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Taxation Law MCQs

on April 14, 2012

This is Set A of the 2011 Bar Examinations on Taxation Law. There are 75 questions in all. The answers are bolded.

1. A munii!alit" ma" le#" an annual ad #alorem tax on real !ro!ert" suh as land$ buildin%$ mahiner"$ and other im!ro#ement
onl" if
A. the real property is within the Metropolitan Manila Area.
B. the real !ro!ert" is loated in the munii!alit".
&. the '(L) authori*es it to do so.
'. the !ower is dele%ated to it b" the !ro#ine.

2. Anne La!ada$ a student ati#ist$ wants to im!u%n the #alidit" of a tax on text messa%es. Aside from laimin% that the law
ad#ersel" affets her sine she sends messa%es b" text$ what ma" she alle%e that would stren%then her laim to the ri%ht to file a
tax!a"er+s suit,
A. That she is entitled to the return of the taxes olleted from her in ase the ourt nullifies the tax measure.
B. That tax money is being extracted and spent in violation of the constitutionally guaranteed right to freedom of
&. That she is filin% the ase in behalf of a substantial number of tax!a"ers.
'. That text messa%es are an im!ortant !art of the li#es of the !eo!le she re!resents.

-. There is no taxable inome until suh inome is reo%ni*ed. Taxable inome is reo%ni*ed when the
A. tax!a"er fails to inlude the inome in his inome tax return.
B. inome has been atuall" reei#ed in mone" or its equi#alent.
C. income has been received, either actually or constructively.
'. transation that is the soure of the inome is onsummated.

.. /e"rand$ (n.$ a 0hili!!ine or!oration$ sold throu%h the loal sto1 exhan%e 10$000 0L'T shares that it bou%ht 2 "ears a%o.
/e"rand sold the shares for 02 million and reali*ed a net %ain of 0200$000.00. 2ow shall it !a" tax on the transation,
A. (t shall delare a 02 million %ross inome in its inome tax return$ dedutin% its ost of aquisition as an ex!ense.
B. (t shall re!ort the 0200$000.00 in its or!orate inome tax return ad3usted b" the holdin% !eriod.
&. (t shall !a" 54 tax on the first 0100$000.00 of the 0200$000.00 and 104 tax on the remainin% 0100$000.00.
D. t shall pay a tax of one!half of "# of the $% million gross sales.

5. Amaretto$ (n.$ im!orted 100 ases of 5arula wine from South Afria. The shi!ment was assessed duties and #alue6added
taxes of 0-00$000 whih Amaretto$ (n. immediatel" !aid. The Bureau of &ustoms did not$ howe#er$ issue the release !a!ers of
the shi!ment "et sine the 7ood and 'ru% Administration 87'A9 needed to test the suitabilit" of the wine for human
onsum!tion. (s the Bureau of &ustoms at fault for refusin% to release the shi!ment 3ust as "et,
A. :es$ beause the im!ortation was alread" terminated as a result of the !a"ment of the taxes due.
B. :es$ the Bureau of &ustoms is esto!!ed from holdin% the release of the shi!ment after reei#in% the !a"ment.
&. ;o$ if the amount !aid as duties and #alue6added taxes due on the im!ortation was insuffiient.
D. &o, because the Bureau of Customs has not yer issued the legal permit for withdrawal pending the 'DA(s findings.

<. =hih theor" in taxation states that without taxes$ a %o#ernment would be !aral"*ed for la1 of !ower to ati#ate and o!erate
it$ resultin% in its destrution,
A. 0ower to destro" theor"
B. )ifeblood theory
&. Sum!tuar" theor"
'. S"mbioti dotrine

7. The s!ouses 2elena and 7ederio wanted to donate a !arel of land to their son 'ondon who is %ettin% married in 'eember$
2011. The !arel of land has a *onal #aluation of 0.20$000.00. =hat is the most effiient mode of donatin% the !ro!ert",
A. The s!ouses should first donate in 2011 a !ortion of the !ro!ert" #alued at 020$000.00 then s!read the 0.00$000.00 equall" for
2012$ 201-$ 201. and 2015.
B. S!read the donation o#er a !eriod of 5 "ears b" the s!ouses donatin% 0100$000.00 eah "ear from 2011 to 2015.
C. The spouses should each donate a $""*,***.** portion of the value of the property in %*"" then each should donate
$"**,***.** in %*"%.
'. The s!ouses should eah donate a 0100$000.00 !ortion of the #alue of the !ro!ert" in 2011$ and another 0100$000.00 eah in
2012. Then$ in 201-$ 2elena should donate the remainin% 020$000.00.

>. 5ia$ a om!ensation inome earner$ filed her inome tax return for the taxable "ear 2007 on 5arh -0$ 200>. ?n 5a" 20$
2011$ 5ia reei#ed an assessment notie and letter of demand o#erin% the taxable "ear 2007 but the !ostmar1 on the en#elo!e
shows A!ril 10$ 2011. 2er return is not a false and fraudulent return. &an 5ia raise the defense of !resri!tion,
A. &o. The + year prescriptive period started to run on April ",, %**-, hence, it has not yet expired on April "*, %*"".
B. :es. The - "ear !resri!ti#e !eriod started to run on A!ril 15$ 200>$ hene$ it had alread" ex!ired b" 5a" 20$ 2011.
&. ;o. The !resri!ti#e !eriod started to run on 5arh -0$ 200>$ hene$ the - "ear !eriod ex!ired on A!ril 10$ 2011.
'. :es. Sine the -6"ear !resri!ti#e !eriod started to run on 5arh -0$ 200>$ it alread" ex!ired b" 5a" 20$ 2011.

@. 'ouble taxation in its %eneral sense means taxin% the same sub3et twie durin% the same taxin% !eriod. (n this sense$ double
A. #iolates substanti#e due !roess.
B. does not #iolate substanti#e due !roess.
C. violates the right to e.ual protection.
'. does not #iolate the ri%ht to equal !rotetion.

10. The !a"or of !assi#e inome sub3et to final tax is required to withhold the tax from the !a"ment due the rei!ient. The
withholdin% of the tax has the effet of
A. a final settlement of the tax liability on the income.
B. a redit from the rei!ient+s inome tax liabilit".
&. onsummatin% the transation resultin% in an inome.
'. a dedution in the rei!ient+s inome tax return.

11. )uidant Aesoures &or!oration$ a or!oration re%istered in ;orwa"$ has a 50 5= eletri !ower !lant in San Bose$ Batan%as.
Aside from )uidant+s inome from its !ower !lant$ whih amon% the followin% is onsidered as !art of its inome from soures
within the 0hili!!ines,
A. /ains from the sale to an locos &orte power plant of generators bought from the 0nited 1tates.
B. (nterests earned on its dollar de!osits in a 0hili!!ine ban1 under the
Ex!anded 7orei%n &urren" 'e!osit S"stem.
&. 'i#idends from a two6"ear old ;orwe%ian subsidiar" with o!erations in Cambia but deri#es <04 of its %ross inome from the
'. Ao"alties from the use in Bra*il of %enerator sets desi%ned in the 0hili!!ines b" its en%ineers.

12. Ton% Sio1$ a &hinese billionaire and a &anadian resident$ died and left assets in &hina #alued at 0>0 billion and in the
0hili!!ines assets #alued at 020 billion. 7or 0hili!!ine estate tax !ur!oses the allowable dedutions for ex!enses$ losses$
indebtedness$ and taxes$ !ro!ert" !re#iousl" taxed$ transfers for !ubli use$ and the share of his sur#i#in% s!ouse in their on3u%al
!artnershi! amounted to 015 billion. Ton%+s %ross estate for 0hili!!ine estate tax !ur!oses is
A. $%* billion.
B. 05 billion.
&. 0100 billion.
'. 0>5 billion.

1-. An1tr"d$ (n.$ bou%ht a !arel of land in 200@ for 07 million as !art of its in#entor" of real !ro!erties. (n 2010$ it sold the
land for 012 million whih was its *onal #aluation. (n the same "ear$ it inurred a loss of 0< million for sellin% another !arel of
land in its in#entor". These were the onl" transations it had in its real estate business. =hih of the followin% is the a!!liable
tax treatment,
A. An1tr"d shall be sub3et to a tax of <4 of 012 million.
B. An2tryd could deduct its $3 million loss from its $, million gain.
&. An1tr"d+s %ain of 05 million shall be sub3et to the holdin% !eriod.
'. An1tr"d+s 0< million loss ould not be deduted from its 05 million %ain.

1.. A!lets &or!oration is re%istered under the laws of the Dir%in (slands. (t has extensi#e o!erations in Southeast Asia. (n the
0hili!!ines$ (ts !roduts are im!orted and sold at a mar16u! b" its exlusi#e distributor$ /im+s Tradin%$ (n. The B(A om!iled a
reord of all the im!orts of /im from A!lets and im!osed a tax on A!lets net inome deri#ed from its ex!orts to /im. (s the B(A
A. :es. A!lets is a non6resident forei%n or!oration en%a%ed in trade or business in the 0hili!!ines.
B. ;o. The tax should ha#e been om!uted on the basis of %ross re#enues and not net inome.
C. &o. Aplets is a non!resident foreign corporation not engaged in trade or business in the $hilippines.
'. :es. A!lets is doin% business in the 0hili!!ines throu%h its exlusi#e distributor /im+s Tradin%. (n.

15. (n 200@$ S!rat*$ (n.+s net !rofit before tax was 0-5 million while its o!eratin% ex!enses was 0-1 million. (n 2010$ its net
!rofit before tax was 0.0 million and its o!eratin% ex!enses was 0-> million. (t did not delare di#idends for 200@ and 2010.
And it has no !ro!osed a!ital ex!enditures for 2011 and the immediate future. 5a" S!rat* be sub3et to the im!ro!erl"
aumulated tax on its retained !rofits for 200@ and 2010,
A. :es$ sine the aumulated amounts are reasonable for o!erations in relation to what it usuall" needed annuall".
B. 4es, since the accumulation is not reasonably necessary for the immediate needs of the business.
&. ;o$ beause there is no showin% that the tax!a"er+s 200@ and 2010 net !rofit before tax exeeded its !aid6u! a!ital.
'. ;o$ beause the tax!a"er is not shown to be a !ublil"6listed or!oration$ a ban1$ or an insurane om!an".

1<. The atual effort exerted b" the %o#ernment to effet the exation of what is due from the tax!a"er is 1nown as
A. assessment.
B. le#".
&. !a"ment.
D. collection.

17. Althou%h the !ower of taxation is basiall" le%islati#e in harater$ it is ;?T the funtion of &on%ress to
A. fix with ertaint" the amount of taxes.
B. collect the tax levied under the law.
&. identif" who should ollet the tax.
'. determine who should be sub3et to the tax.

1>. 0assi#e inome inludes inome deri#ed from an ati#it" in whih the earner does not ha#e an" substantial !artii!ation. This
t"!e of inome is
A. usually sub5ect to a final tax.
B. exem!t from inome taxation.
&. taxable onl" if earned b" a iti*en.
'. inluded in the inome tax return.

1@. (n 2010$ Buliet Elbod earned 0500$000.00 as inome from her beaut" !arlor and reei#ed 0250$000.00 as &hristmas %ift from
her s!inster aunt. She had no other reei!ts for the "ear. She s!ent 0150$000.00 for the o!eration of her beaut" !arlor. 7or tax
!ur!oses$ her %ross inome for 2010 is
A. 0750$000.00.
B. $,**,***.**.
&. 0-50$000.00.
'. 0<00$000.00.

20. Exem!ted from donor+s taxation are %ifts made
A. for the use of the barangay.
B. in onsideration of marria%e.
&. to a shool whih is a sto1 or!oration.
'. to a for6!rofit %o#ernment or!oration.

21. 7ederio$ a 7ili!ino iti*en$ mi%rated to the Enited States some six "ears a%o and %ot a !ermanent resident status or %reen
ard. 2e should !a" his 0hili!!ine inome taxes on
A. the %ains deri#ed from the sale in &alifornia$ E.S.A. of 3ewelr" he !urhased in the 0hili!!ines.
B. the !roeeds he reei#ed from a 0hili!!ine insurane om!an" as the sole benefiiar" of life insurane ta1en b" his father who
died reentl".
C. the gains derived from the sale in the &ew 4or2 1toc2 6xchange of shares of stoc2 in $)DT, a $hilippine corporation.
'. di#idends reei#ed from a two "ear old forei%n or!oration whose %ross inome was deri#ed solel" from 0hili!!ine soures.

22. An exam!le of a tax where the one!t of !ro%ressi#it" finds a!!liation is the
A. income tax on individuals.
B. exise tax on !etroleum !roduts.
&. #alue6added tax on ertain artiles.
'. amusement tax on boxin% exhibitions.

2-. A or!oration ma" han%e its taxable "ear to alendar or fisal "ear in filin% its annual inome tax return$ !ro#ided
A. it see2s prior B7 approval of its proposed change in accounting period.
B. it simultaneousl" see1s B(A a!!ro#al of its new aountin% !eriod.
&. it should han%e its aountin% !eriod two "ears !rior to han%in% its taxable "ear.
'. its onstitution and b"6laws authori*es the han%e.

2.. =hat is the rule on the taxabilit" of inome that a %o#ernment eduational institution deri#es from its shool o!erations,
Suh inome is
A. sub3et to 104 tax on its net taxable inome as if it is a !ro!rietar" eduational institution.
B. 6xempt from income taxation if it is actually, directly, and exclusively used for educational purposes.
&. sub3et to the ordinar" inome tax rates with res!et to inomes deri#ed from eduational ati#ities.
'. Exem!t from inome taxation in the same manner as %o#ernment6owned and ontrolled or!orations.

25. =hih amon% the followin% redues the %ross estate 8not the net estate9 of a iti*en of the 0hili!!ines for !ur!oses of estate
A. Transfers for !ubli use
B. 0ro!ert" !re#iousl" taxed
&. Standard dedution of 01 million
D. Capital of the surviving spouse

2<. /a 0edrin% 5atiba%$ a sole !ro!rietor$ bu"s and sells F1umot at 1ulamboG both of whih are sub3et to #alue6added tax.
Sine he is usin% the alendar "ear as his taxable "ear$ his taxable quarters end on the last da" of 5arh$ Bune$ Se!tember$ and
'eember. =hen should /a 0edrin% file the DAT quarterl" return for his %ross sales or reei!ts for the !eriod of Bune 1 to
Se!tember -0,
A. 8ithin %, days from 1eptember +*
B. =ithin .5 da"s from Se!tember -0
&. =ithin 15 da"s from Se!tember -0
'. =ithin -0 da"s from Se!tember -0

27. (n Banuar" 2011$ the B(A issued a rulin% that &lemen+s #od1a im!orts were not sub3et to inreased exise tax based on his
laim that his net retail !rie was onl" 0200 !er 750 milliliter bottle. This rulin% was a!!lied to his im!orts for 5a"$ Bune$ and
Bul" 2011. (n Se!tember 2011$ the B(A re#o1ed its rulin% and assessed him for defiien" taxes res!etin% his 5a"$ Bune and
Bul" 2011 #od1a im!orts beause it diso#ered that his net retail !rie for the #od1a was 0250 !er bottle from Banuar" to
Se!tember 2011. 'oes the retroati#e a!!liation of the re#oation #iolate &lemen+s ri%ht to due !roess as a tax!a"er,
A. :es$ sine the !resum!tion is that the B(A asertained the fats before it made its rulin%.
B. &o, because he acted in bad faith when he claimed a lower net retail price than what he actually used.
&. ;o$ sine he ould a#ail of remedies a#ailable for dis!utin% the assessment.
'. :es$ sine he had alread" aquired a #ested ri%ht in the fa#orable B(A rulin%.

2>. 'on 7ortunato$ a widower$ died in 5a"$ 2011. (n his will$ he left his estate of 0100 million to his four hildren. 2e named
his om!adre$ 'on E!itaio$ to be the administrator of the estate. =hen the B(A sent a demand letter to 'on E!itaio for the
!a"ment of the estate tax$ he refused to !a" laimin% that he did not benefit from the estate$ he not bein% an heir. 7orthwith$ he
resi%ned as administrator. As a result of the resi%nation$ who ma" be held liable for the !a"ment of the estate tax,
A. 'on E!itaio sine the tax beame due !rior to his resi%nation.
B. The eldest hild who would be reimbursed b" the others.
C. All the four children, the tax to be divided e.ually among them.
'. The !erson desi%nated b" the will as the one liable.

2@. ?n Bul" -1$ 2011$ Es!eran*a reei#ed a !reliminar" assessment notie from the B(A demandin% that she !a"s 01>0$000.00
defiien" inome taxes on her 200@ inome. 2ow man" da"s from Bul" -1$ 2011 should Es!eran*a res!ond to the notie,
A. 1>0 da"s.
B. -0 da"s.
&. <0 da"s.
D. ", days.

-0. The B(A ould not a#ail itself of the remed" of le#" and distraint to im!lement$ throu%h olletion$ an assessment that has
beome final$ exeutor"$ and demandable where
A. the sub3et of the assessment is an inome tax.
B. the amount of the tax involved does not exceed $"**.**.
&. the or!orate tax!a"er has no other unolleted tax liabilit".
'. the tax!a"er is an indi#idual om!ensation inome earner.

-1. Alain 'esartes$ a 7renh iti*en !ermanentl" residin% in the 0hili!!ines$ reei#ed se#eral items durin% the taxable "ear.
=hih amon% the followin% is ;?T sub3et to 0hili!!ine inome taxation,
A. Consultancy fees received for designing a computer program and installing the same in the 1hanghai facility of a
Chinese firm.
B. (nterests from his de!osits in a loal ban1 of forei%n urren" earned abroad on#erted to 0hili!!ine !esos.
&. 'i#idends reei#ed from an Amerian or!oration whih deri#ed <04 of its annual %ross reei!ts from 0hili!!ine soures for
the !ast 7 "ears.
'. )ains deri#ed from the sale of his ondominium unit loated in The 7ort$ Ta%ui% &it" to another resident alien.

-2. (nome is onsidered reali*ed for tax !ur!oses when
A. it is reo%ni*ed as re#enue under aountin% standards e#en if the law does not do so.
B. the tax!a"er retires from the business without a!!ro#al from the B(A.
&. the tax!a"er has been !aid and has reei#ed in ash or near ash the taxable inome.
D. the earning process is complete or virtually complete and an exchange has ta2en place.

--. =hih amon% the followin% irumstanes ne%ates the !rima faie !resum!tion of orretness of a B(A assessment,
A. The B(A assessment was seasonabl" !rotested within -0 da"s from reei!t.
B. ;o !reliminar" assessment notie was issued !rior to the assessment notie.
C. $roof that the assessment is utterly without foundation, arbitrary, and capricious.
'. The B(A did not inlude a formal letter of demand to !a" the alle%ed defiien".

-.. ?n 5arh -0$ 2005 5i%uel 7oods$ (n. reei#ed a notie of assessment and a letter of demand on its A!ril 15$ 2002 final
ad3ustment return from the B(A. 5i%uel 7oods then filed a request for rein#esti%ation to%ether with the requisite su!!ortin%
douments on A!ril 25$ 2005. ?n Bune 2$ 2005$ the B(A issued a final assessment reduin% the amount of the tax demanded.
Sine 5i%uel 7oods was satisfied with the redution$ it did not do an"thin% an"more. ?n A!ril 15$ 2010 the B(A %arnished the
or!oration+s ban1 de!osits to answer for the tax liabilit". =as the B(A ation !ro!er,
A. :es. The B(A has 5 "ears from the filin% of the !rotest within whih to ollet.
B. 4es. The B7 has , years from the issuance of the final assessment within which to collect.
&. ;o. The tax!a"er did not a!!l" for a om!romise.
'. ;o. =ithout the tax!a"er+s !rior authorit"$ the B(A ation #iolated the Ban1 'e!osit Sere" Law.

-5. =hih amon% the followin% tax!a"ers is required to use onl" the alendar "ear for tax !ur!oses,
A. $artnership exclusively for the design of government infrastructure pro5ects considered as practice of civil engineering.
B. Boint6sto1 om!an" formed for the !ur!ose of underta1in% onstrution !ro3ets.
&. Business !artnershi! en%a%ed in ener%" o!erations under a ser#ie ontrat with the %o#ernment.
'. Boint aount 8uentas en !artii!aion9 en%a%ed in the tradin% of mineral ores.

-<. S!anflex (nt+l (n. reei#ed a notie of assessment from the B(A. (t seasonabl" filed a !rotest with all the neessar"
su!!ortin% douments but the B(A failed to at on the !rotest. Thirt" da"s from the la!se of 1>0 da"s from the filin% of its !rotest$
S!anflex still has not ele#ated the matter to the &TA. =hat remed"$ if an"$ an S!anflex ta1e,
A. (t ma" file a motion to admit a!!eal if it ould !ro#e that its failure to a!!eal was due to the ne%li%ene of ounsel.
B. (t ma" no lon%er a!!eal sine there is no B(A deision from whih it ould a!!eal.
C. t may wait for the final decision of the B7 on his protest and appeal it to the CTA within +* days from receipt of such
'. ;one. (ts ri%ht to a!!eal to the &TA has !resribed.

-7. )erardo died on Bul" -1$ 2011. 2is estate tax return should be filed within
A. six months from filin% of the notie of death.
B. sixt" da"s from the a!!ointment of an administrator.
C. six months from the time he died on 9uly +", %*"".
'. sixt" da"s from the time he died on Bul" -1$ 2011.

->. (nome from dealin%s in !ro!ert" 8real$ !ersonal$ or mixed9 is the %ain or loss deri#ed
A. onl" from the ash sales of !ro!ert".
B. from ash and %ratuitous reei!ts of !ro!ert".
&. from sale and lease of !ro!ert".
D. only from the sale of property.

-@. (n 5arh 200@$ Tonette$ who is fond of 3ewelries$ bou%ht a diamond rin% for 0750$000.00$ a braelet for 0250$000.00$ a
ne1lae for 0500$000.00$ and a brooh for 0500$000.00. Tonette deri#es inome from the exerise of her !rofession as a liensed
&0A. (n ?tober 200@$ Tonette sold her diamond rin%$ braelet$ and ne1lae for onl" 01.25 million inurrin% a loss of
0250$000.00. She used the 01.25 million to bu" a solo diamond rin% in ;o#ember 200@ whih she sold for 01.5 million in
Se!tember 2010. Tonette had no other transation in 3ewelr" in 2010. =hih amon% the followin% desribes the tax
im!liations arisin% from the abo#e transations,
A. Tonette ma" dedut his 200@ loss onl" from her 200@ !rofessional inome.
B. Tonette may carry over and deduct her %**: loss only from her %*"* gain.
&. Tonette ma" arr" o#er and dedut her 200@ loss from her 2010 !rofessional inome as well as from her %ain.
'. Tonette ma" not dedut her 200@ loss from both her 2010 !rofessional inome and her %ain.

.0. Anion$ (n. reei#ed a notie of assessment and a letter from the B(A demandin% the !a"ment of 0- million !esos in
defiien" inome taxes for the taxable "ear 200>. The finanial statements of the om!an" show that it has been sufferin%
finanial re#erses from the "ear 200@ u! to the !resent. (ts asset !osition shows that it ould !a" onl" 0500$000.00 whih it
offered as a om!romise to the B(A. =hih amon% the followin% ma" the B(A require to enable it to enter into a om!romise
with Anion$ (n.,
A. Anion must show it has faithfull" !aid taxes before 200@.
B. Anion must !romise to !a" its defiien" when finaniall" able.
C. Anion must waive its right to the secrecy of its ban2 deposits.
'. Anion must immediatel" de!osit the 0500$000.00 with the B(A.

.1. Aeal !ro!ert" owned b" the national %o#ernment is exem!t from real !ro!ert" taxation unless the national %o#ernment
A. transfers it for the use of a loal %o#ernment unit.
B. leases the real property to a business establishment.
&. %ratuitousl" allows its use for eduational !ur!oses b" a shool established for !rofit.
'. sells the !ro!ert" to a %o#ernment6owned non6!rofit or!oration.

.2. 'ondon and 2elena were le%all" se!arated. The" had six minor hildren$ all qualified to be laimed as additional exem!tions
for inome tax !ur!oses. The ourt awarded ustod" of two of the hildren to 'ondon and three to 2elena$ with 'ondon direted
to !ro#ide full finanial su!!ort for them as well. The ourt awarded the <th hild to 'ondon+s father with 'ondon also !ro#idin%
full finanial su!!ort. Assumin% that onl" 'ondon is %ainfull" em!lo"ed while 2elena is not$ for how man" hildren ould
'ondon laim additional exem!tions when he files his inome tax return,
A. Six hildren.
B. 7i#e hildren.
&. Three hildren.
D. Two children.

.-. 0olitial am!ai%n ontributions are ;?T dedutible from %ross inome
A. if the" are not re!orted to the &ommission on Eletions.
B. if the andidate su!!orted wins the eletion beause of !ossible orru!tion.
C. since they do not help earn the income from which they are to be deducted.
'. sine suh amounts are not onsidered as inome of the andidate to whom %i#en.

... =hen a B(A deision affirmin% an assessment is a!!ealed to the &TA$ the B(A+s !ower to %arnish the tax!a"er+s ban1
A. is sus!ended to await the finalit" of suh deision.
B. is sus!ended %i#en that the &TA an re#erse B(A deisions when !re3udiial to the tax!a"er.
&. is not sus!ended beause onl" final deisions of the B(A are sub3et to a!!eal.
D. is not suspended since the continued existence of government depends on tax revenues.

.5. Aeal !ro!ert" taxes should not disre%ard inreases in the #alue of real !ro!ert" ourrin% o#er a lon% !eriod of time. To do
otherwise would #iolate the anon of a sound tax s"stem referred to as
A. theoretial 3ustie.
B. fiscal ade.uacy.
&. administrati#e feasibilit".
'. s"mbioti relationshi!.

.<. The !ower to tax is the !ower to destro". (s this alwa"s so,
A. ;o. The Exeuti#e Branh ma" deide not to enfore a tax law whih it belie#es to be onfisator".
B. :es. The tax olletors should enfore a tax law e#en if it results to the destrution of the !ro!ert" ri%hts of a tax!a"er.
&. :es. Tax laws should alwa"s be enfored beause without taxes the #er" existene of the State is endan%ered.
D. &o. The 1upreme Court may nullify a tax law, hence, property rights are not affected.

.7. Beo!ard" assessment is a #alid %round to om!romise a tax liabilit"
A. in#ol#in% defiien" inome taxes onl"$ but not for other taxes.
B. because of doubt as to the validity of the assessment.
&. if the om!romise amount does not exeed 104 of the basi tax.
'. onl" when there is an a!!ro#al of the ;ational E#aluation Board.

.>. C"%omite 5inerals$ (n.$ a or!oration re%istered and holdin% offie in Australia$ not o!eratin% in the 0hili!!ines$ ma" be
sub3et to 0hili!!ine inome taxation on
A. %ains it deri#ed from sale in Australia of an ore rusher it bou%ht from the 0hili!!ines with the !roeeds on#erted to !esos.
B. gains it derived from sale in Australia of shares of stoc2 of $hilex Mining Corporation, a $hilippine corporation.
&. di#idends earned from in#estment in a forei%n or!oration that deri#ed .04 of its %ross inome from 0hili!!ine soures.
'. interests deri#ed from its dollar de!osits in a 0hili!!ine ban1 under the Ex!anded 7orei%n &urren" 'e!osit S"stem.

.@. As a %eneral rule$ within what !eriod must a tax!a"er ele#ate to the &ourt of Tax A!!eals a denial of his a!!liation for
refund of inome tax o#er!a"ment,
A. =ithin -0 da"s from reei!t of the &ommissioner+s denial of his a!!liation for refund.
B. 8ithin +* days from receipt of the denial which must not exceed % years from payment of income tax.
&. =ithin 2 "ears from !a"ment of the inome taxes sou%ht to be refunded.
'. =ithin -0 da"s from reei!t of the denial or within two "ears from !a"ment.

50. After the !ro#ine has onstruted a baran%a" road$ the San%%unian% 0an%lalawi%an ma" im!ose a s!eial le#" u!on the
lands s!eifiall" benefitted b" the road u! to an amount not to exeed
A. 3*# of the actual cost of the road without giving any portion to the barangay.
B. 1004 of the atual !ro3et ost without %i#in% an" !ortion to the baran%a".
&. 1004 of the atual !ro3et ost$ 1ee!in% <04 for the !ro#ine and %i#in% .04 to the baran%a".
'. <04 of the atual ost$ di#idin% the same between the !ro#ine and the baran%a".

51. &elia donated 0110$000.00 to her friend Ditoria who was %ettin% married. &elia %a#e no other %ift durin% the alendar "ear.
=hat is the donor+s tax im!liation on &elia+s donation,
A. The 0100$000.00 !ortion of the donation is exem!t sine %i#en in onsideration of marria%e.
B. A 010$000.00 !ortion of the donation is exem!t bein% a donation in onsideration of marria%e.
C. Celia shall pay a +*# donor(s tax on the $""*,***.** donation.
'. The 0100$000.00 !ortion of the donation is exem!t under the rate shedule for donor+s tax.

52. Le#ox &or!oration wanted to donate 05 million as !ri*e mone" for the world !rofessional billiard ham!ionshi! to be held in
the 0hili!!ines. Sine the Billiard S!orts &onfederation of the 0hili!!ines does not reo%ni*e the e#ent$ it was held under the
aus!ies of the (nternational 0rofessional Billiards Assoiation$ (n. (s Le#ox sub3et to the donor+s tax on its donation,
A. ;o$ so lon% as the donated mone" %oes diretl" to the winners and not throu%h the assoiation.
B. 4es, since the national sports association for billiards does not sanction the event.
&. ;o$ beause it is donated as !ri*e for an international om!etition under the billiards assoiation.
'. :es$ but onl" that !art that exeeds the first 0100$000.00 of total Le#ox donations for the alendar "ear.

5-. A #iolation of the tariff and ustoms laws is the failure to
A. !a" the ustoms duties and taxes and to om!l" with the rules on ustoms !roedures.
B. pay the customs duties and taxes or to comply with the rules on customs procedures.
&. !a" the ustoms duties and taxes.
'. om!l" with the rules on ustoms !roedures.

5.. =hat is the effet on the tax liabilit" of a tax!a"er who does not !rotest an assessment for defiien" taxes,
A. The tax!a"er ma" a!!eal his liabilit" to the &TA sine the assessment is a final deision of the &ommissioner on the matter.
B. The B(A ould alread" enfore the olletion of the tax!a"er+s liabilit" if it ould seure authorit" from the &TA.
C. The taxpayer(s liability becomes fixed and sub5ect to collection as the assessment becomes final and collectible.
'. The tax!a"er+s liabilit" remains sus!ended for 1>0 da"s from the ex!iration of the !eriod to !rotest.

55. A non6sto1$ non6!rofit shool alwa"s had ash flow !roblems$ resultin% in failure to reruit well6trained administrati#e
!ersonnel to effeti#el" mana%e the shool. (n 2010$ 'on Leon donated 0100 million !esos to the shool$ !ro#ided the mone"
shall be used solel" for !a"in% the salaries$ wa%es$ and benefits of administrati#e !ersonnel. The donation re!resents less than
104 of 'on Leon+s taxable inome for the "ear. (s he sub3et to donor+s taxes,
A. ;o$ sine the donation is atuall"$ diretl"$ and exlusi#el" used for eduational !ur!oses.
B. 4es, because the donation is to be wholly used for administration purposes.
&. :es$ sine he did not obtain the requisite ;)? ertifiation before he made the donation.
'. ;o$ beause the donation does not exeed 104 of his taxable inome for 2010.

5<. =hat is the tax base for the im!osition b" the !ro#ine of !rofessional taxes,
A. That whih &on%ress determined.
B. The !ertinent !ro#ision of the loal )o#ernment &ode.
C. The reasonable classification made by the provincial sanggunian.
'. That whih the 'e!t. of (nterior and Loal )o#ernment determined.

57. There is !rima faie e#idene of a false or fraudulent return where the
A. tax return was amended after a notie of assessment was issued.
B. tax return was filed be"ond the re%lementar" !eriod.
&. tax!a"er han%ed his address without notif"in% the B(A.
D. deductions claimed exceed by +*# the actual deductions.

5>. The !roeeds reei#ed under a life insurane endowment ontrat is ;?T onsidered !art of %ross inome
A. if it is so stated in the life insurane endowment !oli".
B. if the !rie for the endowment !oli" was not full" !aid.
C. where payment is made as a result of the death of the insured.
'. where the benefiiar" was not the one who too1 out the endowment ontrat.

5@. The exess of allowable dedutions o#er %ross inome of the business in a taxable "ear is 1nown as
A. net operating loss.
B. ordinar" loss.
&. net dedutible loss.
'. ;?L&?.

<0. ;o ation shall be ta1en b" the B(A on the tax!a"er+s dis!uted issues until the tax!a"er has !aid the defiien" taxes
A. when the assessment was issued a%ainst a false and fraudulent return.
B. if there was a failure to !a" the defiien" tax within <0 da"s from B(A demand.
&. if the Ae%ional Trial &ourt issues a writ of !reliminar" in3untion to en3oin the B(A.
D. attributable to the undisputed issues in the assessment notice.

<1. (s an artile !re#iousl" ex!orted from the 0hili!!ines sub3et to the !a"ment of ustoms duties,
A. :es$ beause all artiles that are im!orted from an" forei%n ountr" are sub3et to dut".
B. ;o$ beause there is no basis for im!osin% duties on artiles !re#iousl" ex!orted from the 0hili!!ines.
&. :es$ beause exem!tions are stritl" onstrued a%ainst the im!orter who is the tax!a"er.
D. &o, if it is covered by a certificate of identification and has not been improved in value.

<2. 0rior to the enatment of the Loal )o#ernment &ode$ onsumer+s oo!erati#es re%istered under the &oo!erati#e
'e#elo!ment At en3o"ed exem!tion from all taxes im!osed b" a loal %o#ernment. =ith the Loal )o#ernment &ode+s
withdrawal of exem!tions$ ould these oo!erati#es ontinue to en3o" suh exem!tion,
A. :es$ beause the Loal )o#ernment &ode$ a %eneral law$ ould not amend a s!eial law suh as the &oo!erati#e 'e#elo!ment
B. ;o$ &on%ress has not b" the ma3orit" #ote of all its members %ranted exem!tion to onsumers+ oo!erati#es.
&. ;o$ the exem!tion has been withdrawn to le#el the !la"in% field for all tax!a"ers and !reser#e the L)Es+ finanial !osition.
D. 4es, their exemption is specifically mentioned among those not withdrawn by the )ocal /overnment Code.

<-. Ender the Tariff and &ustoms &ode$ abandoned im!orted artiles beomes the !ro!ert" of the
A. government whatever be the circumstances.
B. insurane om!an" that o#ered the shi!ment.
&. shi!!in% om!an" in ase the frei%ht was not !aid.
'. ban1 if the shi!ment is o#ered b" a letter of redit.

<.. /a Tato owns a !arel of land in San Bose$ Batan%as delared for real !ro!ert" taxation$ as a%riultural. (n 1@@0$ he used the
land for a !oultr" feed !roessin% !lant but ontinued to delare the !ro!ert" as a%riultural. (n 5arh 2011$ the loal tax
assessor diso#ered /a Tato+s han%e of use of his land and informed the loal treasurer who demanded !a"ment of defiien"
real !ro!ert" taxes from 1@@0 to 2011. 2as the ation !resribed,
A. ;o$ the defiien" taxes ma" be olleted within fi#e "ears from when the" fell due.
B. &o. The deficiency taxes for the period "::* up to %*"" may still be collected within "* years from March %*"".
&. :es. 5ore than 10 "ears had la!sed for the !eriod 1@@0 u! to 2000$ hene the ri%ht to ollet the defiien" taxes has
'. :es. 5ore than 5 "ears had la!sed for the olletion of the defiien" taxes for the !eriod 1@@0 u! to 2005.

<5. 0ierre de Sa#i%n"$ a 7renhman$ arri#ed in the 0hili!!ines on Banuar" 1$ 2010 and ontinued to li#e and en%a%e in business in
the 0hili!!ines. 2e went on a tour of Southeast Asia from Au%ust 1 to ;o#ember 5$ 2010. 2e returned to the 0hili!!ines on
;o#ember <$ 2010 and sta"ed until A!ril 15$ 2011 when he returned to 7rane. 2e earned durin% his sta" in the 0hili!!ines a
%ross inome of 0- million from his in#estments in the ountr". 7or the "ear 2010$ 0ierre+s taxable status is that of
A. a non6resident alien not en%a%ed in trade or business in the 0hili!!ines.
B. a non!resident alien engaged in trade or business in the $hilippines.
&. a resident alien not en%a%ed in trade or business in the 0hili!!ines.
'. a resident alien en%a%ed in trade or business in the 0hili!!ines.

<<. Lualhati Eduational 7oundation$ (n.$ a sto1 eduational institution or%ani*ed for !rofit$ deided to lease for ommerial
use a 1$500 sq. m. !ortion of its shool. The shool atuall"$ diretl"$ and exlusi#el" used the rents for the maintenane of its
shool buildin%s$ inludin% !a"ment of 3anitorial ser#ies. (s the leased !ortion sub3et to real !ro!ert" tax,
A. :es$ sine Lualhati is a sto1 and for !rofit eduational institution.
B. ;o$ sine the shool atuall"$ diretl"$ and exlusi#el" used the rents for eduational !ur!oses.
&. ;o$ but it ma" be sub3et to inome taxation on the rents it reei#es.
D. 4es, since the leased portion is not actually, directly, and exclusively used for educational purposes.

<7. A!!arentl" the law does not !ro#ide for the refund of real !ro!ert" taxes that ha#e been olleted as a result of an erroneous
or ille%al assessment b" the !ro#inial or it" assessor. =hat should be done in suh instane to a#oid an in3ustie,
A. Huestion the le%alit" of the no6refund rule before the Su!reme &ourt.
B. Enat a new ordinane amendin% the erroneous or ille%al assessment to orret the error.
C. 1ubse.uent ad5ustment in tax computation and the application of the excess payment to future real property tax
'. 0ass a new ordinane !ro#idin% for the refund of real !ro!ert" taxes that ha#e been erroneousl" or ille%all" olleted.

<>. =hat should the B(A do when the !resri!ti#e !eriod for the assessment of a tax defiien" is about to !resribe but the
tax!a"er has not "et om!lied with the B(A requirements for the !rodution of boo1s of aounts and other reords to
substantiate the laimed dedutions$ exem!tions or redits,
A. &all the tax!a"er to a onferene to ex!lain the dela".
B. (mmediatel" ondut an in#esti%ation of the tax!a"er+s ati#ities.
C. ssue a 5eopardy assessment coupled with a letter of demand.
'. (ssue a notie of onstruti#e distraint to !rotet %o#ernment interest.

<@. 5one" olleted from taxation shall not be !aid to an" reli%ious di%nitar" EI&E0T when
A. the religious dignitary is assigned to the $hilippine Army.
B. it is !aid b" a loal %o#ernment unit.
&. the !a"ment is !assed in audit b" the &?A.
'. it is !art of a lawma1er+s !or1 barrel.

70. 'isriminator" duties ma" ;?T be im!osed u!on artiles
A. wholl" manufatured in the disriminatin% ountr" but arried b" #essels of another ountr".
B. not manufatured in the disriminatin% ountr" but arried b" #essels of suh ountr".
&. !artl" manufatured in the disriminatin% ountr" but arried b" #essels of another ountr".
D. not manufactured in the discriminating country and carried by vessels of another country.

71. The tax!a"er seasonabl" filed his !rotest to%ether with all the su!!ortin% douments. (t is alread" Bul" -1$ 2011$ or 1>0 da"s
from submission of the !rotest but the B(A &ommissioner has not "et deided his !rotest. 'esirous of an earl" resolution of his
!rotested assessment$ the tax!a"er should file his a!!eal to the &ourt of Tax A!!eals not later than
A. Au%ust -1$ 2011.
B. August +*, %*"".
&. Au%ust 15$ 2011.
'. Au%ust 1$ 2011.

72. =hih of the followin% are ;?T usuall" im!osed when there is a tax amnest",
A. Civil, criminal, and administrative penalties
B. &i#il and riminal !enalties
&. &i#il and administrati#e !enalties
'. &riminal and administrati#e !enalties

7-. =hih amon% the followin% one!ts of taxation is the basis for the situs of inome taxation,
A. Lifeblood dotrine of taxation
B. 1ymbiotic relation in taxation
&. &om!ensator" !ur!ose of taxation
'. Sum!tuar" !ur!ose of taxation

7.. (n F?!eration /andado$G the B(A tem!oraril" losed business establishments$ inludin% ;ew '"nast" &or!oration that failed
to om!l" with DAT re%ulations. ;ew '"nast" ontends that it should not be tem!oraril" losed sine it has a #alid and existin%
DAT re%istration$ it faithfull" issued DAT reei!ts$ and filed the !ro!er DAT returns. The ontention ma" be re3eted if the B(A
in#esti%ation re#eals that
A. the tax!a"er has not been re%ularl" filin% its inome tax returns for the !ast . "ears.
B. the tax!a"er deliberatel" filed a false and fraudulent return with deliberate intention to e#ade taxes.
&. the tax!a"er used falsified douments to su!!ort its a!!liation for refund of taxes.
D. there was an understatement of taxable sales or receipts by +*# or more for the taxable .uarter.

75. The head !riest of the reli%ious set Tres 0ersonas Solo 'ios$ as the or!oration sole$ rented out a 5$000 sq. m. lot re%istered
in its name for use as shool site of a shool or%ani*ed for !rofit. The set used the rentals for the su!!ort and u!1ee! of its
!riests. The rented lot is
A. not exem!t from real !ro!ert" taxes beause the user is or%ani*ed for !rofit.
B. exem!t from real !ro!ert" taxes sine it is atuall"$ diretl"$ and exlusi#el" used for reli%ious !ur!oses.
&. not exem!t from real !ro!ert" taxes sine it is the rents$ not the land$ that is used for reli%ious !ur!oses.
D. exempt from real property taxes since it is actually, directly, and exclusively used for educational purposes.