Quiz 1-Introduction to Taxation

1. What is the theory of taxation? *Necessity

2. The Constitutional; exemption of non-stock, non-profit educational institutions
refers to 
a. Property tax and income tax
b. Income tax
c. Business tax
d. Real property tax
3. Which of the following statements is incorrect? *
a. Indirect double taxation violates the Constitutional provision of uniformity
and equal protection
b. All of the above
c. There is direct double taxation in taxing the income of the corporation
and again subject the portion of the income declared as dividend to final
tax
d. Indirect double taxation is legal as long as there is no violation of equal
protection and uniformity of the Constitution
4. Which does not properly describe the scope of taxation? *
a. Comprehensive
b. Discretionary
c. Supreme
d. Unlimited
5. Statement 1: Tax avoidance is a scheme used outside of those lawful means to
escape tax liability.
Statement 2: Tax avoidance is a tax saving device within the means sanctioned
by law, and, when availed of, it usually subjects the taxpayer to further or
additional civil or criminal liabilities 
a. Both statements are incorrect
b. Only statement 2 is correct
c. Only statement 1 is correct
d. Both statements are correct
6. The principal purpose of taxation is:
a. To raise revenue for governmental needs
b. To implement the police power of the state
c. To reduce excessive inequalities of wealth
d. To encourage the growth of home industries through the proper use of
tax incentives
7. The provisions in the Constitution regarding taxation
a. Grants and limitations to the power to tax
b. Limitations to the power to tax
c. Limitations against double taxation
d. Grants of the power to tax
8. Which of the following is not an inherent limitation of the power to tax? 
a. Tax should be levied for public purpose.
b. Taxation is limited to its territorial jurisdiction.
c. Tax laws shall be uniform and equitable.
d. Exemption of government agencies and instrumentalities.
9. The following are limitations of taxation:
A. Territoriality
B. Exemption of the government
C. For public purpose
D. Non-impairment of contracts
E. Non-delegation of the power to tax
Which of these are classified as both constitutional and inherent limitations?
a. D and E
b. C and E 
c. A and B
d. B and C
10.When a legislative body taxes person and property, rights and privileges under
the same taxable category at the same rate, this is referred to as compliance
with the constitutional limitation of: 
a. Equal protection clause
b. Equity
c. Uniformity
d. Due process
11.Taxation is exercised both by the legislative and executive branch of the
government. Which of the following is not the function of the Congress? 
a. Selecting the kind of tax
b. Assessment of tax liability 
c. Fixing amount of tax
d. Prescribing rules of taxation
12.Which of the following requires public improvement?
I. Taxation II. Police Power III. Eminent Domain 
III only
I only
I and III only
II and III only
13.After having been informed that most of the massage parlors in the city are
being used as fronts for prostitution, the Sanguniang Panlungsod of Manila
passed a tax ordinance subjecting massage parlors within its jurisdiction to
such "onerous taxes" that leave them no other alternatives but to stop
operating. The passage of the ordinance is a valid exercise of:
a. Eminent Domain
b. Police power 
c. Police power and power of taxation
d. Taxation
14.Which is mandatorily observed in implementing police power? 
a. Public use
b. All of these
c. Just compensation
d. Pubic interest
15.Which of the following powers is inherent or co-existent with the creation of the
government? 
a. Police power
b. All of these 
c. Taxation
d. Eminent domain
16.The following statements reflect the differences among the inherent powers
except: 
a. Eminent domain and police power do not require Constitutional grant,
but taxation, being a formidable power, requires constitutional grant.
b. Taxation, police power, and eminent domain are ways in which
government interferes with private rights and property.
c. The property taken under imminent domain and taxation are preserved
but that of police power is destroyed.
d. Only eminent domain can be exercised by private entities.
17.What is the basis of taxation? 
a. Public purpose 
b. Necessity
c. Constitutionality
d. Reciprocal duties of support and protection
18.With the country under incessant shortage of sugar, the Philippine Congress
enacted a law providing tax exemption and incentives to cane farmers without
the same granting to rice farmers who produce the staple food of the
Philippines. Is the new law valid? 
a. Yes, since sugar is more important than rice.
 b. Yes, since there is a valid classification of the taxpayers who would be
exempted from tax. 
c. No, because there is no uniformity in the grant of exemption.
d. No, since the grant of exemption ins construed against the taxpayers. 
19.No law granting any tax exemptions shall be passed without the concurrence of
a. Unanimous vote of all members of Congress
b. 3/4 vote of all members of Congress
c. Majority of all members of Congress
d. 2/3 vote of all members of Congress
20.Which of the following acts in taxation is administrative by nature? 
a. Fixing the allocation of the amount to be collected between the local
government and the national government
b. Determination of the amount to be imposed
c. Determining the purpose of the tax to impose
d. Levy or distraint of taxpayer’s property for tax delinquency
21.Which is considered in the exercise of eminent domain? 
a. Public use
b. Neither a nor b
c. Just compensation
d. Both a and b
22.The power to enforce proposal contribution from the people for the support of
the government is 
a. Police power
b. Taxation
c. Eminent domain
d. Exploitation
23.When exemption from a tax imposition is silent or not clearly stated, which is
true? 
a. Exemption still applies since this is an instance of exemption by
omission.
b. Taxation applies since exemption are construed against the taxpayer.
c. Taxation applies since exemptions are construed against the
government.
d. Exemption applies since obligation arising from law cannot be presumed
and hence construed against the government
24.Which is the most incorrect statement regarding taxes? 
a. The obligation to pay tax does not rest upon the privilege enjoyed by or
the protection afforded to the citizen of the government, but upon the
necessity of money for the support of the state.
b. Taxes should be collected without unnecessary delay, but its collection
should not be tainted with arbitrariness.
c. There should be personal benefit enjoyed from the government before
one is required to pay tax.
 d. Taxes are necessary for the continued existence of the government.
25.That courts cannot issue injunction against the government's effort to collect
taxes is justified by
a. the ability to pay theory
b. imprescriptibility of taxes
c. the doctrine of estoppel
d. the lifeblood doctrine
26.In order to phase out a huge deficit, the President of the Philippines passed a
law offering all taxpayers with previous tax delinquency to pay a minimum tax in
exchange for relief from tax assessment in the period of delinquency. Is this a
valid exercise of taxation power? 
a. Yes, because the President is merely exercising his presidential
discretion.
b. No, because the power of taxation is non-delegated.
c. Yes, because the measure adopted sis ground upon necessity.
d. No, because only the Department of Finance can issue such ruling.
27.Magnifico's income from leasing his property reaches the maximum rate of tax
under the law. He donated one-half of his said property to a non-stock, non-
profit educational institution whose income and assets are actually, directly, and
exclusively used for educational purposes, and therefore qualified for tax
exemption under Article XIV, Section 4 (3) of the Constitution and Section 30
(h) of the Tax Code. Having thus transferred a portion of his said asset,
Magnifico succeeded in paying a lesser tax on the rental income derived from
his property under the lower tax bracket. Magnifico's action is considered/also
known as: 
a. Tax evasion
b. Tax avoidance
c. Shifting
d. None
28.One of the following is not a Constitutional limitation of the power of taxation? 
a. Exemption from taxes of revenues and assets of educational institutions,
including grants. endowments. donations and contributions
b. Exemption of the government from taxes 
c. Non-infringement of religious freedom and worship
d. Non-impairment of the jurisdiction of Supreme Court in taxes
29.An educational institution operated by a religious organization was being
required by a local government to pay real property tax. Is the assessment
valid? 
a. No, with respect to all properties held by such educational institution.
b. No, with respect to properties not actually devoted to educational
purposes.
c. Yes, with respect to all properties held by such educational institution.
 d. Yes, with respect to properties not actually devoted to educational
purposes.
30.Which of the following statements correctly describe "Equal protection" clause
of the Constitution regarding the government's power to tax?I. All persons
subject to legislation shall be treated alike under similar circumstances and
conditions,both in the privileges conferred and liabilities imposed.II. The
purpose is to protect persons belonging to the same class against intentional
and arbitrary discrimination.III. There is denial of equal protection of laws if
there is discrimination in the implementation of tax laws. 
a. I and III only
b. I, II and III
c. I and II only
d. II and III only
Quiz 2-Introduction to Taxation
1. Which of the following is a local tax? *
a. VAT
b. real property tax
c. documentary stamp tax
d. other percentage tax
2. Which of the following distinguishes license from tax? *
a. Unlimited in imposition
b. Imposed for revenue
c. Does not renders business illegal
d. Pre-activity in application
3. Which is not an excise tax? *
a. income tax
b. community tax
c. estate tax
d. occupation tax
4. Which is an indirect tax? *
a. VAT
b. donor's tax
c. income tax
d. real property tax
5. Tax rulings are issued by the: *
a. Secretary of Finance
b. Supreme Court
c. Court of Tax Appeals
d. Commissioner of Internal Revenue
6. Which of the following is limited in application? *
a. tax laws
b. revenue regulations
c. tax treaties
 d. bir ruling
7. Which issues revenue regulations? *
a. Department of Finance
b. Congress
c. Commissioner of Internal Revenue
d. Commissioner of Customs
8. Which of the following is not a source of our tax laws?
I. Supreme Court Judicial Decisions
II. SEC Regulations and Rulings
III. Bureau of Customs Memorandum Orders
IV. Administrative rules and regulations
V. Legislations, tax treaties and tax ordinances
VI. Opinion of authors *
a. II, III and VI only
b. II, III and IV only
c. II and VI only
d. None of the above
9. The Philippine income tax system has the following features, except *
a. Comprehensive tax situs by using the nationality, residence, and source
rules
b. The individual income tax system is mainly progressive in nature
c. Indirect rather than direct system
d. Semi-global and semi-schedular system
10. Tax of a fix amount imposed among all persons residing within a specified
territory without regard to their property or occupation they may be engage *
a. Personal, poll or capitation tax
b. Property
c. Excise tax
d. Regressive
11. One is not a direct tax *
a. Immigration tax
b. Transfer tax
c. Income tax
d. Value-added tax
12. Contis is a mining operator. The tax he has to pay is based on the actual value of
the gross output or mineral products extracted is *
a. Mining tax
b. Royalties
c. C. Rental
d. Ad-valorem tax
13. Tax as distinguished from license fee *
a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation
14. 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
15. Tax as to rates excludes: *
a. specific tax
b. progressive tax
c. mixed tax
d. proportional tax
16. As to subject matter, taxes do not include: *
a. property tax
b. regulatory tax
c. poll tax
d. excise tax
17. Which is not a characteristic of tax? *
a. It is an enforced contribution.
b. It is generally payable in money.
c. It is subject to assignment.
d. It is levied by the law-making body of the State having jurisdiction.
18. A. Tax must not violate Constitutional and inherent limitation.
B. Tax must be uniform and equitable.
C .Tax must be for public purpose.
D. Tax must be levied by the lawmaking body.
E. Tax must be proportionate in character.
F. Tax is generally payable in money.
Which of the above is/are not an essential characteristic of a valid tax? *
a. All of the above
b. All except F
c. None, except F
d. None of the above
19. Which is intended to regulate conduct? *
a. Penalty
b. License
c. Police power
d. Toll
20. Debt as compared to tax *
a. It is a demand of ownership.
b. It is not assignable.
c. It will not cause imprisonment when not paid.
d. It is generally payable in money.
21. Which is not an application of a principle of a sound tax system? *
 a. Taxes should adjust based on government needs.
b. Taxation should be progressive.
c. Taxation should encourage convenient compliance.
d. None of these
22. By which principle of a sound tax system is the elasticity in tax rates justified? *
a. Theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. All of these
23. Which one of the following is the BIR not empowered to do? *
a. Assess national taxes
b. Collect income, business and transfer taxes
c. Assess and collect local taxes
d. Enforce forfeitures, penalties and fines
24. Which principle demands that tax should be just, reasonable, and fair? *
a. Theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Economic consistency
25. As to tax payments measures, which of the following threshold for the
qualification as large taxpayer is incorrect? *
a. Annual income tax payments of P1M.
b. Annual value added tax payments of P1M.
c. Quarterly percentage tax payments of P200,000.
d. Annual documentary stamp tax of P1M
Quiz 3
1. Which is taxable item of income? *
a. Increase in number of a herd of animals
b. Compensation for personal injuries
c. Moral damages
d. Interest on moral damages
2. Which is not subject to income tax? *
a. Donation
b. Sale of service
c. Sale of goods
d. Barter of goods
3. The total consideration received from the sale of goods at a gain represents *
a. Return on capital
b. Return of capital
c. Either a orb
d. Both a and b
4. Which of the following is not a constructive receipt of income? *
a. Forgiveness of indebtedness in consideration of service
b. Matured detachable interest coupons
c. Deposit of income to taxpayer’s bank accounts
 d. Cash salary of an employee
5. A resident alien naturalized in accordance with Philippine Laws is a *
a. Resident citizen
b. Resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
6. A Japanese who is staying in the Philippines for 183 days is a *
a. Resident alien
b. Non-resident alien
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business
7. Which is taxable on world income? *
a. Resident corporation
b. Non-resident citizen
c. Resident citizen
d. Resident alien
8. A foreign corporation which operates a branch in the Philippines is a *
a. Domestic corporation
b. Resident corporation
c. Non-resident corporation
d. De jure corporation
9. Which is not an income taxpayer? *
a. Non-resident foreign corporation
b. Non-resident alien not engaged in trade or business
c. Joint venture engaged in energy operation pursuant to a service contract
with the government
d. Irrevocable trusts
10. Which statement is correct regarding situs of income? *
a. The gain on the sale of real property is earned in the location of the
property.
b. The gain on sale of any property is earned in the place of sale.
c. Merchandising income is earned in the residence of the proprietor.
d. Manufacturing income is earned in the place of sale.

Miguel has the following items of income:

Philippines Abroad
Business income 200,000 100,000
Professional fees 100,000 50,000
Compensation income 400,000 –
Rent income 300,000 200,000
Interest income 30,000 40,000
11. Assuming Miguel is a resident citizen, compute the total income subject to
Philippine income tax.
 a. 1,390,000
b. 1,180,000
c. 1,030,000
d. 1,420,000
12. Assuming Miguel is a resident alien, compute the total income subject to
Philippine income tax. *
a. 1,420,000
b. 1,180,000
c. 1,030,000
d. 390,000
13. Assuming Miguel is a resident corporation, compute the total income subject to
Philippine income tax. *
a. 1,420,000
b. 1,180,000
c. 1,030,000
d. 390,000
14. Assuming Miguel is a domestic corporation, compute the total income subject to
Philippine income tax. *
a. 390,000
b. 1,180,000
c. 1,030,000
d. 1,420,000
15. Mark received a total sum of P42,000 from his employer consisting of the
following:
•P5,000 reimbursements for employer’s expenses paid by Mark
•P15,000 payment of Mark’s computer set purchased by the employer
•P22,000 monthly salary.
Mark’s computer set cost him P12,000. Compute the total return on capital which
can be subjected to income tax. *
a. 42,000
b. 37,000
c. 25,000
d. 22,000
16. An American citizen has been staying in the Philippines since August 15,2021.
What would be his taxpayer classification for the year 2021 and 2022,
respectively? *
a. Non-resident alien engaged in trade or business; resident alien
b. Non-resident alien not engaged in trade or business; resident citizen
c. Non-resident alien engaged in trade or business; resident citizen
d. Non-resident alien not engaged in trade or business; resident alien
Quiz 4
1. A corporation reporting on a fiscal year ending every March 31 shall file its 2021
income tax return not later than *
a. April 15,2021
b. June 15,2021
 c. July 15,2021
d. April 15,2022
2. Mr. Joe started business on July 15, 2021. What should be the coverage of his
2021 income tax return? *
a. January 1 to July 15,2021
b. July 15, 2021 to December 31,2021
c. July 16, 2021 to July 15,2022
d. January 1 to December 31,2021
3. Stormborn Co. started business on April 5,2021 and opted to report income tax
on a fiscal year ending every October 31. Stormborn’s first income tax return
shall cover *
a. April 6,2021 to October 31,2021
b. April 5,2021 to October 31,2021
c. April 5,2021 to December 31,2021
d. April 5, 2021 to April 5,2022
4. Myra Co. reports on a calendar year. On August 15,2021, it stopped business
due to persistent losses. Myra Co.’s last income tax return shall cover *
a. January 1 to December 31,2021
b. January 1 to August 15,2021
c. August 15, 2020 to August 15,2021
d. August 15 to December 31,2021
5. Effective July 2,2022, Paraiso Co. changed its fiscal year ending every march 31
to anther fiscal year ending every August 31. An adjustment return shall be filed
covering the period *
a. April 1 to July 2,2022
b. April 1 to July 1,2022
c. April 1 to August 31,2022
d. July 3 to August 31,2022
Tokyo Co. reported the following data for 2021:
•Total net sales made to customers were P2,000,000 in cash.
•Goods purchased for sale totaled P1,200,000 in cash.
Beginning and ending inventory of goods for sale, respectively, were P200,000 and
P300,000.
•1-year advanced rent of P30,000 to apply for 2022 was received from sublease
contract.
•P40,000 total interest income from customers promissory note earned. P30,000 of this
was collected.
•Unrealized foreign exchange gains from foreign currency receivables totaled P60,000.
6. Using cash basis, compute the total income subject to income tax. *
a. P990,000
b. P960,000
c. P750,000
 d. P690,000

7. Using accrual basis, compute the total income subject to income tax *
a. P1,060,000
b. P1,000,000
c. P960,000
d. P970,000
Gab is a dealer of household appliances. He reported the following in 2021 and 20222:

Gab’s 2022 collection is inclusive of P100,000 accounts from 2021.

8. Using the installment method, compute Gab’s gross income subject to income
tax in 2022.
a. P360,000
b. P320,000
c. P250,000
d. P275,000
9. Using the accrual basis of accounting, compute Gab’s gross income subject to
income tax in 2022.
a. P360,000
b. P320,000
c. P250,000
d. P275,000
Parrot Inc. constructs residential properties for clients and reports income by the
percentage of completion method. In 2021, Parrot Inc. started a P2,000,000
construction contract. Details of his 2021 and 2022 construction follow: *
10. Compute the construction income in 2021 and 2022.
a. P200,000; P560,000
b. P200,000; P400,000
c. P400,000; P400,000
d. P400,000; P560,000
11. Max entered into a 40-year lease contract with Perlas. Per agreement, Max will
construct a building on Perlas lot and operate the same for 40 years. Ownership
of the building will transfer to Perlas upon the termination of the lease. The lease
will not commence until the building is completed. Max completed the building at
a total cost of P40,000,000 on January 1,2022. The building is expected to be
used over 50 years. Compute Perlas income form the leasehold improvement to
be reported in 2022 using the spread-out method. *
a. P200,000
b. P4,000,000
c. P8,000,000
 d. P32,000,000
12. In the immediately preceding problem, assume that the building was completed
on July 1,2022, what is the income using outright method. *
a. P4,000,000
b. P8,000,000
c. P 32,000,000
d. P 40,000,000
13. A taxpayer received a notice from the BIR to file his 2020 income tax return not
later than January 15,2022. The tax due per his return is P100,000. What is the
total surcharge penalty? *
a. P 0
b. P 20,000
c. P 25,000
d. P 50,000
14. What is his total interest penalty? *
a. P 6,500
b. P 7,900
c. P 9,041
d. P 15,068
15. Compute the compromise penalty. *
a. P 10,000
b. P 15,000
c. P 20,000
d. P 30,000
Quiz 5
A taxpayer has the following data during the year. All are gross amount. Compute for
final tax for each item.

1. Interest on bank deposit *

1,000
2. Interest on 6-year time deposit *
0
3. Yield in a deposit substitute *
2,600
4. Winnings in raffle draw by P&G *
20,000
5. Prize won in a fiesta dance contest *
0
6. Dividend received from C Corp., a domestic corporation *
600
7. Lotto winnings *
0
8. PCSO winnings *
100,000
9. Royalty from books sold *
1,500

10. Prize won in a singing contest *

5,000
11. Royalty from franchise of his food cart *
10,000
12. Prize received for his achievement as most prominent artist of 2018 after being
nominated by his fans *
0
13. Prize won when he placed 2nd in a local badminton tournament sanctioned by
the Philippine Olympic Committee *
0
14. Prize won as Mr. Universe, 2021 1st Runner Up *
60,000
15. Won cash during the 25th Anniversary Raffle Draw of “Ang Probinsyano” *
30,000
16. Statement 1: Passive incomes are subject to separate and final taxes. Statement
2: Passive incomes are included in the computation of taxable income from
compensation or business/professional income. *
a. True, True
b. False, False
c. True, False
d. False, True
17. Which of the following statements is correct?
I. Beginning January, 1 2018, PCSO/Lotto winnings of not more than Php 10,000
received by citizens, residents and non-resident aliens engaged in trade or business
are exempt from income tax.
II. Beginning January 1, 2018, PCSO/Lotto winnings of more than 10,000 received
by citizens, residents and non-resident aliens engaged in trade or business are
subject to 20% final withholding tax.
III. Beginning January 1, 2018, PCSO/Lotto winnings of not more than 10,000
received by non-resident aliens not engaged in trade or business are exempt from
income tax. IV. Beginning January 1 2018, PCSO/Lotto winnings of more than
10,000 received by non-resident aliens not engaged in trade or business are exempt
from income tax. *
a. I only
b. I and II only
c. I and IV only
d. All of the above
17. The following winnings are exempt from income tax prior to the effectivity of R.A.
No. 10963 (Train Law), except? *
a. Lotto winnings
b. Winnings from PCSO
c. Winnings from raffle of a private company
d. None of the choices
18. Taguro, a resident citizen, won $1,000,000 from the US lottery. The lottery
winning is *
a. exempted from tax
 b. subject to 20% final tax
c. subject to 10% final tax
d. subject to regular tax
19. A taxpayer wants to manually file his Monthly Remittance Return of Final Income
Tax Withheld for the month of February 2020. What is the deadline for the
return? *
a. February 14, 2020
b. February 28, 2020
c. March 10, 2020
d. April 15, 2020
e. None of the above
20. Mr. Simon, a resident citizen, received P100, 000 dividend income from Vodka,
Inc., a domestic corporation. How much final tax must have been withheld by
Vodka, Inc.? *
a. P 0
b. P 11, 111
c. P 20, 000
d. P 25, 000
e. None of the above
21. During 2020, SPV reported P3,000,000 profit and declared P1,000,000 in
dividends. How much final tax will be withheld from the dividend distribution to
Tacloban Corporation? *
a. P 100, 000
b. P 30, 000
c. P 90, 000
d. P 0
e. None of the above
22. Mr. Corona submitted a sworn statement regarding the alleged tax evasion
practices of Chili Corporation. This led the BIR to recover P20,000,000 unpaid
taxes. How much net tax informer’s reward shall be paid to Mr. Corona? *
a. P 1,800,000
b. P 1,600,000
c. P 1,000,000
d. P 900,000
e. None of the above
23. Ms. Gynes owns 40% of the capital and profits of Chess Ventures, a business
partnership engaged in the trade of tourist souvenirs. Chess Ventures reported
P200, 000 net income in 2020. Compute the total final tax to be withheld by the
partnership on Gina’s profit sharing. *
a. P 0
b. P 8,000
c. P 10, 000
d. P 20, 000
e. None of the above
 24. In reviewing its tax compliance, Rico Blancha noted that it failed to remit the
P90,000 final taxes it withheld for the month of February 2020. Compute the total
amount of taxes due including the penalties if Rico settles the obligation on
March 20, 2020. *
a. P 90, 000
b. P 112, 500
c. P 113, 000
d. P 128, 000
e. None of the above
Quiz 6
1. Principal Residence is meant the dwelling house, including the land on which its
stands, where the husband and wife, or an unmarried individual, and members of
his family reside. *
a. True
b. False
2. Shares of stock held as an investment is subject to capital gains tax regardless of
the manner of sale. *
a. True
b. False
3. There will be a capital gains tax on the sale of real property, other than principal
residence, held as a capital asset even if the transaction resulted to a loss. *
a. True
b. False
4. Proceeds from sale of principal residence is exempted from capital gain taxation
if utilized within 1 year and 6 months from the date of sale. *
a. True
b. False
5. A taxpayer is absolutely exempted from capital gains tax in a sale of principal
residence for P5,000,000 even if only P4,500,000 was used in the construction of
his new house. *
a. True
b. False
6. Depreciable property used in trade or business is an ordinary asset. *
a. True
b. False
7. The excess of the selling price over cost of an ordinary asset sold is called
ordinary gain. *
a. True
b. False
8. Assets generally held for investment are classified as capital assets. *
a. True
b. False
9. The fixed tax rate used in computing for capital gain tax is 6% regardless of the
property sold. *
a. True
 b. False
10. Both capital gain tax from sale of shares and real property is subject to
withholding. *
a. True
b. False
11. Land and building are real properties. *
a. True
b. False

12. A property purchased for future use in business is an ordinary asset even though
this purpose is later thwarted by circumstances beyond the taxpayers control. *
a. True
b. False
13. Taxpayers habitually engaged in real estate business include those registered
with the HLURB or HUDCC as dealer or developer or those with at least 6
taxable real estate sales transactions in the preceding year. *
a. True
b. False
14. Taxpayers engaged in real estate business includes real estate dealer, real
estate developer, real estate lessor and taxpayers habitually engaged in real
estate business. *
a. True
b. False
15. Change in business from real estate to non-real estate business shall change the
classification of ordinary assets previously held. *
a. True
b. False
16. Real properties used by an exempt corporation in its exempt operations are
considered capital assets. *
a. True
b. False
17. A depreciable asset is an ordinary asset but if it is fully depreciated, or there is a
failure to take depreciation during the period of ownership it is capital asset. *
a. True
b. False
18. The classification of property transferred by sale, barter or exchange, inheritance,
donation, or declaration of property dividends shall depend on whether or not the
acquirer uses it in business. *
a. True
b. False
19. Discontinuance of the active use of the property change its character previously
established as a business property. *
a. True
b. False
 20. Properties classified as ordinary assets for being used in business by a taxpayer
not engaged in the real estate business are automatically converted to capital
assets upon showing of proof that the same have not been used in business for
more than 2 years prior to the consummation of the taxable transaction involving
such property. *
a. True
b. False

II. Computation
21. Mr. Rico, a resident citizen, has the following transactions:

22. CGT on June 15 sale *

900
23. CGT on July 2 sale *
19,500
24. Complete this table

25. CGT on sale of rest house *

192,000
26. CGT on sale of idle land *
126,000
27. CGT on sale of principal residence *
0
 28. Perri sold a vacant agricultural land for P5,000,000. The land was previously
purchased by Perri at P4,000,000 and had an appraisal value of P8,000,000 and
zonal value of P7,000,000. The property had a fair value of P6,000,000 in
Provincial Assessor's Office and an assessed value of P2,400,000. Compute for
the CGT. *
420,000
29. A real property dealer sold a condo unit costing P1,200,000 to a client for
P1,500,000.The unit has a fair value of P1,800,000 at the date of sale. Compute
for CGT. *
0

The following capital gains and losses resulted from the sale of shares of stock held as
capital assets:
Capital gains/(losses)
January 1,2020 sale P90,000
March 1,2020 sale (10,000)
June 1, 2020 sale 80,000
30. CGT on January 1 *
13,500
31. CGT on March 1 *
0
32. Final CGT payable/(refundable) *
0
Quiz 7
1. Items of non-operating income earned by self-employed individuals are added at
the net income from operations. *
a. True
b. False
2. The use of the progressive tax table indicates that there is no tax on the
firstP250,000 of the taxable income, 20% on the next P150,000, 25% on the
nextP400,000, 30% on the next P1,200,000, 32% on the next P6,000,000 and
35% on succeeding amounts *
a. True
b. False
3. The progressive tax table is applied to all individuals including non-resident
aliens not engaged in trade or business. *
a. True
b. False
4. The corporate income tax rate is an ad valorem tax. *
a. True
b. False
5. A certificate of independent CPA is required as attachment if annual receipts
exceed P3,000,000. *
a. True
b. False
6. Income tax returns are required to be filed by taxpayers who are engaged in
business. *
a. True
b. False
7. Exempt corporations are still required to file income tax returns despite absence
of a tax liability. *
a. True
b. False
8. All purely employed individuals are required to file BIR Form 1700. *
a. True
b. False
9. When a mixed income earner chooses the 8% optional income tax, the taxable
compensation income is taxed using the progressive tax table. *
a. True
b. False
10. When an individual taxpayer chooses the 8% optional income tax, theP250,000
threshold is always deducted to the net sales/receipts to serve as the basis for
the income tax due. *
a. True
b. False
11. There is no need to pay the percentage tax if the taxpayer opts to be taxed at the
8% optional rate. *
a. True
b. False
12. The choice of availing the 8% income tax should be signified on the first quarter
returns. *
a. True
b. False
13. Which is a feature of the regular income taxation? *
a. Quarterly tax
b. Final withholding tax
c. Creditable withholding tax
d. Gross income tax
14. The distinction between operating and non-operating income is not required in
the ITR of *
a. Self-employed individuals in business
b. Mixed income earners
c. Self-employed professionals
d. Purely employed individuals
 15. Who cannot claim deductions? *
a. Self-employed individuals in business
b. Mixed income earners
c. Self-employed professionals
d. Purely employed individuals
16. Who is not required to file quarterly income tax declarations? *
a. Self-employed individuals in business
b. Mixed income earners
c. Self-employed professionals
d. Purely employed individuals
17. The BIR Form 1701 is not intended for *
a. Purely self-employed individuals in business
b. Mixed income earners
c. Estates
d. Trusts
18. Which form is applicable to corporate taxpayers whose income are subject to
different rates? *
a. 1702RT
b. 1702MX
c. 1702EX
d. 1702A
Brave Corporation has the following information for the quarters of 2021.
 19. Q1-Total Gross Income *
220,000
20. Q2-Total Gross Income *
205,000
21. Q3-Total Gross Income *
245,000
22. Annual-Total Gross Income *
1,020,000
23. Q1-Taxable Income for this Quarter *
110,000
24. Q2-Taxable Income for this Quarter *
65,000
25. Q3-Taxable Income for this Quarter *
95,000
26. Q1-Total Taxable Income *
110,000
27. Q2-Total Taxable Income *
175,000
28. Q3-Total Taxable Income *
270,000
29. Annual-Total Taxable Income *
440,000
30. Q1-Tax Payable *
27,500
31. Q2-Tax Payable *
16,250
32. Q3-Tax Payable *
51,250
33. Annual-Tax Payable *
58,750
Zendaya signified her intention to be taxed at 8% optional rate on the first quarterly ITR.
The following are reported for each quarter.

34. Q1 1701Q tax payable *

32,000
35. Q2 1701Q tax payable *
56,000
 36. Q3 1701Q tax payable *
446,800
37. Annual 1701 tax payable *
37,200
Quiz 8
1. Physical, exemplary and moral damages except damages except damages as
loss of profit are not taxable. *
a. True
b. False
2. GSIS and SSS benefits are included in gross income to the extent they
exceedP90,000. *
a. True
b. False
3. A BMBE must have net assets not exceeding P3,000,000. *
a. True
b. False
4. The proceeds of life insurance received by employer from insurance policy
coverage taken and paid by such employer constitute taxable income. *
a. True
b. False
5. An employee must have rendered a continuous 10 years of service to avail
exemption for retirement benefit. *
a. True
b. False
6. If the minimum wage earner earns other income subject to regular income tax,
his statutory minimum wage becomes taxable. *
a. True
b. False
7. The employer’s share to SSS, PhilHealth and HDMF contributions are an
exclusion to gross income. *
a. True
b. False
8. Cooperatives, regardless of their classification, are taxable on income from their
unrelated activities. *
a. True
b. False
9. Income subject to treaty obligation binding upon the Government of the
Philippines is exempted from income taxation. *
a. True
b. False
10. Termination pay for any cause beyond the control of an employee is not subject
to tax, except I dismissal is with a cause. *
a. True
b. False
 11. Actual liquidated damages are taxable. *
a. True
b. False
12. Income derived by foreign government in the Philippines is taxable. *
a. True
b. False
13. Donated income is included in the gross income of the donee. *
a. True
b. False
14. A general professional partnership can be registered as a BMBE. *
a. True
b. False
15. Benefits of veterans of war or retired US army personnel are exclusions. *
a. True
b. False
16. Hazard pay of minimum wage earner are exclusions. *
a. True
b. False
17. Laundry service income of a minimum wage earner are exclusions. *
a. True
b. False
18. Income from illegal gambling are exclusions. *
a. True
b. False
19. Interest income on peso time deposits are exclusions. *
a. True
b. False
20. Social security benefit received by a balikbayan from employer abroad are
exclusions. *
a. True
b. False
II. Problem Solving
Trina is a Filipino citizen residing in Australia. She earned the following during the
taxable year: P900,000 from compensation, P40,000 interest income from EFCDU,
P60,000 dividends from a domestic corporation. The interest income from EFCDU has a
resident co-depositor.
21. How much of the P1,000,000 should be excluded from gross income? *
100,000
Renz, a minimum wage earner, reveals the following income and expenses during the
taxable year. *
 22. .

115,500
23. WEE Company has three employees retiring on June 30, 2020. All of these
employees rendered a continuous service since being hired by the company. No
one has previously availed of tax exemption on retirement benefits and WEE
maintains a reasonable retirement benefit plan. Each receives an equivalent of
150% if his monthly salary in every full year of service. *

24. Non-Taxable-P. Wanglu

0
25. Non-Taxable-F. Qureshi *
0
26. Non-Taxable-R. Rastogi *
960,000
Mr. Robinson, an entrepreneur, met an accident and was able to claim the following
damages. *

27. How much of the damages is non-taxable?

130,000
The following amounts were received by the heir of deceased employee from his
employer: *

28. How much of the receipts is non-taxable?

610,000
29. How much is the total exclusion from gross income subject to regular tax? *

1,400,000
MACOOPA, a multi-purpose credit cooperative, had the following income during the
taxable year. *

30. How much of the income is non-taxable?

(400K + 20k +18k) = 438,000

31. Total inclusion = 60,000

Miss Flor, received the following during the year. *

32. How much is taxable to Miss Flor?

30,000
Quiz 9
1. Corporate prizes are exclusions in gross income subject to final tax but are
inclusions in gross income subject to regular income tax. *
a. True
b. False
2. The refund or recovery of non-deductible taxes shall not be reverted back to
gross income. *
a. True
b. False
3. In terms of partnerships, joint ventures and co-ownerships, shares in their net
income are subject to regular tax is the entity is taxable. *
a. True
b. False
4. Passive income earned abroad by a resident citizen that has been subjected to
foreign final tax shall not anymore be taxed in the Philippines. *
a. True
b. False
5. Capital gains are, in general, subject to capital gains tax, therefore, are not
inclusions in gross income for regular income tax. *
a. True
b. False
6. The interest income from bonds issued by banks is subject to final tax. *
a. True
b. False
7. When stock dividends received are of a different class from shares previously
acquired, the stock dividends are taxable income. *
a. True
b. False
8. Income that is not realized is taxable. *
a. True
b. False
9. Gross income includes all income from whatever sources whether legal or illegal.
a. True
b. False
10. If debt is cancelled due to services rendered by the debtor, the basis of tax is the
value of the services rendered. *
a. True
b. False
11. The cancellation of a taxpayer’s indebtedness is an income unless such
cancellation is intended as a gift. *
a. True
b. False
12. The amount of bad debts which resulted to reduction of taxable income will
become a taxable income in the subsequent year when such is eventually
recovered. *
a. True
b. False
 13. If the advance rental is received as a security deposit without restriction, then
such amount should be excluded in the determination of rental income. *
a. True
b. False
14. Income received under a mistake of fact or law is to be included as part of gross
taxable income. *
a. True
b. False
15. Income that is not realized is not taxable, but illegal income is taxable. *
a. True
b. False
II. Problem Solving
Valerian reported the following income during the year.
16. Determine the total amount of gross income if Valerian is a:

17. Domestic corporation *

800k(400k + 300k)+(70k+30k)
18. Resident Citizen *
850,000
19. Resident Alien *
400,000
20. Resident Foreign Corporation *
400,000
Mr. Sam is a famous celebrity doctor. He is a VAT taxpayer and is subject to
10%expanded withholding tax. The following are his items of income and expenses
during the year. *

21. Compute for his tax due.

4,507,000
Mang Juan has several interests in various businesses and partnerships. He received
the following income during the year. *

22. How much is the total income to be reported in gross income?

(80k+100k) = 180,000

WEB received the dividends from the following sources:

23. Compute the total income to be reported as gross income if WEB is a:

24. Resident Citizen *

200,000
24. Non-resident Citizen *
50,000
25. Domestic Corporation *
200, 000
26. Resident Foreign Corporation *
200,000
In 2018, Solo Company wrote-off P80,000 worth of receivables. These were fully
recovered in2021. The following were the net income/(loss) before bad debts expense.

27. Compute for the 2021 taxable income assuming the net income before bad debts
expense during 2018 is P120,000. *
160,000
28. Compute for the 2021 taxable income assuming the net income before bad debts
expense during 2018 is P50,000. *
170,000
 29. Compute for the 2021 taxable income assuming the net income before bad debts
expense during 2018 is P70,000. *
180,000
Additional reviewer
1. Which of the following income is subjected to a monthly creditable withholding
tax?
a. Winnings
b. Income from trading
c. Salaries
d. 13th month pay

e. hese represent reductions

of resources due to
unintended destruction or
f. deprivation of things
2. These represent reductions of resources due to unintended destruction or
deprivation of things - Losses
3. It refers to the disposal through sale or exchange of ordinary assets or capital
assets – Dealings in Property
4. Which of the following taxes incurred in the conduct of business is not allowed as
deduction from business income?
a. Documentary stamp tax
b. Foreign income tax claimed as tax credit
c. Import duties
d. Local business taxes
5. Which of the following interest expense is deductible in full?
a. Interest paid in advance
b. Interest expense which is 20% of the interest income for the same year
c. Interest on tax delinquency
d. Interest on personal loan
6. This income tax system is a combination of gross compensation income and/or
net income from business, trade or profession to arrive at the total income
subject to tabular tax rates. - Global Income Tax System
7. Which of the following is required to be filed with quarterly income tax return?
a. Passive income
b. Capital gain
c. Compensation income
d. Business income
8. Which of the following is a subject to a creditable withholding tax at source?
 a. Gain on sale of shares of stock
b. Royalties
c. Sale of family home
d. Holiday pay
9. All of the following taxes are classified as income taxes, except:
a. 20% royalty tax
b. ½ of 1% tax on the selling price of shares of stock traded in the local stock
exchange
c. 6% capital gains tax on sale of land
d. 10% dividend tax

10. It is a sale or disposition of stock or securities where substantially identical

securities are acquired or purchased within a 61-day period, beginning 30 days
before the sale and ending 30 days after the sale. – Wash sale
11. One of the following is not creditable against the total computed tax per ITR
a. Income tax paid for the first three quarters for the business per ITR
b. Creditable withholding tax on compensation
c. Final withholding tax
d. Foreign income tax paid by the resident citizen
12. If the casual loss on business property is partial, the deductible loss is the
a. Actual cost of damaged on business property
b. Replacement cost of the damaged property
c. Lower amount between a and c
d. Book value of the damaged property
13. Interest on loans granted by the employer to employee are taxable fringe benefit
when the interest rate is
a. Lower than 12%
b. 18% and above
c. Above 12%
d. 12%
14. Which of the following is not true?
a. Fringe benefit tax is a creditable withholding tax
b. Fringe benefit tax of a managerial employee is subjected to final income
tax
c. Fringe benefit tax rate is 32%
d. Fringe benefit tax is an income tax
15. The monetary value of fringe benefit if given in money is:
a. Depreciated value
b. Fair market value or zonal value whichever is higher
c. Amount granted
d. Acquisition cost plus other incidental costs
16. It represents basic interest of ownership in a corporation. Stockholders holding
common shares are called common stockholders - Common Stock
17. Which of the following will be an appropriate deductible expense for the
exhaustion of intangible asset of wasting asset corporation?
 a. Depreciation expense
b. Amortization expense
c. Depletion expense
d. Exploration expense
18. It must be imposed directly upon the taxpayer. – Tax
19. The taxpayer’s income tax is fixed or computed based on the gross income. The
usual allowable deductions are completely disregarded in computing this income
tax. - Gross Income Tax System
20. As a rule, business expenses are deductible only if they are incurred in relation to
the business income taxable in the Philippines. If a business expense could not
be traced whether incurred within or not, such expense shall be allocated based
on the gross income within and without. - Situs of Expenses
21. The gains or losses on short sales are capital asset transactions. - Short Sales
22. Those who are citizens of the Philippines at the time of the adoption of the 1987
Philippine Constitution.- Filipino Citizen
23. “Any good, service, or other benefit furnished or granted by an employer, in cash
or in kind, in addition to basic salaries, to an individual.- Fringe Benefit
24. They provide current and future benefits in business operations - Capital
expenditures
25. Which of the following is deductible from related gross income?
a. Net operating loss carry-over
b. Loss on exchange of capital assets
c. Loss of business property due to theft
d. Worthless and written-off trade receivable
26. In general, which of the following incomes is not allowed to be reduced with
personal exemption
a. Passive income
b. Compensation income
c. Professional income
d. Business income
27. Which of the following is the correct amount of additional personal exemption?
a. 25,000 for each qualified dependent child
b. 25,000 for senior citizen
c. 8,000 for each qualified dependent child
d. 20,000 for each dependent sibling
28. Which of the following is classified as deductible loss?
a. Depreciation
b. All of the above
c. Allowance for bad debts
d. Embezzlement
29. Which of the following business travel expenses is not subjected to fringe benefit
tax?
a. Inland travel expense
b. Hotel accommodation for $300 per day
c. Cost of economy airplane ticket
d. All of the above
30. It is the exhaustion of the natural resources like mines, oil and gas wells due to
production. – Depletion expense
31. They are usually called “period cost” because they are related to a particular
period of time of business operation - Revenue Expenditures
32. It is a foreign-born person who is not qualified to acquire Philippine citizenship by
birth or after birth - Alien
33. A net taxable income of a nonresident alien sole proprietor of a cinematographic
film is subjected to a
a. 25% final tax
b. Normal tax of individuals
c. 32% normal corporate income tax
d. 10% special tax
34. Which of the following taxes included in the conduct of business is allowed as
deduction from business income?
a. Community tax
b. VAT
c. Withholding on wages of employees
d. Income tax
35. A taxpayer that allowed with both personal exemption and additional exemption
is a/an
a. Individual taxpayer
b. Estate and trusts
c. Partnership
d. Corporation
36. The following incomes are not allowed to deduct business expenses except
a. Compensation income
b. Passive income
c. Professional income
d. Capital gains
37. The following individual taxpayers are granted basic and additional personal
exemption except
a. Nonresident alien engaged in trade or business in the Philippines with tax
treaty reciprocity
b. Nonresident citizen
c. Partnership fully owned by resident Filipino citizen
d. Resident citizen
38. It is an activity intended to make profit – Business
39. Which of the following fringe benefit received by a managerial employee is
taxable with final income tax?
a. Educational scholarship related to trade
b. Free housing
c. Foreign travel on account of business convention
d. De minimis
40. It is a class of the stock refer to the shares of stock to be issued by the charter or
by-laws with respect to dividends and/or assets in case of liquidation over the
 remainder of the stocks of the corporation which are called common stock. –
Preferred Stock
41. Which value should be used as tax base to compute the fringe benefit on the
property assigned for the use of employers?
a. Fair market value of the property
b. Fringe benefit value
c. Cost of the property
d. Equivalent rental value of the property
42. It is a corporation’s own stock that has been issued and then reacquired but not
cancelled - Treasury stock

43. Which of the following is not included as entertainment, amusement and

recreation expenses of a business?
a. Fixed representation allowances of key officers subjected to WTH
b. Amusement and recreation expenses
c. Expenses incurred in accommodating company agents
d. Depreciation or rental facilities
44. Which of the following is a taxable fringe benefit?
a. Employer’s tax payment on behalf of the employee
b. 13th month pay and similar benefits in excess of 30,000php
c. Life insurance premium on the life of employee borne by the employer
d. All of the above
45. Which of the following amount of winnings/prizes is subjected to final tax of 20%?
a. 10,000 winnings earned within the Philippines
b. 10,000 winnings outside the Philippines
c. 1,000,000 Philippines Sweepstakes winnings
d. 9,000 first prize singing contest
46. Which of the following income is allowed to be reduced with itemized
deductions?
a. Compensation income
b. Business income
c. Capital gain
d. Passive income
47. It represents basic interest of ownership in a corporation. Stockholders holding
common shares are called common stockholders – Common stock
48. Which of the following is entitled to claim NOLCO?
a. OBU
b. Self-employed individual
c. Employees with respect to his compensation income
d. Foreign international carrier
49. Which of the following taxes are not allowed as deductions from reportable
grossincome, except
a. Capital gains tax
b. Stock transaction tax
c. Documentary stamp tax
 d. VAT
50. It is absorption of a corporation by another corporation, the latter retaining its own
name and identity and acquiring the assets, liabilities, franchises, and powers of
the former, and the absorbed corporation ceasing to exist as a separate juridical
person. – Merger

51. t refers to the disposal

through sale or exchange of
ordinary assets or capital
asse
52.