the
taxpayer is known as
a. assessment.
b. levy.
c. payment.
d. collection.

4. Sale of raw materials or packing materials to export-oriented enterprise is considered export

sales when export sales of such enterprise
a. Exceed 50% of total annual production
b. Exceed 60% of total annual production
c. Exceed 70% of total annual production
d. Exceed 80% of total annual production

5. Although the power of taxation is basically legislative in character, it is NOT the function of
Congress to
a. fix with certainty the amount of taxes.
b. collect the tax levied under the law.
c. identify who should collect the tax.
d. determine who should be subject to the tax.

5. Which of the following is taxable based on world income?

a. Resident alien
b. Nonresident citizen
c. Nonresident alien
d. Resident citizen

6. Which of the following expenses is not deductible from gross income?

a. Salaries and wages of employees.
b. Entertainment, amusement and recreation expenses.
c. Rental expenses.
d. Bribes, kickbacks and other similar payments.

7. Which theory in taxation states that without taxes, a government would be paralyzed for lack
of power to activate and operate it, resulting in its destruction?
a. Power to destroy theory
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine

8. All of the following, EXCEPT one, are basic principles of a sound taxation system:
a. Fiscal adequacy
b. Administrative feasibility
c. Theoretical justice
d. Inherent in sovereignty

1
9. A compromise for a tax liability on the ground of financial incapacity to pay shall involve a
payment of tax from the taxpayer at a minimum compromise rate of
a. 10% of the basic assessed tax
b. 20% of the basic assessed tax
c. 30% of the basic assessed tax
d. 40% of the basic assessed tax

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

a. Two taxes;
b. Same subject matter;
c. Same year;
d. Same amount.

11. Double taxation in its general sense means taxing the same subject twice during the same
taxing period. In this sense, double taxation
a. violates substantive due process.
b. does not violate substantive due process.
c. violates the right to equal protection.
d. does not violate the right to equal protection.

12. The estate tax return should be accompanied by a certificate of an independent Certified
Public Accountant if the gross estate is:

a. P2,000,000
b. P2,000,000 or over
c. Over P2,000,000
d. P50,000 or over

13. The payor of passive income subject to final tax is required to withhold the tax from the
payment due the recipient. The withholding of the tax has the effect of:
a. a final settlement of the tax liability on the income.
b. a credit from the recipient's income tax liability.
c. consummating the transaction resulting in an income.
d. a deduction in the recipient's income tax return.

14. Mr. Antonio B., a nonresident alien employed by a regional operating headquarter of a
multinational company, married, with 6 qualified dependent children has the following data for
the year 2013.

Gross compensation income P 240,000

Premium payment on health insurance 10,000
Compute for the tax due.

a. 12, 020
b. 36,000
c. 72,000
d. none of the above

15. Passive income includes income derived from an activity in which the earner does not have
any substantial participation. This type of income is
a. usually subject to a final tax.
b. exempt from income taxation.
c. taxable only if earned by a citizen.
d. included in the income tax return.

16. John McDonald, a U.S. citizen residing in Makati City, bought shares or stock of a domestic
corporation whose shares are listed and traded in the Philippine Stock Exchange at the price of
P2,000,000. He sold the shares of stock through his favorite Makati stockbroker at a gain of
P200,000.

How much is his liability for income tax on the sale of shares?

a. 132,000
b. 11,000
c. 60,000
d. None

2
17. In 2010, Juliet Ulbod earned P500,000.00 as income from her beauty parlor and received
P250,000.00 as Christmas gift from her spinster aunt. She had no other receipts for the year. She
spent P150,000.00 for the operation of her beauty parlor. For tax purposes, her gross income for
2010 is

a. P750,000.00.
b. P500,000.00.
c. P350,000.00.
d. P600,000.00.

18. ABC University, a proprietary educational institution has a gross income for the taxable year
of 15,000,000. Of the gross income 5,000,000 was derived from unrelated trade or business.
Total deductions amount to 3,000,000. What is the tax due?

a. 1,200,000
b. 3,600,000
c. 4,500,000
d. None, the company is exempt from tax liability

19. Exempted from donor’s taxation are gifts made

a. for the use of the barangay.

b. in consideration of marriage.
c. to a school which is a stock corporation.
d. to a for-profit government corporation.

20. Consider the following statements:

I. No law granting any tax exemption shall be passed without the concurrence of a majority
of all the members of the Congress
II. Tax avoidance refers to the exploitation by the taxpayer of legally permissible alternative
tax rates or methods of assessing taxable property or income in order to reduce or avoid
tax liability.

Statement I Statement II
a. a. True True
b. b. True False
c. c. False True
d. d. False False

21. Federico, a Filipino citizen, migrated to the United States some six years ago and got a
permanent resident status or green card. He should pay his Philippine income taxes on
a. the gains derived from the sale in California, U.S.A. of jewelry he purchased in the
Philippines.
b. the proceeds he received from a Philippine insurance company as the sole beneficiary of
life insurance taken by his father who died recently.
c. the gains derived from the sale in the New York Stock Exchange of shares of stock in PLDT,
a Philippine corporation.
d. dividends received from a two year old foreign corporation whose gross income was
derived solely from Philippine sources.

22. An example of a tax where the concept of progressivity finds application is the
a. income tax on individuals.
b. excise tax on petroleum products.
c. value-added tax on certain articles.
d. amusement tax on boxing exhibitions.

23. A corporation may change its taxable year to calendar or fiscal year in filing
its annual income tax return, provided
a. it seeks prior BIR approval of its proposed change in accounting period.
b. it simultaneously seeks BIR approval of its new accounting period.
c. it should change its accounting period two years prior to changing its taxable year.
d. its constitution and by-laws authorizes the change.

24. Political campaign contributions are NOT deductible from gross income
a. if they are not reported to the Commission on Elections.

3
 b. if the candidate supported wins the election because of possible corruption.
c. since they do not help earn the income from which they are to be deducted.
d. since such amounts are not considered as income of the candidate to whom given.

25. Which of the following is a deductible expense for income tax purposes?

a. Interest paid on delinquent business taxes

b. Provision for doubtful accounts
c. Ordinary repair for personal car
d. Salaries of domestic servants

26. The power to tax is the power to destroy. Is this always so?

a. No. The Executive Branch may decide not to enforce a tax law which it believes to be
confiscatory.
b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of
the property rights of a taxpayer.
c. Yes. Tax laws should always be enforced because without taxes the very existence of the
State is endangered.
d. No. The Supreme Court may nullify a tax law, hence, property rights are not affected.

27. Who among the following is a non-resident alien?

a. An alien who comes to the Philippines for a definite purpose which in its nature may be
promptly accomplished;
b. An alien who comes to the Philippines for definite purpose which in its nature would
require an extended stay;
c. An alien who has acquired residence in the Philippines;
d. An alien who lives in the Philippines with no definite intention as to his stay.

28. Celia donated P 110,000.00 to her friend Victoria who was getting married. Celia gave no
other gift during the calendar year. What is the donor's tax implication on Celia’s donation?

a. The P100,000.00 portion of the donation is exempt since given in consideration of

marriage.
b. A P10,000.00 portion of the donation is exempt being a donation in consideration of
marriage.
c. Celia shall pay a 30% donor's tax on the P110,000.00 donation.
d. The P100,000.00 portion of the donation is exempt under the rate schedule for donor's
tax.

29. All of the following statements, except one, are correct. Which is wrong?

a. April 15, August 15, November 15 of the current year, and April 15 of the succeeding year,
are dates (last day) for filing the quarterly income tax returns of the individual who are
self-employed;
b. April 15 is the last day for filing the annual income tax return of an individual who are self-
employed;
c. April 15 is the last day for filing of the income tax return for individuals who have gross
compensation income only, but whose income tax returns show income tax due or
refundable;
d. The dates will be other than the dates mentioned in (a) to (c) if the individual has a fiscal
year accounting period.

30. What is the effect on the tax liability of a taxpayer who does not protest an assessment for
deficiency taxes?

a. The taxpayer may appeal his liability to the CTA since the assessment is a final decision
of the Commissioner on the matter.
b. The BIR could already enforce the collection of the taxpayer's liability if it could secure
authority from the CTA.
c. The taxpayer's liability becomes fixed and subject to collection as the assessment
becomes final and collectible.
d. The taxpayer's liability remains suspended for 180 days from the expiration of the
period to protest.

4
31. The following, except one, give rise to the presumption that a corporation is improperly
accumulating profits. Identify the exception:

a. The corporation is a mere holding company.

b. The corporation is an investment company.
c. The corporation permits its profits to accumulate beyond the reasonable needs of the
business.
d. The corporation is a service enterprise.

32. No action shall be taken by the BIR on the taxpayer’s disputed issues until the taxpayer has
paid the deficiency taxes

a. when the assessment was issued against a false and fraudulent return.
b. if there was a failure to pay the deficiency tax within 60 days from BIR demand.
c. if the Regional Trial Court issues a writ of preliminary injunction to enjoin the BIR.
d. attributable to the undisputed issues in the assessment notice.

33. Which of the following statements is wrong?

a. A general partnership in trade shall no be treated as a corporation.

b. A co-ownership where the activities of the co-owners are limited to the preservation of
the property and collection of income from the property shall not be treated as a
corporation.
c. A co-ownership by investment of labor or capital shall be treated as a corporation.
d. A regional operating headquarters of a multinational company shall be considered a
corporation.

34. Which among the following concepts of taxation is the basis for the situs of income taxation?

a. Lifeblood doctrine of taxation

b. Symbiotic relation in taxation
c. Compensatory purpose of taxation
d. Sumptuary purpose of taxation

35. Statement 1: When an estate or a trust is taxable, the rules for individuals shall apply.
Statement 2: Any distribution out of the current year’s income by a taxable estate or trust is
a deduction from the current year’s gross income of the estate or trust, which in turn
becomes an item of gross income for the current year of the heir of the estate or the
beneficiary of the trust.
a. Both statements are true.
b. Both statements are false.
c. The first statement is true, but the second statement is false.
d. The first statement is false, but the second statement is true.

36. In “Operation Kandado,” the BIR temporarily closed business establishments, including New
Dynasty Corporation that failed to comply with VAT regulations. New Dynasty contends that it
should not be temporarily closed since it has a valid and existing VAT registration, it faithfully
issued VAT receipts, and filed the proper VAT returns. The contention may be rejected if the BIR
investigation reveals that:

a. the taxpayer has not been regularly filing its income tax returns for the past 4 years.
b. the taxpayer deliberately filed a false and fraudulent return with deliberate intention to
evade taxes.
c. the taxpayer used falsified documents to support its application for refund of taxes.
d. there was an understatement of taxable sales or receipts by 30% or more for the taxable
quarter.

5
For questions 37 to 40:

INCOME TAX – INDIVIDUAL – SEC 24A

Not Over P10,000 5%
Over P10,000 but Not Over P30,000 P500 + 10% in excess of P10,000
Over P30,000 but Not Over P70,000 P2,500 + 15% in excess of P30,000
Over P70,000 but Not Over P140,000 P8,500 + 20% in excess of P70,000
Over P140,000 but Not Over P250,000 P22,500 + 25% in excess of P140,000
Over P250,000 but Not Over P500,000 P50,000 + 30% in excess of P250,000
Over P500,000 P125,000 + 32% in excess of P500,000
A certain taxpayer has the following income and expenses during the taxable year.

Gross rental income (NWT) – Phil P 285,000

Rental expenses – Phil 150,000
Business income – Canada 400,000
Business expenses – Canada 100,000
Salary – Canada 200,000

37. If the taxpayer is a resident citizen the taxable income is

a. P 635,000
b. P 630,000
c. P 885,000
d. Answer is not given

38. The income tax payable in the Phil. in no. 2 above is

a. P 170,000
b. P 164,000
c. P 151,600
d. Answer is not given

39. Supposing the taxpayer stayed in the Philippines from March 1 to May 31, his taxable income is:
a. P 300,000
b. P 285,000
c. P 135,000
d. Answer is not given

40. The income tax payable by the taxpayer in no. 4 to the Philippine government is
a. P 21,500
b. P 59,000
c. P 75,000
d. Answer is not given

41. Any internal revenue taxes which has been assessed within the prescribed period may be collected
by distraint or levy or by proceedings in court:
a. Within 3 years following the assessment
b. Within 5 years following the assessment
c. Within 10 years
d. Answer not given

42. A building contractor had the following receipts during the month:
Gross receipts on principal contracts completed P 500,000
Gross receipts on sub-contracts completed 400,000
Receivables on principal contracts completed 80,000
Receivables on sub-contracts completed 50,000
The amount subject to business tax is:

a. P 500,000
b. P 900,000
c. P 580,000
d. P 950,000

6
43. The distinction of a tax from permit or license fee is that a tax is:
a. Imposed for regulation
b. One which involves an exercise of police power
c. One in which there is generally no limit on the amount that may be imposed
d. Limited to the cost of regulation

44. Which is not correct?

a. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the
state.
b. The state can have the power of 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 Philippine Constitution are grants of power enabling the state to
impose taxes.

45. The power of the Bureau of Internal Revenue to make assessments will not include one of the
following:
a. Examination of tax returns
b. To conduct inventory taking, surveillance, and to prescribe presumptive gross sales and receipts
c. To inquire into bank deposit accounts of a taxpayer
d. To prescribe real property values

46. When a property is donated, the basis of the donor’s tax is

a. The cost of acquisition, if acquired by purchase or the fair market value at acquisition date,
whichever is higher.
b. The agreed upon value by the donor and the done
c. The fair market value at the time of donation
d. Any of the above

47. PahTay, a Chinese billionaire and a Canadian resident, died and left assets in China valued at P80
billion and in the Philippines assets valued at P20 billion. For Philippine estate tax purposes the allowable
deduction for expenses, losses, indebtedness, and taxes, property previously taxed, transfers for public
use, and the share of surviving spouse in their conjugal partnership amounted to P15 billion. PahTay’s
gross estate for Philippine estate tax purposes is

a. P 20 billion
b. P5 billion
c. P100 billion
d. P85 billion

48. Kristal, a pawnshop owner, is a non-VAT taxpayer. For the month of April, she has gross receipts from
Interests amounting to P 25,000. The pawnshop also conducted an auction sale that month. The
pawnshop has gain from it worth Php 13,850. How much is her percentage tax for the month of April?
a. P 6,993.00
b. P 1,165.50
c. P 1,942.50
d. P 4,662.00

49. Donor’s tax shall be filed within

a. 30 days after the gift has been made

b. 6 months after giving the gift
c. 25 days after giving the gift
d. 30 days after the end of every quarter

7
50. A Taxpayer, married, supports the following:
I. Orland, legitimate child, 21 years old.
II. Jaime, recognized natural child, 18 years old.
III. Armi, stepchild, daughter of wife by a former marriage, 23 years old.
IV. Widowed mother of her wife, 62 years old.

For income tax purposes, the taxpayer can claim:

Basic exemption Additional exemption
a. P50,000 P100,000
b. P50,000 P75,000
c. P50,000 P50,000
d. P50,000 P0

51. Which of the following is subject to fringe benefit tax?

a. Compensation of the rank and file employee.

b. Compensation of the supervisory or managerial employee.
c. Fringe benefit of the rank and file employee.
d. Fringe benefit of the supervisory or managerial employee.

52. Which is governed by gross income taxation.

a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. Educational institutions

53. Which of the following renunciations shall not be subject to donor’s tax?

a. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute
community after the dissolution of the marriage in favor of the heirs of the deceased spouse or
any other person/s
b. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary
estate left by the decedent
c. Renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate
left by the decedent categorically in favor of identified heir/s to the exclusion or disadvantage of
the other co-heirs
d. None of the choices

54. Which of the following statements is WRONG:

a. Claims against insolvent person should be included in the gross estate even if uncollectible.
b. Transfer passing under special power of appointment is excluded from the gross estate.
c. Revocable transfers are includible whether or not the right to revoke is exercised.
d. Transfer in contemplation of death for adequate consideration is still includible in the gross
estate.

55. Which of the following is not correct about capital losses?

a. Losses from sales or exchanges of capital assets shall be allowed as deduction only to the extent
of capital gains.
b. Losses from sales or exchanges of capital assets shall be allowed as deduction from ordinary
income.
c. Losses from wagering transactions shall be allowed only to the extent of the gains from such
transactions.
d. If securities held as capital assets become worthless during the taxable year, the loss resulting
there from shall be considered as a loss from sale or exchange of capital assets.

8
56. Debt as distinguished from tax.
a. Based on law
b. May be paid in kind
c. Does not draw interest except when delinquent
d. Generally not subject to set-off or compensation

57. Who is the one statutorily liable for the payment of VAT?

a. Consumer
b. Buyer
c. Seller
d. Buyer or the Seller

58. The common characteristic of transfer taxes is the transfer of property:

a. Is onerous.
b. Takes effect during the lifetime of the transferor.
c. Takes effect upon the death of the transferor.
d. Is gratuitous.

59. Which of the following statements is not correct?

a. Interest income from long term deposit is exempt from income tax.
b. Winnings from Philippine Charity Sweepstakes are exempt from income tax.
c. Royalties on books, literary works and musical compositions are subject to 10% non-creditable
withholding tax.
d. A prize of P10,000 is subject to 20% final tax.

60. The additional exemption applies in all of the following cases, except when:

a. The father is absent on a business

b. A child or other dependent is away at school or on a visit
c. A parent, through force of circumstances, is obliged to maintain his dependent children with
relatives or in a boarding house while he lives elsewhere
d. Without necessity the dependent continuously makes his home, elsewhere

-end-