1. Which statement refers to police power as distinguished from taxation?

a. It can only be imposed on specific property or properties;

b. The amount imposed depends on whether the activity is useful or not;
c. It involves the taking of property by the government;
d. The amount has no limit.
2. The distinction of a tax from permit or license fee is that a tax is:
a. Imposed for regulation;
b. One which involves an exercise of police power;
c. One in which there is generally no limit in the amount that may be imposed;
d. Answer not given.
3. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of
the goods sold;
b. The purchaser asks for a discount or refuses to buy at regular prices unless it is reduced by
the amount equal to the tax he will pay;
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination
abroad, so that the title passes abroad instead of in the Philippines;
d. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in
turn to the retailer and finally to the consumer.
4. One of the characteristics of a tax is that:
a. It is generally based on contract;
b. It is generally payable in money;
c. It is generally assignable;
d. Answer not given.
5. Tax of a fixed proportion of the value of the property with respect to which the tax is assessed
and requires the intervention of assessors or appraisers to estimate the value of such property
before the amount due from each taxpayer can be determined is known as:
a. Specific;
b. Ad valorem;
c. Special or regulatory;
d. Answer not given.
6. 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
b. Does not violate substantive due process
c. Violates the right to equal protection
d. Does not violate the right to equal protection
7. The power of taxation proceeds upon what theory?
a. Ability to pay
b. Severance Test
c. Benefits-protection theory
d. Necessity Theory
8. 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. Lifeblood theory
b. Power to destroy theory
c. Sumptuary theory
d. Symbiotic theory
9. An example of a tax where the concept of progressivity finds application is the
a. Income tax on the individuals
b. Excise tax on petroleum products
c. Value added tax on certain articles
d. Amusement tax on boxing exhibitions
10. KeriRaNi 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 KeriRaNi 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 be 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.
11. “Government agencies performing governmental functions are exempt from tax unless expressly
taxed while those performing proprietary functions are subject to tax unless expressly exempted”
refers to:
a. The tax imposed should be for public purpose.
b. There should be no improper delegation of the taxing power.
c. The power to tax is limited to the territorial jurisdiction of the taxing government.
d. Exemption of government entities from taxation.
12. No law granting any tax exemption shall be passed without the major concurrence of –
a. Majority of all members of Congress
b. 2/3 vote of all members of Congress
c. ¾ vote of all members of Congress
d. Unanimous vote of all members of Congress
13. As regards revenue bill, which of the following is not correct?
a. The President may recommend a revenue bill to Co n gres s .
b. T h e S e n a t e m a y p r o p o s e a m e n d m e n t i f t h e b i l l o r i g i n a t e s f r om t he H o u s e
o f R e p r es e n t a t i v e s .
c. T h e H o u s e o f R e p r e s e n t a t i v e s m a y p r o p o s e amendment if the bill originates
from the Senate
d. Versions of a revenue bill approved separately by th e H o us e of R e pr es e nt at i v es
an d t he Se n at e shall be consolidated with both houses approving t h e
c ons o l id a te d v er s i on
14. The e-filing of tax returns and e-payment system are manifestations of
a. Theoretical justice
b. Administrative feasibility
c. Fiscal adequacy
d. All of these
15. Which is not a source of tax law?
a. Opinions of tax experts
b. BIR Rulings
c. Judicial decisions
d. Constitution
16. Which issues revenue regulations?
a. Department of Finance
b. Congress
c. Commissioner of Internal Revenue
d. Commissioner of Customs
17. The Commissioner of Internal Revenue can delegate the power to
a. Refund or credit internal revenue tax
b. Recommend rules and regulations to the Secretary of Finance
c. Assign and re-assign revenue officer to establishments of excisable articles.
d. Compromise or abate tax liability.
18. Select the incorrect statement regarding tax amnesty and condonation.
a. In tax amnesty, violators are required to pay a portion of the tax assessed.
b. When the remaining unpaid portion of the tax is condoned, the taxpayer cannot ask for refund
for the balance already paid.
c. Tax amnesty operates as a general pardon and is rarely available.
d. Tax condonation operates on the whole balance of the assessed tax; hence, the taxpayer can
ask for refund for the paid portion of the tax.
19. The following taxpayers shall be automatically classified as large taxpayers upon notice in writing
by the CIR, except:
a. All branches of taxpayers under the Large Taxpayer’s Service
b. Publicly listed corporations
c. Barangay Micro-Business Enterprise
d. Corporate Taxpayers engaged in the production of metallic minerals
20. Final withholding tax as contrast with creditable withholding tax
a. Collects only a portion of the income tax
b. Coverage of withholding is certain passive and active income
c. Income payor remits the actual tax
d. Necessity of income tax return for the taxpayer is required
21. A farmer under accrual basis has the following data for the year:
Beginning inventory:
Livestock and farm products raised in the farm P 60,000
Livestock and farm products purchased the previous year 30,000

Ending inventory:
Livestock and farm products raised in the farm 100,000
Livestock and farm products purchased 80,000

Sales of livestock and farm products raised and purchased 120,000

Cost of livestock and farm products purchased during the year 100,000

Miscellaneous income:
Gain on sale of work, breeding or dairy animals 30,000
Gain on sale of farm equipment 10,000
Hire of tractor 20,000
Hire of carabaos and horses 6,000
Others 4,000

How much is his gross income?

a. 370,000
b. 270,000
c. 180,000
d. 90,000
22. Based on the preceding data, how much is the gross income assuming cash basis is used?
a. 370,000
b. 270,000
c. 180,000
d. 90,000

Next five questions are based on the following:

Joseph provided the following data on sale of his capital personal property sold in 2013 held by
him for 15 months:

Cost P225,000

Mortgage assumed by the buyer 270,000

Installment collection schedule:

- 2013 67,500
- 2014 67,500
- 2015 45,000
23. How much is the selling price?
a. 450,000
 b. 270,000
c. 180,000
d. 225,000
24. How much is the contract price?
a. 450,000
b. 270,000
c. 180,000
d. 225,000
25. How much is the initial payment?
a. 67,500
b. 112,500
c. 45,000
d. 225,000
26. How much is the income subject to income tax in 2013, 2014, and 2015?
a. 56,250; 33,750; and 22,500 respectively
b. 112,500; 67,500; and 45,000 respectively
c. 225,000; 0; and 0 respectively
d. None of the choices
27. On July 1, 2014, Ms. L leased her vacant lot for a period of 12 years to Ms, M at an annual rate of
P2,400,000. It was also agreed that Ms. M will pay the following:
- 4,800,000 representing rental payment for two years. Subsequent rental payments will be
made every July 1 of the applicable year.
- Security deposit of 2,400,000.
- Annual real property tax of 30,000.

The lease contract provides among others that the lessee will construct a 5-storey building for
parking purposes at a cost of 36,000,000. Ownership of the building shall belong to the lessor
upon the expiration or termination of the lease contract.

The building was completed on July 1, 2016 with an estimated useful life of 15 years. Ms. L shall
report total income from the leases for 2014 at

a. 2,430,000
b. 2,400,000
c. 4,830,000
d. 2,640,000
28. Assuming Ms. L will use the outright method in recognizing income from leasehold improvements,
how much is the total income from lease for year 2016?
a. 3,030,000
b. 3,630,000
c. 38,430,000
d. 2,400,000
29. Assuming Ms. L will use the spread-out method in recognizing income from leasehold
improvements, how much is the total income from lease for year 2016?
a. 3,030,000
b. 3,630,000
c. 38,430,000
d. 2,400,000
30. Assuming that due to the fault of the lessee, the lease contract was terminated on January 1,
2018, how much income is to be reported by the lessor in 2018?
a. 32,400,000
b. 30,600,000
c. 34,830,000
d. 33,030,000
31. A cash dividend of P100,000 received by a taxpayer in 2017 from a foreign corporation whose
income from Philippine sources is 40% of its total income is:
 Statement 1: partly taxable if he is a resident citizen.
Statement 2: partly taxable if he is a non-resident alien.

a. Statements 1 & 2 are false

b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 & 2 are true
32. Donald Trump received royalty fees from Viva Records Corporation, a domestic corporation, for
his musical composition under the album “There’s no other way” Donald is an American composer
and has never set foot in the Philippines. The royalty fee shall be subject to:
a. 15% final withholding tax
b. 20% final withholding tax
c. 25% final withholding tax
d. 5-32% graduated tax rate
33. Corazon insured her life with Malayan Insurance Company. Under the contract, she will pay a
monthly premium of P2,000 for 10 years. In case of death before the 10 th year, her beneficiary
will receive an indemnification in the amount of P150,000. If she is still living on the 10th year, she
will receive P500,000. If Corazon dies on the 5th year, her beneficiary will report an income of:
a. 500,000
b. 150,000
c. 260,000
d. Nil
34. Suppose Corazon dies on the 5th year and her beneficiary was offered to receive the P150,000 in
cash or to receive it in installment of P20,000 for ten (10) monthly installment payments and the
beneficiary chose the 2nd option. The amount of income to be reported is:
a. 500,000
b. 150,000
c. 50,000
d. Nil
35. Marlon was hit by a car driven by Jaysee causing severe injuries to the former. It was found out
during trial that the driver was drunk at the time of the incident.
After trial, the court awarded the following:
- 1,500,000 actual damages for hospitalization
- 300,000 exemplary damages
- 500,000 for loss of income and
- 100,000 moral damages.

Marlon also received a cash gift of P100,000 from Jaysee. The taxable income received by Marlon
is:

a. 2,400,000
b. 1,900,000
c. 500,000
d. 600,000
36. Sandara, a non-resident Korean stockholder, received a dividend income of P300,000 in 2017 from
Super Bowl Corporation, a foreign corporation doing business in the Philippines. The gross income
of the foreign corporation from within and without the Philippines for the past 3 years preceding
2017 were as follows:
Source 2014 2015 2016
Philippines 16,000,000 12,000,000 14,000,000
Abroad 8,000,000 14,000,000 16,000,000

The amount of income subject to tax should be:

a. 0
b. 90,000
 c. 157,500
d. 300,000
37. Assuming Super Bowl is a domestic corporation, the amount subject to tax of Sandara should be:
a. 0
b. 90,000
c. 157,500
d. 300,000
38. Situs of taxation on income from sale of personal property purchased.
a. Place of the seller
b. Place of sale
c. Place of the buyer
d. As determined by the Commissioner
39. Mr. Conrado won the P50,000,000 6/49 Superlotto Jackpot of the PCSO. How much final tax will
be withheld?
a. 500,000
b. 200,000
c. 100,000
d. 0
40. Ms. A, a resident citizen, won $1,000,000 from the US lottery. The lottery winning is
a. Exempt from tax
b. Subject to 20% final tax
c. Subject to 10% final tax
d. Subject to regular tax
41. Alex, resident citizen, received P100,000 dividend Income from Vodka Inc., a non-resident foreign
corporation. How much final tax must have been withheld by Vodka Inc.?
a. 0
b. 10,000
c. 20,000
d. 25,000
42. On January 1, 2014, Ms. Victoria invested 2,000,000 in the six year time deposit of Sulu Unibank
which pays 10% annual interest. Compute the final tax to be withheld by Sulu Unibank on
December 31, 2014.
a. 0
b. 100,000
c. 200,000
d. 250,000
43. Assume Ms. Victoria pre-terminated the time deposit on July 1, 2018; compute the final tax to be
withheld on pre-termination.
a. 5,000
b. 12,000
c. 45,000
d. 108,000
44. The tax informer’s reward may be granted to
a. Officials of the BIR
b. Public officials or employees
c. Parents of public government employees
d. Relatives of government employees beyond the 6th degree of consanguinity
45. If a corporation distributes its assets to its stockholders upon dissolution, this kind of corporate
distribution will result in:
a. Stock dividend
b. Property dividend
c. Cash dividend
d. Liquidating dividend
46. Grace sold domestic shares directly to buyer. The following relates to the sale:
 Fair market value of shares P400,000
Selling price 300,000
Cost 150,000

Compute the capital gains tax.

a. 7,500
b. 9.925
c. 15,000
d. 22,500
47. Anderson disposes a vacant lot for 3,000,000. The lot has an assessor’s fair value of P2,800,000; a
zonal value of P3,200,000; and an appraisal value of P3,500,000. What is the capital gains tax?
a. 0
b. 180,000
c. 192,000
d. 210,000
48. On January 5, 2020, Mercy, a stock dealer, disposed the following shares directly to a buyer:
Shares Selling Price cost
Stock rights 200,000 170,000
Common stocks 100,000 110,000
Ignoring the documentary stamp tax, the capital gains tax payable on the sale is
a. 0
b. 1,000
c. 1,500
d. 3,000
49. Which of the following properties when sold may be subject to capital gains tax?
a. Domestic stocks
b. Foreign stocks
c. Patent
d. Office buildings
50. Who is not subject to capital gains tax on the sale of domestic stocks directly to a buyer?
a. Dealer of cars
b. Real property developer
c. Dealers of securities
d. Realty dealer