General Principles of Taxation A.

Where there are no constitutional restrictions, and provided

1. Taxation as distinguished from police power and power of
eminent domain.
A. Property is taken to promote the general welfare.
B. Maybe exercised only by the government.
C. Operates upon the whole citizenry.
D. There is generally no limit as to the amount that may be
imposed.
2. The following are constitutional limitations, except A. No
imprisonment for non-payment of poll tax.
B. Non-impairment of the obligation of contracts.
C. Rule of uniformity and equity in taxation.
D. Exemption from income tax of charitable institutions,
cemeteries, churches, personage or convents appurtenant
thereto, as well as all lands, buildings and improvements
actually, directly and exclusively used for religious,
charitable and educational purposes.
the subjects are within the territorial jurisdiction of the state,
Congress has unlimited discretion as to the persons, property
or occupations to be taxed.
B. In the absence of any constitutional prohibition, Congress
has the right to levy a tax of any amount it sees fit.
C. The discretion of Congress in imposing taxes extends to the
mode, method or kind of tax, unless restricted by the
constitution.
D. The sole arbiter of the purpose or which taxes shall be
levied is Congress, provided the purpose is public and the
courts may not review the levy of the tax to determine
whether or not the purpose is public.
9. Which of the following is a nature of taxation?
A. The power is granted by legislative action.
B. It is essentially an administrative function.
C. It is generally payable in money.
D. Without it the state can continue to exist.

3. Which of the following statements is correct? 10. Which of the following is not a determinant of the place of
A. The President is authorized to increase or decrease national taxation?
internal revenue tax rates. A. Source of the income
B. One of the nature of taxation is the reciprocal duties of B. Citizenship of the taxpayer
protection and support between the state and subjects thereof. C. Residence of the taxpayer
C. Every sovereign government has the inherent power to D. Amount of tax to be imposed
tax.
D. Income tax in an indirect tax. 11. Which of the following statements is not correct?
A. An inherent limitation of taxation may be disregarded by
4. A tax must be imposed for public purpose. Which of the the application of a constitutional limitation.
following is not a public purpose? B. The property of an educational institution operated by a
A. National defense religious order is exempt from property tax, but its income is
B. Public education subject to income tax.
C. Improvement of the sugar and coconut industries. C. The prohibition of delegation by the state of the power
D. Improvement of a subdivision road. of taxation will still allow the BIR to modify the rules in
time for filing of returns and payment of taxes.
5. Which is not an essential characteristic of a tax? D. The power of taxation is shared by the legislative and
A. It is unlimited as to amount. executive departments of the government.
B. It is payable in money.
C. It is proportionate in character. 12. Statement 1 – The point on which tax is originally
D. It is an enforced contribution. imposed is impact of taxation.
Statement 2 – Eminent domain is inferior to non- impairment
6. Special assessment is an enforced proportional contribution clause of the constitution.
from owners of land especially benefited by public Statement 3 – As a rule, taxes are subject to set-off or
improvement. Which one of the following is not considered as compensation.
one of its characteristics? Statement 4 – As a rule, provisions on the validity of tax
A. It is levied on land. exemptions are resolved liberally in favor of the taxpayer.
B. It is based on the government’s need of money to Statement 1 Statement 2 Statement 3 Statement 4
support its legitimate objectives. A. True False False True
C. It is not a personal liability of the persons assessed. B. False True True False
D. It is based solely on the benefit derived by the owners of C. True True False False
the land. D. False True True False

7. It is the privilege of not being imposed a financial 13. A tax system where the revenues are supplied mostly by
obligation to which others are subject. indirect taxes.
A. Tax incentive A. Schedular
B. Tax exemption B. Proportional
C. Tax amnesty C. Progressive
D. Tax credit D. Regressive
14. A tax system where the greater bulk of the tax revenues is
8. As to scope of the legislative power to tax, which is not derived by direct taxes.
correct?
A. Schedular D. Intellectual sensitivity
B. Proportional
C. Progressive 23. The sources of revenue as a whole, should be sufficient to
D. Regressive meet the demands of public expenditures.
A. Fiscal adequacy
15. This is an inherent limitation on the power of taxation. B. Equality or theoretical justice
A. Rule on uniformity and equity in taxation. C. Administrative feasibility
B. Due process of law and equal protection of the laws. D. Intellectual sensitivity
C. Non-impairment of the jurisdiction of the Supreme Court in
tax cases. 24. The tax laws must be capable of convenient, just and
D. Tax must be for the public purpose. effective administration.
A. Fiscal adequacy
16. This is a constitutional limitation on the power of taxation. B. Equality or theoretical justice
A. Tax laws must be applied within the territorial jurisdiction C. Administrative feasibility
of the state. D. Intellectual sensitivity
B. Exemption of government agencies and instrumentalities
from taxation. 25. Persons or things belonging to the same class shall be
C. No appropriation of public money for religious taxed at the same rate.
purposes. A Simplicity in taxation
D. Power to tax cannot be delegated to private persons or B. Reciprocity in taxation
entities. C. Equality in taxation
D. Uniformity in taxation
17. They exist independent of the constitution being
fundamental powers of the state, except 26. The tax should be proportional to the relative value of the
A. Power of taxation property to be taxed.
B. Police power A Simplicity in taxation
C. Power of imminent domain B. Reciprocity in taxation
D. Power of recall C. Equality in taxation
D. Uniformity in taxation
18. The power to acquire private property upon payment of
just compensation for public purpose 27.The following are the nature of taxation, except
A. Power of taxation A. Inherent in sovereignty
B. Police power B. Essentially legislative in character
C. Power of imminent domain C. Subject to inherent and constitutional limitation
D. Power of recall D. Subject to approval by the people.

19. The power to regulate liberty and property to promote the 28. It literally means “place of taxation”; the country that has
general welfare. the power and jurisdiction to levy and collect the tax.
A. Power of taxation A. Basis of taxation
B. Police power B. Situs of taxation
C. Power of imminent domain C. Scope of taxation
D. Power of recall D. Theory of taxation

20. The power to demand proportionate contributions from 29. The existence of the government is a necessity and that the
persons and property to defray the expenses of the state has the right to compel all individuals and property
government. within its limits to contribute
A. Power of taxation A. Basis of taxation
B. Police power B. Situs of taxation
C. Power of imminent domain C. Scope of taxation
D. Power of recall D. Theory of taxation

21. Basic Principles of a sound tax system, except 30. The reciprocal duties of support and protection between
A. Fiscal adequacy the people and the government.
B. Equality or theoretical justice A. Basis of taxation
C. Administrative feasibility B. Situs of taxation
D. Intellectual sensitivity C. Scope of taxation
D. Theory of taxation
22. The tax imposed should be proportionate to the taxpayer’s 31. Subject to inherent and constitutional limitations, the
ability to pay. power of taxation is regarded as supreme, plenary, unlimited
A. Fiscal adequacy and comprehensive.
B. Equality or theoretical justice A. Basis of taxation
C. Administrative feasibility B. Situs of taxation
C. Scope of taxation C. Avoidance
D. Theory of taxation D. Evasion

32. Our National Internal Revenue Laws are 40. The use of legal or permissible means to minimize or
A. Political in nature avoid taxes.
B. Penal in nature A. Exemption
C. Criminal in nature B. Shifting
D. Civil in nature C. Avoidance
D. Evasion
33. The levying or imposition of tax and the collection of the
tax are processes which constitute the taxation system. 41. Synonymous to tax evasion.
A. Basis of taxation A. Tax dodging
B. Aspects of taxation B. Tax minimization
C. Nature of taxation C. Tax exemption
D. Theory of taxation D. Tax evasion

34. The process or means by which the sovereign, through its 42. Synonymous to tax avoidance.
law-making body raises income to defray the expenses of the A. Tax dodging
government. B. Tax minimization
A. Toll C. Tax exemption
B. License fee D. Tax evasion
C. Taxation
D. Assessment 43. In every case of doubt, tax statutes are construed
A. Strictly against the government and the taxpayer.
35. Enforced proportional contributions from persons and B. Liberally in favor of the government and the taxpayer.
property levied by the state by virtue of its sovereignty for the C. Strictly against the government and liberally in favor of
support of the government and for all public needs. the taxpayer.
A. Toll D. Liberally in favor of the government and strictly against the
B. License fee taxpayer.
C. Taxes
D. Assessment 44. In every case of doubt, tax exemptions are construed
A. Strictly against the government and the taxpayer.
36. An escape from taxation where the tax burden is B. Liberally in favor of the government and the taxpayer.
transferred by the one on whom the tax is imposed or assessed C. Strictly against the government and liberally in favor of the
to another. taxpayer.
A. Shifting D. Liberally in favor of the government and strictly
B. Exemption against the taxpayer.
C. Transformation
D. Capitalization 45. In case of conflict between the Tax Code and the
Philippine Accounting Standards (PAS).
37. An escape from taxation where the producer or A. PAS shall prevail over the Tax Code.
manufacturer pays the tax and endeavors to recoup himself by B. Tax Code shall prevail over PAS.
improving his process of production thereby turning out his C. PAS and Tax Code shall be both disregarded.
units of products at a lower cost. D. The taxpayer may choose between the PAS or the Tax
A. Shifting Code.
B. Exemption
C. C. Transformation 46. Tax of a fixed amount imposed upon all persons residing
D. Capitalization within a specified territory without regard to their property or
occupation they may be engaged.
38. An escape from taxation where there is a reduction in the A. Personal, poll or capitation
price of the taxed object equal to the capitalized value of B. Property
future taxes which the taxpayer expects to be called upon to C. Excise
pay. D. Regressive
A. Shifting
B. Exemption 47. Tax imposed on personal or real property in proportion to
C. Transformation its value or on some other reasonable method of
D. Capitalization apportionment.
A. Personal, poll or capitation
39. The use of illegal or fraudulent means to avoid or defeat B. Property
the payment of tax. C. Excise
A. Exemption D. Regressive
B. Shifting
48. Tax imposed upon performance of an act, the enjoyment of B. Tax exemptions, tax amnesty tax condonations and their
privilege or the engaging in an occupation. equivalent provisions are not presumed and, when granted are
A. Personal, poll or capitation strictly construed against the taxpayer because such provisions
B. Property are highly disfavored by the government.
C. Excise C. Exemptions from taxation are highly disfavored in law and
D. Regressive he who claims tax exemption must be able to justify his claim
or right.
49. Tax which is demanded from the person whom the law D. The House of Representatives has the duty and the
intends or desires to pay it. exclusive power of constructing and interpreting tax laws.
A. Direct 57. The strongest of all inherent powers of the state because
B. Indirect without it, the government can neither survive nor dispense
C. Excise any of its other powers and functions effectively.
D. Percentage A. Police Power
B. Power of Eminent Domain
50. Tax which is demanded from one person in the expectation C. Power of Taxation
and intention that he shall indemnify himself at the expense of D. Power of Recall
another.
A. Direct 58. This power is superior to the non-impairment clause and is
B. Indirect broader in application because it is a power to make and
C. Excise implement laws.
D. Percentage A. Power of Taxation
B. Power of Recall
51. Tax which imposes a specific sum by the head or number C. Power of Eminent Domain
or by some standard of weight or measurement and which D. Police Power
requires no assessment other than a listing or classification of
the objects to be taxed. 59. Which of the following statements is not correct?
A. Specific A. An inherent limitation of taxation may be disregarded by
B. Ad-valorem the application of a constitutional limitation.
C. Excise B. Income tax liabilities shall be paid by the inhabitants even
D. Income if foreign invaders occupy our country.
C. Taxes may be imposed retroactively by law, but unless so
52. Tax of a fixed proportion of the amount or value of the expressed by such law, these taxes must only be imposed
property with respect to which the tax is assessed. prospectively.
A. Specific D. Tax laws are either political or penal in nature.
B. Ad-valorem
C. Excise 60. Which of the following is not a constitutional limitation on
D. Percentage the Power of Taxation?
A. No person shall be deprived of life, liberty or property
53. Tax based on a fixed percentage of the amount of property, without due process of law.
income or other basis to be taxed. B. No person shall be denied the equal protection of the law.
A. Proportional C. No person shall be imprisoned for debt or non-payment
B. Progressive of tax.
C. Regressive D. No law granting any tax exemption shall be passed without
D. Indirect the concurrence of a majority of all the members of Congress.

54. Tax where the rate decreases as the tax base increases. 61. The distinction of a tax from permit or license fee is that a
A. Proportional tax is:
B. Progressive A. Imposed for regulation.
C. Regressive B. One which involves an exercise of police power.
D. Indirect C. One in which there is generally no limit on the amount
that maybe imposed.
55. Tax where the rate increases as the tax base increases. D. Limited to the cost of regulation.
A. Proportional
B. Progressive 62. Police power as distinguished from the power of eminent
C. Regressive domain:
D. Indirect A. Just compensation is received by the owner of the property.
B. Maybe exercised by private individuals.
56. Which of the following statements is not correct? C. May regulate both liberty and property.
A. Tax burdens shall neither be imposed nor presumed to be D. Property is taken by the government for public purpose.
imposed beyond what the statute expressly and clearly states
because tax statutes should be construed strictly against the 63. A tax wherein both the incidence of or the liability for the
government. payment of the tax as well as the burden of the tax falls on the
same person. A. Taxes may be imposed to raise revenues or to provide
A. Direct tax disincentives to certain activities within the state;
B. Value added tax B. The state can have the power of taxation even if the
C. Indirect tax Constitution does not expressly give it the power to tax.
D. Percentage tax C. For the exercise of the power of taxation, the state can tax
anything at any time.
64. Which one of the following is not a characteristic or D. The provisions of taxation in the Philippine
element of a tax? Constitution are grants of power and
A. It is an enforced contribution. not limitations on taxing powers.
B. It is legislative in character.
C. It is based on the ability to pay. 72. License fee as distinguished from tax:
D. It is payable in money or in kind. A. Non-payment does not necessary render the business
illegal.
65. Tax as distinguished from license fees: B. A revenue raising measure
A. Limited to cover cost of regulation. C. Imposed in the exercise of taxing power.
B. A regulatory measure. D. Limited to cover cost of regulation.
C. Non-payment does not necessarily render the business
illegal. 73. Value-added tax is an example of:
D. Imposed in the exercise of police power. A. Graduated tax
B. Progressive tax
66. The power of taxation is exercised by C. Regressive tax
A. The President D. Proportional tax
B. The Supreme Court
C. Bureau of Internal Revenue 74. Which tax principle is described in the statement “the
D. Congress more income earned by the taxpayer, the more tax he has to
pay.”
67. One of the characteristics of internal revenue laws is that A. Fiscal Adequacy
they are: B. Theoretical justice
A. Criminal in nature C. Administrative feasibility
B. Penal in nature D. Inherent in sovereignty
C. Political in nature
D. Generally prospective in application. 75. The most superior and least limitable among the
fundamental powers of the state:
68. Which of the following is not an example of excise tax: A. Power of recall
A. Transfer tax B. Police power
B. Sales tax C. Power of taxation
C. Real property tax D. Power of eminent domain
D. Income tax
76. One of the characteristics of a tax is that:
69. The following are similarities of the inherent power of A. It is generally based on contact.
taxation, eminent domain, and police power, except one: B. It is generally payable in money.
A. Are necessary attributes of sovereignty C. It is generally assignable.
B. Superior to the non-impairment clause of the D. It is generally subject to compensation.
constitution. 77. The following are the characteristics of our internal
C. Compensation is received. revenue laws except:
D. Are legislative in character. A. Political in nature.
B. Civil in nature.
70. Which of the following is not a scheme of shifting the C. Generally prospective in application.
incidence of taxation? D. May operate retrospectively if congress so provides.
A. The manufacturer transfers the tax to the consumer by
adding the tax to the selling price of the goods sold; 78. Which of the following has no power of taxation?
B. The purchaser asks for a discount or refuse to buy at regular A. Provinces
prices unless it is reduced by the amount equal to the tax he B. Cities
will pay; C. Barangays
C. Changing the terms of the sale like FOB shipping point D. Barrios
in the Philippines to FOB destination abroad, so that the
title passes abroad instead of in the Philippines; 79. Which of the following statements is wrong? A revenue
D. The manufacturer transfers the sales tax to the distributor, bill:
then in turn to the wholesaler, in turn to the retailer and finally A. Must originate from the House of Representatives and on
to the consumer. which same bill the Senate may propose amendments.
B. May originate from the Senate and on which same bill
71. Which of the following statements is not correct? the House of Representatives may propose amendments.
C. may have a House version and a Senate version approved
separately, and then consolidated, with both houses approving 88. A law granting tax exemption requires the concurrence of
the consolidation version. A. Majority vote of members of congress
D. May be recommended by the President to Congress. B. 2/3 vote of members of Congress.
C. 3/4 vote of members of Congress.
80. Tax as distinguished from special assessment: D. Unanimous vote of members of Congress.
A. not as a personal liability of the person assessed.
B. based wholly on benefits 89. No person shall be imprisoned for debt or non-payment of
C. exceptional as to time and place poll tax. This is a(an)
D. based on necessity and is to raise revenues A. Inherent limitation
B. Constitutional limitation
81. Under this basic principle of a sound tax system, the C. International limitation
Government should not incur a deficit: D. Territorial limitation
A. Theoretical justice
B. Administrative feasibility 90. The Department of Finance thru its officers entered into a
C. Fiscal Adequacy contract with foreign investors granting them exemption from
D. Uniformity in taxation all forms of taxes to encourage investments in the Phils. The
contract is
82. Which of the following may not raise money for the A. Void, unless the President ratifies
government? B. Void, because the power to grant tax exemption is
A. Power of taxation vested in Congress.
B. Police power C. Valid, if the President has authorized the officers to enter
C. Eminent Domain into such contract.
D. License fee D. Valid, because the purpose is to promote public welfare.

83. No person shall be imprisoned for non-payment of this: 91. Tax as distinguished from debt
A. Excise tax A. no imprisonment for non-payment
B. Value added tax B. may be paid in kind
C. Income tax C. based on contract
D. Poll tax D. based on law

84. This is a demand of ownership: 92. Congress can impose a tax at any amount and at anytime
A. License fee shows that
B. Tax A. Taxation is an inherent power of the state.
C. Toll B. Taxation is essentially a legislative power.
D. Customs duties C. Taxation is a very broad power of the state.
D. Taxation is based on taxpayers’ ability to pay.
85. Income tax is generally regarded as
A. an excise tax 93. The amount required is dictated by the needs of the
B. a tax on persons government in:
C. a property tax A. License fee
D. tax on profits B. Tax
C. Toll
86. Which of the following is not acceptable for legally D. Debts
refusing to pay the tax?
A. That the right of the state to collect the tax has prescribed. 94. A charge imposed on land for special benefits derived
B. That there is no jurisdiction to collect the tax. resulting from public improvements.
C. That the tax law was declared as unconstitutional. A. Tax
D. That there is no benefit derived from the tax. B. Toll
C. License
87. It is important to know the source of income for income D. Special assessment
tax purposes, i.e. from within or without the Philippines
because 95. Which of the following are National Internal Revenue
A. The Philippines imposes income tax on income from Taxes?
sources within and without of a non-resident citizen. I. Income tax
B. Some individual taxpayers are citizens while others are II. Estate tax
aliens. III. Donor’s tax
C. Separate graduated rates are imposed on different types of IV. Value Added tax
income. V. Other percentage tax
D. Some taxpayers are taxed on their worldwide income VI. Excise Tax
while others are taxable only upon income from sources VII. Documentary stamp tax
within the Phils.
A. I, II, III, IV down is incidence of taxation.
B. I, II, III, IV, V
C. I, II, III, IV, V, VI A. True; True
D. I, II, III, IV, V, VI, VII B. True; false
C. False; true
96. The Bureau of Internal Revenue shall have a chief and four D. False; false
(4) assistant chiefs to be known as
A. Secretary and Assistant Secretaries 102. I. Police power is superior to the non-impairment clause
B. Secretary and Undersecretaries of the constitution.
C. Commissioner and Assistant Commissioners II. Power of taxation is superior to the non-impairment clause
D. Commissioners and Deputy Commissioners of the constitution.

97. The three fundamental powers of the state are A. True; True
I. Inherent in the state and may be exercised by the state B. True; false
without need of any C. False; true
constitutional grant. D. False; false
II. Not only necessary but indispensable.
103. I. No person shall be imprisoned for debt or non-payment
A. True; True of tax.
B. True; false II. Tax laws are civil and penal in nature because there are
C. False; true penalties provided in case of violation.
D. False; false
A. True; True
98. The three fundamental powers of the state areI. Methods B. True; false
by which the state interferes with private rights. II Exercised C. False; true
primarily by the legislature. D. False; false
A. True; True
B. True; false 104. I. Tax may be collected in an unlimited amount.
C. False; true II. License fee may be collected in an unlimited amount.
D. False; false
A. True; True
99. I. Police power regulates both liberty and property while B. True; false
the power of eminent domain and the power of taxation affect C. False; true
only property rights. D. False; false
II Police power and the power of taxation may be exercised
only by the government while the power of eminent domain 105. I. Tax is imposed to raise revenue.
may be exercised by some private entities. II. License fee is imposed to raise revenue.

A. True; True A. True; True

B. True; false B. True; false
C. False; true C. False; true
D. False; false D. False; false

100. I. The property taken in police power is destroyed while 106. I. Tax is a demand of sovereignty.
the property taken under the power of eminent domain and II. Toll is a demand of sovereignty.
power of taxation are not destroyed.
II. In power of taxation, the compensation received is the A. True; True
protection afforded to the citizens; in police power the B. True; false
compensation received is the altruistic feeling that somehow C. False; true
you contributed to the promotion of the general welfare; in D. False; false
power of eminent domain, the
compensation received is the just compensation paid for the 107. I Tax is imposed on persons, property, and property
property taken. rights.
II. Special assessment is imposed on persons, property, and
A. True; True property rights.
B. True; false
C. False; true A. True; True
D. False; false B. True; false
C. False; true
101. I. The point on which a tax is originally imposed is D. False; false
impact of taxation.
II. The point on which a tax burden finally rests or settles 108. I. Collection of tax is a legislative act.
II. Imposition of tax is an administrative act. 115. I. Tax avoidance is the use by the taxpayer of legal or
fraudulent means to avoid or defeat taxes.
A. True; True II. Tax evasion is the use by the taxpayer of illegal or
B. True; false fraudulent means to avoid or defeat taxes.
C. False; true
D. False; false A. True; True
B. True; false
109. I. A state has the power to tax even if not granted by the C. False; true
constitution. D. False; false
II. A state cannot exercise police power if not granted by the
constitution. 116. I. One of the essential characteristics of a tax is it is
unlimited in amount.
A. True; True II. A tax is generally unlimited because it is based on the needs
B. True; false of the state.
C. False; true
D. False; false A. True; True
B. True; false
110. I. There can only be a tax even if there is a law imposing C. False; true
the tax. D. False; false
II. The power to tax may include the power to destroy.
117. I. The power of taxation is inherent in sovereignty being
A. True; True essential to the existence of every government. Hence, even if
B. True; false not mentioned in the constitution the state can still exercise the
C. False; true power and is essentially a legislative function.
D. False; false II. Even in the absence of any constitutional provision,
taxation power falls to Congress as part of the general power
111. I. Due process of law in taxation under the constitution is of law-making.
a grant of power.
II. Provisions in the Philippine constitution on taxation are A. True; True
grants of power. B. True; false
C. False; true
A. True; True D. False; false
B. True; false
C. False; true 118. I. The President has the power to veto a revenue bill even
D. False; false if such bill was already approved by Congress.
II. The President is superior to Congress as he/she can veto
112. I. In the Philippines, there may be double taxation. any bill even if already approved by Congress.
II. Taxation may be used to implement the police power of the A. True; True
state. B. True; false
C. False; true
A. True; True D. False; false
B. True; false
C. False; true
D. False; false

113. I. License fee is a charge imposed under police power.

II. Special assessment is levied on lands only.

A. True; True
B. True; false INDIVIDUAL TAXPAYERS
C. False; true
D. False; false 1. The National Internal Revenue Code of 1988 is
A. RA 9337
114. I. Tax is imposed regardless of public improvement. B. CA 466
II. Special assessment is imposed regardless of public C. RA 9504
improvements. D. RA 8424

A. True; True 2. Which of the following statements is not correct?

B. True; false A. An individual citizens of the Philippines who is working
C. False; true and deriving income from abroad as an overseas contract
D. False; false worker is taxable on income from sources within and without
the Philippines.
B. A seaman who is a citizen of the Philippines and who
receives compensation for services rendered abroad as a
member of the complement of vessel engaged exclusively in
international trade shall be treated as a resident citizen.
C. A non- resident citizen who is not engaged in business in
the Philippines is treated as non-resident alien who is not
engaged in business in the Philippines
D. An alien individual, whether a resident or not of the
Philippines, is taxable only on income derived from
sources in the Philippines
3. Which of the following statements is not correct?
A. In the case of married individuals, where only one of the
spouses is deriving gross
income, only such spouse shall be allowed the personal
exemption.
B. In the case of married individuals, the additional
exemptions maybe claimed by only
one of the spouses
C. As a rule, the husband shall be the head of the family and
proper claimant of the
additional exemption
D. In the case of legally separated spouses, additional
exemption maybe claimed by the spouses who has custody
of the children but shall not exceed four (4) for each spouse
4. A resident citizen is taxable on all income derived from
sources
A. Within the Philippines only
B. Without the Philippines only
C. Partly within and partly without
D. Within and without the Philippines
5. A non-resident citizen is taxable on all income derived from
sources
A. Within the Philippines only
B. Without the Philippines only
C. Partly within and partly without
D. Within and without the Philippines
6. A resident alien is taxable on all income derived from
sources
A. Within the Philippines only
B. Without the Philippines only
C. Partly within and partly without
D. Within and without the Philippines
7. A non-resident alien is taxable on all income derived from
sources
A. Within the Philippines only
B. Without the Philippines only
C. Partly within and partly without
D. Within and without the Philippines
8. The following taxpayers are allowed to claim additional
exemptions, except
A. Resident citizens
B. non- resident citizens
C. Resident aliens
D. Non-resident aliens
9. Which of the following statements is not correct?
A. If only one spouse is deriving taxable income, only said
spouse may claim the additional exemption
B. If both spouses earn taxable income only one of the spouses
can claim additional exemption
C. If legally separated from the spouse, the husband can
claim the additional exemptionunless he waives the right in
favor of his wife
D. An unmarried individual with a child out of wedlock can
claim a personal exemption as a head of the family plus
exemption
10. A citizen of the Phils. who works and derives income from
abroad is a resident if he stayed outside the Phils.
A. For less than 180 days
B. For more than 180 days
C. For 183 days or more
D. For less 183 days
11. A citizen of the Phils. Who works abroad and whose
employment requires him to be physically present abroad most
of the time during taxable years
A. Taxable on income within and without the Phils.
B. Taxable on income from without the Phils.
C. Exempt from income tax
D. Taxable income from within the Phils.
12. A citizen of a foreign country is considered a non-resident
alien engaged in business in the Phils. If he stayed inside the
Phils.
A. For 183 days or more
B. For less than 183 days
C. For more than 180 days
D. For less than 180 days
13. Which of the following dependents is not qualified to
entitle a taxpayer additional persona exemption?
st
A. Recognized natural son who celebrated his 21 birthday
during the taxable year.
B. Legitimate natural son, 21-year-old who got married on
December 31, of the year.
C. Legally adopted son, 21 years old son who became
employed December 30, of the taxable year.
D. Widowed mother, who celebrated her 59th birthday
during the taxable year.
14. For income tax purposes, which of the following is
considered head of the Family?
A. Married individual who has dependent minor child.
B. Married but legally separated individual with a
dependent mother who is 59 years’ old
C. Single individual with a common law life
D. Married individual even if he has no children
15. Which of the following dependents will qualify a single
taxpayer as head of the family?
A. Taxpayer’s brother, 22 years old, unemployed, unmarried,
living with him and dependent upon him for support
B. Taxpayer’s sister, 18 years old, unemployed, unmarried
living with parents, but dependent upon him for chief support
C. Taxpayer’s illegitimate son, 12 years old, unemployed, C. P125, 000
single, living with him and dependent upon him for D. P75, 000
support
D. Taxpayer’s godchild, 10 years old, dependent upon him for 21. A married, earned P225, 000 (net of P40, 000 w/tax)
chief support compensation income from employment from July to
December 2010. He has a legally adopted child as qualified
16. Mr. A with a dependent minor legitimate child became a dependent and paid P3,000 as health and hospitalization
widower in January of 2009. In February of the following insurance premiums. For 2010, he can deduct premiums for
year, he got married to Ms. B and subsequently in November health and hospitalization insurance of:
of the same year, the latter gave birth to three (3) boys. For A. P3, 000
calendar year 2010, Mr. A’s basic and additional personal B. P2, 400
exemption is: C. P1, 200
A. P 75,000 D. P0
B. P100, 000
C. P125, 000 22. Using the preceding number, his personal and additional
D. P150, 000 exemption is
A. P40, 000
17. A German citizen residing in Germany, married is doing B. P75, 000
business in the Phils. His country allows non- resident Filipino C. P77,400
with income from Germany a basic personal exemption of D. P78,000
P30,000 as head of the family, P40, 000 as married and P15,
000 as single. The allowed personal exemption he can claim 23. Which of the following individual taxpayers cannot avail
is? of the allowed deductions for health and hospitalization
A. P50. 000 insurance premiums?
B. P30, 000 A. Non-Resident citizen
C. P32, 000 B. Resident alien
D. P40, 000 C. Non-resident alien engaged in business in the Phil.
D. Non-resident alien not engaged in business in the Phil.
18. Which of the enumerated taxpayers below can claim
personal exemption only if there exist a reciprocity clause/law 24. Taxable on income from all sources within and without the
between the Philippines and his country/ Phil.
A. Non-resident A. Resident citizen
B. Resident alien B. Non-resident citizen
C. Non-resident alien not engaged in business in the C. Resident alien
Philippines D. Non-resident alien
D. Non-resident alien engaged in business in the
Philippines 25. Taxable only on income from sources within the Phil.
except
19. A legally married couple had the following data in year A. Resident citizen
20010? B. Non-resident citizen
Two qualified legitimate dependent children C. Resident alien
Two dependent nephewsOne illegitimate child of husband D. Non-resident alien
One of legitimate child died in December 2010
Both spouses are gainfully employed. 26. May not claim personal exemption
A. Non-resident citizen
The claimable personal and additional exemptions of the B. Non-resident alien engaged in trade or business in the Phil.
couple: Under certain conditions
A. H-P 50, 000, W-P 125, 000 C. Resident alien
B. H-P 100,000, W-P 50, 000 D. Non-resident alien who stayed in the Phil. For 175 days
C. H-P 100, 000, W-P 75, 000
D. H-P 150, 000, W-P 50, 000 27. Exemption which is determined according to the status of
the taxpayer
20. A, who became a widower in February of taxable year A. Personal exemption
2010 had the following dependents: B. Additional Exemption
Two legitimate children C. Optional standard deduction
Recognized natural child with current common law wife D. Special additional personal exemption
B, his common law wife
Illegitimate child with another woman 28. Exemptions allowed based on presence of qualified
dependent children
The total basic personal and additional exemption in 2009 is: A. Personal exemption
A. 150, 000 B. Additional Exemption
B. P100, 000 C. Optional standard deduction
D. Special additional personal exemption A. Good father of a family
B. Married
29. Will not qualify as dependent C. Single
A. Legitimate child D. Head of the family
B. Brother
C. Mother 38. A non-resident alien is deemed doing business in the Phil.
D. Nephew if he
A. Is an individual whose residence is within the Phil.
30. Personal exemption, if single B. Is an individual whose father or mother is an alien who is
A. P20, 000 engaged in business in the Phil.
B. P25, 000 C. Is an individual who is naturalized in accordance with law
C. P32, 000 D. Shall come to the Phil. And stay therein for an
D. P50, 000 aggregate period of more than 180 days during a calendar
year.
31. Personal exemption, if married but judicially declared as
legally separated with no dependent. 39. One is not correct
A. P20, 000 A. If the taxpayer marries during the taxable year, he may
B. P25, 000 claim the personal exemption in full as a married person for
C. P32, 000 such year.
D. P50, 000 B. If the taxpayer dies during the taxable year, his estate may
still claim the personal and additional exemption for himself
32. Personal exemption, if married but living separately and his dependents as if he died at the close of such year.
without judicial decree of separation C. If the spouse of the taxpayer or any of the dependents dies
A. P20, 000 during the taxable year, the taxpayer may still claim the same
B. P25, 000 exemptions as if death occurred at the close of such year.
C. P32, 000 D. If the taxpayer should have additional dependent
D. P50, 000 children during the taxable year, he can always claim the
additional exemptions for such year.
33. Personal exemption, if married but judicially declared as
legally separated with dependent 40. One is correctA. Where both husband and wife receive
A. P20, 000 compensation income, the additional exemption shall be
B. P25, 000 claimed by wife unless she explicitly waives her right in favor
C. P32, 000 of her husband in the withholding exemption certificate.
D. P50, 000 B. Husband and wife shall be treated as separate taxable
units and each shall be allowed to claim personal
34. Personal exemption, if head of the family exemption
A. P20, 000 C. If the gross income does not exceed P20, 000, a special
B. P25, 000 additional personal exemption of P4, 000 may be claimed by
C. P32, 000 the taxpayer.
D. P50, 000 D. Husband and wife shall be treated as separate taxable units
and shall be allowed to claim only one personal exemption
35. Amount of additional exemption each qualified dependent either for the husband or wife at their option.
child is
A. P8, 000 41. The term “chief support” means more than one-half of the
B. P100, 000 requirements for support
C. P50, 000 If two children contribute equal amounts for the support of
D. P25, 000 dependent, neither one of them may be qualify as head of the
family
36. The number of dependent children who will qualify for
additional exemption purposes shall not exceed. A. True, true
A. 3 children B. True, false
B. 4 children C. False, true
C. 5 children D. False, false
D. 6 children
42. If any of the qualified dependents becomes 21 years old
37. An unmarried or legally separated man or woman with one during the taxable year, the taxpayer may claim the same
or both parents, or with one more brothers and sisters, or with exemptions as if such dependent became 21 years old at the
one or more legitimate, illegitimate, or legally adopted close of such year.
children living with and dependent upon him or her for their Parents living with and dependent upon the taxpayer for their
chief support, where such brothers, or sisters, or children, support regardless of their age will qualify as dependents
regardless of age are incapable of self-support because of
mental physical defect. A True, true
B. True, false 48. If the taxpayer is a non-resident citizen, married, his
C. False, true taxable income is
D. False, false A. P 300, 000
B. P159, 000
43. If the dependent child marries during the taxable year, the C. P150, 000
taxpayer may still claim the same exemption as if the marriage D. P200, 000
occurred at the close of such year.
In the case of married individuals, the additional exemptions 49. If the taxpayer is a resident alien, married his taxable
shall be claimed by only one of the spouses income is
A. P 300, 000
A True, true B. P159, 000
B. True, false C. P150, 000
C. False, true D. P200, 000
D. False, false
50. If the taxpayer is a non-resident alien engaged in business
44. Who is non-resident alien not engaged in business in the in the Phil. married and his country allows a reciprocity P30,
Phil.? 000 as personal exemptions for married individuals, his
A. An alien who comes in the Phil. For a definite purpose taxable income is?
which in its nature may be promptly accomplished. A. P370, 000
B. An alien who comes to the Phil. For definite purpose which B. P170, 000
in its nature would require an extended stay of more than 180 C. P200, 000
days. D. P150, 000
C. An alien who has required residence in the Phil.
D. An alien who lives in the Phil. With no definite intention as 51. If the taxpayer is non-resident alien not engaged in
to his stay business in the Phil. married and his country grants P35, 000
as personal exemptions for married individuals, his taxable
45. The personal exemption of the non-resident alien engaged income is?
in trade or business in the Phil. is equal to that allowed by. A. P370, 000
A. The income tax law of his country to a citizen of the Phil. B. P170, 000
not residing there C. P200, 000
B. The income tax law of his country to a citizen of the D. P400, 000
Phil. not residing there or the amount provided by the
NIRC to a citizen or resident whichever lower. 52. With regard to deduction for premiums on hospitalization
C. The NIRC to a citizen or resident and health insurance, which of the following statements is
D. The income tax law of his country to a citizen of the Phil. wrong?
not residing there or the amount provided by the NIRC to a A. Allowed as deduction even if income is from compensation
citizen or resident whichever is higher. only
B. Allowed as deduction even if income is from business or
46. If a taxpayer marries during the year, he may claim the practice of Profession
personal exemption for married individuals in full for such C. Allowed as deduction even if mixed income
year. D. Allowed as deduction only if the taxpayer is taking
A dependent child who marries within the year may still itemized deductions from gross income.
qualify as dependent for the year.
53. Which of the following statements is wrong? The
A. True, true premiums on hospitalization and health insurance may be
B. True, false deducted
C. False, true A. Not exceed P2, 400 a year per family
D. False, false B. Not exceed P200 per month
C. If the family income doesn’t exceed P250, 000
47. Z, married, had the following data for the taxable year: D. By either spouse in the case of married individuals
Gross income, Philippines P400,000
Gross income, China 300,000 54. A resident, single with qualified dependent illegitimate
Expenses, Philippines 200,000 children had the following during the calendar year.
Expenses, China 150,000 Gross compensation income P250, 000
Expenses related to his employment 120, 000
If the taxpayer is a resident citizen, married, his taxable SSS premium contributions 3, 600
income is Philhealth contribution 2, 400
A. P309, 000 Pag-ibig contributions 2, 000
B. P318, 000 Union dues 1, 000
C. 350, 000 Premiums on health insurance 4, 000
D. P300,000
The taxable income before personal and additional exemption
is B. Proprietary Educational Institution
A. P237, 000 C. Phil. Charity Sweepstakes Office
B. P241, 000 D. Government Service Insurance System
C. P238, 600(?)
D. P117, 000 7. A corporation which may be classified as either a resident
corporation or non-resident Corporation is
55. In which of the following should additional exemption not A. Domestic corporation
be allowed to the taxpayer? B. Foreign corporation
A. An alien, whose dependent child is living with him in the C. Government owned and controlled corporation
Phil. D. Non-profit hospital
B. A resident citizen, who has 25 years old mentally retarded
son 8. The Phil. Health Insurance Corporation, a government
C. A resident citizen, who has a 50 years old mother as his owned corporation is:
dependent A. Exempt from the corporate income tax
D. a resident alien with an illegitimate child, 7 years’ old B. Subject to the preferential corporate income tax for special
corporations.
CORPORATION C. Subject to the basic corporate income tax.
1. For income taxation purposes, the term “corporation” D. Subject to final tax.
excludes one of the following:
A. Ordinary partnership 9. Public educational institutions, like the University of the
B. An incorporated business organization Philippines is deemed by law:
C. General professional partnership A. subject to preferential corporate income tax for special
D. Business partnership corporations.
B. Subject to the basic corporate income tax
2. Which of the following is subject to the corporate income C. Subject to both the preferential income tax and the basic
tax? corporate income tax.
A. a non- stock and non profit educational institution D. Exempt from the corporate income tax.
B. Public educational institution
C. Private cemeteries 10. Which is not correct? The following are exempt from the
D. Civic league or organization not organized for profit and corporate income tax:
operated exclusively for the promotion of social welfare A. Philippine Charity Sweepstakes Office
B. Bureau of Internal Revenue
3. A corporation organized and created under the laws of a C. Gov’t. owned or controlled corp.
foreign country and is authorized to do business/ trade in the D. Social Security System
Phil. is:
A. Domestic corporation 11. Which of the following maybe subject to the corporate
B. Resident foreign corporation income tax?
C. Non-resident foreign corporation A. A non-profit educational institution
D. General co-partnership B. A public educational Institution
C. A private educational Institution
4. One of the general principles of income taxation: D. Government Service Insurance System
A. A foreign corporation engaged in business in the Phil. is
taxable on all income derived from sources within and without 12. A domestic corporation may employ, as a basis for filing
the Phil. its annual corporate return the:
B. A foreign corporation engaged in business in the Phil. is A. Calendar year only
taxable on all income derived from sources within the Phil. B. Fiscal year only
only. C. Either calendar or fiscal year
C. A domestic corporation is taxable on income derived from D. Neither calendar nor fiscal year
sources within the Phil. only.
D. A domestic corporation is taxable on income derived from 13. A corporation files a quarterly return within
sources without the Phil. only. A. 30 days after the end of each of the 3 quarters
B. 60 days after the end of each of the first 3 quarters
5. One of the following doesn’t fall under the definition of a C. 30 days after the end of each of the first 4 quarters
“corporation” for income tax purpose: D. 60 days after the end of each of the first quarters
A. General partnership 14. A final or annual return is filed on or before the 15th day of
B. Joint stock company the?
C. Insurance company A. Month following the close of the taxable year
D. Sole partnership B. 2nd month following the close of the taxable year.
C. 3rd month following the close of the taxable year.
6. Which of the following is classified as Special Corporation D. 4th month following the close of the taxable year
subject to preferential corporate income tax rate?
A. Social security System 15. A corporation on a fiscal year ending March 31, should file
its annual return
A. On or before April 15 of the same year The income tax due for the second quarter is
B. On or before April 15 of the following year A. P100, 000
C. On or before July 15 same year B. P80, 000
D. on or before July 15 of the ff. year C. P50, 000
D. P40, 000
16. The improperly accumulated earnings tax shall apply to
A. Publicly held corporation 22. The income tax due for the second quarter is
B. Banks and other non-bank financial A. P120, 000
C. Insurance companies B. P250, 000
D. Private corporations C. P150, 000
D. P230, 000
17. Which of the following statements is not correct?
A. MCIT is not applicable to non-resident foreign corporations 23. The income tax due for the third quarter is
B. The corporate quarterly return shall be filed within 60 days A. P250, 000
following the close of each of the first three quarters of the B. P100, 000
taxable year. C. P140, 000
C. Resident foreign corporations would be taxed on net D. P70, 000
income from within the Phil only
D. Non-resident foreign corporations are taxed on gross 24. The income tax due for the year is
income from within and without A. P200, 000
the Phils.. B. P100, 000
C. P135, 000
18. The following income are subject to final tax, except? D. 165, 000
A. Royalty income received by a domestic corporation from a
domestic corporation 25. Using the preceding problem except that the normal
B. Cash dividends received by a non-resident foreign income tax for the fourth quarter is P50, 000 (instead of P200,
corporation from a domestic corp. 000), the income tax due for the year is
C. Cash dividends received by a domestic corporation A. P120, 000
from a domestic corporation. B. P55, 000
D. Interest income received by resident foreign corporation C. P45, 000
from a Phil. bank. D.P75, 000

19. The MCIT shall not apply to the following resident foreign 26. One of the following is not acceptable as basis of relief
corporations, except from the MCIT
A. RFC engaged in business as int’l carrier subject to 2 1⁄2 0/0 A. Prolonged labor dispute
of their Gross Phil billings B. Force majeure
B. RFC engaged in business as offensive Banking Units on C. Legitimate business reverse
their income from foreign currency transactions with local D. Law suits filed by the company
commercial banks.
C. RFC engaged in business as regional operating 27. Which is not one of the characteristics of corporate income
headquarters D. RFC engaged in hotel, motel and resort tax
operations A. Progressive tax
B. General tax
20. Which of the following is not correct? The gross income C. Direct tax
tax D. National tax
A. Is optional to qualified corporation
B. Is available if the ratio of costs of sales to gross sales or 28. CPA University, a private educational institution organized
receipts from all sources does not exceed 55% in 2000, had the following data for 2007.
C. Shall be irrevocable for three consecutive taxable years that Tuition fees P 850, 000
the corporation is qualified under the scheme Rental income 150, 000
D. Is compared with the normal income tax and minimum School related expenses 820, 000
corporate income tax
The income tax due for 2007 is
21. A Corporation’s records show: A. P 57, 000
Quarter Normal Taxes Excess MCIT Ex B. P 9, 600
WT C. P 18, 000
MCIT Withheld Prior year Prior year D. P 20, 000
First P100, 000 P80, 000 20,000 30,000 10,000
Second 120, 000 250,000 30,000 29. CPA college, a private educational institution organized in
Third 250, 000 100, 000 40,000 2000, had the following data for 2007.
Fourth 200, 000 100, 000 35,000 Tuition fees P 480 000
Rental income 520, 000 D.P150,000
School related expenses 450, 000
36. If it is a non-profit hospital, its income tax credit is
The income tax due for 2007 is A. P730, 000
A. P 17, 600 B.P832,000
B. P 5, 500 C.P275,000
C. P 100, 000 D.P150,000
D. P 165, 000

30. CPA Airlines, a resident foreign international carrier has 37. If it is a resident international carrier, its income tax is
the following records of income for the period. (The income A.P100,000
represents gross Phil. billings) B.P10,000
-Continuous flight from Manila to Tokyo=1, 000 tickets at C.37,000
P 2, 000 per ticket D.P125,000
-Flight form Manila to Singapore; transfer flight from
Singapore to Tokyo=2,000 Tickets at P 2, 000 per ticket 38. If it is a non-resident cinematographic film owner/lessor,
-Continuous flight from Manila to Singapore= 3, 000 tickets at its income tax is
P1,000 per ticket A.P1,000,000
B.P100,000
The income tax due is C.P300,000
A. P225, 000 D.P128,000
B. P125, 000
C. P100, 000 39. If it is a non-resident lessor of vessels, Its income tax is
D. P 175, 000 A.P100,000
B.P180,000
31-46 The A corporation provided the following data for C.P300,000
calendar year ending December 31, 2009 ($ 1= P50). D.P128,000
Philippines Abroad
Gross income P4, 000, 000 $ 40, 000 40. If it is a non-resident lessor of aircrafts, machineries and
Deductions 2, 500, 000 $ 15, 000 equipment, its income tax is
Income Tax Paid $ 3, 000 A. P100,000
B.P180,000
31. If it is a domestic corporation, its income tax after tax C.P300,000
credit is D.P128,000
A. P675,000
B. P832, 000 41. If it is a resident corporation but its expenses within and
C. P962, 500 outside the Philippines is P3M, Unallocated (disregard
D. P480, 000 original data on expenses), its income tax is
A.P640,000
32. If it is a resident corporation, its income tax is B.P700,000
A. P730, 000 C.P480,000
B. P1, 280, 000 D.P128,000
C. P480, 000
D. P450, 000 42. If it is a resident corporation and remitted 60% of its net
33. If it is a non-resident corporation, its income tax is profit to its head office abroad, its total tax liability is
A. P370, 000 (Original data).
B. P1,280,000 A. P480,000
C.P880,000 B.P571,800
D.P1,200,000 C. P196,000
D.P612,750
34. Under No. 31, but it opts to claim the tax paid abroad as
deduction from gross income, its income tax is 43. If it is a private educational institution but P3.5M of its
A. P780,000 total gross income is from lease and restaurant business, its
B. P832, 000 income tax is
C.P275,000 A.P730,000
D.P150,000 B.P275,000
C.P150,000
35. If it is private educational institution, its income tax due D.P812,500
after tax credit
A. P730, 000 44. If it is a domestic corporation, but its total expenses are
B.P832, 000 P5,800,000 (disregard original data on expenses), its income
C.P275,000 tax is
A.P730,000 C.P11,200,000
B.P64,000 D.P15,960,000
C.P120,000
D.P85,000 51. A corporation has the following data for the year 2007:
Gross Income, Philippines P1,000,000
45. Under No.44, but the domestic corporation is non-profit Gross income, USA 500,000
hospital (disregard tax paid abroad), Its income tax is Gross income, Japan 500,000
A.P20,000 Expenses, Philippines 300,000
B.P64,000 Expenses, USA 200,000
C.P10,909 Expenses, Japan 100,000
D.P120,000 Other Income:
Dividend from San Miguel Corp 70,000
46. If the corporation is a non-stock educational; institution, Dividend from Ford Motors, USA 120,000
which uses all its revenues or income for educational and Gain, sale of San Miguel shares
charitable purposes, its income is directly to buyer 150,000
A. P0 Royalties, Philippines 50,000
B.P730,000 Royalties, USA 100,000
C.P120,000 Interest (other than from banks) 60,000
D.P64,000 Rent, land USA 250,000
Other rent income 100,000
47. A domestic corporation organized in 1998 provided the Prize, contest in Manila 200,000
following information: Land sold in the Philippines (SP) 2,000,000
2003 2004 2005 2006 The cost of the land which is not used in business is P1M,
2007 while FMV is P3M. Its total tax liability as a domestic
Net Sales P 4M P 5M P 6M P 7M P 8M corporation is:
Cost of sales 2M 2.5M 2.8M 4M 5.2M A. P780,500
Business Exp 1.9M 2.35M 2.9M 3.1M 2.3M B. P913,600
C. P963,600
The tax due after tax credit, if any for 2005 D. P980,500
A.P86, 000
B. P95, 000 52. Based on the above problem, its total tax liability if it is a
C.P87,500 resident corporation is
D.P97,500 A. P721,000
B. P679,200
48. Using the above data, the tax due after tax credit, if any for C. P659,200
2007 D.P741,000
A. P115,000
B.P140,000 53. And if it is a non-resident corporation, its total tax liability
C.P175,000 is
D.P80,000 A. P843,500
49. A corporation, a resident corporation, provided the B.791,700
following data for taxable year 2006 C. P791,200
Philippines USA D.P846,000
Gross income P40M P20M 54. A domestic corporation had the following data:
Dividends from:
Domestic corporation 5M Gross Income Deductions
Foreign corporation 4M 1998 P1,000,000 P1,200,000
Business expenses 12M 8M 1999 2,000,000 1,900,000
2000 3,000,000 2,950,000
The corporation remitted to its head office the P5M dividend 2001 1,000,000 1,100,000
income and 40% of its net profit to its head office in USA. The 2002 980,000 500,000
corporation’s total tax liability including the tax on the profit
remitted is The taxable income in 2002 is:
A.P10,240,000 A. P380,000
B.P11,545,600 B. P330,000
C.P15,960,000 C. P100,000
D.P12,448,000 D. P50,000
50. In the foregoing problem, if it is registered with PEZA, its Partnership
total tax liability is 1. If a partner on his own transactions, is on the cash method
A.P10,240,000 of accounting while the general professional partnership is on
B. P0
the accrual method of accounting, in the partner’s
determination of his taxable income for the year, he
A. Must convert his income from the partnership into cash
method
B. Must convert his own income into accrual method
C. Does not report his income from the partnership because
the partnership is exempt from income tax
D. Can consolidate his share in the net income of the
partnership under accrual method with his own income under
cash method
2. The net share received by a partner in a general professional
partnership is
A. Part of his taxable income
B. Exempt from income tax
C. Subject to corporate tax
D. Subject to final tax
3. The net shares received by a partner in a general co-
partnership is
A. Part of his taxable income
B. Exempt from income tax
C. Subject to corporate tax
D. Subject to final tax
4. Which of the following statements is not correct?
A. When the co-owners invest the income of the property co-
owned in a business or any income producing properties or
activities constituting themselves into a business partnership,
such partnership is consequently subject to tax as a
corporation.
B. As a rule, a co ownership is mot subject to income tax
because the activities of the co- owners are limited to the
preservation and enjoyment of the property and the collection
of the income there from.
C. A co-owner is subject to income tax on his share in the net
income of the co-ownership actually or constructively
received.
D. All partnerships, no matter how created or organized
are considered corporations subject to corporate income
tax.
5. The following statements regarding taxable partnerships are
correct, except
A. They file quarterly and year-end income tax returns.
B. They are subject to the rules on corporation for capital gain
tax, final tax on passive income, normal income tax, minimum
corporate income tax and gross income tax.
C. The partners’ share in the distributable net income is
subject to final tax.
D. They are subject to the improperly accumulated
earnings tax.
6. Which of the following statements is correct?
A. Partners of a taxable partnership are considered as
stockholders and profits distributed to them by the
partnership are considered as dividends.
B. The share of each partner in net income of a taxable
partnership shall be based on their capital contribution.
C. The share of an individual partner in the net income of
taxable partnership shall be equal to the share of a capitalist
partner with the least capital contribution.
D. The industrial partner shall contribute money and or
property but not services.
7. Statement 1- A CPA and a Dentist may form a GPP or an
ordinary partnership
Statement 2- Partnership and Corporations have separate
juridical personalities distinct from the owners, as such
partners and stockholders are not liable to creditors of business
A. True, true
B. False, false
C. False, true
D. True, false
8. Statement-1 The share of the partner in the net income of an
OP is added on his own gross income.
Statement-2 The share of the partner in the net income in GPP
is also considered as passive Income.
A. True, true
B. False, false
C. False, true
D. True, false
9. As regards a general professional partnership, which of the
following statements is correct?
A. Treated like a corporation, hence it is subject to the
corporate income tax
B. It is exempt from income tax, hence it need not file an ITR
C. Partners’ share are subject to final tax
D. Partners’ share will be included in their respective ITRs
whether distributed or not
10. As regards an ordinary partnership, which of the following
statements is correct?
A. Partners’ share are subject to final tax, hence it not file an
ITR
B. Subject to improperly accumulated earnings tax
C. Treated like corporations, hence partners have limited
liability
D. Partner’s share even if distributed will not be included
in their ITR
11. AB partnership with A and B as partners had a net
professional income amounting to P500,000. Its other income
included bank interest income of P8,000, net of final
withholding tax and it received dividend income from a
domestic corporation of P10, 000. A is single and has
compensation income of P200, 000. The net taxable income of
A who shares profit and loss equally with B is
A.P364, 000
B.P440, 000
C. P400,000
D. P 444, 000
12. Using the preceding number, but it is a business
partnership, the taxable income of the partnership is
A. P518, 000
B. P500, 000
C. P510, 000
D. P508, 000
13. Using the preceding number, the net distributable share of
A is A. P424, 000
A. P162, 500 B. P342, 000
B. P146, 250 C. P357, 000
C. P171, 500 D. P382,000
D. P154, 350
21. The taxable income of A is (OP)
14. A and B are partners in a Partnership which realized a A. P280, 000
gross income of P800, 000 with a Corresponding P350, 000 B. P198, 000
expenses in the year 2007. A is married with 2 qualified C. P165, 000
dependent children, he earned P400,000 in his own business, D. P382, 000
incurring P230,000 allowable expenses while B, single had
P450,000 and P250,000 gross income and expenses 22. The taxable income of B is (OP)
respectively. They share profits and losses at 4:6. If the A. P180, 000
partnership is a GPP, the taxable income of A subject to 5-32% B. P198, 000
is C. P165, 000
A. P276, 000 D. P424, 000
B. P180, 000
C. P250,000 23.The taxable income of C is (OP)
D. P320, 000 A. P180, 000
B. P198, 000
15. And the taxable income of B subject to 5- 32% is C. P165, 000
A. P435, 000 D. P424, 000
B. P270, 000
C. P420,000 24. The income tax due of the partnership if OP
D. P 470, 000 A. P 153, 600
B. P57, 000
16. If the partnership is an OP, its tax due is C. P37, 000
A. P144, 000 /135,000
B. P148, 000 25. If B opts to claim the 10% OSD (OP), his taxable income
C. P153, 000 is A. P367, 600
D. P108, 000 B. P238, 000
C. P280, 000
17. And the total tax liability of A is
A. P12, 240 26. A and B are co-owners by virtue of a property given to
B. P18, 900 them by their father. The co- ownership had a gross rental
C. P31, 140/48,600 income of P500,000 (gross of 5% tax) and expenses related to
D. P32, 500 rental activity of P200,000 but 10% is not deductible for the
year 2007. A and B share in the profits at 75% and 25%,
18. The total tax liability of B is respectively. A withdrew P50,000 from the co-ownership net
A. P32, 500 income for the year, B did not withdraw any amount. A and B
B. P8, 360 are both single. The income tax liability of the co-ownership
C. P50, 860 A. P102,400
D. P31, 140 B. P76,800
C. P80,000
19. A, B, and C are partners sharing profits and losses 30%, D. P0
30% and 40%, respectively. The following data pertain to the
partnership and the individual account of the members in their 27. The taxable income of A before exemption
own business for the taxable year 2004: A. P320,000
A B C B. P240,000
Partnership C. P80,000
Gross income P400K P300K P350K P900K D. P0
Deductions 100K 70K 160K 420K
Drawing Account 0.5K 3K 2K 10K 28. Suppose A and B did not divide but instead invested the
Civil Status Single Married Head of Fam entire profit in another business venture where they earned a
net income after deductions of P450,000, the tax due of the co-
If the partnership is a GPP, the taxable income of C is ownership is
A. P424, 000 A. P102,400
B. P342, 000 B. P144,000
C. P357, 000 C. P157,500
D. P382, 000 D. P0

20. The taxable income of B is (GPP) Estates and Trusts

1. Which of the following statements is correct? D. Heir
A. Estates and trusts are allowed a personal exemption of
P32,000 if the executor or trustee is married. 10. The person for whose benefit the trust has been created
B. The income tax rates for corporate taxpayers apply to A. Legatee
taxable estates and trusts. B. Heir
C. The taxable year of estates and trusts maybe calendar or C. Beneficiary
fiscal year D. Trustee
D. For a trust to be taxable, it must be irrevocable, both as
to corpus (principal) and income 12. For income tax purposes, any person or corporation that
holds in trust an estate of another person or persons
2. The property, rights and obligations of a person which are A. Beneficiary
not extinguished by his death and those which accrued thereto B. Fiduciary
since the opening of succession. C. Legatee
A. Assets D. Devisee
B. Capital
C. Estate GROSS INCOME
D. Income 1. All of the following statements are correct, except one.
Which is the exception?
3. The term applied to the person whose property is A. The source of interest income is the country where the
transmitted through succession, whether or not he left a will debtor resides
A. Decedent B. The source of dividend income is the country where the
B. Transferor corporation was incorporated
C. Transferee C. Rents are considered derived from the country where the
D. Grantor property is located
D. Income from personal services is considered derived from
4. The term applied to the answer in No. 3 if he left a will the country where the services were rendered.
A. Transferor
B. Grantor 2. -A gain from sale of shares of a domestic corporation shall
C. Donor be considered derived from the Philippines regardless of
D. Testator where the shares were sold.
- A gain from sale of shares of a foreign corporation shall be
5. The person called to the succession either by the provision considered derived from the country where the corporation
of a will or by operation of law was created or organized.
A. Heir
B. Devisee A. True; True
C. Legatee B. True; False
D. Trustor C. False; True
D. False; False
6. The person to whom a gift of real property is given by
virtue of a will 3. Which is not a creditable withholding income tax?
A. Heir A. Expanded withholding income tax
B. Devisee B. Withholding income tax on passive income
C. Legatee C. Withholding income tax at source
D. Trustor D. Withholding income tax on compensation income
7. The person to whom the gift of personal property is given
by virtue of a will 4. As a rule, this is not part of taxable income
A. Heir A. Profit sharing
B. Devisee B. Hazard pay
C. Legatee C. Overtime pay
D. Trustor D. 13th month pay

8. The person who establishes a trust 5. This is taxable income

A. Heir A. Retrenchment pay
B. Devisee B. SSS/GSIS benefits
C. Legatee C. Separation pay due to resignation
D. Trustor D. Refund of Philippine Income tax
9. The person in whom confidence is reposed as regards 6. Which of the following is taxable income?
property for the benefit of another person A. Prizes and awards as an awardee of Ramon Magsaysay
A. Devisee Award Foundation
B. Trustee B. Damages awarded as a consequence of a libel and slander
C. Legatee
suits
C. Interest on Philippine lotto winnings
D. Amounts received as returns of premiums
7. One of the following is taxable income
A. Gifts, bequests and devices
B. Amounts received as rewards for giving information
instrumental in the discovery of violation of the Tax Code
and seizure of smuggled goods
C. Proceeds from life insurance
D. Separation pay received by an employee due to a cause
beyond his control
8. As a rule, the following are taxable income, except
A. Cash dividend
B. Property Dividend
C. Scrip dividend
D. Stock dividend
9. The following items are exclusions from gross income,
except
A. Labor union dues
B. SSS/GSIS premiums contributions
C. IOU’s
D. Pag-ibig premiums contributions
10. Which of the following is part of gross income?
A. PCSO & Phil Lotto winnings
B. Bank interest on long-term deposit
C. Proceeds of life insurance
D. Raffle prize not exceeding P10,000
11. If refunded, this is taxable
A. Estate tax
B. Donor’s tax
C. Special assessment
D. Fringe benefit tax
12. Income tax payments to a foreign country, in the case of a
resident citizen may be claimed as
A. Tax credit and deduction from gross income
B. Tax credit only
C. Tax credit or deduction from gross income
D. Deduction from gross income only
13. Dividends paid by a domestic corporation maybe taxable
but subject to final tax, except
A. if received by a resident citizen
B. if received by a resident alien
C. if received by a non-resident corporation
D. if received by another domestic corporation
14. Which of the following statements regarding dividends is
wrong?
A. Exempt from income tax if received by a domestic
corporation from another domestic corporation
B. Exempt from income tax if received by a resident
corporation from a domestic corporation
C. Taxable subject to year-end tax if received by a resident
citizen from a non-resident corporation
D. Taxable subject to final tax if received by a non-resident
citizen from a non- resident corporation
15. X works as a secretary in an advertising firm in Manila.
During the year, she received P10,000 a month as salary or a
total of P120,000. In addition she also received 13 th month
pay, Christmas bonus, productivity bonus, mid year bonus and
14th month pay amounting to P40,000. The total deductions
for her SSS premiums, Medicare, Pag-ibig, and Union dues
contributions amounted to P5,000. X’s taxable income, if
single is
A. P 90,000
B. P105,000
C. C. P 75,000
D. P100,000
16. Which of the following statements is correct?
A. The power of taxation reaches even the citizens abroad and
his income earned from sources outside the Philippines
B. Priests and religious institutions are exempt from income
and property taxes.
C. Separation benefits received by terminated employees
resulting from a deadlock in their collective bargaining
agreement are exempt from income tax.
D. The value of a property received as a gift, or under a will or
testament or through legal succession is exempt from taxation.
17. Which of the following statements is not correct?
A. Proceeds of life insurance policies paid to beneficiaries
upon the death of the insured are excluded from gross income
regardless of whether the proceeds are received as a single
sum or in installments.
B. In case of transfer for a valuable consideration by
assignment or otherwise of a life insurance, endowment or
annuity contract or any interest therein, only the actual value
of such consideration and the amount of the premium and the
sums subsequently paid by the transferee are exempt from
income tax.
C. Marriage fees, baptismal offerings, sums paid for saying
masses for the dead and other contributions received by a
clergyman, evangelist or religious worker for services
rendered is taxable income.
D. Monetization of leave credits of employees who were
unable to go on leave due to
exigencies of the service constitute taxable income.
18. -PCSO and Phil lotto winnings are excluded from gross
income because they are subject to
final tax.
-Prizes, awards and winnings are excluded from gross income
because they are subject to
final tax.
A. Both are true
B. Both are False
C. True; False
D. False; True
19. Which statements is correct?
A. Incomes from illegal activities are taxable.
B. Tax refunds constitute taxable income to the taxpayer.
C. Recovery of bad debts previously written off is part of
taxable income
D. As a rule, contest awards and prizes are subject to 20%
final tax if they amount to P10,00 or more, otherwise they will
be exempt from income tax. -If the amount received by the lessor is in the nature of a
security deposit for the faithful compliance by the lessee of the
20. One of the following is taxable income terms of the contracts
A. Compensation for damages -If the amount received by the lessor is in the nature of a loan
B. The share of a partner in the undistributed net income extended by the lessee to
of a general professional partnership the lessor.
C. Living quarters and meals furnished and given to an
employee for the convenience of the employer A. Only 1
D. Facilities or privilege of relatively small value offered by B. Only 1 and 3
the employer as a means of promoting the health, goodwill, C. Only 2 and3
contentment, or efficiency of the employee. D. 1, 2 and3

21.Which of the following is taxable?
A. P100,000 interest on long-term deposit or investment
B. P200,000 gain on sale of 10-year bonds
C. P12,000 prize in a supermarket raffle
D. P1 M winnings from Phil. lotto
27. One of the following represents taxable income:
A. Refund of overpaid rental expense in prior year
B. Refund of donor’s tax paid in prior year
C. Refund of income tax in prior year
D. Refund of special assessment paid in prior year

22. Gain realized from the sale or exchange or retirement of 28. If an individual performs services for a creditor who in
bonds, debentures or other certificate of indebtedness is consideration thereof cancels the debt, the cancellation of
excluded from gross income if with a maturity of indebtedness may amount to
A. 5 years or more A. A gift
B. More than 8 years B. A donation inter-vivos
C. More than 7 years C. A capital contribution
D. D. More than 10 years D. A payment of income

23. Gross benefits received by officials and employees of 29. This is not part of gross compensation income
public and private entities as 13th month pay and other benefits A. Salary of P 20,000 a month
such as productivity bonus, service incentive pay and B. Fringe benefits of P10,000 of an employee
Christmas bonus shall be excluded from taxable income up to C. Salary of P10,000 a month of a partner in a general
A. P20,000 professional partnership
B. P30,000 D. Honorarium and allowances of P10,000 of a member of the
C. C. P40,000 board of directors of a Corporation
D. P50,000
30. Mr Z, a farmer, had the following data for the year:
24. Exclusions from gross income, except: Sales of livestock and farm products raised 270,000
A. Interest on the price of the land covered by the Presidential Sales of livestock and farm products purchased 160,000
Decree on land reform. Cost of raising livestock and farm products 190,000
B. Interest payments on proceeds of life insurance held by Cost of livestock & farm prod. purchased and sold 140,000
the insurer Rental income of farm equipment 105,000
C. GSIS/SSS, Philhealth and Pag-ibig contributions and Union Inventory of livestock and farm products, Jan.1 110,000
dues of individuals Inventory of livestock & farm products, Dec.31 113,000
D. Gains realized by an investor upon redemption of shares of Using the cash method of accounting, the income is:
stock in a mutual fund company. A. P205,000
B. P208,000
25. Advance rental in the nature of prepaid rental, received by C. P395,000
the lessor under a claim or right and without restriction as to D. P202,000
use is
A. Taxable income of the lessor in the year received if he is on 31. Using the same information above, but the accrual method
the cash method of accounting of accounting is used, the income is
B. Taxable income of the lessor in the year received whether A. P205,000
he is on the cash or accrual method of accounting B. P208,000
C. Taxable income of the lessor in the year received C. C. P395,000
whether he is on the cash or accrual method of accounting D. P202,000
D. Taxable income of the lessor up to the amount earned in the
year the rental is received FRINGE BENEFITS TAX
1. In 2010, X Corporation allows its Sales Manager to incur
26. Which payments made by the lessee under such terms of expenses subject to reimbursement, as follows:
the lease contract should be considered as additional rent Electricity- 70% in the name of X Corporation P20,000
income of the lessor? Water – 70% in the name of X Corporation 2,000
-If a lessee paid directly to the government a real tax on the Grocery (PONES) 10,000
property of the lessor Gasoline of company car 12,000
Representation and Transportation – business trip 4,000
The amount subject to fringe benefit tax is
A. P48,000
B. P25,400
C. P15,400
D. P16,600
2. Which of the following is subject to fringe benefit tax?
A. compensation income of the rank and file employees
B. fringe benefit of the rank and file employees
C. compensation income of the managerial employees
D. fringe benefit of the managerial employees
3. The following concepts denote exemption from the fringe
benefits tax, except
A. convenience of the employer
B. necessity to the business or trade
C. welfare and benefits of the employee
D. de minimis benefits
4. As a rule, fringe benefit furnished or granted in cash or in
kind by an employer to an individual employee maybe subject
to the fringe benefit tax, if given to
-Rank and file employees
-Managerial employees
-Those holding supervisory positions
employee
8. Basic rules on fringe benefits tax, except
A. Fringe benefit given to rank and file employees is not
subject to fringe benefits tax
B. Fringe benefit given to a supervisory or managerial
employee is subject to fringe benefits tax
C. De minimis benefit whether given to rank and file
employee or to supervisory or managerial employee is not
subject to fringe benefit tax
D. The fringe benefit tax is a tax paid by the managerial or
supervisory employee.
9. Facilities or privileges or offered or furnished or offered by
an employer to his employees that are of relatively small value
and are offered or furnished by the employer merely as a
means of promoting the health, goodwill, contentment, or
efficiency of his employees.
A. Fringe benefit
B. Fringe benefit tax
C. De minimis benefit
D. Grossed-up monetary
10. Which statement is wrong? The fringe benefit tax is
A. imposed on the employer
B. imposed on the managerial or supervisory employee
C. withheld at source
D. deductible by the employer

A. 1 and 2 only 11. As a means of promoting the health, goodwill, and

B. 1 and 3 only efficiency of his employees, employer A gave rank and file
C. 2 and 3 only employee X the following fringe benefits in 2009:
D. 1, 2 and 3 -Monetized unused vacation leave of 15 days P9,000
-Rice subsidy 24,000
-Uniform and clothing allowance 8,000
-Achievement award for length of service 15,000
5. The fringe benefit tax is in the form of tangible personal property
-Imposed on the employer -Gifts given during Christmas and major 10,000
-Withheld at source anniversary celebrations
-Deductible by the employer -13th Month pay 18,000

A. 1 and 2 only The amount of taxable fringe benefits is

B. 1 and 3 only A. P30,000
C. 2 and 3 only B. P25,000
D. 1, 2 and 3 C. P23,000
D. P11,000
6. With regard to the amount on which the fringe benefit tax
rate is applied, which statement is wrong? The tax benefit rate 12. The employer’s deductions for the benefits given
is applied on A. P23,000
A. The monetary value of the fringe benefit B. P18,000
B. The gross-up monetary value of the fringe benefit C. P66,000
C. The amount deductible by the employer from gross income D. P84,000
D. Both accounts of the fringe benefit and the fringe benefit
tax 13. The grossed-up monetary value of fringe benefit subject to
7. The following fringe benefits are not subject to fringe fringe benefit tax received by a non-resident alien individual
benefit tax, except not engaged in trade or business in the Philippines is
A. if required by the nature of or necessary to the trade, computed by dividing the monetary value of the fringe benefit
business or profession of the employer by
B. contributions of the employer for the benefit of the A. 75%
employee to retirement, insurance and hospitalization benefit B. 25%
plans C. 85%
C. benefits given to the rank and file employees D. 15%
D. if given for the convenience or advantage of the
14. The following fringe benefits are not subject to fringe
benefits tax, except:
A. Fringe benefits given to the rank and file employees,
whether granted under a collective bargaining agreement or
not
B. Contributions of the employer for the benefit of the
employees to retirement, insurance and hospitalization
benefits plans
C. De minimis benefits, as defined in the rules and regulations
to be promulgated by the Secretary of Finance, upon
recommendations of the Commissioner.
D. Fringe benefits furnished or granted by the employer to
its managerial and supervisory employees.
DEDUCTIONS AND EXEMPTIONS
1. Which of the following statements is true?
A. Payments which constitutes bribes, kickbacks, and others
of similar nature which are necessary to realize the profit are
allowed as deduction from gross income
B. The taxes which are deductible from gross income include
the taxes, interest and penalties incident to tax delinquency
C. Deductions are amounts allowed by the Tax Code to be
deducted from gross income to arrive at the income tax
liability of a taxpayer.
D. Losses from wagering transactions shall be allowed only
up to the extent of the gains from such transactions.
2. X Corp. had a net sales of P1M. The actual entertainment,
amusement and recreation expense amounted to P20,000. The
deductible “EAR” expense is
A. P20,000
B. P 6,000
C. P10,000
D. P 5,000
3. Y Corp. had a net revenue of P1M. The actual
entertainment, amusement and recreation expense amounted to
P20,000. The deductible “EAR” expense is
A. P20,000
B. P 6,000
C. P 5,000
D. P10,000
4. Z Corp. is engaged in the sale of goods and services with
net sales and net revenue of P2M and P1M respectively. The
actual entertainment, amusement and recreation expense
amounted to P18,000. The deductible “EAR” expense is
A. P18,000
B. P16,000
C. P12,000
D. P 6,000
5. This is not deductible from gross income
A. Transportation expenses from the main office to the branch
B. Transportation expenses from home to the office and
from the office back to home
C. Travel expenses on business trips
D. Travel expenses while away from home in the pursuit of
trade, business or profession
6. A revenue expenditure is
A. Usually incurred in the acquisition, betterment or
permanent improvement of the asset
B. Capitalized and the cost is recovered through annual
depreciation
C. Ordinarily to benefit more than one accounting period
D. To benefit one accounting period and is a deduction
from gross income in the year paid or incurred.
7. The optional standard deduction for corporations is
A. 10% of the gross income
B. 10% of the gross sales/ receipts
C. 40% of the gross income
D. 40% of the gross sales/receipts
8. No deductions shall be allowed where the transaction is
between “related taxpayers” for
-Losses from sales or exchanges of property
-Interest expense
-Bad debts
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
9. The phrase “related taxpayers” will apply to the following,
except:
A. Between members of a family
B. Between the grantor and a fiduciary of any trust
C. Between a fiduciary of a trust and a beneficiary of such
trust
D. Between an individual and a corporation more than
50% in value of the outstanding stock of which is owned,
directly or indirectly for such individual, in case of
distributions in liquidation.
10. For individuals, premiums paid during the taxable year for
health and/or hospitalization insurance taken out by him on
himself, including his family shall be allowed as deductions
from gross income, provided that the family has a gross
income of
A. More than P250,000
B. More than P500,000
C. Not more than P250,000
D. Not more than P2,400
11. The deduction for premium payments on health and / or
hospitalization insurance is not available to:
A. An individual with gross compensation income only
B. An individual with gross income from business or practice
profession, whether he is availing of the optional standard
deduction or itemized deduction
C. An individual with mixed income
D. Both husband and wife
12. - In case of married taxpayer, only the spouse claiming the
additional exemptions for dependents shall be entitled to the
deduction on premium payments on health and / or
hospitalization insurance.
- The deduction for premium payments on health and / or
hospitalization insurance shall not exceed P2,400 for the
family or P200 a month
A. True; True
B. True; False B. P200,000
C. False; True C. P160,000
D. False; False D. P240,000

14. In 2009, Z, a resident citizen, engaged in business 19. The operating loss, which had not been previously offset
borrowed money from ABC Bank from which he had an as deduction from gross income shall be carried over as
interest expense of P20,000. His deposit in XYZ bank yielded deduction from gross income for the next
an interest income of P25,000. His deduction for interest A. 2 consecutive taxable years immediately following such
expense is loss.
A. P20,000 B. 3 consecutive taxable years immediately following such
B. P 5,000 loss. 22.
C. P 9,750 C. 4 consecutive taxable years immediately following such
D. P10,250 loss.
D. taxable year immediately following such loss.
15. Interest expense incurred to acquire property used in trade
or business or exercise of a profession is 20. A taxpayer had the following:
A. Not allowed as a deduction against gross income Year 1 Year2 Year 3 Year 4 Year 5
B. Required to be treated as a capital expenditure to form part Gross income P450K P450K P440K P420K P490K
of the cost of the asset Allowable Deduc. 530K 430K 410K 410K 410K
C. Allowed as a deduction or treated as a capital
expenditure at the option of the taxpayer The income to be reported in year 2 is
D. Allowed as a deduction or treated as a capital expenditure A. P20,000
at the option of the government B. P60,000
C. P450,000
15. If an individual is on the cash basis of accounting, will D. P 0
interest paid in advance be allowed as a deduction?
First answer - No, it is a deduction in the year that the 21. The income to be reported in year 5 is
indebtedness was paid and not in the year A. P60,000
that the interest was paid. B. P20,000
Second answer – Yes, if the indebtedness is payable in C. P80,000
periodic amortizations, the amount of the interest which D. P 0
corresponds to the amount of the principal amortized or paid
during the year shall be allowed as a deduction in such taxable 22. One of the following losses can not be deducted from
year. gross income
A. True; True A. To construct a bigger warehouse, a corporation demolished
B. True; False an old warehouse which had a construction cost of P2M and a
C. C. False; False book value of P300,000.
D. D. False; True B. Demolition of a building existing on a land purchased
where the corporation has no use for the building at the
16. May be deducted from gross income time of purchase and it was its intention to remove the
A. Philippine income tax building in order to build its factory.
B. Foreign income tax C. A corporation retired its machinery from the business
C. Estate or donor’s tax because of the increase in the cost of production and the
D. Special assessment failure of the machinery to meet the desired number of units of
production.
17. A taxpayer engaged in business incurred a partial loss of D. A corporation ascertained that its B Corp. stocks are
property as follows: worthless because of the total insolvency of B Corp.
Asset 1 Asset
BV of asset at time of loss P200,000 200,000 23. Examples of taxes that are deductible except
Cost to restore property back to A. Occupation tax
normal operating condition 120,000 300,000 B. Privilege tax
Insurance recovery 50,000 None C. Documentary stamp tax
Salvage None 40,000 D. Philippine income tax

The deductible loss for asset 1 is 24. Non-deductible taxes, except

A. P120,000 A. Special Assessment
B. P 70,000 B. Donor’s tax
C. P30,000 C. Estate tax
D. P80,000 D. Business tax

18. The deductible loss for asset 2 is 25. X acquired a machine at a cost of P250,000. Scrap value is
A. P300,000 P20,000 and the estimated useful life was 25 years. After
depreciating the asset for 20 years using the straight-line D. 1, 2, 3, 4 and 5
method, it was determined that the remaining life is not five
years. The annual depreciation from the 21st year assuming a 31. Any amount subsequently received on account of a bad
remaining life of 10 years without scrap is debt previously charged off and allowed as a deduction from
A. P10,000 gross income in prior years must be included in gross income
B. P11,500 in the taxable year in which received. This is
C. P9,200 A. Severance test
D. P6,600 B. Life-blood theory
C. Destination of income test
26. -An expense which is necessary but not ordinary, or D. Equitable doctrine of tax benefit
ordinary but not necessary is Deductible from gross income.
-The taxpayer must signify his intention to elect the itemized 32. X took out a life insurance policy of P1,000,000 naming
deduction, otherwise, he is deemed to have chosen the his wife as beneficiary. The policy provides that the insurance
optional standard deduction. company will pay X the amount of P1,000,000 after the 25 th
year of the policy and his beneficiary, should he die before this
A. True; True date. The premiums paid on the policy is P700,000. If X
B. True; False outlived the policy and received the proceeds of P1,000,000,
C. False; True such proceeds will be:
D. False; False A. Taxable in full
B. Partly taxable, partly exempt
27. -Interest paid on preferred stock is deductible from gross C. Exempt from income tax
income of the paying corporation. D. Subject to final tax
-A capital expenditure usually benefits more than one
accounting period and is deductible from gross income in the 33. Using the preceding no., if X dies and his beneficiary
year it is paid or incurred. received the proceeds of P1,000,000, such proceeds will be
A. Taxable in full
A. True; True B. Partly taxable, partly exempt
B. True; False C. Exempt from income tax
C. True True; D. Subject to final tax
D. False; False
34. Z, a dedicated and honest employee of RST Corp. for the
28. -The cost of leasehold improvements shall be deductible past 20 years was advised that he is to be retrenched as the
from gross income of the paying corporation. company was losing heavily but that he would be given the
-Contributions by the employer to a pension trust for past separation pay provided by law. To avoid implication of
service cost is deductible in full in the year that the employer inefficiency Z was advised to file a letter of resignation instead
made the contributions. of being retrenched. If Z files a letter of resignation and
receives the separation pay, such amount is
A. True; True A. Taxable in full
B. True; False B. Partly taxable, partly exempt
C. False; True C. Exempt from income tax D. Subject to final tax
D. False; False
35. Using the preceding no., If Z is retrenched and receives the
29. For individuals with gross compensation income, the separation pay, such amount is
following maybe deducted, except: A. Taxable in full
A. Personal exemptions B. Partly taxable, partly exempt
B. Additional Exemptions C. Exempt from income tax
C. Optional standard deduction D. Subject to final tax
D. Premium payments on health and/or hospitalization
insurance 36. May consider capital expenditures as revenue expenditures
A. Resident citizen
30. For individuals with gross income from business or B. Domestic corporation
practice of profession, the following may be deducted C. Private educational institutions
1.Optional standard deduction D. Resident alien
2. Itemized deduction
3. Personal exemptions 37. May claim tax credit for income taxes paid to foreign
4. Additional exemptions country.
5. Premium payments on health and/a hospitalization A. Resident citizen
insurance B. Resident alien
C. Non-resident citizen
A. 1, 2, 3 and 4 D. Non-resident alien
B. True; False
C. 3, 4 and 5 and either 1 or 2 38. One of the following is not correct for deductibility of
losses from gross income will pay Z the amount of P2 M after the 25 th year of the policy
A. Must arise from fire, storm or other casualty, robbery, theft and his beneficiary, should he die before this date. The
or embezzlement premiums paid on the policy is P1.5M. If Z outlived the policy
B. Must not be compensated by insurance or other form of and received the proceeds of P2M, such proceeds will be:
indemnity A. Taxable in full
C. A declaration of loss by casualty should be filed with the B. Exemptfromincometax
Bureau of Internal Revenue C. Partly taxable, partly exempt
D. Must have been claimed as deduction in the estate D. Subject to final tax.
return of the taxpayer
46. B, a retailer of goods uses the accrual method in reporting
39. Which of the following statements is not correct? his income and expenses. His 2010 transactions show:
A. The optional standard deduction is an amount equal to Jan1-Jun30 Jul1-Sep30 Oct1-Dec31
forty percent (40%) of the Gross income from business or Gross Sales P1,000,000 P700,000 P900,000
practice of profession of the taxpayer. Cost of Sales 600,000 200,000 300,000
B. The optional standard deduction is not available against Business expenses 100,000 50,000 70,000
compensation income arising out of an employer-employee
relationship For the period January 1 to June 30, 2010, he used the
C. The election of Optional Standard Deduction is irrevocable itemized deduction but decided to use the optional standard
for the taxable year for which the choice is made. deduction beginning July 1. B’s annual income tax return
D. Unless the taxpayer signifies in his return his intention he using the optional standard deduction will show a net income
shall be considered as havingavailed of the itemized before exemptions of
deduction. A. P1,560,000
B. P 900,000
C. P1,020,000
40. The following may be allowed to claim optional standard D. P1,320,000
deduction, except
A. Resident citizen 47. RLG Corporation, a retailer of goods uses the accrual
B. Non-resident citizen method of accounting in reporting its income and expenses
C. Resident alien under the calendar year basis. From January 1 to June 30,
D. Non-resident alien 2010, it used the itemized deduction but decided to use the
optional standard deduction method when it filed its annual
41. The following may elect optional standard deduction or income tax return. Its 2010 transactions show:
itemized deduction, except Jan1-Jun30 Jul1-Sep30 Oct1-Dec31
A. Taxable estates and trusts Gross Sales P1,000,000 P700,000 P900,000
B. Domestic corporation Cost of Sales 600,000 300,000 600,000
C. General professional partnership Business expenses 100,000 50,000 150,000
D. Foreign corporation
The net income of RDG is
42. The optional standard deduction for individuals is A. P1,560,000
A. 10% of the gross income B. P 660,000
B. 10% of the gross sales/receipts C. P 800,000
C. 40% of the gross income D. P720,000
D. 40% of the gross sales/receipts
48. MDG Corporation is engaged in trading business. The
43. May consider capital expenditures as revenue expenditures reported income and expenses for taxable year 2010 show:
A. Resident citizen
B. Domesticcorporations Sales P10,000,000
C. Private educational institutions Cost of sales 6,000,000
D. Resident alien General business expenses 1,000,000
Interest on time deposit (gross) 100,000
44. A building was partially destroyed by fire in 2010. The Interest expense on loans payable 180,000
building had a book value of P10M. The insurance company
was willing to pay P5 M, which was refused by the owner. The net taxable income is
Finally, the claim was settled in 2011 for P9M. The proceeds A. P2,858,000
will be B. P2,820,000
A. Exempt from income tax C. P3,000,000
B. Part of taxable income D. P2,862,000
C. Subjecttofinaltax
D. Partly exempt, partly taxable CAPITAL ASSETS

45. Z took a life insurance policy of P2M naming his wife as 1. Where the taxpayer is a corporation, which of the following
beneficiary. The policy provides that the insurance company statements is true?
A. The holding period does not apply to corporation, hence, D. Net capital loss carry-over should not exceed the net
capital gains and losses are recognized at 50%. income in the year the loss was incurred.
B. The net capital loss can be carried over in the next
succeeding year 7. The term “capital assets” include
C. Capital loss is deductible only up to the extent of ordinary A. Stock in trade or other property included in the taxpayer’s
gains inventory.
D. Ordinary loss is deductible from capital gains B. Real property not used in the trade or business of
taxpayer.
2. -Capital losses are deductible from ordinary gains but net C. Property primarily for sale to customers in the ordinary
capital loss is not deductible from ordinary gains. course of his trade or business.
- Ordinary losses are deductible only to the extent of the D. Property used in the trade or business of the taxpayer and
capital gains but the net capital loss is not deductible from subject to depreciation.
ordinary gain.
8. A sold his principal residence at a selling price of P5M but
A. True; True with a FMV of P6M. The property sold was acquired for P3M.
B. True False; He purchased his new principal residence at a cost of P7M.
C. True True; The capital gains tax is
D. False; False A. P360,000
B. P300,000
3. An individual taxpayer owns a ten (10)- door apartment C. P240,000
with a monthly rental of P10,000 each residential unit. He sold D. P 0
this property to another individual taxpayer. Which is not 9. How much is the basis (cost) of the new principal
correct? residence?
A. The seller is not liable to pay the capital gains tax. A. P7M
B. The property sold is a capital asset. B. P6M
C. The taxpayer is engaged in business C. P5M
D. The rental income is subject to income tax using the D. P4M
graduated rates.
10. If only P4M out of P5 M was utilized in acquiring his new
4. Holding period is the duration for which the taxpayer held principal residence, the capital gain tax is
the capital asset. A capital assetheld by the taxpayer for not A. P60,000
more than 12 months is said to be B. P72,000
A. short-term C. P300,000
B. medium-term D. P360,000
C. long-term
D. no-term 11. Using the preceding number, the basis (cost) of the new
principal residence?
5. The following rules as to recognition of capital gains or A. P3.2M
losses from the disposition of personal property classified as B. P4M
capital asset apply where the taxpayer is an individual. Which C. P2.4M
is the exception? D. P3M
A. Depending on the holding period, the percentages of gain
or loss is 100% if the capital asset has been held for 12 months INSTALLMENT METHOD
or less; and 50% if the capital asset has been held for more 1. Which of the following statements is not correct? Those
than 12 months. who make a casual sale or disposition of personal property on
B. Capital losses are deductible only to the extent of the the installment plan may elect the installment basis of
capital gains; hence, the net capital loss is not deductible. reporting income if
C. Ordinary losses are deductible from capital gains but net A. The personal property sold is not of a kind which would be
capital loss cannot be deducted from ordinary gain. included in the inventory.
D. Net capital loss carry over in a taxable year should not B. The selling price exceeds P1,000
exceed the capital gain in the year the loss was incurred. C. The sale is in installment
D. The initial payments do not exceed 25% of the contract
6. Where the taxpayer is a corporation, the following rules as price.
to recognition of capital gains or losses from the disposition of
property classified as capital asset shall apply. Which is the 2. In 2009, Z sold a piece of land which had a cost of P1M for
exception? a selling price of P4M. The sale called for an assumption by
A. The holding period does not apply to corporations, hence, the buyer of a mortgage on the land of P1.5M, cash of
capital gains and losses are recognized at 100%. P500,000 on the date of sale and installment payments of
B. Capital losses are deductible only to the extent of capital P500,000 every year thereafter. The land is an ordinary asset.
gains. The income to be reported in 2009 under the installment
C. Ordinary losses are deductible from capital gains but net method of reporting income is
capital loss cannot be deducted from ordinary gain. A. P500,000
B. P750,000
C. P375,000
D. P1,000,000
FILING, PENALTIES AND REMEDIES
1.The Income tax return for the calendar year 2010 was due
for filing on April 15, 2011, but the taxpayer voluntarily filed
his tax return without notice from the BIR, only on July 15,
2011. The tax due per return amounts to P100,000. The total
amount due on July 15, 2011 (excluding compromise penalty)
is
A. P145,000
B. P111,250
C. P117,500
D. P130,000
2. Using the preceding number, but the income tax return is
filed on time but through an internal revenue officer other than
with whom the return is required to be filed. The total amount
due is
A. P100,000
B. P130,000
C. P150,000
D. P125,000
3. The taxpayer did not file his income tax return for the
calendar year 2008. He was notified by the BIR of his failure
to file the tax return, for which reason he filed his tax return
and paid the tax only after said notice on October 15, 2010.
The tax due per return is P100,000. The total amount due on
October 15, 2010 (excluding compromise penalty) is
A. P150,000
B. P155,000
C. P180,000
D. P205,000
4. Taxpayer filed on time his income tax return for the
calendar year 2008 and paid on April 15, 2009. Upon pre-audit
of his return, it was disclosed that he erroneously computed
the tax due. The correct amount of tax due is P120,000. The
taxpayer is assessed for deficiency income tax in a letter of
demand and assessment notice is issued on June 15, 2010
calling for payment on or before July 15, 2010. The amount
still due on July 15, 2010 is:
A. P30,000
B. P31,250
C. P35,000
D. P25,000
5. A corporation filed its ITR and paid tax for calendar year
2008 with a net taxable income of P500,000. However, upon
investigation, it was disclosed that its ITR was false or
fraudulent because it did not report a taxable income
amounting to another P500,000. Failing to protest on time
against the preliminary assessment notice, a final letter of
demand and assessment notice issued on June 15, 2010 calling
for payment on before July 15, 2010. The amount still due on
July 15, 2010 is
A. P328,125
B. P297,500
C. P262,500
D. P306,250
6. Using the preceding number, assuming that the assessment
has become final and collectible, but the corporation pays the
tax assessment only on August 15, 2010, the total amount due
(excluding compromise penalty) is
A. P415,625
B. P376,833
C. P387,917
D. P329,500
7. Individual self-employed taxpayers are required to file their
Income Tax Returns:
A. On a yearly basis, once a year.
B. On a quarterly basis, non-cumulative system
C. On a quarterly basis, cumulative system
D. On a quarterly basis, cumulative system and on a yearly
basis, once a year.
8. The individual income tax return of a fixed earner
(employee) is filed on or before
A. April 15 of the current taxable year
B. April 15 of the following taxable year.
C. May 15 of the current taxable year
D. May 15 of the following taxable year.
9. A resident citizen taxpayer is allowed to pay his income tax
due on installment basis if:
A. Basic income tax is P2,000 or below
B. Basic income tax is over P2,000
C. Basic income tax is over P5,000
D. Basic income tax is over P1,000.
10. B was employed by A Corporation on the first working
day of January 2008 on a part-time basis with a salary of
P10,000 a month. He then received his 13 th month pay. In
September
2008 he accepted another part-time job from B Corporation
from which he received a total compensation of P408,000 for
the year 2008. The correct total taxes were withheld from both
earnings. With regard to the filing of income tax return (ITR)
for the year 2008 which of the following is true?
A. B is exempt from filing his ITR because the correct total
taxes have been withheld.
B. B is not exempt from filing his ITR because his total
compensation income for 2008 came from more than one
employer.
C. B is exempt from filing his ITR because his total income
for 2008 came from employer- employee relationship.
D. B is not exempt from filing his ITR because his income
came from employer-employee relationship.
11. Generally, the following individuals are required to file an
income tax return. Who is the exception?
A. Every Filipino citizen residing in the Philippines.
B. Every Filipino citizen residing outside the Philippines,
on his income from sources outside the Philippines.
C. Every alien residing in the Philippines on income derived
from sources within the Philippines.
D. Every non-resident alien engaged in trade or business in the
Philippines.
12. Where compromise penalties is not allowed
A. Failure to preserve or keep books of accounts and C. 90 days
accounting records. D. 180 days
B. Failure to keep records of accounts or records in a native
language or in English. 20. An appeal on an assessment may be made to the CTA if the
C. Failure to have books of accounts audited and have BIR does not act on the protest within, how many days from
financial statements attached to income tax return certified by the taxpayer’s submission of documents supporting his
an independent CPA. protest?
D. Keeping two (2) sets of books of accounts or records. A. 30 days
B. 60 days
13. All criminal violations may be compromised: C. 90 days
-Except those already filed in court. D. 180 days
-Except those involving fraud.
21. I - The taxpayer shall respond to a pre assessment notice,
A. True; True and if he fails to respond, an assessment shall be issued.
B. True; False II - An assessment issued may be questioned administratively
C. False; True with the BIR.
D. False; False
A. True; True
14. For filing a false and fraudulent return, a surcharge is B. True; False
imposed at: C. False; True
A. 25% as criminal penalty D. False; False
B. 25% as administrative penalty
C. 50% as criminal penalty 24. Where a return was filed, as a general rule, the prescriptive
D. 50% as administrative penalty period for assessment after the date the return was due or was
filed, whichever is later, is within
15. This is not an administrative remedy available to a A. 3 years
taxpayer in connection with collection of taxes. B. 5 years
A. Filing a petition for reconsideration or reinvestigation C. 7 years
B. Filing a claim for tax refund or credit D. 10 years
C. Entering into a compromise
D. Filing a criminal complaint against erring BIR officials 25. Where any national internal revenue tax is alleged to have
or employees. been erroneously or illegally collected. As a remedy, the
taxpayer should first file an action for refund with the
16. A compromise for a tax liability on the ground of financial A. Regional Trial Court
incapacity to pay shall still involve a payment of tax from the B. Court of Tax Appeals
taxpayer at a minimum compromise rate of C. BIR
A. 10% of the basic assessed tax D. Court of Appeals
B. 20% of the basic assessed tax
C. 30% of the basic assessed tax 26. In case of an assessment of a tax
D. 40% of the basic assessed tax A. The assessment should be made within 3 years from date of
filing of the return.
17. Using the preceding number, with regard to compromises B. The assessment should be made within 3 years from date of
other than on the ground of financial incapacity to pay, the the return is due.
compromise shall involve a minimum compromise rate of C. A protest should be made on time, otherwise the
A. 10% of the basic assessed tax assessment becomes final and executory.
B. 20% of the basic assessed tax D. A protest may be filed anytime before the BIR collects the
C. 30% of the basic assessed tax tax.
D. 40% of the basic assessed tax
27. Date of payment of tax erroneously paid April 15, 2009
18. An assessment shall become final if not protested Date of claim for refund was filed January 15, 2010
administratively, if such protest is not filed with the BIR, from Date decision of denial by the BIR
receipt of the assessment within was received September 15, 2010
A. 30 days
B. 60 days Last day to appeal to the CTA is
C. 90 days A. April 15, 2011
D. 180 days B. January 15, 2011
C. November 15, 2010
19. Using the preceding number, relevant supporting D. October 15, 2010
documents must also be presented to the BIR, from filing the
protest on the assessment within 28. Using the preceding number, if date of decision of denial
A. 30 days by the BIR was received on March 31, 2011, the last day to
B. 60 days appeal to the CTA is
A. April 30, 2011 to have been erroneously made.
B. April 15, 2011 D. A suit may be brought even after the lapse of two years
C. March 31, 2012 from the date of payment, if any supervening cause arises after
D. May 30, 2011 payment.

29. Date assessment was received
Date petition for reconsideration
was filed with the BIR
Date of filing of documents to
support the petition
Date of decision of denial of
the petition was received
The last day to appeal to the CTA is
A. April 15, 2011
B. November 8, 2010
C. December 8, 2010
D. October 28, 2010
30. Date assessment was received
Date petition for reconsideration
was filed with the BIR
Date of filing of documents to
support the petition
No decision on the protest is
received as of
The last day to appeal to the CTA is
A. April 15, 2011
B. November 8, 2010
C. December 4, 2010
D. November 30, 2010
March 8, 2010 34. The following are the grounds to cancel a tax liability by
the Commissioner, except
March 18, 2010 A. The tax is unjustly or excessively assessed.
B. The administration and collection costs involved do not
May 8, 2010 justify the collection of the amount.
C. A reasonable doubt as to the validity of the claim
September 28, 2010 against the taxpayer.
D. Illegal collection of tax.
35. Which of the following is not a requisite to toll the
collection of taxes to be made by the BIR, upon proof of the
following to the Court of Tax Appeals
A. It will jeopardize the interest of the taxpayer.
B. It will jeopardize the interest of the government.
C. Filing of a bond for at least double the amount of the
March 8, 2010 tax assessed.
D. The case is not dilatory.
March 28, 2010
36. Which of the following will not interrupt the running of
May 8, 2010 the prescriptive period for assessment and collection of taxes?
A. When the Commissioner is prohibited from making the
October 30, 2010 assessment or beginning distrait and levy or a proceeding in
court and for thirty (30) days after.
B. The taxpayer requests for the reinvestigation which is
granted by the Commissioner.
C. When the taxpayer is out of the Philippines.
D. When the taxpayer cannot be located in the address given
by him in the return.

31. Which of the following statements is correct? 37. The power to decide disputed assessments, refunds of
A. Individuals deriving compensation income are exempt from internal revenue taxes, fees or other charges, penalties
filing ITR. imposed in relation thereto, or other matters arising under the
B. General professional partnership are exempt from filing Tax Code or other laws administered by the BIR is vested with
ITR. A. The Commissioner of the BIR
C. Domestic corporations can avail the optional standard B. The Secretary of Finance
deduction beginning 2008. C. The Court of Tax Appeals
D. Resident aliens engaged in business in the Philippines D. The Regular Courts
are required to file quarterly and annual ITR.
38. It is the official action of an administrative officer in
32. Which of the following statement is correct? determining the amount of tax due from a taxpayer, or it may
A. A protest should be filed by a taxpayer, otherwise the be a notice to the effect that the amount stated therein is due
assessment becomes final and can no longer be questioned from the taxpayer with a demand for payment of the tax or
in court. deficiency stated therein
B. A protest may be filed by the taxpayer anytime before the A. Tax investigation
BIR collects the tax. B. Tax audit
C. The assessment should be made by the BIR within five C. Tax assessments
years from the filing of the return. D. Tax mapping
D. The assessment shall include only tax proper.
39. Which of the following is not the remedies of the
33. Which of the following statements is incorrect? government in tax collection?
A. A pre-assessment notice shall be required before an A. Tax lien
assessment maybe made. B. Compromise
B. The taxpayer shall be informed of the law and the facts on C. Forfeiture
which the assessment is made, otherwise the assessment shall D. Protest
be void.
C. The Commissioner may refund a tax even without a claim 40. Commissioner of BIR may compromise any internal
refund from the taxpayer where on the face of the return upon revenue tax when, except one
which the payment was made, such a payment clearly appears A. A reasonable doubt as to the validity of the claim against
the taxpayer exists.
B. The financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax.
C. The tax or any portion thereof appears to be unjustly or
excessively assessed.
D. The taxpayer has been granted by the SEC or by any
competent tribunal a moratorium or suspension of payments to
creditors, or otherwise declared bankrupt or insolvent.

41. The power of the Commissioner of Internal Revenue

include the following, except
A. Abate a tax liability of a taxpayer.
B. Compromise the payment of any internal revenue tax.
C. Credit or refund a tax that has been erroneously paid by the
taxpayer.
D. Inquire into bank deposits of a taxpayer.