Taxation

Adamson University
Preliminary Examination
AC436 – Business Law & Taxation
2nd Semester – A.Y. 2022-2023
Clark Joed C. Otucan, CPA, MBA, CTT
Theoretical: Multiple Choice Questions (1 point each)

Select the letter that best corresponds to your answer for each of the following questions below.
1. The inherent powers of the government are primarily ________ in character.

a. Executive
b. Legislative
c. Judicial
d. Quasi-judicial
2. Who has the authority to veto the taxation bills passed by the Congress?
a. Supreme Court
b. President
c. Either A or B
d. Neither A nor B
3. Eminent domain and police power

a. Are both executive in character
b. Are both paid for in monetary equivalent compensation
c. Both do not involve the taking of money
d. Both involve the taking of private real property
4. Which of the following statements is false?

a. The rule of taxation shall be uniform and equitable
b. The Congress shall evolve a progressive system of taxation
c. The Senate can neither propose nor concur with amendments on revenue or tariff bills
d. The President shall have the power to veto any particular item or items in a revenue or
tariff bill, but the veto shall not affect the item or items to which he does not object.
5. Which of the following is an example of the State’s exercise of police power?

a. Collection of taxes on sweetened beverages as enacted by Congress
b. Congress’s prohibition of illegally copying pirated movies
c. The government’s taking of privately owned land for the construction of a railway
d. Conduct of the State elections for positions in the national government
6. Which of the following government agencies may exercise the law-making power of taxation?
a. Local government units
b. Bureau of Internal Revenue
c. Bureau of Customs
d. All of the above
7. Which of the following is a characteristic of tax?
a. The amount to be collected is limited to the cost of regulation
b. It is considered a demand of ownership or proprietorship
c. Its efficient cause or juridical tie is a contract
d. It is not subject to legal compensation
8. In case of doubt of statute imposing a tax, how shall the ambiguity be resolved by the court of
law?
a. It shall be construed strictly against the taxpayers and liberally in favor of the
government
b. It shall be construed in accordance with its letter rather than its spirit
c. It shall be construed strictly against the government and liberally in favor of the
taxpayers
d. It shall be construed in accordance with its wordings rather than the intention of the
lawmakers
9. Which is incorrect?
a. Collection of taxes is an administrative act.
b. There can be no tax if there is no law providing for the said tax.
c. No person can be imprisoned for non-payment of a capitation tax.
d. A tax is a form of administrative revenue.
10. The benefits received theory:

a. Can be disproved if the taxpayer can prove that he/she does not benefit from the
government
b. Is conclusive upon the taxpayers and cannot be disproved
c. States that the power to tax is the power to destroy
d. Provides that the judiciary is in charge with the application and interpretation of laws
11. Below are characteristics of a sound taxation system EXCEPT:

a. Administrative feasibility and compliance
b. Fiscal Adequacy
c. Theoretical Justice or Equality
d. Uniformity of Taxation
12. One of the following is NOT inherent limitation:

a. Taxes must be for public purpose
b. Equality in Taxation
c. Territoriality rule
d. Rule on double taxation
13. In case of conflict between the tax code and generally accepted accounting principles (GAAP):
a. Both tax codes and GAAP shall be enforced
b. GAAP shall prevail over tax code
c. Tax code shall prevail over GAAP
d. The issue shall be resolved by the courts
14. Which of the following statements is not correct?
a. Taxes may be imposed to raise revenues or to regulate certain activities within the state
b. The state can have the power of taxation even if the Constitution does not expressly
give it the power to tax
c. For the exercise of the power of taxation, the state can tax anything at any time
d. The provisions of taxation in the Philippines Constitution are grants of power not
limitations on taxing powers
15. The following are the similarities of the inherent power of taxation, eminent domain and police
power except:
a. They are necessary attributes of sovereignty.
b. They affect all persons or the public
c. They interfere with private rights and property
d. They are legislative in implementation.
16. In which inherent power of the state will the affected citizen receive a direct benefit?
a. Power of eminent domain
b. Police power
c. Power of taxation
d. None of the above
17. The distinction of a tax from permit or license is that a tax is:
a. Imposed for regulation.
b. One which involves an exercise of police power.
c. One in which there is generally no limit on the amount that may be imposed.
d. Imposed through the provisions of the Constitution.
18. Which of the following is not expressly provided for by the Philippine Constitution?
a. Due process of law.
b. Equal protection of laws.
c. Progressive system of taxation.
d. Prohibition against double taxation.
19. Which of the following statements is incorrect?

a. Charitable institutions, churches, parsonages, or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually,
directly and exclusively used for religious, charitable, or educational purposes shall be
exempt from income taxation
b. All revenues and assets of educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt from taxes and duties
c. Both A and B
d. Neither A nor B
20. A local government unit (LGU) imposed taxes on the steam boilers of an electric company.
The Department of Labor and Employment also imposed fees on the said steam boilers. There
is no conflict between the two impositions on the same subject matter because:
a. The former is exercising the power of taxation while the latter is exercising the police
power.
b. The purpose of the former is to raise revenue while the purpose of the latter is for
regulation.
c. There is no direct duplicate taxation since there are two different taxing authorities: the
local government and the national government.
d. All of the above are correct.
21. Tax of a fixed proportion of the value of the property with respect to which the tax is assessed
and requires the intervention of assessors or appraisers to estimate the value of such property
before the amount due from each taxpayer can be determined is known as:
a. Specific
b. Ad Valorem
c. Special or Regulatory
d. Fiscal
22. Which of the following is not a basic principle of a sound taxation system?
a. It should be capable of being effectively enforced.
b. It must be a progressive tax.
c. It must be sufficient to meet government expenditures and other public needs.
d. It should be exercised to promote public welfare.
23. The amount required is dictated by the needs of the government in:
a. License fee
b. Tax
c. Toll
d. Interest
24. Who is not a Philippine income tax payer?

a. A resident citizen of the Philippines with income from within and outside the
Philippines
b. A resident citizen of the Philippines with income from within the Philippines only
c. A non-resident citizen of the Philippines with income from outside the Philippines only
d. A non-citizen of the Philippines with income from within the Philippines
25. Taxes must be proportionate. This means that:

a. The tax to be imposed must be based on the needs of the government.
b. The tax to be imposed must be based on the income of the taxpayer.
c. The tax to be imposed must be based on the ability of the taxpayer to pay.
d. The tax to be imposed must be based on the willingness of the taxpayer to pay.
26. The legislative body can impose a tax at any amount underscores the legal truism that taxation
is
a. an inherent power of the tax
b. a very broad power of the state
c. essentially a legislative power
d. for public purposes
27. In cases of deductions and exemptions on income tax returns, doubts shall be resolved
a. strictly against the taxpayer
b. strictly against the government
c. liberally in favor of the taxpayer
d. liberally against the government
28. Income which is constructively received is already taxable income is a rule under this method
of accounting:
a. Cash method.
b. Accrual method.
c. Installment method.
d. Deferred payment method.
29. Which of the following statements is true?

a. opinions of legal luminaries are sources of tax laws
b. the constitution grants exemption from all kinds of taxes to religious and charitable
organizations
c. because the power to tax is unlimited, comprehensive, plenary and supreme, the power
to tax can reach over into any jurisdiction to seize upon person or property
d. the benefits protection theory is the source of the doctrine of symbiotic relationship
30. Which of the following statements is false?

a. An individual taxpayer is exempt on the first P250,000 of his income
b. A compensation earner may opt to avail of the 8% income tax rate
c. A professional income earner who avails of the 8% income tax is exempt from the
payment of 3% non-VAT
d. An operator of cockpit cannot avail of the 8% income tax option even if its gross
receipts during the preceding year did not exceed P3 million
31. Mr. A, government employee, has retired from service. Which of the following amounts is
taxable to him?
a. P730,000 - money value of the accumulated leave credits
b. P210,000 - lump-sum retirement pay from GSIS
c. P150,000 - return of insurance premium payments from a private insurance company
d. P34,000 - salary for his last month of service
32. What is the primary purpose of the power of taxation?

a. To promote the general welfare through regulations
b. To raise revenues for the expenses of the state
c. To facilitate the state’s need of property for public use
d. To advocate protection of constitutional right
33. The following individuals are not required to file income tax return, except
a. An individual whose income tax has been correctly withheld by his employer,
provided, that such individual has only one employer for the taxable year – the
Certificate of Withholding filed by the respective employers, duly stamped “Received”
by the Bureau of Internal Revenue shall be tantamount to the substituted filing of
income tax returns by said employees
b. An individual whose sole income has been subjected to final withholding tax
c. A minimum wage earner
d. An individual earning purely compensation income from two employers whose total
compensation income does not exceed the amount of P250,000
34. A minimum wage earner is not exempt from

a. Basic statutory minimum wage
b. Overtime and night shift differential pay
c. Commission
d. Holiday pay and hazard pay
e. None of the above

a. Supplementary compensation income includes payments to an employee in addition to
the regular compensation, such as commission, overtime pay, taxable retirement,
taxable bonus, and other taxable benefits, with or without regard to a payroll period.
b. Representation and Transportation Allowances (RATA) granted to public officials and
employees are not subject to income tax.
c. Personnel and Economic Relief (PERA) granted to government employees are not
subject to income tax if it constitutes reimbursement for expenses incurred in the
performance of official duties.
d. Representation and Transportation Allowances (RATA) granted to government
employees are not subject to income tax if it constitutes reimbursement for expenses
incurred in the performance of official duties.
36. Which is true with regard to the taxation of non-resident aliens not engaged in trade or
business?
a. They are subject to the final tax of 30% based on gross income
b. They are subject to the final tax of 30% based on taxable income
c. They are subject to the final tax of 25% based on gross income
d. They are subject to the final tax of 25% based on taxable income
37. Namjoon is a non-resident alien. He stayed in the Philippines for a period of 70 days from
March to May, went abroad, and returned to the Philippines for a period of 120 days from
August to December. For tax purposes, is Namjoon considered as a non-resident alien engaged
in trade or business in the Philippines?
a. Yes, considering that his longest stay in the Philippines was for a continuous period of
120 days
b. Yes, considering that he stayed in the Philippines for an aggregate period of 190 days
c. No, considering that his longest stay in the Philippines was only for a continuous period
of 120 days
d. No, considering that he stayed in the Philippines only for an aggregate period of 190
days

a. There is imprisonment for non-payment of taxes, but there is no imprisonment for non-
payment of debt
b. There is no imprisonment for non-payment of taxes, but there is imprisonment for non-
payment of debt
c. There is imprisonment for both non-payment of taxes and debt
d. There is no imprisonment for both non-payment of taxes and debt
39. Who among the following individual taxpayers is qualified under substituted filing, assuming
they are all resident citizens?
a. Lisa, who is employed as an accounting teacher in two (2) universities in Cavite
b. Jennie, who sells cupcakes in her free time
c. Rose, who is employed as a chef in a five-star restaurant, but at the same time, won the
lottery in the current taxable year amounting to P200,000,000
d. Jisoo, who receives professional fees as a singer
40. Married taxpayers are:

a. Required to file separate tax returns
b. Required to file a joint tax return and aggregate their income in the process of
computing their income tax due
c. May file a joint tax return but are required to aggregate their income in the process of
computing their income tax due
d. May file a joint tax return but are required to compute their income tax due separately
41. Which stage of taxation will the legislative department be involved with?
a. Levy
b. Assessment
c. Collection
d. Imprisonment
42. The income tax rates for individuals can be characterized as:
a. Proportional
b. Progressive
c. Regressive
d. Reportional
43. Subject to inherent and constitutional limitations, the following are the general characteristics
of power of taxation, except:
a. Supreme
b. Plenary
c. Limited
d. Comprehensive
44. Which of the following is classified as a local tax?

a. Income tax
b. Estate tax
c. Documentary stamp tax
d. Professional tax
45. All of the following statements are true regarding the legislative branch of the government,
except:
a. It has the authority to determine the persons liable to pay taxes, the subjects of taxation,
and the rate of taxes to be imposed
b. It levies taxes
c. It is headed by the Senate President and the Speaker of the House
d. It is the branch of the government in charge with the collection of taxes

a. The National Internal Revenue Code is a codification by the executive department of
our tax laws
b. The Bureau of Internal Revenue does not have a lawmaking power, but it is able to
promulgate rules within its limits provided by law through Revenue Regulations
c. The Tariffs and Customs Code, the Local Government Code, and the Omnibus
Investment Code are not sources of tax laws
d. The Congress does not need the concurrence of the Senate in enacting a tax law
47. Which of the following is not a characteristic of a tax?

a. It is a personal liability of the taxpayer
b. It is payable in money particularly legal tender
c. It is an enforced contribution
d. It is imposed outside the state’s territory
48. It refers to a type of tax imposed on the privilege of a person.

a. Excise tax
b. Personal tax
c. Property tax
d. None of the above
49. Seamen are classified as:

a. Resident citizen
b. Non-resident citizen
c. Resident alien
d. Non-resident alien engaged in trade or business
50. If a mixed-income earner avails of the 8% income tax option, then:

a. He is entitled to deduct P250,000 as exempt compensation
b. He is entitled to deduct P250,000 from his compensation as exempt compensation, and
another P250,000 as exempt income from trade or business
c. He is entitled to deduct P250,000 from his compensation as exempt compensation, and
another P250,000 as exempt income from trade or business, at his option
d. He is no longer entitled to any exemption
51. Which of the following income is no longer required to be reported in the income tax return?
a. Income already subjected to final withholding tax
b. Income already subjected to creditable withholding tax
c. Illegal income
d. Income outside Philippine territory
52. Generally, which of the following types of income is subject to final withholding tax?
a. Compensation income
b. Business income
c. Passive income
d. Construction income
53. Based on the schedular or graduated income tax rate for individuals, how much annual income
is exempt from income tax?
a. P50,000
b. P150,000
c. P250,000
d. P500,000
e. P0
54. Which of the following is most likely to be considered as a mixed-income earner?

a. Sakura, who is a part-time service crew at a fastfood store and a part-time saleslady at
two different department stores
b. Tomoyo, who earns income from her freelance photography stints and is engaged on a
per-contract basis by different companies
c. Yukito, who is a full-time Vice President for Human Resources at a multinational
company and a lessor of a five-floor apartment
d. Toya, who is still a college student and has income from his gigs with his rock band
55. A non-resident alien engaged in trade or business is one whose stay in the Philippines is
a. At least 180 days
b. More than 180 days
c. At least 183 days
d. More than 183 days
56. On June 2, 2018 Global Bank received a final notice of assessment from the BIR for deficiency
documentary stamp tax in the amount of P5million. On June 30, 2018, Global Bank filed a
request for reconsideration with the Commissioner of Internal Revenue. The Commissioner
denied the request for reconsideration only on March 30, 2022, at the same time serving on
Global Bank a warrant of distraint to collect the deficiency tax. What are the remedies of
Global Bank?
a. Appeal to the Court of Tax of Appeals within 30 days from receipt of the denial.
b. File for injunctive relief to restrain the distraint.
c. Enter into a compromise agreement with the Commissioner of Internal Revenue.
d. All of the above.
57. Gerry was being prosecuted by the BIR for failure to pay his income tax liability for Calendar
Year 2018 despite several demands by the BIR in 2021. The information was filed with the
Regional Trial Court only last January 2022. What are the remedies of Gerry?
a. Gerry should file a motion to quash the Information on the ground of prescription.
b. Gerry should answer the Information.
c. Gerry should file a protest with the Commissioner of BIR.
d. Gerry should appeal to the CTA.
58. 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
59. 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
60. 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.
61. 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.
62. Which of the following statements is correct?
a. The President is authorized to increase or decrease national internal revenue tax rates.
b. One of the nature of taxation is the reciprocal duties of protection and support between
the state and subjects thereof.
c. Every sovereign government has the inherent power to tax.
d. Income tax in an indirect tax.
63. A tax must be imposed for public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
c. Improvement of the sugar and coconut industries.
d. Improvement of a subdivision road.
64. Which is not an essential characteristic of a tax?

a. It is unlimited as to amount.
b. It is payable in money.
c. It is proportionate in character.
d. It is an enforced contribution.
65. Special assessment is an enforced proportional contribution from owners of land especially
benefited by public improvement. Which one of the following is not considered as one of its
characteristics?
a. It is levied on land.
b. It is based on the government’s need of money to support its legitimate objectives.
c. It is not a personal liability of the persons assessed.
d. It is based solely on the benefit derived by the owners of the land.
66. It is the privilege of not being imposed a financial obligation to which others are subject.
a. Tax incentive
b. Tax exemption
c. Tax amnesty
d. Tax credit
67. As to scope of the legislative power to tax, which is not correct?

a. Where there are no constitutional restrictions, and provided 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.
68. 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.
69. Which of the following is not a determinant of the place of taxation?

a. Source of the income
b. Citizenship of the taxpayer
c. Residence of the taxpayer
d. Amount of tax to be imposed

a. An inherent limitation of taxation may be disregarded by the application of a
constitutional limitation.
b. The property of an educational institution operated by a religious order is exempt from
property tax, but its income is subject to income tax.
c. The prohibition of delegation by the state of the power of taxation will still allow the
BIR to modify the rules in time for filing of returns and payment of taxes.
d. The power of taxation is shared by the legislative and executive departments of the
government.
71. This is an inherent limitation on the power of taxation.

a. Rule on uniformity and equity in taxation.
b. Due process of law and equal protection of the laws.
c. Non-impairment of the jurisdiction of the Supreme Court in tax cases.
d. Tax must be for the public purpose.
72. This is a constitutional limitation on the power of taxation.

a. Tax laws must be applied within the territorial jurisdiction of the state.
b. Exemption of government agencies and instrumentalities from taxation.
c. No appropriation of public money for religious purposes.
d. Power to tax cannot be delegated to private persons or entities.

a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the
statute expressly and clearly states because tax statutes should be construed strictly
against the government.
b. Tax exemptions, tax amnesty tax condonations and their equivalent provisions are not
presumed and, when granted are strictly construed against the taxpayer because such
provisions are highly disfavored by the government.
c. Exemptions from taxation are highly disfavored in law and he who claims tax
exemption must be able to justify his claim or right.
d. The House of Representatives has the duty and the exclusive power of constructing and
interpreting tax laws.
74. The following are similarities of the inherent power of taxation, eminent domain, and police
power, except one:
a. Are necessary attributes of sovereignty
b. Superior to the non-impairment clause of the constitution.
c. Compensation is received.
d. Are legislative in character.
75. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to the selling price
of the goods sold.
b. The purchaser asks for a discount or refuse to buy at regular prices unless it is reduced
by the amount equal to the tax he will pay.
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB
destination abroad, so that the title passes abroad instead of in the Philippines.
d. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler,
in turn to the retailer and finally to the consumer.
76. Which of the following statements is correct?

a. Individuals deriving compensation income are exempt from filing ITR.
b. General professional partnership are exempt from filing ITR.
c. Domestic corporations can avail the optional standard deduction beginning 2008.
d. Resident aliens engaged in business in the Philippines are required to file quarterly and
annual ITR.
77. Which of the following statement is correct?

a. A protest should be filed by a taxpayer, otherwise the assessment becomes final and
can no longer be questioned in court.
b. A protest may be filed by the taxpayer anytime before the BIR collects the tax.
c. The assessment should be made by the BIR within five years from the filing of the
return.
d. The assessment shall include only tax proper.
78. Which of the following statements is incorrect?

a. A pre-assessment notice shall be required before an assessment maybe made.
b. The taxpayer shall be informed of the law and the facts on which the assessment is
made, otherwise the assessment shall be void.
c. The Commissioner may refund a tax even without a claim refund from the taxpayer
where on the face of the return upon which the payment was made, such a payment
clearly appears to have been erroneously made.
d. A suit may be brought even after the lapse of two years from the date of payment, if
any supervening cause arises after payment.
79. The following are the grounds to cancel a tax liability by the Commissioner, except:
a. The tax is unjustly or excessively assessed.
b. The administration and collection costs involved do not justify the collection of the
amount.
c. A reasonable doubt as to the validity of the claim against the taxpayer.
d. Illegal collection of tax.
80. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under the Tax Code or
other laws administered by the BIR is vested with
a. The Commissioner of the BIR
b. The Secretary of Finance
c. The Court of Tax Appeals
d. The Regular Courts
81. Statement 1: A person may refuse to pay a tax on the ground that he receives no personal
benefit from it.
Statement 2: A taxpayer has a right to question illegal expenditures of public funds.
a. if only the first statement is correct.
b. if only the second statement is correct.
c. if both statements are correct.
d. if both statements are incorrect.
82. Statement 1: One of the essential characteristics of a tax is it is unlimited in amount.

Statement 2: A tax is generally unlimited because it is based on the needs of the state.
83. Statement 1: A License Fee is a charge imposed under the police power of the state.
Statement 2: Penalty is imposed by the state only.
84. Statement 1: Imposition of taxes is a legislative act.

Statement 2: Collection of taxes is an administrative act.
85. Statement 1: A state has the power to tax even if not granted by the Constitution.
Statement 2: A state cannot exercise police power if not granted by the Constitution.
86. Statement 1: There can only be a tax if there is a law imposing the tax.
Statement 2: The power to tax is inherent.
87. Statement 1: A tax is based on law while debt is based on contract.

Statement 2: A tax is also a custom’s duty.
88. Statement 1: A person cannot be imprisoned for non-payment of property tax.

Statement 2: A law may be passed violating uniformity of taxation.
89. Statement 1: The RDO is known as the alter ego of the BIR Commissioner.
Statement 2: The BIR Commissioner is directly under the President’s Office.
90. Statement 1: Provisions in the Philippine Constitution on Taxation are grants of power.
Statement 2: Due process of law in taxation in the Constitution is a grant of power.
91. Statement 1: An excise tax is also called privilege tax.

Statement 2: A tax which is neither personal nor property, is an excise tax.
92. Statement 1: Estate tax is a proportional tax.

Statement 2: A progressive tax is a tax, the rate of which is directly proportional to tax base.
93. Statement 1: Taxation without representation is not tyranny.

Statement 2: In the exercise of taxation, the state can tax anything at anytime and at any
amount.
94. Statement 1: Taxation and power of Eminent Domain may be exercised simultaneously.
Statement 2: Taxation and Police Power may be exercised simultaneously.
95. Statement 1: All of our tax laws are statutory laws.

Statement 2: The non-impairment clause is a statutory law on taxation.
96. Statement 1: Non-payment of tax makes the business illegal.

Statement 2: The non-payment of license fee makes the business illegal.
97. Statement 1: Margin fee is a tax.

Statement 2: Custom’s duty is a tax.
98. Statement 1: Territoriality is one of the constitutional limitations on the power of taxation.
Statement 2: International comity is an inherent limitation in taxation.
99. Statement 1: Taxes may be used for sectarian purposes if allowed by an ordinance.
Statement 2: The President can refuse to implement a tax law if it appears to be
unconstitutional.
100. Statement 1: Tax avoidance is the use by the taxpayer of legal or fraudulent means to avoid
or defeat taxes.
Statement 2: Tax evasion is the use by the taxpayer of illegal or fraudulent means to avoid or
defeat taxes.
Practical: Multiple Choice Questions (2.5 points each)
Select the letter that best corresponds to your answer for each of the following questions below.
101. For taxable year 2018, a husband and wife with five (5) qualified dependent children shall
be entitled to a maximum basic personal and additional exemptions of:
a. P50,000
b. P100,000
c. P150,000
d. P200,000
e. P0
102. Brooke is a registered real estate broker. Her total receipts amounted to P3,050,000 for
taxable year 2018. Her recorded cost of service and operating expenses were P450,000 and
P1,200,000, respectively. Her income tax liability will be:
a. P717,500
b. P365,000
c. P252,500
d. P190,000
e. P0
103. Fe Bisic is a compensation income earner. Her total basic pay during the year is P220,000
which is more than the statutory minimum wage. Other income during the year were: Overtime
pay, P30,000; Holiday pay, P15,000; Hazard pay, P24,000; and Night-shift differential pay,
P18,000. If the amounts are net of mandatory contributions to SSS, Philhealth and Pag-ibig,
how much is the taxable income?
a. P307,000
b. P265,000
c. P220,000
d. P289,000
e. P283,000
104. Christopher P, married to Julie A, had an income of P400,000 in 2018. If the spouses have
seven (7) dependent children, the income subject to income tax is:
a. P400,000
b. P150,000
c. P350,000
d. P200,000
e. P0
105. Kylene, of Autralian parentage, went to the Philippines to conduct a series of lecture for
four (4) weeks entitled: “How to be a Notorious Accountant?” You were provided with the
following information relative to the lecture series led by Kylene in the Philippines:
Professional fees for conducting a lecture series (P80,000 per week) P320,000
Income from Sale of Books (How to be a Notorious Accountant?) 140,000
Travel Expenses Incurred, with receipts 120,000
Food and Accommodation Expenses Incurred, with receipts 100,000
How much is the taxable income of Kylene?

a. P320,000
b. P460,000
c. P100,000
d. P140,000
e. P240,000
106. In relation to item no. 105, how much is the income tax due of Kylene in the Philippines?
a. P25,000
b. P55,000
c. P110,000
d. P115,000
e. P34,500
107. A taxpayer received the following items of income during the taxable year 2023:
Interest income from BPI – Espana Branch from checking account P62,000
Interest income from BDO – Intramuros Branch from savings deposit 38,500
Interest income from PNB – Quiapo Branch from foreign currency
deposit account under the expanded currency deposit system 42,000
Interest income from dollar deposit on Bank of New Jersey in the United States 130,000
Interest income from promissory note of Mr. X, Philippines 58,400
Interest income from promissory note of Mr. X, United States 62,000
Yield from deposit substitute, Philippines 87,000
Interest from Philippine government securities 21,000
Interest income from long-term deposits, Philippines 57,000
Interest income from long-term deposits, Egypt 62,500
Royalties from books, Philippines 16,000
Royalties from paintings, Philippines 60,000
Royalties from musical compositions, Japan 50,000
If the taxpayer is a resident citizen, how much is the final withholding tax?
a. P57,400
b. P61,600
c. P63,200
d. P66,600
e. P0
108. In relation to no. 107, if the taxpayer is a resident citizen, how much income is subject to
regular income tax?
a. P300,400
b. P312,900
c. P304,500
d. P362,900
e. P0
109. In relation to no. 107, if the taxpayer is a resident citizen, how much is the income tax due?
a. P7,560
b. P9,435
c. P8,175
d. P16,935
e. P0
110. In relation to no. 107, if the taxpayer is a non-resident citizen, how much is the final
withholding tax?
a. P37,900
b. P51,100
c. P55,300
d. P61,600
e. P0
111. In relation to no. 107, if the taxpayer is a non-resident citizen, how much income is subject
to regular income tax?
a. P58,400
b. P100,400
c. P108,400
d. P120,400
e. P0
112. In relation to no. 107, if the taxpayer is a non-resident citizen, how much is the income tax
due?
a. P8,760
b. P15,060
c. P16,260
d. P18,060
e. P0
113. In relation to no. 107, if the taxpayer is a non-resident alien engaged in trade or business in
the Philippines, how much is the income tax due?
a. P8,760
b. P15,060
c. P16,260
d. P18,060
e. P0
114. In relation to no. 107, if the taxpayer is a non-resident alien not engaged in trade or business
in the Philippines, how much income is subject to Philippine income tax?
a. P58,400
b. P100,400
c. P108,400
d. P120,400
e. P0
115. In relation to no. 107, if the taxpayer is a non-resident alien engaged in trade or business in
the Philippines, how much is the income tax due?
a. P8,760
b. 15,060
c. P14,600
d. P25,100
e. P0
116. Ka Wani, married with two (2) dependent children, works for PACTT, Inc. He is not
engaged in business nor has any other source of income other than his employment. For 2018,
Ka Wani earned a total taxable compensation income of P600,000. The income tax due on Ka
Wani is
a. P80,000
b. P20,000
c. P55,000
d. P48,000
e. P0
117. Ling owns a small sari-sari store and a beauty parlor. In 2018, her gross sales in the store
amounted to P680,000, in addition to her receipts from the parlor of P500,000, while her total
cost of sales/services and operating expenses amounted to P300,000 and P200,000,
respectively. The income tax due if she signified her intention to be taxed at the 8% income
tax rate is
a. P74,400
b. P94,400
c. P54,400
d. P34,400
e. P0
118. Ling owns a small sari-sari store and a beauty parlor. In 2018, her gross sales in the store
amounted to P680,000, in addition to her receipts from the parlor of P500,000, while her total
cost of sales/services and operating expenses amounted to P300,000 and P200,000,
respectively. The income tax due if she failed to signify her intention to be taxed at the 8%
income tax rate is
a. P0
b. P37,500
c. P54,400
d. P74,400
e. P100,000
119. Mr. A is an accountant who is engaged in public practice. His total gross receipts in 2018
amounted to P2,250,000. His recorded cost of service and operating expenses were P450,000
and P100,000, respectively. How much is the income tax due if Mr. A avails the use of the
graduated tax rates?
a. P0
b. P570,000
c. P160,000
d. P400,000
e. P0
120. Mr. A is an accountant who is engaged in public practice. His total gross receipts in 2018
amounted to P2,250,000. His recorded cost of service and operating expenses were P450,000
and P100,000, respectively. How much is the income tax due if Mr. A avails the use of the 8%
income tax option?
a. P144,000
b. P180,000
c. P160,000
d. P400,000
e. P0
121. Mr. Z, single with one dependent child, operates a car aircon repair shop. For the year 2018,
it had gross receipts of P1,630,000. The cost of services and operating expenses amounted to
P400,000 and P200,000, respectively. If the business is non-VAT and Mr. Z decides to avail
of the use of the graduated rates, the income tax is
a. P100,000
b. P130,400
c. P199,000
d. P125,000
e. P0
122. Mr. Z, single with one dependent child, operates a car aircon repair shop. For the year 2018,
it had gross receipts of P1,630,000. The cost of services and operating expenses amounted to
P400,000 and P200,000, respectively. If Mr. Z avails of the 8% tax option, the total tax due is
a. P110,400
b. P159,300
c. P247,900
d. P130,400
e. P0
123. A’s income tax liability for 2020 was P75,000. She filed the return and paid the total
amount due on July 15, 2021 but not with the proper internal revenue district office. The
amount payable by A is
a. P96,000
b. P114,750
c. P116,250
d. P112,500
e. P75,000
124. Mr. A with a dependent minor legitimate child became a widower in January of 2009. In
February of the following year, he got married to Ms. B and subsequently in November of the
same year, the latter gave birth to three (3) boys. For calendar year 2010, Mr. A’s basic and
additional personal exemption is:
a. P0
b. P75,000
c. P100,000
d. P125,000
e. P150,000
125. Z, married, had the following data for the taxable year 2017:
Gross income, Philippines P400,000

Gross income, China 300,000
Expenses, Philippines 200,000
Expenses, China 150,000
If the taxpayer is a resident citizen, married, his taxable income is

a. P309,000
b. P318,000
c. P350,000
d. P300,000
e. P0
126. In relation to no. 125, if the taxpayer is a non-resident citizen, married, his taxable
income is
a. P300,000
b. P159,000
c. P150,000
d. P200,000
e. P0
127. In relation to no. 125, if the taxpayer is a resident alien, married his taxable income is
a. P300,000
b. P159,000
c. P150,000
d. P200,000
e. P0
128. In relation to no. 125, if the taxpayer is a non-resident alien engaged in business in the Phil.
married and his country allows a reciprocity P30, 000 as personal exemption for married
individuals, his taxable income is?
a. P370,000
b. P170,000
c. P200,000
d. P400,000
e. P150,000
129. In relation to no. 125, if the taxpayer is non-resident alien not engaged in business in the
Phil. married and his country grants P35, 000 as personal exemption for married individuals,
his taxable income is
a. P370,000
b. P170,000
c. P200,000
d. P400,000
e. P150,000
130. A and B are partners in a Partnership which realized a gross income of P800, 000 with a
corresponding P350, 000 expenses in the year 2007. A is married with 2 qualified dependent
children, he earned P400,000 in his own business, incurring P230,000 allowable expenses
while B, single had P450,000 and P250,000 gross income and expenses respectively. They
share profits and losses at 4:6. If the partnership is a GPP, the taxable income of A subject to
the graduated income tax is
a. P276,000
b. P180,000
c. P250,000
d. P320,000
e. P0
131. In relation to no. 130, the taxable income of B subject to the graduated tax rate is
a. P435,000
b. P270,000
c. P420,000
d. P470,000
e. P0
132. Santi retired from employment with the government on November 30, 2018. As a
consequence of his retirement, he received the following:
Monthly salary (January – November) – P30,000

Monthly personnel economic relief and allowance (reimbursement) – P2,000
13th month pay – P30,000
Cash gift – P5,000
Retirement pay – P750,000
Terminal leave pay – P120,000
Longevity pay – P30,000
Rice allowance per month – P2,500
Clothing allowance – P8,000
Loyalty award – P20,000
How much is the taxable compensation income of Santi in 2018?
a. P452,500
b. P332,500
c. P330,000
d. P356,500
e. P0
133. A minimum wage earner had the following data during the year: Annual Salary – P53,000;
Overtime pay – P5,000; and Holiday pay – P4,000. The amount subject to tax is
a. None
b. P53,000
c. P58,000
d. P62,000
e. P9,000
134. Carissa, resident citizen, single, 45 years of age, is an employee of GMA Inc. from which
she received the following employment income:
Gross pay - ₱850,000

Less CWT - ₱60,000
Less SSS premiums and union dues - ₱6,000
Net Pay - ₱784,000
The amount she received from GMA is inclusive of 13th Month Pay and other benefits of
₱165,000.
Carissa, aside from her employment, is also registered with the BIR as engaged in real estate
leasing and management consultancy.
She has the following financial information in the current taxable year:
(a) Interest income on receivable from her mother - ₱ 25,000

(b) Interest expense on loan owed to grandfather - 10,000
(c) Royalty income from book, net of FT - 15,000
(d) Loss on sale of rental property to brother - 350,000
(e) Gain on sale of personal car bought in 2018 - 90,000
(f) Rental receipts from real property, gross of 5% CWT - 600,000
(g) Cost of revenues related real property leasing - 100,000
(h) Distributive share in net income of a GPP, net of 15% WT - 187,000
(i) Dividend received from Microsoft Corporation with headquarters in Seattle, Washington,
USA - 75,000
(j) Dividend from Jollibee Corporation - 5,000
(k) Expenses for dancing lessons with Zeus Cohen - 50,000
Because she is a mixed income earner and is not qualified for the 8% tax option, she will be
filing BIR Form No. 1701 as her annual ITR.
What is the correct amount of Non-Taxable/Exempt Compensation to be placed on Line 5 in

Schedule 2 (Part V) in page 2 of BIR Form No. 1701?
a. ₱60,000
b. ₱90,000
c. ₱96,000
d. None of the above.
135. In relation to no. 134, what is the correct amount of Taxable Compensation Income to be
placed on Line 6 in Schedule 2 (Part V) in page 2 of BIR Form No. 1701?
a. ₱790,000
b. ₱754,000
c. ₱760,000
136. In relation to no. 134, what is the correct amount of Net Sales/Revenues/Receipts/Fees to
be placed on Line 10 in Schedule 3.A (Part V) in page 2 of BIR Form No. 1701?
a. ₱ 600,000
b. ₱ 850,000
c. ₱1,354,000
137. In relation to no. 134, what is the correct amount of Total Allowable Itemized Deductions
of to be placed on Line 16 in Schedule 3.A (Part V) in page 2 of BIR Form No. 1701?
a. ₱410,000
b. ₱360,000
c. ₱350,000
138. In relation to no. 134, what is the correct amount of Optional Standard Deduction to be
placed on Line 17 in Schedule 3.A (Part V) in page 2 of BIR Form No. 1701?
a. ₱240,000
b. ₱250,000
c. ₱580,000
139. In relation to no. 134, what is the correct amount of Total Other Non-Operating Income to
be placed on Line 22 in Schedule 3.A (Part V) in page 2 of BIR Form No. 1701?
a. ₱340,000
b. ₱295,000
c. ₱365,000
140. Calculate her tax payable in the Annual ITR.
a. ₱252,700
b. ₱285,700
c. ₱315,700
d. ₱0

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Adamson University

Theoretical: Multiple Choice Questions (1 point each)

1. The inherent powers of the government are primarily ________ in character.

3. Eminent domain and police power

4. Which of the following statements is false?

5. Which of the following is an example of the State’s exercise of police power?

10. The benefits received theory:

11. Below are characteristics of a sound taxation system EXCEPT:

12. One of the following is NOT inherent limitation:

19. Which of the following statements is incorrect?

24. Who is not a Philippine income tax payer?

25. Taxes must be proportionate. This means that:

29. Which of the following statements is true?

30. Which of the following statements is false?

32. What is the primary purpose of the power of taxation?

34. A minimum wage earner is not exempt from

35. Which of the following statements is not correct?

38. Which of the following statements is true?

40. Married taxpayers are:

44. Which of the following is classified as a local tax?

46. Which of the following statements is true?

47. Which of the following is not a characteristic of a tax?

48. It refers to a type of tax imposed on the privilege of a person.

49. Seamen are classified as:

50. If a mixed-income earner avails of the 8% income tax option, then:

54. Which of the following is most likely to be considered as a mixed-income earner?

58. The net share received by a partner in a general professional partnership is

59. The net shares received by a partner in a general co-partnership is

61. The following are constitutional limitations, except

64. Which is not an essential characteristic of a tax?

67. As to scope of the legislative power to tax, which is not correct?

69. Which of the following is not a determinant of the place of taxation?

70. Which of the following statements is not correct?

71. This is an inherent limitation on the power of taxation.

72. This is a constitutional limitation on the power of taxation.

73. Which of the following statements is not correct?

76. Which of the following statements is correct?

77. Which of the following statement is correct?

78. Which of the following statements is incorrect?

82. Statement 1: One of the essential characteristics of a tax is it is unlimited in amount.

84. Statement 1: Imposition of taxes is a legislative act.

87. Statement 1: A tax is based on law while debt is based on contract.

88. Statement 1: A person cannot be imprisoned for non-payment of property tax.

91. Statement 1: An excise tax is also called privilege tax.

92. Statement 1: Estate tax is a proportional tax.

93. Statement 1: Taxation without representation is not tyranny.

95. Statement 1: All of our tax laws are statutory laws.

96. Statement 1: Non-payment of tax makes the business illegal.

97. Statement 1: Margin fee is a tax.

How much is the taxable income of Kylene?

Gross income, Philippines P400,000

If the taxpayer is a resident citizen, married, his taxable income is

Monthly salary (January – November) – P30,000

Gross pay - ₱850,000

(a) Interest income on receivable from her mother - ₱ 25,000

What is the correct amount of Non-Taxable/Exempt Compensation to be placed on Line 5 in

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