CPA Review School of the Philippines

Manila

Taxation October 2013

Pre-week Lecture DO Dela
Cruz

1. Congress passed a law imposing taxes on income earned out of a particular activity that was not previously
taxed. The law, however, taxed incomes already earned within the fiscal year when the law took effect. Is
the law valid?
a. No, because laws are intended to be prospective, not retroactive.
b. No, the law is arbitrary in that it taxes income that has already been spent.
c. Yes, since tax laws are the lifeblood of the nation.
d. Yes, tax laws are an exception; they can be given retroactive effect.

2. 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 declare a P2 million gross income in its income tax return, deducting its cost of acquisition as an
expense.
b. It shall report the P200,000.00 in its corporate income tax return adjusted by the holding period.
c. It shall pay 5% tax on the first P100,000.00 of the P200,000.00 and 10% tax on the remaining
P100,000.00.
d. It shall pay a tax of one-half of 1% of the P2 million gross sales.

3. The spouses Helena and Federico wanted to donate a parcel of land to their son Dondon who is getting
married in December 2011. The parcel of land has a zonal valuation of P420,000.00. What is the most
efficient mode of donating the property?
a. The spouses should first donate in 2011 a portion of the property valued at P20,000.00 then spread the
P400,000.00 equally for 2012, 2013, 2014, and 2015.
b. Spread the donation over a period of 5 years by the spouses donating P100,000.00 each year from 2011
to 2015.
c. The spouses should each donate a P110,000.00 portion of the value of the property in 2011 then each
donate P100,000.00 in 2012.
d. The spouses should each donate a P100,000.00 portion of the value of the property in 2011, and another
P100,000.00 in 2012. Then, in 201, Helena should donate the remaining P20,000.00.

4. Mia, a compensation income earner, filed her income tax return for the taxable year 2007 on March 30,
2008. On May 20, 2011, Mia received an assessment notice and letter of demand covering the taxable year
2007 but the postmark on the envelope shows April 10, 2011. Her return is not a false and fraudulent return.
Can Mia raise the defense of prescription?
a. No. The 3 year prescriptive period started to run on April 15, 2008, hence, it has not yet expired on April
10, 2011.
b. Yes. The 3 year prescriptive period started to run on April 15, 2008, hence, it had already expired by
May 20, 2011.
c. No. The prescriptive period started to run on March 30, 2008, hence, the 3 year period expired on April
10, 2011.
d. Yes. Since the 3 year prescriptive period started to run on March 30, 2008, it already expired by May 20,
2011.

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

6. Guidant Resources Corporation, a corporation registered in Norway, has a 50MW electric power plant in
San Jose, Batangas. Aside from Guidant’s income from its power plant, which among the following is
considered as part of its income from source within the Philippines?
a. Gains from the sale to an Ilocos Norte power plant of generators bought from the United States.
b. Interests earned on its dollar deposits in a Philippine bank under the Expanded Foreign Currency
Deposit System.
c. Dividends from a two-year old Norwegian subsidiary with operations in Zambia but derives 60% of its
gross income from the Philippines.
d. Royalties from the use in Brazil of generator sets designed in the Philippines by its engineers.

7. Anktryd, Inc., bought a parcel of land in 2009 for P7 million as part of its inventory of real properties. In
2010, it sold the land for P12 million which was its zonal valuation. In the same year, it incurred a loss of P6
million for selling another parcel of land in its inventory. These were the only transactions it had in its real
estate business. Which of the following is the applicable tax treatment?
a. Anktryd shall be subject to a tax of 6% of P12 million.
b. Anktryd could deduct its P6 million loss from its P5 million gain.
c. Anktryd’s gain of P5 million shall be subject to the holding period.
d. Anktryd’s P6 million loss could not be deducted from its P5 million gain.

8. Aplets Corporation is registered under the laws of the Virgin Islands. It has extensive operations in
Southeast Asia. In the Philippines, its product are imported and sold at a mark-up by its exclusive
distributor, Kim’s Trading, Inc. The BIR compiled a record of all the imports of Kim from Aplets and
imposed a tax on Aplets net income derived from its exports to Kim. Is the BIR correct?
a. Yes. Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines.
b. No. The tax should have been computed on the basis of gross revenues and not net income.
c. No. Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines.
d. Yes. Aplets is doing business in the Philippines through its exclusive distributor Kim’s Traidng, Inc.

9. Passive income includes income derived from an activity in which the earner does not have any substantial
participation. This type of income is
a. Usually subject to a final tax c. Taxable only if earned by citizen
b. Exempt from income taxation d. Included in the income tax return

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

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 d. Dividends received from a two year old foreign corporation whose gross income was derived solely
from Philippine sources.

11. What is the rule on the taxability of income that a government educational institution derives from its school
operations? Such income is
a. Subject to 10% tax on its net taxable income as if it is a proprietary education institution.
b. Exempt from income taxation if it is actually, directly, and exclusively used for educational purposes.
c. Subject to the ordinary income tax rates with respect to incomes derived from educational activities.
d. Exempt from income taxation in the same manner as government-owned and controlled corporations.

12. Which among the following reduces the gross estates (not the net estate) of a citizen of the Philippines for
purposes of estate taxation?
a. Transfers for public use c. Standard deduction of P1M
b. Property previously taxed d. Capital of the surviving spouse

13. The BIR could not avail itself of the remedy of levy and distraint to implement, through collection, an
assessment that has become final, executory, and demandable where
a. The subject of the assessment is an income tax.
b. The amount of the tax involved does not exceed P100.00.
c. The corporate taxpayer has no other uncollected tax liability.
d. The taxpayer is an individual compensation income earner.

14. Alain Descartes, a French citizen permanently residing in the Philippines, received several items during the
taxable year. Which among the following is NOT subject to Philippine income taxation?
a. Consultancy fees received for designing a computer program and installing the same in the Shanghai
facility of a Chinese firm.
b. Interests from his deposits in a local bank f foreign currency earned abroad converted to Philippine
pesos.
c. Dividends received his deposits from an American corporation which derived 60% of its annual gross
receipts from Philippine sources for the past 7 years.
d. Gains derived from the sale of his condominium unit located in The Fort, Taguig City o another resident
alien.

15. On March 30, 2005 Miguel Foods, Inc. received a notice of assessment and a letter of demand on its April
15, 2002 final adjustment return from the BIR. Miguel Foods then filed a request for reinvestigation
together with the requisite supporting documents on April 25, 2005. On June 2, 2005, the BIR issued a final
assessment reducing the amount of the tax demanded. Since Miguel Foods was satisfied with the reduction,
it did not do anything anymore. On April 5, 2010 the BIR garnished the corporation’s bank deposits to
answer for the tax liability. Was the BIR action proper?
a. Yes. The BIR has 5 years from the filing of the protest within which to collect.
b. Yes. The BIR has 5 years from the issuance of the final assessment within which to collect.
c. No. the taxpayer did not apply for a compromise.
d. No. Without the taxpayer’s prior authority, the BIR action violation the Bank Deposit Secrecy Law.

16. Which among the following taxpayers is required to use only the calendar year for tax purposes?
a. Partnership exclusively for the design of government infrastructure projects considered as practice of
civil engineering.
b. Joint-stock company formed for the purpose of undertaking construction projects.
c. Business partnership engaged in energy operations under a service contract with the government.

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 d. Joint account (cuentas en participation) engaged in the trading of mineral ores.

17. In March 2009, Tonette, who is fond of jewelries, bought a diamond ring for P750,000.00, a bracelet for
P250,000.00, a necklace for P500,000.00, and a brooch for P500,000. Tonette derives income from the
exercise of her profession as a licensed CPA. In October 2009, Tonette sold her diamond ring, bracelet, and
necklace for only P1.25 million incurring a loss of P250,000.00. She used the P1.25 million to buy a solo
diamond ring in November 2009 which she sold for P1.5 million in September 2010. Tonette had no other
transaction in jewelry in 2010. Which among the following describes the tax implications arising from the
above transactions?
a. Tonette may deduct his 2009 loss only from her 2009 professional income.
b. Tonette may carry over and deduct her 2009 loss only from her 2010 gain.
c. Tonette may carry over and deduct her 2009 loss from her 2010 professional income as well as from her
gain.
d. Tonette may not deduct her 2009 loss from both her 2010 professional income and her gain.

18. Zygomite Minerals, Inc., a corporation registered and holding office in Australia, not operating in the
Philippines, may be subject to Philippine income taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the proceeds
converted to pesos.
b. Gains it derived from sale in Australia of shares of stock of Philex Mining Corporation, a Philippine
corporation.
c. Dividends earned from investment in a foreign corporation that derived 40% of its gross income from
Philippine sources.
d. Interests derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency
Deposit System.

19. Pierre de Savigny, a Frenchman, arrived in the Philippines on January 1, 2010 and continued to live and
engage in business in the Philippines. He went on a tour of Southeast Asia from August 1 to November 5,
2010. He returned to the Philippines on November 6, 2010 and stayed until April 15, 2011 when he returned
to France. He earned during his stay in the Philippines a gross income of P3 million from his investments in
the country. For the year 2010, Pierre’s taxable status is that of
a. A non-resident alien not engaged in trade or business in the Philippines.
b. A non-resident alien engaged in trade or business in the Philippines.
c. A resident alien not engaged in trade or business in the Philippines.
d. A resident alien engaged in trade or business in the Philippines.

20. Money collected from taxation shall not be paid to any religious dignitary EXCEPT when
a. The religious dignitary is assigned to the Philippine Army.
b. It is paid by a local government unit.
c. The payment is passed in audit by the COA.
d. It is part of a lawmaker’s pork barrel.

21. Joanne married James, a person with no known relatives. Through James’ hard work, he and his wife Joanne
prospered. When James died, his estate alone amounted to P100 million. If, in his will, James designates
Joanne as his only heir, what will be the free portion of his estate?
a. Joanne gets all; estate has no free portion left.
b. Joanne get 1/2; the other half is free portion.
c. Joanne get 1/3; the remaining 2/3 is free portion.
d. Joanne gets 1/4; the remaining 3/4 is free portion.

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22. There is no taxable income until such income is recognized. Taxable income is recognized when the
a. Taxpayer fails to include the income in his income tax return.
b. Income has been actually received in money or its equivalent.
c. Income has been received, either actually or constructively.
d. Transaction that is the source of the income is consummated.

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

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

25. Tong Siok, a Chinese billionaire and a Canadian resident, died and left assets in China valued at P80 billion
and in the Philippines assets valued at P20 billion. For Philippine estate tax purposes the allowable
deductions for expenses, losses, indebtedness and taxes, properly previously taxed, transfers for public use,
and the share of his surviving spouse in their conjugal partnership amounted to P15 billion. Tong’s gross
estate for Philippine estate tax purposes is
a. P20 billion b. P5 billion c. P100 billion d. P85 billion

26. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known
as
a. Assessment b. Levy c. Payment d. Collection

27. Although the power of taxation is basically legislative in character, it is NOT the function of Congress to
a. Fix with certainty the amount of taxes c. Identify who should collect the tax
b. Collect the tax levied under the law d. Determine who should be subject to the tax

28. In 2010, Juliet Ulbod earned P500,000.00 as income from her beauty parlor and received P250,000.00 as
Christmas gift from her spinster aunt. She had no other receipts for the year. She spent P150,000.00 for the
operation of her beauty parlor. For tax purposes, her gross income for 2010 is
a. P750,000 b. P500,000 c. P350,000 d. P600,000

29. Exempted from donor’s taxation are gifts made

a. For the use of the barangay c. To a school which is a stock corporation
b. In consideration of marriage d. To a for-profit government corporation

30. An example of a tax where the concept of progressivity finds application is the
a. Income tax on individuals c. Value-added tax on certain articles
b. Excise tax on petroleum products d. Amusement tax on boxing exhibitions

31. A corporation may change its taxable year to calendar or fiscal year in filing its annual income tax return,
provided
a. It seeks prior BIR approval of its proposed change in accounting period.

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 b. It simultaneously seeks BIR approval of its new accounting period.
c. It should change its accounting period two years prior to changing its taxable year.
d. Its constitution and by-laws authorizes the change.

32. Ka Pedring Matibag, a sole proprietor, buys and sells “kumot at kulambo” both of which are subject to
value-added tax. Since he is using the calendar year as his taxable year, his taxable quarters end on the last
day of March, June, September, and December. When should Ka Pedring file the VAT quarterly return for
his gross sales or receipts for the period of June 1 to September 30?
a. Within 25 days from September 30 c. Within 15 days from September 30
b. Within 45 days from September 30 d. Within 30 days from September 30

33. Don Fotunato, a widower, died in May, 2011. In his will, he left his estate of P100 million to his four
children. He named his compadre, Don Epitacio, to be the administrator of the estate. When the BIR sent a
demand letter to Don Epitacio for the payment of the estate tax, he refused to pay claiming that he did not
benefit from the estate, he not being an heir. Forthwith, he resigned as administrator. As a result of the
resignation, who may be held liable for the payment of the estate tax?
a. Don Epitacio since the tax became due prior to his resignation.
b. The eldest child who would be reimbursed by the others.
c. All the four children, the tax to be divided equally among them.
d. The person designated by the will as the one liable.

34. On July 31, 2011, Esperanza received a preliminary assessment notice from the BIR demanding that she
pays P180,000.00 deficiency income taxes on her 2009 income. How many days from July 31, 2011 should
Esperanza respond to the notice?
a. 180 days b. 30 days c. 60 days d. 15 days

35. Income is considered realized for tax purposes when

a. It is recognized as revenue under accounting standards even if the law does not do so.
b. The taxpayer retires from the business without approval from the BIR.
c. The taxpayer has been paid and has received in cash or near cash the taxable income.
d. The earning process is complete or virtually complete and an exchange has taken place.

36. Which among the following circumstances negates the prima facie presumption of correctness of a BIR
assessment?
a. The BIR assessment was seasonably protested within 30days from receipt.
b. No preliminary assessment notice was issued a prior to the assessment notice.
c. Proof that the assessment is utterly without foundation, arbitrary, and capricious.
d. The BIR did not include a formal letter of demand to pay the alleged deficiency.

37. Gerardo died on July 31, 2011. His estate tax return should be filed within
a. Six months from filing of the notice of death.
b. Sixty days from the appointment of an administrator.
c. Six months from the time he died on July 31, 2011.
d. Sixty days from the time he died on July 31, 2011.

38. Anion, Inc. received a notice of assessment and a letter from the BIR demanding the payment of P3 million
pesos in deficiency income taxes for the taxable year 2008. The financial statements of the company show
that it has been suffering the financial reverses from the year 2009 up to the present. Its asset position shows

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 that it could pay only P500,000.00 which it offered as a compromise with to the BIR. Which among the
following may the BIR require to enable it to enter into a compromise with Anion, Inc.?
a. Anion must show it has faithfully paid taxes before 2009.
b. Anion must promise to pay its deficiency when financially able.
c. Anion must waive its right to the secrecy of its bank deposits.
d. Anion must immediately deposit the P500,000.00 with the BIR.

39. Dondon and Helena were legally separated. They had six minor children, all qualified to be claimed as
additional exemptions for income tax purposes. The court awarded custody of two of the children to
Dondon and three to Helena, with Dondon directed to provide full financial support for them as well. The
court awarded the 6th child to Dondon’s father with Dondon also approving full financial support. Assuming
that only Dondon is gainfully employed while Helena is not, for how many children could Dondon claim
additional exemptions when he files his income tax return?
a. Six children c. Three children
b. Five children d. Two children

40. Political campaign contributions are NOT deductible from gross income
a. If they are not reported to the Commission on Elections.
b. If the candidate supported wins the election because of possible corruption.
c. Since they do not help earn the income from which they are to be deducted.
d. Since such amounts are not considered as income of the candidate to whom given.

41. When a BIR decision affirming an assessment is appealed to the CTA, the BIR’s power to garnish the
taxpayer’s bank deposits
a. Is suspended to await the finality of such decision.
b. Is suspended given that the CTA can reverse BIR decisions when prejudicial to the taxpayer.
c. Is not suspended because only final decisions of the BIR are subject to appeal.
d. Is not suspended since the continued existence of government depends on tax revenues.

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

43. Jeopardy assessment is a valid ground to compromise a tax liability

a. Involving deficiency income taxes only, but not for other taxes.
b. Because of doubt as to the validity of the assessment.
c. If the compromise amount does not exceed 10% of the basic tax.
d. Only when there is an approval of the National Evaluation Board.

44. As a general rule, within what period must a taxpayer to elevate to the Court of Tax Appeals a denial of his
application for refund of income tax overpayment?
a. Within 30 days from receipt of the Commissioner’s denial of his application for refund.
b. Within 30 days from receipt of the denial which must not exceed 2 years from payment of income tax.
c. Within 2 years from payment of the income taxes sought to be refunded.
d. Within 30 days from receipt of the denial or within two years from payment.

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45. Celia donated P110,000.00 to her friend Victoria who was getting married. Celia gave no other gift during
the calendar year. What is the donor’s tax implication on Celia’s donation?
a. The P100,000.00 portion of the donation is exempt since given in consideration of marriage.
b. A P10,000.00 portion of the donation is exempt being a donation in consideration of marriage.
c. Celia shall pay a 30% donor’s tax on the P110,000.00 donation.
d. The P100,000.00 portion of the donation is exempt under the rate schedule for donor’s tax.

46. Levox Corporation wanted to donate P5 million as prize money for the world professional billiard
championship to be held in the Philippines. Since the Billiard Sports Confederation of the Philippines does
not recognize the event, it was held under the auspices of the International Professional Billiards
Association, Inc. Is Levox subject to the donor’s tax on its donation?
a. No, so long as the donated money goes directly to the winners and not through the association.
b. Yes, since the national sports association for billiards does not sanction the event.
c. No, because it is donated as prize for an international competition under the billiards association.
d. Yes, but only that part that exceeds the first P100,000.00 of total Levox donations for the calendar year.

47. What is the effect on tax liability of a taxpayer who does not protest an assessment for deficiency taxes?
a. The taxpayer may appeal his liability to the CTA since the assessment is a final decision of the
Commissioner on the matter.
b. The BIR could already enforce the collection of the taxpayer’s liability if it could secure authority from
the CTA.
c. The taxpayer’s liability becomes fixed and subject to collection as the assessment becomes final and
collectible.
d. The taxpayer’s liability remains suspended for 180 days from the expiration of the period to protest.

48. A non-stock, non-profit school always had cash flow problems, resulting in failure to recruit well-trained
administrative personnel to effectively manage the school. In 2010, Don Leon donated P100 million pesos
to the school, provided the money shall be used solely for paying the salaries, wages, and benefits of
administrative personnel. The donation represents less than 10% of Don Leon’s taxable income for the year.
Is he subject to donor’s taxes?
a. No, since the donation is actually, directly, and exclusively used for educational purposes.
b. Yes, because the donation is to be wholly used for administration purposes.
c. Yes, since he did not obtain the requisite NGO certification before he made the donation.
d. No, because the donation does not exceed 10% of his taxable income for 2010.

49. There is prima facie evidence of a false or fraudulent return where the
a. Tax return was amended after a notice of assessment was issued.
b. Tax return was filed beyond the reglementary period.
c. Taxpayer changed his address without notifying the BIR.
d. Deductions claimed exceed by 30% the actual deductions.

50. The proceeds received under a life insurance endowment contract is NOT considered part of gross income
a. If it is so stated in the life insurance endowment policy.
b. If the price for the endowment policy was not fully paid.
c. Where payment is made as a result of the death of the insured.
d. Where the beneficiary was not the one who took out the endowment contract.

51. The excess of allowable deductions over gross income of the business in a taxable year is known as

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 a. Net operating loss c. Net deductible loss
b. Ordinary loss d. NOLCO

52. No action shall be taken by the BIR on the taxpayer’s disputed issues until the taxpayer has paid the
deficiency taxes
a. When the assessment was issued against a false and fraudulent return.
b. If there was a failure to pay the deficiency tax within 60 days from BIR demand.
c. If the Regional Trial Court issues a writ of preliminary injunction to enjoin the BIR.
d. Attributable to the undisputed issues in the assessment notice.

53. Ka Tato owns a parcel of land in San Jose, Batangas declared for real property taxation, as agricultural. In
1990, he used the land for a poultry feed processing plant but continued to declare the property as
agricultural. In March 2011, the local assessor discovered Ka Tato’s change of use of his land and informed
the local treasurer who demanded payment of deficiency real property taxes from 1990 to 2011. Has the
action prescribed?
a. No. The deficiency taxes may be collected within five years from when they fell due.
b. No. The deficiency taxes for the period 1990 up to 2011 may still be collected within 10 years from
March 2011.
c. Yes. More than 10 years had lapsed for the period 1990 up to 2000, hence the right to collect the
deficiency taxes has prescribed.
d. Yes. More than 5 years had lapsed for the collection of the deficiency taxes for the period 1990 up to
2005.

54. Lualhati Educational Foundation, Inc., a stock educational institution organized for profit, decided to lease
for commercial use a 1,500 sq. m. portion of its school. The school actually, directly, and exclusively used
the rents for maintenance of its school buildings, including payment of janitorial services. Is the leased
portion subject to real property tax?
a. Yes, since Lualhati is a stock and for profit educational institution.
b. No, since the school actually, directly, and exclusively used the rents for educational purposes.
c. No, but it may subject to income taxation on the rents it receives.
d. Yes, since the leased portion is not actually, directly, and exclusively used for educational purposes.

55. What should the BIR do when the prescriptive period for the assessment of a tax deficiency is about to
prescribe but the taxpayer has not yet complied with the BIR requirements for the production of books of
accounts and other records to substantiate the claimed deductions, exemptions or credits?
a. Call the taxpayer to a conference to explain the delay.
b. Immediately conduct an investigation of the taxpayer’s activities.
c. Issue a jeopardy assessment coupled with a letter of demand.
d. Issue a notice of constructive distraint to protect government interest.

56. The taxpayer seasonably filed his protest together with all the supporting documents. It is already July 31,
2011, or 180 days from submission of the protest but the BIR Commissioner has not yet decided his protest.
Desirous of an early resolution of his protested assessment, the taxpayer should file his appeal to the Court
of Tax Appeals not later than
a. August 31, 2011 c. August 15, 2011
b. August 30, 2011 d. August 1, 2011

57. Which of the following are NOT usually imposed when there is a tax amnesty?
a. Civil, criminal, and administrative penalties b. Civil and criminal penalties

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 c. Civil and administrative penalties d. Criminal and administrative penalties

58. Which among the following concepts of taxation is the basis for the situs of income taxation?
a. Lifeblood doctrine of taxation c. Compensatory purpose of taxation
b. Symbiotic relation in taxation d. Sumptuary purpose of taxation

59. In “Operation Kandado,” the BIR temporarily closed business establishments, including New Dynasty
Corporation that failed to comply with VAT regulations. New Dynasty contends that it should not be
temporarily closed since it has a valid and existing VAT registration, it faithfully issued VAT receipts, and
filed the proper VAT returns. The contention may be rejected if the BIR investigation reveals that
a. The taxpayer has not been regularly filing its income tax returns for the past 4 years.
b. The taxpayer deliberately filed a false and fraudulent return with deliberate intention to evade taxes.
c. The taxpayer used falsified documents to support its application for refund of taxes.
d. There was an understatement of taxable sales or receipts by 30% or more for the taxable year.

60. The head priest of the religious sect Tres Personas Solo Dios, as the corporation sole, rented out a 5,000 sq.
m. lot registered in its name for use as school site of a school organized for profit. The sect used the rentals
for the support and upkeep of its priests. The rented lot is
a. Not exempt from real property taxes because the user is organized for profit.
b. Exempt from real property taxes since it is actually, directly, and exclusively used for religious
purposes.
c. Not exempt from realy propery taxes since it is the rents, not the land, that is used for religious purposes.
d. Exempt from real property taxes since it is actually, direcly, and exclusively used for educational
purposes.

61. Spouses A and B sold their family home, a capital asset for P5,000,000. It was acquired in 1980 at
P2,000,0000. The fair market value as determined by the BIR is P6,000,000 but the fair market value as
shown in the schedule of values of the City Assessor is P5,500,000. Later, the spouses utilized P4,000,000
for the acquisition of their new family home. The capital gains tax due is
a. P72,000 b. P60,000 c. P300,000 d. P360,00

62. Using the above data, the cost basis of the new family home is
a. P4,000,000 b. P1,600,000 c. P1,000,000 d. P400,000

63. A Corporation was merged with B Corporation. C, a stockholder of A Corporation was asked to surrender
his shares of stock of A Corporation which C acquired for P200,000 and in exchange he received shares of
stock of B Corporation with a fair market value of P220,000 plus cash of P30,000. After the merger, C later
sold his B Corporation shares for P240,000. C will recognize a gain of:
Merger Sale Merger Sale
a. P30,000 P40,000 c. P30,000 P20,000
b d
P50,000 P20,000 P50,000 P40,000
. .

64. A transferred his commercial land which he acquired for P10M to B Corporation and as consideration he
received shares of stock of B Corpoation with a fair market value of P10.2M and cash of P300,000. As a
result, A acquired control of B Corporation. Two months later, A sold the B Corporation shares for P10.5M.
The gain to be recognized on the transfer and on the sale is:
Transfer Sale Transfer Sale
a. P300,000 P500,000 c. P300,000 P300,000
b d
P500,000 P300,000 P500,000 P500,000PW-TAX-0-11 10
. .
65. A transferred his land in Manila which he acquired for P2M to B Corporation and as consideration he
received shares of stock of B Corpoation with fair market value of P1.8M and as a result A gained control of
B Corporation. Later, A transferred his land in Makati which he acquired for P3M to C Corporation and as
consideration he received share of stock of C Corpoation with fair market value of P2.7M. Even before the
transfer, A already owns 51% of C Corporation outstanding shares. The loss to be recognized by A is
B Corp. C Corp. B Corp. C Corp.
a. P0 P300,000 c. P200,000 P300,000
b d
P0 P0 P200,000 P0
. .
Use the following information for
questions 66 and 67.
A, sold 3 parcels of land held as capital assets, as follows:
Land 1 Land 2 Land 3
Selling Price P160,000 P160,000 P160,000
Cost 100,000 100,000 100,000
Installment payments
Year 1 (year of sale) 40,000 40,000 30,000
2 120,000 60,000 20,000
Assumption of mortgage 0 60,000 110,000

66. The capital gains tax to be paid in year 1 is:

a. P28,000 b. P15,840 c. P19,840 d. P12,640

67. The capital gains tax to be paid in year 2 is:

a. P12,960
b. P8,960
c. P16,160
d. P19,200

PW-TAX-0-11 11
Use the following information for question 71 and 72.
A and B are stockholders in corporations which are being consolidated into a new corporation, had the
following data on their shares of stock:
A B
Consideration received
Fair market value of shares P75,000 P81,000
Fair market value of property 5,000 5,000
Cash 10,000 4,000
Cost of shares surrendered 80,000 80,000

68. The gain or (loss) to be recognized by A is

a. P10,000 b. P15,000 c. P(5,000) d. P0

69. The gain or (loss) to be recognized by B is

a. P9,000 b. P10,000 c. P1,000 d. P0

70. In 1998, Cadena de Amor Corporation gave the following fringe benefits to its employees
To management employees ------------------------------------- P 1,320,000
To rank and file employees ------------------------------------ 5,000,000
The allowable deduction from the gross income of the corporation for the fringe benefits given to employees
is
a. P2,000,000 b. P2,148,000 c. P6,230,000 d. P7,000,000

71. A VAT taxpayer has the following data for a particular quarter during the current year:
Sale of shares of stock
Held as inventory P 1,000,000
Held as investment 500,000
Cost of the shares sold
Held as inventory 300,0000
Held as investment (thru the local stock exchange) 600,000
The stock transaction tax is
a. P0 b. P1,500 c. P2,500 d. P7,500

72. An invoice issued for the sale of vat taxable goods shows the following:
Total invoice amount P 50,400
Less:Trade discount of 5% 2,520
Net P 47,880
If the VAT tax payer enjoys a partial exemption of 40% including VAT and the amount is VAT inclusive,
how much is the output tax?
a. P3,078 b. P3,216 c. P3,447 d. P3,628

73. A, a vat taxpayer, made the following purcahses of capital goods from vat registered sellers for use in his
business (amount are net of vat) for the 3rd quarter
Year 2011 Estimated Life Cost
July 10 – Machine 1 2 years P 200,000
16 – Machine 2 6 years 900,000
Aug. 8 – Machine 3 2 years 400,000
20 – Machine 4 6 years 500,000
Sept. 14 – Machine 5 7 years 2,000,000
a. P2,800 b. P108,000 c. P132,000 d. P2,200

74. The input tax in August is

a. P108,000 b. P3,000 c. P5,800 d. P110,800

75. The input tax in September is

a. P4,000 b. P6,800 c. P26,000 d. P27,800

PW-TAX-0-11 12
76. The power to tax is exclusively lodged with the legislature but the following exceptions are provided by the
constitution, except
a. Power of local government units to levy taxes, fees and charges
b. Authority of the President to fix tariff rates, import and export quotas, tonnage and wharfage dues and
other duties and imposts
c. Delegation to administrative agencies of the implementation and collection of taxes
d. Delegation to private entities the levy and enforcement of tax laws

77. Statement 1 - The prizes received by Manny Pacquiao and Ricky Hatton in their last fight are subject to
Philippine income tax
Statement 2 - If the fight between Pacquiao and Cotto is a world championship fight promoted by Bob
Arum, the gross receipts will be exempt from percentage tax
a. True, true b. True, false c. False, false d. False, true

78. This is an inherent limitation on the power of taxation.

a. The rule on taxation shall be uniform and equitable
b. No law impairing the obligations of contracts shall be enacted
c. Charitable institutions, churches, personages or convents appurtenants thereto, mosque and non-profits
cemeteries and all kinds of lands, buildings and improvements actually, directly and exclusively used for
religious or charitable purposes shall be exempt from taxation
d. The tax laws cannot apply to the property of foreign government

79. This is a constitutional limitation on the power of taxation.

a. The power of taxation cannot be delegated
b. The power of taxation is limited to the territorial jurisdiction of the taxing state
c. No person shall be imprisoned for debt or non-payment of a poll tax
d. Exemption of government instrumentalities and agencies through which the government exercised
sovereign from taxation

80. Taxation as distinguished from police power and eminent domain

a. May be exercised by private individuals
b. May be exercised only by the government
c. Limited to cover the cost to regulate
d. Generally no limit as to the amount may be imposed

81. Statement 1 - The levying, imposition and collection of tax are legislative in character
Statement 2 - The aspects of taxation are shared by the legislative and executive branches of the
government
a. True, true b. True, false c. False, true d. False, false

82. Which of the following statement is not correct?

a. Taxes are neither political nor penal in nature
b. Taxes should be prospective and should not be given retroactive effect because they are burdens
c. The power to collect taxes is not lost even if foreign invaders are in control of our contry
d. The application of a constitutional limitation may disregard an inherent limitation

83. Police power as distinguished from power of taxation

a. It exist independent of the constitution being an inherent power of the state
b. The compensation received in the protection given by the state
c. It involves the taking of property of individuals affected by the exercise of the power
d. The amount collected is limited to the cost of regulation

84. The following are the characteristics of special assessment, except

a. It is based on the government's need of money to support its legitimate objectives
b. It is levied only on land
c. It is based solely on the benefits derived by the owners of the land

PW-TAX-0-11 13
 d. Did not result to personal liability of the person assessed

85. As regards a revenue bill, which of the following is not correct?

a. The Senate may propose amendments if the bill originates from the House of Representatives
b. The House of Representatives may propose amendments if the bill originates from the Senate
c. The President may recommend a revenue bill to Congress
d. A House of Representatives version and a Senate version approved separately and then consolidated
with both houses approving the consolidated version

86. In 2004, X Corporation incurred the following expenses in connection with the conduct of its business
A) Plane tickets and hotel bills of its employees who were sent
to business seminars P 100,000
B) Transportation allowances of its officers from home to
officers from home to office and vice versa as part of their
employment contract net of P64,000 136,000
C) Transportation expenses of messengers from office to
several clients 80,000
The allowable expenses that could be claimed by X Corp. is
a. P180,000 b. P244,000 c. P316,000 d. P380,000

87. Mr. Araki, a non-resident alien stockholder, received a dividend income of P300,000 in 2010 from a foregin
corporation doing business in the Philippines. The gross income of the foreign corporation from within and
without the Philippines for three years preceding 2010 is as follows:
Source of income 2007 2008 2009
From within the Philippines P
P 12,000,000 P 20,000,000
20,000,000
From without the Philippines 18,000,000 14,000,000 16,000,000
How much of the dividend income received by Mr. Araki is considered income from sources within the
Philippines?
a. Zero b. P156,000 c. P144,000 d. P300,000

88. A, married to M had the following during the taxable year:

Gross Income
From the practice of profession P 700,000
Rental income of their conjugal property 300,000
Allowable deductions
For the practice of profession 520,000
For the property rented to tenants 140,000
The taxable income before exemptions of A is
a. P340,000 b. P180,000 c. P260,000 d. P170,000

89. K sold for P10M her Baguio rest house with a FMV of P12M to buy a new principal residence. If K utilized
P8M of the proceeds of the sale in acquring new principal residence, the capital gains tax payable is
a. P720,000 b. P600,000 c. P144,000 d. P120,000

90. On August 12, 2010 A sold the land held as capital assets for P2M with a FMV of P1.8M. A acquired the
land for P1M, and at the time of sale, the property was subject to a mortgage of P1.3M. Payments shall be;
P100,000 on the date of sale and the balance shall be paid in equal monthly installments beginning Jan 1,
2011. The capital gains tax for 2010 is
a. P120,000 b. P24,000 c. P36,000 d. P48,000

91. A took a life insurance policy for P5M where the annual premium is P20,000. The proceeds will be paid to
A after 25 years or to A's estated should A dies before completing 25 years of payment. If A outlived the
policy, which of the following is correct?
a. The proceeds will be part of A's taxable income
b. The proceeds will be part of A's gross estate
c. The proceeds will be partly taxable income and partly exempt

PW-TAX-0-11 14
 d. The proceeds will be partly taxable estate and partly exempt

92. Using the preceding number, but after paying the annual premiums for 10 years, A transferred the policy to
B for P250,000 and B paid the annual premiums as they mature. After 10 years, A died. Which of the
following is correct?
a. The amount received by A from B is part of A's taxable income
b. The proceeds received by B is part of his taxable income
c. The amount received by A from B is partly taxable income and partly exempt
d. The proceeds will be part of A's gross estate

93. The following forms of escape from taxation result to loss of revenue to the government, except
a. Exemption b. Shifting c. Avoidance d. Evasion

94. The following are the objects of taxation, except

a. Citizens b. Corporations c. Intangible property d. Municipal halls

95. A scope of the power of taxation which means that taxation covers many things
a. Plenary b. Comprehensive c. Supreme d. Unlimited

96. This is not a purpose of taxation

a. To expropriate property for the promotion of the general welfare
b. To reduce inequalities of wealth
c. As protective tariff on imported goods to protect local producers against foreign competition
d. To encourage the growth of home industries through the proper use of tax incentives

97. One of the characteristics of a tax is that it is

a. Superior to the non-impairment clause of the constitution
b. Generally unlimited in amount
c. Based on the taxpayers ability to pay
d. Legislative in implementation

98. Statement 1 - A tax is generally unlimited because it is based on the needs of the state
Statement 2 - One of the essential characteristics of tax is it is unlimited in amount
a. True, true b. True, false c. False, true d. False, false

99. In January 1970, A bought one hectare of agricultural land in Laguna for P100,000. This property has a
current fair market value of P10M in view of the construction of a concrete road traversing the property. A,
agreed to exchange his agricultural lot in Laguna for a 1/2 hectare residential property located in Batangas,
with a fair market value of P10M, owned by B, a domestic corporation engaged in the purchase and sale of
real property. B acquired the property in 2007 for P9M. Which of the following statements is correct?
a. Both real properties and ordinary assets
b. Both real properties and capital assets
c. The agricultural land is an ordinary asset
d. The residential land is an ordinary asset

100. In our jurisdiction, which of the following statements may be erroneous?

a. Taxes are pecuniary in nature.
b. Taxes are enforced charges and contributions.
c. Taxes are imposed on persons and property within the territorial jurisdiction of a State.
d. Taxes are levied by the executive branch of the government.

101. Incidence of taxation means

a. Shifting of tax b. Refunds of tax c. Payment of tax d. Imposition of tax

102. This rule is not applicable on the construction of tax laws

a. If the law is repealed, taxes assessed before repeal of the law may no longer be collected.

PW-TAX-0-11 15
 b. If the intent of the tax is not clear as to whether the taxpayers 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 he is exempt from the tax obligation, the tax
shall be construed against the taxpayer
d. Provisions intended for security of the taxpayer or to insure equality or uniformity of taxation are
mandatory.

103. Income derived by a depository bank under the expanded foreign currency deposit system from foreign
currency transaction with local commercial bank, including branches of foreign banks that maybe
authorized by the Bangko Sentral ng Pilipinas, shall be subject to a final tax on such income at
a. 7.5% b. 10% c. 15% d. 20%

104. A privilege granted a taxpayer to deduct or set-off against Phil. income tax, the income, war profits and
excess profits taxes that he has paid or has accrued to a foreign country
a. Tax exemption b. Tax deduction c. Tax consolidation d. Tax credit

105. Tariff may generally be defined as

a. Amounts which are levied on goods leaving the imposing country
b. Amounts imposed on goods entering the imposing country
c. Amounts, imposed on goods passing through the imposing country, but destined ultimately to
another country
d. List of commodities with corresponding duties collectible therefrom

106. Any amount subsequently received on account of a bad debt previously charged off and allowed as a
deduction from gross income for prior years must be included in gross income for the taxable year in
which received. This is
a. End-result doctrine c. Severance theory
b. Destination of income test d. Equitable doctrine of tax benefit

107. Taxation, just like other fields of human learning is dynamic, not static, keeps on changing; so we must
all study, otherwise we might be facing the battles of today with the antiquated weapons of yesterday.
Regardless of economic and business conditions, a sound tax system should provide for the collection of
sufficient revenue to run the government.
a. True, true b. True, false c. False, false d. False, true

108. A progressive system of taxation means a tax structure

a. Where the tax rate increases as the tax base increases
b. Where persons who desire to avail of government services or benefits are required to pay for their
cost in the form of taxes
c. Where persons who possess more in wealth or income are required to bear the cost of government
corresponding to such capacity
d. Where the tax rate increases as the tax base decrease

109. Will not raise money for the government

a. Power of b. License fee d. Eminent domain
taxation c. Police power

110. Similarities of police power, power of taxation and power of eminent domain, except
a. There is compensation c. There is taking of property
b. Sovereign powers of the government d. Superior to the non-impairment clause

111. Which of the following has no power to impose taxes?

a. Provinces b. Cities c. Barangays d. President

112. Which statement is wrong?

a. A tax is a demand of sovereignty c. A special assessment is a tax
b. A toll is a demand of ownership d. Customs duty is a tax

PW-TAX-0-11 16
113. Which of the following is not an element of double taxation?
a. Two taxes b. Same subject matter c. Same year d. Same amount

114. One of the following is the least principle of sound tax system.
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Economic consistency

115. Basis of Taxation

a. Lifeblood theory c. Benefit-protection theory
b. Necessity theory d. Reciprocal theory

116. Tax as distinguished from license fee

a. For regulation purpose c. For revenue purpose
b. Amount imposed is limited d. Exercise of police power

117. The following are examples of non-taxable compensation for injuries, except
a. Actual damages for injuries suffered. c. Compensatory damages for unrealized profits
b. Exemplary damages d. Moral damages for grief, anxiety and physical sufferings

118. How much is the allowable deduction from business income of a domestic corporation which granted
and paid P99,000 fringe benefits to its key officers in 1998?
a. P150,000 b. P100,000 c. P99,000 d. P65,000

119. What would be the allowable deduction for P8,000 contribution made by a resident citizen to a religious
organization from his P70,000 net income after contribution?
a. P8,000 b. P7,000 c. P7,800 d. P3,500

120. A bought a condominium unit under installation basis, to be used as his office in the practice of his
profession and paying P10,000 monthly. For income tax purposes, the P10,000 monthly payment shall
be
a. Treated as business rental, hence deductible
b. Treated as capital expenditure, hence not deductible
c. Treated as depreciation expense, hence deductible
d. Treated as ordinary business expense

121. The following are not taxable, except:

a. Refund of fringe benefits tax c. Refund of estate or donor’s tax
b. Refund of Philippine income tax d. Refund of special assessment

122. Which of the following does not represent compensation income?

a. Honorarium as a guest speaker c. Vacation and sick leave pay
b. Emergency leave pay d. Gratuitous condonation of obligation

123. One of the following is not subject to final tax

a. Interest on savings deposit c. Prizes amounting to more than P10,000
b. Royalties d. Professional fees paid to individuals

124. Gain on sale of domestic shares of stock in New York is

a. Income within Phils c. Income party within and without
b. Income without Phils d. Exempt from income tax

125. A was selected as the most outstanding teacher in her region. Her name was submitted by the school
principal without her knowledge. She received a trophy and a cash award of P15,000.
a. Taxable income c. Exempt from income tax
b. Subject to final tax d. Partly taxable, partly exempt

PW-TAX-0-11 17
126. This will not result to a taxable gain or loss
a. The sale by a corporation of its shares of stock from the unissued stock over its par or stated value.
b. The sale by a corporation of its treasury stock over its cost or other basis of acquisition
c. The purchase and retirement by a corporation of its bonds at a price less than the issue price or face
value.
d. The issuance by a corporation of its bonds at a premium.

127. For ordinary contributions, an individual may be allowed to claim as deductions an amount not to
exceed
a. 5% of the net income before contributions c. 5% of the net income after contributions
b. 10% of the net income before contributions d. 10% of the net income after contributions

128. One of the following is a taxable income

a. Compensation for injuries and sickness c. Proceeds of life insurance
b. Income derived from gifts, bequests and devices d. Amounts derived as returns of premium

129. A domestic corporation made a borrowing from ABC bank thereby incurring a business connected
interest expense of P60,000 for taxable year 1999. During the same year, the corporation earned an
interest income subject to final tax in the amount of P100,000. The deductible interest is
a. P19,000 b. P21,000 c. P60,000 d. P0

130. The share in the profits of a partner in a general professional partnership is regarded as received by him
and thus taxable although not yet distributed. The principle is known as
a. Actual receipt of income c. Accrual method of accounting
b. Advance reporting of income d. Constructive receipt of income

131. Which of the following statements on tax exemptions is not correct?

a. When an electric light and power franchise holder is exempt under its franchise from property tax on
its poles, wires and transformers, its exemption does not extend to the VAT of its importation of said
articles.
b. Where a taxpayer receives as payment for the land expropriated by the government tax exempt
bonds, such tax exempt bonds should be included in the total price to determine correct taxable
profit therefrom
c. The salaries of the CIR and the four deputy CIR are exempt from income tax
d. Exemption granted to cooperatives does not extend to be members thereof in the sale of their
products

132. A donated a parcel of land to B, his 15 year old son on account of B’s graduation. A did not pay the gift
tax on the property donated. Then, B took possession of the property and received the rental derived
from it. In 2007, an assessment on the income derived from the property was issued against B, which is
correct?
a. The assessment against B is correct
b. The income should be included in A’s income tax return
c. The assessment against B should be deferred
d. A validly effected a transfer of the property to B by virtue of delivery

133. A feature of ordinary gains as distinguished from the capital gains:

a. Gains from sale of assets not stock in trade c. Sources are capital assets
b. May or may not be taxable in full d. No holding period

134. On capital gains tax on real property, which of the following statements is not correct?
a. The tax should be paid, if in one lump sum, within 30 days from the date of the sale
b. The instalment payment of the tax should be made within 30 days from receipt of each installment
on the selling price
c. The tax maybe paid in installment if the initial payment does not exceed 25% of the contract price
d. The initial payment maybe more than down payment

PW-TAX-0-11 18
135. A operates a retail store and owns the following properties. Which of the following is capital assets in
the hand of A
a. Building which houses the retail store c. Inventory on hand at the end of the year
b. Fixtures used in the retail store d. Trade accounts receivable

136. Amount receivable by the estate of the deceased, his executor or administrator as an insurance under
policy taken by the decedent upon his own life is
a. Part of gross income whether the beneficiary is revocable or irrevocable
b. Part of gross income if the beneficiary is irrevocable
c. Part of gross income if the beneficiary is revocable
d. Excluded from gross income

137. In 2007, ABC Corp. paid total premiums of P1,000 for the life insurance policy of the vice president,
where the beneficiary is the corporation. At the end of the year, ABC received dividend of P100 because
of the policy. In 2007, the corporation should indicate a claim for a reduction for life insurance premium
of
a. P1,000 b. P900 c. P1,100 d. PZero

138. If a friend inquires whether or not the cost of educational assistance to the employee and/or his
dependents which are borne by the employer be taxable. What will your answer be?
First Answer – A scholarship grant to the employee by the employer shall not be treated as taxable
fringe benefit if the education or study involved is directly connected with the employer’s trade,
business or profession and there is a written contract between them that the employee is under obligation
to remain in the employ of the employer for a period of time that they have mutually agreed upon.
Second Answer – The cost of educational assistance extended by an employer to the dependents of an
employee shall be treated as taxable fringe benefits of the employee unless the assistance was provided
through a competitive scheme under the scholarship program of the company.
a. True, true b. True, false c. False, true d. False, false

139. All of the following taxpayers are not entitled to foreign tax credit, except
a. Resident citizen with income only from the Phils
b. Resident citizen with income only from abroad
c. Resident alien withincome from within and without the Phils
d. Non-resident citizen with income from within and without the Phils

140. 1st Statement – Monetized unused vacation leave credits not exceeding 10 days is an exempt de minimis
benefit.
2nd Statement – Daily meal allowance for overtime work not exceeding twenty five (25%) percent of
the basic minimum wage is exempt fringe benefit.
a. True, true b. False, true c. True, false d. False, false

141. 1st Statement – Laundry allowance not exceeding P300 per month is exempt de minimis benefit.
2nd Statement – Medical cash allowance to dependents of employees not exceeding P750 per employee
per semester, or one hundred twenty five (P125) per month is exempt de minimis benefit.
a. True, true b. False, true c. True, false d. False, false

142. 1st Statement – Flowers, fruits and books or other similar token items given to employees under certain
circumstances are exempt de minimis benefits.
2nd Statement – Gifts given during Christmas and major anniversary celebrations not exceeding P5,000
per employee per annum is an exempt de minimis benefit.
a. True, true b. False, true c. True, false d. False, false

143. 1st Statement – Rice subsidy of one thousand five hundred pesos or one sack of 50 kg. rice per month
amounting to not more than one thousand five hundred pesos is an exempt de minimis benefit.
2nd Statement – Employee achievement awards, e.g., for length of service, or safety achievement,
which must be in the form of a tangible personal property other than cash or gift certificate, with an

PW-TAX-0-11 19
 annual monetary value not exceeding ten thousand pesos received by an employees is an exempt de
minimis benefit.
a. True, true b. False, true c. True, false d. False, false

144. 1st Statement – Uniforms and clothing allowance not exceeding four thousand pesos per annum is an
exempt de minimis benefit.
2nd Statement – Actual medical benefits not exceeding P10,000 per annum is an exempt de minimis
benefit.
a. True, true b. False, true c. True, false d. False, false

145. Which of the following is included in gross income?

a. Amounts received by insured as return of c. Compensation for injuries and sickness
premium d. Share in the net income of a general
b. Life insurance proceeds professional partnership

146. One of the following does not form part of gross income?
a. Interest c. Annuities
b. Royalties d. Gifts, bequest and devices

147. In computing allowable deduction for purposes of income taxation:

1st Statement – Beginning the year 2005 interest expense in connection with taxpayer’s business shall
be reduced by an amount equal to forty two percent (42%) of interest income subjected to final tax.
2nd Statement – Interest incurred on money used to acquire property to be used in trade shall only be
allowed as a capital expenditure.
a. True, true b. False, true c. True, false d. False, false

148. Which of the following is not correct?

a. An individual citizen of the Phils. who is working and deriving income from abroad as an overseas
contract worker is taxable only on income from sources within the Phils.
b. A seaman who is a citizen of the Phils. and who receives compensation services for rendered abroad
as a member of the complement of a vessel engaged exclusively in international trade shall be
treated as an overseas contract worker.
c. An alien individual is taxable only on income derived from sources within the Phils.
d. A citizen of the Phils. is taxable on income derived from sources within and without the Phils.

149. A worked for a manufacturing firm but due to business reverses, the firm offered a voluntary
redundancy program in order to reduce overhead expenses. Under the program, an employee who
offered to resign would be given separation pay equivalent to his 3 months basic salary for every year of
service. A accepted the offer were paid, the firm found its overhead still excessive. Hence, it adopted
another program, where various unprofitable departments were closed. As a result, B have rendered at
least 10 years of service but A was 55 years old while B was only 45 years old. As a result,
a. Both amounts are exempt from income tax c. Only Mr. A is subject to income tax
b. Both amounts are subject to income tax d. Only Mr. B is subject to income tax

150. Which of the following expenses is deductible from gross income?

a. Contribution to a newspaper fund for needy families when such newspaper organizes a drive solely
for charitable purposes.
b. Premiums paid by the self-employed employer for the life insurance of his employees
c. Contributions to the construction of a chapel of a university that declares dividends to its
stockholders
d. Donation of prizes and awards to athletes in local and international competitions and sanctioned by
their respective sport associations.

151. Cash dividend received by a non-resident foreign corporation from a domestic corporation is
a. Exempt from income tax c. Part of taxable income
b. Subject to final tax d. Partly exempt, partly taxable

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152. Cash dividend received by a domestic corporation from a domestic corporation is
a. Exempt from income tax c. Part of taxable income
b. Subject to final tax d. Partly exempt, partly taxable

153. Which of the following statements is not correct?

a. When a compulsory heir is given by will less than his legitime, the provisions of the will should be
modified in such a way that he will receive his legitime
b. The CIR may examine the bank deposit of a decent for the purpose of determining his gross estate
even if the estate did not request for a compromise on the ground of financial incapacity
c. The P500,000 standard deduction for medical expenses for estate tax purposes is a legal mechanism
to further exempt the less privileged estate and heirs from tax burden
d. The sharing of heirs in testamentary succession must satisfy the rules on legitime

154. In a transfer in contemplation of death, receivable transfer and transfer under a general power of
appointment, there are rules to observe to determine what amount to include in the gross estate, which is
not a rule to observe?
a. If the transfer was in the nature of a bona fide sale for an adequate and full consideration in money
or money’s worth, no value shall be included in the gross estate
b. If there was no consideration on the transfer as in donation inter-vivos, the value to be included in
the gross estate shall be the fair market value of the property at the time of transfer
c. If the consideration received on the transfer was less than adequate and full, the value to include in
the gross estate shall be the excess of the fair market value of the property at the time of decedent’s
death over the consideration received
d. If there was no consideration received on the transfer as in donation mortis causa, the value to
include in the gross estate shall be the fair market value of the property at the time of the decedent’s
death

155. Which of the following is not directly reducing the inheritance?

a. Standard deduction c. Unpaid mortgage
b. Claims against the estate d. Funeral expense

156. Which of the following may reduce the taxable estate but not the inheritance?
a. Funeral expense c. Judicial expense
b. Losses d. Family home

157. Donor’s tax is a (an)

a. Progressive tax c. Property tax
b. Proportional tax d. Excise tax

158. Which of the following is a stranger to the donor? If the done is the
a. Grandfather of the donor’s great c. Grandson of the donor’s half-sister
grandfather d. Brother of the donor’s grandfather
b. Granddaughter of the sister of the donor’s
mother

159. J, a Filipino citizen, married to M, died in a vehicular accident in NLEX on April 10, 2012. The spouses
owned, among others a 100-hectare agricultural land in Sta. Rosa, Laguna with current fair market value
of P20M, which was the subject matter of a Joint Venture Agreement about to be implemented with Star
Land Corporation, a well known real estate development company. He bought the said real property for
P2M fifty years ago. On January 5, 2013, the administrator of the estate and SLC jointly announce their
big plans to start conversion and development of the agricultural lands in Sta. Rosa, Laguna, into first
class residential and commercial centers. As a result, the prices of real properties in the locality have
doubled. The administrator of the estate of J filed the estate tax return on January 9, 2013 by including
in the gross estate the real property at P2M. After 9 months, the BIR issued deficiency estate tax
assessment, by valuing the real property at P40M. as a result, the real property should be valued
a. P2M b. P10M c. P20M d. P40M

PW-TAX-0-11 21
160. While driving his car to Baguio, P, together with his wife, A, and only son J, met an accident that caused
the instantaneous death of J. The following day, A also died in the hospital. The spouses and their son
had the following assets and liabilities at the time of death:
A (Exclusive) Conjugal J(Exclusive)
Cash P10,000,000 P1,200,000
Cars P2,000,000 500,000
Land 5,000,000 2,000,000
Residential house 4,000,000
Mortgage payable 2,500,000
Funeral expenses 300,000
Which of the following is correct?
a. The estate of J will pay corresponding estate tax
b. The administrator of J’s estate will claim vanishing deduction
c. The administrator of both estate will file one consolidated estate tax return
d. A CPA certificate as regards the valuation of A’s estate is required.

161. Spouses J and C, both Filipino citizens are owners of a residential house and lot in Quezon City. After
the recent wedding of their son, M to N, the spouses donated the said real property to them. At the time
of donation, the real property has a fair market value of P2M. Which of the following statements is
correct?
a. M and N are subject to income tax for the value of the real property donated by them
b. M and N are both subject to donor’s tax
c. J’s taxable gift to M is P500,000
d. C’s taxable gift to N is P500,000

162. Which of the following statement is wrong? The deduction for donation on account of marriage is
allowed for a donation by:
a. A resident citizen to a resident donee
b. A resident alien to a non-resident donee
c. A non-resident resident citizen to a non-resident done
d. A non-resident alien to a resident done

163. A mode of acquisition by virtue of which, the property, rights and obligation, to the extent of the value
of the inheritance, of a person are transmitted through his death to another either by his will or by
operation of law.
a. Extinctive prescription c. Succession
b. Acquisititive prescription d. Donation mortis cause

164. Which of the following statements is not true?

a. Expenses of successful litigation between spouses are against community property
b. Support of an illegitimate child is against exclusive property
c. Gambling winnings during the marriage constitute community property
d. Gambling losses during the marriage are against community property

165. One of the following is not correct

a. The estate must be valued at the time of death of the decedent
b. Real estate situated in foreign countries will be included in the gross estate of a resident alien
decedent
c. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not
exceeding 6 months for filing the return
d. Vanishing deduction is subject to limitation

166. The location of property is important in determining whether the property shall be included or not in the
gross estate of a decedent who was a
a. Resident citizen c. Resident alien
b. Non-resident citizen d. Non-resident alien

PW-TAX-0-11 22
167. The gross estate includes properties located in USA of a non-resident citizen
The gross income includes income earned in USA of a Filipino citizen
a. True, true b. True, false c. False, true d. False, false

168. This maybe subject to donor’s tax. Donation to

a. The Ramon Magsaysay Award Foundation d. Social welfare, cultural and charitable
b. The Development Academy of the Phils institution
c. The International Rice Research Institute

169. For donor’s tax purposes, this is not a stranger

a. Daughter of godson c. Grandson of the sister of donor’s mother
b. Son-in-law d. Granddaughter of the donor’s sister

170. For donor’s tax purposes, this is a stranger

a. Daughter of a brother c. Grandson of son’s granddaughter
b. Son of an uncle d. Mother of a godson

171. One of the following is not correct as regards property subject to vanishing deduction. If the decedent
was
a. A resident of the Phils. the property should be located in the Phils.
b. Not a resident of the Phils. the property should be located in the Phils.
c. A resident alien, the property should be located in the Phils.
d. A resident citizen, the property maybe located anywhere.

172. Amount receivable by the beneficiary other than estate, executor or administrator as an insurance under
policy taken by the decedent upon his own life is
a. Part of gross estate whether the beneficiary is revocable or irrevocable
b. Part of gross estate if the beneficiary is irrevocable
c. Part of gross estate if the beneficiary is revocable
d. Excluded from gross estate

173. Estate tax is

a. An excise tax c. A percentage tax
b. An income tax d. Sales tax

174. A – Expenses on the death anniversary of the deceased are not deductible expenses from the gross
estate.
B – Attorney’s fees incurred by an heir from appearance at the trial to oppose of the will of the decedent
is deductible expense from the gross estate.
a. True, true b. True, false c. False, true d. False, false

175. One of the following is not correct

Deduction Maximum
a. Funeral expenses P 200,000
b. Family home 2,000,000
c. Medical expenses 500,000
d. Standard deduction 1,000,000

176. Proceeds of life insurance to the extent of the amount receivable by the estate of the deceased, his
executor or administrator under policies taken out by the decedent upon his own life shall be
I. Part of the gross estate irrespective of whether or not the insured retained the power of
revocation
II. Not part of the gross estate if the beneficiary is irrevocable
III. Part of the gross income if the designation of the beneficiary is revocable
IV. Not part of the gross income irrespective of whether or not the insured retained the power of
revocation
a. I and II b. I and III c. I and IV d. Only I

PW-TAX-0-11 23
177. Shares, obligations or bonds issued by a foreign corporation shall be considered as intangible personal
property situated in the Phils if, how many percent of its business is located in the Phils?
a. 33% b. 50% c. 75% d. 85%

178. 1st Statement – Any contribution in cash or in kind to any candidate, political party or coalition of
parties for campaign purposes shall be governed by the election code and not the tax code.
2nd Statement – When the done or beneficiary is a stranger, the tax payable by the donor shall be thirty
percent (30%) of the gross gifts.
a. True, false b. True, true c. False, true d. False, false

179. For purposes of filing estate tax return, the deadline for filing from the death of decedent is:
a. 30 days b. 60 days c. 1 month d. 6 months

180. One of the following is not an ordinary deduction for purpose of Net Taxable Estate.
a. Funeral expense c. Judicial expense
b. Medical expense d. Taxes

181. Deduction for funeral expenses shall be allowed, except:

a. Only if paid out of the estate
b. For a non-resident alien limited to amount that was actually incurred in the Philippines
c. Shall in no case exceed 5% of the gross estate
d. Shall in no case to exceed P200,000

182. A died leaving the property acquired by donation from B who died 3 ½ years ago. Property is now part
of A’s gross estate. The estate’s vanishing rate is
a. 60% b. 40% c. 20% d. 0

183. Which of the following is subject to VAT?

a. Importation of personal or household effects belonging to the residents of the Philippines returning
from abroad and non-resident citizen coming to resettle in the Philippines where such goods were
subjected to custom duties
b. Importation of passenger or cargo vessel and aircrafts, including engine, equipment and spare parts
thereof for domestic or international transport operation
c. Importations of fuel, goods and supplies by persons engaged in international shipping or air transport
operations
d. Sale of real property not primarily held for sale to customers or held for lease in the ordinary course
of business

184. Which of the following is exempt from VAT?

a. Sale of passenger or cargo vessels and aircrafts, including engine equipment and spare parts thereof
for domestic or international transport operations
b. Sale of professional instruments and implements wearing apparel, domestic animals and personal
household effect
c. Sale of fuel, goods and supplies by persons engaged in international shipping or air transport
operations
d. Importation by persons who are not vat registered

185. If the required documentary stamp is not affixed on a document, one of the following is correct. The
document
a. Will be notarized because the document is still valid
b. Will not be admitted as evidence in court because the document is void
c. Will not be registered in the proper registry even if the document is valid
d. Is still valid and if already notarized should be registered and admitted as evidence in court

186. The export sale of a vat registered enterprise is

a. Exempt from the vat b. Subject to the 0% vat

PW-TAX-0-11 24
 c. Subject to the 12% vat d. Subject to percentage tax

187. Which of the following statements is wrong on claim for input tax on depreciable capital goods?
a. Where the aggregate acquisition cost (exclusive of vat) of depreciable capital goods during any
calendar months does not exceed P1,000,000, the total input tax is creditable against output tax in
the month acquired
b. Where the aggregate acquisition (exclusive of vat) of depreciable capital goods during any calendar
month exceeds P1,000,000, the input tax shall be spread evenly over 60 months starting in the
calendar month acquired
c. If the depreciable capital goods is sold or transferred prior to the exhaustion of the amortizable input
tax thereon, the entire unamortized input tax on the capital good sold or transferred can be claimed
as input tax credit in the month when the sale or transfer was made
d. Where the aggregate acquisition cost (exclusive of vat) of depreciable capital goods during any
calendar month exceeds P1,000,000, the input tax shall be spread evenly over the actual number of
months of estimated useful life, starting in the calendar month acquired, if the estimated useful life
of the depreciable capital goods is less than 5 years

188. Effect of failure to affix a documentary stamp which is required by law, except
a. Shall not be recorded in the proper registry
b. Shall not admitted as evidence in any court
c. Shall not be valid
d. No notary public or other officer authorized to administer oaths shall add his jurat or
acknowledgement

189. Which of the following is not internal revenue tax?

a. Value Added Tax c. Excise tax
b. Real estate tax d. Documentary stamp tax

190. This is not example of excise tax

a. Transfer tax c. Income tax
b. Sales tax d. Real property tax

191. This shall be considered a livelihood activity only and shall not be considered doing business, if the
gross sales or receipts in one year does not exceed
a. P100,000 b. P550,000 c. P200,000 d. P60,000

192. Value Added Tax is imposed on sale of goods or services while Percentage tax is imposed on sale of
services only.
Donation mortis causa and inter-vivos are both acts liberality by the person disposing of gratuitously a
property or a right in favour of another who accepts it.
a. True, true b. True, false c. False, true d. False, false

193. The VAT on goods

a. Is a selling expense of the trader
b. Is not based on net sale
c. Is imposed on goods for domestic consumption
d. Maybe due even if there is no actual sale of the goods

194. Value added tax is an example of

a. Graduated tax c. Proportional tax
b. Progressive tax d. Regressive tax

195. The following taxes maybe deducted from gross income, except:
a. Business tax c. Documentary stamp tax
b. Excise tax d. Income tax

196. Which of the following statements is incorrect with regard to large taxpayers?

PW-TAX-0-11 25
 a. Business establishment with VAT paid or payable of at least one million (P1,000,000) for the
preceding taxable year
b. Business establishment with excise tax paid or payable of at least one million (P1,000,000) for the
preceding taxable year
c. Business with annual income tax paid or payable of at least one million (P1,000,000) for the
preceding taxable year
d. Business establishment with withholding tax payment of at least one million (P1,000,000) for the
preceding taxable year

197. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties,
render services, and any person who imports goods shall be subjected to:
a. Business tax c. Other percentage tax
b. VAT d. Excise tax

198. A merchant of stock or securities, whether an individual, partnership or corporation, with an established
place of business, regularly engaged in the purchase of securities and the resale thereof to customers;
and who, as a merchant, buys securities and resells them to customers with a view to the gains and
profits that may be derived there from.
a. Dealer in securities c. Underwriters
b. Stock brokers d. Stock merchants

199. During the month of May, XYZ Corporation had domestic sales amounting to P1,680,000 and export
sales amounting to P1,500,000. During the same month, XYZ’s total purchases directly attributable to
domestic sales amounted to P1,120,000 and total purchases directly attributable to export sales
P1,008,000. For the month of May, XYZ Corporation’s VAT payable:
a. (48,000) b. 54,000 c. 60,000 d. 62,000

200. Which of the following transactions is exempt from value-added-tax?

a. Medical services such as dental and veterinary services rendered by professionals
b. Legal services
c. Services arising from employee-employer relationship
d. Services rendered by domestic air transport companies

201. Which of the following transactions is exempt from value-added-tax?

a. Sale of non-food agricultural products in their original state
b. Sale of non-food marine and forest products in their original state
c. Sale of cotton and cotton seeds
d. Sale of agricultural food products in their original state

202. Which of the following transactions is exempt from value-added-tax?

a. Sale of books, newspaper and magazines c. Sale of literary works
b. Sale of work of art d. Sale of musical composition

203. Which of the following transactions is subject to value-added-tax?

a. Services subject to other percentage tax
b. Educational services duly approved by Department of Education, CHED and TESDA or those
operated by the Government
c. Sale of coal and natural gas
d. Lending activities by credit cooperatives

204. Which of the following transactions is subject to zero-rated value-added-tax?

a. Foreign currency denominated sales
b. Services rendered by banks, non-bank financial intermediaries
c. Generation, transmission and distribution of electricity
d. Services rendered by professionals such as CPAs, Physicians and Lawyers

PW-TAX-0-11 26
205. Sale of raw materials or packing materials to export-oriented enterprise is considered export sales when
export sales of such enterprise
a. Exceed 50% of total annual production c. Exceed 66 2/3% of total annual production
b. Exceed 33 1/3% of total annual production d. Exceed 70% of total annual production

206. Which of the following transactions is subject to zero-rated value-added-tax?

a. Services by regional or area headquarters of multi-national corporations
b. Sale to Philippines Economic Zone Authority
c. Sales by non-agricultural, non-electric non-credit cooperatives
d. Importation of professional instruments and implements by settlers in the Philippines

207. Which of the following business is allowed a presumptive input value-added-tax?

a. Manufacturer of canned goods c. Manufacturer of packed noodles
b. Manufacturer of packed juices d. Manufacturer of dried fish

208. 1st Statement – The input value-added-tax on purchase of capital goods valued at P1,000,000 shall be
spread over 60 months if the life of property is equivalent to 5 years or more.
2nd Statement – The input value-added-tax on purchase of capital goods valued at P1,000,000 shall be
spread over the life of property if the life of property is less than 5 years.
a. True, true b. False, true c. True, false d. False, false

209. A VAT-registered person whose total sales for the year did not exceed P1,500,000 (now 1,919,500) is
a. Exempt from VAT c. Subject to 0% VAT
b. Subject to percentage tax d. Subject to 12% VAT

210. A non-VAT registered whose total sales for the year exceeded P1,500,000 (now 1,919,500) is
a. Exempt from VAT c. Subject to 0% VAT
b. Subject to percentage tax d. Subject to 12%$ VAT

211. Export sales of non-VAT registered person is

a. Exempt from VAT c. Subject to 0% VAT
b. Subject to percentage tax d. Subject to 12% VAT

212. The ITR of the individual taxpayer for the calendar year 2008 was filed on April 1, 2009, the last day for
the BIR to asses is
a. April 1, 2012 b. April 15, 2012 c. April 1, 2014 d. April 15, 2014

213. Assume that it was filed on April 1, 2009, the last day for the BIR to collect without prior assessment is
a. April 1, 2012 b. April 15, 2012 c. April 1, 2014 d. April 15, 2014

214. Assume that it was file on April 30, 2009, the last day for the BIR to assess is
a. April 15, 2012 b. April 15, 2014 c. April 30, 2012 d. April 30, 2014

215. Assume that it was filed on April 30, 2009, the last day for the BIR to collect without prior assessment is
a. April 15, 2012 b. April 15, 2014 c. April 30, 2012 d. April 30, 2014

216. Assume that it was filed on July 15, 2009. Assessment was made by the BIR on June 15, 2012. The last
of for the BIR to collect by judicial or summary proceedings is
a. June 15, 2015
b. June 15, 2017
c. July 15, 2014
d. No more because there is prescription on the part of the BIR to make the assessment

217. Assume that it was filed on April 15, 2009, the BIR discovered that fraud was committed by the
taxpayer, so an assessment for deficiency tax was issued on July 15, 2016. The last day for the BIR to
collect by judicial or summary proceedings is
a. July 15, 2019

PW-TAX-0-11 27
 b. July 15, 2021
c. July 15, 2026
d. No more because there is prescription on the right of the BIR to make the assessment

218. The date the notice of informal conference was received by the taxpayer was September 4, 2011. The
last day for the taxpayer to respond is
a. September 19, 2011 c. October 4, 2011
b. September 4, 2012 d. October 19, 2011

219. The last day for the taxpayer to respond if the date of pre-assessment notice was received on June 14,
2011 is
a. July 14, 2011 b. June 29, 2011 c. July 29, 2011 d. June 14, 2019

220. The last day of the taxpayer to file a protest with the CIR, if the formal letter of demand and assessment
was received by the taxpayer on November 10, 2011 is
a. December 5, 2011 c. January 10, 2012
b. December 10, 2011 d. December 25, 2011

221. A filed his income tax return for 2009 on April 15, 2010 and paid the tax of P20, 000. Upon audit by the
BIR an assessment notice was issued on May 15, 2012 requiring him to pay a deficiency tax of P40, 000
not later than July 15, 2012. A may
a. Go to the CTA to appeal the assessment made by the BIR
b. Go to the Supreme Court if the issues involved are pure questions of law
c. Ignore the assessment as the date of collection is beyond 3 years as the taxable year covers 2009.
d. Request for an extension of time to pay the deficiency income tax

222. Date the national internal revenue tax was paid – April 10, 2010. Claim for refund was filed with the
Bureau of Internal Revenue – March 10, 2011. Date decision of denial of refund was received – March
21, 2012. Last day to appeal to the Court of Tax Appeals.
a. April 20, 2012 b. April 10, 2012 c. April 21, 2012 d. April 15, 2012

223. The powers and duties of the BIR include the following, except
a. To effect and administer the police and supervisory powers conferred by the Tax Code and other
related laws
b. The execution of judgement in all cases decided in its favour by the Court of Appeals and ordinary
courts
c. To enforce all forfeitures, penalties and fines in connection with the collection of national internal
revenue taxes
d. The assessment and collection of all national and local revenue taxes

224. Which of the following statements is not correct?

a. If with prior assessment, collection of the tax can be by summary proceedings
b. If with prior assessment, collection of the tax can be by judicial proceedings
c. If without prior assessment, collection of the tax can be by judicial proceedings
d. If without prior assessment, collection of the tax can be by summary proceedings

225. The following are the requisites for the exercise of the remedy of distraint and levy, except
a. The taxpayer must be delinquent in the payment of tax
b. The tax due should be at least P1,000
c. The taxpayer failed to pay the tax at the time required
d. The period to collect the tax has not yet prescribed

226. The revenue district office can carry out proceedings of a distraint of personal property when the tax
liability is not more than
a. P100 b. P1,000 c. P100,000 d. P1,000,000

227. Which of the following statements is not correct?

PW-TAX-0-11 28
 a. The CTA, in the interest of the government and/or the taxpayer may suspend the collection of a tax
and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more
than the amount due with the court
b. As a rule, no court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the NIRC
c. The prescription if a refund check or warrant shall be within 5 years from the date the said warrant
of check was mailed or delivered
d. The prescription of a tax credit certificate shall be within 5 years from the date of issue, unless
revalidated

228. P, a Filipino citizen residing in Makati City, owns a vacation house and mot in San Francisco,
California, USA, which he acquired in 2000 for P15M. On January 10, 2012, he sold his real property to
J, another Filipino citizen residing in Quezon City for P20M. On February 9, 2012, P filed the capital
gains tax return and paid P1.2M representing 6% capital gains tax. Since P did not derive any ordinary
income, no income tax return was filed by him in 2012. After the tax audit conducted in 2013, the BIR
officer assessed P for deficiency income tax as follows: P5M (P20M less P15M) x 30% = P1.5M,
without the capital gains tax paid being allowed as tax credit. P consulted a real estate broker who said
without that the P1.2M capital gains tax should be credited from P1.5M deficiency income tax. Is the
BIR officer’s tax assessment correct?
a. Yes, assessment issued by the BIR is presumed correct
b. Yes, because the vacation house is located in USA
c. No, the capital gains tax paid should have been deducted from the P1.5M deficiency income tax
d. No, because the 30% tax rate applies to corporation

229. Which of the following propositions may now be untenable?

a. The court should construe a law granting tax exemption strictly against the taxpayer.
b. The Court of Tax Appeals has jurisdiction over decisions of the BIR Commissioner in cases
involving national internal revenue taxes.
c. The Supreme Court has jurisdiction to review decisions of the Court of Tax Appeals.
d. The court should construe a law granting a municipal corporation the power to tax most strictly.

230. Due to an uncertainty whether or not a new tax law is applicable to printing companies, ABC Printers
submitted a legal query to the BIR on that issue. The BIR issued a ruling that printing companies are not
covered by the new law. Relying on this ruling, ABC Printers did not pay the said tax. Subsequently
however, the BIR reversed the ruling and issued a new one stating that the tax covers printing
companies. Could the BIR assess ABC Printers for back taxes corresponding to the years before the new
ruling?
a. Yes, because taxation is the rule and exemption is the exception
b. Yes, because taxes are the lifeblood of the government
c. No, the BIR is not allowed to reverse its ruling
d. No, reversal of a ruling shall not be given a retroactive application if it will be prejudicial to the
taxpayer

231. From the date of the last entry in each book, book of accounts and other accounting records should be
preserved by the taxpayer for a period of at least
a. 2 years b. 3 years c. 4 years d. 5 years

232. The official action of an officer authorized by law in ascertaining the amount of tax due under the law
from a taxpayer is
a. Assessment b. Delinquency c. Deficiency d. Distraint

233. The failure of the taxpayer to pay tax due on the date fixed by law or indicated in the assessment notice
or letter of demand
a. Assessment b. Deficiency c. Delinquency d. Distraint

234. The amount still due and collectible from a taxpayer upon audit or investigation
a. Assessment b. Delinquency c. Deficiency d. Distraint

PW-TAX-0-11 29
235. The seizure by the government of personal property to enforce the payment of taxes to be followed by
its public sale if the taxes are not voluntarily paid
a. Assessment b. Delinquency c. Levy d. Distraint

236. The seizure by the government of real property to enforce the payment of taxes to be followed by its
public sale if the taxes are not voluntarily paid
a. Assessment b. Delinquency c. Levy d. Distraint

237. As regards taxable year, one of the following statements is not correct
a. The taxable year is the accounting period
b. The taxable year maybe less than 12 months
c. The taxable year of a sole proprietor business maybe fiscal or calendar
d. The taxable year of a domestic corporation maybe fiscal or calendar

238. The power to interpret the provisions of the Tax Code and other tax laws shall be under the exclusive
and original jurisdiction of the
a. Regional Trial Court c. Court of Tax Appeals
b. Secretary of Finance d. Commissioner of Internal Revenue

239. Using No. 238, the power referred to above is subject to review by
a. Court of Tax Appeals c. Regional Trial Court
b. Commissioner of Internal Revenue d. Secretary of Finance

240. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under the Tax Code or other laws or
provisions thereof administered by the BIR is vested in the
a. Secretary of Finance c. Court of Tax Appeals
b. Regional Trial Court d. Commissioner of Internal Revenue

241. The power referred to above is subject to the exclusive appellate jurisdiction of the
a. Commissioner of Internal Revenue c. Secretary of Finance
b. Regional Trial Court d. Court of Tax Appeals

242. The Commissioner of Internal Revenue may compromise the payment of any internal revenue tax when
I. A reasonable doubt as to the validity of the claim against the taxpayer exists
II. The tax or any portion thereof appears to be unjustly or excessively assessed.
III. The financial positions of the taxpayer demonstrate a clear inability.
a. I and II b. I and III c. II and III d. I, II and III

243. The Commissioner of Internal Revenue may abate or cancel the tax liability when
I. The administration and collection costs involved do not justify the collection of the amount due
II. A reasonable doubt as to the validity of the claim against the taxpayer exists
III. The tax or any proportions thereof appears to be unjustly or excessively assessed.
IV. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
a. Only I b. I and II c. I and III d. I and IV

244. The following reasons maybe given by a taxpayer in refusing to pay his tax liability. Which 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 no territorial jurisdiction
c. That the prescript on period for the collection of tax has lapsed
d. That he will derive no benefit from the tax

245. 1st Statement – The CTA is now considered as having the same level as the CA, and shall be composed
of 1 presiding justice and 8 associate justices.

PW-TAX-0-11 30
 2nd Statement – The CTA may sit in en banc or in 3 divisions composed of three justices for each
division.
a. True, true b. True, false c. False, true d. False, false

246. One of the following is required to issue receipts or sales invoice

a. Seller of merchandise whose sales amounted to P25 or more
b. Market vendors exclusively selling domestic meat, vegetables, fruits, poultry, fish and other food
products
c. Seller who is exempted by the commission of Internal Revenue in meritorious cases
d. Seller of merchandise whose sales amounted to less than P25

247. An individual taxpayer, other than a corporation may elect to pay the income tax due in two equal
installments if the tax due is
a. More than P100 c. More than P2,000
b. More than P1,000 d. More than P5,000

248. One of the following is required to issue receipts or sales invoice

a. Seller of merchandise whose sales amounted to P25 or more
b. Market vendors exclusively selling domestic meat, vegetables, fruits, poultry, fish and other food
products
c. Seller who is exempted by the commission of Internal Revenue in meritorious cases
d. Seller of merchandise whose sales amounted to less than P25

249. An individual taxpayer, other than a corporation may elect to pay the income tax due in two equal
installments if the tax due is
a. More than P100 c. More than P2,000
b. More than P1,000 d. More than P5,000

250. The period of limitation for assessment of taxes is not suspended

a. The return filed contained inaccuracies due to omissions and mistakes
b. There is failure to file the required return
c. The taxpayer and the CIR agreed on the extension of the period
d. The return filed is fraudulent and made with the intent to avoid the tax.

251. The Tax Reform Act of 1997 is

a. RA 9337 b. RA 8424 c. RA 9504 d. CA 466

252. Using the preceding number, it took effect on

a. January 1, 1997 c. January 1, 1998
b. December 11, 1997 d. July 6, 2008

253. The Tax Reform Act of 1997 was partly amended by (latest)
a. RA 9337 b. RA 8424 c. RA 9504 d. RA 7506

254. Using the preceding number, it took effect on

a. January 1, 2008 c. July 1, 2008
b. July 6, 2008 d. January 1, 2009

255. Using the preceding number, but the optional Standard deduction took effect
a. January 1, 2008 c. July 1, 2008
b. July 6, 2008 d. January 1, 2009

The End!
Good Luck!

PW-TAX-0-11 31