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GENERAL PRINCIPLES OF TAXATION:
1. Which of the following is the primary purpose of taxation?

A. Enforce contribution from its subject for public purpose
B. Raising revenue
C. Achieving economic and social stability
D. Regulate the conduct of business or profession
2. Statement 1: The power to tax includes the power to exempt

Statement 2: The power to license includes the power to tax
A. Only Statement 1 is true C. Both Statements are true
B. Only Statement 2 is true D. Both Statements are false
3. What is the basis of taxation?

A. Reciprocal duties of support and protection
B. Constitutionality
C. Public Purpose
D. Necessity
4. The point in which tax is levied is also called

A. Impact of taxation C. Incidence of taxation
B. Situs of taxation D. Assessment
5. 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. Public Properties
6. Which is not an object of taxation

A. Persons C. Transactions
B. Business D. Public Properties
7. The courts cannot issue injunction against the government’s
effort to collect taxes is justified by
A. Lifeblood doctrine C. Ability to pay theory
B. Imprescriptibility of taxes D. Doctrine of estoppel
8. This theory underscores that taxes are indispensable to the

existence of the state.
A. Doctrine of equitable recoupment C. Lifeblood Doctrine
B. Benefit-received theory D. Holmes Doctrine
9. 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
D. Generally for Public Purpose
10. Which of the following statements is incorrect?

A. Power to tax includes the power to exempt
B. Exemption is construed against the taxpayer and in favor of
the government
C. Tax statutes are construed against the government in case of
doubt
D. Taxes should be collected only for public improvements.
11. Which of the following statements is not included as a

secondary purpose of taxation?
A. Reduce social inequality
B. Protect local industries
C. Raise revenue for the support of the government
D. Encourage growth of local industries

A. Every person must contribute his share in government
costs.
B. The existence of a government is expected to improve the
lives of the people
C. The government provides protection and other benefits
while the people provide support.
D. Only those who are able to pay the tax can enjoy the
privileges and protection of the government.
13. Which is the most incorrect statement regarding taxes?

A. Taxes are necessary for the continued existence of the
government
B. The obligation to pay tax does not rest upon the privilege
enjoyed by or the protection afforded to the citizen of the
government but upon the necessity of money for the support of
the State.
C. There should be a personal benefit enjoyed from the
government before one is required to pay tax.
D. Taxes should be collected without unnecessary delay but its
collection should not be tainted with arbitrariness.
14. Statement 1: In the selection of the objects of taxation, the

courts have no power to inquire into the wisdom, objectivity,
motive, expediency or necessity of a tax law.
Statement 2: An imposition can be both a tax and a regulation.
Taxes may be levied to provide means for rehabilitation and
stabilization of threatened industry.
15. Which of the following acts in taxation is administrative

by nature?
A. Determination of the amount to be imposed.
B. Fixing the allocation of the amount to be collected between
the local government and the national government.
C. Levy or distrait of taxpayers property for tax delinquency.
D. Determining the purpose of the tax to impose.
16. This refers to the privilege or immunity from a tax burden

which others are subject to:
A. Exclusion C. Tax holiday
B. Deduction D. Reciprocity
17. The process by which the sovereign raises income to

defray the expenses of the government is called
A. Subsidy C. Taxation
B. Tariff D. Tribute
18. Which of the following statements 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 to taxation, the state can tax
anything at any time.
D. The provisions of taxation in the Philippine Constitution are
grants of power and not a limitation on taxing powers.
19. One of the characteristics of internal revenue laws is that

they are:
A. Criminal in nature
B. Penal in nature
C. Political in nature
D. Generally prospective in application
20. One of the characteristics of our internal revenue laws is

that they are:
A. Political in nature
B. Penal in nature
C. Generally prospective in operation although the tax statute
may nevertheless operate retrospectively provided it is clearly
the legislative intent
D. Criminal in nature.
21. In case of conflict between tax laws and generally accepted

accounting principles (GAAP)
A. Both tax laws and GAAP shall be enforced.
B. GAAP shall prevail over tax laws
C. Tax laws shall prevail over GAAP
D. The issue shall be resolved by the courts.
22. The following are similarities of the inherent power of

taxation, eminent domain, and police power, except.
A. Are necessary attributes of sovereignty
B. Interfere with private rights and property
C. Affect all persons or the public
D. Are legislative in implementation
23. Tax as distinguished from license fee

A. Non-payment does not necessarily render the business
illegal
B. A regulatory measure
C. Imposed in the exercise of police power
D. Limited to cover cost of regulation
24. Which of the following statement refers to police power as

distinguished from taxation?
A. It can only be imposed on specific property or properties
B. The amount imposed depends on whether the activity is
useful or not.
C. It involves the taking of property by the government
D. The amount imposed has no limit
25. 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. Imposed before engagement in those activities
26. Which of following statements is not an implication of the

lifeblood in taxation?
A. Tax is imposed even in the absence of a Constitutional
grant
B. Claims for tax exemption are construed against taxpayers
C. The government reserves the right to choose the objects of
taxation
D. The courts are allowed to interfere with the collection of
taxes.
27. Which of the following similarities of the three powers of

the state, except.
A. They are all ways in which the State interferes with private
rights and properties
B. They all exist independently with Constitution and are
exercisable by the government even without Constitution
grant. However, the Constitution may impose conditions or
limits for their power.
C. The exercise of these powers by the local government units
have no limits
D. They all presuppose an equivalent form of compensation
received by the persons affected by the exercise of the power.
28. Which of the following statements is not part of

Constitutional limitations?
A. Exemption of religious or charitable entities, non-profit
cemeteries, churches and mosque from property taxes.
B. Exemption of the government
C. Non-appropriation of public funds or property for the
benefit of any church, sect or system of religion.
D. The requirement that appropriations, revenue or tariff bills
shall originate exclusively in the House of Representatives.
29. Which of the following statements is not part of the
Inherent limitations?
A. Non-delegation of the taxing power C. Territoriality of
taxation
B. International comity D. Free worship rule
30. Which of the following statements describe “Marshall

Doctrine”?
A. Taxation power is not the power to destroy
B. The Philippine government adopts free exercise of religion
and do not subject its exercise to taxation
C. Properties outside the Philippine are not subject to tax
D. Taxation power may be used to build or encourage
beneficial activities or industries by the grant of tax incentives.
31. Taxes are not subject to automatic set-off or compensation,

except
A. The taxpayer cannot delay payment of tax to wait for the
resolution of a lawsuit involving his pending claim against the
government.
B. Where the taxpayer’s claim has already become due and
demandable such as when the government already recognized
the same and an appropriation for refund was made.
C. It allows the government sufficient period to evaluate the
validity of the claim
D. The government owes to the taxpayer.
32. Which of the following statements describe “Holmes

Doctrine”?
A. Taxation power is not the power to destroy
B. The Philippine government adopts free exercise of religion
and do not subject its exercise to taxation
C. Properties outside the Philippine are not subject to tax
D. Taxation power may be used to build or encourage
beneficial activities or industries by the grant of tax incentives.
33. Which of the following statements is not correct about

strict construction of tax laws?
A. Vague tax laws are construed against the government and in
favor of the taxpayers.
B. The claim for exemption is construed strictly against the
taxpayer in accordance with the lifeblood doctrine.
C. A well-founded doubt is fatal to the claim; it is only when
the terms of the concession are too explicit to admit fairly of
any other construction that the proposition can be supported.
D. A taxpayer claiming a tax exemption must not necessary to
point a specific provision of law conferring on the taxpayer, in
clear and plain terms, exemption from a common burden.
34. A feasibility study needs or needs to look into the taxes of

different political subdivisions of government which may be
alternative sites of the business because
A. Provinces, cities, and municipalities must have uniform
taxes between and among themselves.
B. The local taxes of a political subdivision need not be
uniform with the local taxes of another political subdivision
C. Businesses that are subject to national taxes are exempted
from local business taxes
D. Local business taxes may be credited against national
business taxes.
35. Which of the following taxation powers that can be
delegated?
A. Determining the nature and purposes for which taxes shall
be collected
B. Fixing the amount to be imposed and tax rates
C. Enact laws and ordinances, and to impose and collect taxes
D. Granting tax exemptions or condonations, and setting down
the rules of taxation in general
36. Which of the following statements is not included about

the importance of taxation?
A. Taxation is very importance to regulate inflation, achieve
economic and social stability and for social control.
B. It is the primary source of government revenue that is used
to effectively and permanently perform government functions.
C. To raise revenue for the very existence of the government
to serve the people for whose benefits taxes are collected
D. To support other inherent powers of the State.

A. Direct duplicate taxation is a valid defense against a tax
measure if it violates the equal protection clause.
B. There is no constitutional prohibition on double taxation
C. A 20% final withholding tax on interest income on bank
deposits and a 5% gross receipts tax on banks is a direct
duplicate taxation
D. The absence of any of the elements of direct double
taxation makes it indirect duplicate taxation.
38. The reduction in the selling price of the income-producing
property by an amount equal to the capitalized value of future
taxes that may be paid by the purchaser.
A. Transformation C. Tax Exemptions
B. Capitalization D. Shifting
39. Which of the following is not a scheme of shifting the

incidence of the tax burden?
A. Changing the terms of the sale like FOB shipping point in
the Philippines to FOB destination abroad, so that the title
passes abroad instead of in the Philippines.
B. The manufacturer transfers the tax to the consumer by
adding the tax to the selling price of the goods sold
C. The purchaser asks for a discount or refuses to buy at
regular price unless it is reduced by an amount equal to the tax
he will pay
D. The manufacturer transfers the sales tax to the distributor,
to the wholesaler, to the retailer and finally to the consumer.
40. Statement 1: The power of taxation is inherent in

sovereignty being essential to the existence of every
government. Hence, even if not mentioned in the Constitution
the state can still exercise the power.
Statement 2: It is essentially a legislative function. Even in the
absence of any constitutional provisions, taxation power falls
to Congress as part of the general power of law-making
A. The power of taxation is shared by the legislative and
executive departments of government.
B. An inherent limitation of taxation may be disregarded by
the application of a constitutional limitation
C. The property of an educational institution operated by a
religious order is exempt from property tax, but its income is
subject to income tax.
D. The prohibition of delegation by the state of the power of
taxation will still allow the Bureau of Internal Revenue to
modify the rules on time for filing of returns and payment of
taxes.

A. A law that imposes a tax on sugar mills central where the
revenue collected will be used to improve the sugar industry is
a tax for a public purpose, and the law is constitutional.
B. A law that imposes a tax on the supervisor’s fee in the
community, however, during the imposition of tax, only one
person is having that income. This law is not constitutional
C. A law that imposes a tax on movie goes in a city, where the
revenues will be used to improve flood control infrastructures
in the low areas in the city is constitutional.
D. A law that gives tax privileges to manufacturers in defined
industrial areas, which are not enjoyed by other manufacturers
elsewhere, is not discriminatory and is constitutional.
43. Which of the following functions is not part of the

legislative?
A. Fixing the amount of the tax and or tax rates to be imposed.
B. Implementation or collection of taxes
C. Determination of the purpose for which taxes shall be
imposed.
D. Selection of the object or subject to be taxed
44. Mr. X is claiming for a refund for the overpayment of his
income tax return, however, he is prevented due to the
prescription. Instead of claiming as a refund he appeals to the
BIR to offset the overpayment to his current income tax
payable. Which tax doctrine best describe the case above?
A. Marshall Doctrine C. Border Rule Doctrine
B. Taxpayer’s Suit D. Equitable Recoupment
45. Direct duplicate taxation is prohibited because it comprises

imposition of the same tax on the same property for the same
purpose by the same state during the same taxing period.
Which of the cases where double taxation does not apply?
A. A tax imposed by the state and the local government upon
the same occupation, calling or activity
B. Taxes are imposed on the taxpayer’s final product and the
storage of raw materials used in the production of the final
product.
C. A 5% tax on bank reserve deficiency and another 1%
penalty per day as a consequence of such reserve deficiency.
D. Real estate tax and income tax collected on the same real
estate property leased for earning purpose.
46. Which of the following cases will the law not allow the
person to do compromise on behalf of the government?
A. Only the BIR Commissioner is expressly authorized by the
Tax Code to enter into compromise for both civil and criminal
liabilities subject to certain conditions.
B. The Local Government Code has no provision regarding
compromise; however, the tax liability is not prohibited from
being compromised.
C. The BIR is given the power to compromise with respect to
customs duties limited to cases where legitimate authority is
specifically granted, such as in the remission of duties
D. The Customs Commissioner, subject to approval by the
Secretary for Finance, has the power to compromise cases
involving the imposition of fines, surcharges, and forfeitures.
47. Which of the following factors is not included in

determining the situs of taxation?
A. Amount of income
B. Sources of income being taxed
C. Place of the excise, privilege, business or occupation being
taxed
D. Subject matter of the tax (either person, property, rights or
activity)
48. Statement 1: Tax laws are given retroactive effect because

the rule of “ex-post facto law” is applicable for tax purposes.
Statement 2: Tax rulings of the Secretary of Finance are
binding to the Courts because the Department of Finance is the
highest agency regarding tax administration.
49. Which of the following statement is incorrect?

A. The government can enforce contribution upon its citizen
only when the Constitution grants it.
B. The State has the supreme power to command to enforce
contribution from people within its jurisdiction.
C. The government automatically possesses the power to
collect taxes from its inhabitants.
D. Taxation power exists inseparably with the State.
50. Which of the following statements is correct?

A. Indirect double taxation is legal as long as there is no
violation of equal protection and uniformity clauses of the
Constitution.
B. Direct double taxation is prohibited by the Constitution
C. Indirect double taxation violates the Constitutional
provisions uniformity and equal protection.
D. There is direct double taxation in taxing the income of the
corporation and again subject the portion of that income
declared a dividend to Final tax.
GROSS INCOME SUBJECTED TO REGULAR TAXES:

51. Under Sec. 32 (B) of the NIRC, which of the following
items is included in the Gross income?
A. The proceeds of life Insurance policies paid to the heirs or
beneficiaries upon the death of the insured.
B. Gains from the sale of bonds, debentures or other
certificates of indebtedness with a maturity of more than five
years, gains from the redemption of shares in mutual fund
company and interest income pertaining to investment
securities of more than 5 years according to Section 22 (B) of
the NIRC.
C. Any amount received by the insured as a return of
premiums paid by him under life insurance, endowment, or
annuity contracts, either during the term of at the maturity of
the term mentioned in the contract or upon surrender of the
contract.
D. Amounts received through accident or health insurance or
under Workmen’s Compensation Acts as compensation for
personal injuries or sickness including the amounts of any
damages received, whether by suit or agreement on account of
such injuries or sickness.
52. Which of the following statements is non-taxable

compensation income according to Section 32 (B) of the
NIRC?
A. Compensation income including holiday, overtime pay,
night shift differential pay, and hazard pay earned by
minimum wage earner, who has other reportable income
according to RR10-2008.
B. Prizes and awards granted to athletes in local and
international sports competitions and tournaments whether
held in the Philippines or abroad and sanctioned by non-
accredited Philippine Olympic Sports Committee.
C. Interest received by a nonresident individual or a
nonresident corporation from deposits with the depository
banks under the expanded foreign currency deposit system
(EFCDS).
D. Interest income received by cooperatives from any currency
bank deposit and yield or deposit substitutes and royalties
derived from sources within the Philippines.
53. Which of the following statements is not a requisite for
non-taxable retirement benefits under Republic Act No. 7641?
A. The retiring official or employee has been in the services of
the same employer for at least 10 uninterrupted years.
B. The employer maintains a reasonable private benefits plan
and approved by the BIR Commissioner.
C. Retiree should have been 50 years old at the time of
retirement
D. It should have been availed of for the first time.
54. Which of the following statements is incorrect regarding

the Revenue Regulations 20-2001 pertaining to the
cooperatives?
A. Cooperatives that transact business purely with members
are exempt from all taxes and fees.
B. Income of cooperatives from business transactions to non-
members are exempt from all taxes and fees, provided the
accumulated reserve and undivided savings do not exceed 10,
000, 000.
C. Cooperatives will be exempt for a period of 10 years from
the date of registration with CDA, provided, that at least 25%
of the net income of the cooperative is returned to the
members in the form of interest and or patronage refund and
the accumulated reserve and undivided saving do not exceed
10, 000, 000
D. Cooperatives are exempted from capital gains tax on sales
or exchange of shares of stock and real property classified as
capital assets.
55. Which of the following statements is incorrect pertaining
to Revenue Regulation No. 1-2015?
A. Further Amendments to Revenue Regulations No. 2-98 and
3-98, as last amended by Revenue Regulations No. 5-2008 and
8-2012, to with respect De Minimis Benefits.
B. Benefits received by an employee by virtue of a collective
bargaining agreement (CBA) and productivity incentive
schemes provided that the total annual monetary value
received from both CBA and productivity incentives schemes
combined do not exceed ten thousand pesos (P10, 000) per
employee per taxable year.
C. It is a contractual agreement between an employer and a
labor union that governs wages, hours, and working conditions
for employees and which can be enforced against both the
employer and the union for failure to comply with its terms.
D. This provision is effective on January 1, 2016, a year after
it was amended.
56. Which of the following causes of separation or termination

is not exempted?
A. Closure of employer’s business, downsizing of employer’s
business
B. Backwages or illegal deductions repaid by the employer
upon termination
C. Terminal leaves pay or the commutation of accumulated
unused leave credits
D. Abandonment of offices such as the registration and
subsequent appointment to another office.
57. Which of the following statements is not exempted from
regular income tax?
A. Social security benefits, retirement gratuitous and other
similar benefits from foreign government agencies and other
institutions, private or public received by resident or non-
resident citizens or aliens who come to settle permanently in
the Philippines
B. Income derived from investments in the Philippines in
loans, stocks, bonds, or other domestic securities, or from
interest on deposits in banks in the Philippines who is enjoying
refinancing from a foreign government.
C. Income derived by the government and its political
subdivision from the exercise of essential government
function.
D. Income derived by the government-owned and controlled
corporation (GOCCs) engaged in income-producing activities
which are proprietary or commercial in nature.
58. Which of the following retirement benefits, pensions,

gratuitous is subject to regular income tax under Sec. 32 (6) of
the NIRC?
A. Retirement benefits received under Republic Act. No. 7641
and those received by officials and employees of private firms,
whether individual or corporate, in accordance with a
reasonable private benefits plan maintained by the employer.
B. Any amount received by an official or employee or by his
heirs from the employer as a consequence of the separation of
such official employee from the service of the employer
because of death sickness or other physical disability or for
any cause within the control of the said official or employee.
C. The provisions of any existing law to the contrary
notwithstanding, social security benefits, retirement gratuities
pensions and other similar benefits received by a resident or
nonresident citizens of the Philippines or aliens who come to
reside permanently in the Philippines from foreign government
agencies and other institutions, private or public.
D. Payment of benefits due to become due to any person
residing in the Philippine under the laws of the United states
administered by the United States Veterans Administration.
E. Benefits received from enjoyed under the SSS in
accordance with the provisions of Republic Act No. 8282 and
benefits received under Republic Act. No. 8291, including
retirement gratuity received by government officials and
employees.
59. Which of the following is incorrect regarding the Revenue

Regulation No. 3-2015?
A. This revenue regulation is promulgated to implement the
provisions Republic Act (RA) No. 10653.
B. Accordingly, the amount of 82, 000 shall ONLY apply to
the 13th-month pay and other benefits prescribed under the
provisions of Section 2.78.1 (B) of RR No. 2-98, as amended
and shall apply ALSO to the Minimum Wage Earner.
C. It must be emphasized that this exclusion from gross
income is not applicable to self-employed individuals and
income generated from the business.
D. The effective implementation of these Regulations all
taxpayer-employers shall ensure the correct computation and
application of the said increase on the 13th month and other
benefits of the employees in the year-end adjustments and the
same shall be clearly indicated among others.
E. The said BIR form shall be issued by the employer to the
employee on or before January 31 of the succeeding calendar
year of if the employment is terminated before the close of
such calendar year, on the day on which the last payment of
compensation is made.
F. In case the employee whose employment is terminated and
subsequently employed transferee shall immediately furnish
the new employer the accomplished BIR form issued by the
previous employer for the appropriate withholding tax
computation of the employee’s regular compensation and
subsequent year-end adjustment if any.
60. Which of the following items is not subject to regular

income taxation?
A. Compensation income for services in whatever forms paid
B. Gross income from the conduct of trade, business or
exercise of a profession
C. Gains derived from dealings in properties
D. Dealings in capital assets of domestic stocks and real
properties
61. Which of the following interest incomes is not subject to

regular income tax?
A. Income from lending activities to individuals and
corporation by banks, finance companies, and other lenders.
B. From bonds and promissory notes
C. Interest income earned by the landowners in disposing their
lands to their tenants.
D. Interest income from banks deposits abroad
62. Which of the following statements about rent is/are
correct?
I. Obligations of the lessor that are assumed by the lessee are
additional rental income to the lessor
II. Advance rental is subject to regular income tax is restricted
to be applied in future years or upon the termination of the
lease
III. Leasehold improvements made by the lessee on the leased
property are recognized by the lessor as income using the
spread-out method or outright method.
IV. Advance rental as a security deposit to guarantee payment
or rent subject to contingency which may or may not happen
V. Rent income is a passive income hence, subject to regular
income tax
A. I, II AND V C. I, II, III, AND IV
B. I, II, III, IV AND V D. I, II, AND II
63. Which of the following statements about royalties is/are

incorrect?
I. Royalties earned from sources within the Philippine are
generally subject to final tax.
II. Active royalty income and royalties earned from sources
outside the Philippines are subject to final income tax
III. Royalties from mining properties and from books in the
Philippines is are subject to final tax
IV. Royalties earned by the resident foreign corporation are
exempt from regular income tax.
A. I and IV only C. III and IV only
B. I, II, III and IV D. II and IV only
64. Which of the statements regarding Dividends income is/are
incorrect?
I. Dividends declared by domestic corporations are generally
subject to 10% final tax if the recipient is an individual
taxpayer.
II. All kinds of dividends received from foreign corporations
are items of gross income subject to regular income tax.
III. When the declaration confers to the recipient a different
interest or right after the stock dividend declaration or when
the stocks dividends are subsequently redeemed is taxable
IV. According to RR6-2008, the difference between the
proceeds of the liquidating dividends and the cost of the
investment is a capital or loss which is subject to the rules of
regular income tax or to the 5%-10% capital gains tax rule.
A. IV only C. I, II, III and IV
B. II and IV only D. II and III only
65. Which of the following statements is relatively correct

regarding the partner’s distributable share of the net income of
the general professional partnership?
A. The general professional partnership is not subject to any
kind of taxes.
B. The basis of income to be subject to regular income tax is
not the net income but the actual distribution.
C. If the items of gross income subjected to final tax and
capital tax to the general professional partnership are included
as an item of gross income subject to regular income tax when
distributed to the partners.
D. Any income received by the partner from the general
professional partnership are not subjected to regular income
tax but rather to a final tax of 10%-15% final tax rule.
66. Which of the following other sources of gross income

is/are subject to regular income tax?
I. Income distribution from taxable estates or trusts
II. Share from the net income of other pass-through entities
III. Farming income
IV. Recovery of past deduction
V. Reimbursement of expenses
VI. Cancelation of indebtedness for a consideration
A. I, IV and VI C. I, III, IV and VI
B. I, II, III, IV and VI D. I, II, III, IV, V and VI

the recovery of past deductions?
A. When past year deductions from gross income are
subsequently recovered by the taxpayer or when accrued
expenses previously deducted are subsequently paid at an
amount less than the deduction claimed
B. Past deductions that created tax benefit to the taxpayer must
be reverted back to gross income in the year of recovery.
C. If the net income in the period the deduction was made
exceeds the amount of the deduction, all recoveries from the
deduction are non-taxable.
D. If the net operating loss in the period the deduction was
made exceeds the amount of the deduction, all recoveries from
the deduction is non-taxable.
68. The following items are the taxable recovery of past
deductions, except.
I. Recovery of previously claimed bad debt expense
II. Refund of local tax expense
III. Stock transaction tax in disposing of stocks through the
Philippine stock exchange
IV. Refund of foreign tax previously claimed as deduction
V. Income tax paid or incurred to a foreign country, if the
taxpayer claimed a credit for such tax in the year it was paid or
incurred.
VI. Re-commissioning of abandoned petroleum service
contracts or mining properties
VII. Release of reserve funds of insurance companies
VIII. Special assessment
A. III, IV, V-VII and VIII C. II, III, V and VIII
B. II, IV, VI and VIII D. III, V and VIII
69. Which of the following data regarding the MWE is

correct?
A. A worker in the private sector who is paid the minimum
wage, or to an employee in the public sector with
compensation income of not more than the statutory minim
wage (i.e. those with salary grade 1 to 3) in the non-
agricultural sector where he is assigned.
B. Rate fixed by the Regional Tripartite Wage and
Productivity Board of the Department of Labor and
Employment or 5, 000 per month or 60, 000 per year,
whichever is lower.
C. The employee must not have other income aside from
minimum wage and exempt benefits.
D. Minimum Wage Income Earner is exempted from the
regular income tax including the 13th-month pay and other
benefits even there is another taxable income provided, that
the other income is tax exempt also.

the Minimum Wage Income Earner (MWE)?
A. When an employee become a minimum wage earner during
the year, he shall be subject to income tax only on
compensation earned during the taxable year before becoming
a minimum wage earner.
B. When an employee ceases to be a minimum wage earner
during the year due to increase in salary, only the income for
the rest of the year is taxable.
C. The employee ceases to a minimum wage earner during the
year by disqualification, the employer shall withhold income
tax for the salaries of the employee for the entire taxable year.
D. Under RMO 23-2011, COLA which forms part of the new
wage rates prescribed to be the statutory minimum wage
should be treated as part of the minimum wage and shall not
be treated as separate or other benefits.
71. Which of the following compensation income is/are non-

taxable or exempted from regular income tax?
I. Income of the minimum wage income earner
II. Other benefits of relatively small value that are not included
in the list of the de minimis benefits.
III. Income exempt under treaty or international agreements
IV. Income or benefits necessary to the trade, business or
conduct of profession of the employer
V. Excess de minimis over the statutory limits.
VI. For the convenience or advantage of the employer
A. I, II, III and VI C. I, III, V, and VI
B. I, III, IV and VI D. I, II, III, IV, V and VI
72. Which of the following de minimis benefits is/ are non-

taxable from regular income tax under RR8-2012?
I. Actual medical assistance not exceeding 10, 000 per annum
II. Employee achievement award in the form of tangible
property other than cash or gift certificates with an annual
monetary value not exceeding 10, 000 received by the
employee under an established written plan which does not
discriminate in favor of highly paid employees.
III. Gifts are given during Christmas and major anniversary
celebration not exceeding 10, 000 per annum
IV. Daily meal allowances for overtime work and night or
graveyard shift not exceeding 25% of the basic minimum wage
on a per region basis.
V. Monetized unused vacation leave credits of private
employees not exceeding not exceeding 10 days during the
year.
VI. Monetized unused terminal leave pay or the commutation
of unused leave credits due to involuntary separation from
employment of the employee not exceeding 10 days leave
credit limit.
VII. Benefits receive by an employee by virtue of a collective
bargaining agreement (CBA) and productivity incentive
schemes provided that the total annual monetary value
receives from both CBA and productivity incentive schemes
combined do not exceed 10, 000 per employee per taxable
year.
A. I, II, III, IV, V and VII C. I, II, III, IV, V, VI and VII
B. I, II, IV, V and VII D. I, II, IV, V, VI and VII

the de minimis benefits?
A. Any benefits received by a rank and file employee will be
treated as other compensation income which is subject to RR3-
2015 for the 13th-month pay and other benefits not exceeding
82, 000.
B. Any excess of the statutory limit of the de minimis of
managerial and supervisory employees is subject to regular
income tax.
C. For managerial and supervisory employees, any benefits are
treated as fringe benefits in which subject to final fringe
benefits tax.
D. Medical cash allowance to dependents of employees not
exceeding 750 per employee per semester or 125 per month.

A. Employee benefits of non-Filipino nationals and or non-
permanent residents of the Philippines from foreign
governments, embassies or diplomatic missions and
international organization in the Philippines are subject to
regular income tax provided they are only rank and files
employees.
B. Filipino employees of a foreign government, embassies,
diplomatic missions and international organization are immune
from regular income tax also.
C. Filipino claiming exemptions under the terms of
international agreements or under provisions of special laws
granting privileges to international organizations shall file an
application for confirmation of tax exemption with the BIR’s
International Tax Affairs Division (ITAD).
D. A Foreign government, embassies, diplomatic missions and
international organization have the obligation to withhold
income tax by virtue of international comity as embodied in
several international agreements to which the Philippine is a
signatory.
75. Which of the following statements does not qualify to as

necessity of the employer rule?
A. Necessary traveling, transportation, representation or
entertainment expenses that are subject to an accounting or
liquidation in accordance with specific requirements of
substantiation of expense.
B. Representation and Transportation Allowance (RATA) of
public officers and employees under the General
Appropriation Act.
C. Personnel Economic Relief Allowance (PERA)
D. Cost of Living Allowances (COLA)
76. Benefits or allowances which are intended for the

furtherance of the interest of the employer’s business or to
ensure its smooth operations are exempt from income tax,
except.
A. Scholarship grant to an employee under contract to remain
in service for a specified period upon completion of the study.
B. Grant of housing privilege to employees working at distant
or remote facilities even if the dwelling is distanced from the
facility in compliance with labor safety standards.
C. Cellphone allowance is given to all employees by the
employer
D. Car incentives to medical doctor’s on-call who are required
to report on duty anytime.
77. Which of the following statements below is incorrect

regarding the fixed allowance is given by the employer to the
employees?
A. The cost of living allowance and other benefits paid to the
employee every payroll period are tax exempt.
B. Ordinary and necessary traveling, representation or
entertainment expense of the employee in the pursuit of his
trade, business or profession is exempted from regular tax
under the necessity of the employer rule.
C. Expenses subjected to accounting or liquidation are tax
exempt.
D. Any excess of the advances return to the employer are non-
taxable
78. Which of the following statements is false regarding paid

vacation and sick leave allowances?
A. The paid absences of an employee applied for his vacation
or sick leave credits which are normally received as part of the
regular salary is part of the regular compensation.
B. Retainer fees of consultants, talents, and directors who have
no management function in the business are professional
income not a compensation income of the recipient.
C. Commissions to non-employees such as independent sales
agent is part of his compensation income.
D. Tips and gratuities paid directly to an employee by
customers of the employer which are not accounted for by the
employee to the employer are not considered as compensation
income but are to be reported as other income on the income
tax return of the employee.
79. Compensation income includes performance based

remunerations to an employee in addition to the regular
compensation with or without regard to the payroll period,
except.
A. Gaines on exercise of stock options
B. Emoluments and honoraria
C. Taxable retirement and separation pay
D. Director’s Fees of an independent employee
80. Which of the following items is not included in 13th-

month pay and other benefits as governed by the RR3-2015?
A. Christmas bonus of private employees
B. Cash gifts for the wedding anniversary of a private
employee
C. Other Fringe benefits of rank and file employees
D. Personal Economic Relief Allowance (PERA)
GROSS INCOME SUBJECT TO FINAL TAXES

81. Under Section 24 (B) of the Tax Code, a final tax is
imposed upon the gross passive income of citizen and resident
aliens, except.
A. Income from the savings accounts and time deposits
maintained by a member of cooperatives.
B. Royalty’s income from books which is less than 10, 000.
C. Dividend income received from a domestic corporation by
an individual.
D. Income from winnings less than 10, 000.
82. Which of the following statements is incorrect pertaining

passive income subject to Final tax?
A. The Philippine government cannot compel non-resident
subjects of foreign countries to withhold the tax as this would
amount to infringement of foreign sovereignty.
B. The final withholding tax is built upon taxpayer and
government convenience in which the taxpayer is relieved the
taxpayer of the obligation to file income tax return.
C. Items of passive income are earned with very minimal
involvement from the taxpayer and are generally irregular in
timing and amount.
D. A non-resident person not engaged in trade or business in
the Philippine and non-resident foreign corporation is not
subject to final tax but rather to regular income tax.
83. Which of the following interest income is/are not subject

to final tax?
i. Deposits substitute
ii. Government securities
iii. Cooperative’s income
iv. Money market placements
v. Trusts funds
vi. Financial companies or lending institutions
vii. Other investments evidenced by certificates prescribed by
the Bangko Sentral ng Pilipinas.
A. i, ii, iv, and vii C. i, ii, iii, iv , vi and vii
B. i, ii, iv, vi, and vii D. i, ii, iv, v, and vii
84. Which of the following amount of winnings/ prizes is

subject to a final tax of 20%?
A. P10,000 winnings outside the Philippines
B. P10,000 winnings earned within the Philippines
C. P1,000 Philippines Sweepstakes winnings
D. P9,000 first prize singing contest
85. The share of a partner in the income of a commercial

partnership is
A. Subject to a final tax of 10%.
B. Subject to a creditable tax of 10% if the amount is P720,
000and below and 15%if the amount is more than P720, 000.
C. Subject to normal tax of individual taxpayer
D. Tax-exempt
86. The following corporate income is subject to income tax,

except
A. Cash dividends received from a domestic corporation by
another domestic corporation
B. Royalty income received from a domestic corporation
C. Interest income on foreign loans
D. Inter-corporate dividends received by a nonresident foreign
corporation from a domestic corporation
87. Interest income received by an individual taxpayer (except

a nonresident individual) from a depository bank under the
expanded foreign currency deposit system shall be subject to a
final income tax at rate of:
A. twenty percent (20%) of such interest income.
B. fifteen percent (15%) of such interest income.
C. seven and one-half percent (7 ½ ) of such interest income
D. two and one-half percent (2 ½ ) of such interest income
88. Which of the following passive income from Philippine

source is exempt from Philippine income tax when received by
non-resident Aliens and non-resident citizens?
A. Royalties, in general
B. Yield or any other monetary benefit from deposit substitute
C. Interest income received from a depository bank under
expanded foreign currency deposit system
D. Other winnings

the dividends?
A. If received by a domestic or resident corporation from a
domestic corporation subject to tax, such dividend is tax-
exempt.
B. The pure stock dividend, dividend received from
cooperative, and pure liquidating dividends are tax- exempt.
C. Cash or property dividend is subject to final tax if received
by an individuals or non-resident corporation from a domestic
corporation.
D. Any pure liquidating dividend not only a mere return of
capital is tax exempt.
90. Which of the following statements is correct regarding the

stock dividend?
A. If the stockholder has a preference to take cash or property
dividends instead of stock dividends it is subject to final tax.
B. Some stockholder exercised the option to take cash or
property dividends is not tax-exempt
C. Any different kind of stock received by stockholder will be
subject to final tax of 10%
D. It is subject to tax if the exercise of option resulted in a
change of the stockholder’s proportionate share of the
outstanding shares of the corporation.
91. Which of the following is not subject to 10 final tax?

A. Share of a partner in a commercial partnership
B. Dividend income received by an individual from a domestic
corporation
C. Royalty income earned by an individual from his literary
works
D. Dividend income received by domestic from a resident
foreign corporation
92. Which of the following statements regarding royalty

income is correct?
A. All royalty incomes are subject to 20% final tax
B. Royalty income derived outside is subject to regular income
tax
C. Any royalty income from literary works received by the
corporation is subject to either 10% or 20% final tax.
D. Income from literary works is subject to 10% final
withholding tax
93. Which of the following prizes is subject to tax?
A. Sports competitions sanctioned by the national sports
organization
B. Nobel prize
C. Prize from dance competition abroad
D. Any prizes received without effort
94. Which of the following items is exempt from final tax?

A. Winnings in competition sponsored by a local trading
company
B. Prizes in a body building competition
C. Dividends from a foreign corporation
D. Winnings from casino
95. On April 15, 2015, the following incomes of Mr. Jerome

Chavez are:
Compensation income from his employer net of
withholding tax of 5, 750 19, 250
Interest income from his investment in UCPB 20, 000
Dividend income from ADFC 50, 000
Prize in a debate competition 15, 000
Royalties outside the Philippines 75, 000
Winnings from raffle sponsored by GMA 100, 000
Gain on sale of bonds with maturity date of less than 317, 650
Share from BDC a cooperative certified by CDA 6, 000
Interest income under EFCDS 20, 000
Interest income from Metrobank with a maturity date
of 6 years but pre-terminated within three years 80, 000
How much is the income subject to regular tax and final taxes
from the passive income?
96. Mr. Jude Capalar, a government rank, and file employee
have the following summary of his compensation and benefits
in 2015.
Gross compensation income 324, 000
Less: Employee payroll deductions
Contribution to GSIS, PHIC and HDMF 32, 000
Deduction for Withholding tax 34, 000 66, 0000
Net Regular payroll 258, 000
Representation and Transportation Allowance 18, 000
Personnel Economic Relief Allowance 24, 000
Christmas bonus 37, 000
Uniform Allowance 10, 000
Honoraria 15, 000
Christmas Gift 5, 000
Additional compensation allowance 36, 000
Monetized value of vacation leave and sick leave (15 days) 7,
500
How much is the gross taxable compensation income of Mr.
Jude Capalar for 2015?
A. 369, 500 C. 325, 000
B. 352, 500 D. 308, 000
97. Mr. Jerome Chavez, a private rank and file employee

derived the following remuneration and benefits in 2015.
Basic compensation income 300, 000
Less: Employee’s contribution to SSS, PHIC and HDMF 24,
000
Withholding tax 30, 000
Net compensation income 246, 000
Overtime Pay 21, 000
Productivity incentive 25, 000
Vacation expense paid by the employer 20, 000
Cost of living allowance (COLA) 24, 000
Pre-computed daily transportation allw. 18, 000
Rice Allowance 27, 600
13th month pay 25, 000
Monetized unused leave credit (16 days) 16, 000
Uniform allowance 15, 000
How much is the gross taxable compensation income of Mr.
Chavez for 2015?
A. 249, 600 C. 364, 600
B. 312, 600 D. 394, 600
98. Mr. Montecina is preparing his income tax return from his
employment and business income are:
Basic compensation income 240, 000
Less: Contribution to SSS, PHIC and HDMF 20, 000
Withholding tax 40, 750
Net Payroll 186, 100
Add: Cost of Living Allowance 24, 000
Overtime Pay 6, 000
Night Shift Differential 8, 000
Holiday Pay 5, 000
Cash Gifts 5, 000
13th month pay 25, 000
Christmas bonus 15, 000
Other fringe benefits 20, 000
Laundry allowance 3, 000
Productivity Incentives 18, 000
Rice allowance 24, 000
Other reportable income:
Gross sales 240, 000
Less: cost of sales 100, 000
Gross income from business 140, 000
Less: Deductions * 100, 000
Taxable income from business 40, 000
Additional information:
a. On December 31, 2015, the taxpayer filed for the additional
exemption of one (1) qualified dependent child.
b. On June 20, 2015, the taxpayer donated a 10, 000 cash to
Marasbaras, National High School- a public school and 5, 000
to the non-accredited non-government organization.
c. Mr. Montecina received 10, 000 interest income, net of final
tax from Bank of the Philippines.
d. All expenses are connected with the taxpayer’s trade or
business.
How much is the tax due and payable or refund of Mr.
Montecina during 2015?
A. 1, 000 C. (1, 000)
B. 500 D. (500)
99. Atty. Jose Aguinalde, 64 years, married with two qualified

dependent children with the following income below:
Gross professional income, net of 10% FWT 625, 500
Professional Expenses 200, 000
Retirement benefits 200, 000
Prize in a sports tournament 50, 000
Gain from sale of bonds with maturity period of 4 years 20,
000
Interest income from bank deposit, Philippines 10, 000
Interest income under EFCDS 60, 000
Royalties income from outside the Philippines 10, 000
Philippine Lotto Winnings 60, 000
Share in a commercial partnership 40, 000
Interest income from bonds with maturity period of 5 years 20,
000
Share in a general professional partnership 60, 000
a. Retirement benefits received from his previous employer
that maintained a reasonable private pension plan after his 12
years of services.
b. Prize in a sports tournament is sponsored by a group of
businessmen promoting health products.
c. The commercial partnership is subject to corporate income
tax of 30% based on the taxable income.
d. Inclusive to the amount received by the taxpayer from the
general professional partnership is the share in interest income
which was subjected to a final tax of 20% of 5, 000.
How much is the taxable net income subject to regular income

tax of Atty. Aguinalde during 2015?
A. 720, 000 C. 485, 000
B. 680, 000 D. 480, 000
100. How much is the total final withholding taxes on passive

income?
A. 20, 500 C. 30, 500
B. 26, 500 D. 32, 500
101. How much is the income tax expense for 2015?
A. 195, 400 C. 139, 500
B. 182, 600 D. 119, 000
102. Mr. Gerald Result, a resident citizen and supporting his

two younger sisters has the following data for the year 2015:
Gross sales 1, 000, 000
Sales returns and allowances 50, 000
Cost of sales 300, 000
Interest income from Metrobank 10, 000
Share in the net income of commercial partnership
net of 10% final withholding tax 90, 000
Salaries of employee, net of 30, 000 CWT 270, 000
Valued Added Tax (VAT) 100, 000
Business permit and licenses 5, 000
Community tax 10, 000
Contribution to pension trust 50, 000
Entertainment expense 10, 000
Interest expense 50, 000
Research and development cost (deferred)
benefits realized during July 1, 2015, 60, 000
Purchase of equipment with estimated life of 5
acquired on October 1, 2015 50, 000
a. Result bought a residential dwelling for 100, 000 and
transferred ownership to his supervisor. The property has 90,
000 zonal value.
b. 20, 000 of the contributions to pension trust covers past
year’s cost.
c. Withholding taxes from the salaries of the employees are
properly remitted to the BIR.
How much is the total itemized deductions?

A. 504, 450 C. 566, 950
B. 506, 950 D. 584, 950
103. How much is the taxable income of Resula for 2015?

A. 255, 000 C. 150, 000
B. 175, 000 D. 68, 050
104. How much is the taxable income of Mr. Resula if he

chooses optional standard deduction?
A. 175, 000 C. 368, 050
B. 255, 000 D. 495, 000
105. How much is the total expense to be claimed as part of

the itemized deductions from the fringe benefits given to his
employees?
A. 15, 000 C. 68, 000
B. 32, 000 D. 100, 000
106. On January 2, 2014, Mr. Keneth Sajorda, a resident

citizen who sold land as a capital asset for 1, 800, 000 which
had a cost to him of 600, 000. The property was subject to a
mortgage of 700, 000, which was assumed by the buyer. Of
the remaining 1, 100, 000 of the consideration, 200, 000 was
payable on the date of sale, 600, 000 on January 2, 2015, and
300, 000 on January 2, 2016.
How much is the capital gains tax?
A. 30, 000 C. 72, 000
B. 66, 000 D. 108, 000
107. Using problem #106, how much is the installment

payment for January 2, 2015?
A. 27, 000 C. 54, 000
B. 34, 000 D. 108, 000
108. Which of the following statements best describe the

characteristics of Taxable Income?
A. There must be a sale of goods or properties
B. The gain must be realized and received
C. There is no law or treaty exempt such income from taxation
D. The gain received must be in form of cash
109. Which of the following items is not subject to taxation?

A. Rentals and royalties from property located within the
Philippines
B. Gains, profits, and income from sale of real property as well
as from personal property in the Philippines
C. Any excess of the proceeds received over the acquisition
costs and premium payments by an assignee of a life insurance
policy.
D. Receipt of money or property to be held in trust for, or to be
remitted to, another person.
110. Which items are not exempted by law from taxation?

A. Income of foreign government and foreign government-
owned and controlled corporations.
B. Philippine Amusement, Gaming Corporation (PAGCOR)
C. Income of International missions and organization with
income tax immunity
D. SSS, GSIS, Pag-IBIG or PhilHealth benefits
111. Which of the following statements is incorrect about

citizen?
A. Those who are citizens of the Philippine at the time of
adoption of the Constitution on February 2, 1987
B. Those born on January 17, 1973, of Filipino mothers who
elected Filipino citizenship upon reaching the age of majority
C. Those whose mothers and fathers are resident of the
Philippines
D. Those who are naturalized in accordance with law
112. Which of the following statements is incorrect about non-

resident citizen?
A. A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his physical
presence abroad with an indefinite intention to reside therein
B. Who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for an employment on a
permanent basis
C. Working and derives income from abroad and whose
employment thereat requires him to be physically present
abroad most of the time during the taxable year.
D. Previously considered as a non-resident citizen and who
arrives in the Philippines at anytime during the taxable year to
reside permanently in the Philippines shall likewise be treated
as a non-resident citizen for the taxable year in which he
arrives in the Philippines with respect to his income derived
from sources abroad until the date of his arrival in the
Philippines.
113. Which of the following statements is considered as a

resident alien?
A. Alien who stayed in the Philippines for an aggregate period
of more than 180 days during the year
B. Aliens who come to the Philippines for a definite purpose
which in its nature may be promptly accomplished
C. Aliens who shall come to the Philippines and stay therein
for an aggregate period of not more than 180 days during the
year.
D. One who comes to the Philippines for a definite purpose
which in its nature would an extended stay and to that end
makes his home temporarily in the Philippines, although it
may be his intention at all times to return to his domicile
abroad.

A. Citizens staying abroad for a period of at least 183 days are
considered resident
B. Aliens who stayed in the Philippines for more than 1 year
as of the end of the taxable year is considered as non-resident
C. Aliens who are staying in the Philippines for not more than
1 year but more than 180 days are deemed non-resident aliens
not engaged in trade or business.
D. Aliens who stayed in the Philippines for more than 180
days are considered non-resident aliens engaged in business
A. A citizen who was previously a nonresident and who
arrives and resides temporarily in the Philippines during the
taxable year is considered non-resident citizen
B. A citizen who works and derives income from abroad and
whose employment requires him to be physically present
abroad most of the time (at least 183 days) during the taxable
year is to be classified as a non-resident citizen.
C. A seaman who is a citizen of the Philippines and who
receives compensation for services rendered abroad as a
member of the complement of a vessel engaged exclusively in
international trade shall be treated as an overseas contract
worker.
D. An individual citizen of the Philippines who is working and
deriving income from abroad as an overseas contract worker is
taxable only on income from sources within the Philippines.

A. The nature of works of an alien will determine whether he
is a resident or nonresident.
B. If one come to the Philippine with an indefinite purpose in
which his transactions can be accomplished with extended
period he becomes non-resident.
C. A foreigner who shall live in the Philippines with definite
intention as to his stay is a non-resident.
D. A foreigner who has acquired residency in the Philippines
shall only become a non-resident when he actually departs
with the intention of abandoning his residency in the
Philippines.
117. Which of the following statements is incorrect about
personal exemptions?
A. In the case of a married individual, only the spouse who has
income is allowed to claim a personal exemption.
B. This exemption is granted only to individual taxpayers who
have earnings not subjected to final taxes.
C. The status of the individual taxpayer will matter in claiming
this exemption.
D. These exemptions include both the exemptions of the
individual taxpayer, his family, and his dependents, are
considered to be the equivalent of the minimum subsistence.
118. Which of the following taxpayers is not allowed for
personal exemptions?
A. Citizens of the Philippines C. Estates and Trusts
B. Partnership and Corporation D. Resident Alien
119. The following are the requisites for a non-resident alien

individual doing business in the Philippines may be granted
personal exemptions, except.
A. The country of which the non-resident alien is a subject or a
citizen has an income tax law.
B. Such income tax law of the foreign country does not allow
personal exemptions to a Filipino citizen deriving income
therefrom but not residing therein.
C. Such ITR is true and accurate, covering all income received
from sources within the Philippines
D. The non-resident alien files an income tax return in the
Philippines in due time.
A. Residents and citizens of the Philippines such as resident
citizen and domestic corporations are taxable on all income
from sources within and without the Philippines.
B. Under the Philippine laws, resident citizens and domestic
corporations enjoy preferential privileges than aliens.
C. The taxation of foreign income of resident citizens and
domestic corporations properly reflected this difference in
benefits consistent with the Benefit Received Theory.
D. Resident and non-resident citizens are not subject to income
tax for the income derived outside the Philippine.
121. Which of the following statements is not a requisite for

Additional Exemptions?
A. A taxpayer’s child, whether legitimate and legally adopted
but not including illegitimate.
B. Incapable of self-support child because of mental or
physical who is more than 21 years old.
C. Chiefly depending for support on the taxpayer and living
with the taxpayer
D. No married, not gainfully and not more 21 years old.
122. Which of the following is correct about the dependents?

A. A dependent child includes a foster child- who is placed
under planned temporary substitute parental care by a person
duly licensed by the DSWD to provide foster care.
B. The term chief support means head of the family only
C. Dependent child includes mentally incapacitated who is
employed
D. Other collateral relatives can be qualified as dependent if
they are chiefly dependent upon and living with the taxpayer
who is also unemployed, incapable of self-support and of legal
age.

A. If both spouses earn income during the taxable year, only
one of the spouses can claim additional exemptions for
dependent qualified children.
B. If only one spouse is deriving taxable income, the only
spouse may claim the additional exemptions.
C. In a separated spouse, only the spouse who is the custody of
the qualified dependent children if the latter income is greater
than the other spouse.
D. An unmarried individual with a child out of wedlock who is
a recognized natural child can claim personal exemptions and
additional exemptions.
124. Which of the following is incorrect as to the rules of

change of status?
A. If any of the dependent dies, marries, becomes 21 years old
or becomes gainfully employed during the taxable year, the
taxpayer may still claim the same exemption as if the event
occurred at the end of the year.
B. If the taxpayer dies during the calendar year, his estate
cannot claim the personal and additional exemptions for
himself and his dependents as if he died at the close of such
year.
C. If the taxpayer should have additional dependents during
the taxable year, the taxpayer may claim the corresponding
additional exemption in full for such year.
D. If the dependent child who is incapacitated is employed, the
taxpayer can’t claimed for additional exemption for the next
calendar year.
125. Under RR2-98, NRA-ETB can claim only a basic
personal exemption subject to the following reciprocity
conditions, except.
A. The country to which the NRA-ETB is a citizen must have
an income tax law
B. The income tax law of the country of the NRA-ETB allows
personal exemptions to citizens of the Philippines not residing
therein
C. The NRA-ETB files a true and accurate return of his
income from all sources from within the Philippines.
D. The personal exemptions granted to NRA-ETB is absolute.
126. Which of the following statements is not correct

regarding the RR2-98?
A. A non-resident alien engaged in trade or business or in the
exercise of a profession in the Philippines shall be applied to
personal exemption in the amount equal to the exemptions
allowed in the income tax law in the country of which he is
subject-or citizen, to citizens of the Philippines not residing in
such country, not to exceed the amount fixed under Sec. 35 of
NIRC.
B. Under Sec. 35 of NIRC can only claim a basic personal
exemption-in which it does not involve the additional
exemptions.
C. If the reciprocity tax treaty stipulates to allow the only basic
personal exemption, the Philippines will only allow basic
personal exemption subject to limit.
D. If the tax treaty stipulates that both basic personal and
additional exemptions be allowed as exemptions, based on
reciprocity principle the Philippine will also grant both basic
and additional exemptions.
127. Which of the following statements is incorrect about the

PHHI (Premium on Health and or Hospitalization Insurance)
A. The premiums on health and or hospitalization insurance
(PHHI) paid by the taxpayer for himself, including h family,
not exceeding P200 a month or P2, 400 a year.
B. PHHI is claimed as a deduction against gross income
provided that the family income of such taxpayer shall not
exceed P250, 000 for the taxable year.
C. To claim this deduction, the employee shall present the
policy contract together with the original receipt of the
premium payment for the current year to the employer.
D. Total family income does not include primary and other
income from sources received by all members of the nuclear
family.
128. Which of the following incorrect regarding the BIR

Ruling 003-2005 about trusts?
A. Tax treatment of UITFs should not be any different from
CTFs since they are considered similar products.
B. An irrevocable trust is treated as a separate and distinct
taxable entity from the person/s or parties that established the
trust.
C. An irrevocable trust is subject to any applicable taxes on its
investment income as well as its investors, if and when the
trust income is subsequently distributed to them.
D. The nature of UITF is that they are considered as
irrevocable trusts since the beneficial ownership in a UITF is
maintained with the trustor-beneficiary, and considering that in
the case of death of the trustor, The UITF participation forms
part of the trustor’s estate subject to estate tax.
129. Which of the following is correct regarding the BIR

Ruling 003-2005?
A. Income accumulated in trust for the benefit of an unborn or
unascertained person or persons with contingent interest, and
income accumulated or held for future distribution under the
terms of the will or trust is exempted from tax.
B. Any income which is to be distributed currently by the
fiduciary to the beneficiaries but not including income
collected by a guardian of an infant which is to be held or
distributed as the court may direct.
C. Income received by estates of deceased persons after the
period of administration or settlement of the estate is subject to
tax.
D. Income which, in the discretion of the fiduciary, may be
either distributed to the beneficiaries or accumulated.
130. Which of the following is not a requisite of exemption of

Employer’s trust under the Sec. 60 (B) of NIRC?
A. Contributions are made to the trust by the employer,
employees, or both for the purpose of distributing to such
employees the earning and principal of the fund accumulated
by the trust in accordance with such plan.
B. Under the trust instrument it is impossible, at any time prior
to the satisfaction of all liabilities with respect to employees
under the trust, for any part of the corpus or income to be used
for, or diverted to, purposes other than for the exclusive
benefit of his employees.
C. Any amount actually distributed to any employee or
distribute shall be taxable to him in the year in which so
distributed to the extent that it exceeds the amount contributed
by such employee or distribute.
D. Employee’s trust must be in forms part of a pension, stock
bonus or profit-sharing plan of an employer.
131. Which of the following conditions of the substituted

filing system is not included?
A. Amount of tax due from the employee at the end of the year
equals the amount of tax withheld by the employer
B. The employee’s spouse received purely compensation
income from only one employer in the Philippines with correct
withholding tax
C. Employer files the annual information return (BIR Form
No. 1604-CF)
D. The employer issues BIR Form No. 1601-E/2307 to each
employee.
132. The filing of consolidated, annual or adjustment return is
required under each of the following circumstances, except.
A. Concurrent employment during the year
B. Successive employment during the year
C. Receipt of income distribution from a general professional
partnership, taxable trusts or taxable estates, exempt co-
ownership or exempt joint ventures.
D. Taxpayerer with employment income only
A. An individual taxpayer engaged in business or practice of
profession shall file, in addition to the annual income tax
return (BIR Form 1701).
B. The annual income tax due to the taxpayer shall be
determined on the annual taxable income.
C. Taxable income shall be reduced by creditable withholding
taxes made upon the gross income of the taxpayer only.
D. Tax refund or overpayment can be claimed through tax
refunds or through a tax credit certificate.
134. Which of the following statements is true regarding the

excess quarterly estimated tax?
A. The excess quarterly estimated tax payments over the
quarterly tax due may, at the option of the taxpayer, be carried
forward to quarters of the succeeding taxable year or claimed
through a tax refund.
B. The option must be indicated in the annual adjustment
return.
C. Even the taxpayer decided to carry still it is revocable for
that period.
D. The option to refund may be in the form of cash or tax
credit certificate. If the option to refund is selected, the excess
refundable amount should not be carried over as a tax credit to
the succeeding quarters of the following year.

A. Married individuals shall file a return for the taxable year to
include the income of both spouses, computing separately their
individual income tax based on their respective total taxable
income.
B. When the filing of one return is not practical, each spouse
may file a separate return of income.
C. If any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the
spouses, the same shall be divided equally between the
spouses for the purpose of determining their respective taxable
income.
D. The income of unmarried minors derived from property
received from a living parent is excluded in the return of the
parent.
136. Which of the following statements is true?

A. If the taxpayer is unable to make his own return, the return
may be made by his duly authorized agent or representative or
by the guardian or other person charged with the care of his
person or property.
B. The principal and his representative or guardian assuming
the responsibility of making the return are not responsible for
penalties provided for erroneous, false or fraudulent returns.
C. Pursuant to RMC No. 6-2001, corporation, companies or
persons whose gross quarterly sales, earnings, receipts or
output exceed P1, 919, 500 may file their annual income tax
returns accompanied by balance sheets, profit and loss
statement, schedules listing income-producing properties and
the corresponding income therefrom, and other relevant
statements duly certified by an independent CPA.
D. For self-employed taxpayers, their quarterly income tax
returns are to be reduced with the corresponding personal
exemption.
137. Which of the following statements is not a requirement of
the annual information return?
A. Individuals, estates or trusts, not engaged in business or
those earning pure compensation income, with sole earnings
subject to final tax or whose sole income is exempt-through
BIR Form 1705 to be filed on or before May 15 of the
following year.
B. Self-employed individuals, estates, and trusts engaged in
business-through BIR Form 1701AIF to accompany the annual
income tax return.
C. Corporations and partnership in general-through BIR Form
1702AIF to accompany the annual income tax return.
D. Pursuant to RMC No. 6-2001, corporation, companies or
persons whose gross quarterly sales, earnings, receipts or
output exceed P1, 919, 500 may file their annual income tax
returns accompanied by balance sheets, profit and loss
statement, schedules listing income-producing properties and
the corresponding income therefrom, and other relevant
statements duly certified by an independent CPA.
138. Which of the following statements is not correct

regarding the filing of income tax return?
A. The return shall be e-file and the tax e-paid on or before the
15th day of April of each year covering the income for the
preceding year using the eFPS facilities through the BIR
website.
B. For non-electronic filing and payment system (not-eFPS)
taxpayers shall be filed and the tax paid on or before the 15th
day of April of each year covering the income for the
preceding year.
C. In the case of no payment returns, the same shall be filed
with the RDo where the taxpayer is registered/has his legal
residence or place of business in the Philippine or with the
concerned RCO under the same RDO.
D. In case the taxpayer has no legal residence or place of
business in the Philippines, the return shall be filed by any
authorized agent banks located within the jurisdiction of the
Revenue District Officer (RDO).
139. Which of the following individual taxpayers are required

to file income tax return that should be filed in triplicate,
except?
A. Individual receiving purely compensation income from a
single employer, although the income of which has been
correctly withheld, but whose spouse is not entitled to
substitute filing.
B. Individuals receiving income subjected to final tax
C. A trustee or a trust, guardian of a minor,
executor/administrator of an estate, or any person acting in any
fiduciary capacity for any person, where such trust, estate,
minor, or person is engaged in trade or business.
D. An individual engaged in trade or business or in the
exercise of their profession and receiving compensation
income as well.
140. The following taxpayers are not required to file income

tax return, except.
A. An individual whose gross income does not exceed his total
personal and additional exemptions.
B. An individual whose compensation income derived from
one employer does not exceed 60, 000 and the income tax on
which has been correctly withheld.
C. An individual who is not engaged in business or practice of
profession whose gross income does not exceed his personal
and additional exemptions for dependents.
D. Every non-resident alien on his income derived within the
Philippines.
141. Which of the following documents are necessary to be

attached to the income tax return upon filing, except.
A. Statement of Net Worth and Operations if the gross sales,
receipts or output from business do not exceed 50, 000 in any
one-quarter
B. Balance sheet and profit and loss statements if the gross
sales, earnings, receipts or output from business in any one-
quarter exceed 50, 000 but do not exceed 150, 000
C. Balance Sheet and profit-and-loss statements certified by an
independent CPA and comparative Profit-and-loss statement
for current and preceding taxable years and schedule of
income producing properties and corresponding income
therefrom if the gross sales, earnings, receipts or output from
business in any one-quarter exceed 150, 000.
D. Withholding tax form (BIR Form 2316) is necessary when
the gross sales, receipts or income is below 50, 000.
142. Which of the following is not required to file an income

tax return?
A. Resident citizen with respect to his business earned outside
the Philippines
B. An employee with only one employer and whose
compensation income is fully collected with creditable
withholding tax
C. Nonresident citizen with respect to his compensation
income earned within the Philippines
D. Nonresident alien with respect to his business income
earned within the Philippines.
143. Which of the following corporations are exempt to the

regular corporate tax, except.
A. Labor, agricultural or horticultural organization established
principally for profit.
B. Mutual savings bank is not having a capital stock
represented by shares, and cooperatives bank without capital
stock organized and operated for mutual purposes and without
profit.
C. Cemetery Company owned and operated exclusively for the
benefit of its members.
D. Civic league or organization not organized for profit but
operated exclusively for the promotion of social welfare.
144. Which of the following requisites for exemption of non-

stock, non-profit corporation, except.
A. It must be a non-stock corporation or association organized
and operated exclusively for religious, charitable, scientific,
athletes, or cultural purposes, or for the rehabilitation of
veterans.
B. All net income or assets of the corporation or association
must be devoted to its purposes and no part of its net income
or asset accrues to or benefits any member or a specific
person.
C. It must be a branch of a foreign non-stock, non-profit
corporation.
D. The non-profit organization should meet the operational test
only.

the Minimum Corporate Income Tax (MCIT)?
A. 2% MCIT is based on gross income not on taxable income
after operating expenses.
B. Passive income that has been subjected to a final tax shall
not be included as a part of gross income.
C. Any excess of the minimum corporate income tax over the
normal tax shall be carried forward and credited against the
normal tax immediately for three succeeding taxable years.
D. A taxpayer who is liable to MCI and at the same time has
an expanded withholding tax may deduct the EWT from
MCIT and any excess will be a tax credit or refund following
taxable year.
146. Which of the following statements is not true regarding

the capital gains tax of a corporation derived within the
Philippines?
A. Capital gains on the sale of shares of stock not traded in the
local stock exchange are subject to 5% and 10% based on net
capital gains.
B. Net capital gains on sales or exchange or disposition of
lands and or buildings located outside the Philippine by the
Resident Foreign Corporation is subject to 30%.
C. Capital gains on sale or exchange or disposition of lands
and or buildings located in the Philippines by a domestic
corporation are subject to 6% of selling price or fair market
value, whichever is higher.
D. Percentage tax on the sale of shares of the stock traded on
the local stock exchange is subject to ½ of 1% based selling
price.
147. Which of the following passive income of a corporation

is incorrect?
A. The income of domestic banks under the EFCDS is subject
to a final tax of 10%.
B. Any dividends received by a resident foreign corporation
from another foreign corporation is taxable at 30% on the
portion which is earned in the Philippines which should be
50% of more of the total income earnings for the past 3 years.
C. Royalty, yield or monetary substitutes from deposits, trust
funds and similar arrangements of a domestic corporation are
subject to 20%
D. Any interest income on currency bank deposit by a non-
resident foreign corporation is subject to 20%.
148. Corporation whether domestic, resident foreign or non-

resident foreign, is subject to a tax rate of thirty percent (30%)
except.
A. Interest, dividends, rents, royalties and salaries
B. Premiums, except reinsurance premiums
C. Annuities, emoluments or other fixed or determinable,
period or casual gains, profits and income
D. Capital gains, including capital gains on sales of shares of
stock in a domestic corporation not traded on the stock
exchange.
149. Minimum corporate income tax is imposed whenever the
corporation has zero or negative taxable income or whenever
the MCIT is greater than the Normal Income tax (NIT) due
from such corporation. Which of the following statements
regarding the latter is incorrect?
A. The effectivity shall commence on the 4th taxable year
immediately following the year in which such corporation
commenced its business operation
B. The tax rate to be imposed is 2% of taxable income
C. The computation and the payment shall apply at the time of
filing the quarterly corporation income tax
D. This tax applies only to domestic and resident foreign
corporations
150. Statement 1: A final withholding tax of 15% of any profit

remitted by the Philippine branch of a foreign corporation to
its head office based on the total profits applied or earmarked
for remittance without any deduction for the tax component
thereof.
Statement 2: A final withholding tax of 15% based on the
gross amount thereof shall be imposed on income derived
from offshore banking units authorized by local commercial
banks and branches of foreign banks that may be authorized by
the Bangko Sentral ng Pilipinas to transact business with
UBOs including interest income derived from foreign currency
loans granted to residents.
A. Both statements are correct C. Only the first statement is
correct
B. Both statements are incorrect D. Only the 2nd statement is
correct
151. This tax is imposed for each taxable year to every
corporation formed or availed for the purpose of avoiding the
income tax with respect to its shareholders or the shareholders
or any other corporation.
A. Minimum Corporate Income Tax
B. Normal Corporate Income Tax
C. Improperly Accumulated Earnings Tax
D. Income Dividend Tax
152. The following organizations shall not be taxed in respect

to income received by them, except.
A. Labor, agricultural or horticultural organization not
organized principally for profit
B. Cemetery company owned and operated exclusively for the
benefit of its members
C. Non-stock corporation or association organized and
operated exclusively for religious, charitable, scientific,
athletic, or cultural purposes, or for the rehabilitation of
veterans, no part of its net income or asset shall belong to or
inure to the benefit of any member, organizer or any specific
person.
D. Philippine Amusement and Gaming Corporation
153. The following statements below describes the Minimum

Corporate Income Tax (MCIT), except
A. The computation and the payment of MCIT shall likewise
apply at the time of filing the quarterly corporate income tax
B. In the computation of the tax due for the taxable quarter, if
the computed quarterly MCIT is higher than the quarterly
normal income tax (NCIT), the tax due to be paid for such
taxable quarter at time of filing the quarterly corporate income
tax return shall be the MCIT which is two percent (2%) of the
gross income as of the end of the taxable quarter.
C. In the payment of quarterly MCIT, excess over MCIT from
the previous taxable year(s) shall not be allowed to be credited
D. Expanded withholding tax, quarterly corporate income tax
payments under the normal income tax, payments under the
normal income tax, and the MCIT paid in the previous taxable
quarter(s) are not allowed to be applied against the quarterly
MICT due.

A. Resident foreign corporation is subject to income tax based
on net income from sources within the Philippines
B. Domestic corporation is subject to income tax based on net
income from all sources
C. Nonresident foreign corporations are subject to income tax
based on gross income from sources within the Philippines
D. Private educational corporations are subject to income tax
based on the net income from sources within the Philippines at
the tax rate of 10%
A. Proprietary educational institutions and non-profit hospitals
are subject to 10% of net taxable income.
B. A proprietary educational institution is any private school
maintained and administered by private individuals or groups
with an issued permit to operate from the DECS or CHED or
TESDA.
C. Any government owned and controlled corporation is
exempted from corporate income tax of 30% based on taxable
income.
D. If the gross income from unrelated trade, business or
another activity exceeds fifty percent of the total gross income
derived by such educational institutions or hospitals from all
sources will be subjected to 30% corporate income tax.
156. Which of the following statements is correct regarding

foreign/expanded currency deposit unit?
A. Any income of depository banks under the Expanded
Foreign Currency Deposit System from foreign currency
transaction with non-residents is exempted from tax.
B. If the interest income is not subjected to final tax by the
borrower, the FCDU, EFCDU or OBU shall repost the same in
its gross income in the income tax return and shall be subject
to 7 1/2 % tax.
C. Any income of non-residents from transactions with
depository banks under the expanded system shall be subject
to 10%
D. The income from the regular banking unit of domestic
banks is subject to the 30% regular corporate income tax.
157. On December 31, 2015, the following data of Hagupit

Corporation are:
Gross sales 4, 000, 000
Cost of Sales 1, 200, 000
Sale of office Building with Acc dep’n 450, 000 600, 000
Dividend Income from a domestic corporation 1, 200, 000
Prizes 40, 000
Royalties 20, 000
Interest Income in EFCDS 50, 000
Net capital gain on sale of stocks (not traded) 180, 000
Gain on sale of capital asset in Japan 800, 000
Rental Income from office computer 25, 000
Refund of business expenses overpaid in 2014 20, 000
Interest Income, net of final tax 6, 400
Gambling Income 20, 000
The following items are the identified deductions from the

gross income are:
Salaries and Wages expenses 400, 000

Rent Expense 36, 000
Light and Water expense 40, 000
Office Supplies Expense 25, 000
Insurance Expense 24, 750
Traveling Expense 30, 500
Advertising Expense 30, 000
Rooming-in and Breast Feeding 500, 000
Representation 75, 000
Depreciation Expense 30, 250
Repairs and Maintenance 5, 750
Postage and telephone expense 23, 500
Interest Expense 40, 000
Losses 80, 000
Bad Debts 40, 000
Retirement Expense 100, 000
Contribution to CHED 200, 000
Contributions to church 80, 000
Entertainment Expense 50, 000
Personal Expenses 200, 000
Additional Information:
a. Salaries and Wages include the payment to the senior citizen
which is classified as minimum wage earner of 15, 000.
b. The company paid 10, 000 prepaid rent which was
considered as Rent Expense. At the end of the year this 10,
000 is still unused.
c. Traveling Expense includes the expense granted to the
manager which is not connected to trade/business of 20, 000.
d. Out of the total repairs and maintenance, 5, 000 was not
supported by official receipts.
e. Only 30% of the bad debts have been written off during the
year.
f. A number of losses include the following:
1. Losses due to fire on one’s company’s warehouse of 10, 000
in which 40% were covered by the insurance.
2. Net operating loss carry-over of 5, 000
3. Wagering loss of 5, 000
4. The rest are deemed deductible
Requirement: Compute the taxable income and tax due and

payable.
157. The US embassy donated a vehicle to the Department of

Foreign Affairs of the Philippines. Which of the following
statements is correct?
A. This transaction is exempted from payment of donor’s tax
only.
B. This transaction is exempted only from payment of
documentary stamp tax.
C. This transaction is exempted from payment of both donor’s
tax and documentary stamp tax.
D. This transaction is subject to both donor’s tax and
documentary stamp tax.
158. A taxpayer gives the following reasons for refusing to

pay a tax. Which of his reasons is not acceptable for legally
refusing to pay the tax?
A. That he has been deprived of due process of law.
B. That there is a lack of territorial jurisdiction.
C. That he derives no benefit from the tax.
D. That the prescriptive period for the tax has elapsed.
159. Which statement refers to police power as distinguished

from taxation?
A. It is restricted by the Constitutional provision.
B. It is superior to the non-impairment clause of the
constitution.
C. It involves the taking of property by the government.
D. The amount imposed has no limit.
160. Which of the following is a correct nature of restriction to

exercise taxation power?
Constitutional Limitation Inherent Limitation
A. Territorial jurisdiction Yes Yes
B. International comity Yes No
C. Rule of uniformity and equity No Yes
D. Due process of law Yes No
161. Which of the following is not true?

Taxation Police Eminent Domain
A. Inherent to the existence Yes Yes Yes
of the government
B. Not legislative in nature No No No
C. Superior to the now- Yes Yes No
impairment clause
D. Restricted by just No No Yes
compensation
162. Which of the following is not correct?

A. In the absence of specific tax provision, taxes, in general,
are not cancelable.
B. Prescriptive period for assessment and collection is
applicable to returnable taxes.
C. The law on prescription being a remedial measure should be
interpreted liberally in order to protect the taxpayer.
D. The prescriptive period should be the shorter between the
required filing date and the actual date of filing.
163. To spread the burden of taxation, the corresponding

estimated tax is collected at once every payroll period so that
at the end of the taxable year, the amount of tax withheld will
be equal or approximate to the actual tax for the year. This
taxation system of the collection at source is based on what tax
principle?
A. Fiscal adequacy C. Administrative feasibility
B. Theoretical justice D. Due process of law
164. One of the following situs of taxation is not true.

Located or Earned Within Outside
A. Taxable income of nonresident Yes No
citizen
B. Taxable estate of resident alien Yes Yes
C. Taxable donation of resident citizen Yes Yes
D. Taxable sale Yes Yes

A. In the absence of specific tax provision, taxes, in general,
are not cancelable.
B. Ad valorem taxes are imposed based on the standard of
weight or measurement.
C. Prescriptive period for assessment and collection is
applicable to returnable taxes.
D. The law on prescription being a remedial measure should
be interpreted liberally in order to protect the taxpayer.
166. Which of the following statement is not true?

A. If a taxpayer is acquitted in a criminal violation of the Tax
Code, this acquittal does not exonerate him from his civil
liability to pay the taxes.
B. A convention for tax evasion is not a bar for collection of
unpaid taxes.
C. A tax assessment is necessary to a criminal prosecution for
a willful attempt to defeat and evade payment of taxes.
D. Criminal proceedings under the Tax code are now a mode
of collection of internal revenue taxes, fees or charges.
167. Which of the following is not required to file an income

tax return?
A. Resident citizen with respect to his business income earned
outside the Philippines
B. An employee with only one employer and whose
compensation income is fully collected with creditable
withholding tax
C. A non-resident citizen with respect to his compensation
income earned within the Philippines.
D. Non-resident alien with respect to his business income
earned within the Philippines
168. Which of the following amount of winnings/ prizes is

subject to a final tax of 20%?
A. P10,000 winnings outside the Philippines
B. P10,000 winnings earned within the Philippines
C. P1,000 Philippines Sweepstakes winnings
D. P9,000 first prize singing contest
169. A Filipino special taxpayer is taxable on his gross

compensation income if his total earnings during the taxable
year from multinational enterprises amounted to more than
P975, 000.
A. Yes, provided that the amount is to be reduced by personal
exemption.
B. Yes, provided that the amount is said taxpayer has the
option to be taxed at special tax rate of 15% or normal tax
C. Yes, for as long as the tax rate applicable is 15%
D. No, because the special tax rate is applicable only to aliens
classified as a special taxpayer.
170. The share of a partner in the income of a commercial

partnership is
A. Subject to a final tax of 10%.
B. Subject to a creditable tax of 10% if the amount is P720,
000and below and 15%if the amount is more than P720, 000.
C. Subject to normal tax of individual taxpayer
D. Tax-exempt
171. Which of the following is subject to tax?

A. The share of co-venturers in the income of a taxable joint
venture.
B. Capital gains on sale of partner’s capital
C. Income of a general professional partnership
D. Dividend income of a commercial partnership from a
domestic corporation.
172. One of the following earnings is not considered as

income of a nonresident foreign corporation subject to a
normal tax of 30% on the gross amount.
A. Rent of aircraft chartered by Philippine nationals
B. Capital gains from sale of shares of stock
C. Gains, profits and income from casual sales
D. Interest dividends and royalty income
173. The following corporate income is subject to income tax,

except
E. Cash dividends received from a domestic corporation by
another domestic corporation
F. Royalty income received from a domestic corporation
G. Interest income on foreign loans
H. Intercorporate dividends received by a nonresident foreign
corporation from a domestic corporation
174. This rule is not applicable to the construction of tax laws
A. If the law is repealed, taxes assessed before the repeal of
the may no longer be collected.
B. If the intent of the tax as not clear as to whether the
taxpayer is covered by the tax obligation, the law shall be
construed against the government.
C. Where the intent to tax is clear and the taxpayer claims his
exempt from the obligation, the tax shall be construed against
the government.
D. Provisions intended for the security of the taxpayer or to
ensure equality or uniformity of taxation is mandatory.
175. In a loan agreement between the Bangko Sentral ng

Pilipinas (as borrower) and private international banks (as
lenders), it is stipulated that all payments of interest by the
Central Bank to the lenders shall be made free and clear from
all Philippine taxes which may be imposed thereon. Is the
stipulation valid?
A. Yes, based on international comity.
B. Yes, based on the doctrine of non-taxability of the
government.
C. No, violative of the inherent limitations.
D. No, violative of the constitutional limitations.
176. Montecina Inc., a Philippine Corporation, sold through

the local stock exchange 10,000 PLDT shares that it bought 2
years ago. Montecina sold the shares for P2,000,000 and
realized a net gain of P200,000. How much shall it pay tax on
the transaction?
A. It shall declare a P2,000,000 gross income in its income tax
return, deducting the cost of acquisition as an expense.
B. It shall report the P200,000 in its corporate income tax
return adjusted by the holding period.
C. It shall pay 5% tax on the first P100,000 of the P200,000
and 10% tax on the remaining P100,000.
D. It shall pay a tax of one-half of 1% if the P2,000,000 gross
sales.
177. The basis or test of exemption of real properties owned

by religious, or charitable entities from real property taxes is:
A. Use of the real property
B. Ownership of the real property
C. Location of the real property
D. Ownership or location real property at the option of the
Government
178. Transfer of the tax burden by one whom the tax is

assessed to another.
A. Shifting C. Transformation
B. Capitalization D. Tax exemption
179. The method by which the manufacturer or producer upon

whom the tax is imposed pays the tax and strives to recover
such expense through lower production cost without
sacrificing the quality of his product.
A. Shifting C. Transformation
B. Capitalization D. Tax exemption
180. The following are tax exempt corporations, except:

A. Philippine Health Insurance Corporation (PHIC)
B. SSS and GSIS
C. Philippine Amusement & Gaming Corporation (PAGCOR)
D. Local water District
181. During the year 2015, Western College University, a

proprietary educational institution registered with Securities
and Exchange Commission (SEC) and the Commission on
Higher Education (CHED), spent P15,000,000 for the
construction of a new building. For income tax purposes, this
amount may be:
A. Claimed entirely as deduction from its 2015 gross income
B. Classified as an asset or expensed outright, at the option of
the government
C. Classified as an asset and claim an annual depreciation over
the life of the building
D. Classified as an asset or expensed outright, at the option of
the taxpayer
182. Which of the following is a nature of taxation?

A. The power is exercised by legislative action
B. It is essentially an administrative function
C. It is generally payable in money
D. Without it, the state can continue to exist
183. Interest income received by an individual taxpayer

(except a nonresident individual) from a depository bank under
the expanded foreign currency deposit system shall be subject
to a final income tax at rate of:
A. twenty percent (20%) of such interest income.
B. fifteen percent (15%) of such interest income.
C. seven and one-half percent (7 ½ ) of such interest income
D. two and one-half percent (2 ½ ) of such interest income
184. Which of the following passive income from Philippine

source is exempt from Philippine income tax when received by
non-resident Aliens and non-resident citizens?
A. Royalties, in general
B. Yield or any other monetary benefit from deposit substitute
C. Interest income received from a depository bank under
expanded foreign currency deposit system
D. Other winnings
185. How will the local government units be able to exercise

their taxing powers?
A. By Local Legislation
B. By authority conferred by Congress
C. By the issuance of the Department of Finance
D. By the help of the Bureau of Internal Revenue
186. Which of the following statements is wrong? The

premiums on hospitalization and health insurance may be
deducted
A. Not to exceed P2,400 a year per family
B. Not to exceed P200 per month
C. If the family income does not exceed P250,000
D. By either spouse in the case of married individuals
187. Which of the following heirs is not considered as

primary?
A. Legitimate children and their descendants, with respect to
their legitimate parents and ascendants
B. Legitimate parents and legitimate ascendants
C. Surviving legitimate spouse
D. Illegitimate children and their descendants
188. The following statements shall be sufficient causes for the

disinheritance of children and descendants, legitimate as well
as illegitimate, except.
A. Has been convicted of adultery of concubinage with the
spouse of the testator
B. Guilty of an attempt against the life of the testator, his or
her spouse, descendants, or ascendants.
C. There is a maltreatment of the testator by word or deed, by
the child or descendant
D. Guilty of criminal offense

estate tax?
A. An essentially Mortis causa transfer which has been titled
as inter Vivos shall be subject to donor’s tax
B. Estate tax is more of revenue tax rather than that of a
special tax
C. If the decedent died on July 5, 20014 but the actual transfer
of possession of the property to the heirs will take place on
September 5, 2016, the estate tax will be computed based on
the prevailing law on July 5, 2014.
D. Under the Benefit-received theory in estate taxation, the
state is a partner of the decedent in the distribution of the
latter’s estate.
190. The following are the motives of a taxpayer that preclude
the transfer in contemplation of death, except one, is to
A. relieve the taxpayer of the burden of management
B. save income and property taxes
C. avoid payment of estate tax
D. make dependents financially independent
191. The following are transactions and acquisitions exempt

from transfer tax, except.
A. Transmission from the first heir or done in favor of another
beneficiary in accordance with the desire of the predecessor
B. Transfer or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the fideicommissary
C. The merger of usufruct in the owner of the naked title.
D. All bequests, devises, legacies or transfers to social welfare,
cultural and charitable institutions.
192. When a person dies and during the marriage the property
relationship between the husband and wife was that of
conjugal partnership of gains, the gross estate of the decedent
would include
A. exclusive property only
B. All properties of husband and wife
C. exclusive properties and one-half of the conjugal properties
D. exclusive properties and all conjugal properties
193. Which of the following donations is not included as part

of the gross estate of the decedent?
A. revocable transfers
B. transfers in a contemplation of death
C. transfers with reservation of certain rights
D. transmission under a special power of appointment
194. Which among the following distinguishes an estate tax

from other kinds of taxes that are presently imposed under the
provisions of the NIRC of 1997?
A. Tax imposed on the privilege to transfer property
ownership
B. Tax that is imposed upon gratuitous transfers
C. It is a tax that is imposed on the net value of the properties
that are transferred
D. It is imposed only upon the death of a person.
195. Mr. A died leaving several parcels of land. Before the
properties are distributed to his heirs, the tax to be paid is
known as
A. Donor’s tax C. Inheritance tax
B. Estate tax D. Transfer tax
196. The estate tax is to be computed starting from the death of

the decedent because
A. The provisions of the NIRC of 1997 require it
B. The privilege to transfer properties takes place upon death
C. It is only upon the decedent’s death that his heirs are known
D. At the time of death, that estate taxes are due
197. Cliff Robertson, an American citizen, was a permanent

resident of the Philippines. He died in Miami Florida. He left
10, 000 shares of Meralco, a condominium unit at the Twin
Towers Building at Pasig, Metro Manila; a house and lot in
Los Angeles, California, USA; a lease contract over a
condominium located in Florida, USA.
Which of the following properties shall be excluded in the
Estate Tax Return to be filed with the BIR?
A. The value of the Florida, USA condominium
B. The value of the Pasig, Metro Manila condominium
C. The value of the house and lot located in California, USA
D. The value of the 10, 000 Meralco shares
199. Which of the following unpaid taxes is not deductible

from the gross estate?
A. Property taxes accrued prior to decedent’s date
B. Income taxes on income earned and received from the
estate after decedent’s death
C. Gift taxes on life time gifts which remain unpaid at date of
death
D. Capital gain tax on transfers before death and paid after
date of death
200. Which of the following is deductible from the exclusive

portion of the gross estate?
A. Vanishing deduction pertaining to property inherited by the
decedent prior to marriage under conjugal property ownership
B. Transfer for public use pertaining to joint donation of
husband and wife to the government
C. Bad debts for uncollectible claims against insolvent person
D. Family home pertaining to house and lot acquired during
marriage under absolute community
201. Which of the following is allowed as a deduction from

the gross estate of a nonresident citizen?
A. Family home with respect to residential house located in
the country
B. Standard deduction of P1,000,000
C. Prorated amount of medical expenses incurred 18 months
prior to date of death
D. Vanishing deduction with respect to property located in the
Philippines which was acquired through gratuitous title 4 years
prior to death of present decedent
202. Which of the following proceeds of life insurance is to be

included in the taxable gross estate?
A. Insurance proceeds from SSS and GSIS
B. Amount receivable by any beneficiary whose designation in
the policy is irrevocable
C. Proceeds of group insurance is taken out by a company for
its employees
D. Amount receivable by any beneficiary designated in the
insurance policy
203. Which of the following should be included as part of the

gross estate of a decedent resident alien?
A. The transmission from the first heir, legatee or done in
favor or another beneficiary, in accordance with the desire of
the predecessor.
B. Reversion of the right of usufruct to the owner of the naked
title
C. Property transferred under a general power of appointment
D. Property transferred for the use of the Government of the
Republic of the Philippines.
204. Which of the following items does not require that the
value of the said deductible amount should be included as part
of decedent’s interest reflected in the gross estate?
A. Claims against the insolvent person
B. Receivable under RA 4917
C. Claims against the estate
D. Accommodation loan
205. The following requisites are needed for the deductibility

of claims against the estate, except
A. All person obligations existing at the time of the decedent’s
death, including medical expenses prior to death.
B. The liability was contacted in good faith and for adequate
and full consideration in money or money’s worth
C. The creditor’s claim must be enforceable in court
D. The indebtedness was not have been condoned or
prescribed
206. In which of following instances is the filing of an estate

return a requirement?
A. The gross value of the estate is 100, 000 and is exempt
from the payment of the estate tax
B. the gross value of the estate exceeds 100, 000 but is below
200, 000 and is exempt from the payment of the estate tax
C. The gross value of the estate does not exceed 200, 000 and
is exempt from the payment of the estate tax
D. The gross value of the estate exceeds 200, 000 but is
exempt from the payment of the estate tax.
207. Which of the following item is considered situated
outside the Philippines
A. Franchise in the name of the decedent which is exercised in
the Philippines
B. Share of stock holdings of decedent in a foreign corporation
whose business is 90% done in the Philippines
C. Bond certificate issued by a domestic corporation owned by
a nonresident decedent
D. Foreign currency deposited in bank outside the Philippines
208. Problem: Read and analyze the problem below. Compute

the total taxable estate and the estate tax due and payable.
Show your solution in a good form.
Mr. Tan Cruz died intestate on September 04, 1990. He was

survived by his wife and his two legitimate children. He and
his wife were under the conjugal partnership of gains.
On December 20, 2013, the administrator of Mr. Tan Cruz

gathered the estates of the decedents which include the cash in
bank:
Savings Deposits 53, 750
Time Deposits (excluding the interest of 5, 756) 120, 000
Bank deposits, Security Savings representing
the amount received by heirs under RA 4917 500, 000
The identified personal and real properties of the decedents are

as follows:
o Real properties inherited before the marriage from his father
who died before the present decedent’s death of 500, 000
o Received 1, 500, 000 real property given as a gift by his
business partner during the marriage 41/2 years before the
present decedent’s death.
o Family car, cost of 1, 000, 000 (the fair market value at the
date of death is 1, 125, 000)
o Household furniture and fixtures acquired during the
marriage, the fair market value, 580, 000.
o Land inherited during the marriage from his mother-in-law
who died 6 years before the present decedent’s death, 1,290,
890
o House and Lot at Tacloban, City, Philippines were his
families live and resides worth 2, 150, 000.
Obligation of and charges against certain properties follow:

o Funeral expenses incurred are as follows
Expense paid during internment for 5 days 10, 000
Mourning apparel of the surviving spouse and his two
sons used on the occasion of the burial 12, 500
Expenses for the death notices published
sent to the relatives 20, 000
Cost of the burial lot, tombstone 50, 500
Fees and charges for the rites and ceremonies
incident to the burial 30, 000
o Medical expenses of last illness (unpaid as of the time of
death, supported by bills and statements from hospital), 600,
000
o Judicial expenses incurred for the administration and
settlement of the estate is 150, 000.
o Claims against insolvent debtor, 20, 000
o Unpaid mortgage on inherited land from his mother-in-law,
25, 000
o Loss of properties due to typhoon at Bacoor, Cavite, 300,
000
o Unpaid realty tax on real property received as a gift from his
father, 30, 000.
Additional information about the estates are as follows:

1. The value of the real properties at the time of inheritance
was 300, 000.
2. The value of the real property received as gift from his
business partner was 1, 000, 000
3. House and Lot at Tacloban, City, Philippines were certified
as the family home of the decedent and his family by the
Barangay Captain in the locality where they were situated
4. Fees and charges for the rites and ceremonies include the
expenses incurred after the burial, 4, 500.
5. Out of the Medical expenses supported by bills and
statements from hospitals include the 140, 000 expenses after a
year of his death.
209. The spouses June and Elvira Sandoval purchases a parcel

of land for P5, 000, 000 and included their two minor children
as co-purchasers in the Deed of Absolute Sale. The
Commissioner of Internal Revenue (CIR) ruled that there was
an implied donation and assessed donor’s taxes against the
spouses. Which of the following statement is correct?
A. CIR is wrong because donation must be express
B. CIR is correct because the amount involved is huge and
ultimately ends up with the children
C. CIR is wrong because financial capacity is not a
requirement for a valid sale.
D. CIR is correct because there was animus don and since the
children had no financial capacity to be co-purchasers
210. May-ann Makabenta, sold to Jan Vincent Vocal, her

residential lot with a market value of 1, 000, 000 for 600, 000.
Makabenta’s cost in the lot is 100, 000. Mr. Vacal is
financially capable of buying the lot. What tax should be
imposed and collected from Ms. Makabenta as a result of the
transaction?
A. Presumed capital gains tax C. Donor’s tax
B. Real Property tax D. Tax on the transfer of property
211. Which of the following is not subject to Philippine

donor’s tax?
A. Donation Mortis causa
B. Donation which will take upon the birth of the done
C. A creditor who, out of his affection, canceled the debt of the
debtor
D. A parcel of land in the USA donated by nonresident
Filipino to a foreigner
212. Ms.Quejada, a citizen, and resident of USA, donated

$100, 000 worth of stocks to her future daughter-in-law who is
to be married to his only son in the Philippines. Is the donation
subject to Philippine donor’s taxes?
A. Yes, but only up to the extent that exceeds the allowable
P10, 000 exemption for donation by reason of marriage.
B. Yes, there is not showing in the problem that the marriage
actually took place within one (1) year from the date of the
donation.
C. No, the donor is a non-resident alien hence he is not subject
to the Philippine donor’s tax law.
D. No, the donation took place outside of the Philippines
hence not subject to the Philippine donor’s tax law.
213. In 2014, Mr. Encarnacion, a retiree, bought 10, 000 CDA

shares that are unlisted in the local stock exchange for 10 per
share. In 2015, the said shares had a book value per share of
60. In view of a car accident in 2016, Mr. Encarnacion had to
sell his CDA shares but he could sell the same only for 50 per
share. The sale is subject to tax as follows:
A. 5% and 10% capital gains tax on the capital gain from the
sale of 40 per share which is the difference between 50 per
share and 10 cost per share.
B. 5% and 10% capital gains tax on the capital gain from the
share and 10 cost per share.
C. 5% and 10% capital gains tax on the capital gain from the
share and 10 cost per share plus donor’s tax on the excess of
the fair market value of the shares over the consideration.
D. Graduated income tax rates of 5% to 32% on the net taxable
income from the sale of the shares.
214. Which of the following transactions is subject to the

payment of the donor’s tax?
A. General renunciation of a surviving spouse in his/her share
in the inheritance of the deceased spouse
B. A general renunciation by the surviving spouse of his/her
share in the conjugal or absolute community upon its
liquidation as a result of the death of the other spouse.
C. Regulatory donation where there are legally demandable
obligations
D. Donation made outside the Philippines by a non-resident
alien of property located outside of the Philippines.
215. Which of the following is not allowed as a deduction

from a gross gift?
A. Wedding gift by a nonresident alien to his only son who got
married during the year
B. Donation by a nonresident alien to the Philippine
government
C. Donation by a nonresident alien to educational institution,
80% of which is for free tuition fee of children of farmers
D. Donation by a domestic corporation to the National
government
216. Which of the following needs to be in writing?

A. P2000 worth of jewelry is given as a gift to stranger
B. P1000 worth of toy car was given as birthday to a son
C. A parcel of land donated to the accredited charitable
institution
D. P4000 credit written off in favor of debtor in the name of
friendship
217. Which of the following need not be in writing?

A. A parcel of land donated to a stranger
B. P2,000 worth of jewelry is given as a gift to mother-in-law
C. P50,000 worth of old car given as birthday gift to a son
D. P6,000 credit written off by the creditor in favor of a debtor
who is a friend
218. Which of the following is subject is subject to tabular

donor’s rate?
A. A birthday gift was given to a mother-in-law
B. A wedding gift was given to a daughter
C. Donation to a town fiesta
D. Gift to a 3rd cousin
219. Rosanna gave her parents a gift of P200,000and made a

donation of P70,000 to her parish church. She also donated a
parcel of land to the city government of Quezon city. Which of
the gift made may be subject to donor’s tax?
A. Donation to parish church
B. Donation to parents
C. Donation to the government of Quezon City
D. All of the above
220. Which of the following is not subject to donor’s tax?

A. Transfer of property for less than adequate and full
financial consideration
B. Cancelation of debt for personal consideration
C. Contribution to a political candidate
D. Gift to a stranger
221. A deed of donation was executed by Mr. A, a resident of

Manila, in the City of Manila, in favor of Mr. B, a resident of
Quezon City. Mr. B executed a deed of acceptance in Quezon
City. The donor’s tax return must be filed with the Bureau of
Internal Revenue Office at the
A. Residence of the donor.
B. Residence of the donee
C. Residence of the donor or of the done, whichever the donor
chooses
D. Location of the property
222. Which of the following overseas call is subject to

percentage tax?
A. Transmitted by the A City Government of Baguio
B. Transmitted by Health Center Massage Clinic of Baguio
C. Transmitted by US embassy in the Philippines
D. Transmitted for dissemination of news item through public
press
223. Which of the following statement is not correct?

A. Donation by a nonresident alien to the Philippine
government is exempt from donor’s tax.
B. A donation made by the husband without the consent of the
wife is valid in cases of moderate donations for charity or on
the occasion of family rejoicing or distress.
C. Cash gift shall be valued at the fair market value or face
value of the currency whichever is lower.
D. The first P100,000 of the net gift for every year is not
subject to donor’s tax.
224. A resident makes the following gifts or donations. Which

of them is exempt from donor’s tax?
A. Dowries or gifts made on account of marriage and before
its celebration or within one year thereafter by parents to each
of their legitimate, recognized natural or adopted children to
the extent of the first P10,000
B. Gifts made to or for the use of the National Government or
any entity created by any of its agencies which are conducted
for profit, or to any political subdivision of the said
Government
C. Gifts in favor of an educational and/ or charitable, religious
cultural or social welfare corporation, institution, foundation,
trust or philanthropic organization or research institution or
organization
D. All of the above
225. Which of the following is subject to 4% percentage tax?

A. Life insurance policy premiums collected by a resident
foreign insurance company
B. Life insurance policy premiums collected by agent of
resident foreign insurance company
C. Life insurance policy premiums collected by agent of
nonresident foreign insurance company
D. Premium on insurance policy took directly from the owner
of the property insured
226. Which of the following statement is correct?

A. The “Gross Philippine Billing” includes the total amount of
gross revenue including non-continuous and interrupted flight.
B. A VAT-registered radio and TV broadcasting company is
subject to a percentage tax of 3% if its total gross receipts
during the year are P1,500,000 and below.
C. The gross receipts of the gas and water franchise are subject
to a 3% percentage tax.
D. Overseas dispatch, message or conversation is subject to a
percentage tax of 10%

A. The percentage tax on stock transaction inside stock
exchange is to be remitted within 5 banking days from the date
withheld by the broker
B. The percentage tax on winnings is to be remitted within 20
days from the date withheld
C. The percentage tax on overseas dispatch is to be remitted
within 20 days from the date withheld
D. The percentage tax on IPO is to be remitted within 30 days
from the date of listing on local stock exchange
228. Which of the following statement is not correct?

A. A follow through offering is conducted during the IPO
B. The primary offering of corporate own share is subject to
IPO tax rate
C. The secondary offering of the investment shares of the
existing shareholder during the IPO
D. IPO is the first-time public offering of the corporate own
shares of stock
COMPREHENSIVE PROBLEMS:
PROBLEM 1: The following data are shown in the books of
account of Dimalugi Service Enterprises:
Collections Current Previous
Revenues
Accounts receivable
Advances
Bad debts recovery (previously written-off)
Claims from insurance
Proceeds of life insurance P 500,000
300,000
200,000
10,000
20,000
1,000,000 P300,000
100,000
20,000
5,000
The accounts receivable collected during the current period

represents the revenue of the previous period.
Required: Compute the total business taxes for the current and
the previous period assuming that Dimalugi is engaged in:
1. Common carrier of passengers
2. Race track
3. Boxing exhibitions
4. Water utilities
5. Life insurance
6. Life insurance as agent of foreign insurance companies
7. Overseas communication dispatches from the Philippines
PROBLEM 2: Mr. X and Mrs. XY made the following

conjugal donations during the year:
1. House and lot, to their nephew, in contemplation of death of
the X spouses
(Their nephew, however, predeceased the donors due to
vehicular accident), 1, 000, 000
2. Cash, to their daughter-in-law, on account of marriage to
their son, 2, 000, 000
3. Business, to their son, on account of marriage, 5, 000, 000
4. Lot, for school building construction of TESDA, 500, 000
5. Car, to their church, 1, 000, 000
6. Shares of stock, to their daughter, who is still a minor. The
investments are included in the will of the spouses, 4, 000, 000
7. Car, to the Rotary Club of Tacloban Chapter, 600, 000
8. Cash, to the Liberal Party on account of the forthcoming
election, 2, 000, 000
Mr. X donated the following from his exclusive properties:

1. Cash, to his secretary, on account of birthday, 100, 000
2. Diamond ring to his wife, on account of wedding
anniversary, 500, 000
3. Car, to his father, on account of birthday, 200, 000
Mrs. XY sold her exclusive land for 2, 000, 000 land for 2,
000, 000 but the fair market value amounts to 5, 000, 000. The
sale was made in favor of her sister who considered the
inadequate consideration as a gift.
Requirements: compute the total amount of donor’s tax
PROBLEM 3: Mr. X and Mrs. XY, Filipino citizen, made

conjugal donations during the taxable year as follows:
August 20, 2013, To their son on account of marriage of 300,
000
September 20, 2013, To their daughter-in-law on account of
marriage, 100, 000
March 2, 2014, Liberal Party (Exclusive property of Mr. X),
500, 000
April 28, 2014, To Philippine Government and Chinese
Government of 1, 200, 000
June 23, 2014, To their nephew on account of graduation of
50, 000
To their grandson on account of marriage of 100, 000
To their church of 200, 000
July 8, 2014, To their daughter, real property subject to
suspensive
The condition of passing the CPA exam. The donee intends to
take the exam on 2015 of 1, 000, 000
To their son, house and lot on account of marriage Last year
August 25, 2013, subject to mortgage of 400, 000 assumed by
their son of 2, 000, 000
December 30, 2014, To Ramon Magsaysay Foundation of 500,
000
To their son of 500, 000
To their daughter-in-law of 100, 000
To their daughter of 500, 000
Requirement: Compute the amount of donor’s tax due of both

spouses in each date.
229. Statement 1: the leasing of residential units is exempt
from VAT if the annual rental does not exceed 12, 800 per
unit.
Statement 2: The sale of adjacent dwelling to different buyer
shall be aggregated as one
A. Only statement 1 is correct C. Both statements are correct
B. Only statement 2 is correct D. Both statements are incorrect
230. Statement 1: The sale fruits and vegetables is exempt

from business tax
Statement 2: The sale of bread is exempt from business tax.
231. Statement 1: The 3% general percentage tax applies for

non-VAT registered taxpayers.
Statement 2: A seller is subject to percentage tax if he is non-
VAT registered even if his sales or receipt exceed the VAT
threshold
232. Statement 1: A seller is subject to percentage tax even if

he registered as VAT taxpayer if his annual sales do not
exceed the VAT threshold.
Statement 2: A seller service which is specifically subject to
percentage tax is subject to VAT if its 12 months sales or
receipts exceed the VAT threshold.
233. Statement 1: Common carriers are subject to VAT on

their transport of cargoes or baggage.
Statement 2: Domestic sea or air carriers are subject to VAT
on their transport of passengers or cargoes.
234. Statement 1: Franchise grantees of private franchises are

subject to VAT.
Statement 2: Franchise grantees of the government on utilities
are subject to percentage tax.
235. Statement 1: The VAT applies to receipts or sales other

than those exempted and those specifically subject to
percentage tax.
Statement 2: A person with vatable sales or receipts not
exceeding the VAT threshold may register as non-VAT
taxpayers.
236. Statement 1: a non-VAT registered person who invoiced

VAT on his sale shall be subject to 12% VAT without the
benefit of an input VAT, 3% percentage tax, and 25%
surcharge.
Statement 2: A VAT-registered person shall be subject to a
final withholding VAT of 12% on sales to the government.
237. Statement 1: The standard input VAT is 5% of

governmental sales.
Statement 2: The claimable input VAT on governmental sales
is 7% of the sales.
238. Statement 1: Sellers of properties are subject to VAT on

the fair market value of the property sold or disposed of
Statement 2: Gross receipts include agency monies and bank
loans received by the taxpayer.
239. Statement 1: The vatable inventories and properties of a

VAT taxpayer upon retirement or cessation of business are
subject to VAT as deemed as sales.
Statement 2: When a business changes its trade name, vatable
items or properties in its possession shall be deemed sold on
the date of the change.
240. Statement 1: No appeal from a decision of the BIR on a

claim for refund may be made until other a decision on the
claim has been received from the BIR.
Statement 2: The decision of the BIR on a claim for refund
may be appealed to any court
241. Statement 1: An assessment of a tax is a prerequisite for
its collection
Statement 2: The remedy for the state to assess and collect
does not prescribe where the taxpayer committed fraud in
filing a return and paying the tax.
242. Statement 1: After the receiving the Notice of Informal

conference, the taxpayer has 15 days to respond on the latter.
Statement 2: Once the BIR found out that the assessment to
the taxpayer is sufficient, issuance of Pre-Assessment letter is
to be followed wherein the taxpayer has 30 days to respond to
this letter.
243. Statement 1: If the protest of the taxpayer is denied, the

taxpayer has a 30 days to appeal his protest to Court of Tax
Appeals.
Statement 2: If the protest of the taxpayer is still denied in the
Court of Tax Appeals, the taxpayer can elevate his protest to
Supreme Court within 15 days.
244. Which of the following shall be subject to Value- Added

Tax?
A. Any person who, in the course of his trade or business,
sells, barters, exchanges or leases goods or properties
B. Any person who, in the course of his trade or business
renders service
C. Any person who imports goods
D. All of the choices
245. In the case of importation of taxable goods, who shall be

liable to VAT?
A. Importer, whether an individual or corporation and whether
or not made in the course of his trade or business
B. Importer if made in the course of trade or business only
C. Importer if corporation and only when made in the course
of trade or business
D. None of the choices
246. One of the followings is not a major business internal

revenue tax in the Tax Code.
A. VAT C. Income tax
B. Excise tax D. Percentage tax
247. The account title to best reflect the VAT on a purchase:

A. Sales tax payable C. Input tax
B. VAT payable D. Output tax
248. Georgia Baby is an operator of parking lots. What

business tax is due on his income from the business?
A. Broker’s tax C. Common carrier’s tax
B. Caterer’s tax D. Value-added tax
249. Who shall be statutorily liable to pay for the tax on the
sale of goods or properties and sale of services and lease of
properties?
A. Buyer C. Consumer
B. Seller D. None of the choices
250. Which of the following shall not be included in the term

“goods or properties”?
A. Real properties not held primarily for sale to customers or
not held for lease in the ordinary course of trade or business.
B. The right or privilege to use patent, copyright, design or
model, plan, secret formula or process, goodwill, trademark,
trade brand or other like property or right.
C. The right or the privilege to use any industrial, commercial
or scientific equipment
D. The right or the privilege to use motion picture film, films,
tapes, and discs
251. Which of the following shall be subject to VAT?

A. Sale of a residential house and lot
B. Sale of an apartment house
C. Sale of a private car by its owner
D. all of the above
252. Mr. Lee Pong is a manufacturer of fermented liquors. In

making sales, all taxes on the products and transactions are
passed on to the buyers. For purposes of the value-added tax,
which of the three taxes mentioned here that he pays forms
part of the gross selling price?
A. Excise tax C. Percentage tax
B. VAT D. None of the above
253. Mr. B is a dealer of liquors. On his sales in the
Philippines, his tax is:
A. Excise tax C. Percentage tax
B. VAT D. None of the above
254. Sale of real property, the initial payments of which

exceed twenty-five percent (25%) of the gross selling price in
the year of sale.
A. Sale of real property by a real estate dealer on a deferred
payment basis, not on installment
B. Sale of real property on installment plan
C. Initial payment
255. Which of the following is not subject to value-added tax?

A. Transmission of property to a trustee if the property is to be
merely held in trust for the trustor and/or beneficiary
B. Property transferred is one for sale, lease or use in the
ordinary course of trade or business and the transfer constitutes
a completed gift
C. A zero-rated sale of goods or properties by a VAT
registered person
256. In which of the following cases shall the selling price be

deemed inclusive of VAT?
I. If the gross selling price is based on the zonal value or
market value of the property
II. If the VAT is not billed separately
A. I only C. Both I and II
B. II only D. Neither I nor II

A. A zero-rated sale of goods or properties (by a VAT-
registered person) is a taxable transaction for VAT purposes,
but shall not result in any output tax
B. The input tax on the purchase of goods, properties or
services, related to zero-rated sales, shall be available as tax
credit only in accordance with the Regulations.
C. The input tax on purchases of goods, properties or services,
related to such zero-rated sale, shall be available for tax credit
or refund in accordance with the Regulations.
D. Any enterprise whose export sales exceeds 70% of the total
annual production of the preceding taxable year shall be
considered an export-oriented enterprise.
258. Which of the following is not a sale and, therefore, is not

subject to the VAT?
A. Transfer, use or consumption not in the ordinary course of
business of goods or properties ordinarily intended for sale or
use in the course of business.
B. Distribution or transfer to shareholders or investors of
shares in the profits of a VAT registered person
C. Distribution or transfer to creditors in payment of debt;
D. Consignment sales
259. Under the VAT law, which of the following sales may
not be zero-rated?
A. Export sales
B. Foreign currency denominated sales
C. Sale of goods to the Asian Development Bank
D. Sale of goods to an export-oriented enterprise
260. Which of the following statements is wrong? The VAT

is:
A. not an expense
B. a tax credit
C. not a part of the gross selling price
D. on purchases, is a part of the cost of inventory
261. Which of the following shall be considered “deemed

sale”
A. Distribution or transfer to shareholders or investors shares
in the profits of VAT registered person
B. Distribution or transfer to creditors in payment of debt or
obligation
C. Consignment of goods if actual sale is not made within 60
days following the date such goods were consigned
D. All of the choices
262. For deemed sale transactions, other than retirement or

cessation of business, the output tax shall be based on the:
A. the selling price of the goods deemed sold as of the time of
the occurrence of the transactions
B. the market value of the goods deemed sold as of the time of
the occurrence of the transactions
C. acquisition cost of the goods deemed sold
D. acquisition cost or the current market price of the goods
whichever is lower
263. Which one is not included in the tax base of VAT on
importation?
A. value used by BOC in determining tariff and customs duties
B. customs duties
C. excise tax
D. other charges after the release of imported goods from BOC
264. Ms. Consuelo Dimagulo receives a package of goods

from her sister who lives in California, USA. Ms. Consuelo
will use the goods for personal purposes. She is not VAT-
registered. Which of the following statements is correct in
connection with the receipt of a package?
A. Ms. Consuelo shall be subject to VAT on importation
B. Ms. Consuelo shall not be subject to VAT on importation
because she is not VAT-registered
C. Ms. Consuelo shall not be subject to VAT on importation
but shall be subject to VAT on sales
265. Bigay Gabay, Inc. enjoys tax exemption for its

importations. During a particular month, it imported goods
from Japan. After the release from customs custody, Bigay
Gabay, Inc. transferred the imported goods to Todo Bigay
Trading, a VAT registered entity. For VAT purposes, the VAT
on importation shall be paid by:
A. both Bigay Gabay, Inc. and Todo Bigay Trading
B. neither Bigay Gabay, Inc, nor Todo Bigay Trading
C. Bigay Gabay only
D. Todo Bigay only
266. Statement 1: In the books of accounts of a VAT-
registered taxpayer, purchases are recorded net of input taxes
Statement 2: In the books of accounts of a VAT-registered
taxpayer, sales are recorded net of output taxes.
A. Both statements are correct
B. Both statements are correct
C. The first statement is correct but the second statement is
wrong
D. The first statement is wrong but the second statement is
correct
267. One of the following statements is wrong. Identify. For a

taxpayer who becomes liable for the first time to the VAT:
A. There can be an input tax on purchases he made when not
yet a VAT taxpayer
B. He must use a VAT invoice on the sale of the goods
purchased when not yet a VAT taxpayer
C. He must still use the Non-VAT invoice in use when he was
not yet a VAT taxpayer on the sale of goods on hand on the
transition date
D. There will be an adjustment in the inventory valuation on
the transition date
268. Which is correct? The inventory balance in the financial

statements at any given date of a VAT-registered person is:
A. Balance, net of input taxes
B. Balance, inclusive of input taxes
C. Balance on which the transitional input tax is computed
annually
D. Balance where the value-added tax thereon may be
calculated by multiplying it by 12%
269. Which statement is incorrect? VAT on importation of

goods:
A. is imposed on an importation for sale or for use in business
B. is imposed on an importation for personal use
C. shall be paid prior to removal from customs custody
D. may not be available as input tax
270. Gaby, a Japanese residing in the Philippines, bought

garments from ABC Corp, a domestic corporation, and
exported the same to Japan. The total value of exports is
P100,000. VAT (output tax) due on the transactions is:
A. P10,000 C. None, because 0% applies
B. P5,000 D. None, because the sale is exempt from VAT
271. All amounts given are VAT not included:

A, Non-VAT taxpayer, sells to B, VAT taxpayer P60,000
B, VAT taxpayer, sells to C, VAT taxpayer 90,000
C, the VAT taxpayer, sells to D, VAT taxpayer, an exporter
150,000
D, VAT taxpayer, exports 300,000
The value added tax of B:

A. payable of P10,000 C. payable of P10,800
B. payable of P9,200 D. payable of P7,200
272. Which of the following non-life insurance companies

shall not be subject to VAT?
A. crop insurance companies C. fidelity companies
B. surety companies D. bonding companies
273. Which of the following milling jobs shall not be exempt

from VAT?
A. play into rice
B. corn into corn grits
C. wheat into flour
D. sugar cane into raw sugar
274. Which of the following is not subject to VAT?

A. Non-life reinsurance premiums
B. Insurance and reinsurance commissions, whether life or
non-life
C. Life insurance premiums
D. Reinsurance premiums
275. A VAT subject real estate dealer sold a residential lot on

January 15, 2007. The following information was made
available on the terms of the sale:
Gross selling price P3,000,000
Initial payments on January 15, 2007 (consisting of down
payment and installment in the year of sale) 900,000
Balance to be paid in equal installment, installments starting
February 15, 2007 2,100,000
The zonal value of the residual lot was P2,800,000

How much was the output tax on January 15, 2007, using 12%
VAT rate?
A. P360,000 C. P108,000
B. P300,000 D. None
276. JP Corporation is a merchandising concern and has an

inventory of goods for sale amounting to P1,000,000. Ria
Corporation, a real estate developer, exchanged its real estate
properties for shares of JP Corporation resulting in the
acquisition of corporate control.
How much was the output tax using 12% VAT rate?
A. P120,000 c. P80,000
B. P100,000 d. None
277. Using the same data in the preceding number, how much
was the output VAT on the exchange of real properties held
for sale for shares of stock using 12% VAT rate?
A. P120,000 c. P80,000
B. P100,000 d. None
278. The following information is taken from the books of a

VAT registered enterprise was provided to you:
Domestic sales of goods P3,000,000
Sales of packaging materials to an export-oriented
enterprise whose export sales exceed 70% of the
total annual production 2,000,000
Local sales of goods to Asian Development Bank 500,000
Consignment of goods (not returned within 60 days following
the date of consignment) 200,000
Goods transferred for the personal use of the owner 100,000
How much was the total taxable sales?
A. P3,000,000 C. P3,800,000
B. P3,300,000 D. P5,800,000
279. using the same data in the preceding number, how much
was the output tax using 12% VAT rate?
A. P360,000 C. P456,000
B. P396,000 D. P696,000
280. Scrap Products is a processor of refined sugar. It

purchases sugarcane from farmers for processing into
intermediate stages until it becomes refined sugar. In a month,
it had the following sales and purchases, no tax include:
Sales P880,000
Purchases of sugarcane 220,000
Purchases of containers and paper label 100,000
The value-added tax payable is:

A. P66,000 C. P74,700
B. P88,000 D. P84,800
281. Mr. C is a VAT registered person, with the following data

for a taxable month, VAT is not included: Sales, domestic, to
consumers – P600,000; Sales, direct exports – P300,000;
Purchases, total invoice cost, from VAT registered persons: Of
goods of P550,000 and of services of P330,000.The services
subject to the value added tax is:
A. P600,000 C. P300,000
B. P400,000 D. P900,000
282. Mr. Abnoy, a VAT taxpayer, on August 1, 2011, made
the following purchases from VAT sellers, for use in his
business. The amounts stated not including VAT:
Machine 1, with a useful life of 19 years P3,000,000
Machine 2, with a useful life of 3 years 1,800,000
Patent, with usefulness of 2 years 600,000
The input tax on the purchases, available to Mr. Abnoy, for the
month of August 2011:
A. P84,000 C. P51,000
B. P15,000 D. P62,000
283. Puss, VAT registered, made the following purchases

during the month of January 2007:
Goods for sale, inclusive of VAT P246,400
Supplies, exclusive of VAT 20,000
Office air-conditioner, total invoice price
(estimated life is 3 years) 56,000
Home appliance for residence, gross of VAT 17,920
Service for store repair, contractor, not VAT registered,
total invoice amount 33,000
Service for repainting of store, total invoice amount
evidenced by an ordinary receipt issued by contractor 4,480
How much was the total allowable input taxes of Puss for the
month using 12% VAT rate?
A. P38,688 C. P34,800
B. P35,337.60 D. P34,542.86

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GENERAL PRINCIPLES OF TAXATION:

1. Which of the following is the primary purpose of taxation?

2. Statement 1: The power to tax includes the power to exempt

3. What is the basis of taxation?

4. The point in which tax is levied is also called

5. The power to enforce proportional contribution from the

6. Which is not an object of taxation

8. This theory underscores that taxes are indispensable to the

9. Which of the following inappropriately describes the nature

10. Which of the following statements is incorrect?

11. Which of the following statements is not included as a

12. Which of the following statements is incorrect?

13. Which is the most incorrect statement regarding taxes?

14. Statement 1: In the selection of the objects of taxation, the

15. Which of the following acts in taxation is administrative

16. This refers to the privilege or immunity from a tax burden

17. The process by which the sovereign raises income to

18. Which of the following statements is not correct?

19. One of the characteristics of internal revenue laws is that

20. One of the characteristics of our internal revenue laws is

21. In case of conflict between tax laws and generally accepted

22. The following are similarities of the inherent power of

23. Tax as distinguished from license fee

24. Which of the following statement refers to police power as

25. The distinction of a tax from permit or license fee is that a

26. Which of following statements is not an implication of the

27. Which of the following similarities of the three powers of

28. Which of the following statements is not part of

30. Which of the following statements describe “Marshall

31. Taxes are not subject to automatic set-off or compensation,

32. Which of the following statements describe “Holmes

33. Which of the following statements is not correct about

34. A feasibility study needs or needs to look into the taxes of

36. Which of the following statements is not included about

37. Which of the following statements is incorrect?

39. Which of the following is not a scheme of shifting the

40. Statement 1: The power of taxation is inherent in

42. Which of the following statements is incorrect?

43. Which of the following functions is not part of the

45. Direct duplicate taxation is prohibited because it comprises

47. Which of the following factors is not included in

48. Statement 1: Tax laws are given retroactive effect because

49. Which of the following statement is incorrect?

50. Which of the following statements is correct?

GROSS INCOME SUBJECTED TO REGULAR TAXES:

52. Which of the following statements is non-taxable

54. Which of the following statements is incorrect regarding

56. Which of the following causes of separation or termination

58. Which of the following retirement benefits, pensions,

59. Which of the following is incorrect regarding the Revenue

60. Which of the following items is not subject to regular

61. Which of the following interest incomes is not subject to

63. Which of the following statements about royalties is/are

65. Which of the following statements is relatively correct

66. Which of the following other sources of gross income

67. Which of the following statements is incorrect regarding

69. Which of the following data regarding the MWE is

70. Which of the following statements is incorrect regarding

71. Which of the following compensation income is/are non-

72. Which of the following de minimis benefits is/ are non-

73. Which of the following statements is incorrect regarding

74. Which of the following statements is correct?

75. Which of the following statements does not qualify to as