PRELIM

EXAM MAC
421

Select the best answer

1. Using the loopholes of law to reduce tax is known as
a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
2. Reducing tax liability, utilizing the deductions, exemptions or reliefs allowed in the
Act and Rules is called----
a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
3. A person buys machinery instead of hiring it, he is availing the benefit of depreciation.
It is his exclusive right either to buy or lease it. This is an example of
a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
4. Which is a correct statement?
I. Tax planning and management focuses efficient administration of tax
procedures and minimization of tax liability through eligible schemes.
II. Tax planning should not be part of overall Financial Planning.
III. Tax avoidance is the legal usage of the tax regime to one's own advantage, to
reduce the amountof tax that is payable by means that are within the law
a. I & II
b. I & III
c. I only
d. II only

5. A tax saving technique that entail spreading the tax base among two or more taxpayers
to take advantage of differing tax rates
a. Creation
b. Conversion
c. Timing
d. Splitting
6. The following are National taxes, except
a. Donor’s Tax
b. Income Tax
c. Percentage tax
d. Community Tax
7. Compliance of the legal requirements in connection with the tax is the essence of -----
a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
8. Which statement is incorrect?
a. The advantages of tax avoidance arise in the short run
b. Tax evasion results generation of black money, the evils of which are obvious
c. Tax Evasion implies the use of benefits of the law.
d. Tax avoidance is the legal usage of the tax regime to one's own advantage, to
reduce the amount of tax that is payable by means that are within the law
9. A tax saving strategy that involves techniques that move amounts being taxed (also called
the tax base) to more favorable tax-accounting periods
a. Creation
b. Conversion
c. Timing
d. Splitting
10. The firm’s strategy involves gaining advantage over competitors to create value for its
customers through its products or services
a. Operational Level Strategy
b. Corporate Level Strategy
c. International Level Strategy
d. a & c
11. Joe's Bakery bought a new delivery truck. They plan on keeping the truck for a period of
five years. The owner knows that the truck will lose usefulness each year. What can he
do to ease taxes on this asset?
a. Depreciate the truck
b. Report the total cost of the truck each year
c. Report the cost of a new truck each year
d. Only report the asset on the first year
12. Focuses on taking advantage of corporate and business strengths in global market.
a. Operational Level Strategy
b. Corporate Level Strategy
c. International Level Strategy
d. a & b
13. A key ingredient of any successful organization is a sound and successfully implemented

a. management
b. planning
c. strategy
d. a & b
14. Know the rules regarding which expenses are deductible and make sure to
document them properly.
 a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
15. How does effective tax management interact with strategy?
a. A firm should not alter the form of a transaction in order to manage taxes, if
the change is inconsistent with its strategy
b. A firm’s competitive strategy may be shaped, in part, by its tax status
c. a & b
d. None of the above
16. Shifting is the transfer of the burden of a tax by original payer or the one on whom the
tax was assessed or imposed to someone else
a. True
b. false
17. The following are local taxes except
a. Real property tax
b. CEDULA
c. Estate Tax
d. Professional Tax
18. Tax planning and management focuses efficient administration of tax procedures
and minimization of tax liability through eligible schemes.
a. FALSE
b. TRUE
19. Each local government unit shall have the power to create its own sources of revenues
and subject to such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy
a. Local Taxation
b. National Taxation
c. International Taxation
d. a & b
20. A tax on consumption levied on the sale, barter, exchange of lease of goods or
properties and services in the Philippines and on importation of goods into the
Philippines
a. Value-added Tax
b. Percentage Tax
c. Income Tax
d. a & b
21. The following are liable for Community Tax
a. Every corporation no matter how created or organized
b. Individuals who are inhabitants of the Philippines, 18 year of age or over
engaged in business or occupation
c. Individuals who are inhabitants of the Philippines, 18 year of age or
over engaged required by law to file an income tax return
d. All of the above
22. Statement 1: In case of persons maintaining/operating a branch or sales outlet making the
sale or transaction, the tax shall be recorded in said branch or sales outlet and paid to the
municipality/city where the branch or sales outlet is located
Statement 2: In case of manufacturers, contractors, producers, and exporters having
factories, project offices, plants, and plantations, proceeds shall be allocated: 30% of
sales recorded in the principal office shall be made taxable by the city/municipality where
the factory, project office, plant, or plantation is located; 70% shall be taxes by the city/
municipality where the principal office is located
a. Only Statement 1 is correct
b. Only Statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
23. Elijah company is in 25% tax bracket while Kiko Company is in net operating loss
situation. If the Philippine government allows additional 20% income tax deductions for
purchasing vaccine of P2million pesos, which company has competitive advantage?
a. Elijah company
b. Kiko Company
c. Both has competitive advantage
d. None
24. In case the plantation is located in a place other than the place where the factory is
located, the 70% will be divided as follows:
60% to the city/municipality where the factory is located
40% to the city/municipality where the plantation is located
a. TRUE
B. FALSE
25. A tax saving strategy that entails changing operations so that more tax-favored
categories of income or assets are produced. For example, advertising in order to sell
inventory results in ordinary income, which is usually taxed immediately and at the
highest rates.
a. Creation
b. Conversion
c. Timing
d. Splitting
26. Tax evasion refers to a situation where a person tries to reduce his tax liability by
deliberately suppressing the income or by inflating the expenditure showing the
income lower than the actual income and resorting to various types of deliberate
manipulations.
a. TRUE
b. FALSE
27. A tax on yearly profits arising from property, professions, trades, or offices, or as a tax on
the person’s income, emoluments, profits and the like
a. Value-added Tax
b. Percentage Tax
c. Income Tax
d. a & b
 28. A national Tax measured by certain percentage of the gross selling price or gross value in
money of goods sold, bartered or imported; or of the gross receipts or earnings derived by
any person engaged in the sale of services
a. Value-added Tax
b. Percentage Tax
c. Income Tax
d. Donor’s Tax
29. Imposed when one person transfers property to another due to non business motives,
such as affection and appreciation.
a. Estate and Donor’s tax
b. Value-added Tax
c. Percentage Tax
d. Income Tax
30. The following are applicable to Individuals, except
a. Minimum Corporate Income tax rate of 2%
b. Graduated Income tax
c. Capital Gains tax
d. b & c
31. The following are applicable to Individuals, except
a. Minimum Corporate Income tax rate of 2%
b. Graduated Income tax
c. Capital Gains tax
d. b & c
32. Sara Company is considering replacing it machine. The new machine would cost
P1,000,000 per year and has a depreciation of 200,000 per year. If the company is
currently subject to 25% tax rate, but next year it expects to go into 20% tax
bracket: (answer the following question- 5 pts)
a. When should the company replace its machine?
b. How much will be the tax benefit for the replacement decision?

33. Concealment of income or false claims to reduce tax liability are cases of ------
a. Tax evasion
b. Tax planning
c. Tax avoidance
d. Tax management
ESSAY
EXPLAIN THE SAVANT FRAMEWORK (15 pts)