Summative Assessment

Multiple Choice (20 items):

1. One of the following is a false statement about double taxation. Which is it?
a. There is no constitutional prohibition on double taxation.
b. Direct duplicate taxation is a valid defense against a tax measure if it is violative of the equal
protection clause.
c. Absence of any of the elements of direct double taxation makes it indirect duplicate taxation.
d. A 20% final withholding tax on interest income on bank deposits and a 5% gross receipts tax
on banks is a direct duplicate taxation.

2. Which of the following statements is not correct?

a. Creditable withholding tax may refer to withholding tax on compensation or to withholding of business
tax.
b. The withholding tax on business may refer either to VAT or to Percentage Tax.
c. Withholding tax on compensation may also refer to expanded withholding tax.
d. Creditable withholding tax is the other term for final withholding tax.

3. Keyrand, Inc., a Philippine corporation, sold through the local stock exchange 10,000 PLDT shares
that it bought 2 years ago. Keyrand sold the shares for P2 million and realized a net gain of
P200,000.00. How shall it pay tax on the transaction?
a. It shall pay tax of 60% of 1% stock transaction tax on the gross sales.

b. It shall pay capital gains tax of 15% on Php200,000

c. It shall pay 5% tax on the first P100,000.00 of the P200,000.00 and 10% tax on the
remaining 100,000.00.

d. It shall pay a tax of one-half of 1% of the P2 million gross sales.

4. In cases of deductions and exemptions on income tax returns, doubts shall be resolved:
a. Liberally in favor of the taxpayer c. Strictly against the government

b. Liberally in favor of the employer d. Strictly against the taxpayer

5. 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 of taxation, the state can tax anything at any
time;
(d) The provisions of taxation in the Philippine Constitution are grants of
power and not limitations on taxing powers.
Answer: d

6. Non-profit, non-stock educational institution is exempt from income tax.

Statement 1: This exemption from tax applies whether the educational
institution by a religious order or not ;
Statement 2 The policy consideration for the tax exemption is to encourage the establishment
and not profit-motivated of educational institutions which is public service oriented
 (a) True true; (b) False, false; (c) True, false; (d) False, true.

7. 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) Generally retrospective in operation

8. When there is a difference in treatment between tax and accounting, 

(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

9. The following are similarities of the inherent power of taxation, eminent domain, and police
power, except one:
(a) Are necessary attributes of sovereignty
(b) Interfere with private rights and property;
(c) Affect all persons or the public;
(d) Are legislative implementation.

10. Which 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.

11. Value-added tax is an example of

(a) Graduated tax;
(b) ' Progressive tax;
(c) Regressive tax,
(d) Proportional tax

12. 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.
It is essentially a legislative function. Even in the absence of any constitutional provision,
taxation power falls to Congress as part of the general power of law-making
(a) True, true: (b) False, false. (c) True, false;(d) False,

13. Which of the following statements is not correct?

(a) A constitutional limitation of taxation may be disregarded by the application of an
inherent limitation.
 (b) The property of an educational institution operated by a religious orders exempt from
property tax, but its income is subject to income tax:
(c)One of the inherent limitations is the prohibition of delegation by the state of the
power of taxation
(d) The power of taxation is shared by the legislative and executive departments of government

14.A fundamental rule in taxation is that the property of one country may not be taxed by
another country. This is known as-
(a) International law;
(b) International comity;
(c) Reciprocity,
(d) International inhibition.

15. A burden is imposed on a person because that person is believed to have received a benefit
(a) Taxation
(b) Police power.
(c) Eminent domain
(d) None of the above

16. No tax can be imposed unless there is a law. This is consistent with the
(a) Uniformity in taxation:
(b) Due process of law,
(c) Non-delegation of the power to tax;
(d) The power of taxation is very broad and the only limitation is the sense of responsibility of
the members of the legislature to their constituents.

17. Statement 1 Direct double taxation is prohibited by the Philippine Constitution,

Statement 2 Indirect double taxation is allowed by the Philippine Constitution
(a) True, true; (b) False, false; (c) True. false;(d) False, true.

18. Which among the following is a non-resident alien?

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

19. Who is not a Philippine income tax payer'?

(a) A resident citizen of the Philippines with income from within and outside the
Philippines
(b) A resident citizen of the Philippines with income from within the Philippines only.
(c) A non-resident citizen of the Philippines with income from outside the
Philippines only.
(d) A non-citizen of the Philippines with income from within the Philippines only
20. Statement 1. The capital gain tax on shares of stock of an individual applies only if the shares
of stock are those of a listed domestic corporation.
Statement 2. The capital gain tax on real property of an individual applies only if the real
property is in the Philippines
(a) True, true: (b) False, false: (c) True, false.
(d) False, true.

21. Statement 1. Gross compensation income is income arising out of employer-employee

relationship.
Statement 2. Gross income from self-employment is income arising out of business or the
practice of profession
(a) True, true; (b) False, false, (c) True, false, (d) False, true.

22. Which of the following is not gross compensation income?

(a) Salary of P20 000 of an employee.
(b) Bonus of P20,000 of an employee.
(c) Lotto Winnings of P20,000
(d) Honorarium

23. Which of the following is not considered as part of gross taxable income?
(a) Salary of P20 000 of an employee.
(b) Bonus of P20,000 of an employee.
(c) Royalties on books in the Philippines
(d) Interest of bank deposits in US

24. Thirteenth month pay P38000

Christmas bonus 30000
Productivity incentives pay 8000

The taxable compensation income from the benefits is:

(a) P38,000; (b) P13,000: (c) P 0.000 (d) p 1,000.

25. Which is not subject to final tax if received by an individual taxpayer?

(a) Interest on bank savings deposit.
(b) Interest on foreign currency under the expanded foreign currency deposit system:
(c) Interest on bonds of the Banko Sentral Ng Pilipinas
(d) Interest on receivable with maturity of more than five years

26
27
28
29
30
31
32
33
34
35

Problem Solving (20 points – 4 items/ 5 points each)

Problem 1:

Ms. Q, a resident citizen, had the following transactions in 2020.

(a) Capital gain on sales directly to the buyer at P280,000 of shares of a domestic corporation,
Php80,0000.

(b) Capital gain on sales directly to the buyer at P2,000,000 of land in  Makati, Php300,0000.

The total capital gains tax paid during the year should be: