Choose the best answer.

Sharon received the following income in 2020:

Business income, Philippines P600,000
Business income, United States 500,000
Winnings in lotto PCSO 40,000
Dividends from PLDT 50,000
Expenses, Philippines 400,000
Expenses, United States 450,000
Interest on deposit with Metrobank 6,000
Interest on deposit in U.S. ($1 = P50) $1,000
Cash prize won in a local contest P12,000
Cash prize won in a contest in U.S. 20,000
Winnings in lotto in U.S. 100,000
1. The income tax due on Sharon assuming she is a nonresident alien ETB, single is -
a. P177,000 c. P153,000
b. P167,000 d. Answer not given
2. The income tax due on Sharon assuming she is a nonresident alien NETB, single is -
a. P177,000 c. P153,000
b. P167,000 d. Answer not given
3. Which statement is wrong?
a. A tax is a demand of sovereignty
b. A toll is a demand of ownership
c. A special assessment is a tax
d. Customs duty is a tax
4. Which of the following is not a characteristic of debt?
a. Generally arises from contract
b. Payable only in money
c. Assignable
d. Imprisonment is not a sanction for non-payment
5. Debt as distinguished from tax
a. Based on law
b. May be paid in kind
c. Does not draw interest except when delinquent
d. Generally not subject to set-off or compensation
6. “Schedular system of income taxation” means
a. All types of income are added together to arrive at gross income.
b. Separate graduated rates are imposed on different types of income.
c. Capital gains are excluded in determining gross income.
 d. Compensation income and business/professional income are added together in
arriving at gross income.
7. Under the Creditable Withholding Tax system, which of the following statements is
incorrect?
a. Taxes withheld on certain income payments are intended to equal or at least
approximate the tax due of the payee on said income.
b. The recipient of the income is no longer required to file an income tax return as
prescribed under the Tax Code.
c. The payee is required to report the income and pay the difference between the tax
withheld and the tax due thereon.
d. Taxes withheld under this system are creditable in nature.
8. Which of the following statements is correct?
a. Withholding tax liability may arise only when the agent has possession, custody
or control of the funds withheld.
b. The withholding tax system was devised to provide the taxpayer a convenient
manner to meet his probable income tax liability and to ensure collection of the
income tax which could otherwise be lost or substantially reduced through failure
to file the corresponding returns.
c. Withholding tax system is designed to improve the government’s cash flow.
d. All of the above.
9. Under the Final Withholding Tax system, which of the following statements is not correct?
a. Income tax withheld by the withholding agent is constituted as a full and final payment of
the income tax due from the payee on the said income.
b. The liability for payment of the tax rests primarily on the payee as a recipient of income.
c. In case of failure to withhold the tax, the deficiency tax shall be collected from the
withholding agent.
d. The payee is no longer required t file an income tax return for the particular income.
10. When the refund of a tax supposedly due to the taxpayer has already been barred by
prescription and the said taxpayer is assessed with a tax, the two taxes may be set-off with
each other. This doctrine is called
a. Set-off doctrine c. Tax sparring doctrine
b. Doctrine of reciprocity d. Equitable recoupment
11. Rule of “No estoppel against the government” means:
a. Rule of law that in the performance of its governmental functions, the state cannot be estopped
by the neglect of its agents and officers.
b. The government is not estopped by the mistakes or errors of its agents; erroneous application
and enforcement of law by public officers do not block the subsequent correct application of
statutes
c. Both a and b
d. Neither a or b
12. In case of ambiguity, tax laws imposing a tax shall be interpreted
a. Strictly against the taxpayer
b. Liberally in favor of the taxpayer
c. Liberally in favor of the government
d. None of the choices
13. 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.
d. Joint account (cuentas en participation) engaged in the trading of mineral ores.
14. In March 2021, 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 P500,000.00. Tonette
derives income from the exercise of her profession as a licensed CPA. In October 2021,
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 2021
which she sold for P1.5 million in September 2022. Tonette had no other transaction in
jewelry in 2022. Which among the following describes the tax implications arising from the
above transactions?
a. Tonette may deduct his 2021 loss from her 2021 professional income.
b. Tonette may carry over and deduct her 2021 loss only from her 2022 gain.
c. Tonette may carry over and deduct her 2021 loss from her 2022 professional
income as well as from her gain.
d. Tonette may not deduct her 2021 loss from both her 2021 loss from both her 2022
professional income and her gain.
15. Anion, Inc. received a notice of assessment and a letter from the BIR demanding the
payment of P3 million pesos in deficiency income tax for the taxable year 2021. The
financial statements of the company show that it has been suffering financial reverses from
the year 2022 up to the present. Its asset position shows that it could pay only P500,000.00
 which it offered as a compromise to the BIR. Which among the following may the BIR
require to enable into a compromise with Anion, Inc.?
a. Anion must show it has faithfully paid taxes before 2021.
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.
16. 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.
17. The excess of allowable deductions over gross income of the business in a taxable year is
known as:
a. Net operating loss
b. Ordinary loss
c. Net deductible loss
d. NOLCO
18. Which of the following requires public improvement?
I. Taxation
II. Police Power
III. Eminent domain
a. I only c. III only
b. I and II only d. II and III only
19. The strongest of all inherent powers of the government is
a. Power of taxation c. The power of eminent domain
b. Police power d. Power of recall
20. The following statement correctly states the difference among the inherent powers of the
state, except;
a. The property taken under eminent domain and taxation are preserved but their of police power
is destroyed
b. Eminent domain does not require constitutional grant but taxation being formidable does in
order to limit its exercise by the legislature
c. Police owner and taxation is exercised only by the government but eminent domain may be
exercised by private entities
d. Police power regulates both property and liberty while eminent domain and taxation affects
only property rights.
21. The following are the differences between the Power of Taxation and the Power of Eminent
Domain, except;

Power of Taxation Power of eminent domain

a. Enforced government contribution Property to be taken is for public use
b. Government has no obligation to Government is a debtor of the property
pay taken
c. It operates in a community It operates on a individual
d. Attribute of sovereignty Fundamental Power
22.
Statement 1: The power to tax is supreme, plenary, comprehensive and without any limit because
the existence of the government is a necessity
Statement 2: The discretion of Congress in imposing taxes extends to the mode, method and
kind of tax, even the constitution provides otherwise
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
23. The existence of the government is a necessity and that the state has the right to compel all
individuals and property within its limits to contribute.
a. Basis of taxation c. Scope of taxation
b. Situs of taxation d. Theory of taxation
24. Statement 1: A provision on taxation in the Philippine Constitution is a grant of power
Statement 2: The power to tax includes the power to destroy.
Statement 3: Sumptuary purpose of taxation is to raise funds for the government
A B C D
Statement 1 True True False False
Statement 2 True True True True
Statement 3 True False True False

25. Situs of taxation is world/global taxation

A B C D
Resident citizen True False True True
Resident alien True False False False
Nonresident alien engaged in trade True False False True
For questions number 27 to 29, please refer to the following data:
 Lheenjay, married, left the Philippines in the middle of the year on July 1, 2018 to go abroad
and work there for five (5) years. The following data were provided as of December 31,
2018:

Gross Business Income Business Expenses

PERIOD Phls. Abroad Phls. Abroad
Jan. 1 to June 30 P300,000 P200,000 P100,000 P50,000
July 1 to Dec. 31 600,000 400,000 150,000 50,000
26. Her taxable income is:
A. P800,000
B. P950,000
C. P1,100,000
D. P600,000
27. Assuming she arrived from abroad on July 1, 2018 to permanently resettle in the Philippines,
after working abroad for 5 years, her taxable income as of December 31, 2018 is:
A. P750,000
B. P1,000,000
C. P1,100,000
D. P600,000
28. If she did not leave Philippines at all, Lheenjay’s taxable income is:
A. P750,000
B. P950,000
C. P1,150,000
D. P600,000
For questions number 30 to 31, please refer to the following data:
George, married, with two dependent children, received the following income:

Rent, Philippines P1,000,000

Rent, Hongkong 200,000
Interest, peso deposit, MBTC 100,000
Interest, US$ deposit, BDO ($10,000xP42) 420,000
Interest, deposit in Hongkong 50,000
(HK$10,000xP5)
Prize (cash) won in a local contest 8,000
Prize (TV) won in a local lottery 50,000
PCSO/Lotto winnings 2,000,000
 Prize won in contest in U.S. 300,000
Lotto winning in U.S. 100,000
Dividend, domestic company 600,000
29. Assuming the taxable year is 2018, determine the taxable net income assuming he is RC,
NRC, RA and NRA-ETB, respectively:
A. 80,000 / 180,000 / 830,000 / 180,000
B. 180,000 / 80,000 / 1,000,000 / 1,000,000
C. 1,558,000 / 908,000 / 908,000 / 908,000
D. 1,658,000 / 1,008,000 / 1,008,000 / 1,008,000
30. Assuming the taxable year is 2018, determine the total final tax assuming he is RC, NRC,
RA and NRA-ETB, respectively:
A. 553,000 / 490,000 / 150,000 / 937,500
B. 121,500 / 90,000 / 121,500 / 150,000
C. 131,000 / 90,000 / 90,000 / 90,000
D. 553,000 / 490,000 / 550,000 / 687,500

31. If the gross income from unrelated trade, business or other activity exceeds fifty percent
(50%) of the total gross income derived by such educational institutions or hospitals from all
sources, what tax rate shall be imposed on the entire taxable income starting January 1,
2009?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
32. The term applies to a foreign corporation not engaged in trade or business within the
Philippines.
a. Resident foreign corporation
b. Nonresident foreign corporation
c. Multinational corporation
d. Petroleum contractor
33. Which of the following corporations shall be taxed upon its taxable income derived during
each taxable year from all sources within and without the Philippines?
a. Domestic corporation
b. Resident foreign corporation
c. Nonresident foreign corporation
d. None of the choices
34. A domestic corporation has the following data for the fiscal year starting June 1, 2016 and
ending May 31, 2017:
Gross income, Philippines P 5,000,000
Gross income, USA 10,000,000
Deductions, Philippines 2,000,000
Deductions, USA 4,000,000
How much is the income tax due for the fiscal year ending May 31, 2017?
a. P 3,150,000 c. 2,880,000
b. P 2,962,500 d. 2,700,000
35. Effective January 1, 2000, the President, upon the recommendation of the Secretary of
Finance, may allow corporations the option to be taxed at 15% of gross income, The
following are the certain conditions except
a. A tax effort ratio of twenty percent (20%) of Gross National Product (GNP);
b. A ratio of forty percent (40%) of income tax collection to total tax revenues;
c. A VAT tax effort of four percent (40%) of GNP
d. A 0.9 percent (0.9%) ratio of the Consolidated Public Sector Financial Position (CPSFP)
to GNP.
36. Which of the following statements is incorrect?
a. The option to be taxed based on gross income shall be available only to firms whose ratio
of cost of sales to gross sales or receipts from all sources does not exceed fifty-five
percent (55%).
b. The election of the gross income tax option by the corporation shall be irrevocable for
three (3) consecutive taxable years during which the corporation is qualified under the
scheme.
c. The term 'gross income1 derived from business shall be equivalent to gross sales less
sales returns, discounts and allowances and cost of goods sold.
d. "Cost of goods sold” shall include all business expenses whether directly or not directly
incurred to produce the merchandise to bring them to their present location and use.
37. Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of how
much on their taxable income at what percent?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
38. Which of the following income is not from a related trade, business or activity of a domestic
proprietary educational institution?
a. Income from the hospital where medical graduates are trained for residency
b. Income from the canteen situated within the school campus
c. Income from bookstore situated within the school campus
d. Income from rent of available office spaces in one of the school buildings
39. Which of the following government-owned or controlled corporations, agencies or
instrumentalities shall pay such rate of tax upon their taxable income as are imposed upon
corporations or associations engaged in similar business, industry, or activity? (TRAIN
LAW)
a. Government Service Insurance System (GSIS)
b. Social Security System (SSS)
c. Philippine Charity Sweepstakes Office (PCSO)
d. none of the above
40. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation:
I - Whenever such corporation has a zero or negative taxable income;
II - When the amount of minimum corporate income tax is greater than the normal income
tax due from such corporation.
a. Both I and II are correct c. Only I is correct
b. Neither I nor II is correct d. Only II is correct
41. A domestic corporation was registered with the BIR on January 1, 2015. What year would
the first MCIT is imposed on such corporation?
a. 2014 c. 2018
 b. 2017 d. 2019

SGC Corporation's computed normal income tax and MCIT, and creditable income taxes
withheld from 1st to 4th quarters including excess MCIT and excess withholding taxes from
prior year/s are as follows:
Excess
Quarter Normal Taxes Excess MCIT Withholding
Income Tax MCIT Withheld Prior Year Tax Prior Year
st
1 P 100,000 P 80,000 P 20,000 P 30,000 P 10,000
2nd 120,000 250,000 30,000 - -
rd
3 250,000 100,000 40,000 - -
4th 200,000 100,000 35,000 - -

42. How much is the income tax payable for the first quarter?
a. P 100,000 c. P 60,000
b. P 80,000 d. P 40,000
43. How much is the income tax payable for the second quarter?
a. P 330,000 c. P 100,000
b. P 230,00 0 d. P 80,000
44. How much is the income tax payable for the third quarter?
a. P 470,000 c. P 80,000
b. P 400,000 d. P 70,000
45. How much is the annual income tax payable?
a. P 670,000 c. P 165,000
b. P 505,000 d. P 100,000